News & Press: Financial Crime Wave

Petrobras CEO and others resign, Hong Kong money laundering unit flooded with reports, and more

Thursday, February 5, 2015  
Posted by: Brian Kindle
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In this week’s Financial Crime Wave, Petrobras executives resign amid bribery probe, Hong Kong money laundering authorities receive a record number of suspicious transaction reports, Canada’s largest bank exits Latin America to lower risk profile, and more.


Federal investigators have charged a former US Navy contracting official in relation to the wide-ranging corruption investigation of a Singapore-based defense contractor. Paul Simpkins, 60, was the ninth person charged in the probe. Simpkins was charged with one count of conspiracy to commit bribery. Glenn Defense Marine Asia, the company at the center of the scandal, overbilled the Navy for services and then demanded kickbacks from its subcontractors, according to court documents. Federal authorities say that the company had surpassed $200 million in Navy contracts for more than a decade  (via Reuters).

The Chief Executive Officer (CEO) of state-run oil giant Petrobras resigned in the midst of a wide corruption probe involving the company and other Brazilian contractors. CEO Maria das Gracas Foster, who is not implicated in the allegations, and five other senior managers, resigned. The board of the company will meet at the end of the week to elect replacements. A record $23 billion reais ($8.9 billion) in suspect transactions have been uncovered in the probe. Three former Petrobras executives have been arrested in connection with contractor kickbacks (via Bloomberg).

A Mexican businessman who is serving time for laundering money for the Zetas Cartel also bribed an official at Mexico’s national oil company, Pemex, to win contracts, according to court documents. The owner of the oil services company based in Veracruz, Mexico, Francisco "Pancho" Colorado, was convicted in a US federal court of laundering drug money for the cartel in 2013. His sentence went up five years from the initial 20-year sentence for conspiring with his son and a business associate to bribe a US federal judge assigned to his case (via Reuters).

Prosecutors in Romania indicted a former presidential candidate of the Eastern-European nation, Elena Udrea. Anti-corruption prosecutors questioned Udrea on suspicion that she failed to declare money received in 2010, a money laundering offense. She is banned from leaving Bucharest during the probe. Her husband was arrested in October on charges of taking a bribe of 9 million euros. Udrea gained notoriety because of her close relationship with the president of Romania from 2004 to 2014 (via ABC News).

An Iranian carrier, Qeshm Airlines, was seized by the Iranian government after the owner was accused of bribery. Owner Babak Zanjani allegedly colluded with corrupt Iranian government officials. The control of the airline has been transferred to the Iranian Oil Ministry as part of reparations owed to Tehran in the case against Zanjani. A five-star hotel also belonging to the airline owner will be confiscated as part of a settlement for $1.52 million in debt owed for the acquisition of the land it was built on. The airline operates flights throughout Iran, as well as to Iraq, Turkey and the United Arab Emirates (via Ch- Aviation).

The Israeli government is deciding if it should formally investigate the Prime Minister’s wife, Sara Netanyahu, who allegedly kept bottle deposits belonging to the state. The State Comptroller is turning over the Netanyahu bottle scandal to the Attorney General, who will decide if it is a case. Two years ago, the Netanyahus returned $1,000 for the bottle deposits to the state, estimating that the deposits totaled $250 per year. Sara Netanyahu’s actions could constitute a criminal offense of theft or receiving an item under false pretenses and that returning the money detracts from the severity of the offense but does not nullify it, a jurist explained (via Haaretz).

Eradicating corruption, a seemingly insurmountable task, can be accomplished, though it takes strong commitments from the public and private sectors on a variety of levels, from a country willing to create anti-graft laws and enforce them, to anti-money laundering professionals giving more scrutiny to potentially corrupt, high-risk politically-exposed persons. Critical to such an initiative are the companies themselves, which must choose to walk the narrow path to get ahead, according to an ACFCS interview with an expert in the field (Read more here).


Iran is drafting new oil contracts for foreign firms to attract business once sanctions on the country’s oil industry are lifted. The Iranian government is still engaged in diplomatic talks with world powers about its nuclear program as it strives to end the sanctions that have cut oil exports in half since 2012. Iran’s president has promised economic recovery but the outcome of the nuclear negotiations remains unclear. The new oil contracts will try to attract foreign investors despite the current outlook by offering long-term durations of up to 25 years (via Reuters).

Amnesty International called for new sanctions against Libya. The human rights advocacy group called on the UN Security Council to impose new targeted sanctions, including travel bans and asset freezes on individuals and entities responsible for international human rights violations. In a recently published report, it also urges the International Criminal Court to pursue indictments and prosecutions and expand its investigations into crimes under international law committed by armed groups in Libya from February 2011 to the present (via World ECR).

Greece’s new finance minister, Yanis Varoufakis, rejected suggestions that complaints from the Greek government over an EU statement on the Ukraine meant that it was going to veto sanctions on Russia. The minister said media reports had distorted his position on the EU statement that they would prepare a new round of sanctions against Russia aimed at punishing Moscow for its support of separatist rebels in eastern Ukraine. The statements have concerned European leaders and prompted speculation that Athens is leaning toward Russia while seeking to renegotiate its bailout program with the EU. EU leaders met on Thursday to extend the sanctions six months (via Reuters).

Sanctions compliance is an issue that has gone from the back office to the boardroom, garnering the attention of top executives through aggressive regulatory enforcement tactics. That has resulted in penalties in the billions of dollars for dealing with sanctioned entities tied to rogue regimes, terrorists and organized crime groups. But the list of off-limits entities is only growing, with the US ushering in an entirely new sanctions tools to go after cyber criminals, a group though diverse of purpose has been singular in focus in perforating some of the largest companies in the world. ACFCS analyzes the new powers and pitfalls of the shifting sanctions landscape (Read more here).

Money Laundering

Royal Bank of Canada is exiting Latin America and the Caribbean after being caught in a series of global money-laundering probes. Over the past 18 months, Canada’s largest bank has closed many of its wealth management offices across Latin America, prompted by the scrutiny of potential money laundering activities in its accounts in at least three countries. The bank is also shutting wealth-management offices in the Caribbean. The move illustrates  how regulatory pressure around the world is causing banks to change the way they do business (via The Wall Street Journal).

The Indian government is preparing a list of non-government organizations (NGOs) who are under scrutiny for money laundering. It is suspected that money laundered to tax havens is reaching the source by being hidden in NGO funds. Indian investigators have concerns that illicit entities, and rogue regimes, are  laundering funds by donating to NGOs, raising suspicious there could be larger scale networks working to cleanse dirty money. NGOs involved in charitable work also get tax benefits which could lead to money laundering charges. The Indian home ministry also compiled a report on terror funding and money laundering through foreign funds entering the country (via India Today).

Hong Kong money laundering police are facing a record 100 reports of suspicious cash transactions per day. The flood of reports is double the number recorded just three years ago. The new figures from the Joint Financial Intelligence Unit showed that over 37,000 suspicious transaction reports were made last year, compared to about 32,000 in 2013. The increase may stem from Beijing’s corruption crackdown, a broader probe to prosecute graft and hold officials accountable. The banking sector accounted for 84 percent of the suspicious transaction reports (via South China Morning Post).

Criminals are cognizant that entry into the international financial system has become more difficult, with financial institutions around the globe, and particularly in large centers like the United States, Europe and United Kingdom, strengthening systems to counter money laundering and report aberrant transactions to federal investigators. But the trade area remains a leaky one to plug, chiefly due to the broad challenges in creating controls while allowing robust economic throughput. The solution, say experts, is taking a combined approach of information exchange, data analysis, and government intelligence to more effectively parse out trends globally and enact more effective controls locally. ACFCS analyzes the issue (Read more here).


The alleged operator of the Silk Road website decided not to testify at his trial. Ross Ulbricht is accused of running the illegal-product marketplace, which took payment in virtual currency. Ulbricht’s attorney said he started the website but later gave up control. The case has caught the attention of bitcoin aficionados and those who say the government is making web hosting a crime. The trial is in its fourth week (via Financial Times).

A pro-ISIS group allegedly hacked London-based charity Women’s Resource Centre, claiming to be operating in Algeria, the Guardian Voluntary Sector Network learned. The Women’s Resource Centre, an umbrella body for women’s charities in the UK, found that their website had been replaced by a page stating “I love Isis and Jihad.” The hackers, who identify themselves as Team System DZ, also hacked the website of Rugby League team, the Keighley Cougars, in November 2014 (via The Guardian).

The United Arab Emirates (UAE) government said it will work with the US to combat cyber crime. The UAE Ministry of Justice and the US Department of Justice held a symposium on cybercrimes and cybercriminal evidence. The Director of International Cooperation of the UAE said that it is necessary to find effective solutions and come up with preventive and deterrent countermeasures to counter the spread of cybercrimes threatening the economies, stability and security of states. The director emphasized the need for international cooperation and a cross-border crackdown on cybercriminals (via Arabian Business).

ACFCS highlights the fact that US federal and state regulatory agencies are ratcheting up the pressure on financial institutions to craft more rigorous and formalized safeguards against cyber attacks, and more efficiently share information on breaches with customers and law enforcement. The initiatives, though, will challenge large financial institutions already grappling with increased scrutiny of their anti-money laundering (AML), sanctions and other financial crime countermeasures. Smaller and medium-sized institutions may face even larger obstacles due to a lack of internal expertise or resources (Read more here).


A man accused of cheating investors out of their share of $50 million in gold bars and coins he recovered from a 19th century shipwreck was captured after two years on the run. Fugitive Tommy Thompson was arrested in Boca Raton, Florida and is scheduled to appear in court this week. The 161 investors who paid Thompson $12.7 million to find the ship never saw returns from the sale. The fugitive and his partner had been living in a suburban hotel for two years (via The Guardian).

US prosecutors said they are prepared to drop charges against five men accused of engaging in insider trading ahead of an IBM Corp acquisition. The letter from prosecutors cited a major appellate court ruling limiting authorities’ abilities to pursue such cases. As a result, Manhattan US Attorney Preet Bharara asked US District Judge Andrew Carter to dismiss the indictment. In the IBM case, prosecutors said a lawyer at IBM’s law firm told former Royal Bank of Scotland Group Plc analyst Trent Martin in 2009 about the company’s planned acquisition of SPSS Inc. for $1.2 billion (via Reuters).

Data analytic tools offer one way to make sense of the tremendous volume of information involved in many fraud cases, but their successful use requires more than simply buying the right tools, according to one ACFCS expert, noting that updating key processes and procedures can increase the efficiency and results when wielding unwieldy data (Read more here).

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