To access “pdf” version : click here
Financial crimes around the world
A Rio de Janeiro state court convicted a former Attorney General Claudio Lopez and his accomplices for money-laundering involving the acquisition of several properties with money obtained through crime. Meanwhile, 4 US physicians were found guilty of administering unnecessary back injections to patients in exchange for prescriptions of over 6.6 million doses of medically unnecessary opioids, defrauding Medicare of over $150 million. The US authoritiesalso charged a high-end escort service for transactions of $10 million from sex profits to local and foreign bank accounts. Elsewhere, a Canadian and Iranian dual citizen was charged with bank fraud, conspiracy and money-laundering of over $115 million which was channeled to the Iranian government account through US Banks. Also, Canada’s BC Lottery Corporation is finally succumbing to the pressure from an inquiry on its 9-year battle to keep the records linked to a $700,000 fine imposed on them by FINTRAC a secret. A report confirmed that the fine was linked to deficiencies in more than 1,285 reports. Meanwhile, Denis Sassou Nguesso, son of the President of Congo, was charged by the French Investigating Magistrate for money-laundering linked to his family’s foreign assets. In other news, India’s Enforcement Directorate discovered the software used by money-laundering accused Wadhawans to hide fake loans and launder money worth $1786 million from the Dewan Housing Finance Corporation.
Financial crimes in the crypto-world
Financial crimes involving crypto-currency reached $4.3 billion in 2019, the highest so far. Investigation showed that 90% of the amount involved in the fraud came from six major schemes. PlusToken was one such Ponzi scheme which was used by fraudsters to scam investors who were looking for platforms to invest their money and make profit. Meanwhile, in the US, Larry Dean Harmon, the CEO of DropBit has been charged for operating a cryptocurrency laundering service that moved about $300 million in bitcoin via a tumbling operation. Harmon was indicted of exchanging more than 350,000 BTC on Helix, a scrambled Bitcoin transaction, between 2014-2017 to conceal criminal transactions from law enforcement on the Darknet. Owing to these charges, Peter McCormack, the host of ‘What Bitcoin Did’, a cryptocurrency podcast, has paused all advertisements for DropBit. As a move against such crypto crimes, Swiss Financial Market Supervisory Authority (FINMA) has revealed that its new AML rules will lower the client identification threshold value for crypto exchange transactions.
Dutch banks identifying their AML gaps
Netherlands’ ABN AMRO bank has hired 2,000 workers for the detection of money-laundering and other related financial crimes by scrutinizing customers’ files. The bank has also adopted the use of artificial intelligence and robotics to enhance the process. In August 2019, the Dutch Central Bank had requested the ABN AMRO to screen its over 5 million customers for a possible link with money-laundering and terrorist financing. Shortly afterwards, the Public Prosecution Service initiated an investigation on the bank for suspicion that the bank either reported suspicious transactions very late or did not report them at all. However, banks, tax advisers, and other financial services have reported that Netherlands’authorities are too weak to handle the volume of suspicious transactions reported to them. The Financial Intelligence Unit is responsible for evaluating reports of suspicious transactions to identify the real ones before passing them to the prosecution service (OM) or the Tax Authority’s Investigative Service (FOID). However, it has been noticed that less than 50% of reported reports were passed to the prosecution office or FOID, and the OM and FOID are only able to investigate a small percentage of the total reports due to insufficient staff.
AML recommendations from MONEYVAL
The Council of Europe’s AML body MONEYVAL has asked the authorities of the British Overseas Territory of Gibraltarto advance their AML/CFT tools after a comprehensive assessment of the effectiveness of their current tools and their compliance with the recommendations of the Financial Action Task Force (FATF). MONEYVAL acknowledged that the jurisdiction’s understanding of money-laundering and financing of terrorism risks was affected by the shortcomings of the National Risk Assessment and by insufficient analysis of the cross-border threat which Gibraltar faces as an international financial center. Similarly, MONEYVAL noted that the Cypriot AML/CFT regime needs major improvements in various aspects. For instance, the passport scheme launched and run secretly in Cyprus since 2013, which has helped over 3000 people obtain citizenship, was found to be vulnerable to money-laundering. The real estate sector has an exponentially increased risk since it has become the preferred choice of investment to acquire citizenship under the Cyprus Investment Programme. As per MONEYVAL’s suggestions, measures should be taken to increase the level of compliance with preventive measures by real estate agents.
Learning, teaching and updating AML strategies
Australia’s AUSTRAC completed its community campaign for creating awareness about illegal money transfer and unregistered dealers and their role in money-laundering or financing of terrorism. AUSTRAC staff went around communities, registering businesses and sharing links to report suspicious dealers. Meanwhile, the US Department of the Treasury issued its 2020 National Strategy for Combating Terrorist and Other Illicit Financing to make the US AML/CFT regime more efficient. Key threats, vulnerabilities and priorities for disrupting and preventing illicit finance activities within the US financial system were identified. Similarly, in 2014, India’s Tax Administration Reform Commission had identified agricultural income tax exemption as a tool of tax evasion and money-laundering. Elsewhere, it was stated at the annual PIMFA Financial Crime Conference that 75% of all fraud crimes reported are cyber-enabled. Thus, swifter technological advancement is necessary to boost AML measures. In a move along these lines, the European Union’s 5th AML Directive recommended the use of machine learning to analyze the connections between buyers and sellers in arts and antiques, a common money-laundering sector, as a digital register of possession will be created that the world authorities can easily assess. In other news, after a review of Switzerland’s follow-up report on its AML progress, the FATF improved the country’s rating on wire transfer, higher risk and statistics.
