In this week’s Financial Crime Wave, a jury in California convicts a man tied to a Hawala network that helped Mexican cartels, the chief banking regulator in the United States expresses concerns about rising anti-money laundering tech challenges, soaring cyber risks, survey says crypto criminals dart to dark net to cleanse illicit profits, and more.

Money laundering

Jury convicts man of running Mexican narco-fueled ‘Hawala’ network spanning U.S., India and Canada

A federal jury convicted an Indian-American man from Monrovia, California, for his role in an international money laundering network that moved millions of dollars in illicit proceeds for narcotics traffickers, including Mexico’s Sinaloa Cartel. Harinder Singh, 32, who also goes by “Sonu,” was found guilty by a jury in California Jan. 19, of conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business. He faces a maximum of 30 years in federal prison.

Prosecutors argued that drug traffickers used a traditional hawala network of brokers spanning the United States, Canada and India to secretly transfer millions of dollars of drug proceeds to the United States, where brokers such as Singh delivered money to couriers acting on behalf of the Canadian drug traffickers and Mexican drug cartels.With the verdicts against Singh, prosecutors have convicted 18 defendants who were named in a 2015 grand jury indictment that was the first major case in the United States involving “hawala” transfers of drug money, (via News India Times).

Corporate Transparency

UK votes down beneficial ownership register in BVI, other offshore territories in narrow defeat for corporate transparency

The United Kingdom (UK) has rejected a proposal for the British Virgin Islands to implement a public register that would reveal the names of beneficial owners of offshore companies registered in the territory. In a continuing fight against money laundering and tax evasion, a number of UK officials have been pushing the BVI to make the names of these beneficial owners public. But, when the proposal for a public beneficial ownership register in the BVI and in five other British Overseas Territories was put to the UK’s House of Lords last week, majority voted against it.

The final tally after the vote was 211 to 201. The six Overseas Territories that would have been affected are Anguilla, Bermuda, the Cayman Islands, Montserrat, Turks & Caicos Islands, and the BVI. According to international media reports, UK politicians who voted against the proposal argued that implementing a public register in these Overseas Territories can lead to identity theft, (via BVI News).

In absorbing FinCEN’s new beneficial ownership rules, debate abounds about who best to foot the bill: banks or government?

To best fight financial secrecy, the question is whether private firms should be the first line of defense, or whether the federal government should take charge of gathering and organizing the information. One problem with putting it all on the banks and brokers, as the U.S. Treasury will do in May, when new rules come into effect, is that the information is fragmented, making it harder to detect the patterns that might reveal money laundering. The financial institutions are trying to shift the onus to the federal government.

A legislative proposal from the House Financial Services Committee would require applicants seeking to form corporations or limited liability companies to file a report with the Treasury Department listing the beneficial owners, including updates if there is any change in ownership. This approach would relieve banks of at least some of the burden of gathering the information, in the first instance reducing the costs of complying with the new disclosure rules. The federal government would be responsible for maintaining a database that banks could just check to establish compliance with the disclosure rules, but similar bipartisan proposals in recent years have floundered, (via the New York Times).

U.K. bringing more sectors under beneficial ownership provisions

Under new U.K. AML rules, more details needed from solicitors, trust and company service providers on beneficial ownership of corporate clients, (via Today’s Conveyancer).

Real estate

More countries considering, extending AML requirements to real estate sector: Report

A new report by payments and compliance firm Accuity states that many jurisdictions are finally wising up to the financial crime vulnerabilities of the real estate sector, which has allowed organized criminal groups, terror cells and corrupt powermongers to safeguard and launder a staggering amount of their ill-gotten gains. The United Nations estimates that money laundering through real estate is worth around $1.6 trillion a year – around three percent of the world’s total GDP. Money launderers are opportunists and the real estate sector is an attractive target, providing the opportunity to move large amounts of money in a single transaction, in an area that is largely untouched by AML legislation, but one that is getting more attention – something the U.S. has been focusing on in recent geographic targeting orders.

No part of the world is immune, but parts of the Asia Pacific region have been identified as “especially at risk.” In a growing number of jurisdictions, notably New Zealand and Hong Kong, anti-money laundering laws are beginning to seep into the real estate sector, according to the report, Money Laundering and Real Estate. The analysis highlights how AML requirements in every major region are beginning to be applied to real estate transactions. It’s not a matter of if, but when real estate professionals will be bound by similar rules to those applied to banks, (via Accuity).


In the United Kingdom, authorities have issued millions of dollars in AML penalties against estate agents, but the fines are not being made public

Estate agents are being slammed with “business busting” fines under new anti money laundering regulations, according to the head of the National Association of Estate Agents (NAEA), but the amounts are not public. Estate agents are being fined six and seven figure sums for failing to comply with new anti-money-laundering and anti-tax-evasion legislation, according to the head of the National Association of Estate Agents. HMRC confirmed fines had been handed to estate agents, but could not say how many, though there is a general consensus there has been a “ramping up” of compliance activity, as firms work to comply with the new laws.

The moves are done to prevent organized criminal groups, corrupt oligarchs and other money launderers from cleansing illicit gains now that that they are looking beyond high-end London locations to university towns to buy properties. One reason estate agents are getting more heavily scrutinized is there are few, if any, qualifications needed to become an estate agent and the onus is on the business to create a robust AML program, a costly process many have shirked, (via Business Insider).

China getting on AML enforcement bandwagon

Chinese central bank penalizes corruption-tinged firm for AML failures, (via Caixin).


Congress asks FinCEN to back states in federal hash fight

A bipartisan group of 15 senators on have joined the chorus of Congress members calling on the U.S. Treasury’s Financial Crimes Enforcement Network to keep intact marijuana banking guidance after the new Attorney General backtracked on the prior administration’s Cole Memo de-emphasizing investigations in legalized states, (via The Cannabist).


Examiners concerned about evolving AML, cyber risks, technology challenges, innovations: OCC

Financial crime compliance risk remains elevated as banks continue to manage money laundering risks in an increasingly complex risk environment, according to the U.S. Treasury’s Office of the Comptroller of the Currency (OCC), in its Semiannual Risk Perspective.  The challenge for banks to comply with AML requirements persists due to dynamism of money laundering and terrorism-financing methods. Also, banks need to maintain a focus on refining or updating BSA compliance programs to address any vulnerabilities created by new product offerings, which criminals can exploit.

In addition, AML compliance risk management systems may not keep pace with evolving risks, constraints on resources, changes in business models, and an increasingly complex risk environment. On the cyber side, banks must be prepared for more, and more complex, cyber attacks and vulnerabilities tied to risky third parties overseeing data and operations, (via the OCC).

U.S. pressuring Caribbean to beef up on AML

U.S. ambassador to Caribbean countries: deal with your AML issues, improve in detecting, preventing money laundering, (via the Jamaica Gleaner).

Tax evasion

Latest Fatca list registrations for compliant banks rise 11 percent to nearly 30,000 institutions

The first list of foreign financial institutions compliant with the US Foreign Account Tax Compliance Act (FATCA) has been published by the US Internal Revenue Service. The year starts with 297,393 registrations – an increase of 1,543 over the 295,850 that ended last year.

Last year started with 267,707 registrations – making a gain of 29,686 (11%) across the year. The next FATCA list is due in February 2018. Some of the countries with the largest bank registrations, in the tens of thousands, include, Brazil, Cayman Islands and Japan, (via IExpats).

Individual liability

More responsibility, more worries for U.K. compliance professionals

What will be keeping AML U.K. compliance professionals up at night in 2018? Two words: Individual liability, (via Lexology).

Securities/Virtual Currencies

U.S. securities regulators target fraudulent virtual currency ICOs

SEC, CFTC state they are more aggressively targeting virtual currency, initial coin offering fraudsters, will prosecute, penalize without hesitation, (via the SEC).

Virtual currencies

Where do criminals turn to launder illicit crypto assets? Survey says: Darknet, exchanges with weak AML, KYC

Darknet markets are the main source of funds that are sent to conversion services in bitcoin laundering attempts, either converting to fiat currencies, other Bitcoins or other crypto currencies, according to a new study by the Foundation for Defense of Democracies, that looked at where criminals go to lauder virtual currencies and profit from fraud and cyber hacks. Additionally, the number of illicit services that could be the source of “dirty bitcoins” sent to a conversion service increased fivefold from 2013 to 2016, according to the study. Having said that, the study finds that the sources of illicit funds entering conversion services are quite centralized.

“Only a small number of entities account for the majority of illicit activity in our sample,” the study says. “Nine of the 102 illicit entities were the source of more than 95 percent of all laundered bitcoins in our study. All nine were darknet marketplaces.” The recent study (PDF) by the foundation’s Center on Sanctions and Illicit Finance and blockchain analytics company Elliptic explored the “bitcoin laundering” ecosystem. In the study, Elliptic’s forensic analysis of the Bitcoin blockchain and other publicly available data were used to track the flows of illicit funds from 2013 to 2016. The study describes bitcoin laundering as a special type of money laundering that exists within the Bitcoin network where a user moves some bitcoins to a new address in a manner that obscures the original source of funds, (via Bitcoin Magazine).

Are ‘money mules’ using Australian banks to beat currency controls and a crypto crackdown in Asia?

Foreign cryptocurrency investors are using Australian bank accounts to deposit and transfer profits on deals that are banned in their own countries, particularly China and South Korea, according to tax and security specialists. ‘Money mules’, such as foreign students at Australian universities, are being used to set up the accounts that can then be sold, or given, to crypto investors to avoid regulatory scrutiny in their own countries. Alternatively, cyber criminals are selling forged Australian bank account, credit card, bank and investment statements for between $6 and $24 with the promise of delivery anywhere in the world within 24 hours.

Top security experts warn using Australia as a safe haven for cryptocurrency deals will “increase massively” as other countries attempt to crackdown on the growing mania. It comes as policy makers in Australia and around the world struggle to improve transparency, lower volatility and strengthen cryptocurrency regulation, which in Asian economies has meant a ban of trading and shutdown on exchanges, (via AFR).


U.S. warns against Venezuelan crypto currency

OFAC issues a statement on Venezuela’s purported energy-based crypto currency, with the basic sentiment being: don’t even try it, (via JD Supra).


Global forum tells companies to prepare for more cyberattacks, data breaches in 2018

The World Economic Forum’s Global Risk Report for 2018 lists cyberattacks and data theft as the two most likely risks to businesses around the globe that can be controlled by people, (via Fortune).