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Corruption and the need for AML measures

Transparency International has released its 2019 Corruption Perception Index ranking, revealing that corruption tends to be higher in countries where big money flows freely into electoral campaigns and governments listen to wealthy individuals. From the 180 countries assessed, New Zealand, Denmark and Finland took the top 3 spots, while Syria, South Sudan and Somalia took the bottom 3. Meanwhile, Spain has amended its anti-corruption laws and developed solutions to detect and prevent corruption in its early stages. An Ethereum-based blockchain solution will allow legal transfer of crypto asset ownership, while an artificial intelligence application will enhance the detection of corruption and tax evasion. Speaking of corruption and wealth, Singapore’s wealth management industry has become a globally recognized financial center for establishment of trusts, with around 60 licensed trust companies. Note that Singapore has over 200,000 millionaires and globally ranks sixth in terms of household wealth per adult. Given the wealth at stake, the Monetary Authority of Singapore has laid emphasis on the responsibilities of senior management to develop rigorous ML/TF risk awareness and management. Along the same lines, the final workshop of the National ML/TF Risk Assessment of Montenegro worked towards money-laundering risk assessment, recommendations and measures to prevent data loss and ensure accuracy of analysis.

Money-laundering crimes around the world

Italy’s Anti-Mafia Investigation Directorate has warned of organized crime described as ‘Ndrangheta with no boundaries, in which money from drug trafficking is cleaned up by ghost companies that are used to launder money. Meanwhile, Italy’s new AML rule will take effect from July 1, 2020 to stop cash payments over 3000 euros ($3328). In other news from Italy, a house arrest order has been issued against orthopedist Paolo Iannelli for fraudulent bankruptcy and bribery. A company attributed to Paolo was seized with money and other goods valued at about $5.6 million. Elsewhere, Australian authorities investigated a suspected Vietnamese Established Criminal Network for money-laundering of $5 million. 2 people were arrested for possession of illegally obtained property while 2 others were caught with cannabis for distribution. Meanwhile, in Germany, a Dubai-based gold dealer was sentenced to prison for transfer of illegal funds of over $50 million, collected as payments for gold and transported to Dubai in cash. In other news, a Russian thrift store owner was punished for non-compliance with the AML law when accepting goods for resale. Meanwhile, in Greece, the former head of Siemens, Hellas Prodromos Mavridis, sentenced for 15 years in prison for money-laundering in December 2019, was released due to his ill-health. Separately, a senior Polish tax expert has been detained for conducting VAT fraud by aiding an organized criminal group with important tips and information.

Frauds and scams engulf the US

Several frauds and scams emerged in the US. A Russian citizen pleaded guilty of operating 2 online platforms for financial fraud and other crimes, of which one sold stolen debit and credit card numbers that have been used for purchases of over $20 million. Meanwhile, 3 people have been arrested for money-laundering and wire fraud of over $11 million through a telemarketing call center in Costa Rica, defrauding the elderly by promising rewards for upfront payments of insurance fees and taxes. Similarly, 8 defendants were sentenced for fraud of $3.7 million through India-based call centers where operators impersonated Internal Revenue Service employees and threatened victims to pay government taxes or fines, or risk legal action. The victims made payments through wire transfer or prepaid debit cards to US-based defendants. Meanwhile, Jeff and Paulette Carpoff have been accused of scamming their investors in a $1 billion Ponzi scheme. Their solar energy business was used to defraud Warren Buffett’s conglomerate of $340 million. Elsewhere, Latvia’s ABLV bank was officially raided after the US treasury alleged its involvement in laundering over $55 million. The crime involved an organized group supported by the ABLV bank to eliminate liquidation and enable money transfer. Meanwhile, after US sanctions on a bulk carrier for providing transportation services to a blacklisted company, a subsidiary of Eagle Bulk Shipping Inc has agreed to pay $1.13 million to settle the allegations.

Casinos, gaming and the crypto-world

After the UN identified casinos in Southeast Asia as potential outlets for money-laundering, the Philippines AML council has partnered with the Philippines Amusement and Gaming Corporation to strengthen the country’s AML measures. The partnership will ensure sharing of relevant information to monitor the flow of cash in the gambling sector. Meanwhile, online betting companies in Spain have been directed to perform KYC within three days of customer registration to combat security threats and money-laundering. In news from the crypto-world, mayor of the Turkish metropolitan Konya announced crypto money to create an ecosystem for collection and management of social benefits while also monitoring the trading companies in the municipal subsidiary. On the other hand, Chainalysis revealed that over $2.8 million worth of illegal Bitcoin transactions took place in 2019, half of them through Binance and Huobi platforms despite their customer diagnosis features. In alarming news from the UN, about $2 billion have been stolen by North Korean hackers from various financial institutions and crypto exchanges through Telegram. On the other side, all companies related to cryptocurrency in Ukraine will be monitored by authorities. Suspicious transactions will be blocked, and companies must provide detailed information about client identities and the source of the cryptocurrency.

Preventing bank-related financial crimes

The increase in financial crimes conducted through banks and other financial institutions has necessitated continuous development of stringent rules by the European Union. While many legitimate bank account owners face due diligence checks and the risk of having their accounts closed or blocked, this is necessary to ensure that true criminals are brought to justice. This is more apparent with some recent news. For instance, there has been a 10-fold increase in reports of suspicious transactions submitted by banks and betting companies in Denmark from 2013 to 2019. This has triggered AML activities to scrutinize Nordic banks. A national auditing agency said that the Financial Intelligence Unit (FIU) has been inefficient in processing reports and forwarding them to appropriate channels. However, the FIU has claimed an improvement in its IT resources and investment in compliance. Banks have also invested in software to automatically identify new customers and detect suspicious patterns in financial transactions. In other news, a recent survey by FICO concluded that the ease of online payments and increase in real-time payment platforms has led to high fraud-related losses among banks. FICO president Dan McConaghy suggested that banks should use AI by adding customers’ biometrics, device telemetry and customer behaviour analytics as about 54% of Asia Pacific banks are still exposed to identity theft, account takeovers and cyberattacks.

Positive news from MONEYVAL

The Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and Terrorist Financing (MONEYVAL) has published a report evaluating the progress of Albania, Andorra, Hungary, Latvia, Serbia and Slovenia against money-laundering. The new ratings are based on the implementation of 40 new Financial Action Task Force (FATF) recommendations. Significant progress has been made by all except Slovenia, whose compliance rating remained the same. Hungary has been re-rated from ‘partially compliant’ to ‘largely compliant’ due to significant improvements in collecting and analyzing money-laundering and terrorist financing data. So far, Hungary is rated ‘compliant’ with 6 of the 40 recommendations, ‘largely compliant’ with 28 and ‘partially compliant’ with the remaining 6. Latvia has also gained recognition as MONEYVAL has rerated the country on 10 recommendations as ‘largely compliant’ from the previous rating of ‘partially compliant’. MONEYVAL has also commended the progress in Albania’s AML/CFT efforts. After a rerating, Albania is now ‘compliant’ on five of the 40 recommendations and ‘largely compliant’ on 8.