In this week’s Financial Crime Wave, authorities raid an Indian call center impersonating the IRS to scam U.S. residents, a shell game with a German bank ends in paying a U.S. tax penalty, FinCEN issues guidance on casino SAR sharing, and more.  


India call center epicenter of international criminal fake IRS scam that bilked U.S. residents of more than $100 million

Betsy Broder, who tracks international fraud at the Federal Trade Commission, was in her office in Washington last summer when she got a call from two Indian teenagers. Calling from a high-rise building in a suburb of Mumbai, they told her, in tones that were alternately earnest and melodramatic, that they wanted to share the details of a sprawling criminal operation targeting Americans. Ms. Broder, who was no stranger to whistle-blowers, pressed the young men for details.

He told her that he was working in a seven-story building and that everyone there was engaged in the same activity: impersonating Internal Revenue Service officials and threatening Americans, demanding immediate payment to cover back taxes. If they reached a person who was sufficiently terrified or gullible — this was known in the business as a “sale” — they would instruct that person to buy thousands of dollars’ worth of iTunes cards to avoid prosecution, they said; the most rattled among them complied. The victim would then send the codes from the iTunes cards to the swindlers, giving them access to the money on the card.

Tax evasion

Shell game finally stops as Deutsche Bank pays $95 million to settle U.S. tax suit

Deutsche Bank AG agreed to pay $95 million to resolve a U.S. government lawsuit accusing the German bank of tax fraud for using “insolvent” shell companies to hide significant tax liabilities from the Internal Revenue Service in 2000. Under the accord described in papers filed on Wednesday with the federal court in Manhattan, Deutsche Bank also admitted to trying to stick the shell companies with the tax bill for its then-new stake in drugmaker Bristol-Myers Squibb Co. The settlement resolves a lawsuit filed in December 2014 that had sought to recoup more than $190 million in taxes, penalties and interest. The tax case arose from Deutsche Bank’s early 2000 acquisition of Charter Corp, which had been sitting on a large unrealized gain in Bristol-Myers. According to settlement papers, the bank in May 2000 sold Charter to the shell companies, which then liquidated Charter and sold the Bristol-Myers shares back to the bank, triggering a more than $52 million tax liability, (via Reuters).


Casino SARs can be shared with domestic parents, affiliates, but not foreign operations, collocated MSBs, says FinCEN

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) Wednesday issued guidance meant to bolster the casino industry’s ability to file suspicious activity reports (SARs) on illicit actions that could be occurring across a gaming organization, though hedged the broad sharing powers with a bright line that ends at the U.S. border.  The country’s arbiter of anti-money laundering (AML) rules stated that under the Bank Secrecy Act (BSA) a casino that has SAR “may share the SAR, or any information that would reveal the existence of the SAR, with each office or other place of business located within the United States of either the casino itself or a parent or affiliate of the casino.”

FinCEN stated it wanted to confirm that because “sharing SARs under these circumstances will assist casinos in discharging their responsibilities with respect to enterprise-wide risk management and compliance with applicable laws and regulations.” Even so, the domestic operations can’t engage in such sharing with foreign affiliates or parent companies. As well, casinos are generally prohibited from sharing information or SARs, or even their existence, with anyone not involved in compliance, such as front line employees, a money services business that happens to be located on casino grounds or restaurants and such on the property, (via FinCEN).


FCPA enforcement had record year in 2016, hitting nearly $2.5 billion on graft in pharmaceuticals, oil, telecommunications, banking

Last year 27 companies paid about $2.48 billion to resolve FCPA cases. It was the biggest enforcement year in FCPA history. Both the number of enforcement actions and the overall amounts paid to resolve them were records.

Four blockbuster FCPA settlements in 2016 — Teva Pharmaceutical at $519 million, Odebrecht / Braskem at $419.8 million, Och-Ziff at $412 million, and VimpelCom at $397.6 million — landed on our list of the ten biggest FCPA cases of all time. For comparison:

  • In 2015, 11 companies paid $133 million to resolve FCPA cases.
  • In 2014, 10 companies paid $1.56 billion.
  • In 2013, 12 companies paid $731.1 million.
  • In 2012, 12 companies paid $259.4 million.
  • In 2011, 15 companies paid $508.6 million.
  • In 2010, 23 companies paid $1.8 billion, (via the FCPA Blog).

Terror finance

Islamic State, depleted, but not yet defeated, as U.S., Middle Eastern officials crimp cash flows

The Islamic State starts the new year with a drastically depleted bank account, counterterrorism officials say, following months of intensified efforts to deprive the Islamists of oil profits and other revenue used to finance military operations and terrorist attacks abroad. Coalition aircraft in the past 15 months have destroyed more than 1,200 tanker trucks — including 168 vehicles struck in a single air raid in Syria in early December — while also using new weapons and tactics to inflict lasting damage on the terrorists’ remaining oil fields, U.S. and Middle Eastern officials say.

The military strikes are being paired with new measures intended to shut down financial networks used by the Islamic State to procure supplies and pay its fighters, the officials say. Two weeks ago, the U.S. and Iraqi governments announced the first coordinated effort to punish Iraqi and Syrian financial services companies used by the terrorists to conduct business. The campaign has slashed profits from oil sales, traditionally the biggest revenue source for the Islamic State, U.S. officials say, and deepened the economic pain for a terrorist organization that until recently was regarded as the world’s wealthiest. One sign of the financial strain, the officials say, is a shrinking payroll: After cutting salaries by 50 percent a few months ago, the Islamic State now appears to be struggling to pay its workers and fighters at all, (via the Washington Post).


New UK law targeting gatekeepers, the financial “enablers” of crime

Starting today, parts of the UK’s Finance Bill 2016 came into effect which allows the HMRC to go after so-called “enablers” who help UK tax payers avoid taxes using offshore schemes, services or arrangements, such as bank accounts, investment or broker accounts, trusts, companies, directors / officers or nominees. The amendments introduce a “name & shame” procedure and civil penalties for anyone, including lawyers, bankers employees, investment firms, accountants, incorporation firms and introducers who help individuals, trusts, funds or companies avoid taxes offshore and for other forms of non-compliance in respect of inheritance, capital gains and income tax. The name and shaming will be like a “perp walk” only online, so that a bank, law firm, advisor or other enabler will be forever located on an online search and is intended to hurt lawyers, accounting firms and banks where it hurts most – reputation, (via Duhaime’s AML).


Industry looking to Senator Warren for support in gaining, keeping banking services

Elizabeth Warren is attempting to right a wrong that has been dealt to the marijuana industry concerning their ability to access full services at American banks, and a decision in their favor could save weed businesses from armed robbery by civilians and law enforcement asset seizures that total in the millions. Worse, because marijuana businesses have to follow strict rules in order to gain minor access to limited services at banks, the pot industry is susceptible to third-party services. One other issue for weed businesses is the lack of access to credit card machines. If Senator Elizabeth Warren is successful in 2017, pot businesses may gain enough legal protection from the U.S. Department of the Treasury to be able to secure all of their money easily in a real bank, (via the Inquisitr).


New AML rules in China to focus on large domestic, foreign transactions

China’s central bank rolled out amended rules on Friday that will require financial institutions to flag large-volume and suspicious transactions – a bid by the government to identify money laundering. Daily RMB transactions of 50,000 yuan ($7,190) or above, plus foreign-currency transactions with a value of $10,000 or more, will be flagged as large-sum transactions, according to the rule issued by People’s Bank of China. Transactions subject to scrutiny include cash deposits, cash withdrawals, settlements or sale of foreign exchange in cash, exchange of notes, cash remittances, and payments via a cash instrument. The new rule will take effect on July 1. According to Caixin, in a previous rule put in place in March 2007, cash transactions of 200,000 yuan or more and foreign currency transactions with a value of $10,000 or above were required to be flagged as “large volume,” (via the China Economic Review).