In this week’s Financial Crime Wave, Kenya’s anti-corruption watchdog published a revealing report on the corrupt activities of 175 government officials, the US approves an agreement to settle money laundering charges on German Commerzbank, and the US Treasury and Saudi Arabia target a Pakistani with sanctions for allegations of terrorist financing. Read for more current news on financial crime.
Amid a far-reaching bribery probe on Brazilian state-run oil company Petrobras, several large institutional investors are independently suing the company for losses they claim occurred because of corporate embezzlement. The plaintiff investors include Dimensional Fund Advisors, the US fund house, six New York City pension funds, and a Swedish government pension scheme. The lawsuit claims that the company misstated the value of its assets and made misleading statements about its anti-corruption policies and internal financial reporting controls. Since last year, Brazilian authorities have investigated Petrobras under allegations that former directors of the energy giant conspired with Brazilian politicians from the ruling party to secure contracts in exchange for kickbacks (via Financial Times).
Kenya’s anti-corruption watchdog published a report with details on the corrupt activities of 175 government officials, with some cases involving projects backed by the Chinese. Since the report was released last week, five ministers have already left their positions temporarily, after President Uhuru Kenyatta made a speech last Thursday in which he urged any public official cited in the report to step aside pending investigation. Kenyatta has launched an anti-graft campaign since taking office in 2013, but critics say it has not been effective. In one case mentioned in the report, a tender for the construction of a $3.5 billion standard gauge railway was awarded irregularly (via News 24).
Four years after the fall of Tunisian dictator Zine el-Abidine Ben Ali, the country is still looking for the funds stolen by the ousted leader and his entourage. The Swiss government froze $61.75 million in the wake of the Tunisian revolution since they were suspected of being “laundered” or gained via participation in a criminal organization. The Swiss investigation named 48 members of the Ben Ali clan. To date, only two planes, two yachts and $28 million have been recovered out of an estimated $40 million that have criminal origins. A report published last month by the World Bank concluded the corrupt former dictator manipulated the law to serve his own interests to control more than 21% of the profits generated by Tunisia’s private sector by the end of 2010 (via Swiss Info).
A senior Swiss banker is in custody as one of the major suspected in the Siemens bribery scandal. The banker, Jean-Claude Oswald, is being held on an international arrest warrant in Greece. According to people familiar with the matter, the Swiss national has already faced a prosecutor in Athens. The bribery case involved German company Siemens AG and Greek government officials during the 2004 Summer Olumpic Games that took place in Athens. A deputy director at the Defense Ministry testified that he took nearly 12 million euros in bribes to approve contracts for German, French, Russian and other foreign arms manufacturers. Swiss authorities have initially denied the expatriation of the former executive at BNP Paribas and Dresdner Bank (via The Greek Reporter).
Macau pledges to support Beijing’s crackdown on graft. The Head of Commission Against Corruption in Macau said the campaign will help bring corrupt fugitives to justice. Through enhanced communication and cooperation with the Chinese mainland, the agency will put forward its best efforts to prevent Macau from turning into a transit point or destination for illicit money outflows and corrupt official fleeing the country, according to the agency commissioner. Despite returning to Chinese sovereignty in 1999, Macau has not devised a law to transfer fugitives to and from the mainland (via South China Morning Post).
A US federal judge approved a settlement between the US government and German bank Commerzbank AG to resolve sanctions and anti-money laundering allegations. The Justice Department offered Commerzbank a deferred prosecution deal to settle charges of moving funds illegally through the US for countries like Iran and Sudan. The bank will pay the Department of Justice $1.45 billion as part of the agreement. Allegations under the charges include failure to comply with anti-money laundering laws that require banks to detect and report suspicious activities. The bank failed to report this suspicious activity during a probe into an accounting scandal at the Japanese Company Olympus. The bank must continue its anti-money laundering reforms and cooperate with the government for three years before charges are dropped (via Bloomberg).
In line with economic sanctions against Russia, US Senators are asking international soccer association FIFA to reconsider the host of the 2018 FIFA World Cup. The senators leading the petition, Robert Menendez and Ron Johnson, said in a letter to FIFA that “allowing Russia to host the FIFA World Cup inappropriately bolsters the prestige of the Putin regime at a time when it should be condemned and provides economic relief at a time when much of the international community is imposing sanctions.” The US and several European nations have imposed economic sanctions on Russia since last year, due to Russia’s role in the Ukraine crisis and occupation of Crimea (via Reuters).
Israeli bankers from Bank Leumi could face charges for helping American clients evade US taxes, investigators say. A criminal probe on the banker’s practices could begin soon, which would involve the bank’s highest executives. The ultimate decision is up to Attorney General Yehuda Weinstein, who formed a team in January to examine the civil and criminal implications of a $400 million settlement Leumi made with the US and New York State authorities last December to settle accusations. The team would also have to conclude whether Bank Leumi also violated Israeli law when it advised American clients how to evade US taxes (via Haaretz).
Switzerland’s top financial watchdog said that India has threatened to launch a criminal investigation if the agency, the Swiss Financial Market Supervisory Authority, does not share detailes of unaccounted money stashed in secret bank accounts. FINMA said in an annual report that Germany, France, Belgium, and Argentina have followed the US in launching high-profile criminal investigations, while Israel and India are threatening to do so. A senior finance ministry official in India said the ministry has asked FINMA to provide the full names and details in respect of the HSBC accounts. In October, the government gave the Supreme Court a list of 628 entities whose names appear in a list of HSBC account holders in Geneva (via Hindustan Times).
A US judge rejected Arab Bank’s bid to overturn a verdict that found the financial institution liable for knowingly supporting terrorism in the Middle East. The Jordanian bank was sued by victims and families of victims of 24 attacks in and around Israel in the early 2000s, for handling transactions for terrorists who carried out the attacks. The bank was also found liable of processing transactions to send money to charities that supported Hamas or families of suicide bombers. The judge said there was “ample” evidence for jurors to conclude last September that Arab Bank provided financial services to terrorists, or groups affiliated to terrorists. The verdict was the first time in the US that a bank was held civilly liable for violating the Anti-Terrorism Act, which lets US citizens affect by international terrorism to pursue damages claims in federal court (via Reuters).
The US Department of Treasury and Saudi Arabia targeted a Pakistani-based charity with sanctions for funding terrorist groups under the guise of humanitarian work. The Treasury said the charity changed its name after the US and the United Nations targeted it with sanctions in 2002 for funding al Qaeda. Saudi Arabia designated the charity under its own counter-terrorism laws. As of 2014, the Treasury said, the charity’s management provided tens of thousands of US dollars to Lashkar-e Tayyiba, a US-listed foreign terror group. The Treasury updated its sanctions designations on Tuesday (via Wall Street Journal).
The last Australian bank, Westpac Bank, providing remittances to Somalia cut off services this week, according to nonprofit Oxfam. US banks have also pulled out of the territory due to compliance risks related to terrorist financing and money laundering. Authorities in some countries view Somalia as a high-risk location for these crimes. However, the account shutdowns present a humanitarian risk as money transfer services provide a crucial source of financial support for the African country (via Somaliland Sun).