In this week’s Financial Crime Wave, South Korea’s president has become embroiled in a corruption scandal that has gripped the nation, a cyberattack has shut down key operations at a UK hospital, suspicious transaction reporting surges in Hong Kong, and more.
SUSPICIOUS TRANSACTION REPORTS HIT RECORD HIGH IN HONG KONG
Hong Kong’s Joint Financial Intelligence Unit (JFIU) has received nearly 60,000 reports from financial institutions on suspected money laundering, terrorist financing and other financial crime in the year to date, a 40% increase over all of 2015 and the largest number in the JFIU’s history. The surge was reportedly tied to tougher scrutiny of AML/CTF programs by the jurisdiction’s regulators, causing institutions to launch lookbacks and scramble to clear backlogs of investigations. The spike in reporting has not yet led to a spike in law enforcement cases against financial criminals in Hong Kong – both convictions and asset seizures related to money laundering offenses are down from previous years, (via The South China Morning Post).
AUSTRALIA PLANS UPDATE OF AML LAWS TO COVER DIGITAL CURRENCIES
The Australian government is plotting a review and update of its anti-money laundering laws to ensure they cover digital currency exchanges, according to a consultation document and proposal issued by the country’s Attorney-General’s Department last week. The government is currently soliciting public feedback on the proposal, with a goal of having final legislation by 2018. The move comes amid a wider review of Australian government policy toward emerging payments and financial technologies, (via CoinDesk).
PANAMA PAPERS TRIGGER PROBE INTO PAKISTAN’S PRIME MINISTER
The Supreme Court of Pakistan authorized an investigative commission to probe corruption allegations involving Prime Minister Nawaz Sharif and his family members earlier this week, a move applauded by opposition political parties and anti-corruption advocates. The probe had its genesis in the Panama Papers leak, which revealed that three of the prime minister’s children controlled companies formed in the British Virgin Islands which owned high-end real estate in London. The prime minister denies any wrongdoing, but the revelations have led to questions about his family’s finances and potential corruption and tax dodging, (via The LA Times).
SOUTH KOREA ROILED BY CORRUPTION SCANDAL INVOLVING PRESIDENT, AS TOP AIDES RESIGN
South Korean president Park Geun-hye accepted the resignations of four senior secretaries on Sunday, amid a widening corruption scandal that triggered street protests in Seoul over the weekend. The corruption allegations hinge on the conduct of one of the president’s long-time friends and confidantes, Choi Soon-sil, who reportedly wielded her influence with the president to garner tens of millions in donations to a foundation she controls. Choi Soon-sil may also have been given access to confidential government documents, including drafts of the president’s speeches, before they became public. South Korea has seen other high-level corruption cases in the recent past, but this one has been met with fiercer public outcry, and may threaten Park’s tenure in office, (via The Wall Street Journal).
EL SALVADOR ARRESTS FORMER PRESIDENT ON GRAFT, MONEY LAUNDERING CHARGES
Former El Salvadorean president Tony Saca was detained on Sunday at the wedding of one of his children, admist allegations by the country’s prosecutors that Saca, along with his family members and associates, had amassed millions in unexplained wealth during his time in office. Prosecutors say that Saca, who held office from 2004 – 2009, could not account for roughly $5 million of the $6.5 million in assets he accumulated while in office, while Saca’s former personal secretary who was also arrested in the probe was found to be holding nearly $19 million in unexplained assets. Saca isn’t the only former El Salvadorean leader to be targeted in a graft probe – both his predecessor and sucessor as president were investigated for corruption, (via The Toronto Star).
AUSTRALIA AND CHINA FINALIZE AGREEMENT TO SHARE INTELLIGENCE ON FINANCIAL CRIMES
After more than a year of discussions, Chinese and Australian authorities entered into a pact to swap information on money laundering and other financial crime yesterday, sharing financial intelligence across borders to support investigations and law enforcement activity. The move comes as China expands its anti-corruption crackdown to hunt for overseas assets and accounts. In recent years, Australian property markets have emerged as a popular destination for dubious proceeds flowing out of China, (via The Wall Street Journal).
INVESTIGATORS TRACE MILLIONS FROM RUSSIAN TAX FRAUD TO CANADIAN ACCOUNTS
A team of investigators and asset recovery specialists say they have tracked millions tied to an elaborate $230 million Russian tax fraud scheme to bank accounts in Canada, and are calling on the Canadian government to enact tougher laws targeting corrupt Russian officials. The investigations were backed by Bill Browder, former head of the hedge fund Hermitage Captial Management, which was exploited by corrupt Russian law enforcement as part of the fraud scheme. One of Hermitage’s lawyers, Sergei Magnitsky, was arrested and allegedly tortured after blowing the whistle on the fraud, and ultimately died in pre-trial detention. His death led to the passage of the US Magnitsky Act, which allows US law enforcement to seize assets of Russian officials who violate human rights. Browder’s team, which traced nearly $15 million in fraud proceeds to Canada, is pushing the country to adopt similar legilsation, (via The Globe and Mail).
NEW HEAD OF TOP TAIWANESE REGULATOR TO PRIORITIZE MEGA FINANCIAL INVESTIGATION
When the New York Department of Financial Services slapped the Manhattan branch of Taiwanese institution Mega Financial with a $180 million penalty for AML failings in August, the case caused major reverberations in the bank’s home country. Taiwan’s president launched an investigation into the country’s finance minister and four other regulators, and lawmakers questioned whether nation’s top regulator, the Financial Services Commission (FSC), was up to the task. Now a new FSC head, Lee Ruey-tsang, is attempting to redeem the agency’s reputation by prioritizing the investigation into Mega for potential violations of US money laundering regulations, (via Reuters).
TRIAL OF FORMER PRIVATE BANKER TIED TO 1MDB FUND STARTS IN SINGAPORE
The trial of an ex-banker with ties to giant Malaysian state investment fund 1MDB began yesterday in Singapore, weeks after regulators penalized and shut down several banks in Singapore for their role in the sprawling corruption case. Yeo Jiawei, a former wealth planner for Swiss private bank BSI, is charged with laundering money connected to 1MDB, as well as forgery and obstruction of justice. In May, Singaporean regulators revoked BSI’s license and shuttered its operations in the country due to AML failings. Law enforcement in 11 countries are investigating allegations that Malaysian officials, including family members and associates of the country’s prime minister, may have stolen $1 billion or more from 1MDB, (via ABC News).
MALWARE FORCES UK HOSPITAL TO CANCEL OPERATIONS, RE-ROUTE PATIENTS TO OTHER FACILITIES
Cybersecurity blogger Brian Krebs reports on a crippling malware infestation that left a UK hospital unable to perform operations or accept major trauma patients today, and forced the institution to shut down the majority of its computer systems. The Lincolnshire and Goole Trust, part of the UK’s National Health System, did not provide details on the nature of the attack. Krebs suspsects it is ransomware; cybercriminals began hitting hospitals and health care providers hard with ransomware attacks earlier this year. Due to the sensitivity and need for timely access to their data, many hospitals end up paying the ransom, encouraging attackers to seek new victims, (via KrebsOnSecurity)
A DEEP DIVE INTO HEZBOLLAH’S CRIMINAL NETWORKS
An in-depth article from a publication by the US National Defense University last week takes a thorough look at the operations and financing of Hezbollah, examining how the terrorist organization utilizes a loosely connected network of formal operatives, unaffiliated criminal groups, and “useful idiots” to assist with fundraising, obtaining arms and supplies, and more. The findings reflect the ties between terrorist groups and criminal gangs that are also exploited by groups like ISIS, (via The Washington Institute)
AN IN-DEPTH LOOK AT PACNET AND HOW IT BECAME THE LINCHPIN OF GLOBAL MAIL FRAUD SCHEMES
This investigative report provides a revealing look at the history of PacNet, how it rose to become the preferred payment processor for direct mail fraudsters worldwide, and the many methods it used to transfer funds on behalf of its clientele. Its descriptions of the scale and diversity of PacNet’s alleged illicit operations – including flying bundles to cash to fraudsters on a company-owned plane – help explain why PacNet earned a rare designation as a “transnational organized crime” ring from the US Office of Foreign Assets Control, (via CNN Money)