September 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 16 Welcome to the September edition of the Financial AN INTERVIEW WITH THE PRESIDENT OF MONEYVAL AND Crime Digest, Aperio Intelligence’s monthly newsletter, an HEAD OF LIECHTENSTEIN’S FIU, DANIEL THELESKLAF informative summary of the most recent developments PRESS AND MEDIA 19 relating to the world of money laundering, fraud and MONEY LAUNDERING | FRAUD | TERRORIST FINANCING terrorist financing, bribery and corruption, and sanctions. PRESS AND MEDIA 34 BRIBERY | CORRUPTION [email protected] PRESS AND MEDIA 47 SANCTIONS
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FCA consults on RTS and EBA guidance on PSD2 and new complaints reporting rules for APP fraud
The UK’s Financial Conduct Authority (FCA) launched a consultation on 17 September on new rules and guidance to implement the revised Payment Services Directive (PSD2). The changes proposed reflect final regulatory technical standards (RTS) on security and new fraud reporting requirements published by the European Banking Authority (EBA). The FCA is also consulting on proposed new complaints reporting rules for authorised push authentication and common and secure open The FCA is also consulting on other changes to payment (APP) fraud. standards of communication (SCA-RTS). the Payment Services and E-Money Approach Document and Perimeter Guidance, which The FCA has set out in consultation The FCA is also consulting on new fraud reflect the FCA’s experience and issues paper 18/25 rules to report and combat reporting requirements that will affect the identified since publication of the September payment fraud, which are intended to data collected and reported by all payment 2017 Policy Statement. improve the security of payment services, service providers (PSPs). Following the FCA’s which includes security processes consultation in June on requiring PSPs and The deadline for responses to the consultation around customer authentication when credit unions to handle complaints when they is 12 October. paying online with cards or accessing have received funds as a result of APP fraud, online banking services. The consultation the FCA has also proposed requiring firms to The consultation paper can be focuses on the RTS for strong customer record and report data on complaints. found HERE.
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EU proposes a series of measures to strengthen the fight against money laundering and terrorist financing
President of the European Commission, • enhance the quality of supervision through supervisors in integrating anti-money Jean-Claude Juncker, proposed a series common standards, periodic reviews of laundering aspects into their various tools and of measures to fight money laundering national supervisory authorities and risk- ensuring supervisory convergence. and terrorist financing more effectively assessments; across Europe during the annual state of The Commission also invited the European the union address on 12 September. The • enable the collection of information on anti- Central Bank to conclude with anti-money proposal includes measures to enhance money laundering risks and trends and foster laundering supervisors a multilateral the role of the European Banking the exchange of such information between memorandum of understanding on exchange Authority (EBA) and strengthen its national supervisory authorities (so-called of information by 10 January 2019, as required mandate to ensure that risks of money data hubs); by the fifth Anti-Money Laundering Directive. laundering are effectively supervised by all relevant authorities. • facilitate cooperation with non-EU countries The proposal to strengthen the EBA’s role will on cross-border cases; and now be discussed by the European Parliament The Commission’s press release announcing and the Council. These amendments will the new measures explains that while the • establish a new permanent committee feed into the ongoing discussions on the EU has strong anti-money laundering rules that brings together national anti-money Commission’s proposal to review the European in place, recent scandals involving some EU laundering supervisory authorities. Supervisory Authorities’ Regulations to banks have raised concerns that those rules strengthen the capacity of the ESAs to ensure The Commission also presented a strategy are not always supervised and enforced convergent and effective financial supervision. to improve information exchange and effectively across the EU. The European cooperation between prudential and anti- Commission proposes amending the Commission Vice-President Valdis money laundering authorities and invited the Regulation establishing the EBA to reinforce Dombrovskis, responsible for Financial European Supervisory Authorities, and the the EBA’s role in anti-money laundering Stability, Financial Services and Capital EBA, to adopt guidance supporting prudential supervision of the financial sector. Markets Union, said “Europe’s Banking Union
The amended Regulation will:
• ensure that breaches of anti-money laundering rules are consistently investigated: the EBA will be able to request national anti- money laundering supervisors to investigate potential material breaches and to request them to consider targeted actions - such as sanctions;
• provide that the national anti-money laundering supervisors comply with EU rules and cooperate properly with prudential supervisors. The EBA’s existing powers will be reinforced so that, as a last resort if national authorities do not act, the EBA will be able to address decisions directly to individual Photo: Associated Press financial sector operators;
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must be built on the highest standards of integrity. Anti-money laundering supervision has failed all too often in the EU. Today we are enabling the European Banking Authority to make sure that different supervisors cooperate and exchange information and that anti-money laundering rules are enforced effectively across EU countries. The EBA will also be entitled to request investigation into alleged breaches of the rules and will become Europe’s phone number for cooperation with international partners on issues related to combating money laundering in the financial sector.”
“The EBA will also be entitled to request investigation into
alleged breaches of the of the investigations and direct the different are investigated in an uncoordinated manner, rules and will become member states’ authorities and EU agencies putting successful prosecution at risk. The Europe’s phone number dealing with terrorist cases affecting more European Public Prosecutor’s Office would than one member state; steer centrally the investigations, irrespective for cooperation with of where the crimes occurred and better international partners” • Timely exchange of information: Although connect investigation and prosecution. significant progress has been made According to the Commission, the reinforced with successful cases of cross-border European Public Prosecutor, as a Union cooperation, the exchange of information level actor, would avoid inefficient parallel The Commission also proposed new rules to on criminal cases between member states prosecution of connected cases, which often remove terrorist content from the web within on investigation and prosecution of terrorist endangers the fight against terrorist crimes. one hour and extend the tasks of the newly crimes is sometimes slow, which can result established European Public Prosecutor’s in some terrorists escaping prosecution. The Commission invites the Council to Office to include the fight against terrorist With its integrated structure, the European take the initiative forward together with the offences. “We need to be able to prosecute Public Prosecutor’s Office would be in a Parliament and decide on the extension of terrorists in a more coordinated way, across position to obtain a unique overview of the the competences of the European Public our Union,” said Mr Juncker. “Terrorists know terrorists’ activities across all participating Prosecutor’s Office to terrorist offences no borders. We cannot allow ourselves to member states. It would have better access affecting more than one member state. If the become unwitting accomplices because of our to information from member states through Council unanimously decides to extend its inability to cooperate.” the European Prosecutors part of the competences, the Commission can propose European Public Prosecutor’s college or the an amendment to the Regulation establishing The reinforced European Public Prosecutor’s European delegated prosecutors. It would be the European Public Prosecutor’s Office. Office will improve the fight against terrorism best placed to gather and share information by filling existing gaps: across the Union, including with the EU Agencies Eurojust and Europol, as well as with The press release on the EBA • Coordinated investigations: EU member non-EU countries; and can be found HERE. states are competent to investigate and prosecute terrorist crimes but their powers • Coherence of investigations in different The press release on reinforcing end at their national borders. The European member states: There is a risk that terrorist the EPPO can be found HERE. Public Prosecutor’s Office would be in charge cases affecting more than one member state
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MEPs approve proposals for new laws to combat terrorist financing
MEPs approved new measures The new rules on cash flows: The proposed regulation refers to the role to combat terrorist financing, by of the customs authorities to control cash preventing money laundering and • extend the definition of cash to include gold transfers and of Financial Intelligent Units that tightening cash flow checks, on 12 and anonymous prepaid electronic cash receive information from various sources and September. The two new laws aim cards; are therefore best placed to indicate whether to make it harder for terrorists and further investigations are required. Member criminals to finance their activities, by • enable authorities to register information states will establish the penalties for those that closing loopholes in the current money about cash movements below the current do not comply with the obligation to declare. laundering rules and by making it easier EUR 10,000 threshold and to temporarily seize for the authorities to detect and stop cash if criminal activity is suspected; and The two sets of new measures have been suspicious financial flows. agreed upon by the Parliament and Council • require disclosure of unaccompanied cash negotiators, but still require the formal approval The new rules to prevent money laundering sent by cargo or post. of the Council. introduce: The proposed regulation Member states will have 24 months from the • EU-wide definitions of money laundering- date of entry into force of the criminalisation related crimes; refers to the role of the of money laundering directive to bring the new rules into force. The rules on cash • EU-wide minimum penalties, such as a customs authorities to controls will apply 30 months from the date of minimum of four years of imprisonment for control cash transfers entry into force of the regulation. money laundering maximum sentences; and and of Financial “Cash is difficult to trace and easy to • new sanctions, such as barring those Intelligent Units that transfer, therefore criminals frequently use convicted of money laundering from running receive information from it,” said Rapporteur Mady Delvaux (S&D, LU). for public office and excluding access to “With this regulation, we are strengthening public funding. various sources and are the tools to combat money laundering therefore best placed to and terrorist financing through better and indicate whether further faster exchange of information between investigations are authorities, as well as by adopting a more complete definition of cash.” required.
The proposed regulation on cash flows foresees that any person carrying a sum The proposal for a directive on amounting to EUR 10,000 or more must combating ML by criminal law provide a declaration indicating who can be found HERE. will receive the money, where the funds originated, and what the money will be used for. The relevant authorities would be able to impound the money if it has not been The proposal for a regulation declared or if criminal activity is suspected on controls on cash can be until the customs authorities are able to found HERE. decide if a further investigation is needed.
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HM Treasury Hong Kong’s SFC issues circular on launches findings of AML/CFT inspections annual frozen Hong Kong’s Securities and Futures inspections. The Financial Action Task Force Commission (SFC) issued a circular is set to visit Hong Kong in October. assets review on 31 August on the adequacy of licensed corporations’ (LCs) anti- Separately, the SFC issued a circular on money laundering and counter terrorist 14 September reminding intermediaries financing (AML/CTF) controls. of the notification requirement under the Code of Conduct for Persons Licensed by The issuance of the circular follows the or Registered with the SFC under which inspection of LCs over the past year, in intermediaries are required to report any which the SFC detected deficiencies in the material or suspected breach of the laws regulatory standards for AML/CTF. The and regulations. The circular states that it The UK government’s HM SFC’s circular lists the deficiencies found to has come to the SFC’s attention that some Treasury launched its annual undermine LCs systems and controls. intermediaries have not promptly reported frozen assets review on 3 breaches or instances of non-compliance. September, which requires The SFC also published supplementary individuals, organisations and appendix documents to complement the businesses holding frozen funds circular detailing the specific deficiencies The circular can be found HERE. and/or assets belonging to a and good practices observed during the client that is subject to financial sanctions in the UK to report them to the Office of Financial Sanctions Implementation (OFSI) Singapore’s MAS launches consultation on by 12 October. cyber hygiene for financial institutions Every year the Treasury carries out a review to update its records to The Monetary Authority of Singapore definitions to be used in the Notice, in particular reflect any changes to frozen assets (MAS) launched a consultation on 6 whether they are clear; comments on the cyber during the reporting period. As part September on its proposals to further security requirements and whether there are of this review, HM Treasury requires strengthen the cyber resilience of other security controls and processes which all persons that hold or control funds financial institutions by issuing a should be included; and whether the transition or economic resources belonging Notice on Cyber Hygiene, which period, of 12 months from the date of issuance to, owned, held, or controlled by a prescribes a set of essential cyber of the Notice, is adequate for financial designated person, to provide a report security practices that financial institutions to comply with the requirements. on these assets. institutions must put in place to manage cyber threats. The proposed measures aim to enhance The report should include details the security of financial institutions’ systems of all funds or economic resources The measures are already part of the MAS and networks as well as mitigate the risk of frozen in the UK as well as those Technology Risk Management Guidelines, unauthorised use of system accounts with overseas where the funds or economic but MAS is proposing to raise them to legally extensive access privileges. resources are subject to UK financial binding requirements. sanctions legislation. The consultation closes on 5 October. The MAS seeks views on: the proposal to HM Treasury’s frozen assets impose requirements on entities that are review can be found HERE. or will be licensed, approved, registered or The consultation can be found HERE. regulated by MAS; comments on the proposed
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UK announces new aid package to recover illegal assets for developing countries
A series of new UK aid programmes was announced on 30 August, during Prime Minister Theresa May’s visit to Kenya, which aim to “stop dirty money in its tracks,” help bring criminals to justice and recover millions of pounds of illegal assets for developing countries.
During the visit, Minister for Africa Harriett Baldwin signed an agreement with the Kenyan government to return stolen and corrupt funds that have been moved out of Kenya and are hidden in banks in the UK. All stolen funds returned to Kenya will be used for development projects, which includes over GBP 3.5 million in proceeds of crime seized by courts in Jersey.
According to the government’s press release, the new aid package will:
• create new centres of British expertise in All stolen funds returned to Kenya will major financials hubs to tackle financial crime be used for development projects, which more effectively; includes over GBP 3.5 million in proceeds • strengthen efforts in southern and eastern of crime seized by courts in Jersey. Africa to recover illegal money flows from crime, fraud and corruption through the courts; by connecting them with counterparts across to help British companies overcome barriers to • support Kenyan authorities to bring people the globe. doing business in Kenya and other emerging committing financial crimes to justice by markets, including advice on dealing with helping to identify proceeds of crime and The UK also announced the expansion of its requests for bribes and human rights issues seizing criminal property; counter improvised explosive device support in supply chains – with tailored support to be in Africa to combat terrorism, which forms offered to SMEs. • train law enforcement officials in southern part of a new UK-Kenya security agreement and eastern Africa to improve criminal that enables both countries to keep pace justice systems by tightening legislation and with the changing nature of threats and to The press release on the new strengthening investigation techniques, which renew cooperation on counter terrorism, child aid package can be found HERE. will help to build their capacity to clamp down protection, and regional security. on serious organised crime, ranging from drugs and people trafficking to rhino and Other initiatives were announced to increase elephant poaching; and investor confidence, encourage UK trade and The press release on counter investment and support economic growth in terrorism can be found HERE. • make use of British asset recovery experts Africa, which included new practical guidance
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FINMA consultation on proposed FINTRAC relaxation of AML rules for FinTechs updates
The Swiss Financial Market One specific relaxation proposed in line guidance on Supervisory Authority (FINMA) with the principle of proportionality will see launched a consultation on 28 August small institutions being exempt from the beneficial on proposed revisions to its Anti- requirement to establish an independent Money Laundering Ordinance (AMLO- anti-money laundering unit with monitoring ownership FINMA) for institutions granted a new duties, explains the FINMA press release. FinTech licence. FINMA is proposing For the purposes of the draft ordinance, The Financial Transactions and what it describes as “organisational “small” institutions are deemed to be those Reports Analysis Centre of Canada relaxations” for FinTech licence with gross revenues of less than CHF 1.5 (FINTRAC) issued updated guidance applicants anti-money laundering million. on 20 August on the means that obligations given that they are likely to can be used to determine beneficial The Federal Council aims to implement the be smaller institutions. ownership of entities. partially revised Banking Act with effect On 15 June 2018, the Swiss parliament from 1 January 2019 and if possible, FINMA The new guidance indicates that, once adopted the Financial Institutions Act (FinIA), hopes that the amendments to AMLO- beneficial ownership information is obtained, which added provisions on the promotion of FINMA will enter into force at the same time. reasonable measures may now be used to innovation to the Banking Act (BA) and created confirm the accuracy of that information. The consultation is open until 26 October. a new licensing category – the FinTech licence. Previously, FINTRAC took the position The corresponding due diligence requirements that only official documentation could be under the Anti-Money Laundering Act (AMLA) relied upon to confirm the accuracy of the must now be defined for institutions which will The consultation can be found HERE. information obtained. fall within this new category. Previously, FINTRAC took the position that only official documentation EU Committee approves plans to could be relied upon to confirm the accuracy of combat fraud of non-cash payments the information obtained.
The EU Parliament’s Civil Liberties include virtual currency transactions Committee approved plans on 3 within the scope of offences; improve EU- FINTRAC’s guidance states that what September to combat fraud and wide cooperation to ensure cross-border constitutes reasonable measures will counterfeiting of non-cash means frauds are dealt with more effectively; depend on the circumstances. For example, of payment such as cards, e-wallets, strengthen assistance to non-cash fraud the measures must be in line with the m-payments and virtual currencies. victims, such as psychological support, assessed risk of a money laundering or advice on financial, practical and legal terrorist financing offence for the entity, as The new rules would: establish prison matters; and improve prevention and well as the complexity of the entity whose sentences of between three and five awareness raising. beneficial ownership is being determined. years, depending on the offence, as the minimum penalty in cases where a judge FINTRAC’s updated guidance can The press release can be accessed HERE. imposes the national maximum custodial be accessed HERE. sentence for non-cash payment fraud;
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FCA policy UK Court of Appeal restores development applicability of litigation privilege update; HMRC The Court of Appeal for England and updates its Wales handed down its decision on 5 September in UK Serious Fraud approach to civil Office (SFO) v. ENRC, overturning a previous judgment by Justice Andrews in May 2017 that certain AML measures documents, including interview notes and documents prepared The UK Financial Conduct Authority by forensic accountants, were not (FCA) issued a policy development covered by litigation privilege. The update on 7 September, which ruling by the Court of Appeal, which provides information on recent and allowed ENRC’s appeal, brings back upcoming publications. clarity on the applicability of litigation privilege in internal investigations into The update includes a notice that a suspected criminal offences. consultation on recovering the costs of the Office for Professional Body Anti- The Court of Appeal acknowledged in its The case relates to the SFO’s criminal Money Laundering Supervision (OPBAS) judgment that it is in the public interest investigation into ENRC’s activities in is expected to be launched in October, that companies should be prepared to Kazakhstan and Africa, which centres on with an expected feedback date of investigate allegations prior to going to a allegations of fraud, bribery and corruption January 2019. The intended audience of prosecutor without losing the benefit of concerning the acquisition of mineral assets. the consultation, which is due to be open legal professional privilege. Any documents for two months, is professional body created in such investigations will still need The court ruling can be found HERE. supervisors listed in Schedule 1 of the to pass the test for litigation privilege. Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and bodies considering applying to be listed.
Separately, the UK’s HM Revenue and SFO can compel production Customs (HMRC) published an updated version of its paper entitled ‘Money of documents held by foreign laundering supervision: Civil measures,’ on 28 August. The paper sets out how companies, rules court HMRC will use its powers under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) The Administrative Court handed The Administrative Court held that Regulations 2017. down its judgment in R (KBR Inc) v. where there is a “sufficient connection” Serious Fraud Office on 6 September to the UK, the SFO can compel the 2018, concerning the Serious Fraud production of such documents. The FCA’s update can be found HERE. Office’s (SFO) powers to compel the production of documents held outside of the UK by companies incorporated The court ruling can be found HERE. HMRC’s update can be found HERE. outside of the UK.
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Pakistan issues AML/CFT guidelines US judge rules The Securities and Exchange by the NPO sector in the country. The crypto ICO Commission of Pakistan (SECP) SECP reiterated that it is actively pursuing issued guidelines on the Anti-Money implementation of the AML and CTF regime Laundering and Countering Financing in its regulated sectors. fraud falls under of Terrorism Regulations 2018 on 11 September and anti-money laundering The guidelines are designed to assist securities law and countering financing of terrorism in improving Pakistan’s outlook by guidelines for non-profit organisations encouraging adherence to the applicable (NPOs) on 4 September. standards and recommendations, whilst enhancing the level of understanding about The SECP stated in a press release on the due diligence required. 5 September that the guidelines for NPOs have been issued according to the The guidelines can be accessed recommendations of the Financial Action HERE and the NPO guidelines can Task Force, whilst keeping in view the be accessed HERE. evolving threats and challenges faced
A New York judge ruled on 11 September that the US Securities Crypto-assets markets should be and Exchange Commission (SEC) can proceed with its legal case regulated, says Committee report against Maksim Zaslavkiy, the organiser of two initial coin offerings The UK government’s Treasury the EU’s Fifth AML Directive, which will (ICOs), who stands accused of Committee published its report on require crypto-asset exchanges to comply defrauding investors. The decision is crypto-assets on 19 September with AML regulations, is a step forward. the first of its kind to grant the SEC following its digital currency inquiry, However, the Government’s consultation the right to proceed with a criminal in which it recommends that the “wild on transposing the EU’s Fifth AML Directive case against ICO organisers under west” crypto-assets market needs to be into UK regulation is not expected to finish US securities law. regulated to protect consumers. until the end of 2019. The Committee therefore urges the UK government to According to court documents, Mr The risks posed by the crypto-assets market prioritise and expedite the transposition. Zaslavkiy the organiser of the RECoin identified in the report include money and Diamond ICO, tried to have the SEC’s laundering, hacking, and price volatility. The Meanwhile, VP of the EU Commission case dismissed by claiming that the report states that as a minimum regulation for the Euro and Social Dialogue, Valdis cryptocurrencies created could not be should address money laundering and Dombrovskis, stated at the ECOFIN categorised as “securities.” consumer protection. The ambiguity of the conference on 7 September that crypto- US district judge Raymond Dearie UK government’s and regulators’ position on assets are here to stay and that in reasoned during his decision, “Though crypto-assets is clearly not sustainable, states particular ICOs have the potential to be ‘investment contract’ has not been the report. a viable form of alternative financing. Mr Dombrovskis said that work is ongoing defined by Congress, the test for The report observes that crypto-asset with EU Supervisory Authorities on the whether a given financial instrument or exchanges are not included in AML “regulatory mapping of crypto assets,” transaction constitutes an ‘investment regulations and that due to their inherent and that the Commission is expected to contract’ under the federal securities anonymity, crypto-assets can facilitate the conclude this assessment later this year. laws, has long been settled.” sale and purchase of illicit goods and services and can be used to launder the proceeds The report can be accessed HERE. The ruling can be accessed HERE. of crime. The Committee recognises that
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FinCEN provides FCA stresses importance of exceptive international cooperation relief from BO Financial Conduct Authority (FCA) Chief Executive, Andrew Bailey, requirements for stated in a speech at the FCA’s annual public meeting on 11 September that certain accounts financial crime remains an operational challenge for the regulator; a priority that sees the FCA working with other authorities domestically and abroad.
Mr Bailey stated that in 2017, the FCA Photo: Money Marketing received 1,064 requests for information and investigatory assistance from over 80 “To give you a flavour of how significant different regulatory and law enforcement our collaboration already is, at the start of The US Financial Crimes Enforcement authorities in 63 countries. “We also the summer we had routed some 3.1 billion Network (FinCEN) announced on 7 worked closely with colleagues on a transaction reports, since January, to other September that it will exempt certain number of high profile cases, including National Competent Authorities. A process accounts from a rule requiring banks against Beaufort Securities, an operation achieved via the European transaction to identify the beneficial owners of that we conducted in tandem with the reporting exchange mechanism,” explained a corporate account. FinCEN will not US Department of Justice, as well as Mr Randell. “And it is important to stress require banks to collect identification regulatory colleagues in Canada and that we cannot manage the risks of from the holders of specific, revolving Germany,” said Mr Bailey. financial crime successfully unless we financial products such as certificates can share data in this way. Data sharing of deposit, loan accounts or safe In his opening address at the meeting, provides both the UK and EU countries with deposit boxes each time they rollover. Chair of the FCA Charles Randell, a vital foundation to tackle cross-border described the regulator’s commented market abuse, including insider dealing and Covered financial institutions are not that despite the shape Brexit eventually cross-market manipulation.” excepted from the obligation to identify and takes, maintaining and deepening the verify the identity of the beneficial owner partnerships with international regulators of legal entity customers at initial account and law enforcement agencies remains The transcript can be found HERE. opening for such accounts occurring on or vital for the FCA. after 11 May 2018. A beneficial owner is defined as any individual who owns upwards of a 25 percent stake in the company, or a person with controlling interest in it. IOSCO final report on conflicts of “Notwithstanding this exception, covered financial institutions must continue to interest during equity capital raising comply with all other applicable anti-money laundering requirements under the Bank Secrecy Act and its implementing regulations, The International Organization of The guidance is not binding, however including program, recordkeeping and Securities Commission (IOSCO) IOSCO members are advised to consider reporting requirements,” stated FinCEN. published its final report on 18 them to address the potential risks. September on conflicts of interest and The announcement can be found HERE. associated conduct risks during the equity capital raising process. The final report can be foundHERE.
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NCA comments on new agency to 4AMLD enters aid the fight against financial crime into force in The deputy director of the UK’s up in 2016 to identify and understand Spain; Sweden National Crime Agency (NCA), Nigel how the UK’s financial system is used Kirby, in an address to the Cambridge by criminals, corrupt foreign officials Economic Crime Symposium on 3 and terrorists to launder, conceal and issues 5AMLD September, stated that it was his manipulate their wealth illegally. intention to include knowledgeable proposal experts from the private sector in the The NECC was announced in December new division of the NCA, the National as part of the government’s anti- Spain’s Royal Decree-Law 11/2018 Economic Crime Centre (NECC), corruption strategy. The NCA is aiming (RDL) which implements EU which will be operational from 31 to stop the GBP 90 billion of criminal Directive 2015/849 of 20 May 2015 October, who will be well placed to money that flows through the UK otherwise known as the Fourth identify patterns of behaviour which annually. The team of 55 in the NECC Anti-Money Laundering Directive point to illegal activities. comes mostly from existing agencies (4AMLD) came into force on 5 such as the NCA, the SFO, the FCA and September. The NECC will take as its model the joint Her Majesty’s Customs and Excise, as money laundering intelligence task force well as the City of London Police and Spain is late in implementing 4AMLD and involving a core group of bankers, set other police forces. will now need to consider the changes that have been brought in by the Fifth Anti- Money Laundering Directive, which must be implemented into national law by 10 FINMA issues factsheet on VCs January 2020.
The changes brought in by the RDL The Swiss Financial Markets bought and sold fall under the Anti-Money include: that all EU based entities Supervisory Authority (FINMA) issued Laundering Act,” states FINMA. Providers operating in Spain need to appoint a a factsheet on 30 August informing of such services need to register with representative before the Bank of Spain’s market players that intend to operate FINMA as a financial intermediary or join a AML division; companies must set up an a blockchain-based business in self-regulatory organisation. Switzerland that they must first find out internal channel to issue complaints or whether any licensing requirements Other activities may also require a denounce practices which are contrary to apply under financial market law. banking licence and may require ongoing the AML rules or procedures; maximum supervision by the regulator, this would be monetary penalties have increased; FINMA explains in its factsheet that the case, for example, for organisations domestic and international PEPs must be Switzerland has no regulation on the buying that accept money “on a commercial treated in the same manner, and must be and selling of cryptocurrencies or their use to basis” from clients and keep it in their subject to enhanced control measures; pay for goods and services. However, since own account. Other blockchain based and the scope of persons subject to AML virtual currencies are based on technology applications may also require approval. obligations has been widened to include that often facilitates anonymity and cross- any provision of services to a corporate border transfers, this entails increased risks FINMA also cautioned against some of the entity, a trust or an association. of money laundering and terrorism financing. risks associated with virtual currencies, Trading in virtual currencies may therefore such as volatility and uncertainties Separately, the Swedish Ministry of require permission from the regulator. regarding the issuer, and said that it would Finance published a proposal on 5 investigate and punish any breaches. September for the implementation “In particular, providing custody wallet into Swedish national law of Directive services (i.e. custody and payment services (EU) 2018/843, the Fifth Anti-Money for virtual currencies) and operating trading The factsheet can be accessed HERE. Laundering Directive (5AMLD). platforms on which virtual currencies can be
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FATF close to agreeing VC standards FinCEN The president of the Financial Action the adoption of anti-money laundering advisory Task Force (FATF), Marshall Billingslea, standards and regimes pertaining to digital said on 19 September that he is assets and virtual currencies is “very much a optimistic that at its plenary, due in patchwork quilt or spotty process,” which is on FATF- October 2018, the FATF will agree a “creating significant vulnerabilities for both set of worldwide standards for virtual national and international financial systems.” identified currencies (VC). Mr Billingslea said that the task force has accelerated its Mr Billingslea said there were concerns jurisdictions work and made significant progress of an emerging use of VCs by terrorist on reaching a “consensus across organisations, as well as in extortion nations” after the G20 requested the schemes. Despite the risks associated with organisation tackle the issue as a digital assets, Mr Billingslea said they also matter of urgency. presented “a great opportunity.”
In October, FATF will discuss which of its Meanwhile, FATF published on 24 September existing standards needs to be updated to an up-to-date overview of the ratings The US Financial Crimes address virtual assets. It will then revise that assessed countries obtained for Enforcement Network (FinCEN) the methodology it uses to assess how effectiveness and technical compliance. The published an advisory on the countries implement these standards and overview should be read in conjunction with Financial Action Task Force when this revised assessment methodology the mutual evaluation reports. (FATF)-identified jurisdictions will take effect. with anti-money laundering The updated consolidated assessment and combating the financing Mr Billingslea, who is also assistant ratings can be found HERE. of terrorism (AML/CTF) secretary to the US secretary, said currently deficiencies on 21 September.
FinCEN’s advisory provides guidance on the jurisdictions that are subject to the FATF’s call FINRA publishes white paper on the rise for countermeasures and/or are subject to enhanced due diligence of RegTech and requests feedback (EDD) due to their strategic AML/ CTF deficiencies, which includes The US Financial Industry Regulatory compliance, regulatory intelligence, reporting a review of the guidance on the Authority (FINRA) published a white and risk management and investor risk countermeasures applied to the paper on 10 September outlining recent assessment. Democratic People’s Republic of regulatory technology (RegTech) Korea and guidance relating to the developments within the securities The paper outlines a number of regulatory EDD measures applied to Iran. industry and the potential opportunities and implementation issues for broker and implications these technologies dealers to consider as they explore RegTech, The advisory also assesses the may have for broker dealers. including supervisory control systems, jurisdictions identified by the outsourcing and vendor management, data FATF as having strategic AML/ The white paper follows a review by FINRA privacy, and security. CTF deficiencies, which includes on the emergence of RegTech tools within Ethiopia, Pakistan, Serbia, Sri the securities industry and summarises the FINRA has requested feedback from Lanka, Syria, Trinidad and Tobago, key findings. Notably, FINRA highlights five interested parties by 30 November. Tunisia and Yemen. areas where industry participants have most prominently leveraged RegTech innovations: surveillance and monitoring, customer The white paper can be found HERE. The advisory can be found HERE. identification and anti-money laundering
14 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
TECHNICAL UPDATES
Council of the EU “Five eyes” to work with private does not object sector on beneficial ownership to the regulation The annual Five Country Ministerial, Encryption that sets out a framework for held on 28 and 29 August, to discuss discussion with industry on resolving the adding Pakistan national security challenges and challenges to lawful access posed by how to better collaborate to meet encryption; and an agreement to support to high-risk third common security challenges, adopted G20 and Financial Action Task Force efforts a series of commitments to combat to combat illicit finance by increasing countries under illicit finance and organised crime, the transparency of legal persons and which included an agreement to work arrangements, and enabling timely access closely with the private sector to to BO information by law enforcement 4AMLD promote the adequate and accurate agencies. collection of beneficial ownership The Council of the European Union (BO) information. The commitments include an agreement published the minutes of its meeting to encourage collaboration between ‘five on general affairs on 18 September The ‘five eyes’ security partners, Australia, eyes’ Financial Intelligence Units to enhance 2018, which records that the Council Canada, New Zealand, the UK, and the the sharing of intelligence, and the need to has decided not to object to the US, agreed a series of commitments, work with the private sector to promote the Commission Delegated Regulation which included: an agreement to expand collection of BO information. adding Pakistan to the list of high- the sharing of information about known risk third countries under the Fourth or suspected terrorists; a Statement of The press release can be found HERE. Anti-Money Laundering Directive (the Principles on Access to Evidence and Delegated Regulation).
The European Commission published a Delegated Regulation which amends Delegated Regulation (EU) 2016/1675 New director of the SFO stresses supplementing the Fourth Anti-Money Laundering Directive (4AMLD) on 22 the importance of technology August 2018, which added Pakistan to the Annex of Delegated Regulation (EU) Lisa Osofsky gave her inaugural speech to identify material subject to legal 2016/1675 that details third countries with as the new director of the UK Serious professional privilege. The SFO is also strategic deficiencies in their anti-money Fraud Office (SFO) to the annual looking to enhance its intelligence laundering and counter-terrorist financing Cambridge International Symposium gathering capabilities, which will regimes. on Economic Crime on 3 September, include working with technology in which she acknowledged that to companies to address the issues According to Article 18a of 4AMLD, deliver a collaborative and joined-up posed by encryption. obliged entities in all member states must approach, the SFO’s use of technology apply enhanced customer due diligence must keep pace with changing time, On the subject of deferred prosecution measures when dealing with natural noting the need to use technology to agreements (DPAs), Ms Osofsky noted persons or legal entities established in manage cases involving thousands – that a DPA is not always the right tool high-risk third countries as set out in sometimes millions – of documents. for prosecution, and will be offered only Delegated Regulation (EU) 2016/1675. if appropriate and in the public interest. In regard to the use of AI in document reviews, Ms Osofsky noted the recent The minutes from the Council’s The transcript can be found HERE. meeting can be found HERE. Rolls-Royce case, where the SFO used AI
15 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
SPECIAL FEATURE
An interview with the President of Moneyval and Head of Liechtenstein’s FIU, Daniel Thelesklaf
Following the proposals to strengthen How can countries that are more lax at AML Europe’s ability to combat money be made to comply? laundering announced by the European Commission on 12 September, which There is no country in Europe that is not includes strengthening the powers of a member of the Financial Action Task the European Banking Authority (EBA), Force or of Moneyval. Both organisations the Financial Crime Digest spoke to assess their members against the same the President of Moneyval and Head of standard and using the same methodology. Liechtenstein’s Financial Intelligence Both organisations also have a stringent Unit, Daniel Thelesklaf, about the compliance mechanism that identifies proposals and the money laundering countries that are not compliant or that are crisis blighting the European Union. not effective. If countries do not follow-up on our recommendations, they will be publicly Why is Europe struggling to combat money level, most countries perform quite well, the exposed - this is a very strong mechanism laundering? problem lies in the effective implementation that already exists and has already shown and in the lack of results in the form of fines results, for example in countries increasing Not only Europe is struggling - all regions or confiscated assets, for example. their sanctions for money laundering. So, we have jurisdictions that perform badly. And don’t need a new system which will take a there are huge differences within Europe How can the EU’s AML rules be enforced long time to work, we need to better resource where some countries perform much better consistently and effectively across the EU? the existing mechanisms and allow them to than others. But luckily there is a discussion do their job. in Europe to strengthen the AML/CFT The rules don’t have to be applied in the system, and the related political pressure. same way in every country - the international Do we need a central EU database for money The tools are available, and we don’t need standard asks for a risk-based approach. laundering information? to waste time re-inventing the wheel. Let’s This means that all jurisdictions have to rather focus on properly implementing the assess their specific risks and design their The EU Financial Intelligence Units already framework and strengthen the assessment defence system commensurate to these have an effective way to share information, bodies and their work. risks. A one size fits all solution would not and the system set up for this purpose meet our goals. has many advantages over a centralised Given repeated failures of certain member database. Such sophisticated systems states to fully implement successive EU “With the current are also in line with EU data protection Money Laundering Directives on a timely requirements and work more efficiently. basis, how realistic is it to expect financial resources, Moneyval Central databases are outdated and have institutions in those countries to detect cannot assess more than proven to be ineffective. and report all relevant money laundering concerns? four countries per year. Does the EU need a single EU entity With a membership of dedicated solely to combating money The deficiencies we detected were less on laundering? the lack of transposition of EU directives, but 34 jurisdictions, it will far more related to the effective application take far too long before I understand that a new body would create of the laws and regulations. On a technical deficiencies are detected.” a lot of job opportunities and this is why
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
SPECIAL FEATURE
continues from previous page
the idea gets some support. But there is national level are unlikely to be confined to they also have to communicate them better no evidence that larger organisms work financial institutions? to the financial sector. There is also room more effectively then smaller ones - quite for more public-private collaboration in the the contrary. And they are certainly far A lot of countries have insufficient assessment of risks, to the degree that more expensive! Money laundering has supervision over the non-financial sector. the private sector is willing to invest in this strong regional and national elements. Many of these players in the non-financial process. A centralisation is contrary to the risk- sector are very small and centralisation of based approach and would create a lot of supervision could have a detrimental result. Some financial institutions would argue that bureaucracy. Where we can improve on a People are not afraid of a supervisor that is aversion to risk simply results in business European level is to further increase the 3000km away, shows up every five years and being diverted to other organisations, or to effectiveness of information exchange, does not understand the local context! other jurisdictions. Is it possible to create or build more joint teams to analyse and a true “level playing field” so bad business investigate cross-border cases where this is The FATF emphasises the need for a risk- is excluded from financial systems, and not necessary, and invest in capacity building. based approach to ML. Other than leadership merely diverted elsewhere? Many EU Financial Intelligence Units already on these issues at an EU or national level, do great work on a bilateral, multilateral or to what extent can individual institutions AML/CFT is the only area where we have regional level and these good practices can be relied upon to fully comprehend the a global standard, and a methodology to be expanded. spectrum of financial crime risks, and take assess countries compliance by a global adequate steps to address them? network of which Moneyval is part. This The EC proposal to strengthen the role global network has more members than of the EBA in tackling money laundering Certainly governments need to not only the UN! And the process is anything but recognises that criminals are exploiting better assess and understand the risks, but convenient for countries: it is tough, stringent gaps in national legislation, supervision and enforcement. Besides a centralised, cross- border focus on AML led by the EBA, what can be achieved at a national level to close these gaps?
There is certainly a role for the EBA to play, by supporting national supervisors, increasing their capacity and enhancing the common understanding of how supervision is conducted. Ultimately, the job has to be done locally, by the national bodies. Simply thrashing the problem to Brussels is short sighted and will not work in practice.
Do you foresee the need for more centralisation of AML measures for the non- financial sector, given AML weaknesses at a
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SPECIAL FEATURE
continues from previous page
How can trust be rebuilt that money laundering is not acceptable anywhere in Europe?
We need to better explain what the consequences of money laundering and the lack of efforts to combat money laundering are. Although it is not an immediate, direct threat to individual citizens, it undermines the rule of law and the trust in our financial systems. And then we need to demonstrate that offenders are not treated like little thieves any longer. We need to see more investigations, prosecutions, confiscation and convictions. All this can be done at national level, we just have to ensure that countries are held accountable.
What is your biggest achievement and biggest challenge as the President of and thorough. I wish such mechanisms With the EU stepping up its role to supervise Moneyval? would also exist in other areas, like anti- AML is there the risk that national Moneyval has built up a tremendous corruption where the global monitoring governments will take less interest in AML if reputation in the global network. Experts, mechanisms are much weaker and allow they perceive the EU is taking a greater lead? international organisations and financial countries to have insufficient systems. Yes, institutions trust in the quality of our there will always be a degree of diversion, Yes, this risk is real - under the international assessment reports. Investors take but there is always crime too, and this should standard, countries will remain responsible decisions using our assessments to avoid not stop us from fighting crime! for supervision, and they cannot simply delegate the hard work to someone else. investing in problematic countries. And we keep pushing hard for a level playing “Where we can improve How will it be possible for the EBA to field. All this is done by a very small team on a European level assess when or if to step in and take action of hard working, dedicated members of is to further increase relating to an AML concern if it is reliant on the Secretariat. And this is also the biggest information provided by member states, who challenge. With the current resources, the effectiveness of might not be inclined to provide it, or not Moneyval cannot assess more than four information exchange, well-equipped to do so? countries per year. With a membership of 34 jurisdictions, it will take far too long before or build more joint That’s a good question! Yes, there is a risk deficiencies are detected. By supporting teams to analyse and that a too centralistic approach would be Moneyval, the EU and large EU countries can investigate cross-border very technocratic, rule-based and lacking prove that they are serious about combating connection to the situation on the ground. money laundering and terrorist financing. cases.”
18 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
FATF publishes follow-up report on Belgium, and mutual evaluation reports on Saudi Arabia and Bahrain
The Financial Action Task Force (FATF) Saudi Arabia’s Financial Intelligence Unit foundation for an effective AML/CFT regime, published its third enhanced follow- was also found lacking, in not being able to but needs to develop its measures based up report and technical compliance conduct sophisticated financial analysis. on risk. FATF explains that although the re-rating report on 3 September, which While ML investigations have increased country demonstrated a moderate level of reassesses Belgium on 15 of the 40 in recent years, Saudi authorities are not understanding of its ML/TF risks, it should recommendations. investigating and prosecuting ML in a use the risk assessment, incorporating proactive fashion, particularly when it information from outside Bahrain, to further The FATF welcomes the measures Belgium comes to complex ML schemes, states the strengthen those measures. This includes has taken to improve its technical compliance report. They do not systematically pursue amending the terrorism offence, which is with Recommendations 6, 7, 13, 14, 23, confiscation of proceeds. currently inconsistent with the Terrorist 34 and 40, however, progress has been Financing Convention, and pursuing both ML/ insufficient to warrant a re-evaluation of these The report notes that Saudi Arabia faces TF in line with the country’s risk profile. recommendations. a significant and dynamic risk of terrorist financing, as well as a large number of foreign According to the FATF report, banks, money FATF published its mutual evaluation terrorist fighters. FATF found that Saudi value transfer services, insurance and report for the Kingdom of Saudi Arabia on Arabia has a sound mechanism to implement securities sectors have a good understanding 24 September, which has found that the UN targeted financial sanctions on terrorism, of ML/TF risks, and financial institutions country is achieving good results in fighting but the measures to implement targeted are able to implement targeted financial terrorist financing but needs to focus on financial sanctions for proliferation financing sanctions without undue delay. However, pursuing larger scale money launderers and and prevent sanctions evasion are weak. designated non-financial businesses confiscating assets. The report notes that have been found to have a fragmented a lack of suspicious transaction reports, in FATF published the Kingdom of Bahrain’s understanding of the ML/TF risks and the particular on suspected cases of terrorist mutual evaluation report on 4 September, majority do not implement targeted financial financing, is a concern. which has found that Bahrain has the sanctions without delay.
BaFIN orders Deutsche Bank AG to take measures to prevent money laundering and terrorist financing
Germany’s Federal Supervisory the authority has ordered the Act (KWG) to report on and assess Authority (BaFin) ordered Deutsche appointment of a third party to the progress of the implementation at Bank AG to take appropriate internal assess progress at a bank relating to Deutsche Bank. safeguards and comply with general money laundering. due diligence obligations on 21 Deutsche Bank issued a statement September in order to prevent money To monitor the implementation of the agreed with BaFin stating that it needs to laundering and terrorist financing. ordered measures, BaFin has appointed a improve its processes to properly identify BaFIN’s order is based on section 51 special representative in accordance with clients. Deutsche Bank was fined nearly (2) of the German Money Laundering section 45c (1) in conjunction with section USD 700 million in 2017 for allowing Act and marks the first time that 45c (2) no. 6 of the German Banking money laundering.
19 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Latvia approves Online crime threat assessment AML action and transparency report published plan; TAX3 Europol published the Internet The EU Internet Referral Unit (EU IRU), part Organised Crime Threat Assessment of Europol’s European Counter Terrorism recommend (IOCTA) on 18 September, which aims Centre (ECTC), published its Transparency to provide a comprehensive overview Report 2017 on 12 September, which improvements to of the current and anticipated provides an account of the EU IRU’s major future threats and trends of crimes activities during 2017, in the fields of ensure financial conducted and/or facilitated online. prevention and investigation of terrorism. Amongst the report’s key findings: The report explains that since the crime cases in skimming remains a common issue in establishment of the EU IRU in July 2015 most of the EU Member States; the abuse until December 2017, the EU IRU has Latvia lead to of PoS terminals is taking on new forms assessed a total of 46,392 pieces of from manipulation of devices to the terrorist content, which triggered 44,807 convictions fraudulent acquisition of new terminals; decisions for referral, with a success and law enforcement and industry action rate of removal of 92 percent. The Latvia’s Financial Sector Development has pushed Islamic State sympathisers into content was detected across 170 online Board approved an Action Plan on using encrypted messaging apps which platforms and the EU IRU performed 11 September that addresses all offer private and closed chat groups, the its searches and analysis on material the recommendations outlined in dark web, or other platforms which are less produced in 10 languages, with a focus the Committee of Experts on the able or willing to disrupt their activity. on non-EU languages. Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) assessment report published on 23 August. Moneyval issues follow-up reports The plan consists of action items in eleven areas related to the Moneyval on the Isle of Man and Armenia report to be completed by the end of 2019. Within this timeline all the The Committee of Experts on and 33 (statistics); and “largely responsible institutions will have to the Evaluation of Anti-Money compliant” with Recommendations 24 demonstrate progress in areas starting Laundering Measures and the (transparency of legal persons) and 35 from AML/CTF policy elaboration and Financing of Terrorism (Moneyval) (sanctions). The Isle of Man will report coordination up to CTF prevention, published a follow-up report on the back to Moneyval within one year. investigation, law enforcement, as well as Isle of Man on 7 September, which proliferation related sanctions. has seen the country re-rated on Moneyval also published a follow-up 8 of the 40 Financial Action Task report on Armenia on 7 September, Separately, a delegation of the Special Force (FATF) Recommendations. which has seen the country re-rated on Committee on Financial Crimes, Tax Recommendations 1 (assessing risks) Evasion and Tax Avoidance (TAX3) of Moneyval has re-rated the Isle of Man and 7 (targeted financial sanctions the European Parliament conducted a as “compliant” with Recommendations related to proliferation), which are now mission to Latvia on 30 and 31 August. 5 (criminalisation of the financing “largely compliant.” Recommendation TAX3 has made recommendations that of terrorism), 6 (targeted financial 8 (non-profit organisations) has also improvements be made to the Latvian sanctions on the financing of terrorism), been re-rated as “compliant.” Armenia judicial system to ensure that financial 16 (wire transfers), 29 (financial will report back to Moneyval in two and crime cases lead to convictions. intelligence unit), 32 (cash couriers) a half years.
20 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Danske Bank CEO resigns as independent report is published, Danes reopen case and UK’s NCA investigates
The chief executive of Danske Bank related to the report of Danske Bank, i.e. that financial penalties should be increased A/S Thomas Borgen announced his information of significance for our continued by up to 700 percent. Business minister resignation on 19 September after investigation,” said Berg. Rasmus Jarlov confirmed in a tweet that admitting that the vast majority of EUR a new anti-money laundering strategy was 200 billion that flowed through accounts being negotiated. held by 15,000 non-resident customers EU Commissioner for of the Danish group’s Estonian branch The Danish government doubled capital between 2007 and 2015 was laundered Justice Věra Jourová requirements on 25 September amid signs money flowing illegally out of Russia, described the scandal as of growing risk in the market, including the the UK and the British Virgin Islands. possibility of fallout from the Danske Bank the “biggest in Europe” scandal. Mr Borgen oversaw Estonia as head of and said she wants international banking from 2009 to 2012 and to understand several Danske said it would donate all its profits following his promotion to CEO rejected calls earned from the suspicious accounts from other bank managers in 2013 to scale issues, including whether between 2007 and 2015 to a charity focused back the business. national supervisors on combating international financial crime.
An independent report commissioned made a mistake. The UK’s National Crime Agency (NCA) by Danske carried out by Danish law firm stated on 21 September that it is Bruun & Hjejle found “a series of major investigating UK-registered companies deficiencies” in its controls to prevent Estonia’s Financial Supervision Authority in relation to the Danske Bank money money laundering. The investigation found (Finantsinspektsioon) also issued a laundering scandal. The NCA said it that more than half of Danske’s 15,000 statement that it is examining the findings was “aware of the use of UK registered customers in Estonia were suspicious. of the report. “The report describes serious companies in this case and has related “We have gone through 6,200 customers shortcomings in the organisation of Danske on-going operational activity,” adding that starting with the customers hitting most risk Bank, where risk-appetite and risk control the threat posed by the use of UK-registered indicators first,” the bank said. “Almost all of were not in balance,” said Kilvar Kessler the companies for money laundering was these customers have been reported to the chairman of Finantsinspektsioon. “We will “widely recognised” and that Britain was authorities.” study the report carefully and decide the next working to restrict it. steps to be taken together with the Danish The investigation found that several dozen financial supervision authority, which is the British and Russian entities dominate the list of its employees may have colluded with primary home supervisor of the bank.” of accounts used to make EUR 200 billion in customers to get around background payments through Danske Bank’s Estonian and security checks. The bank said it had According to a report by The Wall Street branch between 2007 and 2015, many of reported some of its current and former Journal published on 14 September, US which the bank said are suspicious. employees to the police. law enforcement agencies are also probing Denmark’s largest bank over allegations of According to Bloomberg, the European Jesper Berg, Director General of the money laundering flows from Russia and Commission has asked the European Danish Financial Supervisory Authority former Soviet states. Banking Authority (EBA) to review the work issued a statement on 20 September that of national supervisors responsible for it will reopen its investigation into Danske Reuters reported on 17 September that Danske Bank. EU Commissioner for Justice concluded in May following release of the Denmark will tighten its anti-money Věra Jourová described the scandal as the report. “We will not rely on the evaluation laundering laws amid the investigations into “biggest in Europe” and said she wants to made by Danske Bank nor by their law firm, Danske Bank. Reportedly a broad majority of understand several issues, including whether but we will ourselves obtain the information parties in the Danish parliament have agreed national supervisors made a mistake.
21 Photo: Reuters aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Former Bankrate NCA to increase use of UWOs and CFO sentenced scrutiny of professional advisers for accounting The UK’s National Crime Agency strategy to target Russian individuals (NCA) has announced a ramping up and other foreign nationals in the UK with fraud scheme of its anti-money laundering (AML) suspicious wealth. drive, as part of which we can expect further scrutiny of professional The Financial Times reported on the The US Department of Justice advisers such as lawyers, same day that the NCA is also urging announced on 25 September that accountants and financial advisers private schools in the UK to make sure the former chief financial officer of and a notable increase in the use of wealthy parents are not using laundered Bankrate Inc has been sentenced to unexplained wealth orders (UWOs). money to pay for their children’s education 10 years in prison for orchestrating and request that they file more reports a securities and accounting fraud The Financial Times reported on 14 flagging suspicious fee payments. scheme that resulted in USD 25 September that the director of the NCA’s million in shareholder losses. economic crime unit, Donald Toon, Separately, the BBC reported on 15 expressed concerns about the current September that British law enforcement Edward J. DiMaria was also ordered state of firms’ AML arrangements. officers, including the NCA, are to pay restitution of USD 21,234,214. It appears that the NCA will expect frustrated with the lack of cooperation DiMaria pleaded guilty to one count of professional advisers to file more by the authorities in the Cayman Islands. conspiracy to make false statements to a suspicious activity reports than they According to Toon, the Cayman Islands public company’s accountants, falsifying currently do and will subject their AML authorities have not cooperated when a public company’s books, records and procedures to increased scrutiny. asked for information. The NCA said there accounts, and securities fraud; and were signs that criminals were finding one count of making materially false Toon also expressed an intention to new tax havens to exploit lax regulation statements to the US Securities and increase the use of UWOs as part of a and hide their links to corrupt assets. Exchange Commission (SEC).
Between 2010 and 2014 DiMaria directed and conspired to commit a complex scheme to artificially inflate Bankrate’s earnings through Irish authorities raid properties so-called “cookie jar” or “cushion” accounting, where millions of dollars linked to West African ML scheme in unsupported expense accruals were purposefully left on Bankrate’s books and then selectively reversed Detectives from the Garda National in later quarters to boost earnings. Economic Crime Bureau (GNECB) DiMaria also conspired with other are investigating the activities of Bankrate employees to misrepresent a West African criminal network certain company expenses as “deal suspected of being involved in the costs” in order to artificially inflate laundering of EUR 14.6 million in publicly reported adjusted earnings criminal proceeds through Irish bank metrics. He also made materially false accounts. statements to Bankrate’s auditors under investigation is the possibility to conceal the improper accounting Gardai are leading a major search that laundered money may have been entries, and caused Bankrate’s operation across a number of counties used by the criminal network to fund financial statements filed with the SEC in Ireland, which included raids carried the purchase of property and other high to be misstated. out on 6 September. Among the matters value items across the country.
22 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
FINMA finds deficiencies in Credit Suisse AML controls
The Swiss Financial Market Supervisory • determining the beneficial owner; regarding investigation, plausibility checks Authority (FINMA) announced on and documentation regarding the client and • categorising a business relationship as 17 September that it has concluded certain high-risk transactions. two enforcement procedures against posing an increased risk; Credit Suisse AG, the first relating to The PEP case also revealed weaknesses • performing the necessary clarifications deficiencies in the bank’s adherence in the bank’s organisation and risk upon increased risk plus associated to anti-money laundering (AML) due management. FINMA established that the plausibility checks; and diligence obligations in relation to bank had failed to adequately record, contain suspected corruption involving FIFA, and monitor the risks arising from the PEP • documentation. Petrobras and Petróleos de Venezuela, business relationship and the responsible S.A. (PDVSA), and the second relating An above-average number of faults were client relationship manager. The relationship to a business relationship with a discovered in business relationships opened manager in question breached the bank’s politically exposed person (PEP). by former Group subsidiary Clariden Leu AG. compliance regulations repeatedly and on record over a number of years. However, FINMA has issued measures to improve FINMA explains in its press release that to instead of disciplining the client manager, the the bank’s AML processes and accelerate combat money laundering effectively, all bank rewarded him with high payments and the implementation of steps initiated relevant departments within the bank must positive employee assessments. by the bank. FINMA will commission an be able to see all the client’s relationships independent third party to monitor the with the bank instantly. Credit Suisse AG Credit Suisse AG must remediate the implementation of these measures. has been implementing such a “single client relevant control systems and processes, view” since 2015, but the overview is still to and so prove that higher-risk business FINMA’s investigation into Credit Suisse AG be extended outside the compliance unit. relationships and transactions are covered the period from 2006 to 2016. In adequately detected, categorised, monitored regards to deficiencies in compliance with The second enforcement procedure related and documented. In addition, the bank must due diligence obligations relating to FIFA, to the management of a significant business have implemented the “single client view” for Petrobras and PDVSA, FINMA determined relationship with a PEP. FINMA found that all relationships and for all relevant functions that Credit Suisse AG had infringed its the bank was too slow to identify and treat by the end of 2019. FINMA will also appoint obligations in all three instances. The the PEP client as posing increased risks. an independent third party to review the shortcomings are: The due diligence and documentation implementation of these measures, including were incomplete. The bank failed to meet the measures initiated since 2015, their • identifying the client; its heightened due diligence obligations adequacy and effectiveness. Photo: Fortune
Former El Salvador president given 10 years in prison
Former El Salvador president Antonio appropriated public funds for himself and three and 16 years for participating in a Saca was sentenced to 10 years in others, including taking more than USD 7 network of corruption. prison on 12 September after pleading million for his former party, the Nationalist guilty to embezzlement and money Republican Alliance (ARENA). Saca must Saca, who governed El Salvador between laundering charges involving more than also return USD 260 million to the state. 2004 and 2009, was detained in October USD 300 million of public funds. 2016. Saca’s successor, Mauricio Funes, The court also sentenced six other former has been in exile since September 2016, Prosecutors alleged that Saca had officials from Saca’s government to between also accused of corruption.
23 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
EBA will not UK Finance releases fraud figures open formal UK Finance released its latest fraud • There were 1,036,376 reported cases of figures on 24 September, which shows unauthorised financial fraud, a rise of 10 investigation into that a total of GBP 503.4 million percent compared to the previous year. was stolen through authorised and supervision of unauthorised fraud in the first six UK Finance reports that there were 3,866 months of 2018. reported cases of impersonation scams, Pilatus Bank in which criminals pretend to be from a Of the total stolen from customers of financial institution or law enforcement. The Maltese Financial Services British banks, GBP 145 million was Authority (MFSA) announced on 25 due to authorised push payment (APP) Separately, UK consumers’ association September that the European Banking scams and GBP 358 million was lost to Which? published the findings of its Authority (EBA) will not open a formal unauthorised fraud. investigation into fraud in the UK on 24 investigation into the supervision of September, which has found that more Pilatus Bank. A total of GBP 145.4 million was lost due than 96 percent of cases reported to to APP scams, split between personal the UK’s national fraud reporting centre In a letter, seen by Reuters, EBA chairman (GBP 92.9 million) and non-personal or Action Fraud go unsolved. Andrea Enria, said the case was also business (GBP 52.5 million) accounts. dropped because of the MFSA’s actions Which? stated in its press release that against Pilatus Bank. The EBA has The unauthorised fraud data on payment according to official statistics, less than stated that it will soon publish the cards, remote banking and cheques for one in 20 crimes handled by Action letters it has sent to the Commission January to June 2018 shows inter alia: Fraud result in a suspect being charged, and the Parliament in relation to the cautioned or dealt with in some other • Losses due to unauthorised card case. The MFSA said it welcomed way by the justice system. transactions fell to GBP 281.2 million. recommendations from the EBA to further improve its supervision.
The EBA also backs a recommendation by the MFSA to withdraw Pilatus Bank’s banking license following the indictment of its chairman for money laundering. Lawsuit against Rolls-Royce for In a letter to EU lawmakers, dated 24 September, Enria said the move by the alleged fraudulent contract MFSA was justified by the circumstances of the bank’s ultimate beneficial owner, Ali According to media reports, Garuda contract “Total Care Agreement for the Sadr Hashemi Nejad, who was indicted in Indonesia has filed a lawsuit at the Trent 700 Airbus Powered Engine A330- the US for bank fraud, money laundering Central Jakarta District Court on 13 300 Aircraft” signed in 2008. and the evasion of sanctions against Iran. September against Rolls-Royce and its subsidiary Rolls-Royce Total Care Satar was the head of Garuda between Reuters reported that Enria said in the letter Service for an alleged fraudulent 2005 and 2014. The former banker was that the EBA will monitor on a quarterly contract that was signed when named as a suspect by the country’s basis the Maltese regulator’s progress in Emirsyah Satar, who was later named anti-graft agency in January 2017 in a improving its supervisory practices, and as a suspect in a corruption case, was multinational bribery scandal involving will visit the watchdog in mid-2019. Enria the CEO of the carrier. Rolls-Royce, and is alleged to have also reportedly called for changes to EU received more than USD 3 million in anti-money laundering rules which would Garuda is requesting IDR 640.9 billion kickbacks for engine procurement go further than proposals made by the in damages it says it incurred under the contracts for Airbus aircraft. Commission this month.
24 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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Former Malaysian PM’s lawyer Pakistan charged with money laundering Supreme
Muhammad Shafee Abdullah, the Court orders lawyer who represented former Malaysian prime minister Najib investigation Razak was charged in court in Kuala Lumpur with money laundering on 13 into PRK 35 September. Najib is fighting charges of criminal breach of trust, money billion money laundering and abuse of power at a Photo: The Sun Daily former unit of state fund 1Malaysia Development Berhad (1MDB). laundering case
Shafee pleaded not guilty to two counts of 1MDB is at the centre of money Pakistan’s Supreme Court money laundering after allegedly receiving laundering probes in at least six ordered the formation of a joint MYR 9.5 million from Najib, and also faces countries, including the US, Switzerland investigation team (JIT) on 5 two charges of false income tax declaration. and Singapore. A total of USD 4.5 September to investigate a PRK Prosecutors said the case was part of billion was misappropriated from 35 billion money laundering case the 1MDB investigation but did not say if 1MDB by high-level officials of the fund involving fictitious bank accounts. the money allegedly received by Shafee and their associates, according to the Chief justice Mian Saqib Nisar said was from the fund. The charge sheet US Department of Justice. Malaysia that the JIT would submit a report claims Shafee received the money through reopened the probe into 1MDB after on the matter every 15 days. cheques from Najib in 2013 and 2014. Najib, who chaired the fund’s advisory board, was defeated by Mahathir in the During the hearing, Director General of Shafee faces a maximum jail term of five May election. Najib has pleaded not guilty the Federal Investigation Agency (FIA), years, a fine of five times the alleged amount to abuse of power and other charges Bashir Memon, said that the agency or MYR 5 million whichever is higher, or both, arising from the 1MDB investigation. His had recently raided the Omni Group’s if found guilty of money laundering. trial starts on 12 February. Karachi office and found documents related to Kam Crown International Trading House Company in Dubai. Based on those documents, another raid was conducted at the Dubai office where numerous records of foreign Alpha Beta at centre of NGN 100 currency accounts were found. The FIA is investigating 32 people in billion financial crime allegations relation to money laundering, including former president Asif Zardari and his sister Faryal Talpur. Zardari’s close A consulting company owned by the According to media reports published aide Hussain Lawai and Anwar Majeed former governor of Lagos State and on 7 September, Apara’s petition to have also been arrested. It is alleged national leader of the All Progressives Nigeria’s Economic and Financial that over 20 ‘benami’ accounts at some Congress (APC), Bola Tinubu, is at Crimes Commission (EFCC) states private banks were opened between the centre of a NGN 100 billion fraud, that Alpha Beta has become a route for 2013, 2014 and 2015 from which tax evasion and money laundering the corruption of government officials, transactions worth billions of rupees petition filed by Managing Director a conduit for money laundering, tax were made. and CEO, Dapo Apara. evasion, and other vices.
25 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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US State Department report sees drop in global terror attacks and names Iran as top terror sponsor
The US Department of State published to gains against the Islamic State group in Despite the drop in terrorist attacks, the its annual Country Reports on Iraq. The number had declined in 2016 over report describes the terrorist landscape as Terrorism 2017, on 19 September, the previous year. “more complex” and said the terrorist threat which states that Iran remains the to the US and allies around the world had world’s leading state sponsor of The report cites the activities of Iranian Gen. “evolved.” terrorism and records another drop in Qassem Suleimani, the Revolutionary Guard terrorist attacks worldwide. commander who also helped organise According to the report in 2017 terrorist the Iraqi militias against IS. Iran used the attacks took place in 100 countries, but The State Department’s annual survey Revolutionary Guard “to provide support to were concentrated geographically with accuses Iran of intensifying numerous terrorist organizations, provide cover for 59 percent of all attacks taking place in conflicts and trying to undermine associated covert operations, and create just five countries: Afghanistan, India, Iraq, governments throughout the Middle East instability in the Middle East,” the report Pakistan and the Philippines. and beyond. Iran’s “terrorist affiliates and stated. proxies,” the report said, “demonstrated a The report highlights significant terrorist near-global terrorist reach.” The report also observes that in the Middle trends and takes stock of how effective East, Iranian fighters and Iran-backed US and international efforts were in According to the report, the number of militias, like Lebanon’s Hezbollah, emerged countering these threats. It also helps worldwide terrorist attacks dropped by 23 emboldened from the war in Syria with the US government make more informed percent last year compared with 2016, a valuable battlefield experience they seek to judgments and plans about future policies change that the report states is largely due leverage elsewhere. and priorities.
SEC charges microcap fraudsters
The US Securities and Exchange Phillip Frost allegedly participated in According to the SEC, Commission (SEC) charged a group two of these three schemes. Mr Honig of 10 individuals and 10 associated allegedly orchestrated the acquisition from 2013 to 2018, entities on 7 September for their of large quantities of the issuer’s stock a group of microcap participation in fraudulent schemes at steep discounts, and after securing fraudsters based in that generated over USD 27 million a substantial ownership interest in the from unlawful stock sales and caused companies, Honig and his associates South Florida led by significant harm to retail investors. engaged in illegal promotional activity and Barry Honig manipulated manipulative trading to artificially boost According to the SEC, from 2013 to 2018, a each issuer’s stock price and to give the the share price of group of microcap fraudsters based in South stock the appearance of active trading the stock of three Florida led by Barry Honig manipulated the volume. Mr Honig and his associates companies in pump-and- share price of the stock of three companies in then dumped their shares into the inflated pump-and-dump schemes. Miami billionaire market, reaping millions of dollars. dump schemes.
26 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Alleged Argentina raids casinos and hotels Hezbollah linked to terrorist group Hezbollah financier Barakat The Argentine Gendarmerie raided Clan who registered multiple crossings arrested in Brazil casinos and hotels linked to the to Argentina. Once in Argentina, the terrorist group Hezbollah in the clan members would cash in charges Triple Frontier during August. The at a casino in Iguazú exceeding USD casinos are believed to operate as a 10 million without declaring either the source of financing for the group. income nor the discharge of funds when crossing the border. The Financial Information Unit of Argentina has been investigating the According to a Financial Information Barakat Group — a criminal organisation Unit, the Barakat Clan is involved in linked to Hezbollah led by Assad smuggling, falsifying of money and Ahmad Barakat — which resulted in an documents, extortion, drug trafficking, administrative order freezing the assets arms trafficking, money laundering and Photo: The National and money of its members in July under terrorist financing. Barakat, along with the national criminal code related to others who operate in the tri-border area, Brazilian police have arrested financing terrorism. has been designated by the US Office of Assad Ahmad Barakat, who was Foreign Assets Control. The Financial Information Unit identified designated by the US Treasury at least 14 people linked to the Barakat Department in 2004 as one of most Hezbollah’s prominent and influential financiers, authorities in Brazil announced on 21 September. APPG finds Pakistan’s prevention Barakat was detained near the border with Paraguay and Argentina for identity of terrorist financing inadequate theft charges in Paraguay. The Brazilian federal police said that the country’s The Asia Pacific Policy Group under criticism from the US government Supreme Court authorised his arrest on Money Laundering (APPG) for its inability to stop the proliferation of after Paraguayan authorities issued a confirmed on 17 September that homegrown terrorist networks, which has warrant in late August. The Argentine Pakistan’s actions to prevent terrorist culminated in the US announcing that it authorities also accuse him of laundering groups from accessing funds were will cut USD 300 million in military aid to USD 10 million through a casino in the inadequate. the country. border city of Puerto Iguazu.
During the review the APPG noted the The APPG will submit its report on Barakat was previously imprisoned in lack of progress in freezing the funds of Pakistan to FATF next month. Paraguay from 2002 to 2008 on charges organisations like Jamaat-ud-Dawa, the of tax evasion. After his release, Brazilian Hafiz Saeed-led group behind the Mumbai Separately, the APPG has published police said, Barakat lived in Brazil, terror attacks in 2008. mutual evaluation reports for Bangladesh, and carried out business activities in Bhutan, Fiji, Samoa, Sri Lanka, Thailand Paraguay, Argentina, and Chile. Pakistan was placed on the Financial and Vanuatu on 5 September, and a Action Task Force’s (FATF) “grey list” mutual evaluation report for Palau on 10 It is not clear whether Barakat is going in June for its failure to crack down on September. to be extradited to Paraguay or will face terrorist financing. Pakistan has also come charges in Brazil.
27 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
US Subcommittee examines Wells Fargo’s methods to fund terrorist groups wholesale
The Subcommittee on Terrorism and Quotes from witnesses included: Illicit Finance of the United States banking unit House Committee on Financial “Terrorist groups regularly adapt their Services met on 7 September to methods to their available resources, reportedly examine the methods used by skill levels, and the opportunities terror groups to generate and move presented in their target areas of investigated by funds to support their activities and operations. This is as true for financing organisations. as it is for plotting attacks. Terrorist the DOJ organizations have a long history of The key takeaways from the meeting, as exploiting banks and other traditional According to a report by the Wall listed in the Subcommittee’s press release, financial institutions, as well as semi- Street Journal (WSJ) published on are the following: the threat of terrorism formal means of transferring funds, 6 September, the US Department is continually evolving with an increasing such as the hawala exchange system. of Justice (DOJ) is investigating number of groups around the world But emerging financial technologies whether employees committed threatening the US; efforts to combat the offer new channels to raise and move fraud in Wells Fargo & Co’s financing of terrorism are a central pillar funds.” – Yaya Fanusie, Director of wholesale banking unit, following to combating all forms of terrorist activity; Analysis, Center on Sanctions and revelations by people familiar and the threat from terrorism and terrorist Illicit Finance, Foundation for Defense with the matter that employees financing requires constant vigilance and Democracies. adaptation by law enforcement, financial improperly altered customer institutions, and regulators. information.
The DOJ has sought more information from the bank to see if management pressure prompted the employees to Germany and Sweden arrest improperly alter or add the information prior to a regulatory deadline, reported members of cyber fraud gang the WSJ. The DOJ is reportedly interested in learning whether there is With the support of Europol and group, composed of Syrian nationals, a pattern of unethical and potentially Frontex, two suspects were arrested which was fraudulently purchasing fraudulent employee behaviour tied to on 12 September in coordinated airline and train tickets. More than 493 management pressure. raids across Germany and Sweden fraudulent bookings were identified and in an investigation targeting a Syrian in most cases the tickets were one way The incident is said to have occurred organised crime group suspected of from Beirut to EU member states. The in 2017 and early 2018 when Wells cyber fraud, Europol has announced. smugglers avoided detection by using Fargo was trying to meet a deadline Police recovered EUR 54,000 and compromised corporate credit cards to comply with a regulatory consent USD 55,000 and those arrested are and credentials, purchased online. The order related to the bank’s anti-money believed to be the key organisers of a fraud was brought to the attention of law laundering controls. The WSJ’s report cyber fraud gang. enforcement by the private sector. also said that the bank had reported the problem to the Office of the According to Europol’s press release, As part of the operation, Europol and Comptroller of the Currency. the German Federal Police initiated Frontex have identified crossovers Operation GOLDRING in October 2017, between card fraud and irregular which uncovered the organised crime migration and human trafficking.
28 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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Money Britain reportedly to launch cyber laundering probe force to combat terrorism launched into The Times reported on 21 September staff, with experts recruited from that an offensive cyber force to the military, security services and Sistine Chapel combat hostile states, terrorist groups industry. It will quadruple the number and domestic gangs will be set up by of personnel in offensive cyber roles Choir the Ministry of Defence and GCHQ. and marks a step change in the nation’s ability to disrupt and destroy computer According to The Times, the GBP 250 networks and internet connected million unit will comprise of about 2,000 devices.
Financial advisor pleads guilty to money laundering; and state senator indicted on fraud charges
The US Department of Justice Frank Roberto Chatburn Ripalda, who The Vatican announced on 12 (DOJ) announced on 11 September was charged in the same indictment as September that it has launched that financial advisor, Jose Larrea, Mr Larrea, has pleaded not guilty. Mr an investigation into the Sistine has pleaded guilty to one count Chatburn’s charges include one count Chapel Choir, in response to of conspiracy to commit money of conspiring to violate the Foreign allegations that members of laundering in connection with his Corrupt Practices Act (FCPA) and one the choir may be involved in role in making corrupt payments to count of violating the FCPA. embezzlement, fraud and money officials of Ecuador’s state-owned laundering. energy company, Empresa Pública Separately, the DOJ announced on 31 de Hidrocarburos del Ecuador August the indictment of the current The Vatican’s press release confirms (PetroEcuador). Arkansas State Senator Jeremy that Pope Francis has authorised an Hutchinson for allegedly devising a investigation into possible financial Mr Larrea is the fourth individual, scheme to steal thousands of dollars irregularities in the choir. The statement including two former officials of in campaign contributions, which followed a report in La Stampa PetroEcuador, to plead guilty in this involved falsifying state campaign newspaper about the choir, which case, which concerns efforts by finance reports and tax filings. Mr reported that Vatican magistrates were an oil services contractor to make Hutchinson, a State Senator since investigating the choir’s manager and its payments to PetroEcuador officials to 2011, has been charged with eight director on suspicion of embezzlement, retain existing contracts and win new counts of wire fraud and four counts of fraud and money laundering. business with PetroEcuador. filing false tax returns.
29 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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First conviction New York AG report on crypto in US for failing exchanges identifies concerns to comply with New York State Attorney General The AG’s report presents information FATCA (AG) Barbara D. Underwood collected from 10 virtual asset trading announced the results of the Virtual platforms based in the US and abroad, Markets Integrity Initiative, an inquiry The US Department of Justice as well as the conclusions reached into the policies and practices of (DOJ) announced on 11 September about the general state of the virtual platforms used by consumers to that Adrian Baron, the former chief trading markets as a whole. trade virtual or cryptocurrencies, on business officer and chief executive 18 September, which found three officer of Loyal Bank Ltd, an offshore The AG’s office has referred three broad concerns: a lack of protection bank with offices in Budapest, platforms – Binance, Gate.io, and from abusive trading practices; Hungary and Saint Vincent and the Kraken – to the New York State pervasive conflicts of interest; and Grenadines, has pleaded guilty to Department of Financial Services for limited protection of consumer funds. conspiring to defraud the US by failing possibly operating unlawfully. to comply with the Foreign Account Tax Compliance Act (FATCA).
According to court documents, in June 2017, an undercover agent met with Mr SEC shuts down USD 345 Baron and explained that he was a US citizen involved in stock manipulation million Ponzi-like fraud schemes and was interested in opening multiple corporate bank accounts. The The US Securities and Exchange used the funds to make Ponzi-like undercover agent informed Mr Baron Commission (SEC) announced on payments to earlier investors. The SEC that he did not want to appear on any of 19 September that it has obtained also alleges that Merrill and Ledford the account opening documents, even a court order halting an ongoing stole at least USD 85 million of investor though he would be the true owner of Ponzi-like scheme that raised funds to maintain lavish lifestyles. the accounts. Mr Baron responded that more than USD 345 million from Loyal Bank could open such accounts and over 230 investors across the In a parallel action, the US Attorney’s provide debit cards linked to them. US. The SEC also obtained an Office for the District of Maryland emergency asset freeze and the announced criminal charges against The following month the undercover appointment of a receiver. Merrill, Ledford, and Jezierski. The agent met with Baron and described how SEC’s complaint, charges Merrill, his stock manipulation scheme operated, An SEC complaint alleges that Kevin Ledford, and Jezierski, along with their including the need to circumvent the B. Merrill, Jay B. Ledford and Cameron entities, Global Credit Recovery, LLC, reporting requirements under FATCA. Jezierski attracted investors to their Delmarva Capital, LLC, Rhino Capital During the meeting, Baron stated that scheme by promising significant Holdings, LLC, Rhino Capital Group, Loyal Bank would not submit a FATCA profits from the purchase and resale LLC, DeVille Asset Management LTD, declaration to regulators unless the of consumer debt portfolios, but and Riverwalk Financial Corporation, paperwork indicated “obvious” US the defendants were allegedly using with violations of the antifraud involvement. Subsequently, in July and fabricated documents, and forged provisions of federal securities laws. August 2017, Loyal Bank opened multiple signatures in an scheme to entice bank accounts for the undercover agent. investors and perpetuate the fraud. The SEC seeks disgorgement Rather than direct investor funds to of allegedly ill-gotten gains and This is the first ever conviction for failing the acquisition and servicing of debt prejudgment interest, and financial to comply with FATCA. portfolios, the defendants allegedly penalties against the defendants.
30 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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Broker charged with fraud relating to SEC charges unregistered cryptocurrency firm with
The US Financial Industry Regulatory by RMTN common stock. Investors deficient cyber Authority (FINRA) announced on mined more than 81 million HempCoin 11 September that it has filed a securities through late 2017 and procedures complaint against Timothy Tilton bought and sold the security on two Ayre charging him with securities cryptocurrency exchanges. FINRA The Securities and Exchange fraud and the unlawful distribution charged Ayre with the unlawful Commission (SEC) announced of an unregistered cryptocurrency distribution of an unregistered security on 26 September that a broker security called HempCoin. The case because he never registered HempCoin dealer and investment adviser represents FINRA’s first disciplinary and no exemption to registration has agreed to pay USD 1 million to action involving cryptocurrencies. applied. settle charges related to its failures in cybersecurity policies and In the complaint, FINRA alleges that, It is also alleged that, from January procedures surrounding a cyber from January 2013 to October 2016, Ayre 2013 to October 2016, Ayre defrauded intrusion that compromised the attempted to lure public investment in his investors in RMTN by making false personal information of thousands public company, Rocky Mountain Ayre, Inc. statements and omissions regarding of customers. This is the first (RMTN) by issuing and selling HempCoin the nature of RMTN’s business, SEC enforcement action charging and by making fraudulent, positive failing to disclose his creation and violations of the Identity Theft Red statements about RMTN’s business. unlawful distribution of HempCoin, and Flags Rule. making multiple false and misleading FINRA also alleges that in June 2015, statements in RMTN’s financial The SEC charged Voya Financial Ayre bought the rights to HempCoin statements. Advisors Inc. (VFA) with violating the and repackaged it as a security backed Safeguards Rule and the Identity Theft Red Flags Rule, which are designed to protect confidential customer information and protect customers North American regulators have from the risk of identity theft.
200 crypto investigations ongoing According to the SEC’s order, cyber intruders impersonated VFA contractors by calling VFA’s support The North American Securities products. NASAA President and line and requesting that the contractors’ Administrators Association (NASAA) Alabama Securities Commission passwords be reset. The intruders used announced on 28 August that more Director, Joseph P. Borg, stated that the new passwords to gain access to than 200 active investigations of while some of the investigations the personal information of 5,600 VFA Initial Coin Offerings (ICOs) and initiated involve suspected securities customers. The intruders then used cryptocurrency related investment fraud, regulators are finding many the customer information to create products are currently underway other potential violations of state and new online customer profiles and by state and provincial securities provincial securities laws. obtain unauthorised access to account regulators in the US and Canada documents for three customers. as part of the NASAA’s “Operation If these products qualify as securities, Cryptosweep.” they should be registered or qualify for The order also found that VFA’s failure an exemption from registration. But even to terminate the intruders’ access Since its launch in May, the coordinated registered offerings can be fraudulent, stemmed from weaknesses in its regulatory focus has resulted in 46 so investors are advised to perform their cybersecurity procedures, some of enforcement actions involving ICOs own due diligence before investing in which had been exposed during prior or cryptocurrency related investment any ICO or crypto-related product. similar fraudulent activity.
31 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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Report on luxury UK helps Honduras to real estate detect fake passports boom in Boston The UK government announced on International agency of the UK’s Home 11 September that it is supporting Office, and participants include 90 identifies red the Government of Honduras on Honduran officials from the Honduran improving its ability to identify fake Migration Institute and the Office flags travel documents and victims of of the Prosecutor General, 15 staff human trafficking. from the Mission to Support the Fight against Corruption and Impunity According to the government’s press in Honduras, and around 17 crew release, the training is being delivered members from Copa Air, Air Europa by the Immigration Enforcement and Avianca.
US concerned about currency swaps between Africa and China
The US Treasury Department’s assistant secretary for “There remains a great The Institute of Policy Studies terrorist financing, Marshall desire among most of published a report entitled “Tower Billingslea, expressed concern the countries in Africa to at a congressional hearing on 13 Excess: The Perils of the Luxury maintain correspondent Real Estate Boom for Bostonians,” September that increased currency on 10 September, which questions swap agreements between China banking relationships the benefits of Boston’s luxury and African nations will reduce with U.S. banks.” housing boom while providing a visibility into financial transactions closer look at who is buying Boston and make it harder to prevent and the potential risks to the city. money laundering. governments. “That said, there remains a Mr Billingslea responded to questions The report, authored by Chuck Collins great desire among most of the countries by Republican Representative Chris and Emma de Goede, identifies a in Africa to maintain correspondent Smith, who cited a USD 2.5 billion number of “red flag” transactions that in banking relationships with U.S. banks. At currency swap agreement between other jurisdictions would likely trigger a the end of the day they still are finding it China and Nigeria to facilitate trade Treasury Department FinCEN criminal necessary to ultimately clear trade in U.S. between the countries, and a meeting of investigation, which include a large dollars,” he said. African finance leaders that sought to number of properties purchased through discuss using China’s yuan as a reserve Maintaining those correspondent cash transactions by shell corporations currency for the region. Most African banking ties is “our best line of defense and international buyers. The report countries still clear trade in US dollars. to ensure we maintain not just a degree states that cash transactions greatly of transparency and visibility into the increase the risk that the properties “You are very much onto something of transactions in Africa but [...] further involved are being used to launder great concern to us as well,” Mr Billingslea to ensure that anti-money laundering money from criminal activities and said, referring to increased currency swap standards are being applied,” Mr speed capital flight. agreements between China and African Billingslea said.
32 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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ING Group CFO steps down after EUR 775 million settlement for failing to prevent money laundering
ING Group announced on 11 September that Koos Timmermans will be stepping down from his position as chief financial officer and member of the Executive Board of ING Group following the announcement on 4 September of the settlement Photo: The Telegraph with the Dutch Public Prosecution Service regarding shortcomings According to the press release from the your customer’ (KYC) and ‘client activity in the execution of customer due company announcing the settlement, ING monitoring’ requirements; centralising diligence policies to prevent financial has initiated measures against a number and simplifying operational KYC activities crime at ING Netherlands. During the of former senior employees with broader into one ‘KYC Centre’ across divisions, period investigated (2010-2016) Mr responsibility for the safeguarding and introducing standard processes and tooling, Timmermans was a member of the execution of financial crime customer allowing ING Netherlands to manage these Management Board Banking and for due diligence policies and procedures in activities more effectively; the setting up several years responsible for ING ING Netherlands, including holdbacks of of client risk committees across business Netherlands. variable remuneration and suspension of units to decide on client on-boarding and exit duties; has taken various steps to enhance escalations to ensure KYC risk mitigation; The ING settlement agreement with the its compliance risk management and will adopting an engagement programme to Dutch Public Prosecution Service relates further strengthen its compliance culture and strengthen the internal compliance culture to investigations into failings related to awareness; and is committed to conducting and awareness; and active involvement requirements for client on-boarding and its business with integrity, which includes in the taskforce FEC-RAAD, where Dutch the prevention of money laundering and compliance with applicable laws, regulations authorities that have supervisory, control, corrupt practices. Under the terms of the and standards in each of the markets and prosecution or investigation tasks cooperate agreement ING has agreed to pay a fine of jurisdictions in which it operates. with financial sector actors to strengthen the EUR 675 million and EUR 100 million for integrity of the sector. disgorgement. ING acknowledges serious The shortcomings identified at ING include: shortcomings in the execution of customer missing or incomplete customer due The investigations found no evidence or due diligence policies to prevent financial diligence files, assignment of incorrect indication of employees having actively economic crime at ING Netherlands in the risk classifications, failure to have periodic cooperated with clients who used or may period investigated (2010-2016). customer due diligence review processes in have used the banking services for potential order, failure to exit business relationships criminal activities nor indications of ING has received a in a timely manner, insufficient functioning employees having received personal gains, formal notification from of the post-transaction monitoring system, explains the ING press release. The failings incorrect client classification and insufficient identified are therefore not attributable the US Securities and availability of qualitative and quantitative to individual persons but rather collective Exchange Commission human resources. shortcomings at management level. that it has concluded its ING has also started various initiatives ING has received a formal notification from investigation and does at ING Netherlands to further strengthen the US Securities and Exchange Commission not intend to take any its compliance risk management, which that it has concluded its investigation and includes: adopting an enhancement does not intend to take any further action. further action. programme to ensure compliance with ‘know
33 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
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TECHNICAL UPDATES Guatemalan court orders the president to allow the head of the CICIG to enter the country
Guatemala’s Constitutional Court ordered president Jimmy Morales, on 16 September, to allow the head of the International Commission against Impunity in Guatemala (CICIG) to enter the country without restriction, following the announcement on 4 September that Commissioner Iván Velásquez would not be allowed to re-enter the country.
There has been widespread condemnation of the Guatemalan president’s move to revoke the mandate of the CICIG, the UN- sponsored body charged with assisting national corruption investigations, in late August. The CICIG has had significant success in prosecuting numerous high-level corruption cases.
Mr Morales is being investigated in a The ruling has also ordered Mr Morales to case involving more than USD 1 million solve any disputes regarding the CICIG through in purported illicit campaign financing. In negotiations with the United Nations. August, Guatemala’s Supreme Court allowed a motion by the CICIG and Guatemalan prosecutors seeking to lift the president’s In a press conference on 17 September, Human Rights Watch issued a statement immunity from prosecution to go to Guatemala’s solicitor general stated that on 19 September warning that Guatemala’s lawmakers. If approved, Mr Morales could since the Constitutional Court’s ruling did failure to comply with the court ruling could face possible prosecution. Mr Morales not mention Commissioner Velásquez by trigger the application of the Inter-American denies wrongdoing, but critics see his name, the government’s obligation was to Democratic Charter of the Organization move to wind down the CICIG and bar Mr allow a commissioner, not necessarily the of American States (OAS) Democratic Velásquez from the country as a manoeuvre current one, to enter the country and that Charter. Under the Charter, the OAS secretary to protect himself as well as relatives and it would negotiate the selection of a new general or any other member country can associates from investigators. commissioner with the United Nations. convoke a Permanent Council meeting to address situations where there has The ruling has also ordered Mr Morales The foreign minister stated that the been an “unconstitutional alteration of the to solve any disputes regarding the CICIG government no longer considers Mr constitutional regime that seriously impairs through negotiations with the United Velásquez to be the head of CICIG and that the democratic order in a member state.” Nations. Under the agreement between following presidential orders, she had asked Guatemala and the United Nations to the UN secretary-general to send a list of Hundreds of protesters are reported to have establish the CICIG, signed in December candidates within 48 hours. The interior blocked several highways in Guatemala 2006, “[a]ny dispute between the parties […] minister announced that “Iván Velásquez in response to the president’s actions to shall be settled by negotiation.” Gómez will not enter the national territory.” threaten the CICIG.
34 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Andorra charges Venezuelan ex- World Bank officials over PDVSA graft scheme debars M/s
A judge in Andorra charged 28 ex- Rafael Ramírez, as well as Nervis Om Sakthi officials with taking kickbacks of up to Villalobos and Javier Alvarado who both 15 percent to facilitate contracts with served as deputy energy ministers in the Constructions Venezuela’s state-run oil company, government of Hugo Chávez. Fourteen Petróleos de Venezuela, S.A. (PDVSA) of the accused are Venezuelan, with nine The World Bank announced on on 13 September. Prosecutors allege from Andorra and five from Spain. 19 September the 15 month that they were part of a network of debarment of Indian construction officials who received USD 2.3 billion Andorran judge Canolic Mingorance has services company, M/s Om in bribes from companies in return for been investigating the case since 2012 Sakthi Constructions (Om Sakthi), lucrative contracts with PDVSA. and alleges that the accused “joined forces to take control of PDVSA’s public in connection with fraudulent The money was allegedly hidden in the now tendering as well as energy infrastructure practices committed during the defunct Banca Privada d’Andorra (BPA) bank. projects run by PDVSA’s subsidiaries, bidding process for a highway The list of those charged includes Diego Corpoelec and Electricity of Caracas.” construction contract under the Salazar, the cousin of former oil minister World Bank financed Second Tamil Nadu Road Sector Project in India.
According to the settlement agreement, Om Sakthi submitted a fraudulent Report finds counterterrorist aid is certificate of past experience in its bid for a contract under the Project. being used to fund extremist groups The Second Tamil Nadu Road Sector Project was designed to improve rural The Center for International Policy’s The report says that from fiscal year accessibility in areas covering 26 Security Assistance Monitor 2017 to fiscal year 2019, the US districts and strengthen institutional published a report on 13 September proposed an estimated USD 24 billion in capacity for sustainable rural road entitled “Corruption in the Defense counterterrorism aid to 36 countries in maintenance in Tamil Nadu. Sector,” which has found that US Africa, the Middle East, and South and The debarment of Om Sakthi qualifies counterterrorism aid intended to bolster East Asia. for cross-debarment by other US and its allies’ efforts to combat multilateral development banks under violent extremists has also been used To combat corruption, the report the Agreement for Mutual Enforcement to fuel corruption and fund terrorist recommends the US strengthen risk of Debarment Decisions. group activities and recruitment. assessments and provide risk reports on high-risk countries, specifically The report, written by Colby Goodman and Afghanistan, Azerbaijan, Cameroon, Christinia Arabia, finds two-thirds of the Chad, Egypt, Iraq, Kenya, Nigeria, the recipients of US counterterrorism aid pose Philippines, Somalia and Uganda. The “serious” corruption risks. Routine practices focus of these assessments should such as nepotism in the recruitment and be to “map the structure of corrupt promotion system, bribery, extortion, the networks in the countries, including main use of “ghost soldiers” to divert money from revenue streams, external enablers and fictitious military “no shows” to high-ranking facilitators, and connections with the Photo: The Financial officials, and flawed purchasing practices all military,” as well as possible organised pose the most serious corruption risks. crime networks.
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SEC charges Basler Kantonalbank enters DPA for Legg Mason helping customers evade US taxes with FCPA The US Department of Justice (DOJ) announced on 28 August that Basler The DPA requires violation Kantonalbank (BKB) has entered into a BKB to affirmatively deferred prosecution agreement (DPA) The US Securities and Exchange disclose certain material for conspiring to defraud the US of Commission (SEC) announced on taxes and commit tax evasion. Basler information it may later 27 August that Legg Mason Inc Kantonalbank will pay USD 60.4 million will pay over USD 34 million to uncover regarding US in penalties as part of the DPA. resolve charges that the company related accounts violated the Foreign Corrupt BKB admits that between 2002 and 2012 Practices Act (FCPA) in a scheme it conspired with its employees, external to bribe Libyan officials. asset managers, and clients to: 1) defraud Under the DPA, prosecution will be the United States with respect to taxes; 2) According to the SEC order, between deferred for an initial period of three commit tax evasion; and 3) file false federal 2004 and 2010, a former Legg Mason years to allow BKB to demonstrate good tax returns. At its peak in 2010, the bank asset management subsidiary, Permal conduct. held approximately 1,144 accounts for Group Inc, partnered with a French US customers, with an aggregate value of According to the DOJ’s press release, financial services company to solicit approximately USD 813.2 million, many of in March 2008, BKB became aware that investment business from Libyan which were undeclared accounts that were UBS was considering closing its cross- state-owned financial institutions. part of the conspiracy. border business servicing US persons These entities engaged in a scheme and shortly after it became public that to pay bribes to Libyan government The DPA requires BKB to affirmatively UBS’s cross-border business was under officials through a Libyan middleman disclose certain material information criminal investigation by US authorities. to secure investments. Legg Mason, it may later uncover regarding US BKB’s Zurich branch allegedly saw this through its Permal subsidiary, was related accounts, as well as to disclose as a business opportunity and was awarded business tied to USD 1 billion certain information consistent with the aware that many of the clients it sought of investments for the Libyan financial Department’s Swiss Bank Program with to attract wanted to continue to conceal institutions as a result of this scheme, respect to accounts closed between 1 their accounts. earning net revenues of approximately January 2009, and 31 December 2017. USD 31.6 million. Throughout the conspiracy, BKB took a number of steps and provided a number The SEC found that Legg Mason of services to its undeclared clients. violated the internal accounting These services included promoting Swiss controls provision of the Securities bank secrecy as a means of concealing Exchange Act of 1934. Legg Mason assets and income from taxation in agreed to disgorge approximately the US, providing hold-mail services USD 27.6 million of ill-gotten gains and “assumed name” and “numbered” plus USD 6.9 million in prejudgement accounts, and allowing accounts to be interest to settle the case. Legg Mason established through nominee entities set also agreed to pay USD 33 million to up in tax haven jurisdictions such as the the Department of Justice in sanctions British Virgin Islands, Liechtenstein, and resulting from the firm’s involvement Photo: finews.ch Panama. in the Libyan bribery scheme.
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OECD publishes report on Armenia, and Greco publishes reports on Cyprus, France and Denmark
The Organisation for Economic Co- implemented and all are in progress. progress with regard to: the rules on conflicts operation and Development (OECD) of interest and gifts, public access to member published its report on Anti-Corruption Greco notes that efforts to increase of parliaments’ and senators’ declarations Reforms in Armenia on 4 September, transparency regarding the of assets; and the criteria for the award in which Armenia is advised to take appointment of judges in Cyprus has of honorary decorations and distinctions, “vigorous measures to tackle entrenched been made, but integrity requirements and the commencement of disciplinary corruption.” for their appointment need to be made proceedings before the Judicial Service clearer. Greco also welcomes the Commission with regard to judges, and the The report has found that there is a lack of creation of the Guidelines on Ethics and Commission’s investigative powers. enforcement of anti-corruption laws, together Conduct for Public Prosecutors and a with a monopolised economy, which “remains bill on the independence and autonomy France must submit a progress report by 30 a serious concern.” Armenia is advised to of the Law Office. June 2019 at the latest. take bold measures to ensure judicial and prosecutorial independence and integrity, and Greco published a report on 18 September In addition, Greco has decided to subject step up efforts to investigate and prosecute on corruption prevention in respect of Denmark to its non-compliance procedure high-profile and complex corruption cases. MPs, judges and prosecutors in France, due to the lack of sufficient measures to in which it is concluded that France has prevent corruption in respect of MPs and the The Council of Europe Group of States against implemented only four of the eleven judiciary, according to a compliance report Corruption (Greco) published its compliance recommendations made since 2013. published on 12 September. report on Cyprus on 6 September, which finds that although only two of 16 recommendations Greco concludes that the current level of Greco’s report concludes that Denmark has on corruption prevention with respect to compliance with its recommendations implemented satisfactorily only one of six MPs, judges and prosecutors have been in France is “globally unsatisfactory.” It recommendations issued more than four fully implemented, eight have been partly calls on the French authorities to make years ago.
Peru president pushes for anti-corruption reforms
Peru’s congress approved a dismiss two cabinets formed by a single Board of Justice, and change the way its confidence vote on 19 September administration. The current congress members are elected. proposed by president Martín has already voted down one cabinet last Vizcarra in an attempt to pressure year under former president Pedro Pablo Congress into approving a Kuczynski, who resigned in March rather referendum on four political and than face impeachment over corruption judicial reforms to combat corruption. allegations.
Vizcarra announced a no-confidence vote The call for a no-confidence vote has as a way to push for the approval of the already led to Congress unanimously proposed reforms. The 82-22 vote in favour approving the legal ruling to reform the of Vizcarra now forces Congress to pass National Judicial Council (CNM), which his judicial and political reforms. Under would change the name of the institution Peru’s constitution, lawmakers can only to Junta Nacional de Justicia, or National Photo: Reuters
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Sanofi charged with FCPA violation Former Malaysian PM The US Securities and Exchange product prescriptions. In Kazakhstan, Commission (SEC) announced on 4 distributors were allegedly used as part September that Sanofi has agreed of a kickback scheme to generate funds to face more to pay more than USD 25 million to from which bribes were paid to officials resolve charges that its Kazakhstan to ensure that Sanofi was awarded corruption and the Middle East subsidiaries made tenders. In the Middle East, various corrupt payments to win business pay-to-prescribe schemes were used charges in violation of the Foreign Corrupt to encourage healthcare providers to Practices Act (FCPA). increase their prescriptions of Sanofi Former Malaysian prime products. Sanofi agreed to a cease-and- minister, Najib Razak, was According to the SEC, the schemes spanned desist order and to pay USD 17.5 million arrested on 19 September and multiple countries and involved bribe in disgorgement, USD 2.7 million in will be charged over hundreds payments to government procurement prejudgment interest, and a civil penalty of millions of dollars that were officials and healthcare providers in order of USD 5 million. transferred to his personal to be awarded tenders and to increase account, the country’s anti- corruption agency has said.
Najib was arrested in July and charged with three counts of criminal breach of trust and one count of EU urged to investigate Czech PM corruption as part of an investigation into the diversion of money from a over alleged conflict of interest state investment fund he founded, 1Malaysia Development Berhad, also known as 1MDB. MEPs are urging the European Commission to investigate Czech Najib’s latest arrest relates to over prime minister Andrej Babiš for USD 681 million deposited into his possible conflicts of interest account in 2013, the Malaysian involving EU funds, following Anti-Corruption Commission said allegations from the Czech branch in a statement. Najib insists the of Transparency International that money came from Saudi donors, but has put the spotlight on his Agrofert prosecutors say it was taken from business empire, a conglomerate of 1MDB. Najib was also charged with 230 companies, which Transparency three counts of money laundering International say he remains the last month. “beneficial owner” in breach of Photo: Reuters domestic and EU law. Agrofert has According to media reports, Rosmah rejected the claims as false. Mansor, the wife of Najib Razak interest after it emerged that many of his was questioned for 13 hours on 26 When he was finance minister in 2017, former companies have received financial September by Malaysia’s anti-graft Mr Babiš supposedly put Agrofert into a support from Brussels. agency, investigating 1MDB. trust, to comply with new Czech legislation against conflicts of interest. Mr Babiš rejects the allegations, stating There had been speculation that that he has avoided any conflicts of Rosmah could be charged, with local The European Budgetary Control interest by transferring ownership of his media reporting that she may face Committee will urge the Commission to former firms to two trust funds, AB private more than 20 criminal charges which assess whether Mr Babiš has conflicts of trust I and AB private trust II. mostly relate to money laundering.
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United Technologies to pay USD TI Bangladesh 13.9 million to settle FCPA charges reveals its The US Securities and Exchange agent in a bid to obtain confidential corruption Commission announced on 12 information from a Chinese official September that United Technologies that would help the company win survey findings Corporation has agreed to pay USD engine sales to a Chinese state-owned 13.9 million to resolve charges that it airline. United Technologies improperly Transparency International violated the Foreign Corrupt Practices provided trips and gifts to various Bangladesh (TIB) published the Act (FCPA) by making illicit payments foreign officials in China, Kuwait, South results of its national household in its elevator and aircraft engine Korea, Pakistan, Thailand, and Indonesia survey 2017 on corruption in businesses. through its Pratt & Whitney division service sectors on 30 August, and Otis subsidiary in order to obtain which has revealed that 66 percent According to the SEC’s order, United business. of households became the victim of Technologies subsidiary Otis Elevator Co corruption while receiving services made unlawful payments to Azerbaijani United Technologies consented to the from the public and private sector officials to facilitate the sales of elevator SEC’s order without admitting or denying or institutions. equipment for public housing in Baku the findings that it violated the anti- and as part of a kickback scheme to sell bribery, books and records, and internal The survey of 15,581 Bangladesh elevators in China. United Technologies, accounting controls provisions of the households found that 89 percent through its joint venture, was also found to Securities Exchange Act. of those that said they fell victim to have made payments to a Chinese sales corruption paid a bribe because services would not be provided otherwise. Law enforcement agencies (72 percent) were found to be the most corrupt followed by Brazil police file corruption charges passport services (67 percent).
against president Michel Temer Unveiling the findings of the survey at a press conference, TIB stated that the Brazil’s federal police filed a report estimated value of bribes paid to different on 5 September requesting that service sectors was BDT 106,889 million corruption charges be brought against which is a 21 percent increase from president Michel Temer, for his alleged 2015. Speaking at the press conference, involvement in the corruption scandal Advocate Sultana Kamal said that involving construction giant Odebrecht Photo: Associated Press corruption has increased due to a lack of that saw him receive about USD accountability and decried that the culture 300,000 in bribes. received illegal campaign contributions of the bribe has now become a part of from Odebrecht amounting to USD 2.5 everyday life in Bangladesh. Mr Temer denies any wrongdoing, but it million during his election in 2014. Mr will now be for Attorney General Raquel Alckmin denies any wrongdoing. The TIB report put forward a number Dodge to decide for the third time whether of recommendations to prevent the president should be charged since Brazilian prosecutors are also seeking corruption at policy and institutional taking office in 2016. corruption charges against another levels, which included: taking legal likely presidential candidate, Fernando steps against public officials engaged Separately, Brazilian prosecutors asked Haddad of the Workers’ Party. Haddad in corrupt practices; the implementation a judge to approve charges against is expected to take over as the party’s of the rights to information and the conservative presidential candidate presidential candidate from former Whistleblower Protection Act; and the Geraldo Alckmin, which allege that the president Luiz Inacio Lula da Silva. He introduction of a grievance redress former governor of Sao Paulo state denies any wrongdoing. mechanism and citizen’s charter.
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UK aid payments to Zambia suspended in wake of corruption allegations
Zambian president Edgar Lungu has Criticism has been levied at president The education department fraud, alleged to sacked a senior minister in response Lungu, who planned to officially increase the have started in 2012, is said to have been to the suspension of aid payments social fund scheme, but the report says the orchestrated by misuse of the financial to the country by several nations, additional payments were never made and management information system. It is including the UK, Finland, Sweden and the funds were fraudulently misappropriated. understood that auditors notified the Ireland, and UNICEF, amid allegations Zambia’s ministers are accused of being Department for International Development of corruption and fraud detailed in an aware of the fraud and taking no action. of their concerns in June, after suspicious Africa Confidential report published on payments to shell companies were 14 September alleging that up to USD 4.7 Warehouses controlled by the health discovered. Postal service, Zampost, which million in aid payments may have been ministry are said to have been robbed of handles cash transfer payments to poor embezzled. vast quantities of drugs paid for by aid and people is being formally investigated. officials are alleged to have been involved in According to the Africa Confidential report, the purchase of fake pharmaceuticals. The The UK’s suspension of aid payments awaits the corruption relates to three separate report goes on to allege that the country’s the outcome of the investigation into the frauds within the Zambian government ministers have plundered social spending allegations. and involves international aid payments accounts and pension funds to pay for being diverted from key departments ministerial trips and other unauthorised such as health, education and community spending, resulting in delays to the payment development. of pensions and civil service salaries.
Sara Netanyahu reportedly a suspect in Bezeq bribery case
Prime Minister Benjamin Netanyahu’s wife Sara Netanyahu is suspected of taking bribes in connection with the corruption investigation into the Israeli prime minister and the owner of telecoms company, Bezeq Ltd, Hadashot TV reported on 30 August.
A police representative confirmed that Sara Netanyahu was being regarded as a suspect in the case during court testimony in Tel Aviv. Photo: Reuters The officer was responding to a lawyer who asked whether Mr Netanyahu’s wife was aware that Bezeq’s Walla news site published Mr Netanyahu’s eldest son, Yair separate Israeli television report said. positive coverage about her in exchange for Netanyahu, is also suspected of receiving The Netanyahu family have issued a regulatory benefits, according to Hadashot. bribes in the Bezeq graft probe, a statement dismissing the allegations.
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Liberia investigating USD 100M Oil trader disappearance, reports the FT sentenced for bribing African Liberia is investigating the Airport. The ministry of justice stated disappearance of more than USD 100 that the money had arrived in Liberia million of newly printed bank notes last November during the previous officials intended for the central bank in a administration of Ellen Johnson Sirleaf possible fraud worth 5 percent of the and before the new president, George west African country’s gross domestic Weah, took over the presidency in product, reported the Financial Times January. Several former officials have on 19 September. been barred from leaving the country, including Milton Weeks, former central According to the Financial Times, the bank governor, and Charles Sirleaf, ministry of justice has said that it is son of Ms Sirleaf and a former deputy investigating the disappearance of bank governor. The government said “containers and bags of money” worth the investigation has “national security nearly LRD 16 billion passing through implications.” Monrovia port and Roberts International
Probe into whether kickback was paid for SAP contract
According to a report by Reuters on 12 September, South Africa’s Special Investigating Unit (SIU) will investigate whether a kickback of more than ZAR 35 million was paid for a state contract with German software firm SAP.
South African president Cyril Ramaphosa Former oil trader, Pascal Collard, authorised the SIU investigation after the who was based in Switzerland was country’s anti-graft agency started its own Photo: Fortune given an 18-month suspended probe into a ZAR 671 million deal SAP signed sentence by a Swiss Federal with the water ministry in 2016. Criminal Court on 25 August between the water ministry and SAP. The for bribing officials in Africa in SAP is one of several foreign firms to suffer SIU will present the findings of its probe exchange for oil shipments. reputational damage in South Africa after into SAP’s work for the water ministry becoming entangled in corruption scandals within six months. Collard who worked for Geneva-based under former president Jacob Zuma. trading giant Gunvor, admitted bribing In March, SAP admitted to paying more officials in the Congo and Ivory Coast. Nazreen Pandor, the SIU’s spokeswoman, told than USD 9 million to intermediary According to an investigative report by Reuters that the unit had received information companies controlled by the Guptas, Public Eye, a Swiss transparency group, from a whistleblower that a company friends of former president Zuma, relating Collard alleged that his former bosses controlled by an official had received more to deals with South African state firms knew about the bribery. Gunvor denies than ZAR 35 million for facilitating the deal Eskom and Transnet. the allegations.
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Ex-Sarkozy aide Former president of South American charged with football sentenced for corruption bribery and Juan Ángel Napout, the former Trujillo is a former FIFA match agent, president of CONMEBOL, the South while Davidson is a chairman of the North misuse of public American Football Confederation, American Soccer League and former was sentenced by a US judge to nine president of Traffic Sports USA, a sports funds years in prison on 29 August after marketing company. The three officials being convicted of racketeering and have been fined GBP 786,000. Takkas, French authorities investigating the corruption in the ongoing corruption one of the officials arrested in May 2015 financing of Nicolas Sarkozy’s 2007 investigation into world football. before FIFA’s Congress in Zurich, pleaded election campaign, which is alleged guilty to one count of money laundering to have involved cash from Libyan According to US prosecutors, Mr Napout conspiracy. Davidson pleaded guilty to one dictator Moamer Kadhafi, charged took millions of dollars in bribes in count of racketeering conspiracy and one the French ex-president’s interior exchange for the media and marketing count of wire fraud. Trujillo pleaded guilty to minister Claude Gueant on 17 rights to tournaments, including World Cup one count of money laundering conspiracy September for taking bribes, misuse qualifiers. Mr Napout was a vice president and two counts of wire fraud conspiracy in of public funds and conspiracy in of FIFA and a member of its executive connection with his participation in several illegal campaign financing. committee, and previously served as the schemes to bribe football officials. head of Paraguayan soccer. Mr Napout was Gueant is also facing tax fraud and also ordered to forfeit USD 3.3 million and Meanwhile, the Referees’ Association of forgery charges over a EUR 500,000 pay a USD 1 million fine. Ghana (RAG) banned six more referees transfer received from a Malaysian for life, and 47 match officials for 10 Additionally, three FIFA officials have been company in 2008, and the 2009 sale of years each, on 17 September in the wake banned from football for life for their roles a luxury villa in the south of France to a of a bribery probe. RAG also confirmed in the widespread corruption scandal at the Libyan investment fund. the sanctions handed down by the football governing body. FIFA confirmed the Confederation of African Football last The corruption inquiry was opened in sanctions for bribery and corruption against month - two for life and six others for 2013 after claims by several figures in Mr Costas Takkas, the former Caribbean 10 years. The corruption investigation Kadhafi’s ousted regime that Sarkozy’s Association Football (CONCACAF) attache was launched after officials were filmed campaign received cash from the and assistant to president Jeffrey Webb, accepting money by investigative journalist dictator and his son Seif al-Islam. Miguel Trujillo and Aaron Davidson. Anas Aremeyaw Anas.
Transparency International report on climate funds
Transparency International change funding and activities from adaptation stakeholders worldwide from published a report entitled “Climate corruption. the public and private sector, international Adaptation Finance Governance agencies, and civil society who want Standards: A new approach piloted The report presents a new framework to to ensure that climate finance going in the Maldives and Bangladesh,” create and assess governance standards for into countries where they are working on 4 September, which details the climate finance. Transparency International meets the needs of climate-vulnerable ongoing work to safeguard climate explains that the report is for climate communities.
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Former political advisor sentenced DOJ secure for taking bribes another guilty
Former senior political advisor, Sun operations, project approvals and plea in PDVSA Huaishan, was sentenced to 14 personnel promotions while serving years in prison by the Hulun Buir as director of the General Office of the case Intermediate People’s Court in the Communist Youth League of China Inner Mongolia autonomous region Central Committee, deputy secretary- on 17 September for taking bribes general and Standing Committee The US Department of Justice of nearly CNY 40 million, Chinese member of the CPPCC National (DOJ) announced on 13 media has reported. Committee, as well as a member of the September two additional guilty 18th Communist Party of China Central pleas in its foreign bribery Prosecutors accused Sun of taking Committee from 1994 to 2016. investigation into payments to advantage of his positions to seek officials of Venezuela’s state- profits for a number of enterprises Between 2000 and 2016, it is alleged owned energy company, Petroleos and individuals. The court found that that Sun accepted cash, gold bars and de Venezuela S.A. (PDVSA). Sun helped secure land development artwork that had a total value of nearly permissions, approvals for business CNY 40 million. Juan Carlos Castillo Rincon, a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the Foreign Three sentenced for bribery scheme Corrupt Practices Act (FCPA) in connection with corruptly securing The US Department of Justice and was ordered to pay USD 621,500. contracts, contract extensions, and (DOJ) announced on 13 September Mr Paris pleaded guilty to one count of favourable contract terms from that a consultant along with his honest services wire fraud. PDVSA. co-conspirators, the President of an Arkansas college and a former Former Arkansas State Representative, It was revealed that Jose Orlando Arkansas State Representative, have Micah Neal, was sentenced to three Camacho, a PDVSA official, also been sentenced for their roles in a years probation and ordered to pay pleaded guilty to accepting bribes. In bribery scheme in which state funds USD 200,000 to the State of Arkansas July 2017, Mr Camacho pleaded guilty were directed to non-profit entities in and the Northwest Arkansas Economic under seal to conspiracy to commit exchange for kickbacks. Development District. Mr Neal pleaded money laundering. Both Mr Camacho guilty to one count of conspiracy to and Mr Castillo are scheduled to be Consultant, Randell G. Shelton Jr, was commit honest services fraud. sentenced in February 2019. sentenced to 72 months in prison, followed by three years supervised release, and ordered Evidence presented at trial for Woods The DOJ has now brought charges to pay USD 660,698 and forfeit USD 664,000. and Shelton revealed that Mr Neal against 18 individuals as part of its Shelton was convicted of 12 counts, including conspired with Woods to use their investigation into bribery at PDVSA. conspiracy and honest services wire and mail official positions to appropriate and The DOJ explained in its press release fraud. Also convicted was former Arkansas direct government money, known as that due to the limits in the FCPA, the State Senator Jonathan E. Woods, of 15 General Improvement Funds (GIF), to charges against the corrupt foreign counts, including conspiracy, wire and mail two non-profit entities in exchange officials have been based on money fraud, and money laundering. for bribes. Mr Neal admitted that he laundering and not the FCPA whereas authorised and directed a total of USD the charges against the US based Oren Paris III, President of Ecclesia College, 175,000 to the entities and received USD individuals who made and/or directed was sentenced to 36 months in prison, 38,000 in bribes from the two non-profit the corrupt payments generally have followed by three years supervised release, entities. included FCPA violations.
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Amazon Sierra Leone officials ran US visa investigating scam, reports Reuters staff bribery According to a report by Reuters on issuing procedure after a higher-than- 14 September, corrupt Sierra Leonean average number of Sierra Leoneans were claims, reports officials have been selling fraudulent found to be overstaying their visas. service and diplomatic passports for WSJ thousands of dollars to individuals Nine people were arrested on 10 September hoping to use them to enter the by Anti-Corruption Commission (ACC) According to a report published by US, the country’s anti-corruption officers assisted by US Embassy security the Wall Street Journal (WSJ) on 16 commissioner has said. and consular personnel for attempting September, Amazon is investigating to apply for visas with fraudulent service claims that its employees accepted An investigation in Sierra Leone reportedly passports, which are meant to be used only bribes in exchange for leaking uncovered a large network of bureaucrats by government employees for work-related confidential sales data. It is alleged selling passports for up to USD 7,000 and travel. Among those detained was Alieu that independent sellers were also assisting buyers to apply for US visas with Kanu, Sierra Leone’s former ambassador allowed to delete negative reviews them, said Commissioner Francis Ben to the United Nations, who the ACC alleges and restore banned accounts for Kaifala. organised the sale of the passports and payments of between USD 80 and accompanied the buyers to add credence to USD 2,000. “We have evidence of high-ups at the their applications. Ministry of Foreign Affairs and the Amazon said it had zero tolerance for Immigration Department participating, and According to the anti-corruption abuse of its systems and that it was neither agency has much, if any, control commissioner, several unnamed foreign conducting a thorough investigation. over it,” he told Reuters. ministry and immigration department According to the WSJ, Amazon’s officials were arrested on charges relating to investigation reportedly began in May The investigation follows a request from the investigation, while the former minister when the firm was tipped off about the the US government in 2017 for the West of immigration is currently on the run after a practice in China. African country to tighten its passport- warrant was issued for his arrest.
Police raid offices of French electrical firms in corruption probe, reports Reuters
A report by Reuters published on 6 following reports received in April from the September claims that the offices Competition Authority and the French Anti- of four of France’s electrical goods’ Corruption Agency, a source told Reuters. companies have been raided by Twelve searches were carried out at Legrand, police on suspicion of cartel pricing Rexel, Sonepar and Schneider Electric. and corruption, according to a judicial source. Reuters reported that the companies are suspected of cartel pricing, forgery, breach The investigation was launched of trust, misuse of corporate assets, tax by the Paris prosecutor’s office fraud and bribery.
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Police in Sudan rescue nearly 100 OECD report victims of human trafficking on state-owned Operation Sawiyan, took place from including its airport, as well as at open- 26-30 August, and involved 200 air gold mines to the East of the city. enterprises and Sudanese officers who rescued 94 victims, including 85 minors, “Operations such as Sawiyan provide corruption from criminal networks involved in an important opportunity for Sudan to illegal migration, child labour and strengthen its international cooperation The Organisation for Economic exploitation, and forced begging. with INTERPOL’s global network, Co-operation and Development particularly on pressing crime issues (OECD) publishes a report entitled Police seized USD 20,000 which they believe related to human trafficking and people “State-Owned Enterprises and included ransom money obtained from smuggling,” said the Director of Sudan’s Corruption: What Are The Risks the abduction of a migrant. The operation Criminal Investigation Department, Major and What Can Be Done?” on 27 was held at multiple hotspots in Khartoum, General Hussein Naveh Mahmoud. August, which brings facts and figures to the discussion about the corruption risks facing state- owned enterprises (SOEs) and how they, and state ownership, go India’s PM faces pressure to resign about addressing them. over alleged corrupt French jet deal The report puts forward options to help the state as an enterprise owner fight corruption and promote integrity Indian prime minister Narendra Modi choice of billionaire Indian businessman in the SOE sector. According to the faced calls for his resignation over Anil Ambani’s Reliance Defence as press release the report also lays the allegations of corruption in a military Dassault’s local partner instead of a state- foundations for future OECD guidance jet deal with France after former run manufacturer. on the subject. French president Francois Hollande was quoted on 21 September as Under Indian defence procurement rules, Separately, the International Monetary saying New Delhi had influenced the a foreign firm must invest at least 30 Fund (IMF) published a working choice of a local partner. percent of the contract in India to help paper entitled “The Measurement and it build up its manufacturing base and Macro-Relevance of Corruption: A Big India’s opposition party have criticised Modi wean off imports. Data Approach,” on 31 August, which over the purchase of 36 Rafale planes from attempts to address the limitations to For that, the French firm picked Reliance Dassault Aviation in 2016 estimated to be the measurement of corruption and and not Hindustan Aeronautics Limited, worth USD 8.7 billion, which they believe its effects by leveraging news media the state-run giant that has been was an overpayment and not transparent. coverage of corruption. producing planes for decades, most of Hollande, who cleared the deal when he was them Russian under licence. The working paper aims to contribute in office, was quoted as saying New Delhi to the debate on the matter by “The PM personally negotiated and had put pressure on Dassault to choose constructing the first big data, cross- changed the Rafale deal behind closed Reliance. “We had no choice. We took the country news flow indices of corruption doors. Thanks to François Hollande, interlocutor that was given to us,” he was (NIC) and anti-corruption (anti-NIC) we now know he personally delivered a reported as telling the French news service by running country-specific search deal worth billions of dollars to [...] Anil Mediapart. algorithms over more than 665 million Ambani,” Rahul Gandhi, the president of international news articles. India’s main opposition party, Congress the main opposition Congress party, said Party, have questioned the government’s in a tweet. “The PM has betrayed India.”
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PRESS & MEDIA | BRIBERY | CORRUPTION
US designates member of the House of Representatives in Bosnia and Herzegovina for “significant” corruption
The United States Department of State Section 7031(c) provides that, in cases public corruption, including the acceptance announced on 10 September that it where the Secretary of State has credible of improper benefits in exchange for the has publicly designated Nikola Spiric, a information that foreign officials have been performance of public functions and member of the House of Representatives involved in significant corruption or gross interference with public processes, during in Bosnia and Herzegovina, under violations of human rights, those individuals his tenure as a member of the House of Section 7031(c) of the Department of and their immediate family members are Representatives in Bosnia and Herzegovina. State, Foreign Operations, and Related ineligible for entry into the US. Programs Act of 2018, due to his In addition to the designation of Mr Spiric, the involvement in significant corruption. According to the Department of State, Secretary is also publicly designating Nada Mr Spiric engaged in and benefited from Spiric, Aleksandar Spiric, and Jovana Spiric.
Photo: Klix.ba
Report shows half global exports come from countries that fail to punish foreign bribery
Transparency International published and four countries, accounting for 6.7 the 2018 edition of its Exporting percent of world exports, were found to Corruption report on 12 September, have declining levels of enforcement: which reveals that most of the Austria, Canada, Finland and South world’s biggest exporters are failing Korea. to punish corporations paying bribes overseas. For the first time, the The report rates countries based on their report evaluates China, enforcement of foreign bribery under the world’s largest the OECD’s Anti-Bribery Convention. The findings show that 11 of the 44 exporter, as well as jurisdictions, which are responsible for India, Singapore and Corruption, which also calls for enforcement 30.8 percent of world exports, rated against foreign bribery. These four exporters, conduct active or moderate enforcement Hong Kong are in the little or no enforcement category. against companies bribing abroad. Germany, Israel, Italy, Norway, Switzerland, Transparency International recommends the UK and the US were found to carry out For the first time, the report evaluates that governments: improve accountability active enforcement, and Australia, Brazil, China, the world’s largest exporter, and deterrence by publishing up-to-date Portugal and Sweden were found to carry as well as India, Singapore and Hong data and case information; facilitate out moderate enforcement. Kong, which are each responsible cross-border investigations with improved for more than two percent of global mutual legal assistance; and ensure even- Brazil and Israel were found to have exports but are not signatories to the handed, dissuasive sanctions by applying dramatically improved their ratings, up OECD Convention. They are, however, transparency, accountability and due process from little or no enforcement in 2015, parties to the UN Convention against in settlements of foreign bribery cases.
46 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | SANCTIONS
UK will push for new Russia sanctions regime in light of Salisbury revelations
UK Prime Minister Theresa May commented in her statement to Parliament on 5 September that exposed details on Russia’s role behind the chemical weapons attack in Salisbury that in light of the evidence the UK will continue to press for the creation of a new EU Chemical Weapons sanctions regime and a new EU sanctions regime against those responsible for cyber attacks and gross human rights violations – as well as for new listings under the existing regime against Russia. Photo: The Independent
“As a fellow Permanent Member of the UN Security Council, we will continue to engage Russia on topics of international peace and security,” said Mrs May. “But we will also use these channels of communication to make clear there can be no place in any civilised international order for the kind of barbaric activity which we saw in Salisbury in March.” Security minister, Ben Wallace, was quoted as saying: “There are winner and losers in Brexit. One of the winners in this case will be that the UK when it comes to foreign policy such as the The Guardian reported on 6 sanctions regime will be able to behave in a way that we think September, that the UK government will have more of an effect.”
has said a potential battery of The Observer reported on 9 September that the right of more tougher sanctions against Russia than 700 wealthy Russians to live in the UK is under review as could be introduced once Britain the government mulls new ways of curtailing Russian power and influence following the Salisbury attack. Home Office has left the EU next March. sources told the Observer that ministers believe there may need to be further restrictions on the issuing of visas to overseas investors. The Home Office is said to be conducting a review of The UK, US, France, Germany and Canada issued a joint statement tier 1 investor visas, the use of which was curtailed three years before a UN Security Council meeting on 6 September saying that ago amid concerns they were being issued those involved in they had full confidence in the UK’s assessment that the Salisbury corruption. chemical weapons attack was carried out by Russian military intelligence and approved at a senior government level. The UK US Senate Banking Committee held a hearing on Russia was expected to put the case forward during the meeting for sanctions on 6 September, in which senior Administration further sanctions against Russia. officials testified on sanctions and the protection of critical infrastructure and outside perspectives were heard on the The Guardian reported on 6 September, that the UK government effectiveness of US sanctions, and on new tools, including new has said a potential battery of tougher sanctions against Russia sanctions authorities that might usefully be deployed against could be introduced once Britain has left the EU next March. Russian attackers.
47 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | SANCTIONS
OFAC settlement with electronics The OFAC company for Iran sanctions violations designates
The US Treasury Department’s Office shipments were in violation of the sanctions, Venezuelan of Foreign Assets Control (OFAC) the company produced emails indicating that announced on 13 September a USD the other shipments were intended for Dubai. president’s wife 1.5 million settlement with a California- The initial penalty had been calculated based based electronics company, Epsilon on the two shipments categories, so the court and members Electronics Inc, also doing business remanded the matter to OFAC for further as Power Acoustik Electronics, Sound consideration of the penalty calculation. of Maduro’s Stream, Kole Audio, and Precision Audio, for alleged violations of the Iranian In arriving at the revised settlement inner circle Transactions and Sanctions Regulations amount, the OFAC considered the following aggravating factors: the alleged violations when it sold equipment to a Dubai-based The US Treasury Department’s constituted or resulted in a systematic distributor it knew or had reason to know Office of Foreign Assets Control pattern of conduct; the company exported distributed products to Iran. (OFAC) announced on 26 goods valued at over USD 2.8 million; and September that it has sanctioned The settlement resolves litigation between the company had no compliance program in four members of Venezuelan Epsilon and the OFAC stemming from a 2014 place at the time of the alleged violations. The president Nicolas Maduro’s inner lawsuit challenging the OFAC’s initial USD OFAC also considered mitigating factors such circle: Cilia Adela Flores de Maduro 4.07 million civil penalty. While the lower court as the company’s status as a small business, (First Lady and former Attorney granted summary judgment in favour of the the company not receiving a penalty or finding General and president of the OFAC after finding evidence that the company of a violation in the five years prior to the National Assembly of Venezuela); knew the distributor’s business was in Iran transactions at issue, and some cooperation Delcy Eloina Rodriguez Gomez at the time the shipments were made, upon with the OFAC. The OFAC noted that following (executive vice president of appeal, the DC Circuit reached a split decision litigation, the company took additional Venezuela); Jorge Jesus Rodriguez setting aside the OFAC’s initial penalty. While remedial actions to address the conduct that Gomez (Venezuelan minister of the appellate court affirmed that 34 of 39 led to the alleged violations. popular power for communication and information); and Vladimir Padrino Lopez (Venezuelan defence Trump signs new executive order minister). The OFAC has also targeted a “network targeting election interference supporting a key frontman for designated President of Venezuela’s US president Donald Trump signed and mandates automatic sanctions in cases National Constituent Assembly (ANC) a new executive order targeting where a foreign person or power has been Diosdado Cabello Rondon,” which foreign interference in US elections found to have tried to manipulate US elections includes sanctioning three entities: on 12 September, which authorises through direct interference or by disseminating Averuca CA, Quiana Trading Limited, the imposition of sanctions on propaganda or disinformation. and Panazeate SL; and two individuals: foreigners accused of interfering in Jose Omar Paredas and Edgar Alberto US elections Sanctions could include freezing assets, Sarria Diaz. restricting foreign exchange transactions, The order requires the intelligence limiting access to US financial institutions, The OFAC has also identified a USD 20 community and other federal agencies and prohibiting US citizens from investing in million Gulfstream 200 private jet, tail to assess the extent of any foreign companies involved, national security adviser number N488RC, located in Florida, as interference after every US election John Bolton told reporters. blocked property.
48 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | SANCTIONS
EU Parliament triggers sanctions The OFAC procedure against Hungary designates
The European Parliament voted on 12 passed by a majority, which means that Mr North Korea September to pursue disciplinary action Orban’s government could eventually lose against Hungary over alleged breaches its EU voting rights. controlled IT of Europe’s core values, in a motion that opens the door to possible sanctions. The motion must now be approved by the companies Viktor Orban’s government is accused leaders of Europe’s 28 member states. A of silencing media, targeting NGOs and unanimous vote is required to suspend removing independent judges. Hungary’s voting rights and launch in China and sanctions. The Polish Foreign Ministry has The measure to trigger Article 7 of the Lisbon announced that it will vote against any EU Russia Treaty relating to sanctions procedures was sanctions on Hungary. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced E3+2 to establish “special purpose North Korea-related designations on 13 September, against two entities and one individual, vehicle” to facilitate trade with Iran targeting the revenue North Korea earns from overseas information A Ministerial Meeting of the E3+2 as confirmed by 12 reports from the technology (IT) workers. (China, France, Germany, the Russian International Atomic Energy Agency, and Federation and the UK, with the High reiterated the need to continue to do so. Those designated include China-based Representative of the EU for Foreign Yanbian Silverstar Network Technology Affairs and Security Policy) and the Iran’s Foreign Minister, Mohammad Javad Co Ltd, its North Korean CEO, Jong Islamic Republic of Iran, the participants Zarif, warned Europe on 15 September Song Hwa, and its Russia-based of the Joint Comprehensive Plan in an interview with Der Spiegel that it sister company, Volasys Silver Star. of Action (JCPOA), was held on 24 could “reduce its implementation” of the According to the Treasury Yanbian September, to consider ways forward JCPOA and increase uranium enrichment Silverstar Network Technology Co Ltd to ensure the full implementation of the activities, if Europe and the other is nominally a Chinese IT company, but JCPOA in the wake of the reimposition signatories to the JCPOA do not act to in reality is managed and controlled by of US sanctions. offset the consequences of US sanctions. North Koreans.
Participants welcomed and noted the The EU has offered Iran a support package Yanbian Silverstar Network Technology urgency of practical proposals to maintain to compensate for the US pullout, which Co Ltd and Volasys Silver Star were and develop payment channels with Iran, obliges the European Investment Bank to each designated under two authorities, notably the initiative to establish a Special support EU firms willing to enter Iranian for having engaged in, facilitated, or Purpose Vehicle (SPV), to facilitate payments markets, among other measures. been responsible for the exportation related to Iran’s exports (including oil) of workers from North Korea, including Despite the proposal for an SPV, discussed and imports, which will assist economic exportation to generate revenue for regularly in the media this month by operators pursuing legitimate business with the Government of North Korea or German Foreign Minister Heiko Maas, Iran. The participants reaffirmed support for the Workers’ Party of Korea, and for many major German companies have further work to operationalise the SPV. operating in the IT industry in North announced the withdrawal or scaling Korea. Jong Song Hwa was designated Participants reconfirmed their commitment back of their activities in Iran, including: for having acted or purported to act for to the JCPOA and recognised that Iran has Volkswagen, Commerzbank, Deutsche or on behalf of China Silver Star. continued to implement its commitments, Bank, DZ Bank Allianz and BASF.
49 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | SANCTIONS
US accuses North Korean hacker of WannaCry, Sony and Bangladesh central bank cyber attacks and issues sanctions
The US Department of Justice (DOJ) unsealed criminal charges on 6 September alleging that Park Jin Hyok, a North Korean hacker, orchestrated a series of global cyber attacks including spreading the WannaCry malware in 2017, hacking Sony Pictures in 2014 and hacking the Bangladesh central bank in 2016 that resulted in the theft of USD 81 million. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) also sanctioned Korea Expo Joint Venture and Park Jin Hyok pursuant to Executive Order 13722 for being “tied to the Government of North Korea’s malign cyber activities.”
The criminal complaint against Mr Park the website of the country’s Financial Chosun Expo Joint Venture, claiming alleges that he carried out cyber attacks Supervision Authority for use as a ‘watering that the company was a front to generate on behalf of the North Korean regime hole’ to infect the Polish banking sector. The currency for Pyongyang intelligence. from 2014 through 2018 in a spree that DOJ’s investigation is ongoing and the filing included attacks on financial institutions includes unnamed co-conspirators. Federal North Korea has responded to the DOJ’s from the US to south-east Asia. The prosecutors also accuse Mr Park of a failed actions, stating that the man charged with DOJ’s filing provides detail on the tactics attempt to break into Lockheed Martin. hacking Sony Pictures in 2014 is a “non- and techniques used by North Korea, existent” individual and warned the US that including an attack in Poland detected in The US Treasury also announced sanctions its accusation could have a negative effect January 2017 that involved compromising against Mr Park and his former employer on relations between the two countries.
Human Rights Watch calls for sanctions against China
Human Rights Watch published a report Human Rights Watch and the UN cite evidence region’s detention of an estimated one million on 10 September entitled ‘Eradicating of a network of extra-judicial internment people – predominantly ethnic Uighurs, Ideological Viruses: China’s Campaign camps, where prisoners are subject to Kazakhs and other Muslim minority groups. of Repression Against Xinjiang’s indoctrination. Chinese companies involved in building Muslims,’ calling for the international detention camps and surveillance systems community to impose sanctions on According to media reports, the US is are also being considered for US sanctions. China over alleged human rights considering sanctions against seven Chinese violations against the Uighurs, a largely officials, including Chen Quanguo, the Muslim ethnic minority. Communist Party Chief in Xinjiang, over the
50 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
PRESS & MEDIA | SANCTIONS
Trump signs EO to further implement CAATSA, Chinese military designated for buying Russian missiles, and 33 Russians blacklisted
US President Donald Trump signed an Secondly, in consultation with US Department transactions with the US financial system; executive order (EO) on 20 September of the Treasury’s Office of Foreign Assets blocking of all property and interests in authorising the Secretary of the Control (OFAC), the Secretary of State property within US jurisdiction; and the Treasury to take certain actions to has sanctioned Chinese entity Equipment imposition of sanctions on an EDD principal further implement certain sanctions Development Department (EDD) and its executive officer, namely, its director Li set forth in the Countering America’s director, Li Shangfu, for knowingly engaging Shangfu, which include a prohibition on Adversaries Through Sanctions Act in significant transactions with a person that foreign exchange transactions under US (CAATSA) with respect to the Russian is a part of, or operates for or on behalf of, the jurisdiction, a prohibition on transactions Federation and directs agencies of the defence sector of the Russian government. with the US financial system, blocking of all US government to take all appropriate property and interests in property within US measures within their authority to According to the US Department of State jurisdiction, and a visa ban. ensure the full implementation of those China took delivery from Russia of ten sanctions. The US Secretary of State Su-35 combat aircraft in December 2017 The sanctions on China mark the first time has taken two actions to implement and a batch of S-400 surface-to-air missile the US has issued penalties under CAATSA his delegated authorities pursuant system-related equipment in January. Both against third parties for dealing with to section 231 of CAATSA and to transactions were negotiated with Russia’s blacklisted Russians. “further impose costs on the Russian arms export entity, Rosoboronexport, which is Government for its malign activities.” an entity identified on the CAATSA listfor its According to Chinese state media reports, support of the Assad regime in Syria. Chinese officials summoned the US Firstly, the Secretary of State has added 33 ambassador in Beijing to denounce the US for persons to the CAATSA list of those being a The following sanctions have been imposed imposing economic sanctions on a Chinese part of, or operating for or on behalf of, the on EDD: a denial of export licences; a military organisation for buying equipment defence or intelligence sectors of the Russian prohibition on foreign exchange transactions from Russia. government. under US jurisdiction; a prohibition on
OFAC extends expiry date of EN+ and RUSAL licenses
The US Department of the by extending the expiration date controlled by EN+. “EN+ and RUSAL have Treasury’s Office of Foreign Assets from 23 October to 12 November for approached the U.S. Government about Control (OFAC) extended the transactions related to the companies substantial corporate governance changes expiration date of certain general and their subsidiaries. that could potentially result in significant licenses related to EN+ Group plc changes in control. To allow sufficient time (EN+) and United Company RUSAL The OFAC designated EN+ on 6 April for being for review, we are extending these licenses PLC (RUSAL) on 21 September. owned or controlled by Oleg Deripaska and until November 12,” said a Treasury These General Licenses 13D, 14A, other entities he owns or controls. The OFAC spokesperson. and 16A amend previous versions also designated RUSAL for being owned or
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PRESS & MEDIA | SANCTIONS
US Senators introduce Iranian John Bolton Proxies Terrorist Sanctions Act threatens
US Senators David Perdue (R-GA), Ted Specifically, the Iranian Proxies Terrorist ICC with US Cruz (R-TX), and Marco Rubio (R-FL) Sanctions Act would: introduced the Iranian Proxies Terrorist sanctions Sanctions Act on 12 September to • impose terrorism-related sanctions sanction two Iranian-controlled militias on the two Iranian-controlled militias in US national security advisor John in Iraq and Syria following recently Iraq and Syria. This action follows in the Bolton has threatened sanctions declassified reports that Iran provided footsteps of the Countering America’s against the International Criminal ballistic missiles and funding for Adversaries Through Sanctions Act Court (ICC) if it goes ahead with terrorist activities to two Shi’ite proxies, (CAATSA), which applied terrorist prosecutions against Americans Asaib Ahl al-Haq and Harakat Hezbollah sanctions to the Islamic Revolutionary in a speech in Washington on 10 al Nujaba. Guard Corps (IRGC); September. The ICC is currently considering prosecuting US “Iran’s dangerous proxy militias in Iraq and • direct the US president to levy the same servicemen over alleged detainee Syria pose a serious threat to the Middle terrorist sanctions on the two Iranian abuse in Afghanistan. East and the world,” said Senator Rubio. militias operating in Iraq and Syria; and “This legislation would impose sanctions Bolton said that the Trump against Iran’s proxy militias and their agents • require the US Secretary of State to administration would “fight back” and and affiliates, and make clear that the publish and maintain an annual list of all impose sanctions – even seeking to United States opposes the Iranian regime’s armed groups receiving assistance from prosecute ICC officials – if the court human rights abuses, pursuit of ballistic the IRGC, so the public can examine the formally proceeded with opening missile programs, and terrorist activities extent of Iran’s expansionist designs. an investigation into alleged war around the world.” crimes committed by US military and intelligence staff during the war in Afghanistan or pursued any investigation into Israel or other US US accuses Russia of cheating on allies.
NK sanctions at UN meeting The ICC was established by a UN treaty in 2002, to investigate and prosecute US Ambassador to the United Nations report had determined that a specific ship- people responsible for genocide, crimes Nikki Haley accused Russia of “cheating” to-ship transfer of fuel by a Russian ship, against humanity, and war crimes, on UN sanctions on North Korea at a cited by Haley, was not a violation. Haley intervening when national authorities UN Security Council meeting on 17 said Washington has tracked 148 cases cannot or will not prosecute. Several September, and said Washington has this year of oil tankers delivering fuel to countries, including the US, China, India, evidence of consistent violations. North Korea obtained through ship-to-ship and Russia, have refused to join. transfers in breach of a UN cap. Haley told the UN Security Council that Russia was helping North Korea illegally Rosemary di Carlo, UN political affairs obtain fuel through transfers at sea, had chief, welcomed the announcements by refused to expel a North Korean who the North Korea on ending nuclear testing council had blacklisted and had pushed at the meeting, however, she added that for changes to a UN report on sanctions the International Atomic Energy Agency violations to cover up Russian breaches. (IAEA) had observed nuclear signatures consistent with the continued operation Russian UN Ambassador Vassily Nebenzia of a plutonium production reactor, said Moscow had not pressured the authors radiochemical laboratory and alleged Photo: Washington Post of the UN report and pointed out that the uranium enrichment facility in Yongbyon.
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PRESS & MEDIA | SANCTIONS
EU resolution calls for asset freeze Australia of senior Cambodian officials considering Myanmar The European Parliament (EP) voted members plotted to overthrow prime in favour of a resolution on Cambodia minister Hun Sen. on 14 September calling for political sanctions freedoms in Cambodia and sanctions “Recent release on bail of opposition Australia is considering targeted against the government. The leader Kem Sokha is a positive first step sanctions in response to atrocities resolution calls for asset freezes even though he was released under committed against the Rohingya on senior Cambodian officials and very restrictive conditions,” Federica people in Myanmar following action to be taken over Cambodia’s Mogherini told the EP. “We now expect the the publication of a report by the membership of preferential trading dropping of all charges and removal of all Independent International Fact- schemes following the arrest of restrictions placed upon him.” Finding Mission on Myanmar former opposition leader Kem Sokha. on 18 September, which details At the 1991 Peace Accord, the the findings of a 15-month The resolution calls for dropping all Cambodian government agreed to a examination of the situation in charges against the country’s former legally binding obligation to maintain a three states in Myanmar. opposition leader, Kem Sokha, who was pluralistic and democratic system.The placed under house arrest after over a EU is currently reviewing Cambodia’s The report makes dozens of year in detention. Mr Sokha was arrested membership of a trading scheme known recommendations, including to the in September on treason charges and his as Everything But Arms, which allows United Nations and the international Cambodia National Rescue Party dissolved Cambodian goods, predominantly community and to the Government by the Supreme Court over allegations its textiles, tariff-free access to EU markets. of Myanmar. It reiterates a call for the investigation and prosecution of Myanmar’s Commander-in-Chief, Senior General Min Aung Hlaing, and his top UN experts find Belgium in military leaders for genocide, crimes violation of Libya sanctions against humanity and war crimes. Australia’s Foreign Minister Marise Payne said, “The Australian government A UN panel of experts on Libya that the money was sent to mystery is considering options in response published a report on 11 September, beneficiaries behind accounts to the fact-finding mission’s report, which has found that Belgium is in managed by the Libyan Investment including targeted sanctions.” violation of international sanctions Authority (LIA). UN experts opened targeting assets once owned by an investigation into whether the The US, UK and EU have all taken steps the late Libyan dictator Muammar frozen funds were in compliance with to suspend military cooperation with Gaddafi. the 2011 UN sanctions. The assets the Myanmar military. included the interest payments from The UN panel of experts’ report follows Euroclear to accounts belonging to LIA. Politico has also reported this month a Politico investigation that uncovered that according to its sources the EU that tens of millions of euros in interest A spokesperson for the Belgian finance is considering new sanctions against payments from Gaddafi’s frozen funds ministry said that the country planned Myanmar following the UN’s call managed by Euroclear — a financial to hold talks on how to react to the for senior military officials from the institution headquartered in Brussels findings. country to be investigated for genocide — were still being paid out. It is alleged against the Rohingya population.
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COUNTRY UPDATES
Algeria China Iraq
The International Consortium of Investigative Journalists China has introduced a new inspection regulation The United Nations called for calm in Basra on 5 revealed on 10 September that the government of to crack down on statistical fraud and related illegal September after protests over poor public services Algeria has launched a money laundering probe operations, which is expected to improve the authenticity and corruption turned violent. The international based on information revealed by the Panama Papers of economic data and better support policymaking. organisation also called for quick formation of the investigation. The investigation, which involves the abuse The regulation, focusing on preventing and punishing new Iraqi government to tackle the nation’s problems. of a government run milk powder subsidy program, was statistical fraud, was disclosed by the general offices of Special Representative of the United Nations revealed in a decision by Switzerland’s Federal Court, the Communist Party of China Central Committee and Secretary-General for Iraq Ján Kubiš expressed due to the alleged use of bank accounts in Switzerland the State Council in September. grave concern over the casualties during the violent to facilitate the fraud. In reaching its decision, the Swiss protests over the lack of critical public services in Federal Court cited reporting by Algerian journalist and Basra, urging the federal government to do its utmost ICIJ member Lyas Hallas who worked on the Panama to respond to the people’s demands for clean water Papers. Ecuador and electricity as a matter of urgency. At least five protesters died and 30 others injured as crowds in Basra took to the streets. The protests began in The Ecuadorean governing state entities issued in early July and spread to several southern and central late August mandatory resolutions for insurance and provinces, including the capital. Mr Kubiš said the Argentina reinsurance companies as well as for financial institutions UN was calling for “calm and urges the authorities to establish anti-money laundering and financing of to avoid using disproportionate, lethal force against Argentina’s Financial Intelligence Unit published on terrorism compliance programs. These resolutions the demonstrators, provide the necessary protection 29 August resolution 96/2018, which introduces an set up the guidelines of what the prevention manual for the people of Basra, ensure human rights while electronic processing and notifications system to be should contain. Compliance programs inter alia must protecting law and order, and investigate and hold used in administrative sanctions summary proceedings include policies and procedures to prevent the misuse accountable those responsible for the outbreak of the in response to breaches of anti-money laundering of technological developments for money laundering, violence.” The UN’s statement comes as Iraqi parties obligations by obligated entities. and the financing of terrorism, through channels such compete in negotiations over the formation of the as electronic money, ATMs or other deposit networks new government following the contested national and non-personal transactions; and establish monitoring election in May. processes for all transactions. Bermuda
The Bermuda Monetary Authority released an Luxembourg Information Bulletin in September outlining what Ghana documentation is required when submitting an The Commission de Surveillance du Secteur Financier application for a digital asset business licence. The The Ghana Standards Authority in collaboration with the (CSSF), Luxembourg’s financial regulator, issued on 23 Bulletin confirms that AML/CTF legislation is applicable Ministry of Trade and Industry inaugurated a 22 member August 2018 a new circular 18/698 for Luxembourg to digital asset businesses. committee to oversee the implementation of an anti- investment fund managers on AML requirements bribery standard on 5 September. The committee’s applicable to investment fund managers and registrar mandate is to study the International Standard agents. The CSSF’s circular clarifies its expectations Organization (ISO) 371001 system to determine if it can in terms of combating money laundering and terrorist Canada be adopted as a standard in Ghana against bribery and financing in relation to investment funds, their investors, corruption. Any recommendations put forward by the the intermediaries involved in marketing and also committee will be subject to public consultation. According to a new report published on 6 September in relation to the investments made on behalf of by the C.D. Howe Institute entitled ‘Hidden Beneficial investment funds. Ownership and Control: Canada as a Pawn in the Global Game of Money Laundering,’ Canada is falling behind when it comes to anti-money laundering and Ireland anti-terrorist financing measures. The author of the Macedonia report Denis Meunier points out the need for a publicly Director of Enforcement and Anti-Money Laundering at accessible central registry for beneficial corporate the Central Bank of Ireland, Seana Cunningham, delivered The Organisation for Economic Co-operation and ownership, which he deems to be a major structural a speech on 27 August on the Central Bank’s proposal for Development (OECD) announced on 23 August flaw in Canada’s corporate registration system. “There an “Individual Accountability Framework,” which aims to that the Former Yugoslav Republic of Macedonia is a clear link between money laundering and hidden constrain the ability of senior executives to escape liability (FYROM) has become the 117th jurisdiction to join the beneficial ownership,” states Mr Meunier. “The abuse for wrongdoing and increase the Central Bank’s ability to Inclusive Framework on BEPS (IF). The OECD press of corporate vehicles and camouflaged beneficial hold individuals to account and deter misconduct. release welcomed the Former Yugoslav Republic ownership is a recognized means of laundering money of Macedonia’s commitment to implement the — and a worldwide problem.” internationally agreed standards to tackle tax evasion and avoidance. Members of the IF have the opportunity to work together on an equal footing with other OECD and G20 countries on implementing the BEPS package and on developing further standards to address
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COUNTRY UPDATES
BEPS issues. Being part of the IF will facilitate the will see informers rewarded with 20 percent of the Saudi Arabia implementation of agreed minimum standards, as funds recovered. “Initially we will target 100 big fish well as the peer review processes. to retrieve their illegal wealth stashed in foreign countries,” said Special Assistant to the Prime The Organisation for Economic Co-operation and minister on Accountability Shahzad Akbar at a press Development (OECD) announced on 18 September that conference. According to Mr Akbar another ordinance Saudi Arabia has signed the Multilateral Convention Mexico on mutual legal assistance will be announced soon to Implement Tax Treaty Related Measures to Prevent to remove any blockages to seeking information from Base Erosion and Profit Shifting (the Convention). The foreign countries. The government said that it will Convention is the first multilateral treaty of its kind, Mexico’s new government has begun its review of also hire firms to detect and recover illegal money allowing jurisdictions to integrate results from the oil contracts, starting with a major project won by and in the case of recovery, the firm will get an agreed OECD/G20 BEPS Project into their existing networks a consortium led by US-based Talos Energy, the share of the amount recovered. Prime Minister Imran of bilateral tax treaties. The OECD/G20 BEPS Project country’s new energy minister has said. President Khan has also directed the foreign ministry to send a delivers solutions for governments to close the gaps in Andres Manuel Lopez Obrador vowed during his delegation to Switzerland to accelerate ratification of a existing international rules that allow corporate profits election campaign to review all oil contracts awarded treaty on exchange of information on bank accounts. to “disappear” or be artificially shifted to low or no under his predecessor for signs of corruption. tax environments, where companies have little or no A Pakistan accountability court issued an arrest economic activity. warrant on 22 September for Muttahida Qaumi Saudi Arabia has also removed the statute of Nigeria Movement-Pakistan (MQM-P) leader and former chairman of the Karachi Port Trust (KPT), Babar limitations for anti-corruption investigations into Ghauri, in relation to an alleged PKR 2.8 billion current and former ministers of the world’s largest According to media reports, MTN Nigeria has asked corruption case involving the KPT. Pakistan’s National petroleum exporter. The amendment disposes of the the Lagos Federal high court to restrain the Central Accountability Bureau (NAB) alleges that eight 60 day statute of limitations that previously governed Bank of Nigeria (CBN) and the Attorney-General men, including Ghauri, conspired to make illegal investigations into alleged corrupt activity. of the Federation from taking further actions in appointments of 940 people in KPT causing losses of respect of a demand that the telecommunications PRK 2.8 billion to the national exchequer. company refund amounts totaling USD 10.134 billion to Nigeria. The CBN wrote to MTN Nigeria and four Seychelles commercial banks, Standard Chartered Bank, Stanbic- IBTC, Citibank and Diamond Bank, on 29 August Portugal Seychelles assumed the presidency of the Eastern demanding that they refund billions of dollars alleged and Southern Africa Anti-Money Laundering Group to have been repatriated illegally out of Nigeria. CBN Portugal published Ordinance No 233/2018 on 21 (ESAAMLG) from Tanzania on 7 September. Minister spokesperson, Isaac Okorafor, said the repatriation of finance, trade, investment and economic planning, was facilitated by four commercial banks using August, which sets out the legal framework for the central register on beneficial ownership. Maurice Loustau-Lalanne, said on assuming the irregular Certificates of Capital Importation issued presidency, “Seychelles will do all it can to ensure that on behalf of offshore investors of MTN Nigeria. The the achievements made under the Tanzania Presidency CBN sanctions also accuse MTN of not paying taxes are sustained and our organisation continues to play on foreign payments and imports totaling about USD Romania a positive role in the fight against money laundering, 2 billion. The CBN accuses the banks of violating financing of terrorism and proliferation and all the country’s laws, including the Foreign Exchange associated financial crimes.” The Eastern and Southern (Monitoring and Miscellaneous Provisions) Act and Concerns have been raised over alleged links between Africa Anti-Money Laundering Group was launched the Foreign Exchange Manual. MTN, which describes Adina Florea who has been nominated to become in Tanzania in 1999 to combat money laundering by the allegations as regrettable, has promised to Romania’s new anti-corruption chief and the ruling implementing recommendations from the Financial vigorously defend its position that it has not done social democrats. Justice Minister, Tudorel Toader, Action Task Force. anything unlawful. selected Ms Florea as head of Romania’s National Anticorruption Directorate (DNA) on 5 September. President Klaus Iohannis will have the final say on whether to appoint Ms Florea. In a document outlining Switzerland Pakistan her views on the DNA, Florea, a prosecutor in the town of Constanta, said the institution has at times operated in a dysfunctional way and accused some A proposal to improve international efforts to combat The UK will work closely with the Pakistani terrorism was presented to the Swiss parliament authorities in their fight against money laundering, prosecutors of illegal activities in pursuit of cases. Ms Florea’s nomination follows the controversial removal by Justice Minister Simonetta Sommaruga on 14 Sajid Javid said on a visit to the country in September. The proposed measures include raising the September. The British Home Secretary said the of Laura Kovesi from the post, who had been praised in by the EU for cracking down on corruption. Anti- minimum and maximum prison sentences for people two nations would share evidence to enable more convicted of terrorist activities, as well as outlawing the prosecutions to be brought. government protests have occurred across Romania in recent months accusing the social democrats of financing of terrorism.“Switzerland must not become weakening Romania’s fight against corruption. a safe haven for sponsors of terrorism,” Sommaruga The new Pakistan government announced a new told a press conference. The government also wants whistleblower law on 5 September designed to aid to make recruiting and training of militants and trips for the retrieval of illegal wealth of Pakistanis held in terrorist purposes punishable offences. The proposed foreign countries. The government has formed a amendments aim to speed up legal assistance with taskforce comprising of officials from the Federal other countries. The proposals are part of a series of Investigation Agency and National Accountability projects to boost the fight against terrorism. Bureau to enforce the anti-corruption rule that
55 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2018
COUNTRY UPDATES
Uganda Uzbekistan
Ugandan president Yoweri Kaguta Museveni The president of Uzbekistan, Shavkat Mirziyoyev, announced on 9 September that a direct toll-free signed a decree “On measures to organise the activities telephone line to his office will now be available for of crypto-exchanges in Uzbekistan” at the start of whistleblowers to report suspicions of corruption as September, which introduces a licensing system for part of the efforts to combat corruption in the country. cryptocurrency exchanges. In order to be granted In an address to the nation, Mr Museveni, identified a licence to operate a cryptocurrency exchange corruption as the first of six areas of weakness in his in Uzbekistan, a number of requirements must be government, particularly government officials that met, including: applicant servers must be located take bribes. Mr Museveni also commented on the in Uzbekistan; exchanges must have anti-money need to deploy more technology to detect possible laundering procedures in place; and exchanges must crimes. store information about all transactions for five years, including user identification data and other material related to their interaction with customers. In respect of cryptocurrency mining, state-controlled energy United Arab Emirates companies, Uzbekenergo and Uzbekgidroenergo, will allocate land plots for industrial-scale mining operations without holding auctions. The locations Abu Dhabi Global Market (ADGM) launched a for such activities will be designated in coordination framework on 10 September to regulate the with the National Project Management Agency. The operators of private financing platforms (PFPs) decree states that cryptocurrency related income will serving the equity investment, debt financing and not be taxed, licensed exchanges running operations trade receivables funding needs of startups, private with crypto currencies and foreign fiat currencies are enterprises and SMEs. PFPs are online platforms not subject to existing foreign currency regulations that enable startups and smaller enterprises to obtain and crypto exchanges are not subject to the securities financing from private and institutional investors. The and exchange regulations. To operate in the country, new regulatory framework requires the operators foreign trading platforms will have to establish local of PFPs to have appropriate systems and controls subsidiaries and abide by the relevant laws. in place in regard to due diligence, risk disclosures, safeguarding of client assets, and anti-money laundering and counter terrorist financing. The Financial Services Regulatory Authority (FSRA) has published guidance on the regulatory framework for PFPs and the application form for interested parties to operate a PFP.
US
New Jersey Attorney General Gurbir Grewal announced on 10 September that he is setting up an Office of Public Integrity and Accountability to target government wrongdoing, from bribe-pocketing public officials to abusive police officers and wrongful convictions. Attorney General Grewal said the office will be led by longtime federal prosecutor Thomas Eicher, the former head of the criminal division at the US Attorney’s Office in Newark, who has a record of public corruption convictions. He will oversee an office of detectives and prosecutors charged with routing out “criminal abuses of the public trust and handle other sensitive matters that implicate the public’s confidence in both government and the criminal justice system,” according to an announcement from Grewal’s office. Previously, corruption cases were handled by the state Division of Criminal Justice, which maintains a corruption and government crime bureau. However, Mr Grewal said the new office, which will sit outside the normal reporting chain is meant to ensure the independence of sensitive investigations.
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