October 2018 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 Find out more about the Aperio Intelligence Team at: networks. Critical to our intelligence-gathering capabilities are the www.aperio-intelligence.com languages we speak in-house, including all major European languages, as well as Russian, Arabic, Farsi, Mandarin, Cantonese and Japanese.
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SPECIAL FEATURE 17 Welcome to the October edition of the Financial Crime EVADING TRUMP: HOW IRAN CIRCUMVENTS SANCTIONS Digest, Aperio Intelligence’s monthly newsletter, an PRESS AND MEDIA 23 informative summary of the most recent developments MONEY LAUNDERING | FRAUD | TERRORIST FINANCING relating to the world of money laundering, fraud and PRESS AND MEDIA 37 terrorist financing, bribery and corruption, and sanctions. BRIBERY | CORRUPTION [email protected] PRESS AND MEDIA 46 SANCTIONS
COUNTRY UPDATES 53
BOOK REVIEW 55
TECHNICAL UPDATES
High Court dismisses challenge to NCA’s UWO
The High Court of England and Wales could have had independent capital. The dismissed a legal challenge against ruling also refused permission to appeal. the National Crime Agency’s (NCA) first ever unexplained wealth order According to court documents, the first (UWO) on 3 October, in National UWO relates to a house on Walton Street, Crime Agency v. Mrs A [2018] EWHC London, which was bought for GBP 11.5 2534 (Admin), which means that million in 2009 by a British Virgin Islands (BVI) Photo: East2West News the respondent – Mrs A, who has company, Vicksburg Global Inc. According been officially identified as Zamira to the High Court’s ruling, in June 2015, Hajiyeva, wife of former Chair of Mrs Hajiyeva informed the Home Office that was not commensurate with their known the International Bank of Azerbaijan during her application for indefinite leave to sources of income. The NCA described how (IBA) Jahangir Hajiyeva – must now remain that she was the beneficial owner of Mrs Hajiyeva spent GBP 16 million at Harrods explain how she was able to afford Vicksburg Global. However, according to the using credit cards issued by the IBA during GBP 22 million worth of UK property. ruling this appears to be contradicted by the a ten-year period. The NCA also provided BVI’s Financial Investigation Agency which evidence that suggests that Mr Hajiyeva is The High Court ruling rejected Mrs in 2018 informed the NCA that Mr Hajiyeva registered as the beneficiary of a company Hajiyeva’s challenge to the UWO on all was the beneficial owner of Vicksburg Global. which used a GBP 32.36 million loan to buy a eight grounds, which included that Mr The second UWO was issued in relation to Gulfstream jet, and Mrs Hajiyeva had sought Hajiyeva was not a PEP and that the NCA, land on which Mill Ride Golf Club is located. a fast track to UK residency through the Tier in the ex-parte assertion that there were Mrs Hajiyeva is said to have purchased this 1 Investor visa system. Mr Hajiyeva was reasonable grounds to suspect any monies property in 2013 for GBP 10.5 million, using a convicted in 2016 for his part in embezzling of Mrs Hajiyeva, originating from Mr Guernsey company called Natura Limited. GBP 109 million from the IBA. Hajiyeva, were not lawfully obtained, had not established the “income requirement” The NCA also showed the court evidence of The court ruling can be found HERE. to the relevant standard, as Mrs Hajiyeva the couple exhibiting a pattern of spending
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TECHNICAL UPDATES
UK exposes Russian military service cyber attacks, US indicts Russian officers and EU calls for new measures to combat illegal cyber activities
The UK government exposed on 4 fraud, aggravated identity theft, and money Council is calling for measures to combat illegal October a campaign by the Russian laundering. According to the indictment, cyber activities. In this context, the Council has military intelligence service, the GRU, beginning in or around December 2014 asked ministers to work on a sanctions regime of “indiscriminate” and “reckless” cyber and continuing until at least May 2018, that will be specific to cyber attacks. attacks targeting political institutions, the conspiracy conducted persistent and businesses, media and sport. sophisticated computer intrusions based The NCSC published its annual review 2018 on their strategic interest to the Russian on 16 October, which reveals that the NCSC GRU officers were also identified as being government. has helped to support 1,167 cyber incidents responsible for the nerve agent attack – including 557 in the last 12 months. The in Salisbury, the attempted hack of the The defendants, all Russian nationals and report reveals the majority of attacks against Organisation for the Prohibition of Chemical residents, are Aleksei Sergeyevich Morenets, the UK are carried out by hostile nation states. Weapons (OPCW) and having travelled Evgenii Mikhaylovich Serebriakov, Ivan under diplomatic cover to target the MH17 Sergeyevich Yermakov, Artem Andreyevich investigation in Malaysia and a World Anti- Malyshev, and Dmitriy Sergeyevich Badin, who Doping Agency conference in Switzerland. were each assigned to Military Unit 26165, The UK government’s press release and Oleg Mikhaylovich Sotnikov and Alexey can be found HERE. The government’s press release provides a list Valerevich Minin, who were also GRU officers. of the cyber actors and the attacks, which have been identified by the National Cyber Security After a meeting at the European Council on 18 The DOJ’s press release can be Centre (NCSC) to be associated with the GRU. October president Donald Tusk confirmed that found HERE. in light of the cyber attack against the OPCW, the UK Ambassador to the Netherlands, Peter Wilson, issued a statement on behalf of Europe Minister Alan Duncan on the details of the attempted hack of the OPCW by the GRU. The disruption of this attempted attack was carried out by the Dutch security services, in partnership with the UK.
Meanwhile, the US unsealed an indictment against GRU officers for various malicious cyber activities on the same day, which charges some of the same Russian operatives caught in The Hague, along with their colleagues in Moscow, as part of a conspiracy to hack a variety of individuals and organisations, in the US, Canada, and Europe.
Seven defendants, all officers in the GRU Photo: Metropolitan Police were indicted for computer hacking, wire
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TECHNICAL UPDATES
OECD publishes list of high-risk “golden visa” schemes and Transparency International publishes joint report
The Organisation for Economic Co- Grenada, Malaysia, Malta, Mauritius, Monaco, posed by schemes for the EU as a whole and operation and Development (OECD) Montserrat, Panama, Qatar, Saint Kitts and mitigate accordingly; seek to broaden anti- has published a list of citizenship Nevis, Saint Lucia, Seychelles, Turks and money laundering rules so they apply to all and residence by investment (CBI/ Caicos Islands, the UAE and Vanuatu. players in the golden visa industry; establish RBI) schemes that potentially pose a mechanisms for collecting and coordinating high-risk to the integrity of OECD/G20 The OECD explains that in particular, information on applications, investment and Common Reporting Standard (CRS) identity cards, residence permits and other rejections; and start legal proceedings against on 16 October, following its analysis documentation obtained through CBI/ member states whose schemes could of over 100 schemes offered by CRS- RBI schemes can potentially be abused to undermine the security of EU nations. committed jurisdictions. The OECD’s misrepresent an individual’s jurisdictions of analysis finds that CBI/RBI schemes, tax residence and endanger the operation of The report identifies Malta’s scheme as often referred to as “golden passports” the CRS due diligence procedures. having awarded passports to three Russian or visas, can potentially be misused to investors, who appear on the US “Kremlin hide assets held abroad. Together with the results of its analysis, the list” of wealthy individuals believed to be OECD also published practical guidance to close to president Vladimir Putin and who The OECD states that the potentially high- enable financial institutions to identify and could have been enriched through corruption. risk CBI/RBI schemes are those that give prevent cases of CRS avoidance through Transparency International and Global access to a low personal tax rate on income the use of such schemes. Where there are Witness call on the EU to take action to set from foreign financial assets and do not doubts regarding the tax residences of a CBI/ common standards and mechanisms for require an individual to spend a significant RBI user, the OECD has recommended further reducing the corruption risk posed by golden amount of time in the jurisdiction offering questions that a financial institution may raise visa programmes. the scheme. The schemes identified as with the account holder. high-risk by the OECD are those operated by The Financial Times reported on 10 October Antigua and Barbuda, The Bahamas, Bahrain, Going forward, the OECD will work with CRS- that the EU Commission will publish a Barbados, Colombia, Cyprus, Dominica, committed jurisdictions, as well as financial report on citizenship schemes in November, institutions, to ensure that the guidance and following the tax evasion and money other OECD measures remain effective in laundering concerns raised. ensuring that foreign income is reported to the actual jurisdiction of residence. Separately, the Guardian published the findings of an investigation on 16 October Transparency International and Global that claims to have established how a small Witness, published a joint report on 10 firm of wealth advisers built up a USD 3 October, entitled “European Gateway: Inside billion ‘golden passports’ industry and gained the Murky World of Golden Visas,” which influence in the Caribbean. analyses CBI/RBI schemes and highlights the corruption risks posed by the sale of citizenship and residency and how these schemes threaten the integrity of the EU. The OECD’s analysis can be found HERE.
The report calls on EU institutions to: set EU-wide standards for golden visa schemes, The report by Transparency International including enhanced due diligence and and Global Witness can be found HERE. transparency; identify and assess the risks
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TECHNICAL UPDATES
UK announces FCA publishes review on ML/TF specialist unit risks in the e-money sector to combat The UK’s Financial Conduct Authority effective AML systems and controls, (FCA) published the findings of its revised and updated policies and organised thematic review TR18/3 into money procedures to comply with the Money laundering and terrorist financing Laundering, Terrorist Financing and crime in prison risks in the e-money sector on 3 Transfer of Funds (Information on the October, which found that the majority Payer) Regulations 2017, and effective of e-money institutions (EMIs) had transaction monitoring. However, the effective controls but identified review highlighted potential weaknesses potential weaknesses. which firms should be aware of, including narrow staff training, too generic business- The FCA visited 13 EMIs to assess their wide risk assessments, and risk scoring anti-money laundering (AML) and counter methodologies that omit retail customers. terrorist financing control framework, focusing on e-money products, including prepaid cards and digital wallets. The The FCA’s review can be found HERE. FCA found that the majority of EMIs had UK Justice Secretary, David Gauke, announced on 2 October the setting up of a new specialist unit to identify and freeze bank APP Scams Steering Group publishes draft accounts linked to organised crime in prisons, which will see voluntary code for consultation prison and police officers use intelligence to monitor bank The UK’s Authorised Push Payment consumers could be reimbursed if neither accounts for signs of illicit (APP) Scams Steering Group published they, nor the PSP, is at fault. It is also seeking transactions. its draft voluntary code, designed views on the evidential approach that should to help prevent APP scams and underpin the code; how disputes between Transactions used by inmates to better protect consumers, for public banks and PSPs should be resolved; and who pay for drugs are to be targeted by consultation on 28 September. should oversee the code once finalised.The the unit, who will be able to freeze Steering Group intends to publish the code in bank accounts and initiate criminal The code is based on a ‘contingent early 2019. proceedings against those involved. reimbursement’ model, which sets out the Money laundering in prisons is circumstances in which victims of APP fraud The consultation closes on 15 November. widespread, with much of the activity can expect to be reimbursed, establishes taking place through individual, low- the principle that where customers have met The UK’s Payment Systems Regulator value transactions between external the “requisite level of care” they should be (PSR), which set up the Steering Group, has bank accounts, explains the UK reimbursed for losses incurred, and sets out announced its support for the draft code and government’s press release. The unit, the matters to be taken into account when confirmed it plans to consult, by December based in Peterborough, was due to assessing whether that level of care has been 2018, on using its regulatory powers to issue become fully operational in October. met. It also sets out the steps that banks and a General Direction to banks and PSPs to other payment service providers (PSP) should implement confirmation of payee (see page 9). take to protect customers. The UK Government’s press release can be found HERE. The Steering Group is seeking views on a The consultation can be found HERE. suitable funding mechanism through which
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TECHNICAL UPDATES
EU Council adopts new anti-money laundering directive
The European Council adopted a new anti-money laundering directive on 11 October, which introduces new criminal law provisions that aim to disrupt and block access by criminals to financial resources, including those used for terrorist activities.
The new rules include:
• establishing minimum rules on the definition of criminal offences and sanctions relating to money laundering. Money laundering activities will be punishable by a maximum term of imprisonment of four years, and which member state has jurisdiction, between anti-money laundering and prudential judges may impose additional sanctions and how those member states involved supervisors so as to create an efficient and measures. Aggravating circumstances cooperate, as well as how to involve Eurojust. monitoring framework. will apply to cases linked to criminal organisations or for offences conducted in Once the directive is published in the EU official The Council also adopted a regulation the exercise of certain professional activities; journal, member states have up to 24 months tightening controls on cash entering or leaving to transpose it into national law. the Union, bringing EU legislation in line with • the possibility of holding legal entities liable international standards on combating money for certain money laundering activities which In addition, the European Commission laundering and terrorism financing. can face a range of sanctions (e.g. exclusion presented its new proposal, to strengthen the from public aid, placement under judicial role of the European Banking Authority (EBA) supervision, judicial winding-up, etc); and in supervising EU financial institutions, to the The Council’s press release can be Council on 2 October. found HERE. • removing obstacles to cross-border judicial and police cooperation by setting common Finance ministers stressed the importance provisions to improve investigations. For of proper implementation of EU rules on anti- The proposal can be tracked HERE. cross-border cases, the new rules clarify money laundering and enhancing cooperation
European Parliament approves Eurojust and VAT reforms
The EU Parliament approved updated border crime. The reforms will permit trade within the single market and reduce rules on 4 October to clarify the Eurojust to work with the new European VAT fraud and the other that aims to set up a role of Eurojust, the EU agency for Public Prosecutor’s Office and give more clearer system of VAT rates. The Parliament criminal justice cooperation, and control to the Parliament and national also proposed improvements to the improve its effectiveness. parliaments in the activities of the agency. proposals that will now pass to the Council.
The changes to the functioning and Meanwhile, the EU Parliament approved on structure of Eurojust, including a new 3 October the majority of proposed reforms The Eurojust release can be found HERE governance model, aim to make the to the VAT system. Two pieces of legislation and the VAT release can be found HERE. agency more efficient at tackling cross- were approved: one that aims to facilitate
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TECHNICAL UPDATES
EU Parliament adopts new rules on Treasury confiscation of criminal assets confirms GBP
The European Parliament approved ensure that EU countries act faster and 50 note will new rules on 4 October that aim to communicate more efficiently; make it easier for EU member states remain part of to ask each other to freeze criminal • wider scope: EU countries will be able assets or confiscate criminal property. to confiscate assets from other people connected to the criminal and can act in UK currency The new measures include: cases where there is no conviction; and
• the introduction of deadlines: an EU • victims’ rights: victims will be the first country that receives a confiscation order in line to receive compensation when from another member state will have 45 confiscated assets are distributed. days to execute the order, cross-border freezing orders have to be executed with The new rules still require the formal the same speed and priority as national approval of the Council and will apply 24 orders. Authorities will have four days to months after entry into force. freeze the assets if the request is urgent;
• standardised documents: standard The press release can be found HERE. certificates and forms will be used to
FCA consults on proposed fees to recover the costs of OPBAS
The UK’s Financial Conduct Authority with the annual reports they submit to (FCA) launched a consultation on 18 the Treasury; and October on the proposed fee-rate to HM Treasury unveiled on 13 October charge professional body supervisors • allowing PBSs to submit their figures plans for a new, more secure GBP 50 (PBSs) in 2018/19 to recover the for the 2019/20 fees by 28 February note despite concerns over criminal costs of the Office for Professional 2019 instead of 31 October 2018, since use of large denomination notes. Body Anti-Money Laundering the rules will not come into effect until Supervision (OPBAS). The FCA is January 2019. Following a public consultation, the UK also consulting on the timetable for government has confirmed that the The FCA has also confirmed that it will reporting data and the fee structure. current mix of coins and notes will remain. charge a minimum fee of GBP 5,000 for The Bank of England said that it has PBSs supervising up to 6,000 individuals. Consultation CP18/32 proposes: started the process of designing the new note, which will be introduced after 2020. • charging a fee of GBP 45.49 per The consultation closes on 14 December. supervised individual for 2018/19;
• aligning the timetable for reporting the The press release can be found HERE. The press release can be found HERE. number of individuals PBSs supervise
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TECHNICAL UPDATES
EU Parliament Freezing order against “persons adopts non- unknown” in cyber fraud case legislative The English Commercial Court resolution on DLT released its written judgment in CMOC Sales & Marketing Limited and blockchain v Persons Unknown & 30 ors [2018] EWHC 2230 (Comm) on 20 September, in which the court granted The European Parliament adopted final proprietary relief and damages at a non-legislative resolution on trial in cyber fraud litigation that saw distributed ledger technology (DLT) the first known worldwide freezing and blockchain on 3 October, which and proprietary injunctions against discusses potential benefits from the persons unknown. application of DLT in various sectors of the economy, including financial The case concerned a cyber fraud in which services, and sets out the suggested persons unknown caused CMOC’s London regulatory approach. bank to pay out sums of USD 8 million to accounts in 19 jurisdictions around the The European world. In the period between discovering the fraud and the trial, CMOC was engaged The plaintiff obtained disclosure orders Parliament welcomes in an extensive asset tracing and freezing against the banks and accounts into which the current approach not exercise to lay the groundwork for recovery the stolen funds had been paid, thereby of the stolen funds, but struggled to identify identifying further defendants to the action. to regulate DLT directly the perpetrators and recipients of the funds. As a consequence, the court granted a worldwide freezing order against “persons The court ruling can be found HERE. According to the Parliament, to foster unknown,” the perpetrators of the fraud. the opportunities of DLT, an innovation- friendly, enabling legal framework, developed on the basis of technology neutrality is necessary. Such a framework would promote legal certainty and provide Pay.UK announces “confirmation for safeguards to ensure consumer, investor and environmental protection of payee” service to combat fraud and facilitate efforts to prevent corruption, tax evasion, unlawful payments, AML and Pay.UK, the UK’s retail payment an electronic payment, which has been misappropriation of assets. authority, announced the new exploited by fraudsters. “confirmation of payee” service on 18 The Parliament welcomes the current October, which aims to help prevent The Payment Systems Regulator has approach not to regulate DLT directly, but fraudulent payments from being made said that it will consult on requiring stresses the need to remove barriers to and warn customers about the risks of PSPs to implement confirmation of the implementation of blockchain. sending money to an account where payee in the first half of 2019. the name does not match.
The resolution can be found HERE. According to the press release, currently the The press release can be found HERE. account name is not checked when sending
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TECHNICAL UPDATES
FATF adopts amendments to UK publishes regulate virtual assets, and sheds guidance on light on ongoing projects sanctions policy in a “no deal” The Financial Action Task Force (FATF) Separately, the FATF also confirmed during has adopted changes to the FATF the plenary meeting that it has started a Brexit scenario Recommendations and Glossary that project that will consider the feasibility of clarify how the Recommendations expanding the FATF Recommendations to apply to financial activities involving proliferation financing as well as enhancing The UK government published virtual assets, confirmed a statement implementation of existing obligations. guidance on 12 October on by the FATF on 19 October following The project will also consider developing sanctions policy in a “no deal” Brexit its plenary meeting. best practices on combating proliferation scenario, which explains how the UK financing. would implement sanctions if the UK The changes add to the Glossary new leaves the EU without a deal. definitions of “virtual assets” and “virtual The FATF also adopted risk-based approach asset service providers” – such as (RBA) guidance for the securities sector that The guidance explains that if the exchanges, certain types of wallet providers, was published on 25 October, and the life UK leaves the EU without a deal, the and providers of financial services for Initial insurance sector, which will be published government will look to carry over all EU Coin Offerings (ICOs). The changes make shortly, and confirmed that it will develop sanctions at the time of departure and clear that jurisdictions should ensure that guidance on digital identity. The guidance will implement sanctions regimes through virtual asset service providers are subject will consider endorsement by national new legislation made under the Sanctions to AML/CFT regulations, for example authorities as a key test for the acceptability and Anti-Money Laundering Act 2018. conducting customer due diligence including of digital ID. The FATF will consider a first If the UK leaves the EU without a deal, ongoing monitoring, record-keeping, and draft of this guidance in February with a those affected by UK sanctions are reporting of suspicious transactions. They planned completion of the project in June advised to refer to the Sanctions Act should be licensed or registered and subject following further consultation with private and the UK regulations made under it. to monitoring to ensure compliance. sector experts. If regulations for the sanctions regime The FATF press release states that “All FATF Heads of FIUs met during the plenary have not been made, the advice is to refer jurisdictions should urgently take legal and to discuss how to enhance the effectiveness to any EU Council Regulations retained practical steps to prevent the misuse of of suspicious transaction reporting and the under the EU Withdrawal Act 2018, which virtual assets,” which includes assessing quality of financial intelligence, and agreed may be modified under that Act. The and understanding the risks associated with two reports, one addressing how large guidance explains that it should not be virtual assets in their jurisdictions, applying international financial institutions identify assumed that all aspects of existing EU risk-based AML/CFT regulations to virtual suspicious activity, and the other describing sanctions will be replicated exactly. asset service providers and identifying the practical considerations in setting up Separately, the UK’s Office of Financial effective systems to conduct risk-based public-private partnerships. Sanctions Implementation (OFSI), monitoring or supervision of virtual asset published its annual review on 5 October. service providers. The OFSI states that going forward it The FATF press release on virtual The FATF will prepare updated guidance on aims to maintain its central role in global assets can be found HERE. a risk-based approach to regulating virtual sanctions implementation as the UK asset service providers and guidance for prepares to leave the EU. operational and law enforcement authorities The FATF press release on the on identifying and investigating illicit activity plenary can be found HERE. The guidance can be found HERE. involving virtual assets.
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TECHNICAL UPDATES
EC issues draft EU adopts new chemical weapons guidelines sanctions regime for internal The European Council adopted a new regime of restrictive measures compliance to address the use and proliferation of chemical weapons on 15 October. programmes The European Union will now be able to impose sanctions on persons and that could entities involved in the development and use of chemical weapons anywhere, regardless of their be useful for nationality and location. sanctions The restrictive measures target persons and entities who are directly responsible compliance for the development and use of chemical weapons as well as those who provide financial, technical or material support, The European Commission, in and those who assist, encourage or are Miscellaneous Amendments Regulations conjunction with member states, associated with them. 2018, SI 2018/1090, which comes into published draft guidance on 25 force on 7 November. September on the elements that It is reported that the two Russian military should be included in internal intelligence officers allegedly involved compliance programmes (ICPs) in the Novichok poisoning in Salisbury, The EU’s press release can be for trade in dual-use goods, which Anatoliy Vladimirovich Chepiga and found HERE. legal experts believe could be useful Alexander Mishkin, will be sanctioned for sanctions compliance. The under the new regime. Commission has asked for feedback The UK’s regulation can be found on the draft guidance via an online Accordingly, the UK has passed the HERE. survey by 15 November. Chemical Weapons (Asset-Freezing) and
The draft ICP guidance considers seven elements to ensure an effective ICP that could be applied in the sanctions UK government targets estate compliance context: (1) top-level management commitment to compliance; agents with AML campaign (2) organisation structure, responsibilities and resources; (3) training and awareness The UK government announced on raising; (4) transaction screening process Valuers, the National Association of 26 October that it has teamed up with and procedures; (5) performance review, Estate Agents and the Royal Institution property industry experts to target audits, reporting and corrective actions; (6) of Chartered Surveyors, the government estate agents who fail to report money recordkeeping and documentation; and (7) aims to help estate agents spot the signs laundering suspicions. The government physical and information security. of money laundering and reinforce their is expanding its “Flag It Up” campaign obligations to report suspicious activity. into the property sector.
The draft guidance can be found HERE. Working with professional bodies including The press release can be found HERE. the Central Association of Agricultural
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FATF extends suspension of counter ICJ orders measures against Iran until February US to lift Iran
The Financial Action Task Force to provide mutual legal assistance; sanctions on (FATF) discussed the monitoring of and ensuring adequate legislation for Iran’s actions to address deficiencies confiscation of property. humanitarian in its AML/CFT measures during its plenary on 19 October and despite Iran’s parliament approved a bill on goods, and US the outstanding shortfalls confirmed counter terrorist financing on 7 October, the continued suspension of counter which aims to bring its laws into line measures. The FATF has given Iran with international standards and allow to terminate until February to bring into force the the country to join the United Nations necessary legislation. Convention for the Suppression of the Treaty of Amity Financing of Terrorism. The FATF noted that Iran must address, The International Court of Justice amongst other things: criminalising (ICJ), the principal judicial organ of terrorist financing; freezing terrorist The outcomes of the FATF plenary the UN, ordered the US to suspend assets; implementing the Palermo and TF can be found HERE. sanctions against Iran that impede Conventions and clarifying the capability trade in humanitarian goods and civil aviation on 3 October.
The ICJ’s ruling means that pending UK ruling in case relating to the the resolution of Iran’s application for provisional measures the US must reimposition of US Iran sanctions remove any impediments arising from the measures announced on 8 May to the free exportation to Iran of: medicines The UK’s Commercial Court issued underwriters to EU or US sanctions on Iran and medical devices, foodstuffs and its ruling on 12 October in the first if paid before the end of the wind down agricultural commodities, and spare case in the English courts to deal with period on 4 November. The court stated parts, equipment and associated services the impact of the reimposition of US that “exposure” to sanctions meant that necessary for the safety of civil aviation; sanctions on Iran. In Mamancochet the payment had to breach sanctions as and ensure that licences and necessary Mining Ltd v. Aegis Managing Agency opposed to just posing the risk of a breach. authorisations are granted and that Ltd & Others [2018] EWHC 2643 payments and other transfers of funds (Comm) the dispute centred on whether The court did not decide on the issue of are not subject to any restriction as they the underwriters could resist paying out whether the defendants’ reliance on the relate to the said goods and services. on an indemnity under a marine cargo sanctions clause would breach the EU Blocking Regulation. The judge noted insurance policy following the loss US secretary of state, Mike Pompeo, that he saw “considerable force” in the of cargoes shipped to Iran in 2012. A reacted to the ICJ’s ruling by announcing defendants’ argument that if the sanctions sanctions clause in the policy provided that the US was terminating the Treaty clause suspended the claim to pay, then that the defendants would not have of Amity, which Iran claims has been the Blocking Regulation was not engaged to pay out if such a payment “would violated by the return to sanctions because there was no “act” of compliance expose that (re)insurer to any sanction, imposed following the US withdrawal with US sanctions by the defendants; the prohibition or restriction” under UN, EU, from the 2015 nuclear agreement. UK or US sanctions. contract operates according to its terms.
The court held the defendants liable to pay the claim under the insurance contract The court ruling can be found HERE. The court ruling can be found HERE. because payment would not “expose” the
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Latvia approves AML/CTF action plan European
Latvia’s Ministry of Finance approved 1. strengthening risk-based supervision Commission the action plan on anti-money and introduction of preventive laundering and counter-terrorist measures, including, the transparent 2019 work financing on 11 October that outlines and professional management of the the strategy and goals to address the ABLV bank liquidation procedure; programme shortcomings identified in the Council of Europe’s comprehensive review of 2. effective information exchange; includes Latvia’s anti-money laundering and counter terrorism financing measures. 3. ensuring adequate human resources for supervisory, control and law focus on AML enforcement authorities; The action plan aims supervision 4. introduction of IT solutions for timely to strengthen Latvia’s and effective data management; and ability to identify and prosecute individuals 5. enhancement of the sanctions system. and organisations that Māris Kučinskis, Latvia’s prime minister, in an perpetrate financial article published in the Financial Times on 30 September, explained that the action plan crimes. aims to strengthen Latvia’s ability to identify and prosecute individuals and organisations that perpetrate financial crimes. The action plan, which focuses on the period up to 31 December 2019, addresses the 11 immediate outcomes demanded by the The European Commission Council of Europe’s review, with the following The action plan can be found HERE. published its work programme key priorities: for 2019 that is focused around the ten priorities of the Juncker Commission before the European Parliament elections in May, on 23 October, which includes intensified efforts to HMT issues advisory notice on ML/ agree on proposals to establish stronger anti-money laundering TF controls in overseas jurisdictions supervision.
The Commission also intends The UK’s HM Treasury updated its HM Treasury advises firms to consider the to establish the European advisory notice on money laundering Democratic Peoples’ Republic of Korea and Cybersecurity Industrial, Technology and terrorist financing controls in higher Iran as high-risk and apply counter measures and Research Competence Centre risk jurisdictions on 25 October. The and EDD measures; and take appropriate and coordinate action on artificial advisory notice sets out the requirement actions to minimise the risks posed by intelligence across European to apply enhanced due diligence the Bahamas, Botswana, Ethiopia, Ghana, member states. (EDD) for higher risk jurisdictions and Pakistan, Serbia, Sri Lanka, Syria, Trinidad attaches two statements published and Tobago, Tunisia and Yemen. on 19 October by the Financial Action The European Commission’s work Task Force identifying jurisdictions with The advisory notice can be found HERE. programme can be found HERE. deficiencies in their AML/CTF regimes.
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TECHNICAL UPDATES
US to create US regulators encourage Bank transnational Secrecy Act resource sharing organised crime The US Department of the Treasury’s money laundering or terrorist financing.” Financial Crimes Enforcement The agencies describe several instances task force Network, the Board of Governors in which collaboration between banks may of the Federal Reserve System, be beneficial, such as conducting internal the Federal Deposit Insurance control functions, including reviewing and US Attorney General Jeff Sessions Corporation, the National Credit Union drafting BSA/AML policies and procedures announced the creation of a Administration, and the Office of the and risk-based customer identification and transnational organised crime task Comptroller of the Currency, issued an account monitoring processes. force of prosecutors on 15 October, interagency statement on 3 October which will be led by Deputy Attorney outlining instances where banks The agencies cautioned that banks General Rod Rosenstein. and credit unions may enter into who choose to enter into collaborative collaborative arrangements to share agreements should carefully consider the AG Session also announced the resources to more effectively manage associated risks in relation to the bank’s designation of the following criminal their Bank Secrecy Act (BSA) and anti- risk profile, adequate documentation, groups as the top transnational organised money laundering (AML) obligations. consideration of legal restrictions, and the crime threats facing the US: MS-13; Cartel establishment of oversight mechanisms. de Jalisco Nueva Generacion, or CJNG; The statement notes that collaborative the Sinaloa Cartel; Clan del Golfo; and arrangements are most suitable for “banks Lebanese Hezbollah. with a community focus, less complex The statement can be found HERE. operations, and lower-risk profiles for According to AG Sessions, the new task force will be organised FinCEN issues advisory warning on into one subcommittee for each of the risks of corruption from Nicaragua target organisations designated. The US Financial Crimes Enforcement through the US financial system. Network (FinCEN) issued an advisory on 4 October to alert financial FinCEN requests that financial According to AG Sessions, the new institutions of the increasing risk that institutions file suspicious activity task force will be organised into one proceeds of corruption from Nicaragua reports, consistent with their existing subcommittee for each of the target may enter the US financial system. Bank Secrecy Act obligations, when organisations designated. Each of they identify potential misuse of the subcommittees are to provide The advisory has been instigated by the Nicaraguan public funds or potential recommendations within 90 days on the expectation that figures connected to the proceeds of corruption associated best ways to prosecute these groups. regime of president Daniel Ortega could with senior foreign political figures react to the threat of further unrest, potential connected to the Ortega regime. sanctions, or other factors by moving assets in Nicaragua or elsewhere, which could be The Treasury’s press release can the proceeds of corruption, and may be The advisory can be found HERE. be found HERE. directed into US accounts, or laundered
14 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
TECHNICAL UPDATES
Switzerland adopts tax reforms and US exempts exchanges account information from CIP
The Swiss Federal Council adopted (AEOI), which will allow the tax authorities requirements the new Federal Act on Tax Reform to verify whether taxpayers have correctly and AHV Financing (TRAF) formerly declared their foreign financial accounts. certain tax proposal 17, on 28 September, which aims to reform the tax system According to the FTA, it sent information on premium by abolishing certain tax privileges in around 2 million financial accounts to the order to avoid Switzerland being put on AEOI partner states as well as another nine a blacklist of tax havens. states and territories: Australia, Canada, finance loans Guernsey, Iceland, Isle of Man, Japan, Following publication of the new law in Jersey, Norway, and South Korea. Cyprus the Federal Gazette, the standard three- and Romania did not receive the information month referendum period will begin, during as part of the AEOI as they are currently which time 50,000 citizens may request excluded for failing to meet the requirements that a referendum be held on the matter. A on confidentiality and data security. potential referendum on the TRAF is planned to be held on 19 May 2019, otherwise the law will enter into force on 1 January 2020. The Federal Council’s press release The US Department of the can be found HERE. Treasury’s Financial Crimes In addition to this, the Swiss Federal Tax Enforcement Network, the Administration (FTA) announced on 5 Office of the Comptroller October that it has exchanged financial The Tax Administration’s press of the Currency, the Board account information for the first time, as part release can be found HERE. of Governors of the Federal of the automatic exchange of information Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration, jointly issued an order on 28 September US publishes counterterrorism strategy granting an exemption from the requirements of The US Administration published the terrorist threat to the US and that Iran the customer identification National Strategy for Counterterrorism remains the most prominent state sponsor program (CIP) rules imposed on 4 October, which outlines the of terrorism, supporting militant and terrorist by the Bank Secrecy Act for approach of the US to countering groups across the Middle East. certain premium finance loans. terrorist threats and represents the Nation’s first fully articulated In a statement about the new strategy, The order applies to “banks” — as counterterrorism strategy since 2011. Trump commented on the successes of his defined at 31 C.F.R. § 1010.100(d) presidency in confronting terrorist groups — and their subsidiaries. The order The strategy focuses on, amongst other and financiers of terrorism, from the near- explains that premium finance things: isolating terrorists from sources decimation of ISIS in Iraq and Syria to his loans present a low risk of money of support; modernising and integrating withdrawal from the Iran nuclear deal, “which laundering, and therefore are counterterrorism tools; and protecting US had provided a windfall for the Islamic exempt from the CIP rules. infrastructure and enhancing resilience. Revolutionary Guard Corps and its proxies.”
The strategy states that radical Islamist The press release can be The strategy can be found HERE. terrorists remain the primary transnational found HERE.
15 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
TECHNICAL UPDATES
United for Wildlife Financial Taskforce launched
The Duke of Cambridge, president of United for Wildlife, launched the United for Wildlife Financial Taskforce on 10 October, which comprises of representatives from 30 global banks, experts on illegal wildlife trade and financial organisations such as Standard Chartered, RBS, Bank of America Merrill Lynch and JP Morgan.
The United for Wildlife press release explains that the finance sector can become involved with those who traffic illegal wildlife products, which is why work is being done to identify includes commitments to increase awareness additional GBP 6 million to protect some of actions the financial sector can take to detect of how the financial industry can combat the world’s endangered species including and stop illegal wildlife trade, and intercept illegal wildlife trafficking, review intelligence rhinos, elephants and pangolins. the financial gains. alerts received through the taskforce and take appropriate actions, and consider additional actions such as policy amendments. Using existing frameworks for tackling global The United for Wildlife press financial crime, alongside initiatives which release can be found HERE. some financial institutions are already utilising Meanwhile, UK government’s department to tackle the issue, a bank-led experts group for international development announced comprising of representatives from financial the launch of a major push to find new ways The UK government’s press organisations, legal advisors and technical of tackling the illegal wildlife trade (IWT) release can be found HERE. experts has created the taskforce, which on 7 October, which includes providing an
Australia’s interim report on misconduct in the financial services industry published
The interim report of Australia’s • the present regulatory regime: whether • APRA: whether APRA’s regulatory and Royal Commission into Misconduct the current regulatory regime is too enforcement practices were satisfactory, in the Banking, Superannuation and complicated and impedes effective risk whether APRA, after having conducted the Financial Services Industry was management and regulatory enforcement; Prudential Inquiry into CBA in late 2017/ published on 28 September, which early 2018, could take further steps on provides a summary of the first • codifying industry codes: whether codes governance, culture and accountability in four rounds of hearings held by the such as the Banking Code of Practice other financial services entities. Commission. should be applied by legislation;
The following issues have been proposed • ASIC: whether its remit is too large, whether The interim report can be found HERE. for possible reform in light of the its enforcement practices are satisfactory, misconduct identified: whether its priorities should change; and
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
SPECIAL FEATURE
Evading Trump: How Iran circumvents sanctions
By Barry Marston Senior Consultant Aperio Intelligence
Iran experts have been taken aback at the rapidity with which new rounds of sanctions have impacted the Iranian economy, even before major oil and financial sanctions kick in from 5 November. Within a month of 7 August sanctions taking effect (outlawing dollar purchases, precious metals, and trade in certain industrial materials), the rial plunged by 60 percent1. With A successful sanctions evasion strategy foreign tankers or those registered under oil accounting for around 70 percent for Tehran means maximising its ability to foreign flags using forged documentation. of Iran’s exports and 80 percent of tax derive revenue from oil exports and other Discounted prices tempted purchasers to revenue, recorded exports fell by around major income sources; finding ways to plug ask few questions, with smaller Chinese 900,000bpd, from around 2.5mbpd in into the international financial system; while refineries being a notable destination. As of April. However, as we shall see below, a continuing to bankroll its overseas agenda. mid-October, the monitoring organisation, significant proportion of this shortfall is This article draws lessons from Iran’s TankerTrackers, estimated that Iran was being offset by off-the-books exports. previous efforts at circumventing sanctions actually sustaining exports of 2.2mbpd. to contextualise measures which Iran’s This higher-than-expected statistic factored As the world gears up for the November leadership is already beginning to implement in satellite images of departing oil tankers sanctions, EU imports of Iranian oil fell in response to the Trump Administration’s which had disabled their signals. This may by 46 percent between May and August efforts to ratchet up the pressure. partly explain why oil prices for the month to 226,000bpd, while exports to South were significantly lower than expected4. Korea plunged to zero. In contrast, it took Invisible ships and ghost companies significantly longer for previous rounds of Iranian businesses and exporters the UN Security Council-centred sanctions Between 2010 and 2015, as international improvised a plethora of tricks to continue process to have a comparable effect; sanctions intensified, Iranian tankers operations. Significant volumes of Iraqi with a steady fall in Iran’s oil exports continued shipping millions of barrels of oil are exported overland through Iran, occurring between 2011 and 2014, from oil through the simple gambit of turning off and Iranian oil exporters were thus able to 2.4mbpd to 1mbpd2. While the scale of this their tracking beacon to efface a record of fake documentation so their own convoys assault against Iran’s economy is perhaps their voyage. In recent weeks, monitors have appeared to be of Iraqi origin. The owner of unprecedented, Iran is accustomed to observed Iranian tankers turning off their an Iranian mining business in 2013 reported 3 periodic bouts of isolation and has options transponder signals to evade detection . how he obtained equipment from Europe available to weather the storm. Iranian oil was previously also diverted onto by agreeing with Western companies to
1 https://www.bloomberg.com/news/articles/2018-09-03/iran-s-rial-resumes-drop-as-oil-exports-sink-ahead-of-sanctions
2 https://yaleglobal.yale.edu/content/why-iran-style-sanctions-worked-against-tehran-and-why-they-might-not-succeed-moscow
3 https://www.ft.com/content/d2c7105e-bcf0-11e8-8274-55b72926558f
4 https://www.ft.com/content/6d1510ac-d21d-11e8-a9f2-7574db66bcd5
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export these products to Dubai. From there, names like “True Honour Holdings” and pressures, with talk of an imminent shift to middlemen arranged for the equipment to be “Alpha Effort Limited.” Yet according to the trading in rupees and rials. However, India’s diverted to the Iranian port of Bandar Abbas. US Treasury in 2011, which designated over Central Bank is set to halt processing Iranian He paid foreign suppliers via Iranian traders 20 other Iran-linked entities, these were oil payments from November10. based in South Africa and Malaysia5. Some Iranian front companies surreptitiously businessmen resorted to the risky approach purchasing military equipment8. In 2013 around 45 percent of India’s of travelling to-and-fro from the Emirates payments to Tehran were made through with suitcases of cash. Nevertheless, such Keeping oil and revenues flowing the Kolkata-based USO Bank which lacked activities significantly increased the cost of significant US exposure; the remaining doing business. In 2016 internal paperwork Many states and importers previously 55 percent of payments were transacted from the Chinese telecommunications operated in a grey area between passive via the Turkish Halkbank11. Halkbank was conglomerate, ZTE Corp, showcased the defiance of US demands, and willingness furthermore at the centre of an “gold-for- company advising clients from Iran and other to cast a blind eye to oil imports with oil” laundering scheme which between blacklisted states on how to circumvent forged documentation or circuitous 2012 and 2014 allowed Iran to repatriate sanctions through establishing front payment regimes; tempted by Iran’s steeply USD 13 billion of frozen funds through the companies and other dubious methods6. discounted black market offerings. Turkish banking system12. Over the past two years the US authorities have implemented In the pre-2015 phase of sanctions, Iran India’s readiness to comply will be a major measures against several East Asian banks exploited a fluid network of front companies determinant of success for Trump’s punitive whose imperfect compliance procedures in diverse locations like China, the UAE, measures. To retain customers Iran has were exploited by Iran to illegally launder Iraq and Liechtenstein; giving rise to an been offering sharp discounts, extended revenues and frozen funds13. The Kunlun endless game of cat-and-mouse by US credit terms, free cargo insurance, and bank in China’s semiautonomous Xinjiang agencies trying to identify these entities cheap shipping. Despite recent cuts in India’s region was earmarked as an entity exploited and apply pressure for their closure. oil imports from Iran (from an average of by Iranian banks to launder hundreds of As one compliance attorney explained: 773,00bpd in early 2018, to 523,000bpd by millions of dollars. Given that Kunlun bank “Fifteen years ago some guy would set up a August) this was still 56 percent higher than is covered by US Treasury sanctions and 9 company in Dubai’s Jebel Ali port and load for August 2017 . States like Italy, Greece has already modified its business model to stuff from wherever and ship it to Iran and and Turkey likewise temporarily boosted mitigate these pressures, it is increasingly no one would notice. Now the detection imports of Iranian oil to capitalise on these difficult for US officials to craft new penalties systems and knowledge are leaps and discounts. The US and GCC states may try to target such institutions, whose appeal to bounds ahead7.” weaning India away from Iranian oil with certain clients is precisely that they act as a discounted rates of their own. The current shadowy parallel network to the mainstream A cluster of businesses in a Hong Kong India-Iran trade in Euros via the SWIFT global financial system14. tower block had been given innocuous system provides some insulation from US
5 https://www.economist.com/business/2013/03/30/around-the-block
6 https://www.wsj.com/articles/u-s-plans-to-place-restrictions-on-zte-1457337207
7 https://www.theatlantic.com/international/archive/2018/05/iran-sanctions-trump-nuclear-turkey/560819/
8 https://www.treasury.gov/press-center/press-releases/Pages/tg1022.aspx
9 https://www.bloomberg.com/news/articles/2018-09-03/secret-oil-shipments-could-help-iran-cushion-u-s-sanctions-blow
10 http://www.atimes.com/article/why-india-is-ignoring-us-sanctions-and-sticking-with-iran/
11 https://idsa.in/idsacomments/iran-sanctions-srdadwal-120718
12 https://www.theatlantic.com/international/archive/2018/01/iran-turkey-gold-sanctions-nuclear-zarrab-atilla/549665/
13 https://www.bloomberg.com/news/articles/2018-02-20/iran-s-sanctions-evasion-moved-east-after-europe-crackdown
14 https://www.treasury.gov/press-center/press-releases/Pages/tg1661.aspx
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Western banks have fared little better, with a readying themselves for renewed pressures, outlaw. Furthermore, the risk of a protracted succession of well-known high-street outlets and perhaps US offers to soften tariffs and sanctions regime without a clear endgame is facing stiff penalties for transactions which other economic measures targeting them that over time, through a shift towards non- infringed sanctions, often for unintentional both in the event of full cooperation. dollar payments and networks of institutions due diligence failures. BNP Paribas in resilient to US pressure, Iran evolves a 2015 was hit with an eye-watering USD With the devalued Iranian rial increasingly diminished but sustainable economic 8.9 billion fine after prosecutors claimed unattractive to traders and obstacles to equilibrium, leaving it relatively immune to that information had been deliberately dealing in dollars, Iran may negotiate barter future attempts to influence its behaviour. stripped from wire transfers to expedite their deals, or trade in gold and local currencies. movement through the US financial system Prior to 2015, Iran used around USD 50 Iran’s oil ministry is also planning to relaunch without raising red flags15. billion of frozen oil revenues held in East its domestic energy exchange (or ‘bourse’), Asian banks as security or down-payments through which it anticipates selling up to China, the biggest importer of Iranian oil for goods purchased from China, South 1 million bpd of crude to local buyers who (800,000bpd in July16), has reduced its Korea, Japan and India. Between 2012 and could then export the oil though private dependence on Tehran over the past couple 2016, India agreed to buy Iranian oil with transactions17. However, some Iranian of months; but will comply reluctantly with rupees, allowing Iran to use the proceeds to officials are concerned that this risks fuelling US sanctions which Beijing claims lack import goods from India. an informal black market from which the the legitimacy conferred by the UN. Given state budget would derive limited benefit. the fractious nature of China and Turkey’s Barter economies and shifts into local current relationship with the US, they are currencies may be challenging for the US to The imposition of sanctions may benefit entities like IRGC Quds Force, which are well-placed to profit from this shift towards clandestine sanctions circumvention activities. As of 2007 it was estimated that the IRGC was reaping around USD 12 billion from off-the-books oil smuggling, which expanded significantly in the ensuing years as sanctions intensified18. To put this in context, Iran’s total military budget for 2018 was USD 8 billion.
Lebanon, Syria and Iraq – The “axis of resistance”
Iran is also afforded significant strategic depth through its paramilitary, economic and
15 https://www.reuters.com/article/us-bnp-paribas-settlement-sentencing/bnp-paribas-sentenced-in-8-9-billion-accord-over-sanctions-violations-idUSKBN0NM41K20150501
16 https://www.forbes.com/consent/?toURL=https://www.forbes.com/sites/arielcohen/2018/08/29/irans-oil-exports-plummet-600000-bd-as-u-s-sanctions-force-key-buyers-to-seek-alternatives/#8d129a6247e8
17 https://financialtribune.com/articles/economy-business-and-markets/94168/iran-energy-exchange-to-start-trade-in-oil-futures
18 http://www.aei.org/publication/how-intertwined-are-the-revolutionary-guards-in-irans-economy/
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political assets in Lebanon, Syria and Iraq; all While Syria is likely to remain isolated from munitions to Syria26. Qeshm Fars Air has also three of which are coming under substantial the international system, facilitated access been identified as flying circuitous routes to pressure to resist US measures. Iranian to Lebanon and the eastern Mediterranean smuggle munitions into Lebanon27. entities and affiliated proxies are already offers Iran a range of additional options for carving out major roles in reconstruction in circumventing sanctions. Over the 2010-2013 period, Iran’s payments Syria and Iraq, with paramilitary groups which to Iraq-based proxy militias like Asaib have been accused of war crimes sectarian Iran has made extensive use of Iraqi, Syrian Ahlulhaq and Kata’ib Hezbollah decreased killings capitalising on their position on the and Lebanese financial systems23. In May as sanctions intensified and US troops ground to diversify into various economic 2018, Iraq’s Al-Bilad Islamic Bank, and its departed Iraq. However, Iranian spending sectors. As one Iraqi paramilitary leader CEO Aras Habib Karim, a prominent MP, were simultaneously surged for propping up the argued: “We were volunteers. We liberated designated by the US Treasury for facilitating Damascus regime; with estimated funding these areas and now we should stay on to the movement of funds to the IRGC and for Hezbollah mushrooming from around rebuild them19.” Hezbollah24. Financers and front companies USD 100 million to USD 700 million28. have also been targeted to counter money Thus, although Tehran will seek to cut A Russia-Israel understanding for reducing laundering by entities affiliated with Iran. unnecessary expenditure to its proxy assets, the presence of Shia paramilitaries in past experience indicates that sanctions southern Syria, was countered by Tehran Large volumes of weapons have been won’t automatically diminish its readiness through high-profile visits by officials to exported to affiliated forces in Syria, Iraq, to fund militancy overseas. It may indeed Damascus to discuss defence cooperation Lebanon, Afghanistan, Yemen, Bahrain and result in Iran’s leadership encouraging and Iran’s role in reconstruction20. Iran’s other states in violation of international their paramilitary proxies to adopt a more defence minister signed a deal committing sanctions. Airlines like Mahan Air faced aggressive posture, such as through recent Tehran to a major role in rebuilding sanctions in 2011 (with additional measures transfers of missiles to Iraqi proxies. Syria’s armed forces21. Meanwhile, applied in May 2018) for operating on Iranian companies are to be involved in behalf of the Revolutionary Guard to move Smuggling and sanctions evasion across rehabilitating Syria’s transport infrastructure, weapons, personnel and funds for Hezbollah Iran’s eastern borders along with rebuilding 30,000 homes and and forces in Syria. A US Treasury official plans for a railway connection between the described Mahan as the “aviation arm” of Afghan traders have been benefiting from a two states. China has been sympathetic to Quds Force25. Iranian ally Hadi al-Amiri, booming trade in dollars smuggled across such efforts as a means of facilitating its as Iraqi transport minister, is understood the border from Herat province as the value own overland access to the Mediterranean22. to have facilitated overflights of Iranian of Iran’s rial plunges, while the US attempts
19 https://www.crisisgroup.org/middle-east-north-africa/gulf-and-arabian-peninsula/iraq/188-iraqs-paramilitary-groups-challenge-rebuilding-functioning-state
20 http://www.irna.ir/fa/News/83004177
21 https://www.afr.com/news/world/middle-east/iran-defence-minister-amir-hatami-signs-deal-to-rebuild-syrian-military-20180827-h14lcu
22 https://thediplomat.com/2017/11/why-china-wants-syria-in-its-new-belt-and-road/
23 https://www.reuters.com/article/us-usa-sanctions-iraq-iran/u-s-lifts-sanctions-on-iraq-bank-that-had-links-to-iran-idUSBRE94G0NJ20130517
24 https://www.thenational.ae/world/mena/iraq-cuts-ties-with-us-sanctioned-bank-1.731506
25 https://www.flightglobal.com/news/articles/us-warns-of-sanctions-on-companies-that-support-iran-450052/
26 https://www.nytimes.com/2012/12/02/world/middleeast/us-is-stumbling-in-effort-to-cut-syria-arms-flow.html
27 http://www.foxnews.com/world/2018/09/03/irans-secret-weapons-smuggling-air-route-to-lebanon-revealed-by-intel-sources.html
28 https://www.thenational.ae/world/the-americas/iran-pays-hezbollah-700-million-a-year-us-official-says-1.737347
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to squeeze Iran out of dollar-denominated smuggling of oil and other goods when he system. Venezuela granted large tracts of markets. Such was the scale of this trade testified to the Iranian Majlis earlier this year isolated land to Iranian military firms for that it contributed to a 3.5 percent drop in that the authorities had reduced the annual developing missile technology, as a route to Afghanistan’s own currency this August, with value of such activities from USD 22 billion avoiding sanctions against Iran’s ballistics an estimated USD 5 million in cash crossing to USD 12.5 billion33. programme34. US-sanctioned Parchin the Afghan-Iran border every day29. Chemical Industries was just one Iranian company setting up facilities in Venezuela35. Iran’s less heavily-policed border with Iran’s less heavily- Turkmenistan is a major narcotics smuggling policed border with Iranian and Hezbollah figures became route from Afghanistan towards Europe, deeply complicit in the narcotics trade. doubling-up as a conduit for sanctions Turkmenistan is a major Lebanese businessman Ayman Joumaa evasion activity. The fact that Iran has one narcotics smuggling collaborated with Mexico’s Los Zetas cartel of the highest rates of drug use worldwide route from Afghanistan to move “multi-tonne loads” of cocaine into (official and NGO estimates vary between the US36, while laundering an estimated 3.5 to 6 million users) is testimony to the towards Europe, USD 200 million per month in criminal scale of the narcotics smuggling problem30. doubling-up as a conduit proceeds37. The Lebanese Canadian Bank for sanctions evasion in 2011 was accused of being at the centre In the remote Baluchistan region, diesel of a phenomenally complex international smuggling into Pakistan has long afforded activity. operation which saw Colombian cocaine a livelihood for small-time smugglers. exported into Western markets, while From 2010 these fuel smuggling activities revenues were laundered through the intensified as a means of evading sanctions. Drugs, crime and money laundering US banking system and via African car In 2013 it was estimated that tankers were dealerships, before being used to pay exporting around 4 million litres per day Former president Mahmoud Ahmedinejad’s East Asian suppliers of imports back into via this route31. US officials even became outreach to Latin American states – Iran38. In 2016 European police took action concerned that Afghan security forces were Venezuela in particular – to consolidate a against a major Hezbollah cell involved in using US funding to purchase smuggled united front against US-led pressures, gave the narcotics trade, with revenues reportedly petroleum products of Iranian origin. One rise to a remarkable increase in economic being fielded towards operations in Syria39. expert from FGE London estimated that after activity by Iran and Hezbollah across 2018 around 20,000bpd could be illegally the American continent. One example On 22 September 2018 it was announced transported overland through Afghanistan, was massive Iranian investments in real that Brazilian police had picked up Assad Pakistan, Iraq and Central Asia32. President estate, for which much of the revenue was Ahmad Barakat, a prominent Hezbollah Rouhani drew attention to the scale of later laundered through the US banking member and “Specially Designated Global
29 https://www.bloomberg.com/news/articles/2018-09-13/trump-s-iran-sanctions-trigger-a-booming-cash-smuggling-business
30 https://www.state.gov/j/inl/rls/nrcrpt/2016/vol1/253274.htm
31 https://www.reuters.com/article/uk-pakistan-iran-smugglers/iran-sanctions-spur-boom-for-pakistani-diesel-smugglers-idUKBRE92U09820130331
32 https://www.bloomberg.com/news/articles/2018-09-03/secret-oil-shipments-could-help-iran-cushion-u-s-sanctions-blow
33 https://foreignpolicy.com/2018/10/04/irans-revolutionary-guard-corps-wont-suffer-from-stronger-u-s-sanctions-theyll-benefit-irgc-trump-sanctions/
34 https://thehill.com/blogs/pundits-blog/international/293632-iran-looks-to-latin-america-to-revive-missile-infrastructure
35 https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/pages/20080708.aspx
36 https://www.politico.com/interactives/2017/obama-hezbollah-drug-trafficking-investigation/
37 https://www.washingtoninstitute.org/policy-analysis/view/iran-and-hezbollah-remain-hyperactive-in-latin-america
38 https://www.treasury.gov/press-center/press-releases/Pages/tg1057.aspx
39 https://www.thedailybeast.com/trump-starts-to-put-the-squeeze-on-irans-international-terror-operations
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Terrorist40.” Since the mid-2000s, the Barakat in Hezbollah contributions donated by the In 2018, the critical question is how clan operated out of the notorious tri- Lebanese diaspora in West African states44. successful Tehran’s international strategy border area (between Brazil, Argentina and will be in thwarting Trump’s aspiration to Paraguay), laundering funds and smuggling Iran also evades international arms reduce oil exports to zero. Through a range weapons, narcotics and counterfeit US sanctions to profit from the global weapons of legal and illegal methods, experts and dollars. According to the RAND Corporation, trade. Conflict armament research identified Tehran-based Western diplomats assess this activity earnt Hezbollah around USD 20 substantial quantities of Iranian arms that Iran could continue exporting in excess million annually, and is one of its principal and ammunition being sold on the black of a million barrels of oil a day, well into sources of foreign exchange41. market or in insurgent hands across Africa, 201948. Such a scenario would be crippling, including: Côte d’Ivoire, the DRC, Guinea, without necessarily dealing the fatal blow. John Kelly, the former coordinator of Kenya, Niger, Nigeria, South Sudan, Sudan these cases in the US’s Drug Enforcement and Uganda45. One notable example included The fact that these sanctions are being Administration, observed that Hezbollah was the 2010 seizure of 13 large containers of implemented unilaterally by the US may limit “a paramilitary organization with strategic Iranian heavy arms at a port in Nigeria46. international compliance. The EU for now is importance in the Middle East, and we Iran made common cause with other pariah defying the US by trying to keep the nuclear watched them become an international states, such as North Korea, Syria, Venezuela deal alive through a posited mechanism criminal conglomerate generating billions and Sudan, for engaging in arms proliferation for shielding companies from the impact of dollars for the world’s most dangerous across continents. Iran owes much to of these sanctions. This may be a pyrrhic activities, including chemical and nuclear Pyongyang and the Pakistani Abdul Qadeer effort, given that leading Western companies weapons programmes and armies that Khan network for acquisition of much of its – like Siemens, Total, Renault, Peugeot, believe America is their sworn enemy42.” ballistics and nuclear technology47. General Electric, Boeing and Daimler – are already exiting the Iranian market to avoid Given that profits from such schemes Conclusion jeopardising their US operations. Recent accrue to Iran’s proxy militias overseas, a tensions between Saudi Arabia and the West paradoxical impact of Trump’s sanctions The 2005-2015 decade of escalating over the killing of Jamal Khashoggi also may be an uptick in such activities as international pressures on Iran were closely demonstrate how difficult it will be to retain a revenue generating exercise. Large correlated with a remarkable expansion of a unity of purpose among key players in the émigré Lebanese communities across illegal revenue-generating activities, such anti-Iran alliance over a sustained period. the Americas, Africa and Asia have been as narcotics and weapons smuggling, exploited as a Trojan horse by Quds money laundering and organised crime. This Ultimately, the impact of sanctions may Force and Hezbollah for setting up front unfortunate side-effect of sanctions has be determined by the response of the companies used for money laundering, drug enabled entities like the IRGC to strengthen Iranian people. Will they stoically bear the running, arms smuggling, terrorism and their hold on the domestic and regional consequences in the hope that the 2020 US sanctions evasion43. These communities economy, while increasing expenditure elections brings about change; or will the are themselves a source of revenue. A plane on transnational paramilitary forces like economic pain unleash forces which could that crashed in 2003 contained USD 2 million Hezbollah. overwhelm the regime or oblige it to change?
40 https://www.treasury.gov/press-center/press-releases/pages/hp190.aspx
41 https://homeland.house.gov/files/Testimony%20Berman.pdf
42 See footnote 36, Politico report.
43 https://nationalinterest.org/feature/hezbollah-has-been-active-america-decades-22051?nopaging=1
44 http://www.trackpersia.com/iran-and-hezbollahs-exploitation-of-africa/
45 http://www.conflictarm.com/wp-content/uploads/2014/09/Iranian_Ammunition_Distribution_in_Africa.pdf
46 https://www.reuters.com/article/us-nigeria-weapons-idUSTRE69T1YT20101030
47 https://www.unitedagainstnucleariran.com/north-korea-iran
48 https://www.ft.com/content/d5a39a98-cb1b-11e8-b276-b9069bde0956
22 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
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EU to issue binding opinion on action to be taken by Malta’s FIAU, and Malta’s FIAU launches consultation
According to a report in the Financial then be able to give direct orders to Maltese procedures that reflects the amendments Times published on 3 October, the banks to bring them into line with EU to the Prevention of Money Laundering Act European Commission is preparing rules, such as requirements for customer and the Prevention of Money Laundering to issue binding demands on Malta’s background checks and other due diligence and Funding of Terrorism Regulations. The financial regulator after the European measures. The Commission has until mid- consultation closes on 31 December. Banking Authority (EBA) found November to formally issue the opinion, after “systematic” weaknesses in its which Malta’s FIAU has 10 days to reply and Malta’s FIAU also published two guidance enforcement of anti-money laundering set out what changes it intends to make. notes in October: one on AML/CFT rules. Vĕra Jourová, the EU’s justice obligations in relation to payment accounts commissioner, told the Financial Times The EBA probe centred on the supervision with basic features and the other on the that Brussels would publish a “formal of Pilatus Bank, a private lender, which was procedures that must be implemented in opinion” on action that must be taken accused by US authorities of being set up with relation to the transfer of funds with missing by Malta after its financial conduct criminal proceeds. Pilatus lost its banking or incomplete information. regulator failed to address concerns licence this year after its chairman was raised by the EBA in July. arrested in the US over allegations of evading Meanwhile, Malta’s Financial Services sanctions against Iran. But the EBA said the Authority (MFSA) published new guidance The EBA’s report warned of “general and investigation also revealed problems with the on politically exposed persons (PEPs) on systematic shortcomings” in the work of “general practice” of the regulator that went 8 October, which it describes as “another Malta’s financial intelligence analysis unit, or beyond “this particular case.” step in the MFSA’s efforts to enhance FIAU, an independent government agency AML supervision and tackle international tasked with combating money laundering Malta’s FIAU published a revised version challenges posed by money laundering and terrorist financing. The Commission’s of its Implementing Procedures Part I for in line with international best practice opinion will be formally binding on Malta’s consultation on 30 October, which seeks and commitments with international FIAU. Should it fail to act, the EBA would feedback on the updated set of implementing counterparts and supervisory bodies.”
Report on illicit financial flows published
Interpol, Rhipto and the Global Initiative that environmental crimes now earn groups at a 38 percent share of illicit flows to Against Transnational Organized Crime, between USD 110 to USD 281 billion a year, armed groups in conflict. Based on public published a report entitled ‘The World making environmental crimes the third reports and criminal intelligence, the Atlas of Illicit Flows’ on 26 September, most profitable crime in the world. report identifies more than 1,000 routes which provides an overview of illicit used for smuggling and other illicit flows. financial flows in conflicts worldwide. The illicit exploitation of natural resources, such as gold, minerals, The report provides insight into how armed diamonds, timber, oil, charcoal and non-state actors and terrorist organisations wildlife, has been found to represent are relying on revenue from the exploitation the single largest category of threat The report can be found HERE. of natural resources. The report estimates finance to conflicts today, estimated
23 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
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Trade unions Seven countries reviewed on accuse Chevron beneficial ownership information
Corp of tax The Global Forum on Transparency Bahrain and Singapore received an and Exchange of Information overall rating of “Compliant.” Austria, evasion for Tax Purposes published Aruba, Brazil, Saint Kitts and Nevis and seven peer review reports on 15 the UK were rated “Largely Compliant.” It October assessing compliance was concluded that all the jurisdictions with the international standard have demonstrated progress on on transparency and exchange deficiencies identified in the first round of information on request (EOIR), of reviews including improving access which includes assessing whether to information, developing broader EOI beneficial ownership information agreement networks, and monitoring of all relevant legal entities and the handling of increasing incoming EOI arrangements is in line with requests as well as taking measures to Financial Action Task Force implement the strengthened standard on Recommendations. the availability of beneficial ownership.
Patisserie Holdings plc uncovers accounting irregularities
Photo: Reuters Patisserie Holdings plc announced Fraud Office. The company accepted on 10 October that it was halting Mr Marsh’s resignation with immediate The federation of Dutch trade unions, trading in its shares and the effect on 26 October. The company the International Transport Workers’ suspension of chief financial confirmed on 12 October that historical Federation and Public Services officer Chris Marsh, following statements on the cash position of the International filed a complaint with notification to its board of company were misstated and subject the Organisation for Economic Co- directors of “significant, and to fraudulent activity and accounting operation and Development (OECD) potentially fraudulent, accounting irregularities, and the activity and on 9 October accusing Chevron Corp irregularities.” irregularities are also likely to have of tax evasion. affected historical financial statements. In a separate announcement, the The unions allege that Chevron used company said the board had been made The bakery chain has also revealed its Dutch subsidiaries to breach OECD aware that a petition to wind up its that it had awarded millions of pounds disclosure guidelines in respect of their trading company, Stonebeach Ltd, had of share bonuses to its two most operations with Chevron’s Nigerian, been filed by HM Revenue & Customs. senior executives without notifying Argentinian, and Venezuelan businesses. The High Court petition relates to GBP shareholders. The complaint states that Chevron 1.14 million due to the tax authority. specifically failed to meet requirements Patisserie Holdings plc has been saved to pay tax in the country of extraction On 11 October, Mr Marsh was arrested from closure as a result of the scandal and to adhere to Dutch financial on suspicion of fraud, and is now facing after chairman Luke Johnson agreed to disclosure requirements. a criminal investigation by the Serious lend the company GBP 20 million.
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Santander China fines actress CNY 884 involved in million for tax evasion tax fraud Chinese authorities have ordered actress Fan Bingbing to pay CNY investigation 884 million for tax evasion, reported state news agency Xinhua on 3 October. According to the report, The Financial Times reported on the tax bureau in the eastern coastal 18 October that Banco Santander province of Jiangsu has levied fines Photo: Reuters is the latest bank to become of more than CNY 596 million for tax embroiled in a German fraud evasion and overdue taxes of more In a post on Weibo, Ms Bingbing investigation into a share-swapping than CNY 288 million. apologised stating that she fully accepts scheme that allegedly allowed the decision, will pay the penalties and investors to reclaim EUR 55.2 Xinhua said an investigation found Ms step up supervision of her companies. billion of tax they never paid. Bingbing had split her contract to evade taxes of CNY 7.3 million regarding Ms Bingbing’s agent was also detained Prosecutors in payments for her role in “Air Strike,” and for allegedly obstructing the investigation Germany have that Ms Bingbing and companies she and officials at the Jiangsu tax office are represented also evaded CNY 248 million also reported to have been investigated spent several years in additional taxes. for possible involvement. investigating cum-ex transactions, which allowed investors to exploit a legal loophole EU considers EU cross-border screening MS on VAT fraud A spokesperson for Santander said it was “fully co-operating with German tax avoidance investigation authorities” and that the Madrid-based bank was conducting its own internal According to a report by Reuters on The European Anti-Fraud Office investigation. Prosecutors in Germany 10 October, the EU is considering (OLAF), the Romanian National have spent years investigating cum-ex screening its own member states Anticorruption Directorate and the transactions, which allowed investors to assess whether they should Italian Guardia di Finanza searched to exploit a legal loophole that enabled be included in its blacklist of tax the homes and offices of individuals multiple parties to claim a refund of havens, a senior EU official has said. in Romania on 2 and 3 October in a taxes paid on share dividends. joint operation into suspected EUR The blacklist drawn up in December 30 million cross-border VAT fraud. Correctiv, a non-profit investigative 2017 currently excludes member states journalism group, and 19 news from its screening process. According It is alleged that a complex carousel organisations, published the findings to Reuters, the new Austrian presidency fraud scheme was set up to evade VAT of an investigation that cites leaked of the EU is reviewing the mandate of duties on the sale of electronic devices. spreadsheets that allegedly shows the the Code of Conduct Group on Business Fraudsters are said to have avoided “organised theft from the tax coffers” Taxation. Any changes to the tax paying VAT to Italian authorities using of at least ten European member rules will require the backing of all 28 shell companies and foreign bank states, in addition to Germany. member states. accounts to hide their identity.
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Latvia’s Financial and Capital Market Commission fines LPB Bank for anti-money laundering failings
Latvia’s Financial and Capital Market According to the press release, the FCMC the activities of a connected group of clients; Commission (FCMC) announced on has repeatedly found breaches indicating and the Bank failed to give sufficient weight 16 October that it has imposed a fine “serious deficiencies” in LPB Bank’s AML/ to unusually large, complex, inter-related of EUR 2,205,282 on LPB Bank for CFT internal control system, particularly transactions that had no apparent economic breaches of the anti-money laundering relating to customer due diligence and or visible lawful purpose. and counter terrorist financing (AML/ transaction monitoring. The FCMC’s CFT) rules. The enforcement action inspections found that LPB Bank had The FCMC has also instructed LPB Bank to requires that LPB Bank must submit failed to set up its internal control system dismiss board member Arnis Kalveršs for an action plan to the FCMC within a appropriate to the operational risks, failing to ensure that adequate measures specified time period addressing the for example: the Bank failed to obtain were taken at the Bank to improve its internal deficiencies identified and perform documents to verify the origin of funds control system. LPB Bank was also fined in an assessment of compliance by in customer accounts; the Bank failed to 2016 for violating AML/CFT rules. independent auditors. document a reasoned judgment regarding Photo: LPB Bank
Danish regulator rejects Danske Bank’s proposed CEO
Danske Bank A/S announced on 17 October that it has withdrawn the application for Jacob Aarup-Andersen, member of the executive board and head of wealth management, to become the new chief executive officer of the bank, following the Danish Financial Supervisory Authority’s (FSA) rejection of the candidate.
Photo: Financial Post According to Danske Bank’s press release, “The FSA’s preliminary assessment is that it considers the candidate well-qualified in many areas, but also finds that longer Meanwhile, Danske Bank announced on 4 Separately, the UK’s National Crime experience, including within certain of October that it is in dialogue with authorities Agency issued a statement on 8 October, Danske Bank’s business areas, is needed.” regarding the terminated non-resident which explains that Bill Browder of portfolio at its Estonian branch, which Hermitage Capital raised concerns on a Danske Bank’s search for a new CEO will was active between 2007 and 2015, which number of occasions regarding Russian continue following the decision to relieve includes criminal investigations in Estonia money laundering in the UK and that a former CEO Thomas F. Borgen of his duties and Denmark. Danske Bank stated that it criminal investigation was considered on 1 October. Danske Bank’s board of has also received requests for information not to be an effective way forward. directors has appointed Jesper Nielsen, from the US Department of Justice in “Instead, the NCA intended to support member of the executive board and head of connection with a criminal investigation into other overseas jurisdictions with on-going banking DK, as interim CEO. the bank’s Estonian branch. enquiries into Mr Browder’s case.”
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SEC charges Browder files money laundering Elon Musk with complaints against Nordea Bank securities fraud Bill Browder, chief executive of According to the Financial Times, Hermitage Capital Management, filed Swedish prosecutors have stated that criminal complaints with Swedish, they are looking into the claims. Mr Norwegian and Finnish authorities Browder, whose previous request for in October against Nordea Bank AB Danish authorities to investigate Nordea for alleged money laundering. Mr Bank AB in 2013 was rejected, told the Browder’s complaint to the Swedish Financial Times that he had received and Norwegian authorities alleges new information from investigations in that USD 175 million flowed through Lithuania and France that allowed him to 365 Nordea Bank AB accounts in make the fresh complaint. Sweden, Denmark and Norway Photo: Associated Press relating to the alleged USD 230 million The Danish State Prosecutor for Serious Russian fraud uncovered by Sergei Economic and International Crime (SØIK) The US Securities and Exchange Magnitsky. The complaint filed by confirmed in a tweet on 17 October Commission (SEC) announced on 29 Mr Browder to the Finnish authorities receipt of a complaint: “We can confirm September that CEO and chairman the following week requests that a that we have received a report regarding of Tesla Inc, Elon Musk, has agreed criminal investigation is carried out Nordea, which we are already handling to settle the securities fraud charge into allegations that USD 234 million a case against. We will of course look relating to a series of tweets about from the fraud flowed through 527 closely at the submitted material and we a potential transaction to take Tesla Nordea accounts in Finland. will coordinate with relevant authorities.” private. The SEC also announced that Tesla has agreed to settle charges that it failed to require disclosure controls and procedures relating to Mr Musk’s tweets. NY DFS fines Mashreqbank PSC
The settlements, which were approved USD 40 million for AML violations by a federal judge on 16 October, require: The New York State Department party “lookback consultant” to conduct • Mr Musk to step down as Tesla’s of Financial Services (NYDFS) a review of the branch’s transaction chairman and be replaced by an announced on 10 October that it clearing activity for April to September independent chairman. Mr Musk will be has fined UAE-based Mashreqbank 2016, along with other remedial actions. ineligible to be re-elected as chairman PSC and its New York branch USD for three years; 40 million for violations of US Bank The failings identified include, among Secrecy Act (BSA) and anti-money other things: the failure to maintain • Tesla to appoint two new independent laundering (AML) laws in the New adequate transaction monitoring; directors to its board; York branch’s US dollar clearing deficient recordkeeping practices; operations for foreign customers insufficient documentation concerning • Tesla to establish a new committee located in high-risk jurisdictions. its dispositions of OFAC alerts and of independent directors and put in cases; the failure to substantiate its place additional controls to oversee Mr According to the consent order, rationales for waiving specific alerts Musk’s communications; and Mashreqbank must immediately hire and cases; and the failure to sufficiently a third party compliance consultant to oversee the third party auditor who • Mr Musk and Tesla to each pay a USD oversee and address deficiencies in the conducted the branch’s 2017 BSA/AML 20 million penalty. branch’s compliance function and a third audit and remedial work evaluation.
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Son of the former Angola president Paddy Power arrested on suspicion of ML Betfair fined
Jose Filomeno dos Santos, the former for money chairman of Angola’s sovereign wealth fund and the son of Angola’s laundering former president Jose Eduardo dos Santos was arrested on 24 September failings on suspicion of money laundering, embezzlement of public funds and Photo: BBC The Gambling Commission (GC) fraud in a case involving USD 1.5 announced on 16 October that billion in fraudulent transactions. it has fined Paddy Power Betfair (PPB) GBP 2.2 million for failing to Asset manager, Jean-Claude Bastos, was adequately carry out anti-money also arrested. A joint investigation by the the scandal at Angola’s sovereign laundering (AML) checks and BBC World Service and File on 4 into the wealth fund has accused authorities of failing to adequately interact with Paradise Papers revealed that Mr Bastos intimidation after its founder Mr Bastos customers who were displaying allegedly received USD 41 million in 20 was detained in the country. signs of problem gambling. months for managing Angola’s sovereign wealth fund. Mr Bastos, sometimes known Quantum Global has said that its as Jean-Claude Bastos de Morais, also used managed funds have all been properly AML failings were his position to help set up large investment accounted for and that it is seeking to also identified for deals he would stand to profit from, negotiate a resolution to the matter, the according to Paradise Papers documents. Financial Times reported. Authorities in three retail and online Mauritius have also suspended licences customers including The Financial Times reported on 1 October for locally registered Quantum Global weaknesses in source that Quantum Global which is linked to companies and frozen bank accounts. of wealth and social responsibility checks. US senators call for further study The failings relate to two customers into ML risks in real estate sector who were allowed to gamble significant sums of stolen money on PPB’s betting exchange Betfair, one of which had US senators Chris Van Hollen (D-Md.) comply with, states the press release. stolen from his employer. AML failings and Sheldon Whitehouse (D-R.I.) “Addressing this problem is even were also identified for three retail and wrote a letter to the Government more urgent when you consider the online customers including weaknesses Accountability Office (GAO) on 3 widespread reporting on the potential of in source of wealth and social October requesting that it study the criminal activity in the real estate market responsibility checks. Richard Watson, issue of whether vulnerabilities in with regards to the Trump Organization GC Executive Director, stated: “These anti-money laundering laws applicable and Russia. As such, the Senators failings all stem from one simple to the real estate sector present believe this must be seriously looked at.” principle – operators must know their increased risk of criminal activity. customer. If they know their customer The senators are asking the GAO to and ask the right questions then they Cash-only real estate transactions are investigate efforts the US government is place themselves in a strong position subject to fewer reporting requirements taking to close the regulatory loopholes to meet their anti-money laundering than financial institutions have to and study what more needs to be done. and social responsibility obligations.”
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Europol publishes report on criminal networks involved in human trafficking
Europol published a situation report that criminal profits are mainly redirected trafficking, including those groups using on “Criminal Networks Involved in to the country of origin of the key suspects legal business structures to facilitate or the Trafficking and Exploitation of in small amounts via money transfer disguise their criminal activities. Underage Victims in the EU,” on 18 services and in larger sums using criminal October, which presents key findings on money couriers and mules. Separately, Europol and Frontex, the child trafficking in the EU, the features European border and coast guard agency, of the criminal networks and the Europol’s report is produced in the announced on 5 October that they are methods employed. framework of the EU Policy Cycle for stepping up cooperation, which includes organised and serious international crime expanding the exchange of information to Amongst the key findings, the report and contributes to the aim of disrupting strengthen their fight against terrorism and states that document fraud is an essential organised crime groups involved in cross-border crime. Both agencies signed a component in the trafficking of minors and intra-EU human trafficking and human Statement of Principles for Collaboration.
FCA fines Tesco Personal Finance plc for failing to protect customers from a cyber attack
The UK’s Financial Conduct Authority particular, failing to: design and distribute transactions, earned it a 30 percent penalty (FCA) published its final notice on the its debit card appropriately; correctly credit for mitigation. In addition, Tesco Bank Tesco Personal Finance plc (Tesco configure its authentication and fraud agreed an early settlement which qualified Bank) cyber attack on 1 October that detection rules; take appropriate action to for a 30 percent discount under the FCA’s revealed “serious weaknesses” in prevent the foreseeable risk of the cyber executive settlement procedure. Tesco Bank’s financial crime controls. attack; and respond to the cyber attack The FCA has fined Tesco Bank GBP with sufficient rigour, skill and urgency. 16,400,000 for failing to exercise due The FCA was especially critical of failures skill, care and diligence in protecting by Tesco Bank’s internal teams to follow The FCA was especially its personal current account holders its own procedures for responding to such critical of failures by from the cyber attack that took place in an attack, which led to a 21 hour delay in November 2016. notifying its specialist fraud team. Tesco Bank’s internal teams to follow its The FCA’s press release describes the Tesco Bank’s immediate action to own procedures for incident as “largely avoidable” and was put in place a comprehensive redress particularly critical of Tesco’s response. programme, devote significant resources responding to such an Despite the limited effect on customers, its to the improvement of deficiencies which attack, which led to a 21 cooperation with the FCA and its consumer contributed to the attack and undertake a redress programme, the FCA found that comprehensive review of its financial crime hour delay in notifying its Tesco Bank had breached Principle 2 of controls, together with its prevention of specialist fraud team. the FCA’s Principles for Businesses for, in a significant percentage of unauthorised
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2018 Basel AML US study finds rise in value of index published fraudulent noncash payments
The US Federal Reserve published from USD 6.1 billion in 2012 to USD 8.3 the results of its payments study billion in 2015. Over the same period, survey of depository institutions the total value of noncash payments and payment card networks on rose 12 percent to USD 180.3 trillion. 16 October, which has found that the value of fraudulent noncash The report provides estimates of payments in the US rose significantly payments fraud totals and rates for between 2012 and 2015 – outpacing payments processed over general- growth in noncash payments overall. purpose credit and debit card networks, including non-prepaid and prepaid The study’s survey of depository debit card networks, the automated institutions found that the value of clearinghouse (ACH) transfer system, noncash payments fraud rose 37 percent and the cheque clearing system.
The International Centre for Asset Recovery, part of the Basel Institute on Governance, published the 2018 Peruvian opposition leader Basel Anti-Money Laundering Index on 9 October, which ranks countries’ investigated for alleged money risk exposure to money laundering and terrorist financing. laundering linked to Odebrecht
The risk scores are based on publicly available indicators of anti-money A Lima appeals court ordered the sought to interfere in the Odebrecht laundering and countering the financing immediate release of Peruvian investigation. Despite her release Ms of terrorism (AML/CFT) frameworks, opposition leader and daughter of Fujimori remains under investigation. corruption risk, financial transparency the former president, Keiko Fujimori, Prosecutor Rafael Vela said witness and standards, and public transparency on 17 October, according to state testimonies and documents obtained and accountability. television. Ms Fujimori was detained during raids confirmed there were as part of an investigation into plausible risks of obstruction of The press release states that, “The alleged money laundering during the probe. It is alleged that the raid findings tie into recent high-profile her 2011 presidential campaign. uncovered evidence of what appeared probes involving countries generally Prosecutors are investigating the to be bribes given to witnesses. considered low-risk.” In light of the origin of several large undeclared money laundering scandal involving financial donations to Ms Fujimori’s Separately, Peru’s supreme court Danske Bank, as well as a recent campaign and links to the Brazilian overturned a medical pardon of former corruption scandal involving the Danish construction firm Odebrecht. president Alberto Fujimori and ordered tax authority, Denmark’s risk score his immediate capture and return to jail worsened the most from 2017 to 2018. Judge Richard Concepcion ordered Ms on 3 October. Mr Fujimori must now Denmark was joined by Iceland, the Fujimori’s arrest on 10 October, along complete his 25-year jail sentence for Netherlands, and Finland as among the with 19 former campaign officials, after authorising death squads, overseeing top ten decliners in 2018. prosecutors alleged she may have corruption and vote rigging.
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Former Malaysian deputy PM OCC fines charged with money laundering Capital One
Malaysia’s former deputy prime Separately, Datin Seri Rosmah Mansor, USD 100 minister Datuk Seri Ahmad Zahid the wife of former Malaysian prime Hamidi was charged on 45 counts minister Najib Razak, was charged with million for for alleged money laundering 17 counts of money laundering and and corruption offences on 19 tax evasion on 4 October, following her anti-money October, 27 counts of which relate arrest by the Malaysian Anti-Corruption to receiving and transferring illicit Commission, which is investigating laundering money involving MYR 72 million, how billions of dollars went 10 counts which relate to criminal missing from state fund 1Malaysia failings breach of trust and abuse of power, Development Berhad (1MDB). and eight counts which relate to corruption involving MYR 42 million. It is unclear whether the charges against Ms Mansor relate directly to Mr Ahmad Zahid, also the former home 1MDB. During raids on houses and minister, is accused of using his position condos owned by Ms Mansor and Mr to receive bribes in exchange for helping Razak, who is facing money laundering companies win contracts for ministry and abuse of power charges involving projects and that he misappropriated funds 1MDB, police seized USD 273 million from a charitable foundation he headed worth of jewellery, handbags, and Photo: Reuters and laundered money by buying property. valuables.
The US Office of the Comptroller of the Currency (OCC) announced on 23 October that it has fined Capital One N.A. and Capital One Center for Global Development Bank (USA) N.A. USD 100 million for deficiencies in the bank’s Bank follow-up report on de-risking Secrecy Act/anti-money laundering programme, including failing to file suspicious activity reports (SARs). The Center for Global Development The report states that stakeholders published a follow-up report entitled should continue to work together to The deficiencies, cited in the OCC’s ‘Policy Responses to De-risking: mitigate de-risking and its root causes, 2015 order against the bank, included Progress Report on the CGD Working despite the progress made. In addition weaknesses in its compliance Group’s 2015 Recommendations’ to the actions already underway, the programme and related controls; on 1 October, which assesses the report suggests additional measures deficiencies in its risk assessment, accomplishments made following that could augment the policy response. remote deposit capture and the publication of its ‘Unintended correspondent banking processes; and Consequences of Anti-Money De-risking has exposed flaws in the failing to file SARs. Laundering Policies for Poor approach to AML/CFT, but also presents Countries’ report and puts forward an opportunity to address those In assessing the civil money penalty, recommendations for international shortcomings and to move to a system the OCC found that the bank failed to institutions, governments, and banks that does more to ensure integrity and achieve timely compliance with the to continue addressing de-risking. inclusiveness, states the report. 2015 order, as required.
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New York tax UK report on the operation of the authorities Terrorism Acts in 2017 investigating The UK’s Independent Reviewer Terrorist Asset Freezing Act 2010 of Terrorism Legislation, Max Hill with the Sanctions and Anti-Money allegations QC, published his annual report on Laundering Act 2018 for terrorist asset 10 October on the operation of the freezing in the UK. that Trump Terrorism Acts in 2017. The report makes recommendations engaged in The report assesses the major terrorism on what should be learnt from the investigations in 2017, the organisations terrorist attacks in 2017, executive suspicious tax proscribed and the replacement of the orders and port and border controls. schemes
New York state tax authorities are FATF update on TF methods reportedly investigating allegations made in a New York Times article published on 2 October that US The Financial Action Task Force president Donald Trump engaged (FATF) provided an update on in suspicious tax schemes as he the financing methods employed and his siblings took control of real by ISIL, Al Qaeda and affiliates, estate from the president’s late and released a public statement father, Fred C Trump. following its plenary meeting on 19 October on the evolution of these “The tax department is reviewing the terrorist financing (TF) strategies. allegations in the NYT article and is The plenary also approved a report vigorously pursuing all appropriate on the disruption of TF flows. avenues of investigation,” a representative from the New York state The report provides authorities with tax authority told the Washington Post. a toolkit of disruption tools and comprehensive strategies to assist The New York Times report details, them to improve domestic CFT actions amongst other things, that Trump and and identify novel ways in which his siblings paid USD 52.2 million in competent authorities can effectively taxes on more than USD 1 billion in work together to disrupt TF activity. • guidance, to help countries better wealth transferred to them by their identify and understand the terrorist parents, which is a 5 percent tax The plenary agreed to focus its work on financing risks they face so that they payment at a time when gifts and combating the financing of terrorism in can appropriately resource counter inheritances were taxed at 55 percent. three areas: terrorist financing efforts; and
The New York Times report alleges • implementation, to ensure that • training, to build knowledge across the that this seeming under payment was countries can prosecute and convict Global Network on terrorist financing due to the systemic undervaluation of terrorist financiers, FATF will prioritise risks, asset freezing, information assets and properties. work on the effective investigation and sharing and disrupting terrorist prosecution of this crime; financing.
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Ukraine requests Indian banks request guidance on that the Swiss KYC following Aadhaar ruling authorities seize The Indian Banks Association (IBA), wrote to the Reserve Bank of India Kurchenko (RBI) on 10 October requesting revised know your customer (KYC) assets guidelines following the Supreme Court’s ruling to uphold the legality Photo: Inc42 The Ukrainian Prosecutor General’s of the Aadhaar program, the world’s Office (PGO) has requested that largest biometric database, but which Swiss authorities seize the assets struck down certain provisions on be reactivated after paying a fine of of Ukrainian businessman Serhiy how Aadhaar information can be INR 5,000, but those barred for failing Kurchenko, local media reports used, including that Aadhaar will no to comply will not be able to sign stated on 16 October. longer be mandatory for opening compliance documents on behalf of bank accounts. The banks are their company until the necessary KYC “During the investigation it was concerned about the lack of clarity on details have been provided. established that a former official of PJSC KYC following the ruling. Brokbusinessbank received significant Separately, the RBI announced on amounts for participation in a criminal Meanwhile, India’s central government 3 October that it has imposed a organization and the crimes it committed. has deactivated 18 lakh director activation penalty of INR 50 million on Federal According to the competent authorities numbers (DINs) after the extended Bank Limited for violation of the of the Swiss Confederation, an account deadline on KYC ended on 5 October. The Banking Regulation Act and for non- was determined to which, according to KYC requirements are designed to curb compliance with directions issued the investigation, illegally obtained funds shell companies and make companies by the RBI, which includes failing to were transferred, as well as the account take compliance seriously. Accounts can comply with KYC/AML norms. of an enterprise controlled by the criminal organization in the territory of this state,” reads a statement from the PGO.
Mr Kurchenko is suspected to have 19 charged in fraud and match- created and run a criminal organisation, that is alleged to be involved in offences fixing probe in Belgian football including embezzling funds from state and banking institutions, tax evasion, The Belgian Federal Prosecutor’s Belgium, France, Luxembourg, Cyprus, laundering the proceeds of crime, and the Office announced on 12 October Montenegro, Macedonia and Serbia. creation and acquisition of businesses to that 19 individuals have been cover up illegal activity. According to media charged and nine individuals The federal prosecutor said its year- reports, a total of USD 2 million was frozen detained in a fraud and match- long investigation shows evidence at the request of the PGO. fixing investigation involving of “suspect financial operations” by sports agents and indications of Following the impeachment of former Belgium’s top football league. possible influencing of games. The president Viktor Yanukovych, Mr The offices of four Belgian clubs– statement said that some soccer Kurchenko became subject to a European Anderlecht, Club Brugge, Standard agents have schemed to hide transfer Union asset freeze. Mr Kurchenko left Liege and Genk – were raided and commissions, payments of players Ukraine in February 2014, his current referees, officials, agents and coaches and coaches, and other payments whereabouts are unknown. Mr Kurchenko were questioned after raids across from the Belgian authorities. is on the international wanted list.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
SEC stops microcap fraud scheme Russian involving international accounts billionaire sues
The US Securities and Exchange shares in the US market. Michael T. Sotheby’s Commission (SEC) announced on 3 Gastauer allegedly aided and abetted October that it filed an emergency the fraud by establishing several US over allegedly action and obtained an asset corporations and allowing Mr Knox to freeze against two individuals and use their bank accounts to disburse the assisting in their companies in a scheme that proceeds of his illegal stock sales. generated more than USD 165 fraudulent art million of illegal sales of stock in at Meanwhile, a New York federal court least 50 microcap companies. SEC ordered on 15 October Gelfman investigators unravelled the scheme Blueprint, Inc (GBI) and CEO Nicholas deals with assistance from international Gelfmann to pay over USD 2.5 million regulators and analysis of 400 bank in the first anti-fraud action involving Russian billionaire, Dmitry and brokerage accounts. bitcoin brought by the Commodity Rybolovlev, is suing Sotheby’s for at Futures Trading Commission (CFTC). least USD 380 million, alleging the According to the SEC’s complaint UK auction house helped his former art citizen Roger Knox and his Swiss- Between 2014 and January 2016, adviser Yves Bouvier to defraud him. based company Wintercap SA helped GBI operated a bitcoin Ponzi scheme, Two companies owned by a trust microcap securities holders evade federal soliciting more than USD 600,000 from of the Rybolovlev family, Accent securities laws that restrict sales by large at least 80 customers. Ruling in favour Delight International Ltd and Xitrans shareholders. The complaint charges of the CFTC, the court ordered GBI and Finance Ltd, filed a civil case against that Mr Knox and Wintercap, formerly Mr Gelfmann to pay USD 554,734.48 Sotheby’s in a court in New York on 2 Silverton SA, helped sellers conceal their and USD 492,064.53 in restitution to October. stock ownership and provided anonymous customers and USD 1.85 million and access to brokerage accounts to sell the USD 177,501 in civil monetary penalties. Mr Rybolovlev alleges he was systematically overcharged on a series of multi-million SEC releases report on cyber fraud dollar deals by Mr Bouvier The US Securities and Exchange or vendors to dupe company personnel Commission published a report into sending funds to bank accounts analysing nine public companies controlled by the perpetrators. The Mr Rybolovlev alleges he was that fell victim to cyber fraud on 16 frauds in some instances lasted systematically overcharged on a series October, which recommends that months and often were detected only of multi-million dollar deals by Mr Bouvier cyber threats should be considered after intervention by law enforcement and that Sotheby’s “knowingly and when implementing internal or other third parties. In total, the intentionally made the fraud possible.” accounting controls. nine companies wired nearly USD In response to the dispute between Mr 100 million as a result of the frauds, Rybolovlev and Mr Bouvier, Sotheby’s filed The SEC’s investigations focused on most of which was unrecoverable. a suit against Mr Rybolovlev in a Swiss “business email compromises” in which No charges were brought against the court in 2017 seeking a declaration that it perpetrators posed as company executives companies or their personnel. had done nothing wrong.
34 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Global Witness Son of former Thai PM indicted on publish report money laundering charge on logging in the A Thai court granted bail to the son The allegations relate to a corruption of former prime minister Thaksin case involving Krungthai Bank, in Solomon Islands Shinawatra on 10 October after he which executives of the bank were was indicted on money laundering sentenced to 18 years in prison for charges. Panthongtae Shinawatra extending illegal loans. Panthongtae will be prosecuted on charges of Shinawatra is accused of laundering money laundering and conspiring to some of the money involved. launder THB 10 million.
Egmont Group plenary and paper on FIU independence
The Egmont Group published a paper in October on Understanding The Heads of FIU also Financial Intelligence Unit (FIU) decided to suspend Operational Independence FIU El Salvador due to and Autonomy following endorsement by the Heads of FIU a continuous lack of Global Witness published a report during the plenary at the end of compliance with Egmont on logging in the Solomon Islands September. The paper defines Group principles on 18 October, which presents the characteristics of operational research that shows that tropical independence and identifies the timber across the Solomon challenges FIUs may face. Islands is being harvested on an unsustainable scale, and that much The Heads of FIU also approved a set of Nigeria’s suspension. The Heads of of the activity is at high risk of indicators for corruption related cases, FIU also decided to suspend FIU El being illegal. from the perspective of FIUs, during the Salvador due to a continuous lack plenary. The indicators can be used as of compliance with Egmont Group The report calls on China, the main a tool to help identify transactions and principles relating to operational importer of logs from the Solomon clients related to the money laundering independence and autonomy. Islands, to require its timber importers of the proceeds of corruption. to carry out checks to ensure that the Other highlights from the plenary, timber they buy is legal in its country In regard to membership, the FIUs include the endorsement of a new of origin. The report states that few US of Azerbaijan, Benin, the Republic of strategic plan that focuses on or EU companies import timber direct Congo and Zambia were welcomed as enhancing bilateral and multilateral from the Solomon Islands, but it is likely Egmont Group members. The Heads of exchanges of financial information that companies importing timber from FIU concluded that legislative changes between FIUs, as well as strengthening processing countries such as China may in Nigeria addressed the issues that FIU capability by leveraging traditional be importing Solomon Islands timber. led to its suspension in 2017 and lifted and non-traditional partnerships.
35 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
FinCEN employee charged with Newsweek unlawful disclosure of SARs and Christian
The US Attorney for the Southern The complaint alleges that this Media chiefs District of New York announced on information was published and that Ms 17 October the arrest of a senior Edwards had told investigators that she indicted for employee of the Financial Crimes considered herself a “whistleblower.” Enforcement Network (FinCEN), The government acknowledged that USD 10 million Natalie Mayflower Sours Edwards, Ms Edwards had filed a whistleblower for unlawfully disclosing Suspicious complaint with the Treasury, but it fraud Activity Reports (SARs) to a member is alleged that Ms Edwards initially of the media. concealed from investigators her contact with the reporter. Ms Edwards allegedly disclosed SARs (and other materials) via encrypted email to a The government has charged Ms reporter, the substance of which related Edwards with a conspiracy to defraud to matters under investigation by the US the US. The case reiterates the need to Office of the Special Counsel, including comply with the Banking Secrecy Act’s the investigation of Paul Manafort Jr, the confidentiality requirements as to the president’s former campaign manager. disclosure of SARs information.
Photo: Reuters
Manhattan District Attorney SFO charges former Afren execs Cyrus R. Vance Jr announced the indictment on 11 October of Newsweek and Christian Media The UK’s Serious Fraud Office chiefs for improperly obtaining announced on 24 October that two USD 10 million in loans to finance former executives of Afren Plc, its operations and laundering Osman Shahenshah and Shahid Ullah, the money through a network of have been found guilty of fraud and corporate bank accounts. money laundering offences from which they received more than USD 17 The indictment against Newsweek million and laundered USD 45 million magazine’s former parent company IBT by deceiving Afren into agreeing a Media, its former chairman and three USD 300 million business deal. others alleges that the scheme began Shahenshah and Ullah recommended in March 2015, when William Anderson Following a shareholder revolt which that the Afren board agree to a USD was the CEO of Christian Media Corp, objected to their GBP 6.6 million and 300 million payment to Oriental Energy Etienne Uzac was the co-owner and GBP 3.8 million salary packages, the two Resources Ltd, the company’s oil field chairman of IBT Media Inc and an hatched a fraudulent scheme to increase partner in Nigeria. Unknown to the Afren unindicted co-conspirator was the their pay. Shahenshah and Ullah created board, Shahenshah and Ullah had struck general manager of Oikos Networks, a side deal with one of Afren’s Nigerian oil a side deal, which led to 15 percent who allegedly worked together to obtain partners that allowed them to benefit from being paid out to a Caribbean shell loans from financial institutions to the payments Afren would make. company controlled by the defendants. purchase computer servers.
36 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
TECHNICAL UPDATES OECD and World Bank publish report on cooperation to combat tax evasion and corruption
The Organisation for Economic Co- operation and Development OECD and the World Bank have jointly produced a report entitled “Improving Co-operation between Tax Authorities and Anti- Corruption Authorities in Combating Tax Crime and Corruption,” published on 22 October, which states that countries must step up work to ensure that tax and anti-corruption authorities can effectively cooperate in the fight against tax evasion, bribery, and other forms of corruption.
The report, which draws on the experiences of 67 countries, calls on countries to enhance cooperation by: • utilising enhanced cooperation for cooperation and identify opportunities mechanisms such as joint operations and for improvements based on best practices. • making available the broadest range task forces; and of legal gateways for reporting and The report also supports the OECD and information sharing permitted by law; • promoting a culture of cooperation at all World Bank’s ongoing capacity building levels of an organisation, starting with work and furthers the OECD’s Oslo Dialogue • implementing streamlined and efficient political leaders and agency heads. – which promotes a whole-of-government operational procedures to ensure that approach to tackling financial crimes by reporting and information sharing is The report aims to enable countries to fostering inter-agency and international effective in practice; review and evaluate their own approaches cooperation.
Indonesia steps up bribery probe into Lippo Group’s Meikarta real estate project
Indonesia’s anti-corruption agency (KPK), including government officials, two detained Lippo employees said they had raided 12 locations on 18 October, Lippo Group consultants and an employee been acting on his instructions to bribe a including the home of deputy chairman accused of attempting to pay city officials government official. Mr Syarif identified of Lippo Group, James Riady, as part in return for permits for the company’s that official as Neneng Hasanah Yasin, of a bribery investigation into the Lippo Meikarta property project, KPK chairman who is the regent for West Java’s Bekasi Group’s USD 21 billion Meikarta real Laode Muhammad Syarif told the press. area where the Meikarta project is located, estate project near Jakarta. who has also been arrested. Mr Syarif told reporters that Lippo Group The raids follow the arrest of nine suspects director Billy Sindoro was arrested and by the Corruption Eradication Commission named as the prime suspect in the case after
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PRESS & MEDIA | BRIBERY | CORRUPTION
Spanish Travel bans placed on 50 high defence profile Nigerians, and opposition contractor politician faces corruption charges investigated Nigeria’s president Muhammadu EO6 is directed at law Buhari ordered a travel ban on 50 high enforcement agencies to for alleged profile Nigerians pursuant to Executive Order 6 (EO6) on 13 October to stop ensure that all assets with Saudi bribes them from selling off assets suspected a minimum value of NGN to be acquired with stolen funds, the 50 million or equivalent, Several media outlets reported presidency has said. Those banned in October that a special court in from travelling include individuals subject to investigation Spain is investigating executives whose assets, valued at NGN 50 or litigation are protected at a state-owned defence million and above, are subject to company, Defex, which allegedly corruption investigations and litigation. from dissipation paid millions in bribes to win weapons contracts with Saudi The Abuja division of the federal high court Separately, opposition politician, Peter Arabia spanning two decades. ruled on 10 October that Executive Order 6 does not violate the rights of citizens to Ayodele Fayose, appeared in federal high It is reported that five deals between own property, but rather it was informed by court in Lagos on 22 October on charges Defex and Riyadh from 1992 to Mr Buhari’s aim to save suspected property of corruption, after he stepped down as 2004 are being investigated. Defex’s from being dissipated. EO6 is directed state governor on 16 October following former president, vice-president, and at law enforcement agencies to ensure the election of his successor. Mr Fayose chairman are all under investigation that all assets with a minimum value of pleaded not guilty to 11 counts of criminal for “a systematic criminal behavior NGN 50 million or equivalent, subject to breach of trust and theft totalling USD pattern,” Judge José de la Mata said. investigation or litigation are protected 18 million. Mr Fayose, and his company, from dissipation by employing all available Spotless Limited, are accused of taking Spanish officials have frozen four lawful means, pending final determination cash to fund his 2014 campaign to Swiss bank accounts linked to the of corruption related matters. become governor of Ekiti. Saudi deals and are working with Switzerland on the investigation that is alleged to involve a network of shell companies used to pay bribes. Swiss International network of anti- investigators found one transaction involving a USD 7.6 million payment to a Saudi company but for which corruption bodies to be launched there are no records of any services rendered. A declaration to launch an Corruption of the Council of Europe international network of national and the Ministry of Justice of Croatia. Defex allegedly used a Cayman- anti-corruption bodies was presented The network, sponsored by the Croatian, headquartered shell company, for signature on 16 October during a French and Italian authorities, aims to Peninsula Inc Ltd, to pay around USD conference organised by the Croatian promote the collection, management and 69 million in connection with arms Chairmanship of the Committee exchange of information and intelligence deals in Saudi Arabia, according to of Ministers of the Council of between anti-corruption authorities. investigators. Europe, the Group of States against
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EBRD outlines commitments to combat corruption
The European Bank for Reconstruction clients across its countries of operation and owned companies through the provision and Development (EBRD) released would work with selected clients, particularly of legal and technical assistance to draft a statement on 23 October that it large multinational corporations, to design appropriate legislation, collect relevant data has stepped up its drive to combat and implement new measures to raise and publish it in official registries. corruption in the countries where it integrity and anti-corruption standards. invests with a new set of commitments In regards to government procurement aimed at tackling the threat to The EBRD will also expand its activities and contracting, the EBRD has pledged economic development. promoting the implementation of corruption- to expand its support for procurement proof state ownership policies and will policy and law reform in its countries of Outlining its new commitments, the EBRD work with the governments committed operation, including the adoption of modern said it would continue to enforce the highest to enhancing transparency to support eProcurement standards and technology. standards of compliance and business the development of registers of ultimate integrity in conjunction with private sector beneficial owners of domestic and foreign-
Petrobras reaches agreements with authorities on FCPA violations
Brazilian state-owned energy company, According to Petrobras’s admissions, illegal payments with Brazilian politicians who Petróleo Brasileiro S.A. (Petrobras), while the company’s American helped them obtain their high-level positions entered into agreements with US and Depository Shares traded on the New at Petrobras. Petrobras erroneously recorded Brazilian authorities on 27 September, York Stock Exchange, members of these payments as money spent to acquire in which it agreed to pay a combined the Petrobras executive board were and improve assets, resulting in an estimated total of USD 853.2 million in penalties involved in facilitating and directing USD 2.5 billion overstatement of assets. to resolve the US government’s millions of dollars in corrupt payments to investigation into violations of the politicians and political parties in Brazil, Foreign Corrupt Practices Act (FCPA) and members of Petrobras’s board of in connection with Petrobras’s role in directors were also involved in facilitating facilitating payments to politicians and bribes that a major Petrobras contractor political parties in Brazil, as well as a was paying to Brazilian politicians. related Brazilian investigation. The SEC’s order finds that senior The Securities and Exchange Commission Petrobras executives worked with (SEC) charged Petrobras with misleading US Petrobras’s largest contractors and investors by filing false financial statements suppliers to inflate the cost of Petrobras’s that concealed a bribery and bid-rigging infrastructure projects by billions of scheme at the company. The Department dollars. The companies executing those of Justice (DOJ) also announced a non- projects paid billions in kickbacks to the prosecution agreement with Petrobras. Petrobras executives, who shared the Photo: WSJ
39 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Bulgarian journalist murdered and Former Slovakian president’s report in the chairman wake of the murder of Jan Kuciak of China Huarong Asset Viktoria Marinova has become the third journalist to be killed in an EU member state in the past year, following the Management discovery of the Bulgarian television presenter’s body on 6 October. Co facing
Frans Timmermans, European Commission corruption Photo: EPA vice-president, linked Ms Marinova’s murder with her work on corruption. allegations She had recently presented a show on on 23 October that state officials had investigations into the alleged misuse of EU covered up organised crime schemes Former Communist Party chief funds by several Bulgarian and Romanian for a decade, in response to the murder and former chairman of China construction companies. of journalist, Jan Kuciak and his fiancée Huarong Asset Management Co, Martina Kusnirova in February. Lai Xiaomin, will be prosecuted Ms Marinova’s murder follows that of for allegedly using his position Slovakian journalist Jan Kuciak in February Mr Kiska based his claims on a report for personal gain, China’s anti- and the death of Maltese investigative from the country’s intelligence services corruption agency confirmed reporter Daphne Caruana Galizia in a car into alleged mafia activity in Slovakia on 15 October. Lai Xiaomin bomb attack in October 2017. and stated that he commissioned the is accused of violating party report in the wake of the murder of Mr discipline by squandering state Slovakia’s president, Andrej Kiska, Kuciak, who had investigated organised assets, illegally organising public commented in daily newspaper Dennik N crime networks. banquets and accepting bribes.
Lai Xiaomin was expelled from the Communist Party for “serious violations” of party law and Romania approves ordinance requiring regulations, including trading his power and influence for sex with prosecutors to have more experience several women, the government has stated. Romania’s government passed an investigations including investigations emergency ordinance on 15 October into anti-corruption protests. Activist investor, David Webb that requires prosecutors in the published a post on his website on anti-corruption agency and the Commission president Jean-Claude 19 October entitled “The Huarong- agency that investigates organised Juncker called on Romania to end CMB network: 26 stocks not to crime to have a minimum of 15 infighting over anti-corruption efforts by own,” which lists stocks to avoid years’ experience, almost double the the end of the year if it wants to join the with alleged links to China Huarong current requirement. EU’s Schengen zone, on 23 October. Mr Asset Management Co and China Juncker suggested politicians should Minsheng Banking Corp., which General prosecutor Augustin Lazar agree a common approach by the time according to Mr Webb helped finance criticised the measure stating that the new the country takes over the presidency of a “complex web of dealings” in 24 requirements would hamper many ongoing the Council of the EU in January. other publicly traded firms.
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UK announces new measures to Former tackle corruption ahead of IACC South Korean
The UK government announced new The conference also saw Ukraine sign president measures on 22 October to tackle an agreement with Open Ownership, a corruption ahead of the International DFID-funded organisation that is working convicted for Anti-Corruption Conference (IACC) to build a global beneficial ownership in Copenhagen, which includes the register. corruption launch of an international campaign to promote transparency of company More than 45 national governments, ownership. businesses and organisations endorsed a new joint statement during the Denmark’s ministry of foreign affairs conference that aims to prevent and launched a new report on the use of drive out corruption. The signatories digital instruments in the fight against have pledged to take action including corruption at the conference. The report by returning the proceeds of corruption provides a range of examples on how to their rightful owners, ending secrecy digitalisation can be used in the fight over company ownership, clamping against corruption, which includes the use down on money laundering and tax of blockchain to increase transparency in evasion, promoting integrity in state the administration of landownership and owned enterprises, and improving financial transactions. implementation of existing conventions.
UK recycling industry facing fraud and corruption investigation Photo: EPA Former South Korean president Lee Myung-bak was sentenced to According to a report in the Guardian Allegations that the 15 years in prison and fined KRW published on 19 October, the UK’s EA is understood to be 13 billion after being found guilty plastics recycling industry is facing of bribery and embezzlement by an investigation into suspected investigating include: the Seoul central district court on widespread fraud and corruption within exporters falsely 5 October. the export system, which has led to the Environment Agency (EA) setting claiming for tens of The court ruled that Mr Lee, who up a team of investigators to deal with thousands of tonnes served as president from 2008 to 2013, had accepted bribes from some complaints that organised criminals of plastic waste which and firms are abusing the system. of South Korea’s largest companies, might not exist including Samsung, and the country’s Allegations that the EA is understood intelligence service. Mr Lee was to be investigating include: exporters found to have embezzled around falsely claiming for tens of thousands of being routed to the Far East via the KRW 24 billion through slush funds at tonnes of plastic waste which might not Netherlands; and UK firms with serial an auto parts company called DAS. exist; UK plastic waste not being recycled offences of shipping contaminated Mr Lee claimed the firm belonged to and being left to leak into rivers and waste being allowed to continue his brother but the court ruled that in oceans; illegal shipments of plastic waste exporting. actual fact he was the de facto owner.
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Och-Ziff Capital Management Group Missing reaches class action settlement Interpol chief
Och-Ziff Capital Management Group price by concealing investigations being held LLC and certain of its executive by the Department of Justice (DOJ) officers and others reached a class and the Securities and Exchange by Chinese action settlement with shareholders Commission into potential violations of that was made public on 2 October in the Foreign Corrupt Practices Act. authorities which it has agreed to pay USD 28.75 million to settle securities claims The class actions settlement before that it misled investors about US the US district court in Manhattan investigations into its involvement in requires court approval. alleged bribery in Africa. Och-Ziff entered a deferred prosecution Investors accused Och-Ziff chief executive agreement with the DOJ and its OZ Daniel Och and former chief financial officer Africa Management unit pleaded guilty Joel Frank of inflating the company’s stock to criminal conspiracy in 2016.
Photo: Reuters
The Chinese authorities New S.W.A.M.P. index published admitted on 7 October that they are holding Interpol A new index called “The States With Some of the major findings include: chief, Meng Hongwei, who is Anti-Corruption Measures for Public under investigation by a new officials (S.W.A.M.P.) Index” from the • 36 states scored 60 percent or below government anti-corruption unit Coalition for Integrity was published and 21 states scored 50 percent or for suspected violations of the on 4 October, which ranks the “state of below; law, after an investigation was ethics” in each US state. launched into his disappeared • three states, Washington, Rhode following his flight from France The report presents the findings of a study Island, and California, are at the top of to China. Interpol said it has into the laws of the 50 States and the District the score chart; and received Mr Meng’s resignation. of Columbia regarding the establishment and scope of ethics agencies, the powers of those • North Dakota fared the worst with a According to media reports, Interpol agencies, acceptance and disclosure of gifts score of 0. has requested through official law by officials, and transparency of funding. enforcement channels clarification from China’s authorities on the status of Mr Meng. Mr Meng’s wife and children have been put under French police protection after they were subject to threats, according to France’s interior ministry.
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Russia detains Global SFO issues deputy prime incorporation claim to minister of transparency seize assets Crimea for report of Gulnara alleged bribery published Karimova
According to media reports, The Commission on Security and The UK’s Serious Fraud Office authorities in Russia have detained Cooperation in Europe, also known announced on 3 October that it has a deputy prime minister of Crimea, as the US Helsinki Commission, issued a claim for civil recovery in Vitaly Nakhlupin, for alleged bribe published a report on 4 October the High Court under the Proceeds taking. Igor Mikhailichenko, Crimea’s entitled “Incorporation Transparency: of Crime Act 2002, relating to a deputy prime minister, said in a The First Line of Financial Defense,” number of assets, including three statement on 17 October that he which assesses the countries in UK properties, which it alleges had informed the peninsula’s prime which money is most often hidden were obtained using the proceeds minister, Sergei Aksyonov, about the — the US, the UK, and many EU of corrupt deals in Uzbekistan detainment. countries, especially France and involving Gulnara Karimova and Germany — that have a strong rule of Rustam Madumarov. Mr Aksyonov published a statement on law system and desirable markets. Facebook that Mr Nakhlupin’s detention Gulnara Karimova is the eldest daughter was linked to investigations against The report explains that while anonymous of Islam Karimov, the former president unspecified regional officials and state shell companies have legitimate uses, of Uzbekistan, who was convicted for structures. According to local media they are often abused to launder money. tax evasion, embezzlement, illegally investigations are being carried out Autocrats can create a chain of such appropriating state assets and fraud in relation to employees of the State companies across many jurisdictions, in 2015. It is alleged that Ms Karimova Committee for Road Management and evading law enforcement and moving gained at least USD 300 million in bribes the State Committee for Competition stolen money from company to company from Sweden’s Telia Company AB and Policy, the Road Service of the Republic until that money is nearly untraceable. Amsterdam-based VimpelCom. Rustam of Crimea, as well as employees of state- At that point, the money is considered Madumarov is an Uzbek businessman owned enterprises Krymenergo and “washed” and can be used for all manner who was convicted for stealing assets Krimgazset. of ostensibly legitimate purposes. and tax evasion in 2014.
Former Mexican state governor charged for corruption
Former Mexican state governor, state of Veracruz pleaded guilty to and could be freed in as little as three Javier Duarte, was sentenced to charges of organised crime and money years, according to media reports. During nine years in prison and fined MXN laundering. Mr Duarte’s term of office, Veracruz 58,890 by Mexican prosecutors was involved in a string of atrocities as on 26 September, for embezzling State authorities seized properties and drug cartels battled for territory amid millions in state funds. The former cash worth around USD 120 million, but Mr widespread allegations of official collusion governor of Mexico’s Gulf coast Duarte will not have to pay any damages, with organised crime.
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ICC brings charges for violations of DOJ reportedly the Anti-Corruption Code investigating Major League The International Cricket Council Jayasuriya, with two counts of (ICC) announced on 8 October that breaching the Anti-Corruption Code on it has charged three Hong Kong 15 October. Baseball for players – Irfan Ahmed, Nadeem Ahmed and Haseeb Amjad – with 19 According to media reports the ICC’s alleged FCPA counts of breaching the ICC Anti- anti-corruption unit (ACU) has briefed Corruption Code. Sri Lanka’s president, prime minister violations and sports minister about ongoing The ICC also charged former Sri Lanka investigations into “serious allegations Cricket chair of selectors, Sanath of corruption in cricket in the country.”
Three found guilty in Adidas college basketball corruption trial
A federal jury in Manhattan found “Today’s convictions Jim Gatto, director of global sports The US Department of Justice marketing at Adidas and two others expose an underground (DOJ) is reportedly investigating guilty on fraud charges on 24 October culture of illicit payments, Major League Baseball (MLB) relating to payments they steered to deception and corruption for alleged Foreign Corrupt families of high-school basketball Practices Act (FCPA) violations in players. in the world of college connection with MLB’s recruitment basketball,” said Robert S. of international players and Mr Gatto, former Adidas consultant Merl prospects, according to a report Code and former sports agent Christian Khuzami, the deputy US published by Sports Illustrated on Dawkins were convicted of conspiring attorney for the Southern 2 October. to pay the families of players to attend District of New York. schools sponsored by Adidas. They were The DOJ probe reportedly targets found guilty on all seven counts of wire the use of bribery and fraud in the fraud and conspiracy to commit wire fraud. MLB’s recruitment of players from universities into issuing scholarships countries including Cuba, Haiti and the “Today’s convictions expose an underground under false pretenses, they deprived the Dominican Republic. The allegations culture of illicit payments, deception and universities of their economic rights and include that teams utilise schemes corruption in the world of college basketball,” tarnished an ideal which makes college involving bribery, kickbacks, smuggling said Robert S. Khuzami, the deputy US sports a beloved tradition.” and fraudulent immigration documents attorney for the Southern District of New to sign and move baseball players York. “The defendants not only deceived Sentencing is set for 5 March. from Caribbean countries into the US.
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Bangladesh OECD states Mexico must increase to investigate foreign bribery enforcement allegations The Organisation for Economic Co- Mexico has initiated operation and Development (OECD) against former published the Working Group on a number of anti- Bribery’s Phase 4 report on Mexico’s corruption reforms since chief justice implementation of the Convention on Combating Bribery of Foreign Public October 2011 and once Bangladesh’s Anti-Corruption Officials in International Business fully functional, they Commission (ACC) announced on 3 Transactions and related instruments could have a positive October that it will be investigating on 19 October, which has found that the case filed against former chief Mexico needs to give more priority to impact on enforcement, justice Surendra Kumar Sinha on foreign bribery enforcement, as it is the OECD said. charges of misuse of power and yet to prosecute a case involving the corruption. bribery of foreign public officials 19 years after ratifying the Anti-Bribery The ACC also confirmed that an enquiry Convention. is underway into allegations made against Sinha’s brother, Ananta Kumar The OECD describes the situation as “a a positive impact on enforcement, the OECD Sinha, regarding allegations that he cause for significant concern,” especially said. The report recommends the urgent illegally transferred funds to New Jersey. given the export driven nature of the implementation of the following reforms: economy, and because exports include the nomination of a special anti-corruption The case against Surendra Kumar high-risk sectors for corruption. prosecutor, the appointment of judges to Sinha follows the publication of his the federal court of administrative justice, autobiography, having sought asylum in Mexico has initiated a number of anti- the appointment of the AG pursuant to the the US after resigning from his post amid corruption reforms since October 2011 new constitutional mechanism, and the a row with the government. and once fully functional, they could have implementation of the anti-bribery protocol.
Zimbabwe arrest employees of state-owned electricity company suspected of corruption
According to local media reports, Dhliwayo, on 3 October in connection police in Zimbabwe arrested with USD 35 million in alleged illicit three employees of state-owned dealings with an Indian company. electricity company, Zimbabwe Electricity Supply Authority (ZESA), It is alleged that in 2012 the three accused ZESA’s chief executive, Joshua awarded PME Power Solutions India Ltd Chifamba, the managing director a two-year contract without deadlines by of a ZESA subsidiary, Julian which the company was to deliver the agreed Chinembiri, and the subsidiary’s equipment and without any performance finance director, Thokozani guarantee, according to local media.
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PRESS & MEDIA | SANCTIONS
OFAC and JPMorgan Chase Bank N.A. agree settlement over sanctions violations
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced on 5 October a USD 5,263,171 settlement with JPMorgan Chase Bank N.A. to settle potential civil liability for 87 apparent violations of the Cuban Assets Control Regulations, the Iranian Transactions Photo: Bloomberg and Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations.
The settlement allegedly involves, among other things, processing net settlement payments for bank clients between January 2008 In arriving at the settlement amount, and February 2012, for which 0.14 percent were attributable to the OFAC considered factors such as interests of non-US person entity members that were at various prior to January 2012, the bank did times identified on the OFAC’s SDN List, sanctioned, or located in countries subject to the OFAC’s sanctions programs. not appear to have in place a process to independently assess participating In arriving at the settlement amount, the OFAC considered factors such as prior to January 2012, the bank did not appear to have in member entities of the non-US place a process to independently assess participating member person entity for OFAC sanctions risk entities of the non-US person entity for OFAC sanctions risk, despite allegedly receiving red flag notifications regarding OFAC sanctioned members and staff members processing the net settlement transactions may have had actual knowledge of the members. Separately, the OFAC has issued a finding of violation to The OFAC also considered numerous mitigating factors, including JPMorgan Chase Bank N.A. regarding violations of the Foreign managers and supervisors were not aware of the conduct, the Narcotics Kingpin Sanctions Regulations and the Syrian Sanctions total harm caused was significantly less than the total value of the Regulations. The OFAC found that between August 2011 and April transactions, and the bank has implemented several steps as part 2014, the bank processed 85 transactions and maintained eight of its risk-based compliance program to prevent future violations. accounts for six customers who were identified on the SDN List.
EU renews Burundi sanctions until October 2019
The European Council renewed four individuals whose activities were The Council considered that the absence on 25 October the restrictive deemed to undermine democracy of progress in the situation regarding the measures against Burundi until 31 or obstruct the search for a political four persons subject to restrictive measures October 2019, which consist of a solution to the crisis in Burundi. justified the prolongation of the sanctions. travel ban and asset freeze against
46 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | SANCTIONS
FinCEN issues advisory on attempts OFAC by Iran to exploit the financial system designates
The US Financial Crimes Enforcement support terrorist groups, develop missile Singapore Network (FinCEN) issued an advisory systems, and aid the Syrian government. on 11 October to help financial The advisory describes such deceptive based targets institutions better detect and report financial strategies, and provides red potentially illicit transactions related flag indicators related to specific malign for sanctions to the Islamic Republic of Iran. The activities and typologies. advisory is also intended to help evasion and foreign financial institutions better The US Treasury’s press release states that understand the obligations of their US following the full reimposition of sanctions DOJ unseals correspondents, to avoid exposure to lifted under the Joint Comprehensive Plan US sanctions, and address the AML/ of Action (JCPOA) on 5 November, FinCEN CFT risks that Iranian activity poses to expects that Iranian financial institutions, indictment the international financial system. the Iranian regime, and its officials will increase their efforts to evade US sanctions The advisory lays out ways the US believes to fund malign activities and secure hard The US Department of the Iran exploits the global financial system to currency for the Government of Iran. Treasury’s Office of Foreign Assets Control (OFAC) designated Singaporean national, Tan Wee Beng, and two Singapore-based entities, Wee Tiong (S) Pte Ltd and WT Marine Pte Ltd, on 25 October, pursuant to Executive OFAC sanctions financial network Order 13551 (asset freezes), for engaging in “money laundering, supporting Iranian paramilitary force the counterfeiting of goods or currency, bulk cash smuggling, narcotics trafficking, or other illicit The US Department of the and financial institutions. The Bonyad economic activity that involves Treasury’s Office of Foreign Assets Taavon Basij employs shell companies or supports the Government of Control (OFAC) announced on 16 and other measures to mask Basij North Korea or any senior official October that it has taken action ownership and control a variety of thereof.” Mr Beng is a director and against a network of businesses multibillion-dollar business interests in shareholder of Wee Tiong (S) Pte providing financial support to the Iran’s automotive, mining, metals, and Ltd, and the managing director of Basij Resistance Force (Basij), a banking industries, many of which have WT Marine Pte Ltd. paramilitary force subordinate to significant international dealings across Iran’s Islamic Revolutionary Guard the Middle East and with Europe. Two vessels operated by WT Marine Corps (IRGC), which recruits and Pte Ltd were also designated trains child soldiers to fight in IRGC- The OFAC’s designations include Parsian for engaging in illicit economic fuelled conflicts across the region. Bank, Sina Bank, and Bahman Group activity involving or supporting the pursuant to EO 13224 for assisting, North Korean government. The US The Treasury’s press release explains sponsoring, or providing financial, Department of Justice also unsealed that this network is known as Bonyad material, or technological support criminal charges against Mr Beng for Taavon Basij, which is translated as for, or financial or other services to conspiring to violate US sanctions Basij Cooperative Foundation, and is or in support of, Andisheh Mehvaran by conducting illicit transactions on comprised of at least 20 corporations Investment Company. behalf of North Korean entities.
47 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | SANCTIONS
US considering Iran sanctions US Senate waivers as 5 November looms passes two
A US government official confirmed The Telegraph reported sanctions bills on 5 October that the Trump administration is considering on 9 October that BP will relating to waivers relating to the reimposition be able to move ahead of sanctions on Iran’s crude oil Hezbollah consumers that come into force on 5 with the sale of some of November. its North Sea gas fields after securing a waiver The US Senate passed the The Telegraph reported on 9 October that Hezbollah International Financing BP will be able to move ahead with the sale from US authorities Prevention Amendments Act of of some of its North Sea gas fields after 2017 and the Sanctioning the securing a waiver from US authorities to Use of Civilians as Defenseless allow the deal to go ahead. Reuters reported in negotiations with the US Treasury Shields Act on 11 October, which on 18 October that according to industry in an attempt to persuade the Trump expand the scope of economic sources Turkey’s top refiner, Tupras, is in Administration not to cut off Iran’s access and financial sanctions imposed talks with the US to obtain a waiver allowing to financial messaging service SWIFT. against Hezbollah. it to keep buying Iranian oil. The Financial Times published a report The Hezbollah International Financing The Trump Administration is due to on 4 October, stating that big European Prevention Amendments Act of 2017 reimpose the final set of sanctions against oil companies are spurning the EU’s imposes sanctions on: foreign persons Iran in November, which includes secondary attempt to create a “special purpose that knowingly assist in, or provide sanctions on financial messaging services vehicle” to shield Iranian crude from US support for, fundraising or recruitment to the Central Bank of Iran and some sanctions, because of fears it could leave activities for Hezbollah; agencies of Iranian financial institutions. European businesses exposed to harsh penalties foreign governments that provide finance ministers are understood to be from the US. Hezbollah with financial support, arms or other assistance; and Hezbollah networks, by reason of its narcotics trafficking and significant transnational Russia signs decree to allow criminal activities. counter-sanctions against Ukraine The Sanctioning the Use of Civilians as Defenseless Shields Act imposes Russian president Vladimir Putin legal entities facing special economic sanctions on each foreign individual signed Executive Order “On Special measures; determine special economic and entity that is a member of, or Economic Measures in Connection measures to be imposed on individuals acts on behalf of, Hezbollah and that with Ukraine’s Unfriendly Actions and legal entities designated; and provide is responsible for, or complicit in, the toward Citizens and Legal Entities for other measures within its scope of use of human shields, as well as each of the Russian Federation,” on 22 authority required for the implementation foreign person, entity, or instrumentality October, which will allow Russia to of this Executive Order. of a foreign state that has supported or target Ukrainian companies and facilitated such person or entity. individuals with sanctions in response The Executive Order states that it may to Ukrainian sanctions against Russia. be cancelled if the restrictive measures US president Donald Trump signed imposed by Ukraine against the citizens the Hezbollah International Financing The Executive Order requires that the Russian and legal entities of the Russian Prevention Amendments Act into law Federation: designate individuals and Federation are lifted. on 25 October.
48 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | SANCTIONS
Germany halts arms exports to Saudi Arabia, EU passes resolution and US considers sanctions following the killing of Jamal Khashoggi
Germany announced on 22 October that, until further notice, it will not be approving new arms exports to Saudi Arabia following the killing of journalist Jamal Khashoggi in the Saudi Consulate General in Istanbul on 2 October. Germany is also urging other EU member states to follow suit.
A joint statement by the foreign ministers of Germany, France and Great Britain published on 21 October states that despite the preliminary findings issued by Saudi Arabia on the death of Mr Khashoggi there remains an urgent need for clarification as to exactly what happened – beyond the hypotheses that have been raised so far in Photo: ABC News the Saudi investigation.
Members of the European Parliament called The United States has identified a number would be asked to hand over the 18 Saudi for “an EU-wide arms embargo on Saudi of Saudi officials allegedly responsible for suspects being held in connection with Arabia” on 25 October in response to the the killing of Mr Khashoggi and is taking the killing. Under mounting international murder of Mr Khashoggi. The non-binding action, including revoking visas and exploring pressure, Saudi Arabia again changed its resolution states that the Parliament wants sanctions, US Secretary of State Mike narrative about Mr Khashoggi’s killing, all EU governments to reach a common Pompeo said on 23 October. acknowledging that it was “premeditated.” position on an arms embargo on Saudi Turkey has called for full disclosure. It is Arabia following Riyadh’s confirmation Saudi Arabia’s most senior prosecutor, Saud alleged that some of the Saudi agents that Mr Khashoggi died in the kingdom’s al-Mojeb, was due to hold talks with Turkish involved appear to work directly for Crown consulate in Istanbul earlier this month. investigators and it was expected that he Prince Mohammed bin Salman.
World Bank Group publishes sanctions system report
The World Bank Group published its the Office of Suspension and Debarment In addition to the 78 first Sanctions System Annual Report (OSD) and the Sanctions Board to prepare a on 3 October, which illustrates the joint overview of the Bank Group sanctions debarments, the World institution’s efforts to investigate and system and its activities over the past year. Bank Group opened adjudicate allegations of fraud and 68 new investigations corruption in Bank Group projects, In addition to the 78 debarments, the World which includes debarring 78 firms and Bank Group opened 68 new investigations into allegations of individuals during fiscal year 2018. into allegations of misconduct in bank-funded misconduct in bank- projects and recognised 73 cross debarments The inaugural annual report is the result of from other multilateral development banks funded projects efforts by the Integrity Vice Presidency (INT), during the year.
49 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
PRESS & MEDIA | SANCTIONS
EU Cambodia and Myanmar notice; US extends and Australia Myanmar sanctions monitoring
EU trade commissioner Cecilia and respect the values enshrined in of ZTE Corp Malmström announced in a blog post conventions of the United Nations and on 5 October the EU’s response to the the International Labour Organisation. for violating human rights situation in Myanmar and Cambodia, which will see the The EU has said that it will keep sanctions launch of the process of withdrawing its channels of dialogue with both Cambodia from the Everything But countries open, and that “there is still settlement Arms (EBA) arrangement, and the time for Cambodia and Myanmar to EU has given notice of its intention draw themselves back from the brink.” to send an emergency EU mission to A US federal judge issued an Myanmar to assess the situation. Separately, the Australian government order on 3 October that China’s unveiled sanctions on 23 October against ZTE Corp be scrutinised by a The emergency, high-level mission to five officers in Myanmar’s military who court-appointed monitor for a Myanmar is within the framework of are accused of overseeing violence further two years, following the a potential withdrawal of Myanmar against members of the Rohingya ethnic firm’s violation of a March 2017 from the EBA arrangement. The EBA group. Noting the recommendations of settlement resolving charges that arrangement, which benefits both the international fact-finding mission, it violated US sanctions on Iran Cambodia and Myanmar, guarantees full Australia has imposed targeted financial and North Korea. tariff-free access to the European market sanctions and travel bans against the for all exports, except for weapons officers cited as responsible for human The ruling relates to the finding that and ammunition. However, the EBA rights violations committed by units the company “falsely disciplined” comes with a responsibility to uphold under their command. employees who were part of the Iran trading activities, contrary to the settlement agreement which required ZTE to terminate the employment of certain senior members of staff Former Standard Chartered execs and discipline others involved. Judge Ed Kinkeade extended until 2022 to face Iran sanctions charges the term of a monitor appointed to assess ZTE’s compliance with US export control laws, which was The Financial Times reported on 8 after it paid USD 667 million to avoid originally scheduled to end in 2020. October that US prosecutors have told criminal charges for similar activity in Standard Chartered they are preparing 2012. The bank made a commitment to bring criminal charges against two that it had stopped working with Iranian of the bank’s former employees over and Iran-connected companies, as part alleged sanction breaches involving of its deferred prosecution agreement, Iran-linked companies, according to which was extended again in July. people briefed on the matter. According to media reports in early The investigation into Standard Chartered October, Standard Chartered is currently relates to allegations that it continued to responding to preliminary findings from breach sanctions by processing US dollar US regulators and negotiating over a transactions for Iran-controlled entities possible USD 1.5 billion fine. Photo: Reuters
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PRESS & MEDIA | SANCTIONS
OFAC OFAC extends expiry for licenses designates related to EN+ Group and RUSAL, Colombian and Belarusian sanctions relief drug The US Treasury Department’s Separately, the OFAC issued General Office of Foreign Assets Control Licence No 2F, which extends the traffickers (OFAC) announced on 12 October sanctions relief for one year for nine the further extension of the Belarusian entities until 25 October 2019. expiration dates of three general Subject to the restrictions, all transactions licenses related to EN+ Group plc otherwise prohibited by Executive Order and United Company RUSAL Plc 13405 involving the nine Belarusian (RUSAL) by one month until 12 entities, or any entities that are owned, December. individually or in the aggregate, directly or indirectly, 50 percent or more by one “EN+ and RUSAL have approached the or more of the named Belarusian entities, U.S. Government about substantial are authorised. corporate governance changes that could potentially result in significant US persons relying on the licence to changes in control. As the review of engage in transactions involving any these proposals is ongoing, OFAC is of the Belarusian entities must file a extending the expiration date of related report to the US Department of State if a The US Department of the licenses until December 12,” said a transaction, or any series of transactions, Treasury’s Office of Foreign Treasury spokesperson. exceeds USD 50,000. Assets Control (OFAC) announced on 18 October that it has identified Colombian national Pedro Luis Zuleta Noscue as a significant foreign narcotics trafficker pursuant to OFAC sanctions Iraq-based money the Foreign Narcotics Kingpin Designation Act. Four Colombian service business nationals – Jonathan Alvarez Escobar, Jose Efer Higuita The US Department of the According to the Treasury, Peralta, Alonso Zuleta Noscue Treasury’s Office of Foreign Assets this MSB is a part of and Jose Oscar Zuleta Trochez Control (OFAC) announced on – were also designated for their 17 October that it has imposed ISIS’s financial network involvement in the narcotics sanctions on Afaq Dubai, an Iraq- that includes an array of trafficking activities. based money service business (MSB) that according to the other MSBs, hawalas, and Meanwhile, US president Donald Treasury has been moving money financial facilitators in the Trump issued a notice on the for the Islamic State of Iraq and Middle East continuation of the national Syria (ISIS). emergency with respect to significant narcotics traffickers in Colombia According to the Treasury, this MSB Middle East, and that contrary to what the on 17 October, which continues is a part of ISIS’s financial network name may imply, it is located in Iraq and those sanctions and the national that includes an array of other MSBs, does not have any branches in the United emergency for another year. hawalas, and financial facilitators in the Arab Emirates.
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PRESS & MEDIA | SANCTIONS
Terrorist Financing Targeting US accuses Center nations sanction Taliban former HK facilitators and Iranian supporters official of
The seven nations of the Terrorist The US Department of the Treasury’s sanctions Financing Targeting Center (TFTC) Office of Foreign Assets Control has designated nine individuals designated the Taliban members violations associated with the Taliban on 23 and their Iranian regime sponsors in October in order to disrupt Taliban partnership with the TFTC members: the actors and their Iranian sponsors that Kingdom of Saudi Arabia, the Kingdom seek to undermine the security of the of Bahrain, the State of Kuwait, the Afghan government. Sultanate of Oman, the State of Qatar, and the United Arab Emirates.
OFAC designates associates of
Japanese Yakuza syndicate Photo: SCMP
The US Department of the Treasury’s According to the Office of Foreign Assets Control US prosecutors submitted (OFAC) announced on 2 October Treasury, the Yakuza documents to a US district court that it has taken action against two engages in money on 2 October accusing a former Hong Kong official working companies and four individuals laundering, using front in Japan associated with the on behalf of Shanghai-based Yamaguchi-gumi, the largest and companies within CEFC China Energy, Patrick Ho most prominent Japanese Yakuza legitimate industries, Chi-ping, of facilitating arms transactions in Africa and the syndicate. Two Kobe, Japan-based including construction, companies, Yamaki, K.K. and Toyo Middle East, and brokering Shinyo Jitsugyo K.K., and four real estate, and finance, business with Iran in violation of US sanctions. individuals, Utao Morio, Chikara to hide illicit proceeds Tsuda, Yasuo Takagi, and Katsuaki Mr Ho was arrested in New York in Mitsuyasu, have been designated 2017 on charges of attempting to pursuant to Executive Order 13581, bribe officials in Chad and Uganda to which targets significant transnational win favourable treatment for CEFC criminal organisations (TCOs) and China Energy. Mr Ho, who was the their supporters. finance, to hide illicit proceeds, secretary for home affairs of the Hong and has relationships with criminal Kong Special Administrative Region According to the Treasury, the Yakuza affiliates in Asia, Europe, and the government from 2002 to 2007, is engages in money laundering, using front Americas. This action marks the first scheduled to go on trial for bribery and companies within legitimate industries, time Yakuza-owned companies have money laundering next month. including construction, real estate, and been targeted by the OFAC.
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COUNTRY UPDATES
Australia China India
The Australian government confirmed in October that The People’s Bank of China issued anti-money laundering The Securities and Exchange Board of India (SEBI) the new bill currently being drafted to amend the Anti- and counter-terrorism financing regulations for online issued two circulars on 21 September in relation to Money Laundering and Counter Terrorism Financing financial institutions on 10 October, which will come into foreign portfolio investors (FPIs) registered under the Act 2006, contrary to initial proposals, will not include force on 1 January 2019. The new requirements include SEBI (Foreign Portfolio Investors) Regulations 2014 lawyers, accountants, and real estate agents within its that institutions must set up internal control mechanisms – one on know your customer (KYC) requirements scope. The new bill is expected to include changes to the for combating money laundering and terrorism financing, and the other on eligibility conditions. The KYC circular “tipping-off” rules and other secrecy provisions to allow follow know your customer rules, and report suspicious aims to clarify the rules for determining beneficial more sharing of information between the government transactions in a timely manner. owners and other disclosures made by FPIs. and private sector.
Estonia Ireland Canada The Estonian government announced on 19 October that Ireland’s National Police Service, An Garda Síochána, Global Affairs Canada (GAC) has established a it is planning to toughen anti-money laundering rules by launched a confidential telephone line for the reporting new Sanctions Policy and Operations Coordination forcing people suspected of benefiting from suspicious of bribery and corruption on 28 September. The Garda Division with a view to improving the effectiveness of financial transactions to prove the source of their Anti-Corruption Unit was set up within the Garda the Canadian sanctions regime and streamlining its wealth. Estonia’s Anti-Money Laundering Commission National Economic Crime Bureau and is dedicated interactions with business and other stakeholders. The has been tasked with drawing up a set of proposals on to the investigation and prevention of bribery and primary objectives of the new division are: improving strengthening anti-money laundering legislation, which corruption occurring both within and outside the state. the GAC’s capacity to effectively apply sanctions as an was due to be presented to the government in October. instrument of Canada’s foreign policy, and improving the GAC’s ability to work with stakeholders, including the private sector, to enhance understanding of and Italy adherence to Canada’s sanctions. Among its priorities, Germany the Sanctions Division plans to review the effectiveness Italy’s draft 2019 budget, which was rejected by the of existing sanctions and to provide guidance to Germany’s Federal Financial Supervisory Authority (BaFin) European Commission on 23 October, includes an stakeholders on their application. published the findings of its cyber security survey of amnesty for certain unpaid taxes that has caused German insurance undertakings and pension funds on a dispute between the two parties in the coalition Separately, the Guardian published a report on 15 24 September, which found that every respondent had at government, due to concerns that the amnesty could October, in which David Eby British Columbia’s attorney least taken basic steps towards increased cyber security, shield those involved in financial crime. A compromise general describes how Canada’s casinos are being used but that there is considerable room for improvement on the tax amnesty was agreed at a coalition meeting to launder millions of dollars in cash and the possible within the industry. BaFin conducted a survey of all on 20 October. links to Vancouver real estate. Mr Eby’s office tasked a German insurance undertakings and pension funds – former police officer and money laundering expert with excluding funeral expenses funds – between August investigating the so-called Vancouver model, a scheme and November 2017. BaFIN’s press release explains that in which some of the province’s casinos were used two points arise from the findings: first, many insurers to launder more than CAD 100 million during the past – primarily the small ones – do not take a sufficiently Jordan decade. The report, made public in June, outlines how systematic approach to cyber security; and second, the scheme worked and linked the practice to wealthy companies must better document end-user computing Jordan’s cabinet approved two draft laws on 24 Chinese citizens. applications. BaFin aims to begin systematically September that would amend the Illicit Gains Law conducting supervisory IT audits, which will include and the Integrity and Anti-Corruption Law. The draft outsourced entities. The Supervisory Requirements for law amending the Illicit Gains Law aims to promote IT in Insurance Undertakings will form the basis of the transparency and expand the scope of the law by Cayman Islands assessments. adding the heads and members of municipalities’ temporary committees, executive directors and the The Cayman Islands Monetary Authority has extended heads and members of the governorate councils the deadline for Cayman domiciled investment funds to to the categories subject to the law. The draft law designate and appoint natural persons to act as its anti- Hong Kong amending the Integrity and Anti-Corruption Law aims money laundering compliance officer, money laundering to strengthen the independence of the Jordan Integrity reporting officer and deputy money laundering reporting Hong Kong’s Companies Registry published a new and Anti-Corruption Commission (JIACC) board’s officer from 30 September to 31 December 2018. Each “Guideline on Compliance of Anti-Money Laundering and chairman and members. Cayman investment fund which launched prior to 1 June Counter-Terrorist Financing Requirements for Licensed 2018 now has until 31 December 2018 to designate Money Lenders” on 21 September that came into force entity specific AML officers. with immediate effect. Although the guidelines are not legally binding, it is stated that any non-compliance with the guidelines may cast doubt on whether a licensee is fit and proper to carry on business as a money lender.
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COUNTRY UPDATES
Liberia on organisations and will impact NGO’s working that the implementation of economic sanctions by with vulnerable individuals whose data is protected the Federal Council is deficient. The report claims that under the EU General Data Protection Regulation. An the State Secretariat for Economic Affairs (SECO) only The governor of Liberia’s central bank, Nathaniel amendment introduced on 16 October exempts the monitors the implementation of sanctions on an ad-hoc Patray, stated on 2 October that it did not lose organisations of national minorities, and members of basis and does not make full use of the instruments USD 104 million in newly printed notes, disputing the Council of National Minorities, from the provisions. at its disposal and as such calls on the SECO to better government statements that have instigated a federal supervise sanctions. investigation. A Liberian court issued arrest warrants on 28 September for more than 30 former central bank officials in connection with the funds that are Singapore alleged to have gone missing. Turkey
Singapore’s Serious Crimes and Counter-Terrorism (Miscellaneous Amendments) Bill 2018 was Turkey expects the US to lift its sanctions against the Nigeria introduced to Parliament on 1 October, which country following the release of US pastor Andrew proposes legislative amendments that aim to Brunson, the spokesman for president Tayyip Erdogan enable Singapore to more effectively tackle money said on 22 October. A court in Turkey ordered the Nigeria’s president Muhammadu Buhari signed laundering and terrorism financing. The new Bill, which release of Mr Brunson on 12 October who was a new Executive Order for the introduction of the seeks to amend the Corruption, Drug Trafficking and detained for two years over alleged links to political Voluntary Offshore Assets Regularization Scheme Other Serious Crimes (Confiscation of Benefits) Act groups, including the banned Gulenist movement, after (VOARS) on 8 October, which requires Nigerian (CDSA) and the Terrorism (Suppression of Financing) a failed coup attempt in 2016. taxpayers who hold offshore assets and income Act (TSOFA), proposes changes that will strengthen for which no taxes have been paid, to voluntarily the government’s ability to enforce and prosecute disclose and regularise the payment of tax on these offences relating to money laundering and terrorism assets. Taxpayers that apply for the scheme, which financing; enhance penalties for offences relating United Arab Emirates came into force immediately, will obtain immunity to money laundering and terrorism financing; and from prosecution for tax offences and offences facilitate the sharing of financial intelligence with Dubai’s Financial Services Authority provided notice related to offshore assets, among others. foreign jurisdictions. on 3 October of amendments to its anti-money laundering and counter terrorist financing legislation, which were set to enter into force on 29 October. The Papua New Guinea changes aim to improve the supervisory oversight of South Africa financial institutions, and are expected to bolster the UAE’s assessment in the upcoming FATF evaluation. The Organisation for Economic Co-operation and South Africa’s finance minister Nhlanhla Nene resigned Development (OECD) and Papua New Guinea’s on 8 October after admitting meeting members of the Internal Revenue Commission agreed to step up Gupta family, who have been accused of corruption, efforts to tackle tax base erosion and profit shifting during the ongoing inquiry. Mr Nene told the inquiry US by multinational enterprises in Papua New Guinea, into the alleged influence of the Guptas, known as through participation in the OECD/UNDP Tax the Zondo commission, about meetings that he had The US Department of Justice (DOJ) published new Inspectors Without Borders initiative on 18 October. previously denied. President Cyril Ramaphosa said guidance on the selection of monitors in criminal he accepted the resignation “in the interests of good division matters on 11 October, clarifying the factors the governance.” There is no suggestion that Mr Nene DOJ will consider when deciding whether to impose Romania had done anything illegal in meeting the businessmen a corporate monitor. The new guidance confirms during his role as deputy finance minister and finance DOJ policy that a corporate monitor should not be minister in Mr Zuma’s government, but he was under imposed as a punitive measure, and instructs that On 22 October the Romanian Parliament finally intense political pressure to step down since making the Department will favour monitors as part of future adopted legislation to implement the EU’s Fourth the admission. settlements only when the need and benefits derived Anti-Money Laundering Directive (4AMLD) into from such a monitor outweighs the projected costs and national law. Romania was referred to the Court of burdens to the company. Justice of the EU in July for failing to implement the legislation and was facing possible fines of EUR 1.8 Switzerland million and then EUR 21,000 for each day of delay. European Commissioners Frans Timmermans and The Swiss Capital Markets and Technology Association Venezuela Věra Jourová and international organisations the published anti-money laundering standards for digital Civil Society Europe (CSE), the European Foundation assets on 18 October, which are designed to clarify Venezuela’s vice president, Delcy Rodriguez, announced Centre, and the Donors and Foundations Networks the measures to be taken by issuers of digital assets on 5 October that passport issuance fees can only in Europe (DAFNE) expressed concerns about the and financial intermediaries to comply with the Swiss be paid in the government-issued cryptocurrency legislation. The new law bans the issuance and regulations against money laundering and the financing Petro as of 1 November. According to president further transactions with existing bearer bonds and of terrorism. The standards, which are not compulsory, Nicolas Maduro’s updated whitepaper on Petro, places civil society organisations under the same represent a consensus among the financial sector as to the cryptocurrency will be backed by oil and natural due diligence obligations as financial services how applicable regulations can be complied with. resource reserves and will go on sale to the public on 5 providers. Instead of reporting on beneficial November. ownership, associations and foundations must report on the beneficiaries of their operations. This Separately, a report published by the Swiss Senate provision imposes a great administrative burden Management Committee on 23 October has found
54 aperio-intelligence.com FINANCIAL CRIME DIGEST | OCTOBER 2018
BOOK REVIEW
A passport to the hidden offshore world of illicit financial flows: Moneyland by Oliver Bullough
Like dark matter, illicit financial flows It is often argued that those who use such cannot be seen, but can only be offshore havens have a legitimate right detected by the distortive effect they to and need for privacy. But as Bullough have on their surroundings. The amount argues, the protection and privacy afforded of money which disappears offshore by an offshore account or a faceless each year is widely estimated to run into holding company in an offshore jurisdiction the trillions of dollars, more than the is only available to the select few with the GDP of most countries. Oliver Bullough, capital to afford them. These individuals an accomplished investigative journalist are far more likely to be the beneficiaries of with significant first-hand experience corruption and politically compromised law researching corruption in Russia and enforcement agencies than they are to be the CIS, has a name for this missing the victims. “country,” which kleptocrats and crooks use to steal, hide and then spend their This book at times paints a bleak picture previously near-untouchable senior member loot – Moneyland. of a world in which legal impunity is of the American political establishment, increasingly becoming a commodity for is perhaps the most high-profile example In his book, Bullough concisely and sale to those who have the money to exploit of a citizen of Moneyland being exposed convincingly traces the genesis, evolution, international loopholes. So what chance do and prosecuted. The pages of the Financial and present state of Moneyland, from we have in the fight against Moneyland? Crime Digest are full of similar convictions. where the tunnel first opened to this parallel The only answer is increased international New legislation in the UK such as relating world in the dying-days of the Bretton- cooperation on anti-money laundering to unexplained wealth orders and the Woods system, to today’s complex and and anti-corruption regulation. We can all upcoming push to force British Overseas nebulous web of offshore companies and contribute to this by raising awareness and Territories to declare ownership information obscure ownership structures which enable putting pressure on legislators. are further signs of an increased dirty money to evade detection. Through understanding and appreciation of the his exposé of the current state of the At first glance, the prospects of disastrous effects of corruption and illicit Ukrainian healthcare system, he reminds us international cooperation seem less financial flows on society and the need to of the human cost of corruption, and that than promising given the current state of fight back. it is never, as it is sometimes claimed, a international affairs. Yet in some respects, victimless crime. the tide does appear to be turning. The Financial crime undermines the rule of recent conviction of Paul Manafort, a law and shatters public faith in financial Moneyland is not some shady international institutions. Yet the systems which conspiracy, but the natural result of a Moneyland is not some facilitate it are formidable, entrenched and system in which law enforcement stops at truly global. Moreover, the recent purges in international borders while capital flows shady international China and Saudi Arabia serve as reminders are unrestrained. This means that there conspiracy, but the that anti-corruption rhetoric can cynically are substantial gains to be made for any natural result of a be used as a political weapon. But just jurisdictions or institutions willing to not because the scale of the problem is such a ask too many questions; for those happy to system in which law daunting one, that does not mean it is not turn a blind eye to egregious mismatches enforcement stops at worth taking on. between a public official’s declared salary and the vast sums they have somehow international borders amassed, or to allow a company to be while capital flows are incorporated without recording any unrestrained. Review written by James Tytler, information about its owners. Aperio Intelligence
55 Aperio Intelligence Limited Aperio Intelligence Limited (France) Aperio Intelligence Romania SRL 16 Dufferin Street 91 rue du Faubourg Saint-Honoré, Bulevardul 21 Decembrie 1989, nr.67, London EC1Y 8PD 75008 Paris ap. A03, Cluj-Napoca, Romania T +44 (0)20 3146 8900 T +33 (0) 6 43 07 80 29 T +40 (0)371 780 734 [email protected] [email protected] [email protected]