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Fincrime Daily Brief: The cost of dirty money, crypto scam central, record fentanyl haul, and more

Friday, February 8, 2019   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe

February 7, 2019

In ACFCS’ latest Fincrime Daily Briefing, we highlight a great resource for financial crime compliance professionals, a visual, country-by-country roundup of some of the world’s biggest compliance and money laundering scandals, U.S. border agents nab record fentanyl haul in Arizona that could have killed tens of millions of Americans, the IMF previews updates to country-wide AML reviews, including new focal points, tactics to bolster efficiency, proficiency, and more.

Money laundering

The Cost of Dirty Money: Skipping around the world to analyze the why, who and how of the sector’s biggest financial crime compliance penalties

Over the past decade, the financial crime compliance sector has seen regulators and investigators hammer banks with record penalties and equally draconian and usually even more expensive remediations in a bid to crush the hubs where criminals flow to launder their dirty money.

This Bloomberg piece is a great visual roundup and speedy snapshot of some of the most high-profile historical and current actions, including a $9 billion sanctions penalty against BNP Paribas, a seminal nearly $2 billion fine against HSBC and a review of the Danske Bank scandal, where some $230 billion in suspicious funds touched many of the world’s riskiest regions.

Since the financial crisis, dozens of crackdowns have targeted money launderers who effectively rely on banks, shell companies, and other mechanisms to cover their tracks. Fines have surged into the billions of dollars, but it’s unclear whether the enforcement efforts—some of the more notable ones are described here—have made much of a dent.

According to the United Nations Office on Drugs and Crime, shady transactions continue to reach as much as $2 trillion a year, (via Bloomberg).

Monroe’s Musings:

I really enjoyed this Bloomberg piece as it was interesting, engaging, easy to navigate and really gave a sense of what are, and have been, the global hotspots for both where illicit funds are flowing and what has happened to banks that intentionally, or unintentionally, fostered these movements due to lax anti-money laundering programs.

If you are a financial crime compliance officer or new to the industry, regardless of your role or level in the AML function, the regulatory enforcement actions are required reading.

As the old saying goes: unless you know your history, you are doomed to repeat it. While there are always new things to worry about as criminals adjust, evolve and test new vulnerabilities, many of them stick with tried-and-true tactics, like structuring, bulk cash, hiding behind shell companies and the like.

In short, the more you know about how bad guys have won where banks have failed, the more you can strengthen your AML program to be a true phalanx against financial crime in all its forms – both new and old.

Drug trafficking

U.S. CBP officers snare record Fentanyl haul at Arizona port, enough to kill nearly 60 million people

 U.S. Customs and Border Protection officers (CBP)  at the Nogales Commercial Facility seized nearly $4.6 million in fentanyl and methamphetamine totaling close to 650 pounds on Saturday from a Mexican national when he attempted to enter the United States through the Port of Nogales.

The action is the largest seizure of fentanyl in CBP history. The methamphetamine seizure represents the third largest at an Arizona port. CBP Officers discovered more than 400 packages of drugs concealed within a special floor compartment of a trailer that was laden with cucumbers, driven by a 26-year-old truck driver.

Following an alert by a CBP narcotics detection canine, CBP officers seized nearly 254 pounds of fentanyl with a value of approximately $3.5 million and almost 395 pounds of methamphetamine valued at $1.1 million. 

Media reports noted that much Fentanyl, a powerful, concentrated opioid that many drug dealers use to cut heroin, could have killed some 57 million people. Fentanyl can be lethal at as little as two milligrams, according to reports, (via CBP).


Watching the Watchdogs – A look at updated standards for country-wide fincrime compliance: Review of the IMF’s new strategies on strengthening oversight of AML/CFT

The International Monetary Fund, one of the global watchdog groups that review countries under its purview for compliance with global financial crime and compliance standards, is reviewing its procedures, with a stronger focus on the risks of correspondent banking networks, the rise of fintechs and bolstering overall evaluation proficiency and efficiency.

The staff report takes note of the multi-pronged approach set out by the Paris-based Financial Action Task Force (FATF), which has enabled the IMF to address issues related to money laundering, terrorist financing, proliferation financing, and broader financial integrity-related issues, including emerging issues such as those related to correspondent banking relationships (CBR) and financial technology (Fintech), key updates since a prior 2014 review.  

The IMF is working to increase synergies between the different evaluation workstreams in order to strengthen the efficiency and impact of the Fund’s AML/CFT work — including in surveillance, Fund-supported programs, Financial Sector Assessment Programs, and Fund’s capacity development (CD) activities, including AML/CFT assessments and other related policy work.

The staff report suggests that while the Fund’s AML/CFT program remains appropriate, in order to expand its reach and maximize the impact of the Fund’s overall involvement in AML/CFT assessment work, consideration should be given to shift to fewer Fund-led assessments but increase staff’s participation in the quality and consistency review of other assessments, and training efforts.

Going forward, the Fund will continue to cooperate in these areas with the World Bank, FATF, the FATF-Style Regional Bodies (FSRBs), and other stakeholders, (via the IMF).

Monroe’s Musings:

The IMF, like its parent and sister agencies, FATF, Moneyval and FATF regional-style bodies, is a global watchdog group that helps review jurisdictions for country-wide compliance with international AML standards.

In tandem with its relative groups it has also in recent years expanded its evaluation ambit to review more than laws on the books, dubbed technical compliance, to more heavily scrutinize effectiveness, including actual cases cracked, seizures, forfeitures and AML penalties.

Not surprisingly, the IMF is echoing other investigative and regulatory agencies in places like the by stating it will give extra attention to how countries oversee their banks’ sprawling and at times risky correspondent networks and, in addition, what controls are in place for the burgeoning fintech sector – an industry still in its infancy and, in some cases, not yet covered by definitive AML rules.

But what is surprising is how the new updated FATF standards, giving more attention and ink on effectiveness, has made country reviews a bit more challenging for IMF reviewers. The document gives some rare insight into the behind-the-scenes scrambling that can occur when an agency must quickly get up to speed on new, more rigorous exam provisions, and likely must do so with similar staffing and funding levels.

The apparent solution now: precision prioritization to ensure more in-depth reviews over spreading reviewers too thin too quickly. In short: engage in fewer full country reviews, but do so with more staff and enhanced scrutiny, ensuring that in the regions IMF reviewers have the time and resources to visit, no stone is left unturned.

Crypto currencies

Data shows Ethereum is the ‘Cryptocurrency of choice for scams’

Over the last two years fraud in the Ethereum ecosystem has run rampant and it’s been the “cryptocurrency of choice for scams for a variety of reasons,” according to the blockchain surveillance company, Chainalysis.

The blockchain monitoring company Chainalysis has been releasing a series of reports concerning the recent “trends in crypto crime.” The firm’s report “Crypto Crime Series: Decoding Ethereum Scams” explains how ethereum (ETH) is the top choice for crypto-related scams throughout the ecosystem.

In 2017, there was only $17 million worth of ETH stolen in scams but in 2018 roughly 0.01 percent of ETH was involved in swindles worth $36 million. “The number of scams declined through 2018, although those that remained were bigger, more sophisticated and vastly more lucrative,” the Chainalysis report details.

“From late 2016 through the end of 2018, Chainalysis has identified over 2,000 scam addresses on Ethereum that have received funds from nearly 40,000 unique users — Scam activity increased dramatically in 2018 with nearly 75% of scamming activity taking place that year,” the report explains, (via

Monroe’s Musings: These reports are vital to understand where and how criminals, fraudsters and hackers are monetizing their digital value hauls. We know that while most of the world’s dirty money is laundered through the traditional banking system – ironically enough through countries like the U.S., EU and U.K., which have the most stringent AML rules – many virtual brigands are increasingly turning to crypto coinage and ethereal exchanges to get real world cash.

This obviously puts more pressure on the exchanges themselves to police what companies and individuals are using their platform – and ensuring they are not obscuring their true identity through anonymous coins, tumblers and opaque, impenetrable shell companies.

One other vital piece of this puzzle, however, that appears unknown is what banks were used to pull out this money? As well, where were these banks located? In Eastern Europe? The Middle East?

Did any of these institutions realize their customers or corporates are working with murky crypto exchanges – or are an exchange in disguise? All these questions must be answered to form a stronger defensive barrier against such criminal groups in the real and virtual worlds.


UK, France and Germany create payments system to trade with Iran

The UK, Germany and France have forged ahead against a longtime ally, creating a new controversial payments system designed to allow European businesses to trade with Iran without falling foul of US sanctions – a system currently only allowing broadly licensed transactions, but with aims to facilitate blacklisted oil and other sanctioned transactions. 

All three EU powers opposed last year's decision by President Donald Trump to abandon a 2015 deal under which international sanctions on Iran were lifted in response to easing purported nuclear proliferation goals.

Some of the US sanctions make it difficult for European banks to make direct payments to Iran. The US said sanctionable activity with Iran risked "severe consequences," including being blacklisted and not allowed entry into the U.S. financial system.

By creating a new payment channel, based in Paris, and managed by a German banker, the UK, France and Germany hope to enable companies to continue to trade with Iran. Many other existing payment channels have links to the US, which means making payments to Iran is difficult.

The UK Foreign Office said the Instrument for Supporting Trade Exchanges (INSTEX), was a “new mechanism for facilitating legitimate trade between European entities and Iran.”

Foreign Secretary Jeremy Hunt said initially the new payment system would only apply to food, pharmaceuticals and consumer goods, which are not subject to sanctions. Oil, Iran's main source of foreign exchange, will not be covered, (via the BBC).

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