To access “pdf” version : click here
AML advice and review by global regulatory bodies
The global war against money-laundering is proving to be ineffective and causing social and economic harm. Bank leaders, tech firms and government agencies should invite politicians to allow the AML system to impact finance crimes with less cost and harm. Along these lines, the UN has created a High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) to explore the action needed by authorities in areas of financial transparency, money-laundering and corruption. This is important, going by a PwC report that showed that despite a drop in economic crime in South Africa, fraud and corruption are still rampant due to limited resources for risk assessment, governance and third-party management. Similarly, the 2020 International Narcotics Control Strategy Report (INCSR) of the US Department of State also highlighted that corruption is a significant by-product and facilitator of the international drug trade and organized crime, and effective countermeasures must be taken. In the same vein, the Financial Secrecy Index has advised Australia to improve its fight against money-laundering related to organized crime, tax avoidance, drug activities and terrorism. Meanwhile, US-based think tank Global Financial Integrity has identified India as the number three country in trade-based illegal financial transactions that have led to a loss of $83.5 billion in taxes.
Financial crimes worldwide
Singapore authorities are investigating over 99 people for 565 cases of cheating and money-laundering. Meanwhile, Philippines’ Bureau of Customs has identified several Chinese citizens who brought in over $160 million worth of foreign currencies in cash into the country in the last 3 months. The Philippines AML Council has also flagged $280 million in suspicious transactions relating to drug trafficking, fraud and e-commerce law violations. Elsewhere, $3.32 billion were recovered in debts from over 28,000 people arrested for financial crimes by the Dubai police. In other news, despite the increase in Bangladesh’s grain import from Canada from $438 million to $1.08 billion in a year, Bangladesh Bank’s statistics on import payments do not match the Canadian data, perhaps due to imports entering India for its tariffs.Meanwhile, in the US, a former Minneapolis bank officer has been fined $450,000 for failing to prevent corporate violations of AML laws. Elsewhere, South Africa’s Pam Golding Properties is under investigation for money-laundering related to sale of properties to the children of a former Mozambican President without following legal requirements. In other news, Portugal may freeze proceeds from the $200 million sale of Isabel dos Santos’ stake in EuroBic. She agreed to sell her shares after the Angolan government launched a civil action to recover $1 billion of money-laundering related losses. Portuguese authorities are also investigating several football-related properties for money-laundering and tax fraud.
Financial crimes through banks
Due to the unavailability of policy to monitor cash inflows, the amnesty granted to Kenya in 2018 by the US led to over $7.79 billion money-laundering. Amnesty, which was granted to facilitate tax payment, made it possible for Kenyans to repatriate money from offshore accounts while concealing the origin. However, the Kenya Revenue Authority (KRA) failed to adopt a policy to confirm if funds were returned as ‘clean money’. Moreover, the banks in Kenya were also found to be susceptible to money-laundering, fraud and terrorism financing. Five commercial banks in Kenya – KCB Group, Equity, Co-op Bank Kenya, StanChart Kenya and Diamond Trust – have been fined with $3.75 million for violation of AML laws leading to theft of almost $100 million from the National Youth Service. The five banks failed to install an effective AML system and know-your-customer policy. In other news, following the withdrawal of Deutsche Bank from the European market due to its AML deficiencies, British Regulators have warned that the bank might lose access to the UK market too. The Bank of England is asking for monthly updates from Deutsche Bank, rather than quarterly reports. Meanwhile, Deutsche Bank has said that it has expanded its AML staff and is investing heavily on risk and controls.
News from the world of crypto and digital currency
The 2-year legal battle to get virtual currencies reinstated in India has ended as the ban placed on cryptocurrency by India’s central bank has been reversed by the country’s top court. The bank had earlier compared digital currencies to Ponzi schemes and threatened to impose harsh regulations. It should be noted that India loses about 2 to 5% of its national GDP to financial crimes due to a weak AML system, with cryptocurrency, drugs and gambling sectors being among the most common perpetrators. Meanwhile, the cyber-intelligence company IntSights has identified illegal financial activities in Latin America, highlighting the sophisticated organized crime groups in the region that have turned to cryptocurrency to launder large amounts of money. Elsewhere, the US has charged two Chinese citizens with money-laundering of $100 million worth of cryptocurrency by hacking virtual currency exchanges for the benefit of a North Korean actor in 2018. The North Koreans engaged in numerous automated transactions with new Bitcoin addresses to create ‘peel chains’ leading to 4 different exchanges, making them hard to track. In other news, the Bahamian digital dollar, issued by the country’s Central Bank, will strengthen its AML measures by allowing for tracking and recording of all transactions. It will also allow for offline payment functionality to help during natural disasters.
