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Financial Crime Wave – IRS-CI lays out priorities under new chief, civil asset forfeiture, and more

Thursday, September 21, 2017   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
September 21, 2017

In this week’s Financial Crime Wave, the new IRS Criminal Investigations chief lays out his priorities for countering international tax evaders and improving domestic enforcement, a professor details six key details about the push and pull of civil asset forfeiture efforts, European Union banks pay $84 billion to comply with anti-money laundering rules, and more.


New U.S. AML legislation introduced to expand interbank sharing of suspicious activity, FinCEN use of AI

Rep. Ed Royce (R-CA) proposed legislation last week to strengthen the anti-money laundering (AML) and countering terrorism financing (CTF) system in the United States. The bill suggests several reforms to the U.S. AML regime, including adjusting for inflation the thresholds for filing suspicious activity reports (SARs) and currency transaction reports (CTRs). These haven’t been updated since 1996 and 1972, respectively. Doing so would reduce the number of filings which now total over 55,000 per day and allow the Financial Crimes Enforcement Network (FinCEN) to prioritize those of the highest law enforcement and national security consequence.

Further, the draft bill would expand the ability of financial institutions to share suspicious activity reports within their organization to improve risk management. It would also require the Treasury Department to improve qualitative feedback for financial institutions and Federal financial regulators on their AML/CTF efforts. Lastly, the legislation would improve FinCEN’s administrative rulings process and require Treasury to explore the potential for artificial intelligence, machine learning, and other technologies to help detect and prevent money laundering and terrorist financing, (via HPN).

Asset Forfeiture

How the government can steal your stuff: 6 questions about civil asset forfeiture answered

A professor looks at the issue of civil asset forfeiture, a program originally envisioned to seize and freeze the assets of criminals, but what has evolved into, into many cases, law enforcement forfeiting people’s funds and property without them ever being charged or convicted of a crime. The story covers the current push and pull of Trump administration efforts to expand the practice, and federal and state congressional moves to limit it, along with detailing how you can get your stuff back if it’s taken, (via The Conversation).

Securities Fraud

China’s version of ‘Bernie Madoff’ jailed for life for multi-billion-dollar fundraising fraud

Ding Ning was the head of Ezubao, a fraudulent online finance firm that duped investors out of more than $7.7 billion, according to state media reports. Ding, 35, was the head of Ezubao, a peer-to-peer online financing firm. He fleeced more than 50 billion yuan (US$7.7 billion) from about 900,000 investors across the country with fabricated projects and returns from June 2014 to December 2015 when the scheme was busted by police, according to earlier state media reports.

Ezubao was the biggest Ponzi scheme ever broken up China in terms of the amount of money involved. The case exposed the financial and social risks which similar programs posed as they mushroomed across the country amid lax regulations, (via the South China Morning Post).


Appellate court blocks Saudi bid on billion-dollar Barclays lawsuit

New York state's highest appellate court has denied a Saudi contractor’s bid to revive a $10 billion fraud suit against Barclays PLC over a settlement between the British bank and the Saudi government, (via Law 360).


A look at Chinese, U.S. efforts to fight corruption

A look at the similarities and vulnerabilities in the efforts of China and the United States in cracking down on corruption in the banking sector, (via the South China Morning Post).

Want to know if companies are keeping their commitments to fight corruption and bolster transparency?

Well, lucky for you, Transparency International has you covered, with a just-announced on-line pledge tracker to see who has done what, who is following through and where more needs to be done. The current scorecard: More than two-thirds of the promises made by states and organizations to fight corruption at the May 2016 London Anti-Corruption Summit are now either complete or have seen progress (via TI).

Countering graft must include two tactics: bolstering transparency, regulatory reform, accountability

IMF Managing Director Christine Lagarde said that tackling corruption requires a two-pronged approach that involves increasing transparency and accountability as well as enacting regulatory reform and bolstering legal institutions, (via the IELR Blog).


More federal, state initiatives to bolster cyber defenses puts pressure on companies to make data security a priority or face penalties

Cybersecurity has emerged over the past several years as one of, if not the greatest threat to the insurance industry, with multiple high-profile data breaches of insurance companies and other entities demonstrating the potential scope of the threat. Companies must closely monitor information security developments and prepare for breaches in advance to prevent the worst-case scenario, said one expert.

The growing threat has prompted both industry and regulators to devote additional resources to cybersecurity preparedness. Regulators are stepping up their evaluations of insurers’ cybersecurity measures, and are issuing additional guidance and creating new requirements that insurance entities must comply with. One of the most high-profile examples of this are new cyber standards that recently became effective in New York, a first-in-the-nation requirement, (via Reactions).

Seven steps to strengthen cyber defenses, resilience

A story with a helpful graphic to be more cyber resilient in seven steps, (via AIG).


Agonizing over whether to upgrade AML systems or reinstall programs to improve performance?

A helpful blog about the pros and cons of doing a fresh install of AML software to doing a true upgrade, including ensuring past data, current monitoring protocols and future third-parties are not forgotten, (via Oracle).


More evidence of de-risking, this time with banks trimming correspondent connections to riskier regions

A new report from the International Finance Corporation, a part of the World Bank Group, finds correspondent banking relationships are down, an unintended consequence of regulatory reform. Nearly 30 percent of global banks surveyed have reported a drop in the number of correspondent banking relationships. The decline has led to a cutback in services, especially in developing countries, the IFC said. In a survey of 300 banks across 92 countries, the report found Sub-Saharan Africa saw the steepest decline in correspondent banking activity, with 35 percent of banks there reporting a drop in such relationships, (via Pymnts).


EU financial institutions face nearly $84 billion a year in cumulative costs to comply with AML rules, says study

Complying with financial crime requirements in a given jurisdiction is a difficult figure to quantify as costs depend on the risks and resources of a given institution. But after a study across France, Germany, Italy, Switzerland and the Netherlands, the consensus is that banks in Europe are spending some $83.5 billion annually on anti-money laundering (AML) compliance, chiefly to rising threats, regulatory expectations and the EU’s Fourth AML directive coming into force.  

Banks in these countries are cognization more regulators globally are willing to follow the lead of the United States and hand down compliance penalties in the millions and even billions of dollars for extensive and longstanding failures – figures compounded by equally expensive remediation engagements. Financial institutions of all sizes are hit by AML compliance costs and these expenses are only expected to grow with an increased volume of alerts and pressures on resources, according to the LexisNexis report, (via Business Insider).

Virtual currency

Swiss regulator FINMA seizes assets tied to providers of fake crypto currency ‘E-Coin’ for acting as an unlicensed financial institution

Switzerland’s financial markets regulator has closed an unauthorized and unlicensed crypto currency dubbed “E-coin,” which eventually turned out to be a scam by several companies to steal millions of dollars. The company, the QUID PRO QUO Association, and two other firms, worked take deposits and issue certain coins that could be traded and transferred, but in most cases had not real assets backing up their value, as the company claimed.

The regulator initially went after the companies because they never got a required license, and later found the operations were a sham. The action by the Swiss regulator happens amid a large-scale wave of regulatory warnings against crypto currencies and initial coin offerings, in particular. Regulators from the United States, the United Kingdom, the Netherlands, Russia, Hong Kong, Singapore, and China, have been among those to raise their concerns recently, (via Finance Feeds).

Money laundering

More financial crime, terror risks for Venezuela, Nicaragua, so foreign banks with ties to the regions must be wary

Are companies with ties to Venezuela and Nicaragua laundering money for FARC? The answer could be yes, according to a U.S. Congressional hearing, (via Insight Crime).


Mexico looking to bake in AML rules to hotly rising fintech sector

A Mexican bill looking to regulate the fast-growing fintech sector focuses heavily an AML, (via Reuters).

Tax evasion

Five investigative areas the new IRS-CI chief will focus on, including international tax schemes and enforcement

IRS Chief of Criminal Investigation Don Fort said his office is planning to take aim at international tax wrongdoing in a more targeted way, and to create a new national enforcement plan. Fort took over for longtime head Rich Weber, who left a few months ago to take a top compliance position at a larger international bank.

Fort said those are two of the five areas of focus he envisions as he takes charge of a division with a critical role in hunting down tax crimes. That role, he said Sept. 15 at the American Bar Association tax section meeting in Austin, Texas, is one that supports the Internal Revenue Service’s efforts to boost tax compliance and makes committing tax crime tougher, (via Bloomberg BNA).


FATF threatens Nigerian FIU to get autonomous or could lose its connection global watchdog’s mission

The Paris-based Financial Action Task Force, which sets global anti-money laundering standards, has threatened to suspend its high-level mission visit to Nigeria scheduled for November if the country fails to meet the demands of the Egmont Group of Financial Intelligence Units (FIU) to ensure the country’s FIU is autonomous, and free from outside interference in investigating corruption and other financial crimes, (via This Day Live).

Corporate transparency

India cracking down on shell companies, a bastion of illicit money of all stripes

As the Indian government continued its crackdown on shell companies, Vice President M Venkaiah Naidu on Saturday said money laundering through anonymous corporations is a menace affecting the economy and has a "deleterious impact" that is a haven for money laundering, black money, hoarding and counterfeiting. The country recently sanctioned a bevy of companies for failing to disclose their ownership details, a trend that will continue until firms follow the rules, (via the Business Standard).


North Korea turns to Bitcoin mining to evade growing restrictions

Is trading Bitcoin secretly funding the North Korean regime and its alleged nuclear proliferation goals? It could be, (via Facts Chronicle).


Indonesian AML law to snare money exchangers, fintech firms

A new AML law in Indonesia is designed to fintech firms and money changers as criminals move to sectors with the weakest financial crime compliance defenses, (via the Jakarta Post).

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