News & Press: Financial Crime Wave

Bribery probe uncovers terrorism links in Australia, and more

Friday, February 26, 2016  
Posted by: Brian Kindle
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In this week’s financial crime wave, an Australian construction company probed for bribery allegations is found to have links to the Islamic State, Goodyear paid more than $16 million to the SEC for an FCPA violation settlement, JPMorgan boosts its cybersecurity staff with new hires, and more.


A building company owned by one of Australia’s most wanted terrorists has been implicated in a foreign bribery investigation. Australian federal police raided the construction company, Lifese, and charged three men, including the father of a notorious terrorist, Mamdouh Elomar. Elomar has been fighting with the terrorist group ISIS since 2013. Court documents reveal that individuals connected to Lifese attempted to bribe an Iraqi foreign official in order to win contracts. No allegations of terrorist financing have been made as part of the case against the three men (via Sydney Morning Herald).

China is attempting to improve a national online database of individuals convicted of bribery-related offenses in a bid to better keep corrupt individuals out of public and private positions of influence. The agency spearheading the project, the Supreme People’s Procuratorate, is pushing the use of the database by companies before hiring people and particularly in jobs tied to government projects. Since 2012, the database has processed more than 4 million inquiries and some 2,000 companies have been punished (via Xinhua).

A Chinese court announced a life sentence for a senior Chinese banker for taking a $1 million bribe. Yang Kun, the vice president for Agricultural Bank of China Ltd., accepted cash from a property developer in 2011 that wanted loans from the bank. Senior bankers are appointed by the Chinese Communist Party and are allowed to give out relatively cheap loans, impeding efforts to crack down on corruption. Chinese President Xi Jinping has already taken on energy companies and the military in a broader clampdown that has disciplined high-profile individuals. Experts say the anti-corruption campaign will buy time for the government to fix other fundamental mechanisms in the financial industry (via Bloomberg).

Goodyear Tire & Rubber Co. has agreed to pay more than $16 million to the Securities and Exchange Commission (SEC) for bribery charges involving the company’s segments in Kenya and Angola. The SEC claims Goodyear failed to prevent more than $3.2 million in bribes paid to government entities and private companies to gain sales contracts during a four-year period. The bribes were recorded as a legitimate expense for the units, according to the SEC. The Foreign Corrupt Practices Act (FCPA) violation was disclosed in October by the company itself, and is now in the process of selling the Angolan unit (via The Wall Street Journal).

Cuba freed the president of a Canadian transport company after he spent more than three years in jail for bribery charges. Cy Tokmakjian was arrested in 2011 as part of an anti-corruption crackdown, along with two other employees of the Tokmakjian Group. The Cuban government had also seized the Cuban assets of the company, which totaled $100 million. The Ontario-based Tokmakjian Group sold transportation, mining and construction equipment to Cuba for more than 20 years. It is not clear whether the other two employees will be released (via BBC).

Burma’s effort to be transparent in the natural resources sector may be sullied by the Asian country’s lucrative jade trade. Burma’s jade mining industry is still entrenched in opacity and protected by government secrecy. Burma is currently a candidate for the Extractive Industries Transparency Initiative, a global standard promoting openness in the natural resources sector. The jade-rich region of Burma is a no-go area for most foreigners and journalists in particular. According to a 2013 Harvard University study, the region is thought to have yielded between $6 billion to $9 billion worth of jade alone (via Irrawaddy).

The stench of corruption has become particularly foul in Brazil's healthcare sector, say analysts. In that country, the cumulative cries for change have reached a fever pitch in recent weeks, with citizens and doctors calling for not just change and better oversight of hospitals and staff to weed out illicit individuals, but also for an end to the hypocrisy of a government that can spend lavishly for the World Cup, but misfire on achieving the core goals of giving health care professionals the tools to survive and save lives. ACFCS explores these challenging issues(read more here).

Money Laundering

A Hong Kong regulator imposed a one-year ban on a former chief executive of a securities company for failing to ensure that it had sufficient anti-money laundering (AML) measures in place. He Zhihua was punished for not implementing AML measures on Ping An securities and was banned from being a licensed securities representative. The regulator found that between August 2010 and April 2011, he failed to address gaps in internal control procedures for staff (via South China Morning Post).

South Africa’s Central Bank Friday fined Germany’s Deutsche Bank 10 million rand, or nearly $860,000, for weak AML compliance structures tied to properly identifying and verifying customer details and reporting cash transactions above certain thresholds to the country’s financial intelligence unit. In addition, the regulator penalized a local institution, Capitec Bank, 5 million rand for not adequately complying with securities laws. Deutsche bank has stated it is working with US investigators about possible sanctions violations, and in 2013 set aside nearly $400 million (via Reuters).

The biggest methamphetamine dealer on the Silk Road online marketplace pleaded guilty to selling 17 pounds of meth for more than $600,000. Jason Hagen was charged for conspiracy to distribute meth and 15 counts of money laundering. In a court affidavit, Hagen explains that he sold the drug and laundered money on the Silk Road site from August 2012 to December 2013 and accepted Bitcoin as payment. Hagen and his codefendants made more than 3,000 sales globally. In a related decision,   two weeks earlier, Ross Ulbricht, who created the site, was convicted on several drug and money laundering charges (via Forbes).

United Kingdom regulators, law enforcement agencies, and banking groups unveiled a pilot project Wednesday aimed at bolstering the country’s ability to deter and detect organized crime groups, money launders and cyber hackers. As well, the UK announced it was starting a Financial Crime Alerts Service, slated to launch in April, to get banks details about breaking trends and warnings on individuals and entities. ACFCS highlights these decisions and what led up to them(read more here).


Iran has launched its own search engine to beat the internet-related sanctions imposed by western powers over Tehran’s nuclear program. The search engine, called Yooz, is capable of supporting up to one billion Iranian websites, according to Iran’s Ministry of Communication and Information Technology. The search engine will help Iranian’s circumvent economic sanctions and grant the academic world access to Iranian cyberspace. Iranian users visit Google 25 million times a day, according to the Communication and IT ministry (via IBTimes).

A Cuban cigar maker sees itself gaining 25 percent to 30 percent of the US premium cigar market if the US lifts its embargo on trade with Cuba. The company, Habanos SA, would potentially sell 70 million to 90 million cigars per year. The US announced its plan to restore diplomatic relations with Cuba in December 2014, which would potentially lift the 53-year-old embargo. The US now allows American travelers to Cuba to legally bring back up to $100 worth of tobacco and alcohol for personal use (via Reuters).


The Office of Management and Budget is getting on board with broader administrative proposals to bolster the nation’s cybersecurity defenses with the establishment of a new cyber unit. The unit, dubbed the E-Government Cyber Unit, will head the office’s cybersecurity oversight initiatives with a budget boost of $15 million, for a total of $35 million. The unit will go beyond issuing policy guidance and reporting mandates, focusing on more data-driven decision-making, crafting new regulations and staying on top of emerging attack avenues to coordinate better responses to cyber incidents and vulnerabilities (via Federal Times).

After getting skewered in late 2014 by hackers, eventually absconding with details on more than 80 million customers, the nation’s largest bank decided to fight virtual flames with some cyber firepower of their own. Since the data breach at JPMorgan Chase of 83 million customers – including names and addresses, but not credit card numbers and passwords – the bank has hired former government and military security experts, boasting a staff of more than 1,000, to create stronger defenses and be more agile when incursions occur. JPMorgan is also building a new facility near the National Security Agency’s headquarters in Maryland to woo top talent and is taking a more militaristic approach to cybersecurity, even arguing to government agencies that the hack was a national security threat (via Bloomberg).

With a possible partial shutdown of the nation’s chief agency for securing physical and virtual borders, the president chose to weigh in Monday, driving home the point that Congress must set aside their personal and political agendas for the greater good. President Barack Obama stated that the shutdown of the Department of Homeland Security – it’s spending authority will expire on midnight Friday if lawmakers don’t approve new funding of nearly $40 billion – would result in some 100,000 airport, border and sea port inspectors being temporarily without paychecks and only skeleton crews officially on the payroll. The main issue is a disagreement on Obama executive orders that would back off the deportation of certain undocumented immigrants (via Bloomberg).

Tax Evasion

A former US Senator who investigated shell company abuses as the chairman of the Permanent Subcommittee on Investigations gave a two-step answer on how to stop illegal shell companies. Carl Levin, who is a pioneer in the anti-financial crime field, said the US administration should revoke a regulation exempting real estate and escrow agents from an anti-money-laundering law requiring them to know their customers and report suspicious transactions to law enforcement. Step two would be for the US Congress to pass legislation that would require states to get the names of people behind the shell companies they form (via The New York Times).

Terrorist Financing

The victims of the 1983 bombing of a US Marine barracks in Beirut, Lebanon lost a legal bid to seize $1.6 billion of Iranian assets from a Luxembourg account managed by a unit of Deutsche Boerse, the operation said in a statement Friday. A US judge dismissed the suit because the money belongs to Iran’s Central Bank. The case was brought by the families of the 241 Americans that were killed in the truck bombings (via Bloomberg).


Investigations by the UK financial markets’ chief regulatory body increased by 20 percent last year, with a renewed focus on companies rather than individuals. The Financial Conduct Authority (FCA) opened 109 inquiries in 2014, compared with 90 in 2013, according to new data. Broad probes such as those into the Libor and Forex benchmark rate rigging scandals have consumed the resources of the FCA. Between both, they have resulted in regulatory fines totaling more than $10 billion. The investigations led to much higher annual fines, but fewer penalties against individuals (via Financial Times).

London-based HSBC stated Monday it could be looking at an additional $1 billion in penalties due to manipulating certain debt protection products, a sum on top of the $611 million paid to US and United Kingdom authorities in November for allegedly manipulating foreign exchange markets, according to the company’s annual report. The bank has already been the subject of historic billion-dollar penalties for anti-money laundering and other financial crime failures and this month got accused or extensive tax evasion offenses by a coalition of investigative journalists, which then sparked additional scrutiny and investigations from the US, UK and other countries (via Reuters).

Bad guys in recent years have shown little fear parking in major cities to defraud auto insurers by smashing cars and grabbing illicit capital through overblown and fictitious medical claims from sham clinics, a rising problem bilking auto insurance companies out of billions of dollars a year. ACFCS analyzes why these scams are a major issue for insurance companies and the banks holding accounts for insurers and the straw clinics as these scammers can’t launder their ill-gotten gains without them (read more here).

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