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Welcome to the July 2015 edition of the FinancialCrime Digest, which covers updates from June 2015.In this edition, we cover various headline topics including;public statements and documents from the latest FATFplenary meeting in Brisbane, the latest update of the EUBest Practices paper published by the Council of the EU,the ESMA’s report on anti-money laundering concernsrelating to investment-based crowdfunding, and a reportinto telephone fraud and “vishing” scams by the FOS.
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MAKE INFORMED DECISIONS
FINANCIAL CRIME DIGESTJuly 2015
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
FATF plenary meeting - latest public statementsand documents
Following its plenary meeting held in Brisbane on
24-26 June 2015, the Financial Action Task Force
(FATF) has:
l Published two documents identifying jurisdictions
that may pose a risk to the international financial
system;
l Issued a statement and future work plan on de-
risking;
l Revised best practices on combating the abuse of
non-profit organisations (Recommendation 8);
l Adopted guidance for a risk-based approach to
virtual currencies;
l Adopted a typologies report on the money
laundering/terrorist financing risks and
vulnerabilities associated with gold.
The documents identifying jurisdictions that may
pose a risk to the international financial system are
HERE and HERE
The statement and future work plan on de-risking is
HERE
The revised best practices on combating the abuse
of non-profit organisations is HERE
The guidance for a risk based approach to virtual
currencies is HERE
The press release is HERE.
Welcome to the July 2015 edition of the FinancialCrime Digest, which covers updates from June 2015.
In this edition, we cover various headline topics, including;public statements and documents from the latest FATFplenary meeting in Brisbane, the latest update of the EUBest Practices paper published by the Council of the EU,the ESMAs report on anti-money laundering concernsrelating to investment-based crowdfunding, and a reportinto telephone fraud and vishing scams by the FOS.
We also highlight recent media news relating to money laundering, bribery & corruption, sanctions, and terrorist financing.
TECHNICAL AND REGULATORY UPDATES
1
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
2
De-risking - FCA supports FATF work
The Financial Conduct Authority (FCA) has issued its support for the
work being conducted by the FATF on de-risking. The FCA has said it
expects banks will be particularly interested in the section of the FATF
statement about due diligence for correspondent banking relationships.
The press release is HERE
Sanctions - the Council of the EU publishes update of the BestPractices paper
The Council of the European Union has published the latest update of
the EU Best Practices for the effective implementation of restrictive
measures (sanctions). The paper contains non-exhaustive
recommendations for the effective implementation of restrictive
measures in accordance with EU law and national legislation.
The intention of the paper is to identify key elements in the
implementation of sanctions taking into account:
l The specific situation within the European Unions legal system;
l The review of the current state of implementation of sanctions;
l The importance of emphasising some already existing best
practices that reflect current priorities of Member States.
The paper is annexed to an I Item note and is HERE
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
3
Investment-based crowdfunding platforms -ESMA publishes Q&As on anti-moneylaundering
The European Securities and Markets Authority
(ESMA) has published Q&As aimed at national
competent authorities on the application of rules on
anti-money laundering and terrorist financing to
investment-based crowdfunding platforms. The
purpose of this document is to promote common
supervisory approaches and practices in the
application of anti-money laundering rules to
investment-based crowdfunding.
Answers were provided to three questions:
l What are the risks in relation to terrorist financing
and money-laundering with regards to investment-
based crowdfunding, and how could they be
mitigated?
l Is the risk profile of the platform affected by
whether it is regulated under MiFID or not?
l How should investment-based crowdfunding be
treated under the Third Anti-Money Laundering
Directive?
The Q&A is HERE
The press release is HERE
Telephone fraud and vishing scams - FOSpublishes review of complaints
The Financial Ombudsman Service has published
a report reviewing its work dealing with
complaints about voice phishing (vishing) and
no hang up frauds. The report includes
information on how banks try to prevent vishing
scams, bank actions once fraud has been
detected, how banks handle complaints about
scams, and best practice going forward. The
ombudsman found that in 4 in 10 cases, the
banks response to the fraud had fallen short, so
the customers were compensated. In the
remainder of the cases, the bank had done all that
it could - but the money had been stolen and the
ombudsman could not find the bank at fault.
The report is HERE
The press release is HERE.
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
4
Hmicho v Barclays Bank plc [2015] EWHC1757 (QB) - Financial Sanctions: accountsheld in the name of the wife of a designatedperson
The application was made by Mrs Hmicho in
relation to Barclays decision to freeze her
accounts following her husbands designation
under the EU sanctions against Syria. The Queens
Bench Division has declined to grant Mrs. Hmicho
a mandatory interim injunction to order Barclays
Bank to restore her access to three bank
accounts. The application was refused on the
grounds that Barclays had reasonable cause to
suspect that the funds within Mrs Hmichos
accounts were owned or controlled by Mr Hmicho,
a designated person under financial sanctions
imposed in respect of Syria. In so finding, the
court noted that the suspicion held by Barclays
arose not from the marriage relationship alone,
but also from the circumstances arising from the
history of deposits into the accounts, including
their unusual size and timing, which coincided
with the imposition of sanctions against Mr.
Hmicho.
This case provides useful guidance in respect of
the application of concepts of ownership and
control in the context of international sanctions,
where a non-designated third party individual, in
this case a spouse, is involved.
The Court considered Regulations 3, 4 and 5 of the
Syria (European Union Financial Sanctions)
Regulations 2012, and Regulation 16 (which
includes the circumvention offence).
The judgement is HERE.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
5
PRESS AND MEDIA: MONEY LAUNDERING
The Geneva prosecutor has agreed to close its investigation into HSBC, in return for a financial settlement of
SWF 40 million (around GBP 28 million). In addition, the bank was given a final warning by the authorities for
organisational deficiencies, which allowed money laundering to take place in the banks Swiss subsidiary. As a
result of the settlement, HSBC will not be prosecuted and Swiss authorities will not publish findings of their
investigation into alleged aggravated money laundering. The Geneva authorities described the payment as
compensation rather than a fine, reflecting the harm done to the city and the profits obtained by HSBC from
processing illicit funds. The settlement with HSBC does not cover employees.
Switzerlands attorney-general, Michael Lauber, hassaid that banks in Switzerland have flagged up 53possible acts of money laundering that could belinked to FIFAs 2018 and 2022 World Cup biddingcontest. Future World Cup hosts Russia and Qatarwere not implicated by the Swiss federal prosecutor.Laubers ofce has opened a case for suspectedcriminal mismanagement and money laundering inthe bidding contests, which involved 11 nations.Lauber said the 53 suspicious bank relations wereled to comply with Switzerlands anti-moneylaundering regulations.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
6
Italian prosecutors have formally asked for Bank
of Chinas Milan branch and 297 individuals, most
of whom are Chinese living in Italy, to be tried for
smuggling and other crimes. The investigating
prosecutors allege various crimes, including
money laundering and tax evasion. The case
reportedly centres on an investigation that began
in 2008 into the growing influence of Chinese
criminal groups in Italys Tuscany region.
Investigators claimed that money sent to China
through the agencies of Money2Money transfer
service included proceeds of crime including
counterfeiting, embezzlement, exploitation of
illegal labour, and tax evasion. Of the total of more
than EUR 4.5 billion smuggled to China from Italy
via the transfer service, EUR 2.2 billion was
reportedly sent through the Bank of China Milan
office. A judge will review the prosecutors request
and decide whether charges should be brought.
PRESS AND MEDIA: MONEY LAUNDERING
The U.S. Treasury Department issued a two-part
National Money Laundering Risk Assessment
(NMLRA) on 12 June. Whilst the report identified
areas for improvement, its conclusion was
generally positive. Adam Szubin, acting
undersecretary for terrorism and financial
intelligence, wrote in his introduction: "Our anti-
money-laundering and countering the financing of
terrorism framework is sophisticated and well-
designed to address these threats, while
maintaining an attractive business environment".
The report is expected to be provided to the
Financial Action Task Force as part of its mutual
evaluation inspection in early 2016. The report
found ongoing issues relating to misuse of
nominees to hide beneficial ownership. It also
noted that fraud was by far the largest contributor
to illicit proceeds-generating activities.
Commentators on the risk assessment also noted
it contains a large number of examples and cases
of money laundering, which are likely to prove
useful to the private sector.
The NMLRA can be found HERE.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
7
Ricardo Teixeira, the former head of the Brazilian football federation, is
facing charges of money laundering and tax evasion. Teixeiras
successor as president of the CBF federation, Jos Maria Marin, was
one of the individuals arrested by Swiss police on indictments of
corruption brought by the U.S. authorities. Teixeira left the CBF in 2012
amid criticism over his preparations for the 2014 World Cup, which
Brazil hosted, and a police investigation into reports that he had taken
millions of dollars in bribes from a sports marketing firm. Teixeira
denied the allegations and was not charged with any wrongdoing.
PRESS AND MEDIA: MONEY LAUNDERING
Hong Kong police have charged a
prominent figure in Macau's casino
junket industry with laundering
HKD 1.8 billion (around GBP 150
million) through bank accounts in
the southern Chinese city. Cheung
Chi-tai faces three separate counts
of money laundering, according to
a charge sheet. The businessman
was a major investor in publicly
traded Macau junket operator
Neptune Group. Cheung Chi-tai
was named as a triad leader in a
1992 U.S. Senate subcommittee
report and in recent Hong Kong
court cases.
According to the Swiss government, a report issued by
Switzerlands interdepartmental group on combating money
laundering and terrorism financing (CGMT) shows that
Switzerland is not immune to financial crime, and is still an
attractive location for laundering the proceeds of crime mostly
committed abroad. Money laundering relating to sports
organisations was not covered in the report. The CGMT report
found existing legislation to be an adequate response to current
risks, but recommended eight measures to improve the existing
anti-money laundering infrastructure. This included increased
dialogue between the public and private sectors, as well as
developing and systematising statistics. Switzerlands
government will make its recommendations to parliament, after
reviewing the report. The CGMT report noted in particular that
Switzerland is running the risk of being abused as a platform for
money laundering by certain commodities trading parties.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
8
PRESS AND MEDIA: MONEY LAUNDERING
At the Plenary meeting of the FATF in Brisbane,
Australia, the FATF congratulated Indonesia for
significant progress made by the country in
addressing strategic AML/CFT deficiencies earlier
identified by the FATF and included in its action
plan. The FATF said that Indonesia will no longer
be subject to the FATFs monitoring process under
its on-going AML/CFT compliance process.
The U.S. Treasury Financial Crimes Enforcement
Network (FinCEN) has levied a USD 75 million
penalty against a casino operator in a Pacific
island for what it referred to as wilful and
egregious violations of anti-money laundering
rules dating back to 2008. The civil fine against
the Tinian Dynasty Hotel & Casino in the Northern
Mariana Islands, a U.S. commonwealth, was the
largest ever issued against a casino by FinCEN.
The fine follows warnings by FinCEN to other
casinos to increase their efforts to prevent money
laundering.
Jin Wang, a former Executive Vice President of Qualcomm Inc. has been sentenced to 18
months imprisonment and directed to pay a USD 500,000 fine after pleading guilty in a U.S.
Securities and Exchange Commission case to securities fraud, based on his insider trading
and money laundering linked to his efforts to evade detection and obstructing justice. Wang
was found to have traded insider information obtained from his employer on three occasions.
Wang and an associate, Gary Yin, a registered representative at Merrill Lynch, created
offshore entities and set up bank accounts. The ownership of accounts was designed to
make it appear they belonged to others. Yin also admitted to conspiring with Wang to
obstruct justice and launder money.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
9
PRESS AND MEDIA: BRIBERY & CORRUPTION
The U.S. Department of Justice has filed a
complaint for civil forfeiture of USD 34 million,
representing the value of shares in a Canadian
energy company which were used to bribe Chads
former ambassador to the United States and
Canada, Mahamoud Adam Bechir. The DOJ said
that in 2009, Bechir and Youssef Hamid Takane,
deputy chief of mission for Chad to the U.S.,
agreed to use their official positions to influence
the award of oil exploration rights in Chad to a
Canadian oil company, Griffiths Energy
International Inc. In late 2009, Griffiths Energy
issued four million shares to the wives of Bechir
and Takane, and to another associate. Griffiths
Energy also agreed to make a payment of CND 2
million to Bechirs wife as a consulting fee. The
money was co-mingled and transferred through
U.S. bank accounts and real estate, according to
the DOJ. In 2013, Griffiths Energy pleaded guilty
to bribing Bechir in Canadian courts under the
Canadian Corruption of Foreign Public Officials
Act. The DOJ has filed the civil forfeiture action
under the Kleptocracy Asset Recovery Initiative.
A court in France has acquitted 14
companies accused of bribing the
former Iraqi regime and violating the
UN-sponsored Oil-for-Food
programme. Renault Trucks,
Schneider Electric, Legrand, and
several other French companies, were
found not guilty of bribery, corruption
and misuse of company assets. The
acquittal follows a 2013 trial in which
a number of other French companies,
including oil conglomerate Total, were
also acquitted.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
10
PRESS AND MEDIA: BRIBERY & CORRUPTION
U.S. authorities have commenced a forfeiture action for USD 300 million claimed to be the proceeds of an
international bribery conspiracy involving two Russian telecoms companies. The U.S. alleges that
Vimpelcom Ltd, which is part owned by Mikhail Fridman, and Mobile TeleSystems OJSC used a web of shell
companies and phony consultancy contracts to funnel bribes to a close relative of Uzbekistans president,
Islam Karimov. The assets sought by the U.S. are held in the Bank of New York Mellon Corporation in
Ireland, Luxembourg and Belgium, according to the complaint filed in a Manhattan court. The funds sought
allegedly belong to a company called Takilant Ltd, owned by Karimovs relative. The company has
previously been the subject of a corruption investigation by Swedish prosecutors. The individual was not
named, but referred to only as Government Official A.
In its rst corporateenforcement action for2015 under the U.S.Foreign Corrupt PracticesAct, the U.S. Department ofJustice announced that IAPWorld Services Inc., aFlorida-based defence andgovernment contractor,agreed to pay USD 7.1million in a non-prosecution agreement forconspiring to bribe Kuwaitiofcials in exchange for acontract to build a large-scale domestic surveillancesystem in Kuwait. Theprimary employee of IAPWorld Services, JamesRana, pleaded guilty to onecount of conspiracy toviolate the FCPA.
The former co-Chief Executive Officer of PetroTiger Limited, an
oil and gas company based in the British Virgin Islands, with
operations in Colombia and a former office in New Jersey,
pleaded guilty to conspiring to pay bribes to a foreign
government official in violation of the U.S. Foreign Corrupt
Practices Act. The case was brought to the attention of the
U.S. Department of Justice through a voluntary disclosure by
PetroTiger. As a result of the companys voluntary disclosure,
co-operation and remediation amongst other factors, the DOJ
declined to prosecute PetroTiger. Joseph Sigelman pleaded
guilty to conspiring to violate the FCPA. Sigelman is the third
former PetroTiger executive to plead guilty in the case.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
11
PRESS AND MEDIA: BRIBERY & CORRUPTION
British private investigator Peter Humphrey and his American
wife Yu Yingzeng have been released early from prison in
China. The pair were convicted in China last year on charges
of purchasing private information on Chinese citizens in a
case involving a sex tape and allegations of bribery linked to
GlaxoSmithKline PLC. In his first interview since his release,
Humphrey claimed he had not bribed anyone or obtained any
information from any Chinese government employee. He
claimed he had been constantly harassed in prison over
signing a document called admission of guilt and a
statement of remorse. He claimed a confession aired on
Chinese television shortly after his arrest had been heavily
distorted. He further claimed that some Chinese medical
staff had refused his requests for appropriate medical
attention as a deliberate effort to force him to sign a
confession of crimes both before and after the trial. Chinese
authorities have stated that Humphreys claims of
mistreatment are not true.
Interpol has announced it is
suspending a four-year-old agreement
with FIFA, following investigations into
corruption against world footballs
governing body. Under the deal the
worlds largest police institution was
receiving a donation from FIFA worth
USD 20 million over 10 years to create
an Integrity in Sport programme.
Interpols programme aimed to prevent
the manipulation of sporting events
and illegal gambling by criminal
groups. Interpol has issued
international wanted persons alerts
known as Red Notices for two former
FIFA officials and four corporate
executives at the request of
U.S. authorities.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
12
PRESS AND MEDIA: BRIBERY & CORRUPTION
Two former officials of Edinburgh City Council and
two directors of a private construction company,
ABC Limited, have been jailed for bribery and
corruption offences relating to the award of
building contracts. Charles Owenson and James
Costello worked for City of Edinburgh Council
when they were given hospitality by ABC,
including corporate seats at Hibs and Hearts
football grounds, meals and bar crawls. They
admitted offences under the Public Bodies
Corrupt Practices Act 1889 (the legislation that
pre-dates the Bribery Act 2010). Kevin Balmer and
Brendan Cantwell, two former directors of ABC,
that went into liquidation in 2010, also admitted a
corruption offence. The Crown has also raised
proceedings to recover crime profits in the case.
The U.S. Department of Justice has announced
that two more Swiss banks, Socit Gnrale
Private Banking and Berner Kantonalbank AG will
pay penalties of USD 17.807 million and USD 4.619
million respectively to reach resolutions under the
DOJs Swiss Bank Programme, which provides a
path for Swiss banks to resolve potential criminal
liabilities in the United States. As part of the non-
prosecution agreements, the two banks have
agreed to co-operate in any civil or criminal
proceedings, and to demonstrate implementation
of controls to stop misconduct involving
undeclared U.S. accounts, and pay penalties in
return for the DOJs agreement not to prosecute
these banks for tax-related criminal offences.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
13
PRESS AND MEDIA: SANCTIONS
Russia has said it will extend
its ban on Western food
imports for six months beyond
its expiry in early August after
the European Union extended
its measures. Russia also
announced it was considering
more import curbs on Western
goods, including confectionery,
canned fish products, and
flowers. The current list of
banned food products includes
fruit, vegetables, meat, poultry,
fish, milk and dairy.
The European Union has extended its
economic sanctions against Russia
until the end of January 2016 to
maintain pressure on Moscow to
comply with a ceasefire accord signed
with Ukraine. EU Ministers agreed on
the extension of the sanctions due to
Russias destabilising role in Eastern
Ukraine. The EU and U.S. sanctions
have targeted close associates of
President Vladimir Putin and Russian
state banks, military and energy firms.
The move was condemned by Russia.
The South Korean government has imposed financial
sanctions on seven foreign businessmen and entities for
engaging in the arms trade with North Korea, targeting three
Taiwanese individuals, three Taiwanese companies, and a
state-run Syrian missile development institute. It is the first
time Seoul has imposed financial sanctions separate from
United Nations sanctions on third-country individuals and
groups not from North Korea. The three blacklisted
Taiwanese individuals are Tsai Hsein Tai, Su Lu-Chi and
Chang Wen-Fu. The three Taiwanese entities are Trans Merits
Company, Trans Multi Mechanics Company and Global
Interface Company. The Scientific Studies and Research
Center, a state-run Syrian institute linked to the training of
engineers in chemical and biological weaponry, has been a
target of American sanctions for more than a decade. Hsien
Tai Tsai was arrested by U.S. authorities in 2013 and has
admitted that he engaged in illegal business transactions
involving the export of U.S.-origin goods and machinery to
North Korea. He was sentenced to two years in prison by a
U.S. court in March for conspiring to defraud the United
States and challenging its efforts to stop the proliferation of
weapons of mass destruction.
Russian President Vladimir Putin
signed off on an amnesty for
Russians illegally hiding money in
offshore accounts, provided the
funds were taxed or repatriated. The
move is seen as part of a response to
the imposition of economic
sanctions on Russia which have
coincided with record-high capital
flight from the country. In March,
Russian Finance Minister Anton
Siluanov was reported as saying the
bill declares immunity from criminal,
administrative and tax punishment
within the framework established by
the law and in relation to
transactions performed before
January 1, 2014, if the wrongdoings
committed involved the formation of
the declared property items and
transactions connected with the
acquisition of these assets.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
14
PRESS AND MEDIA: TERRORIST FINANCING
Sweden's Security Service (Sapo) has
warned that growing numbers of
individuals are funding trips to Syria with
money received via text message loans
secured in Sweden. Investigators
working for the security service said that
there had been a rise in people taking
trips to the Middle East to fight alongside
terror organisations such as IS (also
known as ISIL or ISIS) over the last year,
with growing numbers of visits funded by
loans taken out in Sweden. A Sapo
representative said that, whilst some
individuals had taken out bank loans or
money using Swedish credit cards,
others had paid for their travel using SMS
loans, representing money borrowed via
text messages from private companies.
U.S. officials have warned that recent IS gains in the
western Iraqi city of Ramadi and the southern Syrian city of
Palmyra could open new lines of illicit funding for the
terrorist organisation. The U.S. State and Treasury
departments and the Pentagon have over the past year
focused on drying up ISs finances, by destroying both its
ability to sell oil and restricting its ability to raise donations
from overseas benefactors. However U.S. officials believe
that the majority of the terrorist groups funding comes
from extorting local populations it controls in Iraq and
Syria. It has also looted banks and businesses in areas it
controls, in cities such as Mosul and Tikrit in Iraq, and
Raqqa in Syria. A senior U.S. official working in combatting
terrorist financing said that the large population and
administrative structure in Ramadi offered IS new avenues
to raise funds and bolster its balance sheet. In addition, IS
has been active in smuggling artefacts and antiquities
plundered from sites in Iraq and Syria.
Aperio Intelligence Limited125 Old Broad StreetLondon EC2N 1AR
t: +44 (0)20 7073 0430e: [email protected]
ABOUT APERIO INTELLIGENCEWe are a corporate intelligence and financial crimeadvisory firm based in the City of London. We specialisein: conducting enhanced due diligence on high riskcustomers and third parties; integrity due diligence oncritical acquisitions and investments; market entry andpolitical risk analysis; and investigations. We providetailored training and advisory services relating to financialcrime, in particular anti-money laundering and sanctionscompliance. Our clients include some of the worldsleading regulated financial institutions. Our clientsinclude some of the worlds leading regulated financialinstitutions. Our team has decades of collectiveexperience in advising clients on financial crime andintelligence gathering, helping them to manage risk andmaximise potential.
For further information, please contact:
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