News & Press: Financial Crime Wave

Turkish ministers acquitted from graft probe, British banks seek more clarity, and more

Thursday, January 22, 2015  
Posted by: Brian Kindle
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In this week’s financial crime wave, four former Turkish ministers are acquitted from a graft probe in a controversial vote, British banks ask for clarity on virtual currency, North Korea says it is committed to fighting money laundering, and more.


Turkey’s parliament voted to acquit former ministers who faced graft charges, in a controversial vote. Transparency International frowned on the ruling, which essentially swept away a major corruption investigation. The four ministers were implicated in a corruption scandal that caused political turmoil in 2013. Transparency International said the votes had “taken the culture of political impunity to a dangerous new level” and raised questions about Turkey’s willingness to combat corruption. Turkey has seen increased economic growth in recent years, though the Corruption Perceptions Index by Transparency International, which ranks country’s on a perceived willingness to bribe, in 2014 indicated that the country is increasingly corrupt (via Associated Press).

New research shows that bribery is often an “unspoken rule” in China. Charney Research, a polling firm specializing in emerging markets, did a study on China and corruption, surveying more than 2,000 executives working in all of the country’s regions and economic sectors. The report delves deep into the country’s most aggressive enforcement era since the beginning of globalization. Among the findings, the report concluded that 35 percent of companies in China pay bribes or give gifts in order to operate. Among the industry sectors, the highest incidence of corruption is in real estate and construction, according to the whitepaper (via Forbes).

Beyond China, there is growing global momentum to eradicate corruption large and small, creating a climate more hostile to greasing palms. But even if countries have appropriate rules, enforcement and the private sector is actively policing its staff, there can be multiple, less direct entities and third parties potentially creating liability for companies with the best of intentions, according to an expert interviewed by Read More

The president of Bosnia and Herzegovina was charged today with abuse of power, receiving bribes and illegal intermediation. Zivko Budimir, 52, was indicted on January 15 in Sarajevo. He was charged along with five other officials, including his adviser and a parliament delegate. The case originates from a state-level indictment in November 2013 when Budimir was accused of intervening on his own initiative and at the request of politicians and crime figures to give amnesty to criminals serving sentences and erase their criminal records (via The Organized Crime and Corruption Reporting Project).


US prosecutors in the Silk Road trial against alleged administrator Ross Ulbricht sharply reduced the estimate of overall sales of the online black market operation. Ulbricht was arrested in October 2013 on charges of money laundering, computer hacking and conspiracy to commit drug trafficking. Initially, authorities claimed the website had made $1.2 billion in illicit sales. This week, prosecutors estimated that Silk Road had actually made $200 million in illicit sales. The reduced sales figure would put Ulbricht’s offenses into a different category under federal sentencing guidelines for money laundering (via Reuters).

Major United Kingdom banks, including Barclays and Royal Bank of Scotland, are warning that virtual currency could help finance terrorism. The British Banker’s Association (BBA) sent a letter to the Treasury with concerns that terrorists could harness unregulated currencies, which would be difficult for law enforcement and intelligence agencies to track down. The Chancellor of the UK, George Osborne, had previously announced a plan to turn the region into a hub for the virtual currency trade. The BBA is asking for more clarity for payment services providers on their responsibilities with regards to servicing those working with, paying or receiving digital currencies (via Business Insider).

Virtual currency has a host of dark corners that can create compliance challenges, particularly in the area of due diligence, getting to know a customer, or their customers, and creating an accurate and defensible risk assessment. That issue was highlighted as one of the top vexing issues for compliance professionals in 2015. Read More »

The United Kingdom and US are to carry out virtual “war games,” such as cyber attacks on each other as part of a new joint defense against online criminals. The first exercise, a staged attack on the financial sector, will take place later this year. The “unprecedented” arrangements between the countries were announced by Prime Minister David Cameron ahead of talks with US President Barack Obama. The two men discussed a range of other issues, including counter-terrorism (via BBC).

In President Obama’s State of the Union Address Tuesday, he specifically mentioned the challenges and upcoming changes to the country’s cybersecurity defense networks, ushering in new legislation to prod better public-private sector information sharing and give new tools to law enforcement to punish foreign hackers and any firms gaining from stolen US secrets.

Terrorist Financing

New details about the funding behind the Charlie Hebdo attack reveal that it is difficult for authorities to spot terrorist financing, according to experts. One of the two brothers that perpetrated the attacks at a French magazine earlier this month had received $20,000 in Yemen in 2011 to help finance the attack, US officials confirmed. The man who killed four hostages at a supermarket said he lent one of the terrorist brothers several thousand euros for the attack. Experts say these payments may not be detected by law enforcement because the money may have little interaction with the formal financial system. Anti-money laundering systems at banks are not always helpful in tracing small payments to fund terrorism (via Wall Street Journal).

The US Treasury Department is more involved than ever in intelligence as a weapon to fight terrorism, nuclear proliferation, drug trafficking and other issues. The department provides financial expertise and actionable intelligence to civilian and military leaders through “threat finance cells.” The Treasury Under Secretary for Terrorism and Financial Intelligence, David Cohen, will become the deputy director of the Central Intelligence Agency next month, marking the first time that a Treasury official has moved into such a senior CIA post (via Bloomberg). 

A special court in Riyadh on last week sentenced 23 people convicted of various terrorism charges to prison terms ranging from 11 months to 20 years, the Saudi Press Agency reported. The men were part of a larger group of 36 militants standing trial for embracing a deviant ideology, money laundering, illegal possession of weapons and a host of other charges. The defendants were accused of joining a terrorist cell and inciting young men to adopt the Takfiri ideology of branding Muslims who do not agree with their views as infidels (via Al Arabiya).


Compliance is the new buzzword in Brazil following the  largest ever corruption scandal involving state-run oil giant Petrobras and large construction companies. Brazil has implemented tougher anti-corporate malpractice rules, resulting in a legal boom in Latin America’s largest economy. Compliance lawyers are benefiting from more requests for advice on how ensure they, or the companies they are working with, are not snared in a bribery probe. Clients are asking some Brazilian law firms to do due diligence and compliance checks before closing commercial contracts, according to Brazilian lawyers. Brazil passed new anti-corruption legislation in late 2013 in a broader effort to join other nations penalizing more aggressively on graft (via Bloomberg).

Companies are also more cognizant that allowing corruption, at or even near the scale of Petrobras, can do more than tarnish a reputation and bring federal and regulatory scrutiny, it can bring lawsuits by jaded investors who believe such shoddy stewardship at the executive level constitutes a clear breach of fiduciary duties to raise value for stockholders. Read More »

The UK’s Financial Reporting Council  has had its annual review of developments in corporate governance and stewardship for 2014, with a heightened  focus  on the importance of good culture within organizations. The 2014 Code asks boards to look at the risks which might affect the company and its long-term viability. Its latest report states more than 90 percent of the largest publicly listed companies in the UK  comply with “all but one or two provisions of the UK corporate governance” (via Forbes).

Money Laundering

The former treasurer of Spain’s ruling People’s Party was granted bail after being charged with money laundering and other crimes. Luis Barcenas was detained in June 2013 over a long-running corruption investigation and was released on a 200,000 euro bail. Barcenas stashed up to 48 million euros in Swiss banks, according to court documents. He has also admitted to running a slush fund for the party by which cash donations from business magnates were kicked back to party leaders (via Reuters).

North Korea said it was committed to fighting money laundering and financing of terrorism, two weeks after the US imposed more sanctions following a cyberattack on Sony Pictures. North Korea has been accused for decades of earning money from illicit drugs, arms deals and financial scams that include counterfeiting high-quality US $100 notes. Raids on North Korean entities and ships have found illegal narcotics and counterfeit notes. The North Korean regime has denied involvement in criminal activities to earn foreign cash (via Reuters).  

Three employees of Banco de America Central in Costa Rica were arrested Thursday on money laundering charges. The suspects are accused of exchanging up to $160,000 in small, daily increments into colones and either delivering the cash to the fourth suspect, or depositing it into a bank account under another name. Sources say the group allegedly exchanged between $4,000 and $6,000 a day in order to avoid being flagged by banking laws for amounts more than $10,000. According to investigators, the bank employees – including a boss at the bank’s San Jose branch – allegedly received commissions on each transaction (via Tico Times).

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