In this week’s Financial Crime Wave, a coalition of current and former public and private sector officials urge Congress to tackle corporate transparency, Canadian high-roller allegedly launders nearly $1 billion, U.K. fines bank for AML gaps, and more.

Money laundering

EU agrees to new rules strengthening penalties for money laundering offenses, including linked legal entities

On Thursday, the EU Council confirmed the agreement reached between the Bulgarian presidency and the Parliament on new rules to better counter money laundering and penalize any individuals and shady corporates involved. The main objectives of the new rules are to:

  • Establish minimum rules, definitions, penalties for criminal money laundering offenses.
  • Remove obstacles to cross-border judicial and police cooperation, information sharing.
  • Bring EU rules in line with international obligations related to freezing, seizing assets.

The final compromise agreed between institutions establishes that:

  • Money laundering activities will be punishable by a maximum four-year prison term.
  • Judges can add further sanctions to convicted launders, including individual penalties.
  • Authorities can increase sanctions for money laundering done by organized criminal groups, corrupt gatekeepers and through expensive real estate.
  • Legal entities can also be held liable for certain money laundering activities and face bans related corporate monitors or being shut down.

As for next steps, the text will now undergo linguistic revision before formal adoption by the Council and Parliament. Member states will then have up to 24 months to transpose the new provisions into national law, (via the EU Council).


In May, Ponzi schemers still a schemin’ in monthly roundup, where more than a dozen frauds robbed victims of hundreds of millions of dollars 

Below is a summary of the activity reported for May 2018. The reported stories reflect at least 15 new Ponzi schemes worldwide; 5 convictions and guilty pleas; over 26 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 55 for the alleged Ponzi schemers.

The latest roundup covers hundreds of millions of dollars in schemes, with many fraudsters using some new, but many classic, tried and true methods, including a tall tale about reselling timber to sawmills, fictitious retirement plans, real estate rentals, farming equipment for government contracts and selling unregistered securities, just to name a few, (via the Ponzi Scheme Roundup).

Corporate transparency

Three dozen former national Security officials urge Congress to end criminal magnet of anonymous shell companies

A coalition of dozens of former military and civilian national security leaders have sent a bipartisan letter to Congress urging legislators to address the problem of anonymous shell companies in order to better defend U.S. national security interests and defeat a currently gaping criminal vulnerability. The letter is addressed to the leaders of the House Financial Services and Senate Banking Committees. Some excerpts of the letter include:

“As you and your colleagues look to curb rogue nations, kleptocrats, and transnational criminal networks from using America as a safe harbor for their ill-gotten gains, we urge you to take action against the use of anonymous shell companies. Drug cartels and human trafficking operations have long understood the benefits of corporate secrecy to launder money from criminal enterprises.  More recently, anonymous companies are implicated in terror financing, fraudulent contracting with our military, and even sanctions evasion.” To read the full letter, click here.

In irony of ironies, U.S. feels heat it usually doles out as EU threatens to put country on tax blacklist

The United States, which typically uses its own tax-related information sharing laws to force foreign country compliance, faces being put on the European Union tax blacklist if it does not agree by June 2019 to exchange the details of foreign bank account holders in the U.S. with tax authorities in their respective home jurisdictions under the so-called OECD Common Reporting Standard (CRS). Valere Moutarlier, the EU Commission’s head of direct taxation and tax cooperation, told a tax investigations committee of the European Parliament on May 15 that the EU’s transparency criteria are clear in that “the June 2019 deadline must be respected.” In an ultimate irony, the CRS is based largely on the U.S. Foreign Account Tax Compliance Act (Fatca). The EU has drawn up a list based on tax information exchange and fair tax criteria that non-EU countries have to meet to avoid potential punitive measures. Mr. Moutarlier alluded to a change in the methodology which takes effect in June next year.

Until then, countries can avoid a blacklisting when they meet at least two out of three transparency criteria. These consist of committing to the common reporting standard; being rated “largely compliant” by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes; and having signed up to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The U.S. is not participating in the common reporting standard because it claims that it is providing tax information under Fatca. However, this possibility exists only on paper and is unlikely to be implemented in practice, (via the Cayman Compass).

Piercing the Veil: A look at how $12 trillion in value worldwide is hidden away behind phantom corporate investments

New research reveals that multinational firms have invested $12 trillion globally in empty corporate shells, and citizens of some financially unstable and oil-producing countries hold a disproportionately large share of the $7 trillion personal wealth stashed in tax havens, a persisting problem of corporate opacity even as many financial centers look to capture and publish beneficial ownership data. The current state of affairs: an international game of whack-a-mole, where sullied entities and tax evaders are constantly looking for the jurisdictions with the highest degree of secrecy and fewest agreements to share information on suspicious money trails.

Although Swiss Leaks, the Panama Papers, and recent disclosures from the offshore industry have revealed some of the intricate ways multinational firms and wealthy individuals use tax havens to escape paying their fair share, the offshore financial world remains highly opaque. Because of the secrecy that lies at the heart of the services offered by offshore banks, lawyers, and domiciliation companies, it is hard to know exactly how much money is funneled through tax havens, where the money is coming from, and where it is going. This is a particularly vexing issue in financial crime circles as anonymous shell companies are magnets for a wide range of illicit groups, including organized criminals, corrupt oligarchs, cyber fraudsters and terror financiers, (via the IMF).


ACFCS looks for fincrime compliance community participation in working whitepaper on challenges, costs, outcomes of AML risk assessments

Want to be part of whitepaper analyzing the costs, challenges and impacts of AML risk assessments? Great! Just click here. The overall study/whitepaper is envisaged to cover three areas in regard to the risk assessment process and its impacts:

  1. Internal Costs–Focus on the consumption of internal resources and time invested in the BSA department. We looked at the base consumption of time and talent of the annual risk assessment process.
  2. External Costs–This paper seeks to answer the question, what is the impact to the budget of the organization for use of third parties.
  3. Best Practices in BSA Risk Assessments-By identifying the areas of challenge and risk exposure in the process, we can identify the best practices approach to mitigating those risks, (via Deb Geister).

Are Wells Fargo’s values still “contemptable,” or has it truly created a culture of compliance, not just profits at any cost?

Is Wells Fargo truly turning over a new life when it comes to financial crime compliance and deceptive customer practices? Or is the new trite public relations campaign to “re-commit” to customers a sham hiding its truly contemptable values? Some believe the bank is still too scandal-ridden to commit to fairness and adequate controls against interior and exterior control threats. The bank has a bevy of issues that have come up in recent years calling into question its purported core values, including:

  • · Low-level bank officials had felt so pressured to meet impossible sales targets that they created fake accounts that customers didn’t ask for and didn’t even know existed.
  • July: Wells Fargo acknowledged that 570,000 customers were charged for auto insurance they didn’t need — and 20,000 of those customers may have defaulted on their cars as a result.
  • August: Wells Fargo admitted it had found an additional 1.4 million fake accounts.
  • October: Wells Fargo had to repay $3.4 million to brokerage customers because the company’s brokers put them in investments that regulators said were “highly likely to lose value over time.”
  • November: Wells Fargo agreed to pay $5.4 million in a Justice Department settlement because it illegally repossessed service members’ cars.
  • April 2018: Wells Fargo was fined $1 billion for the auto and mortgage infractions.
  • On Thursday, Wells Fargo was accused of improperly altering information on “documents related to corporate customers,” related to meet an AML deadline tied to an AML content order.

In other words, at Wells Fargo, when you are under pressure to meet a tough goal, you do whatever you need to do, even if it’s fraudulent. That appears to be Wells Fargo’s real core value, according to one analyst’s analysis, (via Bloomberg).


Canadian authorities arrest casino “high roller” in B.C., accused of laundering nearly $900 million

Canadian authorities have accused a man of orchestrating a massive international money laundering syndicate, including more than $855 million through Australian casinos and is now awaiting deportation after his arrest in British Columbia. Investigators arrested Dan Bui Shun Jin in Richmond, B.C. on May 25. At the time of his arrest, he had been living at the River Rock Casino and had more than $75,000 in cash on him. The RCMP say Jin is an alleged “high roller” accused of laundering the illicit funds through Australian casinos alone, with tendrils of the scheme snaking all around the world. There are active investigations into his activities in Australia, the United States, Macau and Singapore.

The United States had previously issued an arrest warrant for Jin due to an alleged fraud in Nevada worth $1.4 million. During a search of Jin’s hotel room, investigators say they found documents that detailed a recent alleged laundering effort through the Vancouver International Airport. The alleged scheme involved a female money courier who was told to pick up $25,000 in cash from an unidentified man in a Las Vegas parking lot and bring it to Jin in Richmond. Canadian Border Services officers pulled the woman aside once she arrived in Canada and officers found the money, (via CTV News).


European banking watchdog probing why Malta’s financial regulator failed to enforce AML rules for bank clearly being used to evade Iranian sanctions

The European Banking Authority is opening a probe on Malta’s regulatory oversight of Pilatus Bank, which is currently embroiled in an alleged scheme to circumvent economic sanctions against Iran. In March, Malta’s financial regulatory authority – the Financial Intelligence Analysis Unit (FIAU) – imposed a freeze on the operations of the lender. The freeze came after a US Federal Court called out the chairman of the lender, Ali Sadr Hashemi Nejad, 38, for attempting to evade U.S. economic sanctions. Ali Sadr Hashemi Nejad was arrested on March 20, 2018.

US Prosecutors said Sadr’s family controlled an Iranian conglomerate called Stratus Group, which between 2004 and 2005 has made a deal to construct 7,000 housing units in Venezuela. Status group incorporated an Iranian company – the International Housing Corporation – as well as capital. According to US authorities, this fact was concealed to evade U.S. economic sanctions. In time, the Iranian International Housing Corporation received payments via Switzerland and Turkey to the tune of $115 million. At issue is that while Malta’s FIU was aware of these and other issues, and even raided the operation, it never pushed the bank to strengthen AML rules required under EU directives, (via New Europe).


ACFCS Resource Spotlight: FATF consolidated assessment rankings list

Even wanted a quick, condensed version of the Financial Action Task Force’s (FATF) mutual evaluation results for the countries it has reviewed so far? Well here you go! The Paris-based group, which sets global counter-financial crime standards, has released a handy, dandy nine-page covering more than four dozen countries evaluation teams have reviewed under updated standards.

The more stringent processes grade both technical compliance, or laws on the books and effectiveness, including such metrics as large, complex cases closed, convictions, forfeited assets and anti-money laundering penalties against recalcitrant financial institutions. The document covers from Armenia to Australia, the Bahamas to Bangladesh, details that could be a great reference guide for compliance officers when risk-ranking countries, corporates and individuals, (via FATF)


Ahead of watchdog visit, Japanese regulators buckle down on AML

Japan’s financial regulators are considering more rigorous on-site inspections of regional banks with weak AML programs, potentially issuing formal enforcement orders or penalties in order for financial institutions to have noticeably stronger programs ahead of a country review by a global watchdog group next year, (via the Japan Times).


Gotham dives into the Matrix by advancing crypto taskforce bill

New York state legislature advances bill on creation of cryptocurrency task force, with goal of creating a report on how to improve financial crime compliance countermeasures and user transparency in the virtual currency space, (via the Econo Times).


Britain fines foreign bank more than $1 million on extensive, longstanding AML failures

Britain’s markets regulator has fined the U.K. division of Canara Bank $1.2 million and blocked it from accepting new deposits for around five months for systemic anti-money laundering (AML) failures, affecting almost all levels of its business and governance structure, including senior management, despite regulatory warnings dating back to 2012, (via Hindustan Times).