Financial Crime Wave – After Western Union penalty, investors demand share, asset seizure, and more

In this week’s Financial Crime Wave, in aftermath of historic Western Union penalty, investors demanding their share, in 2016, field of asset forfeiture law expands, constricts in some areas with high court ruling, “alternative payment” systems fall prey to criminal tactic dubbed transaction laundering, and more.

Investor lawsuits

In aftershocks of historic Western Union penalty, investors now want their pound of flesh

In aftermath of nearly $600 million Western Union penalty for widespread AML and fraud failings, investors in California are suing the massive remitter for allegedly violating the nation’s securities laws by issuing false and misleading statements on the state of the company’s compliance systems and agent oversight between 2012 and now. The lawsuit states Western Union aided wire fraud by allowing its agents to structure transactions and avoid reporting requirements that allowed criminal schemes to continue. The suit also states that the money services business did not comply with applicable AML program rules from 2004 to 2012, mirroring the dates used in federal penalty orders. Lastly, the suit states that Western Union gave “materially false and misleading statements” tied to fraud-induced money transfers totaling more than $630 million, (via 4-traders).

Money laundering

Dutch lawyers, activists say Rabobank assisting Mexican Drug Cartels

Dutch lawyers and rights activists recently filed a criminal complaint against Rabobank accusing the lender of complicity in money-laundering by Mexican drug cartels and urging prosecutors to investigate. Acting on behalf of Fernando Hernandez, a Mexican now living in The Netherlands, the SMX Collective filed the complaint against the bank and its executives to the Dutch prosecution. It accused the bank of “having laundered structurally and for a long period of time the proceeds of crimes committed by Mexican drugs cartels” via a branch of its subsidiary in Calexico, southern California, just over the border from Mexico. “By doing this, they assisted the drugs cartels in the commission of all their crimes, including crimes against humanity,” the complaint alleges, (via AFP).

Asset Forfeiture

Forfeiture law saw some areas constrict, others reinstated as High Court took hands off policy for ‘clean funds’ to defend dirty suspects

The field of forfeiture saw significant action in 2016. The IRS offered to return forfeited funds used in structuring, but Congress still may clip its ability to forfeit such funds. Meanwhile, DOJ renewed a controversial program that incentivizes local law enforcement to aggressively pursue forfeiture. It filed a major forfeiture action which reminds law firms of their own need to vet the source of funds flowing into firm bank accounts. Finally, the U.S. Supreme Court made it clear that “clean” funds cannot be restrained pretrial when a defendant needs those funds for his criminal defense, even if the government wants to restrain the money in order to pay for forfeiture or restitution if the defendant is convicted, (from Ballard Spahr LLP, via JDSupra).


New Zealand finds dirty dozen on AML compliance, but not naming and shaming just yet

New Zealand’s Financial Markets Authority has found a dozen reporting entities to be deficient with anti-money laundering laws after requesting risk assessment and compliance audits from 77 firms, just under 10 percent of the universe of institutions that the regulator supervises, according to a recent analysis. Nine reporting entities failed to provide their audit, two did not respond to the FMA’s request while one did not submit an AML/CFT annual report as legally required, (via Good Returns).

Virtual currency

As Indian Central Bank decries virtual currency, firms band together to form association espousing virtues of tech, blockchain

In response to central bank pressure, India firms creating their own blockchain and virtual currency association, mostly as a way to bank together against a government attempting to ban the use of Bitcoin and related payment avenues due to the potential use by organized crime groups, (via NewsBTC).


Mega merger for MoneyGram could expose ugly compliance warts in China

A recent megadeal to purchase a U.S.-based money remitter by a Chinese e-commerce giant could bring new, unwanted scrutiny by federal regulators to potentially lax foreign compliance practices as well as open doorways for criminals to the international financial system, (via Reuters).


Chinese banks could be next on OFAC’s list in bid to thwart Iran missile program

The U.S. Treasury’s Office of Foreign Assets Control Friday sanctioned individuals and companies in three networks for “procuring technology and/or materials to support Iran’s ballistic missile program,” a move done in reaction to the country’s recent test of an intermediate-range missile. But one of the three blacklisted networks also contains Chinese companies, which could portend the sanctioning of Chinese banks, a move that no doubt would reverberate in global markets, (via Forbes).

Alternative payments

While a boon to business, mobile payments, eWallets, can be equally appreciated by criminal groups engaged in mutated “transaction laundering”

Alternative payments, while innovative, fast and time-saving, haven’t had the same compliance, risk and security processes built into their core like traditional payment methods. In a new report, G2 Web Services has found that alternative payments providers — including P2Ps, mobile payments, money transfers and eWallets — are increasingly providing sponsorship and access to high-risk merchants. Often, these payment brands are unknowingly enabling this commerce because they haven’t had to look for it before, unwittingly being part of a criminal tactic dubbed transaction laundering, (via Pymnts).


Iran, trying to bolster financial transparency, ward off U.S. sanctions, aligning banking sector closer to FATF standards

To increase financial transparency, and ward off expected new U.S. sanctions, Iran’s government aims to expand the Central Bank’s independence and adhere to the Financial Action Task Force (FATF) standards against money laundering and terrorist financing. Both areas reflect underlying conflicts of interest between the government and state-linked powers like the Islamic Revolutionary Guard Corps (IRGC) and bonyads (state-operated religious foundations) that have an influential stake in the economy, (via the Cairo Review).


As EU battles corruption, and tarries on a country-by-country report, Romania backslides to give politicians free rides

Corruption is rampant in Europe, according to one campaigner. In Romania, politicians were preparing to legalize political corruption, and elsewhere the misuse of European Union funds makes headlines every day. Sandor Lederer, the head of Hungarian anti-corruption NGO K-Monitor, now questions why has the Commission decided not to release an in-depth anti-corruption report, (via Euractiv).

Looking for lessons to extend meager, dwindling compliance budgets, look to energy sector

Corruption expert and attorney Thomas Fox talks us through how to still keep compliance programs lean and mean during an economic downturn, countering the purely cost center mentality, via (JD Supra).


Swiss government cracking down in wake of 1MDB debacle

Swiss regulator Finma fines Coutts & Co. $6.5 million for 1MDB breaches, “serious deficiencies” in AML defenses, (via Finma).

Individual liability

Former MSB compliance chief still battling FinCEN on $1 million individual AML penalty

The first-ever high-profile individual penalty and related court case against an anti-money laundering (AML) officer for failing to create an adequate program has been going on for more than two years and appears headed to a jury trial, forcing to U.S. Treasury’s Financial Crimes Enforcement Network to defend their view of liability, (via Grand Jury Target).

Money laundering

Some analysts believe Trump will stay tough on AML rules, enforcement, even as he tries to ease business red tape

Despite various signals from the administration that President Trump intended to take a lighter-handed approach to financial services regulation than his predecessor did, it seems that will not extend to the regulations that control money laundering, even as he releases executive orders to cut down on the government bloat created by new regulations, (via Pyments).

Tax evasion

Has girth of Fatca finally gotten too big for its britches under Trump?

One former American lobbies Trump to dump Fatca, a powerful, global-spanning 2010 law that has helped the IRS recoup some $10 billion from citizens living abroad, (via Forbes).


Rare SEC AML penalty, a job typically handled by Finra, shows new teeth, focus on compliance officer oversight, liability

The SEC recently charged a New York-based broker-dealer, Windsor Street Capital, L.P. and John David Telfer, who acted as Windsor’s Chief Compliance and AML Officer for three-years, alleging serious Anti-Money Laundering violations, (via JD Supra).