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Rising financial crimes amid the COVID-19 crisis
The European Banking Authority has warned regulators and banks of new financial crimes linked to the coronavirus pandemic. The FATF also noted that criminals are trafficking in counterfeit medicines, offering fraudulent investment opportunities, and engaging in phishing schemes. Since people cannot perform physical transactions right now, the FATF is encouraging technologies, including Fintech, to eliminate risks. Meanwhile, Europol has also issued warnings about frauds in the supply of medical gadgets.
Europol’s recently conducted Operation Pangea resulted in the seizure of thousands of counterfeit surgical masks and other COVID-19 related merchandise. Authorities also seized potentially risky pharmaceuticals worth over $14 million. Similarly, Europol helped authorities in Singapore to arrest a man involved in money-laundering and a COVID-19 phishing scheme. He defrauded a French pharmaceutical company of over $7 million in a deal involving the delivery of surgical masks and hand sanitizers. Some individuals in the UK have also been registering companies with names using the word ‘coronavirus’. Companies like Corona Virus Claims Ltd and Corona Compensation Ltd are registered to a Marc Feldman in Leeds. He believed that the government would announce special relief packages for the people who have incurred losses during the outbreak.
Difficulties in investigating financial crimes due to the coronavirus pandemic
QuantaVerse has reported that the coronavirus outbreak may lead to a drastic decrease in the number of financial crime investigators. The agency has requested affected banks to contact FinCEN if they cannot timely file the required Bank Secrecy Act reports. It has also advised brokers and asset management companies to monitor trades for compliance with regulations. Similarly, businesses involving financial services need in-person verification checks on customers, which have become impossible due to the outbreak. Since we do not know when the pandemic will end, electronic verification can help businesses stay compliant with money-laundering regulations. Difficulties in investigating financial crimes are also arising elsewhere. For example, Indian authorities have identified several illegal properties linked to Yes Bank promoter-director Rana Kapoor. However, the ongoing lockdown has stopped the attachment of assets worth hundreds in the Yes Bank money-laundering probe.
Other financial crimes around the world
A US court has sentenced William Neil Gallagher, a Texas radio host and financial consultant, to 25 years in prison. Gallagher defrauded over 60 elderly radio listeners of $29.2 million through a Ponzi scheme. US authorities also arrested William Anderson Burgamy for unlawful distribution of medications through the Darknet and Bitcoin-based money-laundering. Burgamy illegally operated Darknet since August 2019 as a vendor who claimed to sell medications including prescription opioids. Burgamy laundered the illegal proceeds by withdrawing Bitcoin cryptocurrency drug payments and transferring them to several bank accounts.
Elsewhere, Bulgarian authorities busted an international organized crime group involved in fraudulent financial trading and money-laundering of over $87 million. Meanwhile, New Zealand’s Financial Markets Authority has formally warned Tiger Brokers Limited for its AML deficiencies. The company failed in conducting due diligence and KYC and verifying the source of funds associated with high-risk customers. Other news of rising financial crimes and reporting came from Malta. Malta’s Financial Intelligence Analysis Unit received 2,778 reports of suspicious activity in 2019 as against 1,679 in 2018.
Countries violating international regulations
Most EU countries are yet to establish efficient beneficial ownership registry as instructed by the Global Witness. Only 5 out of the 24 countries have reformed their AML policies. Some countries known to be vulnerable to frauds through Golden Visa programs are yet to comply. Meanwhile, Chainalysis has revealed that North Korea moves its ill-gotten cryptocurrency through trade-based money-laundering. The Royal United Services Institute claimed North Korea actors also make cryptocurrencies payment to shipping companies, brokers and middlemen. They use this method to avoid detection of carrying undeclared bulk cash.
Banks breaching AML regulations
Australian authorities have found that HSBC bank breached the AML Act by failing to report thousands of international money transfers. HSBC has now initiated an AML program to address its record-keeping and report inter-border transactions. In a similar move, Kenya’s Central Bank has ordered a stop on all foreign exchange activities of Absa Bank Kenya. The step followed an allegation that the bank breached AML regulations, such as KYC, in some of its trades.