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AML violations and arrests around the world

In 2019, global penalties for violating AML laws reached a total of $8.14 billion. Trends forewarn further increase in money-laundering in the future and recent news from around the world is grim. In India, former ICICI Bank chairperson Chanda Kochhar is being probed for money-laundering worth Rs 78 crore. Similarly, in Ghana, the founders of UT Bank and Beige Bank have been charged for stealing client money worth millions of dollars. Meanwhile, in the US, the former vice-president of operations for DC Solar pleaded guilty of scamming investors of about $1 billion in a Ponzi scheme. A doctor in the US was also charged for transferring money from marijuana sales to the leaders of a drug operation. In contrast, in Germany, a gold trader arrested for laundering 40 million euros of drug money has now strongly denied any involvement. Meanwhile, in Italy, extortion allegations from the owner of a gaming and entertainment company has led to a probe against 36 people. Similarly, in Spain, 4 people have been arrested for impersonating a company and defrauding them of 70,000 euros, while about 10,000 tax evaders in Pakistan were found to be laundering trillions of rupees. In other news, a Philippines judge reinstated money-laundering charges against Philrem Service Corp, a remittance firm linked to stealing from Bangladesh Bank in 2016. Likewise, in Russia, a court rejected a request to grant bail to the head of Piggy Bank, Elena Witter, charged with hefty money-laundering.

Emerging patterns in financial crimes

New patterns are emerging in the world of financial crime. One such crime pattern was identified in a new research by experts where rich business leaders or Oligarchs in Russia systematically manipulate the judicial system to carry out money-laundering activities. They often sue other people believed to be in their groups by setting up fake companies and then use ‘unclean’ money to pay damages after the judgement, thereby leaving them uncaught. Following a different means to commit similar crimes, several associates and family members of the Croatian businessman Mihajlo Perencevic have previously escaped Croatian money-laundering controls by getting millions of dollars transferred into their personal accounts in the name of purchasing non-existing estates. Similarly, Belgium’s CTIF has reported about 223 million euros of suspicious transactions related to the phenomenon of clearing companies in 2019. The revelations by CTIF indicate that there is an increase in the criminal phenomenon known as ‘Brazilian sector’ that is gradually becoming the technique of compensation. The principle of clearing houses comes from the synergy between social fraud participants and those in areas traditionally known for drug trafficking.

Preventing money-laundering in the crypto industry

Chainalysis a crypto-forensics firm has reported that in 2019, over $2.8 billion worth of Bitcoin was converted into cash for criminal activities through over-the-counter brokers. Shadowy operators make use of messaging apps to offer criminals easy routes to convert bitcoin to hard currency as only a few countries have strict regulations guiding against such transactions. Some countries are trying to resolve this issue by modifying their AML laws. For instance, Austria has incorporated a new regulation for the crypto industry effective from 10 January, 2020. Service providers of virtual currencies will now be included in the legal regime of the Financial Market Laundering Act. The new obligations for the crypto industry include risk analysis and appointment of a money-laundering officer. Meanwhile, many banks in Latin America are on the verge of completely blocking operations with crypto-trading platforms. Bradesco, one of Brazil’s biggest banks, has successfully defended its argument that the Brazilian Association of Cryptocurrency and Blockchain (ABCB) could lead to violation of money-laundering laws in Brazilian exchanges. Following Bradesco, Banco de Credito e Inversiones in Chile was also reported to have taken steps in closing down Chilebit’s (Chile’s first crypto-exchange) account.

UK’s new AML regulations are a welcome move

According to the National Crime Agency, the United Kingdom loses over 100 billion pounds to moneylaundering every year. Some of the biggest frauds in the UK during the last decadeinvolved mortgage frauds, smuggling, bank-related frauds and others worth millions of pounds.In a move to prevent such frauds in the future, the UK has incorporated EU’s 5th Anti-Money Laundering Directive (5AMLD) into national law, effective from January 10, 2020. Changes to the AML law concern letting agents, crypto-asset exchange providers, custodian wallet providersand art dealers who accept cash payments more than 10,000 euros. The changes require parent firms to establish and maintain AML/CFT policies and understand the ownership and control structure of all customers. 5AMLD also requires game operators to review their policies and risk assessments on moneylaundering and terrorist financing. The gaming commission has also published an updated guide of its measures against moneylaundering and terrorist financing.

Novel ways to counter money-laundering

To tackle the movement of black money, a joint working group of leading agencies in India has recommended integration of core banking systems and use of data analytics with artificial intelligence to determine the end beneficiaries of any fund transaction. A use-case for the technology has also presented itself as 931 cases of GST refund claims have been identified through data analytics by India’s Department of Revenue. All purchases made from tax evaders since 2017 will now undergo scrutiny using this technology. Meanwhile, Spanish notaries have developed new measures to prevent politicians from embezzling public funds or engaging in moneylaundering. They have identified 3,437 people with public responsibilities (and their relatives) for detailed monitoring of their businesses. The notary council’s database gives thestate security forces and other authorities direct access to their profiles and company information to help prevent illicit transactions. Another AML measure has been proposed in Australia in the form of cash ban. Since the proposed bill has been met with backlash, Australia’s Reserve Bank has reiterated that the $10,000 cash limit bill is to combat moneylaundering and not to get rid of cash. The Reserve Bank has alleged that of about $80 billion worth of cash in circulation daily, only 25% of the cash was used in transactions.

Recognition of progress in AML measures

According to the Financial Action Task Force in the Middle East and North Africa, Tunisia has made tremendous progress in implementing AML/CFT recommendations. In another news, the number of moneylaundering and terroristfinancing cases reported in Macau decreased by20.8% in 2019. The Asia/Pacific Group on Money Laundering (APGML) had previously commended Macau for correcting its AML deficiencies. In March, Laos will also evaluate its AML/CFT laws, after which APGML will review them. Many other countries are also moving in a positive direction. For instance, Seychelles has proposed a collaboration between the Registrar General for companies’ registration and the Financial Intelligence Unit to effectively identify and investigate suspicious transactions. The French government has also been advised by a Europeananti-corruption body to enhance transparency between the executive and the lobbyists. Similarly, to increase transparency among the investors and managers of investment funds, Cayman Islands’ new bill requires mutual funds with 15 or fewer investors to file the fund operatorsreturns annually. Meanwhile, Estonia wants its financial institutions to strictly comply with AML measures but also ensure that legitimate business transactions do not suffer. Elsewhere, Romania’s AML authority has clarified the obligations under its new law, which include reporting suspicious transactions and foreign currency transactions of over 10,000 euros.