News & Press: Financial Crime Wave

US banks cut Somalian remittances dramatically, and more

Thursday, February 12, 2015  
Posted by: Brian Kindle
Share |

In this week’s Financial Crime Wave, US banks cut ties with Somalian money remitters, the Silk Road administrator was found guilty, national governments respond to HSBC tax misdeeds, and Russian banks look to Islamic finance to boost funds in face of Western sanctions.


Insurers are worried that cyber risks are too big to cover and are asking governments to take responsibility. British and US insurers like Lloyd’s and Anthem have disclosed that hackers present a large systemic risk to their companies. Some executives say that a growing number of electronic incursions presents a big opportunity for the industry to sell more coverage. Several insurers offer “cyber policies,” which are designed to help companies meet the costs of increasingly expensive forensic investigations after cyber breaches (via Financial Times).

The administrator of the online drug bazaar Silk Road was found guilty in his trial on all seven counts related to money laundering, hacking, trafficking forged identities and distributing narcotics. Ross Ulbricht’s attorney admitted that he ran the site and that the millions of dollars in bitcoins that he made off the site were his. Federal prosecutors showed that the revenue in Bitcoin payments kept coming in until Ulbricht was arrested, amassing more than $18 million. The Bitcoin trial showed that electronic money is in fact traceable (via CNN Money).

The data breach at one of the largest insurance companies in the US may lead to others, experts warned. Hackers stole valuable personal information, including Social Security numbers, physical  and email addresses from Anthem. According to a federal database, other small attacks across the country have included both medical records and financial information. Medical identity theft has become a booming business, according to security experts, due to the high value of the data on the black market. The breach exposed information on about 80 million people and is already generating phishing email scams (via The New York Times).

The increasing prevalence of virtual victories for hackers has commanded more attention from companies, the government and the commander-in-chief himself. President Obama in his State of the Union address last month stated that more legislation is coming to punish cyber thieves wherever they may roam, which is adding further momentum to already higher regulatory expectations for companies to more effectively gird their systems and data against attacks and recover more quickly (Read more here).

Money Laundering

A former Venezuelan judge faces sentencing in Miami federal court for money laundering, extortion and conspiring to obstruct justice after US prosecutors accused him of taking bribes from a drug cartel kingpin. Benny Palmeri-Bacchoi pleaded guilty in November as part of a deal with prosecutors to cooperate with US efforts to target high-profile Venezuelan officials suspected of aiding and abetting Colombian drug traffickers. The ex-judge allegedly helped Jaime Alberto Marin Zamora, a leader of Colombia’s North Valley Cartel, ship thousands of kilograms of cocaine from Venezuela to the US (via Reuters).

Banks are paying anti-money laundering contractors more than 1,000 British pounds per day as a skills shortage pushes their value to new heights, recruiters at Venn Group said. The supply of workers has not kept pace with an increasing demand, according to the experts. Banks are going through a period where asset managers and investment banks are still struggling not only to interpret but also implement the Financial Conduct Authority’s client asset rule (via City AM).

Somalian remittances from the US are expected to plummet after one of the few remaining banks working with money transfer outlets serving the country stated it was terminating related accounts., Oxfam America representatives said. Merchants Bank of California NA is terminating the accounts of money service providers that send funds to Somalia. The Carson, California-based lender could not meet regulatory financial crime surveillance requirements, according to the bank. Somalians in the US send $215 million to the east African country each year, based on a 2013 Oxfam report. The closure could cut remittances from the US to Somalia by 80 percent and potentially cause a humanitarian crisis in one of the world’s poorest countries (via Bloomberg).

Global banks must be ever vigilant to companies and sectors, in addition to jurisdictions, that pose a potentially higher risk for money laundering. Those risks shone brightly in a recent case out of Colombia involving a powerful figure referred to as the “Czar of Gold” due to his position as chief executive of CI Goldex SA. Colombian authorities say Jhon Uber Hernandez’s was actually a front or criminal networks and terror groups and laundered nearly a billion dollars (Read more here).

Tax evasion

A Belgian judge in charge of the investigation into the private banking arm of HSBC is considering issuing an international arrest warrant for the group’s directors because they are not cooperating. Belgium charged the private banking unit with tax fraud and money laundering in November, accusing the bank of offering diamond dealers and other wealthy clients in Belgium ways of hiding cash and evading taxes. The judge said that if the bank does not give the information voluntarily, he will consider international arrest warrants for the present directors in Belgium and Switzerland (via Reuters).


Iran’s supreme leader said he could accept a compromise in nuclear talks. A foreign minister of Iran met other government leaders from the West in Munich this week. Ayatollah Ali Khamenei said he supported President Hassan Rouhani’s decision to negotiate with the western nations in order to lift the sanctions on Iran’s oil industry and financial sector. Negotiators have set a June 30 final deadline for an accord. The main points of the negotiations are which sanctions would be removed, the size of Iran’s nuclear fuel-producing capacity and the length of any agreement (via Reuters).

As Russian banks face western sanctions over the Ukraine crisis, they are also developing their expertise in the Islamic banking sector, which could breathe new life into the Russian financial sector. An estimated 20 million Muslims living in the country are a potential source of funds for local firms, as well as cash-rich Islamic funds abroad. Islamic finance has become a mainstream funding source for some other governments and companies such as Britain and South Africa, which debuted Islamic bonds last year (via Reuters).

Complying with global sanctions is something banks continue to pay close attention to as these requirements to find more direct and indirect connections only grow. In a meshing together of key areas of concern, the US government recently created a new sanctions mechanism to go after cyber assassins, putting more pressure on financial institutions to make any related connections in their own institutions before investigators or regulators do (Read more here).

Terrorism Financing

Six people were indicted for funding ISIS using money services businesses that routed funds from the US to the Middle East. According to the indictment, a former Bosnian foreign national who became an American citizen defected from the US in 2013 to join ISIS. The other defendants communicated on Facebook to post terrorist propaganda for ISIS. The indictment said funds were paid through multiple PayPal and Western Union transactions that were routed through a conduit country, mainly Turkey. The indictment suggests that western money services businesses and financial institutions should be on high alert in respect to transactions bound for towns that share a border with ISIS-controlled territories (via Duhaime’s Anti-Money Laundering Law).


Victims of Bernard Madoff’s Ponzi scheme have starting receiving another $355 million in recovered funds. Irving Picard, the trustee appointed by US District Court in the Southern District of New York to help recover the stolen assets, said the total reimbursement has reached $7.2 billion so far. The latest payment was distributed to 1,077 victims. This is the fifth reimbursement paid out so far. In 2009, Madoff pleaded guilty to running the largest Ponzi scheme in history and was sentenced to 150 years in prison. Last year, five of his former employees were sentenced to prison for charges related to the Ponzi scheme (via CNN Money).


Two Singaporean firms denied reports in Brazilian media linking them to bribery in the widening Petrobras probe. It is the first time a group of international investors has been linked to the corruption scandal on the state-run oil giant. A former director of Sete Brasil, a leasing company in charge of supplying Petrobras through shipbuilders, made the allegations about the Singaporean and Brazilian companies in testimony to federal police. According to the former Sete Brasil director, the shipbuilders were required to pay bribes worth nearly a full percentage point  of contracts to a group that included the treasurer of Brazil’s ruling Workers’ Party, Joao Vaccari Neti and a range of Petrobras and Sete Brasil officials (via Financial Times).

Dozens of people, including New York City building inspectors, property owners and private contractors, are expected to be arrested on Tuesday in a bribery scheme to speed up the approval of construction projects. The defendants are expected to face various corruption charges. The charges against the defendants are detailed in indictments after an investigation by the Manhattan District Attorney’s Office and Department of Investigation that lasted more than a year. Mayor Bill de Blasio has made new construction a centerpiece of his push to add more affordable housing in the city (via The New York Times).

©2018 Association of Certified Financial Crime Specialists
All Rights Reserved