Financial Crime

In this week’s Financial Crime Wave, the United Kingdom is considering branding top sporting federation officials as politically-exposed persons in wake of FIFA scandal, U.S. blacklists Middle Eastern money laundering network, terrorism and criminal networks intertwine in Miami banks, and more.

PEPs: U.K. considering tagging top sporting federation officials as PEPs

The U.K.’s Treasury is considering tagging senior managers at international sporting federations as politically-exposed persons, a move that would give compliance officers a clearer path for tackling the risks of money laundering and corruption associated with these institutions. As it prepares to implement the Fourth Money Laundering Directive from the European Union, which incorporates the latest Financial Action Task Force standards, the U.K. published a consultation last month that proposed including high-ranking officers at international sporting federations, their families and known associates in its definition of PEPs. Citing the recent “scandal” at FIFA, the world’s football governing body, the Treasury said “it is clear there is a risk” of money laundering, corruption and bribery by people with decision-making powers at sporting federations. Although the E.U. directive doesn’t require that senior managers at these organizations be screened as PEPs, the inter-governmental FATF has raised some flags in its guidance over PEPs about the risks of exposure to illicit transactions in such roles, (via the Wall Street Journal).

Money laundering: U.S. blacklists Middle Eastern money laundering group aiding criminal cartels, terrorists

The United States blacklisted four men and their companies based in Pakistan and the United Arab Emirates on Tuesday, for purported ties to an organization accused of laundering money for drug traffickers and Chinese, Colombian and Mexican crime groups. Among them was Pakistani national Obaid Khanani, whose father Altaf Khanani was arrested by U.S. authorities in September 2015 and accused by the U.S. Treasury Department of laundering billions of dollars for the Taliban and other groups. The department said in a statement that Obaid Khanani, 29, continued to help lead his father’s money laundering organization after the arrest. Altaf Khanani is set to be tried on money laundering charges in Miami this month, according to federal court records, (via Reuters). To read the original OFAC release, please click here.

Enforcement: UK FCA penalizes Bangladeshi bank more than $4 million on lax AML program

The United Kingdom’s top financial watchdog has imposed a £3.25m fine, or just more than $4 million, on a Bangladeshi state bank for failing to check its British clients for possible money laundering. Sonali Bank (UK), which is majority-owned by the Bangladeshi government, had “serious and systemic weaknesses” that allowed suspicious money transfers from its six British branches without proper checks. The Financial Conduct Authority has also taken the unusual step of banning Sonali from accepting new banking customers for almost six months, saying that it gave “clear warnings” to the firm about its lax money laundering controls in 2010 and repeatedly afterwards, (via The Telegraph).

Enforcement: Singapore regulator shuts down Swiss bank, fines others in AML crackdown

Singapore’s central bank has shut down a second Swiss bank and fined banks DBS and UBS in its biggest crackdown on alleged money-laundering activities connected with Malaysian sovereign fund 1MDB. Singaporean and Swiss regulators said that investigations showed Falcon Private Bank breached money laundering regulations in its dealings with the indebted Malaysian state fund 1MDB. The Monetary Authority of Singapore (MAS) ordered the private bank to close down and pay a fine of 4.3 million Singapore dollars for violations that included not filing suspicious transaction reports and failing to alert authorities about irregular activity in customers’ accounts. Two former Falcon board members are facing enforcement proceedings in Switzerland, it said. Singapore’s DBS Bank was fined S$1 million and Swiss global financial services company UBS S$1.3 million for breaches in Singapore’s law on prevention of money laundering, (via ABC).

Enforcement: Germany may not face home regulator’s wrath in suspected Russian laundering

Germany’s financial watchdog has found no evidence to date that Deutsche Bank violated money laundering rules in Russia, people close to matter said on Thursday, possibly relieving one headache for the country’s biggest bank. The Russian case is just one of many regulatory investigations that have combined to push Deutsche Bank into the most damaging crisis in the 146-year old bank’s recent history. Last month, a U.S. Department of Justice (DOJ) demand for up to $14 billion to settle claims that Deutsche Bank mis-sold U.S. mortgage-backed securities before the financial crisis sent the bank’s shares to their lowest ever levels, (via Reuters).

Fraud: From bank peon to illicit payment network chief, a profile of PacNet head exec

This is how someone goes from being a low-level bank employee to running an international enterprise now singled out by the U.S. government as one of the world’s most illicit criminal organizations. It started more than 20 years ago when a young Canadian banker stumbled upon a golden opportunity. The bank she worked for had shut down the accounts of a number of direct marketing clients because of the suspicious ways they were making their money. Rather than staying at her banking job, Rosanne Dronsfield (now Day) used her connections to create an entirely new payment processing business that would cater to clients like these and help them access bank accounts wherever they wanted to do business, (via CNN).

Corruption: U.S. to prosecute individuals, require guilty plea in massive hedge fund corruption case

US prosecutors pursuing alleged bribery in Africa have a big prize in their sights – Och-Ziff, one of the world’s largest and most powerful hedge funds, as well as dealmakers and money men on three continents. If investigators net some big fish, it will put individual executives on notice that they cannot disclaim responsibility for far-flung misbehavior. Och-Ziff, the $39 billion New York-listed hedge fund run by Daniel Och, has already set aside $414 million to pay penalties it expects to incur as part of a deal to settle alleged bribery in Africa following an investigation by the Department of Justice and the Securities and Exchange Commission. The two sides are in talks and US prosecutors are expected to insist that an Och-Ziff subsidiary — but not the parent company — pleads guilty to violating anti-corruption law, according to people familiar with the probe, (via the Financial Times).

Corruption: Billionaire banker faces investigations tied to tax evasion, corruption

A court date has been set for billionaire banker Joseph Safra in a criminal case that’s part of a federal investigation into tax fraud in Brazil, said a person with direct knowledge of the matter.Bottom of Form Prosecutors allege Grupo Safra executive Joao Inacio Puga, who is also a defendant in the case, negotiated paying a kickback to zero a tax debt owed by a Safra subsidiary, JS Administracao de Recursos. While Joseph Safra, 78, wasn’t directly involved in the illicit negotiations, Puga allegedly discussed the bribes with the billionaire owner, prosecutors say intercepted telephone conversations indicate, (viaBloomberg).

Terror finance: Hezbollah-linked network laundered illicit drug funds through Miami banks

Three men suspected of laundering cocaine money for the Colombian cartel have been busted after agents say they illegally moved $500,000 into Miami banks through a series of complicated financial transactions stretching from Australia to Europe. That’s not uncommon in Miami, but the trio’s background is: They are suspected associates of the Middle Eastern terror group Hezbollah. The case underscores the need for increased law-enforcement scrutiny on the role of Middle Eastern terror groups who use financial networks in Latin America to earn untold millions off drug profits. The involvement of radical Islamic terrorist groups in Latin American is not new but has increased in recent years, according to federal law enforcement and security experts, (via the Miami Herald).

Sanctions: U.S. Treasury loosens Iran sanctions tied to foreign dollar transactions

The U.S. Treasury Department is loosening sanctions on Iran, relaxing rules on foreigners doing dollar-denominated transactions with businesses in the nation. The new rules allow such deals with entities in Iran that aren’t under sanctions even if they are minority owned or controlled by someone who is on the sanctions list. “It is not necessarily sanctionable for a non-U.S. person” to engage in deals with an entity not on the list “but that is minority owned, or that is controlled in whole or in part, by an Iranian or Iran-related person on the” list, the Treasury said in guidance for businesses updated on its website late on Friday.  It’s the third update to the guidance and was intended to clarify the scope of the sanctions lifting and those that remain in place, according to a department spokesman.  The U.S. lifted some international sanctions in January after inspectors certified that Iran curtailed its nuclear program as promised under a 2015 agreement with world powers. Iranian officials have said the the U.S.’s restriction on dollar-denominated trades involving the nation has inhibited the sealing of additional agreements, (via Bloomberg).

Cybersecurity: Second hacking group goes after SWIFT, banks be wary

Cyber-security firm Symantec Corp said on Tuesday that a second hacking group has sought to rob banks using fraudulent SWIFT messages, the same approach that yielded $81 million in the high-profile February attack on Bangladesh’s central bank. Symantec said that a group dubbed Odinaff has infected 10 to 20 Symantec customers with malware that can be used to hide fraudulent transfer requests made over SWIFT, the messaging system that is a lynchpin of the global financial system. Symantec’s research provided new insight into ongoing hacking that has previously been disclosed by SWIFT. SWIFT Chief Executive Gottfried Leibbrandt last month told customers about three hacks and warned that cyber attacks on banks are poised to rise. SWIFT and Symantec have not identified specific victims beyond Bangladesh Bank. Symantec said that most Odinaff attacks occurred in the United States, Hong Kong, Australia, the United Kingdom and Ukraine, (via Reuters).

Casinos: AML exemption for smaller casinos gives competitive advantage, could draw crooks

Mesquite Gaming recently called for toughening a state bookmaking regulation meant to monitor potential money-laundering activity, a move analyst believe is an attempt to bring tough anti-money laundering obligations to smaller gaming operations now currently exempt because their income is less than $1 million a year. The company operates the Casa Blanca and Virgin River casinos in Mesquite, a southern Nevada town about 100 miles north of Las Vegas, on Interstate 15 near the Utah state line. The casinos include full-service sports books. Their only competition is from the Eureka Hotel & Casino, which offers customers a William Hill US satellite sports book that operates at a lower level of regulatory compliance because it grosses under $1 million a year. Mesquite is arguing that if there is a sliding scale for casino AML rules, it could mean criminals will be drawn to the path of least resistance, possibly fostering illicit activity, (via CDC Gaming Reports).

Corporate transparency: FATF giving more emphasis to how countries capture ownership data

The Financial Action Task Force, an international anti-money laundering standards body, said it would be placing a greater emphasis on questions concerning how countries require companies to capture beneficial ownership information as it evaluates regions going forward. The FATF on Friday publicly released its report to finance ministers and central bank chiefs of the G-20 that laid out its work on implementing international standards of transparency, including on the availability and exchange of beneficial ownership information. The report noted the FATF issued its first standards on beneficial ownership in 2003, updated them in 2012 and now have set out “comprehensive measures” on the issue, (via the Wall Street Journal).

Human trafficking: U.S. authorities arrest Backpage CEO on alleged pimping, trafficking

Carl Ferrer, chief executive of advertising website, was arrested on Thursday on criminal charges including pimping, as authorities investigate the company which has been accused of facilitating sex trafficking of minors. The attorneys general of Texas and California said in a statement that Ferrer had been taken into custody in Houston on a California warrant. Backpage, the second-largest U.S. online classified ad service after Craigslist, has faced scrutiny from the U.S. Senate as well as civil lawsuits over allegations that the site facilitates sex trafficking, especially of children, (via Reuters).