G20 Hackers

In this week’s Financial Crime Wave, watchdog groups levy criticism on G20 countries for failing to live up to corruption ideals, metrics, IBM merges cyber surveillance with artificial intelligence to counter hackers, new battleground in Canada in fight between attorneys, AML rules, and more.


Can AI supercomputer Watson repel cyberattacks?

IBM says its supercomputer Watson can help give analysts an edge in the cybersecurity war. But not everyone is convinced artificial intelligence is the solution. Technology, which makes it so easy for cyberhackers and thieves to attack computers with malware and other threats, ironically enough, may offer the best counterattack. Watson’s handlers say they are set to integrate its cognitive computing processes into the company’s security intelligence platform.

The move would greatly enhance the human capability to parse vast quantities of security-related information in a timely manner. For state and local government, the implementation of machine learning in cyberdefense could give analysts access to previously unavailable sources of information. In particular, Watson could tap into unstructured data, something human analysts cannot easily accomplish, making connections to references in online blog posts or whitepapers that would take organic brains longer to find, or could miss entirely, (via Government Technology).


EU committees approve amendments to AML laws, snaring virtual currencies, boosting transparency

Amendments to the European Union anti-money laundering law places virtual currencies under the same obligations as other payment institutions, according to the European Parliament news service. The MEPs recently agreed to the amendments by a vote of 89 to 1. The amendments approved by the Economic and Monetary Affairs and Civil Liberties committees are designed to eliminate gaps in the EU’s laws to prevent money laundering and terrorism financing. The law would also include stricter rules to prevent tax evasion. The committees also supported lower financial thresholds for checking identities to make it harder for criminals to use prepaid cards anonymously.  

If enacted, EU citizens would be able to access beneficial ownership registers of companies without demonstrating a legitimate interest in the information. The law presently restricts access to journalists and lobbyists. The amendments also seek to streamline coordination among member states to fight money laundering and terrorism financing, in addition to streamlining the checks institutions make across the EU and improving information flow among states’ intelligence units. Parliament must now approve the measure in the March MEP plenary session to begin three-way talks with the EU Commission and Council, (via Crypto Coins News).


In the fight against money laundering, the U.S. casino industry lauded, but more needed

In its December report, the global Financial Action Task Force applauded the stateside industry for its “increased focus on raising awareness and improving compliance” and for “mitigating measures above the requirements” of the 2007 Bank Secrecy Act. Overall, casinos are finding and reporting on more activity, but have also in recent years absorbed the sector’s largest ever anti-money laundering (AML) penalties, with one action alone soaring to $75 million.

But when it comes to maintaining a paper trail—or the electronic equivalent—the industry is on its toes. Between 2011 and 2014, the number of SARs filed with the federal government increased 164 percent. Other seemingly simple money-changing measures have made an impact—such as the choice by operators including MGM Resorts International to banish cash at the poker table. Among the most effective deterrents may be the increasing use of player cards, not just for VIPs but for patrons at all levels, allowing player actions to be tracked across various gaming types, including table games and slots, (via Global Gaming Business Magazine).


Promises, but not enough progress from G20 Countries, say global watchdog groups

Open data is a pretty simple concept: governments should publish information about what they do to fight corruption– data that can be freely used, modified and shared by anyone for any purpose, according to two major international anti-corruption watchdogs. This is particularly important in the fight against corruption. In 2015 the Group of 20 (G20) governments agreed on a set of G20 Anti-Corruption Open Data Principles. These principles aim to make crucial data public specifically because they can help stop corruption, a joint research project published by Transparency International (TI) and the Web Foundation has revealed.

Publishing this data would allow civil society to monitor things like the use of public resources and taxes, the awarding of public contracts, and the sources of political party finance, the research underlines, explaining that this would make it easier to hold governments to account and deter criminal activities like bribery and nepotism, adds the research. But in an analysis of five countries, Brazil, France, Germany, Indonesia and South Africa, the inescapable conclusion for the group is that there isn’t enough progress. No country released all the data-sets required, and much of the information proved either hard to find or difficult to use.

Did private bank become piggy bank for PEPs socialite daughter?

Swiss prosecutors announced last week that they are investigating whether private bank Lombard Odier failed to prevent the daughter of former Uzbek president Islam Karimov from laundering money tied to bribes estimated to total nearly $1 billion, (via the OCCRP).


In an era of AML enforcement on banks, companies should fear failings on trade oversight

With a greater focus on AML programs at banks and compliance corruption programs at corporate, is the counter-financial crime communities at the dawn of a new age: trade-based money laundering enforcement? (via Polsinelli and Baker Tilly).


U.S. agencies hit California bank with $7 million AML penalty tied to MSB, correspondent oversight, compliance officer authority, independence

The U.S. Treasury Monday penalized Merchant’s Bank of California $7 million for “egregious and willful” violations of anti-money laundering (AML) regulations, chiefly tied to its monitoring, oversight and reporting of suspicious activity through correspondent portals and its stable of money services business clients. The failures “allowed billions of dollars to flow through the U.S. financial system without effective monitoring to adequately detect and report suspicious activity,” according to FinCEN.  What also raised the final penalty tally was that many of the transactions were conducted on behalf of MSBs owned or managed by bank insiders “who encouraged staff to process these transactions without question or face potential dismissal or retaliation. Bank insiders directly interfered with the [AML} staff’s attempts to investigate suspicious activity related to these insider-owned accounts,” according to penalty documents. The Office of the Comptroller of the Currency (OCC) also levied a $1 million penalty, which will be absorbed by FinCEN’s figure. To read FinCEN’s action, please click here, and to view the OCC’s order, please click here.    

Federal, state authorities looking at Capital One’s AML program, check casher clients

Here’s what’s in Capital One Financial’s wallet: Federal and state investigators’ requests for information about the U.S. banking giant’s anti-money-laundering program. Investigations by the Department of Justice, the Department of the Treasury’s Financial Crimes Enforcement Network, and the Manhattan District Attorney’s office in New York focus on “certain former check-casher clients” of Capital One’s commercial banking business, the company said Thursday in its annual report. The disclosure reworded information the bank reported in previous Securities and Exchange Commission filings. Investigators have also sought information about the bank’s required internal safeguards to prevent money-laundering transactions, Capital One said, adding that it is cooperating with all of the agencies. Capital One also noted that it is already subject to a 2015 consent order with the Office of the Comptroller of the Currency “concerning regulatory deficiencies” in the bank’s anti-money-laundering program, (via USA Today).

Real estate

Contrary to pundit prognosticators, FinCEN renews GTOs in four states for “all cash” luxury real estate purchases

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has renewed geographic targeting orders, or GTOs, in six major metropolitan areas to better identify the beneficial owners behind all cash, and at times nebulous, purchases of luxury real estate. The GTOs, originally created in July and reupped and expanded in August, will be in place for roughly the next six months targeting several key regions in South Florida, New York, California and Texas. The latest orders released last week temporarily require U.S. title insurance companies to identify the natural persons behind shell companies used to pay “all cash” for high-end residential real estate properties. FinCEN stated it has found that “about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in ‘all-cash’ transactions,” (via FinCEN).


As Islamic Banking grows, so do challenges in aligning AML, regulatory frameworks to international standards

The International Monetary Fund (IMF) is urging countries and institutions engaging in Islamic Banking to bolster a bevy of areas and bring them in line with international standards, including anti-money laundering (AML) programs, according to a staff paper, which concluded that the legal and regulatory frameworks underpinning some operations need to be strengthened. Islamic banking (IB) “continues to grow rapidly, in size and complexity, contributing to financial deepening and inclusion in many countries, but also posing a challenge to supervisory authorities and central banks,” according to the paper IMF.

“Although accounting for a small share of global financial assets, IB has established a presence in more than 60 countries and has become systemically important in 14 jurisdictions.” Moreover, IB involves operations, balance sheet structures, and risks “that differ from their conventional banking counterparts. Accordingly, there is a need for putting in place an environment that promotes IB financial stability and sound development, including legal, prudential, financial safety nets, anti-money laundering and countering the financing of terrorism, and liquidity management frameworks,”  (via the IMF).

Foreign exchange restrictions

China bringing underground banks into the light

AML authorities in China vow to expose underground banks skirting currency exchange rules, recently cracking a network that moved hundreds of billions of yuan, (via China Daily).

Money laundering

AML crisis in the Americas

Is the global war on money laundering in crisis? One person, focusing the lens on the Americas, says yes, (via the Fletcher Forum).


In fight to subject Canadian lawyers to AML rules, new battleground in B.C.

B.C. is the front line of a developing skirmish between federal Finance Department officials and Canadian lawyers over rules designed to fight money laundering. In a Supreme Court of Canada ruling in 2015, lawyers won an exemption from reporting requirements that apply to other professionals, such as bankers and real estate agents. The ruling was based on concerns about lawyer-client privilege. B.C. lawyers argued they protect confidentiality while counteracting money laundering risks by policing themselves. But a growing chorus of international critics say Canada’s lawyer loophole is unique among developed countries, and leaves a dangerous gap in the federal government’s money-laundering defences. “The law societies claim to have rules in place to prevent money laundering but they are weak, non-transparent and almost never enforced,” said Adam Ross, the author of a recent Transparency International report, which pointed to lawyers and money laundering risks in Vancouver real estate, (via The Ottawa Citizen).


Analysts, panelists conclude not all bank “de-risking,” due to AML concerns

Banks face a much higher regulatory burden than previously, with tax issues, AML requirements and international sanctions all contributing to the cost and effort of compliance. Recent fines may also have prompted some banks to rethink continued operations in certain markets, leading to a trend dubbed “de-risking.” However, not all decisions to exit relationships are entirely risk-driven. The panelists at a recent event noted that concerns about profit margins also contribute to the trend. In a low interest rate environment, correspondent banking is a lower margin business. Some banks may see the current climate as an “opportunity to get out of a loss leader,” one expert noted. Download the info paper ‘Banking low-risk clients in high-risk jurisdictions’ to learn more, (via


New insight tied to managing AML risks

BAFT — the American Bankers Association’s global transaction banking subsidiary — commented last week on the Basel Committee’s proposed revisions to its guidance on managing risks related to anti-money laundering and terror financing, (via the ABA).


House preparing to grade U.S. banks on fighting financial crime, cyber attackers

A U.S. House panel is eyeing the country’s chief AML rules to grade how banks are faring on fighting financial crime, cyber threats, (via Bloomberg BNA).