December 2019 ISSN: 2632-8364
About Us
Founded in 2014, Aperio Intelligence is a specialist, independent corporate intelligence firm staffed by individuals who collectively have decades of experience in undertaking investigations and intelligence analysis.
Our team has worked in over 150 countries, on thousands of cases, for a wide range of leading global corporations, financial institutions and law firms.
We have both knowledge of and access to relevant public and proprietary data sources, as well as a longstanding network of reliable, informed local contacts in the regions where we operate, cultivated over decades, who support us regularly in undertaking local enquiries on a confidential and discreet basis.
As a specialist provider of corporate intelligence, we source our intelligence and conduct research to the highest legal and ethical We provide specialist investigation skills, together with local standards. jurisdictional knowledge, to enable you to identify and understand financial crime, integrity and reputational risks arising from a lack of We operate a “Client First” policy that ensures strict adherence to the knowledge of counterparties or local jurisdictions. We empower you core principles of quality control, confidentiality and respect for time to make better informed decisions, allowing you to achieve positive constraints, and provide cost-effective solutions, which allows our outcomes and realise the full benefits of your business activities. clients to obtain the highest quality standard of EDD at one of the best cost-to-benefit ratios in the marketplace. Our independence enables Our enhanced due diligence (EDD) services help clients comply with us to avoid many of the potential conflicts of interest that may affect anti-bribery and corruption, anti-money laundering and other relevant our larger competitors. financial crime legislation, such as sanctions compliance, or the evaluation of tax evasion risks. For banking and asset management Should you like to know more about our services or discuss how we clients, our services are designed to support on-boarding new may be able to help you, please do not hesitate to get in touch with our customers or third parties, reviewing existing relationships, or as part London or Paris offices. of a remediation process.
We support clients in assessing complex integrity and political risks in opaque and high-risk markets through local insight and contact networks. Critical to our intelligence-gathering capabilities are the Find out more about the Aperio Intelligence team at: languages we speak in-house, including all major European languages, www.aperio-intelligence.com as well as Russian, Arabic, Farsi, Mandarin, Cantonese and Japanese.
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DECEMBER 2019 ENFORCEMENT 03
Aperio Intelligence is pleased to announce the forthcoming SPECIAL FEATURE 13 launch of a brand new online version of the Financial Crime THE FINANCIAL CRIME TRENDS IN 2019 AND BEYOND Digest. The online portal will provide extended coverage, GUIDANCE AND ANNOUNCEMENTS 21 commentary and analysis, together with full customisation and searchability. It will offer users rapid access to emerging REPORTS AND SPEECHES 26 financial crime developments, in particular focusing initially on the UK, EU and US. If you are interested in being involved in LEGISLATION 29 the beta testing phase please get in touch. [email protected] CONSULTATIONS 32
PRESS AND MEDIA 33
ENFORCEMENT
Ericsson agrees to pay USD 1 billion to settle FCPA probe
The US Department of Justice (DOJ) on the FCPA. An Ericsson subsidiary, Ericsson Between 2013 and 2016, it made payments 6 December announced that Swedish Egypt Ltd, pleaded guilty to a one-count of USD 31.5 million to third party service multinational telecommunications criminal information charging it with violating providers pursuant to sham contracts for company Telefonaktiebolaget LM anti-bribery provisions of the FCPA. services that were never performed. The DOJ Ericsson (Ericsson) had agreed to further accused Ericsson of making corrupt pay penalties of more than USD 1 The DOJ added that Ericsson had, via a payments in Vietnam, Indonesia and Kuwait. billion to resolve the US Government’s subsidiary, between 2010 and 2014, made The DOJ said that in arriving at its resolution investigation into violations of the US USD 2.1 million in bribe payments to high- with Ericsson, the Department took into Foreign Corrupt Practices Act (FCPA). ranking government officials in Djibouti in account that Ericsson had failed to voluntarily order to obtain a contract with the state- disclose the conduct. It did not receive full The DOJ said the penalty arose from owned telecommunications company valued credit for cooperation and remediation as it Ericsson’s scheme to make and improperly at USD 20.3 million to modernise the mobile did not disclose allegations of corruption with record tens of millions of dollars in improper networks system in Djibouti. respect to two relevant matters; the company payments around the world. The fine includes produced materials in an untimely manner; a criminal penalty of over USD 520 million and The DOJ said Ericsson had used a sham and it did not fully remediate. approximately USD 540 million to be paid to contract with a consulting company and the US Securities and Exchange Commission approved fake invoices to hide the bribe (SEC) in a related matter. payments. Between 2000 and 2016 in China, the DOJ said Ericsson subsidiaries caused Ericsson entered into a deferred prosecution tens of millions of dollars to be paid to The press release can be found HERE. agreement (DPA) with the DOJ in connection agents, consultants and service providers, with a criminal information filed on 6 a portion of which was used to fund a travel The plea agreement can be found HERE. December in the Southern District of New expense account in China that covered gifts, York, which charges the company with travel and entertainment for foreign officials, which included officials at state-owned conspiracies to violate anti-bribery, books and The Ericsson DPA can be found HERE. records, and internal controls provisions of telecommunications companies.
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ENFORCEMENT
Former Goldman Sachs executive settles SEC charges over 1MDB bribery scheme
On 16 December, the US Securities at Goldman Sachs to advance and conceal and Exchange Commission (SEC) the corrupt scheme, according to the SEC. announced a settlement with Tim Leissner, formerly managing director The Commission ordered Leissner to of Goldman Sachs, for violating the disgorge USD 43.7 million in illicit payments Foreign Corrupt Practices Act (FCPA) he received for facilitating the scheme as by scheming to bribe Malaysia and well as permanently banning him from the Abu Dhabi officials to award 1Malaysia securities industry. Development Berhard (1MDB) contracts The press release can be found HERE. to the bank in 2012 and 2013. The announcement follows the unsealing in a federal court on 1 November 2018 of Leissner also breached the US Exchange Act Leissner’s admission to criminal money The SEC’s order can be found HERE. by circumventing internal accounting controls laundering and bribery charges.
SNC-Lavalin division pleads guilty to fraud charge over Libya operations and enters into agreement
The construction division of SNC- The money was directed through two The deal stipulates Lavalin pleaded guilty to a single representative companies, Duvel Securities • The division pleads guilty to a charge of fraud charge on 18 December, settling Inc and Dinova International Inc, which listed fraud over CAD 5,000 and agreed to pay a criminal charges that had centred on Riadh Ben Aissa, former vice-president and CAD 280 million penalty; allegations that the company paid president of SNC-Lavalin Construction Inc, as nearly CAD 48 million to public officials the sole beneficial owner. • The division will be subject to a three-year in Libya to influence government probation order; decisions under Muammar Gaddafi’s In addition to this, funds were paid to Ben Aissa and to Sami Bebawi, former president regime between 2001 and 2011. • The division will engage an independent of SNC-Lavalin. Aissa pleaded guilty in monitor who will release scheduled reports, The guilty plea put forward by SNC-Lavalin Switzerland in 2014 to corruption of foreign executive summaries of which will be Construction Inc accompanies an Agreed public officials, disloyal management of posted on the company’s website; and Statement of Facts filed with the Court of funds, fraud and money laundering. Bebawi was found guilty of all five charges against Quebec as part of a settlement that saw other • The division will make any changes to its him, which included fraud, corruption, money charges faced by SNC-Lavalin withdrawn. By compliance and ethics programmes that are laundering and possession of the proceeds pleading guilty to fraud, and not the bribery identified by the independent monitor. charges it also faced, the company can of crime on 15 December 2019. Crown continue to bid on construction projects. In Prosecutor Richard Roy noted that had a the Agreed Statement of Facts, SNC-Lavalin similar case been brought before courts in the Official statement can be found HERE. Construction Inc admitted to paying CAD 48 US or the UK, the company could have been million to Saadi Gaddafi to use his influence fined as much as CAD 705 million. But, he as the son of Muammar Gaddafi to secure said, SNC-Lavalin had changed its corporate SNC’s statement can be found HERE. construction contracts for the company. culture since 2012.
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ENFORCEMENT
FCMC fines UK FCA enforcement over PDMR’s SEB Latvia over failure to notify personal trades alleged AML The UK’s Financial Conduct Authority The enforcement action is the FCA’s first (FCA) announced on 20 December a for a breach of Article 19(1) of MAR, which and sanctions GBP 45,000 penalty against Braemar requires persons discharging managerial Shipping Services plc’s ex-managing responsibility (PDMRs) and their close breaches director, Kevin Gorman, for breaching associates to notify the FCA and issuer of the Market Abuse Regulations (MAR) every transaction conducted on their own by failing to promptly notify the account above a certain threshold. regulator or issuer of three personal trades conducted between August The press release can be found HERE. 2016 and January 2017.
SEB Group and Latvia’s Financial and Capital Market Commission UK SFO announces DPA with Güralp (FCMC) announced on 20 December that SEB Latvia will pay Systems over bribes to South Korea a combined fine of EUR 1.8 million over alleged breaches of EU AML The UK’s Serious Fraud Office (SFO) Reporting restrictions on the deferred and sanctions rules. announced on 20 December that prosecution agreement (DPA) were Güralp Systems Ltd has agreed to lifted following the acquittal of Cansun The settlement relates to certain pay GBP 2 million and review internal Güralp, Andrew Bell and Natalie Pearce of alleged shortcomings in SEB Latvia’s anti-bribery and corruption controls conspiring to make the corrupt payments. identification and documentation of to settle charges that it failed to client beneficial ownership from 2017, prevent employees from bribing in breach of the EU’s Fourth Money a South Korean official for state The press release can be found HERE. Laundering Directive (4MLD). contracts between 2003 and 2015.
The FCMC also found that the bank did not acquire documentation on client economic activity in “sufficient scope and quality” to identify suspicious US DOJ fines Switzerland’s Coutts & transactions. The bank stated that its failure to correctly determine that a client was a subsidiary of an EU-designated Co over undisclosed accounts entity led to it processing EUR 1,304 in illicit transactions before it terminated The US Justice Department (DOJ) Program, which seeks to counteract the relationship and reported the breach. announced on 20 December that tax fraud. Swiss private bank Coutts & Co Ltd will pay an additional USD 28 million The Swiss Bank Program enabled banks to resolve potential criminal liabilities in the Press release can be found HERE. for failing to disclose 311 additional US-related accounts when signing a US relating to offshore banking services. non-prosecution agreement (NPA) SEB statement can be found HERE. with the DOJ in December 2015 over The press release can be found HERE. its compliance with the Swiss Bank
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ENFORCEMENT
Aero Sky Aircraft Maintenance APRA probes found in violation of Iran sanctions Westpac senior
The US Treasury Department’s managers over Office of Foreign Assets Control (OFAC) issued on 12 December a AML breaches Finding of Violation against Aero Sky Aircraft Maintenance Inc, a now- On 17 December, the Australian dissolved US aircraft maintenance Prudential Regulation Authority company, for negotiating a (APRA) opened an investigation into memorandum of understanding possible breaches of the Banking (MoU) and a contingent contract Act 1959, including the Banking for providing maintenance and Executive Accountability Regime repair services to the designated related parts and services. OFAC makes (BEAR), by Westpac, its directors or Iranian airline Mahan Air, in violation clear that the execution of a contract senior managers. of Executive Order 13224 and or contingent contract with a person the Global Terrorism Sanctions or entity whose property and property The APRA’s probe of Westpac will Regulations. interests are blocked is prohibited, unless authorised by OFAC or exempt by law. In focus on the conduct that led to the alleged AML violations announced by According to notice, the MoU signed in the Aero Sky case, the lack of caution and AUSTRAC in November and the bank’s 2016 included in the appendix a provision care in negotiating the contract, a senior actions to rectify compliance issues. The that the agreement was contingent upon manager’s participation in the violations agency will also initiate an “extensive” Mahan Air being delisted by OFAC. Aero and the fact that the designated entity was review of Westpac’s risk management, Sky reportedly signed the contingent a high-profile Iranian company were all accountability, remuneration and culture. contract after mistakenly determining aggravating factors. The APRA imposed an immediate that the contract was allowed under increase of AUD 500 million in Westpac’s the scope of the Iran General Licence I capital requirements. authorising certain transactions related The press release can be found HERE. to the negotiation of contingent contracts on the export or reexport to Iran of Enforcement notice can be found HERE. The press release can be found HERE. commercial passenger aircraft and
Owner of purported UK investment firm charged with fraud in the US, alongside two others
The owner of a purported which they reportedly stole at least through Chimera Group Ltd, where the investment firm based in the USD 6.2 million from investors, defendants promised to pay victim investors UK, Brian Michael Bridge, was according to an indictment unsealed at a later date in exchange for an upfront indicted alongside two US-based on 16 December. advanced payment. co-conspirators, James Michael Johnson and James Leonard Smith, The indictment alleges that Bridge, for their alleged participation in an Johnson, and Smith, operated an The press release can be found HERE. investment fraud scheme through international “advance fee scheme”
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ENFORCEMENT
Former Mexican law enforcement chief arrested in the US for bribery and drug trafficking
The US Justice Department (DOJ) According to the indictment, in exchange for ensuring the public safety of Mexico, as the announced on 10 December that the bribes, García Luna provided safe passage for head of the Federal Investigation Agency former Mexican secretary of public drug shipments and provided sensitive law (between 2001 and 2005) and the Secretary security Genaro García Luna has been enforcement information about investigations of Public Security in charge of the Federal arrested in Texas and indicted on into the Cartel, as well as information Police Force (between 2006 and 2012). drug trafficking charges, for allegedly about rival drug cartels. After obtaining US allowing Joaquin ‘El Chapo’ Guzman’s naturalisation in 2018, García Luna continued Sinaloa Cartel to operate freely in to conspire to import and distribute at least The press release can be found HERE. Mexico and distribute drugs to the US five kilograms of cocaine into the US. between 2011 and 2012, in exchange for bribes of between three and five The alleged offences were committed at a The indictment can be found HERE. million US dollars. time when García Luna was responsible for
HSBC’s Swiss private bank enters into DPA in the US and agrees to pay USD 192 million in penalties
The US Department of Justice had approximately 720 undeclared US client HSBC Switzerland is one of a number of (DOJ) announced on 10 December that relationships, with an aggregate value of more Swiss banks that have reached settlements HSBC Private Bank (Suisse) SA (HSBC than USD 800 million. At its peak in 2007, the with US authorities over allegations of Switzerland), the Swiss private banking bank held approximately USD 1.26 billion in facilitating tax evasion by US citizens. In 2009, unit of HSBC headquartered in Geneva, undeclared assets for US clients. UBS agreed to pay USD 780 million in fines has entered into a deferred prosecution and penalties and in 2014 Credit Suisse paid agreement (DPA) with the DOJ and The DOJ said that in an effort to attract USD 2.6 billion. the US District Court for the Southern new US clients, and maintain existing District of Florida. relationships, HSBC Switzerland bankers HSBC’s latest settlement with US authorities took trips to the US; at least four bankers is one of a number of settlements the bank HSBC Switzerland admitted to conspiring travelled to the US between 2005 and 2007 has reached with national authorities resulting with US taxpayers to evade taxes. As part of to meet at least 25 different clients. The DOJ from the leak of confidential client files from the agreement, HSBC Switzerland will pay said that HSBC Switzerland began a series HSBC Switzerland’s Geneva office in 2008 by USD 192.35 million in penalties. The penalty of policy changes in early 2008, following a a former information technology employee includes a civil forfeiture of USD 71.8 million, criminal investigation into UBS AG, for tax at the bank, Herve Falciani. In August 2019, for proceeds derived from the conduct. and securities violations in connection with HSBC Switzerland agreed to pay around EUR undeclared assets for US clients, but HSBC 294 million to settle a Belgian criminal probe According to court documents, between 2000 Switzerland did not immediately cease that into alleged facilitation of tax evasion and in and 2010, HSBC Switzerland admitted that business. The DOJ said that in fact, some November 2017, the bank reached a EUR 300 it conspired with its employees, third-party HSBC Switzerland bankers assisted clients million settlement with French authorities. and wholly owned fiduciaries, and US clients in closing their accounts in a manner that to: 1) defraud the United States with respect continued to conceal their offshore assets, to taxes; 2) commit tax evasion; and 3) file such as withdrawing the contents of their false federal tax returns. In 2002, the bank accounts in cash. The press release can be found HERE.
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ENFORCEMENT
Latvia’s Baltic US and UK target perpetrators of International bank fraud malware scheme
Bank fined for The US Department of Justice December the Russia-based cybercriminal (DOJ) unsealed criminal charges on organisation Evil Corp, its leader Maksim AML failures 5 December against two Russian V. Yakubets, senior member Denis Gusev, individuals accused of hacking, six members of the group, eight Moscow- The Board of the Latvian Financial bank fraud and malware offences. based financial facilitators involved in and Capital Market Commission The DOJ, which was assisted by the laundering funds stolen by Evil Corp as well (FCMC) on 6 December adopted a UK’s National Crime Agency (NCA), as Gusev’s six Russia-based businesses. decision to impose a fine of confirmed that Maksim V. Yakubets, All individuals and entities were designated EUR 1,556,046 on JSC “Baltic aka online moniker “aqua”, has been pursuant to Executive Order (EO) 13694, International Bank” for alleged charged with two criminal offences as amended, for engaging in cyber- deficiencies in the bank’s internal including international computer enabled activities that cause significant control systems. hacking and bank fraud schemes misappropriation of funds for private gain. dating from May 2009 to the present. The FCMC stated that the Bank is also According to OFAC, Evil Corp is responsible subject to a number of legal obligations A second Russian individual, Igor for the development and distribution of the including the submission of an action Turashev, was indicted for his role in the Bugat malware, which caused as of 2016 plan, within an agreed timeframe, to “Bugat” malware conspiracy. The State losses of USD 100 million to 300 banks and address the breaches and shortcomings Department, in conjunction with the FBI, financial institutions in over 40 countries identified, and carrying out an also announced a reward of up to USD 5 by stealing online banking credentials and independent review of control systems. million for information leading to the arrest fraudulently transferring funds to accounts and/or conviction of Yakubets. Yakubets controlled by the group. In a press release, the Bank said: was allegedly engaged in a decade-long “Baltic International Bank considers spree, which deployed two of the most the administrative fine imposed by the damaging pieces of financial malware ever DOJ press release can be found HERE. FCMC and reproach about deficiencies used. The “Bugat” malware, also known as in the internal control systems during the “Cridex” and “Dridex” targeted individuals period from 2014 as disproportionate.” and companies across the globe. NCA press release can be found HERE. The Bank added that the review carried out by the FCMC covered the period In parallel action, the US Treasury from 2014, “when the control of the Department’s Office of Foreign Assets OFAC statement can be found HERE. customers and transactions were Control (OFAC) designated on 5 determined by the laws and regulations that are drastically different from the current. The Bank considers its arguments were not heard or listened to UK confirms Glencore Plc probe in essence during the period of almost two years.” The Bank said it intends to Following an announcement by The SFO stated that the investigation is appeal the FCMC’s decision. Glencore Plc, the UK’s Serious Fraud currently live, so cannot comment further. Office (SFO) confirmed on 5 December that it is investigating FCMC release can be found HERE. SFO press release can be found HERE. suspicions of bribery in the conduct of business by the Glencore group of Bank statement can be found HERE. companies, its officials, employees, Glencore statement can be found HERE. agents and associated persons.
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ENFORCEMENT
Former head US charges Indonesian individual of Romanian and entities with violating sanctions intelligence The US Department of Justice (DOJ) announced on 17 December agency detained that Indonesian national and former Garuda Indonesia director Sunarko over suspected Kuntjoro has been indicted by the Columbia District Court for violating US export laws related to the Iranian drug trafficking sanctions regime, conspiracy to defraud the US and launder monetary instruments, and false statements. The Romanian Directorate for Investigating Organised Crime and Three Indonesian companies, PT MS profit by transporting Mahan Air goods Terrorism (DIICOT) announced Aero Support (PTMS), PT Kandiyasa and technology to the US and re-exporting on 16 December the arrest of the Energi Utama (PTKEU) and PT Antasena them by evading the export regulations former head of the Interior Ministry’s Kreasi (PTAK), have also been charged for and licensing requirements of the Department for Intelligence and allegedly being used by Kuntjoro and his International Emergency Economic Powers Internal Protection (DGIPI), Gelu co-conspirators to import goods owned by Act (IEEPA), the Iranian Transactions and Oltean, his partner, Vanessa Youness, Mahan Air into the US and return them to Sanctions Regulations (ITSR), the Export and a British citizen, Thomas Iran without valid licences. Administration Regulations, and the Global Lishman, over allegations of drug Terrorism Sanctions Regulations (GTSR). trafficking. Between 2011 and 2018, Kuntjoro, a director and majority shareholder of According to DIICOT, the defendants PTMS, allegedly conspired with Mahan Air allegedly organised spiritual sessions in a executive Mustafa Oveici, and an American The press release can be found HERE. clinic founded by Youness, which involved person and company to make a financial the use of dimethyltryptamine (DMT), a high-risk hallucinogenic drug. In order to attend the sessions participants would transfer EUR 1,100 into Lishman’s bank account. The sessions were arranged by Money mule sentenced in the US Lishman, who promoted the events through a website, which was disguised as a travel A Miami resident, Yamel Guevara accounts associated with a number of agency registered in the Isle of Man. Tamayo, was sentenced on 20 different money mules. On 14 December, during a search warrant December to five years in prison The mules would agree for their names to at the clinic, the police discovered 42 for his role as a money mule and be used on incorporation documents for individuals, including Oltean, Youness and mule recruiter in an international shell companies, and open bank accounts Lishman, over 6.6 lbs of DMT, along with cybercrime and money laundering linked to these shell companies in different other plant-derived drugs. On 15 December, network, according to the US branches, which were then used to launder the Brasov Tribunal ordered the remand of Attorney’s Office in the Southern the proceeds of the scam. Tamayo the defendants for 30 days. District of Florida. recruited and managed over 15 mules. Tamayo, along with his co-conspirators, participated in a scheme that stole USD 1.5 million from unsuspecting victims before The press release can be found HERE. The press release can be found HERE. laundering the proceeds through bank
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ENFORCEMENT
UK’s Serious Fraud Office charges ex- OFAC settles Serco directors with fraud with insurance
The UK’s Serious Fraud Office (SFO) electronic monitoring contract with the companies announced on 16 December charges Justice Ministry, following the completion against Nicholas Woods and Simon of a deferred prosecution agreement (DPA) over Cuba Marshall, formerly directors of UK public with Serco Group subsidiary Serco Geografix services provider Serco, over alleged Ltd in July 2019. sanctions fraud and false accounting between 2011 and 2013. violations
The charges relate to the Serious Fraud The press release can be found HERE. Office’s criminal investigation into Serco’s The US Treasury Department’s Office of Foreign Assets Control (OFAC) announced on 9 December that it has reached separate settlements with Sudan convicts ex-president for two insurance companies for providing insurance coverage corruption and money laundering for travel in Cuba in violation of the Cuban Assets Control On 14 December, a Sudan court power during a military coup in 1989, is also Regulations (CACR). convicted ex-president Omar al-Bashir facing charges over the killing of protestors of money laundering and corruption during the uprising that led to his removal The settlements are as follows: a after investigators seized more than from office in April. USD 170,535 settlement with EUR 1 million-worth of suspicious Chicago-based Allianz Global Risks funds from his home, Associated Press It is uncertain whether the transitional U.S. Insurance Company (AGR US) reported. government will extradite Al-Bashir to the and a USD 66,212 settlement with International Criminal Court (ICC), which Swiss-based Chubb Limited, the legal Al-Bashir has reportedly been sentenced to issued arrest warrants for him in March 2009 successor of ACE Limited (ACE). two years at a state-run rehabilitation facility and July 2010 for crimes against humanity for elderly people. Al-Bashir, who seized and genocide in Darfur. OFAC noted that ACE’s violations were due to the company’s apparent misunderstanding of the applicability of US sanctions to its activities. In March 2012, in response to a request France fines Morgan Stanley €20M for from ACE Europe’s Spanish branch for guidance on Cuba sanctions, the manipulating government bond prices regional compliance team advised that travel to Cuba by the European travel agency’s EU customers was The French Financial Markets and manipulating the price of an OAT governed by Europe’s Blocking Authority (AMF) announced on 10 futures contract. Regulation, which prevented December that its Enforcement enforcement of US sanctions Committee has fined Morgan Stanley The press release can be found HERE. regulations related to Cuba. & Co International Plc EUR 20 million for manipulating the price of 14 French government bonds (OAT) and eight The full decision can be found HERE. The notice can be found HERE. Belgian bonds (OLO) on 16 June 2015
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ENFORCEMENT
South Africa fines banks for AML/CFT control failings
The South African Reserve Bank (SARB) failures to comply with suspicious and imposed administrative sanctions on unusual transaction reporting requirements, five banks on 20 December for failure failures to comply with training requirements, to comply with suspicious and unusual and failures to comply with cash threshold transaction reporting requirements reporting requirements, with the largest relating to anti-money laundering/ financial penalty levied against Standard Bank counter terrorist financing prevention, of ZAR 30 million (GBP 1.6m). All five banks which impacted the banks’ compliance have also been directed to take remedial with the provisions of the Financial action to address the weaknesses identified. Intelligence Centre Act (FIC Act).
The five banks in question are: Standard of Athens Limited); Ubank Limited; Bank Bank South Africa Limited; GroBank Limited of China, Johannesburg Branch; and HBZ The press release can be found HERE. (formerly known as The South African Bank Bank Limited. The fines were imposed for
Deutsche Bank AG agrees to pay EUR 15 million to end German money laundering and tax evasion investigation
Deutsche Bank AG announced on 6 In statements, the bank and the Frankfurt Investigations into two Deutsche Bank December that it has agreed to pay EUR public prosecutor’s office said that the employees as part of the probe were dropped 15 million, comprising a fine of EUR settlement reflects shortcomings in Deutsche by Frankfurt prosecutors. 5 million and a confiscation penalty Bank’s compliance and its filing of suspicious of EUR 10 million, to settle a probe activity reports relating to German clients’ into possible money laundering and interactions with offshore entities established tax evasion involving German clients, by the bank’s subsidiary Regula Limited in the The press release can be found HERE. following a raid of the bank’s Frankfurt British Virgin Islands from 2015 to early 2018. offices in November 2018.
Lithuania fines Šiaulių Bankas for AML/CFT deficiencies
The Bank of Lithuania announced on 30 According to the Bank of Lithuania, Šiaulių sufficient collection of know-your-customer December that it has imposed a penalty Bankas acted quickly to address the (KYC) information; and the bank had not of EUR 880,000 on Šiaulių Bankas shortcomings, having eliminated most of the adopted proper procedures to establish following a scheduled inspection, issues identified before the Bank of Lithuania whether customers were politically which found that during the period discussed its inspection findings. compromised persons. under review the bank had improperly assessed its money laundering and The inspection found: cases where the bank terrorist financing risks. wrongly identified the identity of a customer The press release can be found HERE. or a beneficiary; the bank did not ensure
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TECHNICAL UPDATES
US arrest four UK’s NCA reaches settlement with men allegedly Pakistan businessman involved in The UK’s National Crime Agency Members of the Sharif (NCA) reported on 3 December that USD 722M it has reached a GBP 190 million family were named in settlement with Malik Riaz Hussain, the Panama Papers cryptocurrency a Pakistani national, whose business is one of the largest private sector fraud scheme employers in Pakistan. It said the assets will be returned to the State of Pakistan. Pakistan’s Asset According to the NCA, the family holds Recovery Unit stated on 3 December that The US Department of Justice large property developments in Pakistan Malik Riaz acquired the property at 1 (DOJ) announced in an updated and elsewhere. In August 2019, eight Hyde Park Place from Hassan Nawaz in statement published on 11 account freezing orders were secured March 2016, shortly before the Panama December that four men have at Westminster Magistrates’ Court in Papers scandal. Hassan Nawaz is the been arrested in connection with a connection with funds totalling around son of former Pakistan prime minister cryptocurrency mining scheme that GBP 120 million. This followed an earlier Nawaz Sharif. Members of the Sharif allegedly defrauded investors of freezing order in December 2018 linked to family were named in the Panama USD 722 million. the same investigation for GBP 20 million. Papers and have since been the targets of an anti-corruption campaign pursued Matthew Brent Goettsche and Jobadiah The NCA reported that it has accepted a by current Prime Minister Imran Khan. Sinclair Weeks have been charged with settlement which includes a UK property, conspiracy to commit wire fraud and 1 Hyde Park Place, London, W2 2LH, conspiracy to offer and sell unregistered valued at GBP 50 million and all of the securities. Joseph Frank Abel has been The press release can be found HERE. funds held in frozen UK bank accounts. charged with conspiracy to offer and sell unregistered securities. Silviu Catalin Balaci who was arrested in Germany following the original announcement on 10 December has also been charged. Ukrainian ex-lawmaker allegedly According to the DOJ’s indictment: from 2014 to 2019, the defendants schemed to launder funds allegedly operated BitClub Network, a fraudulent scheme that solicited money through Swiss bank accounts from investors in exchange for shares of cryptocurrency mining pools and rewarded investors for recruiting new Swiss prosecutors announced on 20 payments” to the offshore company’s investors; the accused conspired to December charges against Ukrainian Swiss bank accounts in exchange for solicit investments in BitClub Network by ex-lawmaker Mykola Martynenko Ukrainian state contracts. The suspects providing false and misleading figures and a second Ukrainian national for allegedly thwarted asset seizures by and directed others to manipulate the allegedly conspiring to launder nearly using the illicit funds for purchases and figures from “mining earnings”. EUR 3 million through Swiss bank investments in Switzerland and abroad. accounts held by a Panama-based company they seemingly controlled.
The press release can be found HERE. According to the indictment, Czech The press release can be found HERE. company Skoda JS sent “commission
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SPECIAL FEATURE
Financial crime currents: Examining the developing trends in 2019 and beyond
By Adrian Ford CEO Aperio Intelligence
Escalating concerns over EU banks’ role in money laundering and financial crimes
Existing concerns over the role played by banks within the European Union in facilitating alleged money laundering and other financial crimes widened in 2019.
In February, the Estonian Financial Services programme broadcast allegations linking been a failure by the Estonian and Danish Authority (EFSA) issued a statement that Swedbank AB to the money laundering competent authorities to comply with their Danske Bank A/S must cease its activities scandal involving Danske Bank. The obligations. in Estonia within eight months, concluding programme referenced transactions that it should not be allowed to operate in totalling at least SEK 40 billion reportedly In early March, the Organized Crime and Estonia following analysis of the bank’s transferred between accounts at Swedbank Corruption Reporting Project (OCCRP), a internal report into the money laundering and Danske Bank between 2007 and 2015. group of investigative journalists focusing scandal together with the results of The TV programme said that transactions on financial crime issues, published a onsite inspections at the branch and input by 50 clients should have raised flags at report focusing on the Troika Laundromat, received from the Estonian FIU. Danske Swedbank as they were companies with no named after the Russian investment bank Bank subsequently closed its operation in visible operations, had unknown beneficial Troika Dialog. The report highlighted far- Estonia and announced it would also shut owners or were represented by people who reaching allegations about the involvement its business operations in Latvia, Lithuania only provided a front for an organisation. of banks in the Nordics and Baltics in and Russia. Other than investigations by The programme cited a large number of handling suspicious transactions relating the Danish Financial Supervision Authority classified documents detailing Danske Bank to funds originating from shell companies (DFSA) and the EFSA, Danske Bank also dealings with Swedbank. SVT claimed that registered in tax havens. The allegations announced a formal investigation by the some of the funds were linked to the 2007 cited Danske Bank, Swedbank AB, Nordea Tribunal de Grande Instance de Paris in fraud uncovered by the Russian lawyer, Bank Abp, ING Groep NV, Credit Agricole connection with a probe into suspicions of Sergei Magnitsky. SA, Deutsche Bank AG, KBC Group NV, money laundering related to its branch in Raiffeisen Bank International AG, ABN Amro Estonia, as well as a formal inquiry by the US Separately, in February the European Banking Group NV, Cooperatieve Rabobank UA and Securities and Exchange Commission, which Authority (EBA) opened an investigation into the Dutch unit of Turkiye Garanti Bankasi is carrying out its own investigation into the whether there had been a breach of EU law AS. According to the report, USD 4.6 billion allegations of money laundering, in addition by the EFSA and the DFSA in connection with is alleged to have been laundered through to an ongoing criminal investigation being money laundering activities linked to Danske the EU and US via the Troika Laundromat. carried out by the US Department of Justice. Bank. The EBA’s investigation followed The scheme is reportedly connected to receipt of a letter from the European companies involved in the Magnitsky Later that month, Swedish television’s Commission calling on the EBA to use Affair, the Russian Laundromat and the (SVT) Uppdrag Granskning investigative its powers to examine whether there had Sheremeteyvo fuel fraud.
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Since the allegations arose in early 2019, to the authorities. SVT reported allegations In October, the Joint Committee of the Swedbank stated that its Swedish and that SEB processed USD 72 million in European Supervisory Authorities (ESAs), Estonian operations previously failed transactions involving more than 90 announcing its 2020 work programme, to allocate sufficient “resources and individuals or entities linked to previously- said that from 1 January 2020, the joint competence” to adequately manage the known money laundering scandals, committee’s competence for AML matters risks of money laundering by clients and including the Russian tax fraud case raised will be transferred to a permanent internal third parties. The bank commissioned by Sergei Magnitsky. committee of the EBA. The EBA will ensure an internal investigation and said it would that breaches of the EU’s AML rules are publish by early 2020 details of historical The FI has said it expects to finalise its probe consistently investigated across the bloc shortcomings at Swedbank and provide into SEB by April 2020, while the outcome of and, where necessary, the EBA will ask recommendations for ensuring compliance similar investigations into Swedbank’s AML national AML supervisors to investigate and best practice. The bank was however hit systems is likely to be announced by around financial institutions and impose specific by more revelations published by the OCCRP March 2020. remedial actions. The EBA also aims and covered by SVT which indicated that it to foster information sharing on AML was facing investigations by US authorities The European Union’s response to recent risks and trends between supervisors, for sanctions breaches. Specifically, money laundering scandals including through the new permanent that Swedbank’s Estonian branch had internal committee of the EBA. The EBA assisted its biggest client, Russian oligarch subsequently issued further joint guidelines Isakander Makhmudov, to conduct more in December 2019 for establishing than EUR 1 million in transactions between supervisory “colleges” between prudential US-designated Russian entity Concern and AML authorities overseeing financial Kalashnikov JSC and its Florida-based institutions in the EU. The colleges are subsidiary Kalashnikov USA. intended to provide a permanent structure for supervisors in EU member states Swedbank also disclosed in October that it and third countries to cooperate, share was being investigated by the ECB as well as information, establish a common approach national authorities in the US, Sweden, Latvia and coordinate actions. and Lithuania for possible money laundering. The EFSA closed its misdemeanour The ongoing and substantial allegations Beneficial ownership disclosure reforms proceedings against Swedbank to prioritise of money laundering by banks across criminal charges for money laundering. Europe has reinforced calls within the The creation of corporate registers of European Union for more effective ultimate beneficial owners, a requirement of Sweden’s financial supervisory authority, national enforcement of existing AML/ the EU’s Fourth Money Laundering Directive, Finansinspektionen (FI), confirmed in August CFT legislation. In September 2019, the is regarded as a key measure in the fight 2019 that alongside Swedbank, it was also head of the European Banking Authority against money laundering and financial probing the activities of SEB, also aiming to (EBA), José Manuel Campa, said that crime. However, the implementation of assess the bank’s management and control further centralisation of EU AML efforts and centralised registers across the EU has of money laundering risks in its Baltics a move from a Directive to a Regulation- been slow and gaps remain. In September operations since 2007. Like Swedbank, based framework may be “the only way” 2019, the European Parliament, reporting SEB was also cited by SVT over money to ensure consistent AML supervision and on the state of implementation of the EU’s laundering allegations. In November, SEB sanctions across the bloc. He added that AML legislation, said it was concerned said it had previously terminated relationship the EBA is currently working on finding that the deadline of 10 January 2020 for with 95 percent of the 194 corporate entities “common ground” for withdrawing financial implementation of beneficial ownership cited in the SVT television programme and institutions’ licences when serious AML/CFT registers for corporates and other legal added that it had reported suspicious activity deficiencies are identified. entities and 10 March 2020 for trusts and
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similar legal arrangements will not be met. Cash) Act, a bipartisan bill aimed at updating large cross-border money mule operation in It called on member states to take urgent AML rules contained in the Bank Secrecy Europe, encompassing 3,833 money mules, action to speed up the transition process. Act 1970. The Illicit Cash Act includes a 386 money mule recruiters, more than 650 number of measures such as beneficial banks and 17 bank associations and other In the UK, the adequacy of the People with ownership reporting requirements and an financial institutions. Significant Control (PSC) register, held by information-sharing forum similar to the Companies House, has been called into UK’s Joint Money Laundering Intelligence The UK National Crime Agency assessed question. In March 2019, the Department Taskforce (JMLIT). The bill would require in July 2019 as part of its public-private for Business, Energy & Industrial Strategy new and existing companies to submit threat update on economic crime that (BEIS) issued a review of the implementation beneficial ownership information to the the use of money mules to launder the of the PSC register. Whilst the PSC is widely Treasury Department’s Financial Crimes proceeds of crime remains a key threat. used by law enforcement and financial Enforcement Network (FinCEN). The bill The NCA said that social media platforms institutions to obtain information on follows the introduction in the House in May are being increasingly used by criminals beneficial ownership data, some of those of the Corporate Transparency Act 2019, to recruit money mules, with students and surveyed are of the view that the introduction which aims to ensure beneficial ownership school age children being drawn into this of the PSC register has not had a positive transparency of entities. FinCEN director, activity. The House of Commons Treasury effect on their work, as they do not consider Kenneth A. Blanco, said that “the lack of a Committee published a report on Economic it to be a reliable source of information about requirement to collect information about Crime in October 2019 which highlighted beneficial ownership. Many stakeholders who really owns and controls a business the extent of the problem facing financial suggested that Companies House introduce and its assets at company formation is a institutions: it cited figures that Santander both validation (i.e. checks at the point of dangerous and widening gap in our national estimated it closed about 900 accounts a submission) and verification processes (e.g. security apparatus”, adding that criminals month suspected of money mule activity; checks to verify information submitted). hiding behind shell companies and the Nationwide shut 23,790 accounts over a Another possible measure to improve secrecy they afford represents “a clear and three-year period which had proven criminal quality would be the introduction of a present danger”. activity; and Metro Bank estimated it shuts unique ID for individuals on the register. around 200 mule accounts per month which This would also permit a simplified way Elsewhere globally, other jurisdictions have “received confirmed proceeds of crime”. to identify all corporate interests for an also announced updates to beneficial individual across the register. ownership reporting requirements: British CIFAS’s fraud landscape 2019 report showed Columbia will introduce new beneficial that in 2018 there were around 40,000 Measures to address the adequacy of ownership requirements from 1 May 2020 cases that “bore the hallmarks” of money beneficial ownership information were in accordance with amendments to the mule activity, a 26 percent increase on the introduced in the United States in 2019. Canadian Business Corporations Act; previous year. The Treasury Committee Information concerning the ownership the Cayman Islands has also said it will report said that it is often existing and of US-registered companies, particularly “advance legislation” to introduce public genuine accounts which are being disclosure of information pertaining registers of company beneficial ownership repurposed as money mule accounts over to private limited companies, is a well- information by 2023. time. For example, students selling their recognised issue. US states such as bank account details (sharing login details) Delaware regularly feature among lists of The involvement of money mules in money for as little as GBP 50 to GBP 100, which is jurisdictions with a high prevalence of shell laundering operations used to finish university or travel abroad. The corporations. In response, in September Committee recommended that the Financial 2019, eight US senators introduced the Money mules represent one of the most Conduct Authority should set a “challenging Improving Laundering Laws and Increasing prevalent money laundering threats across timeframe” in which an account must be Comprehensive Information Tracking of Europe, according to Europol. In December, frozen when evidence has been received by a Criminal Activity in Shell Holdings (Illicit the agency announced it had taken down a bank that it is receiving money fraudulently.
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In Northern Ireland, the Police Service of issues attract substantial public, and Northern Ireland was in November 2019 therefore government scrutiny. reported to be actively investigating more than 200 cases of fraud and internet scams The OECD’s Global Forum on Transparency laundered through money mule accounts and Exchange of Information for Tax that might run into “millions of pounds”. Purposes published its implementation Consistent with the Treasury Committee report in November 2019 on the Automatic report findings, press sources suggested Exchange of Financial Account Information that money mules might earn from GBP in Tax Matters (AEOI) which assesses the 200 to GBP 500 to allow their accounts to international community’s ability to fight tax be used to launder sums in excess of GBP evasion by going after undeclared financial 10,000. Those involved were aware it was accounts abroad. The OECD said there had “a quick way of making fast money” but are been an increase of 36 percent between “certainly aware of what is going on”. 2018 and 2019 in the number of exchanges and that 98 percent of jurisdictions have the In December, the European Payments domestic and international legal framework in tax evasion on capital income. The countries Council issued a report on the 2019 place to permit exchange of tax information. that suffered the highest losses were France payments threats and fraud trends. It said It will begin reviewing the implementation of (EUR 10.08 billion), the UK (EUR 8.52 billion) that whilst most money mule transactions AEOI by jurisdiction in 2020. and Germany (EUR 7.22 billion). Cyprus, were still not very complex, and do not Malta, Portugal and Greece within the EU involve more than one or two levels of The EU Parliament in December adopted had the largest offshore wealth relative to mules, the trend is likely to go in the direction a resolution stating that if no or limited GDP. The increase in global offshore wealth of using more complex mule or money agreement is reached internationally by 2020 is primarily driven by non-OECD countries, laundering schemes, probably often referred on measures to counteract tax avoidance led by China. to “as a service”. The report highlighted by large companies, the executive body will issues relating to lack of experience, younger act on the basis there is a “strong rationale” The EU maintains a list of non-cooperative or impressionable individuals, peer pressure, for action at EU level. However, standards jurisdictions for tax purposes, which by and the targeting of vulnerable groups within the EU itself differ markedly with November 2019 had been reduced to eight (such as low-income persons, addicts, a handful of countries pursuing low tax jurisdictions deemed to have inadequate etc). Detection of complex mule and strategies that put them at odds with other defences against tax fraud, evasion and money laundering schemes requires closer EU members. Several countries, reportedly avoidance: American Samoa, Fiji, Guam, cooperation by payment service providers, including France, Germany, Spain and Oman, Samoa, Trinidad and Tobago, the US secure and legal pooling of payment data, Austria are pressing for stronger measures Virgin Islands and Vanuata. and strong analytical tools. Such measures to protect against the risks of tax evasion would need to be cross-border and will and avoidance, but such an approach risks Separately to the EU’s list, France updated its become more important in view of the a dispute with other EU member states own list in December 2019, adding Anguilla, evolution of instant payment systems. that make use of low-tax regimes to attract the Virgin Islands, the Bahamas and the business, notably including Luxembourg, Seychelles to an existing list which includes Aggressive tax optimisation schemes and the Netherlands and Ireland. In October, Brunei, Nauru, Niue, Panama, the Marshall tax avoidance the EU published a report which estimated Islands, Guatemala and Botswana. France international tax evasion by individuals. The has taken assertive action to crack down Tax evasion and avoidance issues have report concluded that the average yearly loss on tax evasion, including a EUR 500 million remained high profile throughout 2019. to international tax evasion for 2004-2016 settlement with Google in September 2019 Whether aggressive tax optimisation was EUR 46 billion for all EU member states. in relation to the company’s tax activities schemes or personal tax avoidance, the The majority (37 percent) was lost through between 2011 and 2014.
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Rule of law in EU member states The UK National Crime information sharing mechanism through the Joint Money Laundering Intelligence The EU has also become increasingly Agency’s National Taskforce (JMLIT). In its Economic Crime concerned by activities in some of its Economic Crime Plan, published in July 2019, the UK Treasury member states, including concerns over Centre published for and Home Office set out a number of agreed weak rule of law and the impact this might actions, including the enhancement and have on its fight against financial crime. The the first time a public- expansion of JMLIT activities by July 2020. assassination of anti-corruption journalist private threat update The UK National Crime Agency’s National Daphne Caruana Galizia in Malta in 2017 Economic Crime Centre in 2019 published and the implication of Malta’s Prime Minister on economic crime, for the first time a public-private threat Joseph Muscat in the ensuing criminal drawing together update on economic crime, drawing together investigation led to the announcement intelligence provided by intelligence provided by the NCA as well as in December 2019 of Muscat’s intention a wide range of private sector organisations. to resign, following EU pressure. The the NCA as well private In a speech in October at Chatham House Conference of Presidents of the European sector organisations focusing on illicit finance and economic Parliament agreed in November to send an crime, John Glen MP, economic secretary to urgent mission to Malta to examine the rule HM Treasury, emphasised the importance of law following Daphne Caruana Galizia’s The EU has also voiced concerns over the of public-private partnerships. Glen said: murder. At the end of that month, the rule of law in Slovakia, following the murder “we also need to recognise that the private Council of Europe’s Parliamentary Assembly of investigative journalist Jan Kuciak and his sector is our first line of defence”, adding (PACE) issued a statement demanding fiancée, Martina Kusnirova, in February 2018. that the Government’s approach to tackling Muscat’s immediate resignation and the economic crime recognised “the need for far appointment of a prime minister with no The Democracy, Rule of Law and greater and easier collaboration between the conflict of interest in relation to the inquiry. Fundamental Rights Monitoring Group was public and private sectors”. The EU’s scrutiny of events in Malta followed mandated in September 2019 to monitor the publication in December 2018 of a and report on the respect of democracy and Elsewhere, both the Danish financial sector report on the rule of law in the country by fundamental rights in member states until 31 trade association, Finans Denmark, and the the Venice Commission, which identified a December 2021, when a mid-term review will Swedish Bankers’ Association have called number of shortcomings. The report urged be carried out. for the roll-out of initiatives to create public- the Maltese government and parliament private information-sharing forums to tackle to implement all of the Commission’s Public-private partnerships and public- money laundering and terrorist financing recommendations without exception. public cooperation threats. The Dutch Banking Association has also called on EU policymakers to recognise The European Parliament Civil Liberties The prevalence of financial crime and the the importance, and actively encourage the Committee (now renamed the Democracy, threat posed by increasingly sophisticated proliferation, of public-private partnerships. Rule of Law and Fundamental Rights organised crime groups has led to The Eurasian Group on Combating Money Monitoring Group) also identified concerns growing interest in effective public-private Laundering and Financing of Terrorism over investor citizenship and residence partnerships and public-public cooperation (EAG) published a report in October 2019 schemes, which allow foreigners to gain (PPC). These initiatives are recognised as summarising an international workshop to residence rights in Malta in exchange for a useful measures in the fight against financial discuss public-private partnerships. The large investment. MEPs want such schemes crime, provided that personal data security is workshop was held in conjunction with terminated without delay as they considered not infringed in the process. representatives from the UK FIU and EU’s the schemes pose “serious risks” to the fight Moneyval. The EAG recommended creating against money laundering and “result in the The UK has been at the forefront of public- an International Compliance Council under actual sale of EU citizenship”. private partnerships and has an established the EAG to promote public-private cooperation
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on money laundering and terrorist financing awareness among EG members on how out against such pressure, to a lesser or risks, share best practices in preventive FIUs could enhance their cooperation with greater extent there are signals of popular measures used by financial institutions and competent authorities to better identify, discontent within the countries affected that non-financial firms. understand and tackle money laundering may point to at least partial success of the and terrorist financing risks and to fight sanctions. In Russia, five years of declining Australia’s Fintel Alliance, which enables ML/TF and predicate offences more incomes and an unpopular decision to raise public-private cooperation, delivered a report effectively. The EG plenary found that 91 the retirement age by five years resulted in an on financial indicators of child exploitation percent of participants surveyed believed unusually strong wave of protests (by recent in November 2019. The US Financial Crimes that enhancing PPC enables FIUs to better Russia standards) against President Putin. Enforcement Network (FinCEN) Exchange, identify ML/TF risks and know how to Economic stagnation, although unlikely which was launched in December 2017, fight ML/TF and predicate offences more to cause an immediate political threat to announced additional measures in July effectively. Challenges remain in relation Putin’s regime, may have a greater impact 2019 to curtain and impede Business Email to areas such as inter-agency cooperation, on his popularity in the medium term if Compromise (BEC) scammers and others budgets and resources, the existence of sanctions are retained. Venezuela, subject that profit from their schemes. Based on legislation limiting information-sharing to a practical economic blockade by the US, FinCEN Suspicious Activity Report data, capability, technological barriers and a lack is – per US secretary of state Mike Pompeo it said that hackers and other illicit actors’ of culture for cooperation with criminal “one of the worst man-made humanitarian BEC schemes generated more than USD investigation authorities. Nevertheless, disasters in the modern world”. 300 million per month in 2018, cumulatively the EG highlighted a range of case studies amounting to billions of dollars of losses to where improved intelligence-sharing resulted The country’s international reserves have individuals and corporations. in a broader investigation and quality collapsed from USD 21.5 billion when improvements. Nicolás Maduro assumed the presidency in The 2019 European Police Chiefs 2013 to just USD 8 billion by August 2019. Convention (EPCC) in October 2019 Development of economic sanctions The country’s public debt has ballooned to stressed the need for greater engagement around USD 140 billion. Faced with crippling between law enforcement and the private Sanctioning countries, notably the United sanctions against the national oil company sector, at national and EU (Europol) level. States, made increasing use of financial PDVSA, the regime resorted to selling off Europol’s Financial Intelligence Public Private sanctions as a policy instrument throughout and/or smuggling gold, resulting in further Partnership (EFIPPP) was established in 2019, ratcheting up pressure on regimes US sanctions on this activity. Despite the December 2017, incorporating input from such as Iran and Venezuela, to change their dire financial position in Venezuela, and the eight countries (France, Germany, Belgium, behaviour. Whilst these regimes, as well as efforts of Juan Guaidó to seize control from Netherlands, Spain, Switzerland, the UK and countries such as Russia, have so far held Maduro, the latter has managed to sustain the US), 15 banks and nine national and his regime for the time being. Notably, EU supervisors. Canada’s Major Reporters Russia and China have declined to support Forum initiatives, including project PROTECT, US sanctions on Venezuela, undermining the is developing typologies based on public- extent of their potential effectiveness. private information-sharing. The US has also made increasing use In October 2019, the Egmont Group (EG) of of sanctions focusing on human rights Financial Intelligence Units (FIUs) published violations or corruption around the world, a compendium on enhancing PPC. The targeting individuals accused of such compendium was based on the outcome abuses, in some cases as a result of of the 26th Egmont Group plenary meeting investigative work carried out by NGOs and in The Hague, attended by 497 participants. public interest groups. The Global Magnitsky The goal of the meeting was to raise Sanctions, enforcing the Global Magnitsky
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Human Rights Accountability Act, has of foreign government officials in order to The regulatory response to stablecoins and resulted in sanctions against more than 70 improperly influence them to obtain or retain crypto-assets individuals, including Saudi Arabian officials investment banking business. implicated in the murder of Jamal Khashoggi. Stablecoins such as Facebook’s Libra Commodities traders, which have historically project, which are pegged to a “stable” More recently, the US has used Global avoided scrutiny because of private asset or basket of assets to minimise price Magnitsky sanctions to target individuals ownership via low-disclosure jurisdictions, volatility, have garnered significant public accused of human rights violations in have been in the spotlight in 2019; Glencore attention during 2019. Innovation continues Cuba, Iraq, Burma, Pakistan, Libya, Slovakia, announced an investigation into allegations apace, arising partly from perceived South Sudan and the Democratic Republic of bribery by the UK’s Serious Fraud Office, inefficiencies in traditional banking systems. of the Congo. In December 2019, the and the Swiss offices of Vitol and Trafigura In response, national governments and European Union said the European External were raided by Swiss prosecutors. This multilateral organisations have warned about Action Service (EEAS) would prepare followed an earlier charge against Swiss the potential for stablecoins to undermine documentation for the bloc’s equivalent commodities trader Gunvor for failing to national sovereignty and create regulatory to the US Global Magnitsky Human Rights prevent bribery. arbitrage. In June 2019, the Financial Action Accountability Act. In the Queen’s speech Task Force (FATF) issued international in December 2019, the British monarch FIFA prosecuted a number of former officials standards for combatting the money said her government proposed to develop a for their roles in bribery and corruption, laundering and terrorist financing risks Magnitsky-style sanctions regime “to directly in violation of FIFA’s Code of Ethics. This relating to virtual assets and virtual asset address human rights abuse” after Brexit. included individuals in Latin America and the service providers. Canada also pledged to build on its existing Caribbean, Equatorial Guinea, Papua New legislation targeting human rights abusers. Guinea and El Salvador. In October, FATF said it expected countries to implement these requirements “swiftly”. Bribery and corruption developments Evolving cyber threats FATF will assess how countries are implementing these measures as part Corruption remains a hot topic in financial Ransomware, encryption trojans and of its mutual evaluation process. ECB crime, and US authorities have brought a malware attacks have become increasingly president Mario Draghi said in July that number of actions in 2019 under the Foreign widespread and more sophisticated. stablecoins should be subject to the “same Corrupt Practices Act (FCPA), including According to Swiss authorities, the former business, same risks, same rules” principle, one of the largest ever - a USD 1 billion has evolved significantly in recent years, and based on a comprehensive assessment penalty against Swedish telecoms giant is now available “as a service”, even giving of their functionality. The same prudential Ericsson. The US Department of Justice individuals without significant technical supervision and oversight should apply as to said the penalty arose from Ericsson’s knowledge the ability to launch cyberattacks. fiat currencies, or other financial products. scheme to make and improperly record tens Both real-time phishing (to combat two- Draghi said that technology-neutral regulation of millions of dollars in improper payments factor authentication) and business email would prevent regulatory arbitrage. around the world. According to the DoJ, the compromise have become much more activity spanned 17 years, across at least sophisticated and professional, often In October, French and German authorities five countries, and was conducted with targeting the finance divisions of companies. said that Facebook’s plans for its Libra the involvement of high-level executives. currency do not “properly” address the risks The company did not receive full credit for In December, US authorities charged two of stablecoins being exploited by money cooperation and remediation. Russian individuals with their role in an launderers and terrorist financiers. They international malware conspiracy known indicated that monetary power is inherent to Both Deutsche Bank and Barclays settled as “Bugat”, responsible for a decade-long national sovereignty and cannot be claimed by separate FPCA probes into hiring practices. crime spree that the Department of Justice private entities. In the same month, Financial The banks were accused by US authorities called “one of the most widespread malware Stability Board chair Randal K. Quarles warned of hiring relatives, friends and associates campaigns we have encountered”. against the challenges “global” stablecoins
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posed to regulators and advised on the need to address possible regulatory gaps “as a matter of priority”.
The Bank for International Settlements followed up these comments in October when it published a report by a G7 working group on how national authorities can best deal with the money laundering and tax evasion risks of stablecoins. The G7 chair said that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are “adequately addressed”. The G7 said it would swiftly move to implement Recommendations from FATF followed the appointment of Xiangmin Liu Act – which would authorise the State on cryptoassets but recognised that as the new, Chinese president of FATF. In Department to offer financial rewards for further work may be needed to clarify the his objectives statement, Liu highlighted information leading to the disruption of extent to which activities within stablecoin that the FATF may consider the opportunity transnational criminal and terrorist networks ecosystems are covered by existing anti- to work on combatting money laundering involved in wildlife trafficking. US legislation financial crime rules. from illegal wildlife trafficking, recognising already tackles the trafficking of endangered that IWT is estimated to be the fourth most or threatened species through the Eliminate, In December, the EU Council and European profitable criminal trafficking enterprise, Neutralize, and Disrupt Wildlife Trafficking Commission echoed the G7 position when with links to modern slavery, narcotics and Act of 2016. it adopted a joint statement setting out that the arms trade. no global stablecoin arrangement should be In November, the US added Madagascar, allowed in the EU until the legal, regulatory RUSI noted that IWT has not been a priority in Laos and the Democratic Republic of the and oversight risks have been identified and the National Risk Assessments of countries Congo to its list of “countries of concern” addressed. The statement cited concerns in advance of their FATF evaluations, and as in its latest wildlife trafficking report, which relating to stablecoins over possible money a result, it is not given the same emphasis as named 29 countries in total as major laundering and terrorist financing risks, as other forms of organised crime such as the sources, transit points or consumers of well as impacts on taxation, cyber security, trafficking of humans, weapons or narcotics. wildlife trafficking products or derivatives. market integrity and the safety of payments In September, the UN General Assembly At the first high level Americas conference and financial stability. adopted a resolution urging member states on IWT in October, 20 countries signed the to take “decisive” steps to tackle IWT by Lima Declaration, which seeks to employ International wildlife trafficking and linking the offence to financial crime. The public-private partnerships to identify illicit financial crime resolution called on member states to take financial flows, criminal organisations and steps, including treating IWT as an offence networks associated with IWT. The agreed In August, a number of non-governmental predicate to money laundering and to measures also included making wildlife organisations including RUSI, TRAFFIC allow connected assets to be seized under trafficking offences serious crimes under International, the Environmental Investigation domestic proceeds of crime legislation. national legislation. The EU also issued a Agency, the World Wildlife Fund and Wildlife public consultation on the effectiveness of Justice Commission proposed seven steps The US Foreign Relations Committee in the EU’s Environmental Crime Directive of that FATF could take to tackle international September approved a bipartisan Bill – the November 2009 and will issue an evaluation wildlife trafficking (IWT). The proposals Rescuing Animals With Rewards (RAWR) of the directive in the first half of 2020.
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GUIDANCE AND ANNOUNCEMENTS
French AFA NCA calls for crackdown on fraud issues guidance The UK’s National Crime Agency greatest harm and increasing the priority (NCA) announced on 20 December of fraud across the system. for companies the issuance of a “voluntary tasking” calling for law enforcement, It applies to all police forces and regional regulatory and tax authorities to organised crime units in England and on drafting improve their response to fraud. Wales, Police Scotland, the Police Service of Northern Ireland, the Serious Fraud anti-corruption The tasking, which is the fourth issued by Office, HMRC and the FCA. the NCA under the Crime and Courts Act 2013, focuses on improving intelligence programmes The press release can be found HERE. on fraud, pursuing offenders causing the The French Anticorruption Agency (AFA) published on 19 December an updated practical guide to assist companies on building effective compliance programmes Swedbank backs AML findings to guard against corruption, CEO Jens Henriksson said in a statement focusing on the common aspects Swedbank announced on 20 that insufficient internal governance and that large corporations and small December that it has replied to controls to address deficiencies related and medium-sized enterprises Estonian and Swedish financial to suspected money laundering created need to address. supervisors’ notification letters on the findings of their anti-money a risk that Swedbank and its subsidiaries The guide provides details on the laundering investigations and were used to launder money. practical steps companies need to confirmed that it “shares many of take to establish, implement and the authorities’ observations and The press release can be found HERE. update anti-corruption programmes, preliminary conclusions”. the disciplinary system, the role of ethics and integrity officers and their interaction with senior management and other parts of the business. In setting up a compliance programme, US Nord Stream 2 sanctions notice companies are encouraged to assess the corruption risk, including concerning On 27 December, the US State suppliers and other third parties. companies from US sanctions targeting Department announced that parties the gas pipeline, the Wall Street Journal The guide mentions the example of involved in selling, leasing or reported on 27 December. some financial services businesses, providing vessels to lay gas pipes where compliance officers are for Nord Stream 2 must immediately The Nord Stream 2 pipeline, which is responsible for a wide range of tasks, cease construction-related activity designed to transport natural gas from including implementation of Financial or face visa bans and asset freezes Russia to the European Union, would Markets Authority rules, export controls, under the Protecting Europe’s Energy increase Ukraine’s “vulnerability to fraud and anti-corruption controls and Security Act of 2019, which was Russian aggression” by enabling Russia to AML procedures. signed into law on 20 December as bypass Ukraine for gas transit to Europe, Section 7503 of the National Defense according to the State Department. Authorization Act (NDAA) for 2020.
The AFA’s guide can be found HERE. German lawmakers have called on Europe The fact sheet can be found HERE. to adopt measures to protect European
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GUIDANCE AND ANNOUNCEMENTS
EU Parliament UK announces Global Anti-Corruption calls for Programme priority projects sanctions on The UK Government published strengthening existing ones; on 19 December its priorities for China over the Prosperity Fund’s Global Anti- • Increasing transparency across the Corruption Programme (GACP), public sector, on beneficial ownership abuses against which includes nine projects worth and procurement; and GBP 45.1 million to be delivered Uyghurs bilaterally, regionally and globally • Strengthening the investigation and until March 2022. recovery of stolen assets. The European Parliament (EP) In line with the UK’s Anti-Corruption The GACP’s priority countries are adopted on 19 December a Strategy 2017-2022, the priority projects Indonesia, Nigeria, Kenya, Pakistan, South resolution condemning the will focus on disincentivising corruption, Africa, Mexico and Columbia, based on Chinese government’s arbitrary reducing opportunities for corruption and the scale and trajectory of corruption, detention of the Uyghurs and other improving the recovery of illicit assets. incidence of poverty and potential export primarily Muslim ethnic minorities benefits for the UK. in the Xinjiang autonomous region The expected outcomes include: and calling on the EU Council to adopt targeted sanctions • Introducing new anti-corruption The policy paper can be found HERE. and freeze assets against the policies, laws and regulations and Chinese officials responsible for the systematic human rights violations against Uyghurs, “if deemed appropriate and effective”. US House of Representatives votes The EP notes that the EU should effectively use its export control in favour of impeaching President mechanisms to stop all exports and technology transfers of Trump over alleged abuse of power goods and services used for cyber surveillance in China and to adopt a On 18 December, the US House of 16 December an impeachment report common position on the Dual Use Representatives voted in favour of accusing President Trump of committing Regulation reform on the grounds of impeaching President Donald Trump federal crimes, including criminal bribery national security and human rights for abuse of power by allegedly and wire fraud, in his 25 July call with considerations. MEPs emphasise soliciting Ukraine’s interference Ukrainian President, Volodymyr Zelensky. that companies doing business in in the 2020 presidential election Xinjiang should make sure their supply and obstructing Congressional The report, which supplements the chains do not endorse forced labour oversight. impeachment articles passed by the or acts of repression against Uyghurs, committee on 13 December, accuses including by putting in place a robust The articles of impeachment will next Trump of criminal conduct during the human rights due diligence system. progress to the Senate, where Trump phone call by making USD 391 million in faces a trial to determine whether he military aid and a White House meeting should be convicted and removed contingent on politically motivated The resolution can be found HERE. from office. Prior to this, the US House investigations into Hunter Biden, Joe Judiciary Committee published on Biden’s son, that would benefit Trump.
22 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
GUIDANCE AND ANNOUNCEMENTS
OFSI guide on establishing whether Maersk an entity is subject to sanctions probed by
The UK’s Office of Financial Sanctions Brazilian police Implementation (OFSI) published a blog post on 17 December on how in Petrobras to establish whether a company is subject to financial sanctions, in charter particular in cases involving more complicated ownership structures contracts where it is necessary to run checks beyond the scope of OFSI’s investigation consolidated list of individuals and entities targeted by asset freezes or financial markets and services The guidance includes a case study of Brazil’s Federal Prosecutor’s Office restrictions. several high-end hotels in Africa, some announced on 18 December of them partially owned or controlled that three shipping companies, According to OFSI’s general guidance, an by a subsidiary of Libya’s Arab African including A.P. Moller-Maersk, are asset freeze and some financial services Investment Company (known as being investigated in relation to restrictions will also apply to entities LAAICO or LAICO), a designated entity contracts with Petrobras totalling that are owned or controlled, directly under the EU Libya sanctions regime. more than BRL 5 billion (USD 1.19 or indirectly, by a designated person. billion) as part of the Operation Companies are advised to carry out Car Wash, otherwise known as extensive due diligence measures and Operação Lava Jato, probe that run searches of ownership structures and The blog post can be found HERE. unveiled wide-ranging corruption control mechanisms. at state-run oil company Petrobras.
It is alleged the companies bribed Petrobras employees for privileged information on the schedule of ships Swedish regulator considers fine in used to transport oil and derivative products in order to gain an edge in bidding for contracts, federal police SEB money laundering probe said in a statement.
Sweden’s financial supervisory enough grounds for a potential Twelve search and seizure warrants authority (FI) disclosed on 18 financial penalty. were carried out and Brazilian December that it has opened a police raided the offices of Maersk. sanctions case against Skandinaviska FI expects to finalise the SEB probe in Prosecutors named shipping brokers Enskilda Banken AB (SEB), as part April 2020, while the outcome of similar Tide Maritime and Ferchem alongside of its investigations into SEB’s investigations into Swedbank is likely Maersk as targets in the probe. management and control of its money in March 2020. The FI’s investigation Maersk confirmed in a statement that laundering risks in the Baltic countries. is being conducted in cooperation with its offices in Rio de Janeiro and Sao Estonia, Latvia and Lithuania. Paulo were searched. In deciding to open a sanctions case, FI considered whether the weaknesses observed during the investigation and The statement can be found HERE. The statement can be found HERE. the circumstances to the case provided
23 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
GUIDANCE AND ANNOUNCEMENTS
US revises policy for disclosure of ESAs publish sanctions and export violations guidance for
The US Department of Justice a non-prosecution agreement and sharing AML (DOJ) announced on 13 December a will not pay a fine, absent aggravating revised policy for voluntary company factors. Where aggravating factors supervisory disclosures of sanctions and export warrant a deferred prosecution control violations to the National agreement or guilty plea, the DOJ will information Security Division’s Counterintelligence cap the fine at an amount equal to the and Export Control Section (CES). gross gain or loss and will not require the appointment of a monitor if the on EU banks The DOJ now provides that when a company has implemented an effective company voluntarily self-discloses compliance programme at that time. sanctions or export control violations to the CES, fully cooperates and timely and appropriately remediates, there is a The policy can be found HERE. presumption that the company will receive
Russia ready for Phase 3 Evaluation by OECD Working Group on Bribery The European Supervisory The OECD Working Group on Bribery in the Convention on Combating Authorities (ESAs) published on announced on 13 December that Bribery of Foreign Public Officials 16 December joint guidelines for it is ready to conduct the Phase 3 in International Business establishing supervisory “colleges” Evaluation of the Russian Federation, Transactions by October 2020. between prudential and anti-money contingent on Russia making progress laundering authorities overseeing in aligning its definition of a foreign The statement can be found HERE. financial institutions operating in the bribery offence with the definition used European Union.
The AML/CFT colleges provide a permanent structure for a firm’s supervisors in EU member states and US Department of State advisory third countries to cooperate, share information, establish a common on metal products exports to Iran approach and coordinate actions. The guidelines are intended to create The US State Department issued an The advisory urges industry to a formal cooperation framework that advisory on 16 December warning implement due diligence policies ensures “adequate and effective” AML/ individuals and companies globally prior to conducting any transfers to CFT supervision of financial institutions about US sanctions risks for parties Iran, regardless of whether Iran’s steel operating across EU member states. involved in the transfer or export of industry is involved in the transaction. graphite electrodes and needle coke to Iran, which are considered essential The advisory can be found HERE. The guidelines can be found HERE. materials for Iran’s steel industry.
24 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
GUIDANCE AND ANNOUNCEMENTS
EU Council adopts conclusions on AML/CFT priorities
The Council of the European Union to ensure better cooperation between (ECOFIN) adopted the on 5 December Financial Intelligence Units; conclusions on strategic priorities for anti-money laundering and countering • Ascertaining the role of technological the financing of terrorism (AML/CFT), innovation in combatting money laundering urging member states to implement primarily in the financial sector; and all recent legislative amendments into national law and calling on the European • Considering ways to improve AML/ Commission (EC) to identify the areas CFT supervision and achieving greater where further harmonisation of AML/ harmonisation through an AML Regulation. CFT rules is needed. The Council calls on the EC and member having direct powers in relation to certain states to report on the action points every six The Council demands that the EC acts to obliged entities; enhance the AML/CFT framework by: months, starting from June 2020. • Identifying restrictions to the effective • Exploring the possibility of establishing an exchange of information among independent body to take on future AML/ competent authorities and considering The conclusions can be found HERE. CFT supervision responsibilities, including a cross-border support mechanism
US federal agencies issue statement on bank reporting requirements concerning cannabis-related clients
In a joint statement issued on 3 The guidance notes that marijuana is still Insurance Corporation (FDIC), the Financial December, federal agencies and state a controlled substance under federal law. Crimes Enforcement Network (FinCEN), the regulators clarified that US banks are The Agriculture Improvement Act of 2018 Office of the Comptroller of the Currency no longer required to file suspicious (2018 Farm Bill) amended the definition (OCC) in conjunction with the Conference of activity reports (SARs) on all customers of marijuana to exclude hemp from the State Bank Supervisors (CSBS). involved in hemp production and should Controlled Substances Act of December instead apply standard SAR procedures 2018. The statement was issued by the The statement can be found HERE. under the Bank Secrecy Act (BSA). Federal Reserve Board, the Federal Deposit
EU Council and Commission statement on stablecoins
The EU Council and European According to the statement, stablecoins Bank (EBA) and with national and ESAs Commission (EC) adopted on 5 might pose money laundering and terrorism to ensure proportionate regulatory and December a joint statement setting out financing risks and could have an impact on oversight frameworks. that no global stablecoin arrangement taxation, cybersecurity, market integrity, the should be allowed in the EU until the safety of payments and financial stability. legal, regulatory and oversight risks The two bodies expressed their readiness The statement can be found HERE. have been identified and addressed. to work together with the European Central
25 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
REPORTS AND SPEECHES
UK audit sector review recommends Luxembourg transparency and fraud detection publishes
A UK Government backed review, AML/CFT risk published on 18 December, has found that the audit profession is in need assessment of urgent reform in order to increase confidence in business and prevent of the private further scandals, following a series of corporate collapses, including Carillion and BHS, which suggests that auditors banking sector principles, alongside a wider redefinition should be “suspicious and sceptical” in of audit and its purpose. Brydon A joint risk assessment published their work, focusing on detecting fraud recommends auditors undergo training by the Commission De Surveillance and ensuring companies can afford in forensic accounting and report Du Secteur Financier (CSSF) shareholder dividends. annually on the actions they have taken and the Luxembourg Bankers’ Association (ABBL) on 20 The author of the report, Sir Donald Brydon, to prevent and detect material fraud. December has found a “medium- states that the audit sector should be made high” risk of money laundering and independent from the wider accounting The report can be found HERE. terrorist financing in the private profession, having its own governing banking sector.
The risk assessment identifies weaknesses in private banks’ risk ECB’s partially anonymous central mitigation measures and sets out recommendations for further bank digital currency concept enhancement, which includes examples of how private banks can The European Central Bank (ECB) has CFT) requirements, which is set out go about showing compliance with developed a proof of concept (PoC) in its latest report published on 17 such recommendations. The report for a partially anonymous central bank December. also includes an appendix of red flag digital currency (CBDC) that aims indicators for three categories of to balance the desire for anonymity predicate offence particularly relevant with anti-money laundering and The report can be found HERE. to private banking in Luxembourg: tax counter terrorism financing (AML/ crimes, corruption and fraud.
Key findings include that the money laundering risks specific to the sector AML/CFT risks in Islamic banking in Luxembourg are the use of private banks by foreign individuals for tax The Islamic Financial Services Board authorities, finding no significant evasion, foreign corruption and bribery (IFSB) and the Arab Monetary Fund difference in the ML/FT risks between due to the international nature of the (AMF) published a joint working paper conventional and Islamic banking, sector and the high concentration of on 26 December on money laundering and no merit in introducing specific wealthy and politically exposed clients, and the financing of terrorism (ML/FT) regulations or measures to address the and forms of fraud including ponzi risks in Islamic banking. ML/FT risks in Islamic banking. schemes and insider trading.
The paper discusses survey responses The paper can be found HERE. The report can be found HERE. received from regulatory and supervisory
26 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
REPORTS AND SPEECHES
NAB acknowledges deficiencies at Anti-corruption annual general meeting agency project
In a statement at the 2019 National improved AML/CFT compliance finds lack Australia Bank Ltd (NAB) annual since 2016, has taken remedial general meeting on 18 December, action and implemented an internal of focus on NAB Chairman Philip Chronican culture index to assess whether admitted that the bank has not always NAB’s values are upheld. combatting met the anti-money laundering and counter terrorist financing (AML/ Chronican added that the Board “is corruption in CFT) requirements, but it maintains “a acutely aware of the risk that our close and constructive relationship” banking services could be used by those with Australia’s financial intelligence with criminal intent”. private sector unit AUSTRAC to report any potential shortcomings. According Chairman’s address can be found HERE. The French Anticorruption Agency to Chronican, NAB has significantly (AFA) published on 17 December the preliminary results of the global mapping project of national anti- corruption authorities, launched in June 2019 in partnership with the FATF warns of widespread non- Council of Europe’s Group of States Against Corruption (GRECO), the compliance by Russian FIs Organisation for Economic Co- operation and Development (OECD), In a mutual evaluation report (MER) The MER warns that Russia needs to and the Network of Corruption published on 17 December, the prioritise investigating and prosecuting Prevention Authorities. Financial Action Task Force (FATF) sophisticated and high-value money warned that Russia’s financial sector laundering cases involving financial The main conclusion of the initial survey has a “widespread and persistent institutions remitting the proceeds of of the national public authorities’ is a trend of non-compliance” with corruption abroad. FATF also expressed lack of focus on preventing corruption requirements to combat money concern over the insufficient number of in the private sector. laundering and terrorist financing on-site AML/CFT inspections of banks. and that supervisors lack effective The preliminary findings show that monetary penalties for banks that do The report can be found HERE. 125 national authorities (out of 171 not comply with AML/CFT rules. authorities in 114 countries) responded that having a code of conduct is mandatory for the public sector, but that it is a legal requirement for companies in only 22 countries. Similarly, 56 EU Payments Council threat report percent of organisations indicated that corruption risk mapping is an obligation in their countries, but only 22 authorities The European Payments Council most significant threats facing the specified that this obligation was also (EPC) published on 9 December its payments landscape. applicable to companies. annual payment threats and fraud trends report, which identifies threats related to virtual currencies, botnets, advanced persistent threats and The report can be found HERE. The fact sheet can be found HERE. mobile device related attacks, as the
27 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
REPORTS AND SPEECHES
TECHNICAL UPDATES Turkey must improve the implementation of targeted sanctions related to terrorism, states FATF
The Financial Action Task Force (FATF) proliferation, as well as swift action to links to crime, but less of an understanding published on 16 December Turkey’s address shortcomings in areas such of its exposure to terrorist financing; and mutual evaluation report (MER), as politically exposed persons (PEPs), non-financial entities, such as real estate which finds that the country has made customer due diligence (CDD) and agents, dealers in precious metal and stones significant progress in strengthening supervisory measures applicable to have a less comprehensive and sometimes its anti-money laundering and designated non-financial businesses limited understanding of the risks they face. counter terrorist financing (AML/ and professions (DNFBPs). CFT) framework, but that fundamental improvements are needed in the Highlights of the report include: the Turkish implementation of targeted financial banking sector has a good understanding of The FATF report can be found HERE. sanctions related to terrorism and its potential exposure to transactions with
Westpac admits to transaction monitoring failings
Westpac’s chairman Lindsay Maxsted Acting CEO Peter King apologised to functions. According to Maxsted, a admitted to shareholders on 12 individuals harmed by Westpac’s “mistake” historic “mistake” in applying Westpac’s December that the bank should have and said the bank will implement every correspondent banking system to two global implemented “more robust” transaction aspect of its response plan to address banks also led to Westpac’s failure to report monitoring sooner than it did, and that compliance gaps and prevent any more than 20 million international fund its delay in doing so led to failings recurrence. He said the bank has introduced transfer instructions (IFTIs). in reporting possible child sexual additional transaction monitoring and exploitation in the Philippines and is recruiting 200 more people for its Chairman’s address can be found HERE. Southeast Asia. compliance and anti-financial crime
French financial markets authority’s thematic review of cybersecurity at asset management companies
The French Financial Markets Authority 2018 and assessed the effectiveness of specific asset management business and (AMF) published on 16 December a internal cybersecurity measures as well regulatory needs. thematic review of its 2019 inspections as the proper definition of cyber risks by of cybersecurity systems in six asset companies. In relation to AMCs which are The review identifies a series of management companies (AMCs), in part of a larger group, the review reveals vulnerabilities, namely limiting cyber risk view of the increased cybersecurity that subsidiaries generally rely on the parent to operational risk only and deficiencies in threats facing the financial market. bank for adequate supervision of IT services, cyber incident management processes. cybersecurity and business continuity The targeted inspections covered the period plans, which potentially generates high-risk The thematic review can be found HERE. from 1 January 2016 to 31 December situations given the lack of focus on the
28 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
LEGISLATION
UK confirms scope and timeline of US passes Money Laundering Regulations 2019 law to impose
On 20 December, the UK Money Under the MLRs 2019, sanctions over Laundering and Terrorist Financing (Amendment) Regulations 2019 firms are required Nord Stream (MLRs 2019) were laid before to understand the Parliament together with an ownership and control explanatory memorandum by HM 2, TurkStream Treasury. structure of corporate clients and report data involvement Under the MLRs 2019, firms are required to understand the ownership and control discrepancies On 20 December, US President structure of corporate clients and report Donald Trump signed into law discrepancies with data contained in (5MLD). The regulations come into force measures to impose visa bans the Companies House Register. The on 10 January 2020, with the exception and asset freezes on parties regulations also include new risk-based of Regulation 5(5)(c) on customer due involved in selling, leasing or criteria for enhanced due diligence and diligence for anonymous prepaid cards; providing vessels to lay gas lower e-money thresholds for customer and Regulations 6 and 12(b) on bank pipes for the Nord Stream 2 due diligence. account portals. project, TurkStream pipeline or successor projects after a The regulations update the Money stipulated wind-down period. Laundering, Terrorist Financing and The MLRs 2019 can be found HERE. Transfer of Funds (Information on the The Protecting Europe’s Energy Payer) Regulations 2017 to incorporate Security Act of 2019 (PEESA) was standards set by the FATF and transpose The memorandum can be found HERE. signed into law as Section 7503 of the EU’s Fifth Money Laundering Directive the National Defense Authorization Act (NDAA) for 2020. The Nord Stream 2 pipeline is designed to transport natural gas from Russia UK plans to introduce Magnitsky to the European Union, while TurkStream plans to supply Russian sanctions and boost AML legislation natural gas to Turkey, south and southeast Europe. Britain’s monarch delivered on 19 EU, “building on existing Magnitsky-style The US Department of the Treasury’s December a speech announcing the measures and developing the powers Office of Foreign Assets Control new Government’s legislative and to tackle human rights abusers around (OFAC) issued a new Ukraine-/ reform plans, including a proposal to the world”. Additionally, the Registration Russia-related frequently asked develop a Magnitsky sanctions regime of Overseas Entities Bill will be aimed question (FAQ) on 20 December, “to directly address human rights at strengthening AML measures and which provides insight into how the abuse” after Brexit and strengthen transparency in the UK property market. US government plans to implement financial services legislation to fight the wind-down specified in Section money laundering and achieve greater 7503(d) of the NDAA. transparency in the UK property market. Queen’s speech can be found HERE.
The accompanying legislative pack mentions that the UK will develop an independent Legislative pack can be found HERE. Statement can be found HERE. sanctions regime after the UK leaves the
29 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
LEGISLATION
EU extends economic sanctions UK’s Senior against Russia for six months Managers
The Council of the European Union implementation of the Minsk agreements. and adopted on 19 December a decision extending the economic sanctions The restrictive measures which respond Certification targeting Russia’s energy, finance, to Russia’s actions to destabilise the defence sector and dual-use goods by situation in Ukraine were imposed through Regime six months, until 31 July 2020, given EU Council Decision 2014/512/CFSP of 31 the lack of implementation of the July 2014 and strengthened in September extended to Minsk agreements, approved in 2014 2014. The sanctions were renewed on 27 in response to the crisis in Ukraine. June, when the Council adopted Decision (CFSP) 2019/1108 to extend the sanctions solo-regulated The decision follows an update by until 31 January 2020. French President Emmanuel Macron and firms German Chancellor Angela Merkel to the The press release can be found HERE. European Council on 12 December on the
US Foreign Relations Committee advances Russia sanctions bill
The US Senate Foreign Relations on Russia, targets of DASKA would Committee voted on 18 December include Russian banks that support to approve the Defending American efforts to interfere in foreign elections, The UK Senior Managers and Security from Kremlin Aggression the country’s cyber sector, Russian Certification Regime (SMCR) has Act 2019 (DASKA) by a vote of sovereign debt, as well as measures been extended from 9 December 17-5, advancing the bipartisan bill on Russia’s oil and gas sector. to cover all solo-regulated firms. to the Senate for full consideration. SMCR now applies to almost all Dubbed the ‘bill from hell’ because Financial and Services Markets The bill can be found HERE. of the proposed ‘crippling’ sanctions Act (FSMA) authorised firms, as well as branches of non-UK firms with permission to carry out regulated activities in the UK. Panama approves bill to create The extension of SMCR to solo- regulated firms now covers beneficial ownership register approximately 47,000 more financial services firms including hedge funds, Under Bill 169, resident agents of legal Panama’s National Assembly approved asset manager and independent entities incorporated in Panama would be on 19 December a Bill that would financial advisers. SMCR has been in required to file information collected on create a national register of the place for larger firms since 2016. beneficial owners of legal entities, individuals who own or control the entities. as part of efforts to help authorities counteract money laundering through The press release can be found HERE. The statement can be found HERE. shell companies.
30 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
LEGISLATION
US extends global Magnitsky sanctions for one year
US President Donald Trump issued Executive Order 13818 of 20 December outside the US continues to pose an on 18 December a notice extending 2017, pursuant to the US International extraordinary threat to the national security, for one year the national emergency Emergency Economic Powers Act. foreign policy, and economy of the US. with respect to serious human rights abuse and corruption around the world, The notice states that the prevalence of The press release can be found HERE. declared by the Global Magnitsky corruption and human rights violations
EU Parliament backs proposal on e-commerce VAT fraud
On 17 December, the European The draft regulation and directive are now would also be required to collect cross-border Parliament announced that MEPs have pending adoption by the European Council. e-commerce payment records. notified their support for two pieces of The proposed measures would create a legislation proposed by the European central electronic storage system to help Commission in December 2018 to anti-fraud authorities process tax payment The press release can be found HERE. combat VAT fraud in the EU. information. Payment service providers
UN renews Taliban-linked sanctions in Afghanistan
The UN Security Council adopted information on sanctions non- sanctions concerning individuals and entities on 16 December resolution 2501 compliance. and other groups and undertakings associated (2019) renewing the restrictive with the Taliban in constituting a threat to the measures against individuals and The Security Council notes that the measures peace, stability and security of Afghanistan. entities associated with the Taliban are needed to “contribute to security and in Afghanistan and extending for 12 reconciliation in Afghanistan”. The Taliban- months the mandate of the sanctions linked sanctions regime was set out in The press release can be found HERE. monitoring team to continue gathering resolution 2255 of 21 December 2015 on
US bill would impose sanctions on Mexican drug cartels
A bill to amend the US Immigration organisations (TCO) in order to impose individuals providing material assistance and Nationality Act, referred to as the sanctions on Mexican-led transnational drug or resources to a TCO. In addition, the bill Significant Transnational Criminal cartels. The bill asks the US Attorney General demands that the US President submit a Organization Designation Act, was to determine a TCO designation. report to Congress on the Government’s introduced to the US Senate on 12 findings about the attack on US citizens in December. The list of potential sanctions against TCOs northern Mexico on 4 November. would include visa bans for their members, spouses and children, asset freezes and The bill proposes creating the ability to The press release can be found HERE. designate significant transnational criminal potential civil and criminal penalties against
31 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
CONSULTATIONS
EU Commission consults on crypto- UK regulators assets and operational resilience consult on
The EU Commission announced on and other risks as it becomes building 19 December the launched of two increasingly reliant on ICT. consultations on digitalisation in operational the financial sector; the first seeks The consultations are open for comment views on the suitability of the existing until 12 March 2020. resilience in the regulatory framework for crypto- assets including stablecoins; the 1st consultation can be found HERE. second seeks feedback on how the financial sector existing legislative framework can be improved to ensure that the financial 2nd consultation can be found HERE. The Bank of England, the UK’s sector can deal with cyberattacks Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) published on 5 December a shared policy summary UK FCA consults on open finance and coordinated consultation papers (CPs) on new requirements The UK’s Financial Conduct Authority The deadline for responses to the call to strengthen operational resilience (FCA) called on 17 December for input for input is 17 March 2020. in the financial services sector, in on the risks and opportunities posed response to cyberattacks and other by plans to extend open banking potential technology failures. principles to the general insurance, The call for input can be found HERE. cash savings and mortgage markets. As part of the joint effort, the FCA issued consultation paper (CP) 19/32, setting out expectations for banks and other firms to identify ways in which disruption of business services Basel Committee working paper on can impact consumers and business integrity, map and test their important the treatment of crypto-assets business services based on disruption scenarios to identify key vulnerabilities The Basel Committee of the Bank concerning the prudential regulation of and develop self-assessment for International Settlements (BIS) crypto-assets, including: the features documents and communications plans. published a discussion paper on and risk characteristics of crypto-assets 12 December that outlines a set of that should inform the design of their The PRA and the Bank of England tentative ideas for the prudential prudential treatment; and general have also issued consultation papers, treatment of crypto-assets. principles and considerations to guide supervisory statements and a the design for the prudential treatment of statement of policy. Amidst a rapidly expanding crypto-asset banks’ exposures to crypto-assets. market, the Committee suggests that Comments to the consultations can be crypto-assets have the potential to increase The Committee welcomes comments on submitted until 3 April 2020. both financial stability concerns and risks the working paper until 13 March 2020. faced by banks. As such, the Committee has released a discussion to seek input The paper can be found HERE. Press release can be found HERE. from various stakeholders on several areas
32 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
PRESS & MEDIA
Angolan court freezes assets of Formations Isabel dos Santos and associates House accused
An Angolan court froze on 23 Angola and their stakes in nine Angolan of facilitating December the assets of Isabel dos companies. The Angolan Government is Santos, her husband Sindika Dokolo reportedly also seeking to freeze Isabel organised crime and Banco de Fomento Angola’s dos Santos’ international assets. chairman Mário Leite da Silva for allegedly causing more than USD In a series of tweets on 1 January, dos An investigation by the Organized 1 billion in state losses, Reuters Santos, the daughter of the former Crime and Corruption Reporting reported on 31 December. president José Eduardo dos Santos, Project (OCCRP), alongside condemned the charges against her investigative journalists from The The asset freeze reportedly applies to the as politically motivated and based on Times (UK) and partner media three individuals’ personal bank accounts in “fabricated” evidence. outlets in 18 countries disclosed on 4 December that companies created by Formations House, a UK company set up by Pakistan-born Nadeem Khan, were allegedly used by criminals to Billionaire’s loan to mining company carry out scams worth more than GBP 300 million and avoid anti-money probed by Congolese prosecutors laundering reporting requirements.
An investigation by Reuters Two sources at the Democratic The claims are based on a series of published on 23 December Republic of the Congo’s Prosecutor’s leaked Formations House internal records claims that prosecutors in the Office and two at the presidency obtained by Distributed Denial of Secrets Democratic Republic of the Congo reportedly told Reuters that the Group, known as #29Leaks, which cover are investigating a EUR 200 million investigation is focused on possible the period from 2008 to 2018. According loan to the Congolese state mining money laundering and fraud related to the investigation, Formations House company, Gecamines, by a company to a loan issued in October 2017 by created a web of companies, bank owned by sanctioned Israeli Gertler’s Fleurette Mumi, which has accounts and its own shadow business billionaire Dan Gertler. been renamed Ventora Development. registry in Gambia, which were used by fraudsters and organised criminals around the world in scams including overpriced real estate investment schemes, gold Equatorial Guinea president must and diamond trading, public procurement declare assets to receive IMF loan fraud and illegal cannabis plantations. The Times disclosed in a second article President Teodoro Obiang Nguema On 18 December, the IMF agreed to a published on 7 December that Formations Mbasogo of Equatorial Guinea, must programme worth USD 283 million to House helped Naftiran Intertrade Co, a publicly declare his assets before help the country’s economy mitigate the subsidiary of designated Iranian state- the nation receives more financial effects of the crisis, of which USD 40 owned oil company National Iranian support to help tackle their current million has been sent, according to an Oil Company (Nico), switch domiciles economic crisis, according to a IMF report. The remaining funds will be repeatedly in violation of US sanctions telephone interview with Lisandro released once the regime has declared on Iran with the help of its Swiss partner. Abrego on 27 December, the their assets and the country has joined Formations House helped create over International Monetary Fund’s (IMF) the Extractive Industries Transparency 400,000 companies, partnerships and mission chief for Equatorial Guinea, Initiative, which promotes good trusts and sold ready-made companies in quoted by Bloomberg. governance in the oil sector. the BVI, the Seychelles, and Panama.
33 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2019
PRESS & MEDIA
UK Home Secretary on tackling internationalised crime
In an op-ed for the Sunday Telegraph The following plans were outlined: • Increased security against illicit goods such on 28 December, UK Home Secretary as drugs and firearms by collecting pre- Priti Patel outlined plans to tackle • Legislation will be introduced in January arrival goods data to target criminals and violent crime in the UK, stating that to “transform Interpol red notices from our stop smuggling; and criminal activity has become “more close partners into a powerful new tool for internationalised”, with trafficked guns, law enforcement”; • Electronic travel authorisations will be weapons and drugs that originate required to enter the UK, allowing pre- elsewhere fuelling crime. • Reaffirming the UK’s contribution to Europol; screening before people arrive at the border.
Maltese investment fund managing Holy See assets reportedly linked to money laundering cases
The Vatican’s Catholic News Agency Enrico Crasso, an Italian resident based in investigation and was also involved in a case (CNA) reported on 9 December that Switzerland who manages the Centurion involving an alleged USD 62 million bribe paid Centurion Global Fund, a Malta-based fund, was allegedly responsible for a list of to a PDVSA official. Additionally, Centurion’s investment fund managing the Vatican controversial investments in 2018, including formal investment manager, Malta-based Secretariat of State’s assets, is under Hollywood films, real estate and an eyewear group Gamma Capital, was owned by a investigation by Holy See authorities company. former senior manager of the now-closed after it emerged that it has links with Swiss bank BSI, which was found in 2016 two Swiss banks Banca Zarattini and The fund is reportedly responsible for at least in serious breach of anti-money laundering BSI, previously involved in bribery and EUR 46 million of Holy See assets. The CNA regulations. money laundering cases. investigation subsequently revealed that all Centurion investment funds were held by The Holy See Press Office reportedly The investigation was instigated by a Swiss bank Banca Zarattini, which had been confirmed on 4 December that “investigations report from Italian newspaper Corriere della holding accounts seized in the Petróleos de are in progress” concerning the Centurion Serra, which disclosed on 4 December that Venezuela, S.A. (PDVSA) money laundering fund investments.
Monaco drops charges against Swiss art dealer Bouvier
According to media reports, the Council of artwork to Rybolovlev, including were conducted in a biased and unfair Chamber of the Monaco Court of Leonardo da Vinci’s Salvator Mundi. way” and “the evidence in the proceedings Appeal dismissed a long-running fraud was collected under conditions which and money laundering case on 12 According to Rybolovlev’s lawyers, Bouvier significantly undermined the rights of the December against prominent art dealer initially negotiated lower prices for the defendant”, according to the Financial Times. Yves Bouvier, who was arrested in 2015 art and resold it to Rybolovlev at inflated and accused of defrauding Russian prices as part of a fraudulent scheme. In connection with the case against Bouvier, businessman and AS Monaco president The ruling has not been made public as Monaco prosecutors indicted Rybolovlev Dmitry Rybolovlev of up to USD 1 billion the proceedings continue in Monaco and himself with influence peddling in 2018, after in artwork purchases over more than proceedings are ongoing in France, the allegations emerged of controversial links ten years. Reuters reported that Bouvier US, Singapore, and Switzerland. The Court with members of Monaco’s judiciary and sold more than USD 2 billion worth of Appeal stated that the “investigations government.
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