French tell UBS to post $1 billion bail in tax fraud case

This week’s Crime Wave covers a US law enforcement crackdown on money laundering by human smuggling rings that transport Central American children, FinCEN’s “death sentence” for a bank operating out of Cyprus, an announcement by French authorities of a tax fraud investigation into UBS, and much more.

Money Laundering and Sanctions

FinCEN hits Federal Bank of the Middle East with ‘primary money laundering concern’ designation – The US Financial Crimes Enforcement Network employed one of its most powerful enforcement tools against the Federal Bank of the Middle East (FBME) last week, designating the institution as a “primary money laundering concern” and cutting off its access to the US financial system. According to FinCEN’s press release announcing the designation, also called a Section 311 rule, the FBME “had a large shell company customer base” and willingly served as an institution for the “global criminal element,” facilitating corrupt public officials, terrorist financiers, organized crime and sanctions evaders. Though headquartered in Tanzania, the FBME reportedly conducted the bulk of its transactions through a branch in Cyprus. The bank issued a statement saying it was “shocked” at FinCEN’s actions and fully compliant with AML and other financial crime laws. The Central Bank of Cyprus seized control of the FBME several days after FinCEN’s Section 311 designation. Read more here and here (via the Wall Street Journal and YaLibnan).

US targets money laundering operations tied to human smugglers fueling border crisis – Last month, FinCEN issued an advisory to US financial institutions, warning them to look out for money laundering activity in “funnel accounts” potentially linked to cartels and human trafficking gangs. That advisory may be the opening salvo in a wider effort against the finances of trafficking operations. A wave of unaccompanied Central American children attempting to cross the US-Mexico border has given law enforcement agencies new urgency to investigate money laundering by human traffickers and try to choke off their financial channels. The Department of Homeland Security sent 60 additional human trafficking investigators to Texas last month as part of the effort, and is requesting $109 million in funding from the US Congress for counter-smuggling operations. Trafficking in persons, including children, remains lucrative and relatively low-risk for many criminal gangs running smuggling routes between Central America and Mexico. Read more here (via the LA Times).

Amid reports of illegal money transfers in mainland China, Macau combats money laundering – Money laundering and illegal financial transfers continue to be a hot topic for China and Macau, a Chinese administrative region that is known for its bustling gambling industry. The Secretary for Economy and Finance of Macau stressed the role of AML laws at a forum in the country this week. Tam said that Macau’s laws make it an “active participant” in the region’s cooperative effort against money laundering. With Chinese authorities currently probing allegedly fraudulent transfer schemes that allow unlimited amounts of Chinese money to be sent abroad, there have been reports of special terminals in pawnshops and casinos in Macau that let citizens transfer their money to overseas locations, bypassing strict limits imposed by the Chinese government (via Macau Business Daily).

As tensions run high in Ukraine, EU and Canada vow new sanctions on Russian individuals and entities – In the wake of the downing of a Malaysia Airlines passenger flight, European Union officials announced plans this week to impose further sanctions on Russian individuals and entities connected to the Putin administration and Ukrainian separatists. EU officials agreed to the expansion of sanctions in response to the Russian government’s suspected support of separatists and perceived lack of interest in defusing conflict in Eastern Ukraine. The latest sanctions apparently fall far short of sectoral sanctions that would target entire segments of the Russian economy, which have been proposed by some EU foreign ministers. To date, the EU has sanctioned 63 Russian and Ukrainian individuals and entities. Canada also announced plans to add more names to its sanctions list by Thursday of this week. Read more here (via the Washington Post).


UK’s Serious Fraud Office embarks on criminal investigations of forex rate-rigging – The UK’s leading financial crime enforcement agency, the Serious Fraud Office (SFO), formally announced it had begun criminal investigations of illegal manipulation tied to trading on foreign currency exchange markets. Often called forex, currency exchange is the world’s largest financial market, with an estimated $5.3 trillion in daily transactions. The forex market is dominated by some of the world’s largest banks, and traders from those institutions are suspected of having manipulated currency exchange rates up or down to benefit their trading positions, as well as fraudulently trading ahead of deals submitted by their clients. The SFO did not name specific institutions under investigation, but it is thought that the probe is focused on many of the same institutions involved in rigging the Libor rate. The SFO’s informal announcement comes after months of less formal information-gathering, as well as an announcement of a criminal case by the US Justice Department last October. Read more here (via the Independent).

Implicated in Rothstein’s $1.2 billion fraud scheme, former sheriff’s deputy receives 5-year sentence – Fraudster Scott Rothstein managed to run a massive Ponzi scheme in part by corrupting those around him, from partners at his law firm, to bankers and complicit investors who kept the funds flowing. Even four years after the scheme’s collapse, a parade of Rothstein facilitators are still shuttling through South Florida courtrooms. This week, former Broward Sheriff Office lieutenant David Benjamin became the latest collaborator to end up behind bars, receiving a five-year prison sentence for a range of misdeeds. Benjamin pleaded guilty to wrongfully arresting a woman to win favor with Rothstein and a friend, taking money and gifts from Rothstein, and even escorting Rothstein to the airport during the fraudster’s short-lived escape attempt during the final days of his Ponzi scheme. The Rothstein case is notable not only for the size of the fraud, but also the degree to which Rothstein was able to co-opt regional and national banks and their employees into his Ponzi scheme. Read more here (via the Sun Sentinel).

Tax Evasion and Enforcement

French launch tax fraud investigation into UBS, order bank to post $1 billion bail –UBS entered a deferred prosecution agreement with the US Justice Department over tax fraud charges nearly five years ago, but the Swiss financial giant’s tax enforcement troubles appear far from over. On July 23, French prosecutors announced a formal investigation into UBS for facilitating tax evasion and ordered the institution to post bail of more than $1 billion. The allegations of UBS’s misconduct in France are reportedly similar to those in the US case. UBS is suspected of courting wealthy French tax evaders and assisting them to conceal assets in offshore accounts. Read more here (via the NY Times Dealbook).