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Tax havens around the world
An estimated US $21 to $32 trillion of private financial wealth is untaxed in tax havens around the world. This encourages tax evasion and state looting through offshore secrecy. The Financial Secrecy Index has revealed that efforts to crack down on tax havens and financial secrecy are futile because the people helped by illicit funds are the ones setting the rules. Meanwhile, a study by the Tax Justice Network has revealed that Cayman Islands’ legal and financial systems encourage laundering and concealing of illicit funds, making it the most preferred destination for such crimes. As a result, the European Union finance ministers have blacklisted Cayman Islands as a tax haven. Similarly, the United Arab Emirates has been found to be ahead in global money-laundering operations perpetrated by corrupt people because of its virtually tax-free structure. Over 17,000 bank transactions that occurred in the UAE, including 554 from the UK, were found to be problematic. Moreover, Dubai’s real estate market has been indicted as a medium for money-laundering, terror financing and drug trafficking.
Money-laundering news from Canada
Regulators in Canada fined Meng Xi Li, a former CIBC Securities Inc. mutual funds dealer, $100,000 and ordered her to cease further work in the securities industry after she was found guilty of money-laundering and tax evasion. Li violated several trading rules when managing funds for her future husband and his nephew. She attempted to move about $1.36 million from the nephew’s unregistered CIBC Bank account to her husband’s account and then closed both the accounts. Meanwhile, Canadian authorities investigating Moxipay Corporation for alleged facilitation of payment for unlicensed illegal online cannabis dispensaries concluded that the corporation was operating an unregistered money service business. Moxipay facilitated more than 80,000 transactions and up to $15 million was accumulated from illegal online Cannabis sales in 2018. Consequently, four directors of the company have been charged with several money-laundering related offenses. In separate news from Canada, the regulatory agency for real estate operators in British Columbia has initiated an online AML course compulsory for license renewal. The course will help them flag suspicious transactions – such as the use of unregulated lenders or purchases without a mortgage – and prevent money-laundering in the real estate sector.
AML news from banks
China’s Central Bank will impose fines of over $1.4 million on financial institutions lacking adequate AML measures. China Minsheng Bank and China Everbright Bank were fined $3.4million and $2.6 million respectively for non-compliance with AML regulations. Overall, fines worth $27 million were issued in 2018. Elsewhere, Switzerland’s financial watchdog FINMA has reprimanded the country’s third-largest bank, Julius Baer, for negligence in handling money-laundering involving the transfer of $71 million of black money to a customer from Venezuela in 2014. FINMA has instructed the bank to ensure compliance and improve its controls.Meanwhile, Bahrain has opened legal proceedings against entities involved in a money-laundering scheme associated with state-owned Iranian banks. The scheme enabled certain Iranian organizations in Bahrain to stealthily move billions of dollars through Future Bank, an Iran-controlled Bahrain-based bank, through manipulation of the SWIFT network. In some positive news, the Association of Certified AML Specialists (ACAMS) has collaborated with Mastercard to develop an AML tool that will promote AML compliance programs and improverisk assessment procedures. It will integrate machine learning and advanced technologies to help financial institutions perfectly identify potential money-laundering, account take-overs, scams, and illegal transaction threats to their systems.
Money-laundering in the crypto-world
Crypto money-laundering has recently become a growing concern. Dutch authorities apprehended 2 men in separate investigations to unmask cryptocurrency money–laundering. One of the arrested was accused of laundering over 2.1 million euros using crypto-enabled credit card. The second was accused of laundering 100,000 euros in cryptocurrency using a crypto mixing service. 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. Looking to counter such cases of crypto money-laundering, the Central Bank of Russia (CBR) has released a new set of rules that categorizes any transaction involving cryptocurrency as potential risk for money-laundering. CBR has noted that identifying suspicious transactions is important to reduce money-laundering. Upon detection of any suspicious transactions, the bank may freeze or shut down the concerned accounts.
Other financial crimes in the world
In Egypt, 25 people have been detained for a money-laundering scheme that involved workers of the postal service in Egypt opening accounts for other people to deposit illegal money. Meanwhile, Australian authorities charged several people suspected to be involved in a Vietnamese Established Criminal Network that engaged in money-laundering of $5 million. 2 people were arrested for possession of illegally obtained property while 2 others were caught with cannabis for distribution. Elsewhere, in India, a court dismissed a petition on behalf of R Subramanian, Managing Director of Subiksha Trading Services Limited, caught in possession of illegal properties. The court ordered that these properties be seized, upholding the law that helps prevent the legitimization of funds earned through illegal means by spending it on movable and immovable property.
News surrounding the FATF
Even as the Financial Action Task Force (FATF) will be visiting India in April, the country is considering relaxing the compliance and tax infractions that were criminal violations earlier down to only fineable failings because the regulations such as the Income Tax Act and the Prevention of Money Laundering Act have apparently become a hindrance to the economic growth of the country. Elsewhere, civil society organizations have urged the participants of an FATF conference in Paris to insist that the owners of companies in each country be displayed in a public register so that authorities can trace illicit financial behavior anywhere in the world. Meanwhile, Pakistan’s largest bank, Habib Bank Ltd is being investigated by the UAE’s central bank as well as a Paris Unit of the FATF for inadequacies in complying with global AML/CFT regulations. The Central Bank of UAE has been working with Pakistan’s banking regulator to verify the irregularities of a UAE based Pakistani bank.
AML warnings from authorities worldwide
Citizens of Saudi Arabia have been cautioned by the Saudi Arabian Monetary Authority to be careful in their transactions to avoid being played into money-laundering schemes. Meanwhile, authorities in Kuwait have issued precautionary measures against companies that have violated AML/CFT regulations, spanning the realty, jewelry, money exchange and insurance sectors. Elsewhere, MONEYVAL has warned that Cyprus could turn into a money-laundering haven as Cyprus Casinos (C2) is operating beyond the limits of its AML/CFT compliance and risk management system. However, C2 claimed to be taking all necessary AML measures. In other news, UK’s Office for Professional Body AML Supervision found that 80% of professional bodies do not have suitable governance arrangements for AML supervision. Accountants should pay attention to Enhanced Due Diligence, Trust Registration Service and Beneficial Ownership. In the US, the criminal justice system has exhibited reduced seriousness to fight white-collar crime as related criminal penalties decreased from $3.6 billion to $110 million since 2015. Moreover, the US Government Accountability Office has warned that the rate at which illicit funds are being moved into the system through legitimate trade and transactions is alarming. B2B companies should use machine learning algorithms to monitor transaction flow and establish different thresholds for checking transactions with different risks.
