In the latest Financial Crime Wave, a counter-graft watchdog names Danske Bank 2018’s “Most Corrupt Actor,” beating out Russia’s leader, a look at last year’s biggest corporate scandals, from 1MDB to the swirling “Car Wash,” the FBI more aggressively goes after money mules through more prosecutions, awareness campaign, and more.


Wells Fargo to pay nearly $600 million to resolve state investigations into unauthorized accounts scandal, sales practices

Wells Fargo will pay $575 million to resolve investigations by all 50 states and Washington, D.C., into a range of practices, the latest chapter in the bank’s long-running legal problems. The deal ends inquiries that began after federal regulators revealed in September 2016 that Wells Fargo employees had for years opened millions of unauthorized bank accounts in customers’ names. The employees said they had done so because they feared losing their jobs if they could not meet Wells Fargo’s aggressive sales goals.

The disclosure led to the departure of Wells Fargo’s chief executive at the time, John G. Stumpf, and several other senior executives. It also sullied the company’s prized image as the best-behaved major American bank after the 2008 financial crisis.

Wells Fargo admitted its missteps and paid fines of $185 million, but accusations of bad behavior kept multiplying: that some customers who took out car loans were forced to buy unwanted auto insurance; that more than 500,000 people were enrolled in a bill-paying service they may not have asked to join; that some mortgage customers had been overcharged; and that some people had been charged for life-insurance policies they did not buy, (via the New York Times).

Hong Kong

HKMA penalizes JPMorgan Chase $1.6 million for AML failings,

Hong Kong’s financial regulator penalized a local branch of the largest bank in the United States nearly HK13 million for a host of financial crime compliance failures, including lax customer screening and monitoring and a lack of client details in wire transfers over a roughly two-year period.

The Hong Kong Monetary Authority (HKMA) fined the JPMorgan Chase branch HK$12.5 million, or $1.6 million, for breaches of anti-money laundering (AML) rules, in particular, for the depth and accuracy of customer due diligence and cross-referencing those findings with wire transfers and related entities, particularly to riskier regions and higher risk customers. The settlement also requires that JPMorgan submit to an outside monitor to ensure the branch effectively remediates past deficiencies and brings the entire problem up to current standards.

The penalty takes into consideration several aggravating and mitigating factors, according to the HKMA:

·         “The need to send a clear deterrent message to JPMorgan Hong Kong and the industry about the importance of effective controls and procedures to address money laundering and terrorist financing risks.”

·         “JPMorgan Hong Kong had self-identified and reported certain deficiencies, and had taken positive and extensive remediation work in respect of such deficiencies and after it became aware of the contraventions and other deficiencies identified by the HKMA. In particular, it has enhanced its control functions to prevent similar contraventions from recurring,” (via the HKMA).


OCCRP names Danske Bank Corrupt Actor of the Year in wake of 230-billion-euro money laundering scandal

 A €230 billion money laundering scandal put Danske Bank ahead of a record 22 other contenders to win the 2019 Corrupt Actor of the Year award from the Organized Crime and Corruption Reporting Project. For the past seven years, the non-profit media organization has spotlighted the individual or institution that has done the most over the previous 12 months to advance organized criminal activity and corruption in the world. “Danske Bank is a worthy recipient of this prize. It highlights the role of the criminal services industry in enabling international corruption and crime,” said OCCRP co-founder and editor Drew Sullivan. The term “criminal services” refers to the banks, law firms, registration agents, accountants, and others who help criminals and corrupt officials hide their assets and legitimize their operations.

“In the past 20 years, they’ve globalized organized crime and autocracy and helped everyone from Mexican drug cartels to Russian President Vladimir Putin to terrorists, autocrats, and almost every global threat,” he said. Sullivan was one of nine judges who made the final selection. Nominations were submitted by journalists and the public.

Finalists for the award meant to identify the world’s most influential rogues included:

  • Russian President Vladimir Putin, a former OCCRP Person of the Year;
  • Hungarian President Viktor Orban, who has enriched himself and his friends while cracking down on migrants and turning his country away from democracy;
  • Saudi Arabian Crown Prince Mohammed bin Salman, implicated in the death and dismemberment of US-based journalist Jamal Khashoggi, as well as in jailing dissidents and shaking down and torturing rivals, (via the OCCRP).


JPMorgan to pay more than $135 Million for mis-handling of securities receipts, ADRs

The Securities and Exchange Commission today announced that JPMorgan Chase Bank N.A. will pay more than $135 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs). ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank.  The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents.

The SEC’s order found that JPMorgan improperly provided ADRs to brokers in thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs.  Such practices resulted in inflating the total number of a foreign issuer’s tradeable securities, which resulted in abusive practices like inappropriate short selling and dividend arbitrage that should not have been occurring. This is the eighth action against a bank or broker, and fourth action against a depositary bank, resulting from the SEC’s ongoing investigation into abusive ADR pre-release practices,(via SEC).

Corporate scandals

The largest corporate scandals of 2018: From 1MDB to Operation Car Wash and beyond

When looking at 2018, the year had no shortage of corporate misconduct. Most interestingly, the three largest frauds of 2018 all shared a theme: the use of professionals. Here are some snapshots, analysis and common threads through some of these schemes:

·         1MDB: Sovereign wealth fund 1Malaysia Development Berhad (1MDB) was created to attract foreign investment.  Instead, criminal and regulatory investigations have revealed embezzlement on an industrial scale. This was perpetrated by former Prime Minister Najib Razak and those surrounding him.

·         Operation Car Wash: The Malaysia Parliament has identified at least $4.2 billion in fraud in 1MDB. Shockingly, in November 2018, the Department of Justice has implicated three senior Goldman Sachs bankers, and one of them, Goldman’s Southeast Asia chairman and a managing director, has pleaded guilty. Malaysia has now filed criminal charges against Goldman. This is a first for a U.S. investment bank.

·         The story churned out of control in 2018, as it brought down the Brazilian government. It also created at least two Netflix movies, “The Mechanism,” and “The Laundromat.” As crazy as a multi-billion-dollar fraud would appear, this is not what makes the fraud notable. Rather, it is the involvement of professionals, in this case, attorneys, including those in the United States.

·         EU bank money laundering scandals: One of the largest corporate scandals of 2018 is the involvement of EU banks that have been centrally involved in the Panama and Paradise Papers, in laundering billions of dollars for kleptocrats, money launderers and ordinary everyday tax cheats.

·         HSBC, based in London, estimates that it may be required to pay $1.5 billion in fines to U.S. regulators. Germany’s largest bank, Deutsche Bank, was raided by hundreds of German police in November 2018, and these investigators specifically were ordered to search each board of directors’ office, (via The Hill).

Money mules

FBI steps up efforts against ‘money mules,’ explosion of related online fraud by scammers, duped victims

The FBI is grappling with a seemingly endless cycle of money laundering schemes that law enforcement officials say they’re scrambling to slow through a combination of prosecution and public awareness: money mules. Beyond the run-of-the-mill plots, officials say, is a particularly concerning trend involving these “money mules.” These are people who, unwittingly or not, use their own bank accounts to move money for criminals for purposes they think are legitimate or even noble.

The “mule” concept has attracted renewed attention with this month’s release of Clint Eastwood’s “The Mule,” a real-life tale of an elderly horticulturist who smuggled cocaine for a Mexican cartel. But the modern-day mules of most concern to the FBI are people who get themselves entangled in complicated, international money laundering schemes that cause huge economic losses and show no signs of stopping.

The FBI and international law enforcement agencies have stepped up efforts against the fraud and say they’re building bigger cases than before. Europol said this month it had identified 1,504 money mules, arresting 168, in a continent-wide bust. The FBI in June announced the arrests of 74 people, including 29 in Nigeria, for schemes targeting businesses and the elderly, and has launched a publicity campaign called “Don’t Be a Mule.”

The money mule cases are an offshoot of more generic frauds encountered by the FBI, including schemes that dupe people into thinking they’ve won the lottery and can claim their prizes by wiring an advance payment, or that trick the unsuspecting into believing a relative has been arrested and needs urgent bail money or that a supposed paramour they’ve met online requires cash, (via AP).


New allegations against Ghosn concern payments to Saudi businessman: report

Fresh misconduct allegations brought by Tokyo prosecutors against ousted Nissan Chairman Carlos Ghosn center on the use of company funds to pay a Saudi businessman who is believed to have helped him out of financial difficulties, two company sources with knowledge of the matter said. Prosecutors arrested Ghosn for a third time on Friday, accusing him of aggravated breach of trust in transferring personal investment losses to the automaker. The prosecutors’ statement said they believe that around October 2008, Ghosn was trying to deal with losses on paper of 1.85 billion yen ($16.6 million) incurred on a swap contract he had with a bank which it did not name.

A person helped arrange a letter of credit for Ghosn and a company run by the person later received $14.7 million in Nissan funds in four installments between 2009 and 2012, the statement said, adding that the payments were made in Ghosn’s and the person’s interests. According to the Nissan sources who have knowledge of the company’s probe into its former chief, the person who helped Ghosn is Khaled Al-Juffali, vice chairman of one of Saudi Arabia’s largest conglomerates, E. A. Juffali and Brothers, and a member of the board at the Saudi Arabian Monetary Authority. He is also majority owner of a company called Al-Dahana which owns half of a regional joint venture called Nissan Gulf with the other half held by a wholly owned unit of Nissan Motor, (via Reuters).


FCMC and JSC ‘BlueOrange Bank’ have entered into an administrative AML agreement, a fine of 1.2 million euro imposed 

Latvia’s financial regulator, the Financial and Capital Market Commission (FCMC) has penalized JSC “BlueOrange Bank” 1.2 million Euros for anti-money laundering (AML) failures, including monitoring and reporting on risky clients – such as non-resident clients hailing from former Soviet Union regions. Overall, Latvia has come under intense scrutiny by EU and foreign regulators as being a conduit for illicit Russian funds. The country and its banking sector are trying to change that, chiefly by changing laws and strengthening AML enforcement.

Since the changes of the AML/TF regime in the international financial environment along with the reforms to the Latvian banking sector taken by the FCMC over the past four years, various sanctions for the breaches of AML law have been applied to the financial sector entities, including the fines in the amount of approximately 16 million euros,” according to the regulator, noting that between 2003 and 2014, it handed down 55 penalties worth 1.2 million euros, but in the past four years, levied 22 sanctions worth just less than 16 million euros, (via the FCMC).


The new wave of Netflix phishing attacks is so bad that the FTC issued a warning.

The year may be drawing to a close but that doesn’t mean scammers are taking any time off for the holidays. A new bulletin issued by the Federal Trade Commission highlights a fresh wave of Netflix phishing scams that have been landing in email inboxes around the globe.

The scam itself is old. It’s a classic “update your payment information” request that includes a link to a fake Netflix login screen where gullible folks might enter their details, and it’s the kind of thing that we see pretty regularly in our spam filters and junk mail folders, but this particular scam is apparently widespread enough to have drawn the attention of the FTC, (via BGR).


U.S. Indicts Two Chinese Hackers tied Government for Global Campaigns to Steal Intellectual Property, Confidential Business Information 

 Deputy Attorney General Rod J. Rosenstein and other high-level U.S. officials announced the unsealing of an indictment charging Zhu Hua (朱华), aka Afwar, aka CVNX, aka Alayos, aka Godkiller; and Zhang Shilong (张士), aka Baobeilong, aka Zhang Jianguo, aka Atreexp, both nationals of the People’s Republic of China (China), with conspiracy to commit computer intrusions, conspiracy to commit wire fraud, and aggravated identity theft.

Zhu and Zhang allegedly belong to a hacking group operating in China known within the cyber security community as Advanced Persistent Threat 10 (the APT10 Group).  The defendants worked for a company in China called Huaying Haitai Science and Technology Development Company (Huaying Haitai) and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau, (via the IELR Blog).

Tax evasion

IRS turning to social media to bolster cases

The Internal Revenue Service (IRS) is looking to get its hands on a product that will help its agents investigate tax dodgers who’ve set up shop on social media, according to a request posted to the federal government’s procurement website, FedBizOppsThe post indicates that the IRS, whose under-equipped enforcement agents ferret out financial crime related to the tax system, is looking for a new way to investigate potential tax cheats based on their social media usage, citing as one example the ubiquity of online stores.

The IRS currently has no “formal tool,” it says, to comb through social media feeds. It also says that its agents are currently largely prohibited from viewing or accessing “publicly available information on social media sites,” (via Quartz).


White House mulls new year executive order to bar Huawei, ZTE purchases: sources

 President Donald Trump is considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using telecommunications equipment made by China’s Huawei and ZTE, three sources familiar with the situation told Reuters. It would be the latest step by the Trump administration to cut Huawei Technologies Cos Ltd and ZTE Corp, two of China’s biggest network equipment companies, out of the U.S. market.

The United States says the companies work at the behest of the Chinese government and that their equipment could be used to spy on Americans. The executive order, which has been under consideration for more than eight months, could be issued as early as January and would direct the Commerce Department to block U.S. companies from buying equipment from foreign telecommunications makers that pose significant national security risks, sources from the telecoms industry and the administration said, (via Reuters).


Vatican tribunal hands down first money laundering verdict, builder gets more than two years in prison

The Vatican’s criminal tribunal has convicted an Italian builder of using his accounts in the Vatican bank to launder money, and sentenced him to 2½ years in prison. The Vatican press office said the Dec. 17 decision, announced Thursday, marked the first time the Vatican court had handed down a money-laundering verdict since the city state criminalized the offense in 2010 as part of its financial reform efforts.

Italian police had placed Angelo Proietti under house arrest in 2016 as part of an investigation into the alleged fraudulent bankruptcy of his construction firm, Edil Ars Srl, which had done contract work for various Vatican entities. The Vatican cooperated in the investigation after flagging a suspicious transaction in one of Proietti’s Vatican bank accounts in 2013 and seizing 1 million euros. The money was ordered confiscated by the court, (via AP).

Securities enforcement

Finra fines Morgan Stanley $10 million for AML program failures, lax monitoring system, oversight of penny stock trades

The Financial Industry Regulatory Authority (Finra), the chief self-regulatory sentinel of the nation’s security sector, Wednesday penalized Morgan Stanley Smith Barney $10 million for a host of financial crime compliance and supervisory failures, from customer vetting and monitoring to missing and reviewing alerts on aberrant transactional activity.

The action stated the firm, among other issues, failed to properly vet customer deposits and sales of penny stocks, wrestled with a weak transaction monitoring system that didn’t adequately scrutinize tens of billions of dollars of wire and foreign currency transfers, including transfers to and from countries known for having high money-laundering risk, and allowed tens of billions of shares of penny stock to move freely – a current Finra focal point, (via Finra).

Energy sector

Global Witness Investigation: Senior executives at top world oil companies implicated in Brazilian bribery scandal

Giant commodity traders Trafigura and Vitol find themselves deeply embroiled in Brazil’s sprawling Car Wash scandal.  High-ranking executives in two of the world’s largest companies were complicit in vast bribery schemes to secure sweetheart oil deals in Brazil, prosecutors have said in court documents reviewed by Global Witness. 

Trafigura and Vitol, the commodity trading goliaths, have found themselves embroiled in Brazil’s Car Wash scandal, one of the biggest corruption cases of all time. Brazilian authorities are investigating them and rival Glencore for allegedly paying bribes totaling $15.3 million to officials at the Brazilian state oil company Petrobras, in return for oil deals at preferential rates, (via Global Witness).


New York regulator fines Barclays Bank, local branch $15 million for CEO attempting to ferret out whistleblower, clashing with compliance

The New York State Department of Financial Services (NYDFS) has fined Barclays Bank PLC and its New York branch $15 million for violations of New York Banking Law stemming from a DFS investigation into attempts by the bank’s CEO to identify the author, or authors, of two whistleblowing letters in contravention of Barclays’ established whistleblowing policies and procedures. The DFS investigation found that shortcomings in governance, controls and corporate culture relating to Barclays’ whistleblowing function permitted a sequence of events that potentially could have had a detrimental impact on the efficacy of Barclays’ whistleblowing program.

Several members of senior management failed to follow or apply whistleblowing policies and procedures in a manner that protected the CEO and the bank itself.  Limited gaps in the bank’s whistleblowing policies and procedures became apparent during the investigation, and it appears that the cultural transformation that Barclay’s Group Compliance had been working hard to instill in the more than one hundred thousand Barclays employees worldwide, was not nearly complete, (via the NYDFS).


A look at how a former CIA officer was caught betraying his country

News program 60 minutes details the targeting, grooming, fall, and eventual prosecution, of a former CIA officer who betrayed his country by selling secrets to Chinese intelligence officials, (via CBS).

ACFCS Resource Review

DOJ, FBI Money Mule Awareness Booklet

Federal investigators reveal the profile of money mules to better help compliance professionals and frontline staff, including parsing out those acting in unwitting, witting and complicit capacities. Red flags include opening multiple accounts in their own names, likely warned previously about being part of fraudulent activity and may receive funds from unknown or third-party entities, (via DOJ).