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EU’s 5th AML Directive
EU’s 5th AML Directive (AMLD) demands transparency about companies’ beneficial owners. However, only five out of twenty-seven member states have fulfilled the requirement of introducing public registers to reveal the true owners of all companies based in their countries, as part of the fight against money laundering. Bulgaria, Denmark, Latvia, Luxembourg and Slovenia presented changes in their law that will permit free access to public registers. There are still 17 member states that do not have such centralized registers. In other news related to the 5th AMLD, the art market has been brought into the scope of the regulated sector by the directive and will need to conduct customer due diligence like other industries within the regulated sector by identifying the customer and, where necessary, the source of the funds. The seller, the buyer and the agent will all be classified as the dealer’s customers for the regulations, and hence will all need to be the subject of due diligence. Moreover, the dealer will need to verify that the agent is authorized to act on the buyer’s behalf.
COVID-19 crisis – criminals and authorities
Criminals never seize to utilize any open window to perpetrate their illicit act. Some scammers are taking advantage of the pandemic COVID-19 to feed off unsuspecting members of the society. Those seeking a work-from-home job may be the target for a money-laundering scheme. A recent example is Vasty Health Care Foundation which has entrapped several innocent people in the name of donations. To discover such scams, individuals must be wary of employers asking them to transfer funds to another financial account especially in cryptocurrency, suspicious websites that have only recently been set up, and unrealistic compensation. In other news, COVID-19 has forced the Financial Transactions and Reports Analysis Center Canada (FINTRAC) to adjust money-laundering reporting requirement. In normal circumstances, businesses are required to regularly report the movement of clients’ money. However, due to the staff working from home, being sick or laid off, FINTRAC has now issued pandemic guidelines to focus on the most urgent cases. Elsewhere, the outbreak has delayed Sweden’s financial supervisory authority from deciding on the money-laundering case of Skandinaviska Enskilda Banken AB. An assessment which was previously scheduled to be concluded in April has been postponed to June this year.
Money-laundering through banks
A report published by Clifford Chance has revealed that transactions worth over $41 billion with a high risk of money-laundering were carried out by Swedbank in five years. High-risk customers being offboarded by another bank in Estonia have now become targets for Swedbank Estonia and Swedbank Latvia, confirming Swedbank’s failure in its AML measures. The bank has lost over one-third of its value, which led to the dismissal of chief executive Birgitte Bonnesen and much of the board. The Swedish and Estonian financial watchdog had already fined Swedbank $416 million last week and the bank is also facing an investigation in the US, as well as criminal probes in Sweden and Estonia. Meanwhile, after 6 months of investigation into Malta’s Pilatus Bank suspected money-laundering activities, the bank’s administrator Lawrence Connell has said that Pilatus Bank was a ‘money transfer operation’. In a report handed to the government this month by the regulator, there was little mention of the money-laundering allegations for which the bank’s license was seized. Instead, the report said that some accounts were concerning. The former chairman of the bank, Ali Sadr, was recently convicted by a US court for various fraud and breaching sanctions against Iran.
Financial crimes in Venezuela
A Venezuelan oilfield contractor, Leonardo Santilli, who attempted to bribe officials at the state oil company Petroleos de Venezuela S.A. (PDVSA) to win overpriced contracts has been arrested and charged with money-laundering by the US Prosecutors. Leonardo received almost $150 million from PDVSA between 2014 and 2017 on contracts to supply equipment. Meanwhile, Venezuelan President Nicolás Maduro and 14 high-ranking officials have been indicted by the US Justice Department for conspiring with the Revolutionary Armed Forces of Colombia (FARC) to bombard the US with cocaine. Maduro and his cohorts were running a narco-terrorism partnership with the FARC for the past two decades inflicting devastating systemic corruption and looting Venezuela of billions of dollars. Maduro’s aides were alleged of taking bribe in tens of millions and engaging in money-laundering.
Other financial crimes around the world
Global Financial Integrity has reported that India ranks third among 135 countries with the highest trade-related black money. Corruption, tax evasion, and transnational crime are the culprits as a drug cartel was found to be using trade-based money-laundering techniques to buy exotic cars and export them to the drug source. Meanwhile, 11 people of a Sydney-based organized crime syndicate have been charged by Australia’s Organized Crime Squad with $3 million worth of drugs seized. Elsewhere, Gulnara Karimova, sentenced in March 2019 for an international bribery scheme and charged with conspiracy to violate US foreign corruption law, went on trial again and was declared guilty of extortion, money laundering, and other crimes. In other news, Dubai, UAE has become an alluring destination for politically exposed persons (PEPs), including many from Nigeria, to invest their ill-gotten wealth. Dubai has few legal or logistical obstacles to transferring large amounts of cash or purchasing property, which is why at least 800 properties have links to Nigerian PEPs or their relatives. Politicians in Northern Ireland have raised alarm after an investigation into the activities of the country’s entities revealed that a little-known form of corporate entity valuable for the country is being adopted by criminals to exploit workers and carry out corrupt practices and money-laundering.
Good AML steps taken by authorities
According to Louise MacDonald of the UK HMRC’s Fraud Investigation Service, financial institutions and professional service firms must understand the constantly evolving threats in the financial landscape, as there is no one-size-fits-all approach to AML. The Institute of Chartered Accountants in England and Wales (ICAEW) must ensure that firms perform business risk assessments to reveal their proper policies and controls. ICAEW is working with law enforcement and other professional body supervisors to identify current money-laundering typologies and is also increasing the range of AML resources it produces for its firms and members. Elsewhere, Malta’s Financial Intelligence Analysis Unit has reported a 157% increase in suspicious transaction reports in 2019 from 2017. It is also exchanging information with other countries as part of global efforts to tackle financial crime. This is good news as the Council of Europe’s AML body Moneyval had earlier called on the Maltese authorities to strengthen the practical application of their measures to combat money-laundering and financing of terrorism. Meanwhile, regulators in Singapore have updated the country’s AML/CFT guidelines. Digital payment service providers are now required to have three lines of defense: robust mechanisms to detect illicit activities, controls to monitor the service provider’s fulfilment of the AML/CFT duties, and an independent audit function.
