News & Press: ACFCS News

Daily Briefing: US authorities hit UniCredit with $1.3 billion fine, EU gets tough on AML, and more

Thursday, April 18, 2019   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
April. 17, 2019

Quote of the Day: “Without continual growth and progress, such words as improvement, achievement, and success have no meaning.” – Benjamin Franklin

In today’s ACFCS Fincrime Daily Briefing, U.S. federal and state authorities hit UniCredit bank with $1.3 billion fine on sanctions failures, EU talks tough on AML after “Landromat” scandals, and more.

Please enjoy this unlocked story, part of the many benefits of being an ACFCS member.

Want to talk about industry trends, story ideas or get published? Feel free to reach out to ACFCS Vice President of Content Brian Monroe at the email address above. Now, on to more sweet sweet content!


U.S. authorities fine UniCredit Bank $1.3 billion for Iran, sanctions violations, second huge fine in week   

U.S. federal and state authorities have fined one of Europe’s largest banks more than $1.3 billion and forced it to enter a guilty plea for processing hundreds of millions of dollars for blacklisted entities and countries, including Iran – the second such billion-dollar plus settlement in as many weeks.

The U.S. Department of Justice, U.S. Treasury, and state and federal regulators have hit Munich-based UniCredit Bank AG (UCB AG), operating at the time as HypoVereinsbank, for “knowingly and willfully” moving nearly $400 million through the U.S. financial system on behalf of sanctioned entities for more than a decade.

Federal prosecutors noted that, in particular, the bank provided financial and other transactional resources for an entity specifically designated to being blocked out of the international financial system for helping move funds supporting the creation of weapons of mass destruction.

The New York State Department of Financial Services (NYDFS) went even further, stating the UniCredit deliberately moved billions of dollars for clients tied to rogue regimes, including Iran, Libya and Cuba, an institutionalized procedure ironically enough run by the “Core Compliance Team” in a supposed bid to be “neutral” to countries and improve customer service.

The UniCredit settlement is actually the second hefty sanctions compliance settlement in just two weeks – a rare synchronicity that is likely a planned parallel by mostly these same cast of characters.

Federal and state authorities in the United States and United Kingdom last week levied a penalty of more than $1.1 billion against Standard Chartered, one of London’s largest banks, for engaging in thousands of illicit transactions worth hundreds of millions of dollars involving blacklisted countries including Iran, Sudan and Syria – a rare global settlement for financial crime compliance failures.

That was the third time federal and state regulators have penalized StanChart for such failings.  

The NYDFS penalized StanChart $340 million in August 2012 for AML, sanctions and books and records violations, at one point threatening to pull its banking license. The decision front-ran a concurrent federal investigation, leading to criticism of then head Benjamin Lawsky.

Just a few months later, in December 2012, the bank paid $327 million to U.S. regulators and prosecutors for sanctions breaches related to Iran and broader AML compliance failings.

In total, the NYDFS has penalized StanChart more than $1.1 billion alone in four separate actions for AML, sanctions and other financial crime failures.

And now, just days later, UniCredit faces many of the same charges in its settlement, (via DOJ).

Monroe’s Musings:

This penalty has a lot to chew on, with a plethora of compliance lessons aplenty, including how not to use a sanctions screening system and how not to teach compliance…by institutionalizing, in some instances in a how-to-booklet, how to evade compliance.

First and foremost, think of how rare it is for two billion-dollar plus sanctions penalties to come out in a week. Just happenstance? Serendipity? Doubtfully. These kinds of settlements typically take years to investigate and months to negotiate.

So there is a strong chance that these federal investigators and regulators worked overtime to bring two settlements together in a close succession as a “shock and awe” move to the industry to say that the era of massive sanctions fines started more than a decade ago is not over and, hopefully, push more large, international backs to more aggressively check their own dark compliance corners.

This also brings to mind the old adage, “you can bring a horse to water, but can’t make it drink.” Similarly, you can take a sanctions transaction screening system to compliance, but you can’t make them comply.”

The lesson: don’t just install a new piece of software and leave up to compliance to see how it’s operationalized. Check back on what they are doing with the system, alerts, hits and dispositions to see if they are in line with industry best practices or, in this case, are the opposite of them.

Money laundering

Council of Europe Urges Swift Action on Money Laundering, citing Baltics, UK scandals, gaps

European lawmakers are urging financial institutions and governments to address dozens of legal and supervisory shortcomings they say contributed to the proliferation of massive money laundering schemes in recent years, a move to put more pressure on exterior financial crime gaps as it seeks to buttress its own gaps.

In a resolution adopted Thursday, the Council of Europe’s Parliamentary Assembly said that recent money laundering schemes linked to Russia, the Baltic states and the United Kingdom were of such scale that they posed a “serious threat to democratic stability, human rights and the rule of law.”

The intergovernmental group, which advises on international law but is not part of the European Union, singled out three alleged money laundering operations—the so-called “Global Laundromat,” “Azerbaijani Laundromat,” and “Troika Laundromat”—believed to have been used to transfer at least $28.5 billion in suspicious funds through a massive network of shell companies and banks.

“The three laundromats have two important features in common: the use of banks in the Baltic states and the use of shell companies based in the UK and its overseas territories,” said Assembly Member Mart van de Ven in speech presenting the resolution Thursday.

Geographic proximity and historic relations to Russia, as well as inadequate implementation and enforcement of anti-money laundering (AML) recommendations, have made financial institutions in the Baltic states particularly vulnerable to Russian money laundering, according to van de Ven, who has served as a Dutch senator since 2015.

At times, corporate formation laws in the United Kingdom and its overseas territories have facilitated the schemes, the resolution concluded.

The resolution calls on authorities in Russia, Moldova, Azerbaijan, the United Kingdom, Denmark, Sweden and the Baltic States to step up their efforts to curb financial crime by closing legal loopholes, bolstering their enforcement efforts and pursuing criminal prosecutions.

The intergovernmental group cited fiscal amnesty and golden visa programs in Moldova and purportedly lax beneficial ownership rules in the United Kingdom and its overseas territories as contributing to international money laundering, (via KYC360).

Monroe’s Musings:

The EU is clearly feeling more pressure to put its own AML house in order, but also realizes that without going after the major compliance weak points and money laundering hubs, they won’t detect and deter large scale financial crimes.  

Political forces realize all will be for naught if only internal means embolden, due to the interwoven nature of the international financial system and plethora of spidery correspondent relationships connecting the riskiest regions and banks to the jurisdictions with supposedly strong financial crime compliance laws.


The National Cyber Security Alliance and the Better Business Bureau recommend to Online "Take-Action Tips" to help strengthen cyber hygiene, thwart hackers

Taking some simple, proactive steps for cyber hygiene will go a long way in safeguarding you against any number of potentially disruptive issues – like identity theft, loss of funds or credit card fraud – that can cause mayhem by compromising your data.    

NCSA and BBBs nationwide are encouraging everyone to follow our top three "take-action tips" and enjoy the benefits of the internet. In addition, to assist in the safe disposal of electronically stored data – like past tax returns – be sure to participate in BBB's Secure Your ID Day or other "shred day" events in your area.

  • Lock Down Your Login: Both at home and at work, security is critical to protecting highly personal accounts. One of the first things everyone needs to do is ensure that passphrases are lengthy, unique and safely stored. In addition, it is essential to fortify accounts by adopting strong authentication, which adds another layer of protection.
  • Update Your System and Software: Don't procrastinate any longer! Having the latest updates, security software, web browser, and operating system is one of the easiest ways to keep devices secure and protect data. This simple "digital to do" is a must to help keep cybercriminals at bay.
  • Back It Up: Protect your personal and workplace data by making electronic copies – or backups – of your most important files. Whether it's family photos, health records or employee contacts, back up your files this spring and set a schedule to do so regularly throughout the year, (via the National Cybersecurity Alliance).


Swiss court orders Falcon bank to hand over ‘illegal’ 1MDB profits

The Swiss Federal Court has rejected an appeal by Falcon Private Bank against “illegally generated profits” that Switzerland’s financial watchdog seized from the bank in 2016. The CHF2.5 million ($2.56 million) is linked to the Malaysian 1MDB scandal. 

In a decision published on Fridayexternal link, the court said it had ruled in favour of the Swiss Financial Market Supervisory Authority (FINMA) over “illegally generated profits” it ordered to be surrendered in 2016. 

Falcon was accused of seriously violating money-laundering rules by failing to carry out background checks into transactions and business relationships relating to the 1Malaysia Development Berhad, or 1MDB sovereign fund, registered in Switzerland, Singapore and Hong Kong. 

After an appeal by Falcon, the Federal Administrative Court reduced the amount confiscated to CHF1.7 million in April 2018. Judges said the bank could deduct general management fees from the confiscated earnings. 

On Friday, Switzerland’s highest court annulled this decision and insisted on the full amount to be handed over. It said the purpose of confiscating assets obtained in violation of existing rules was to impose a legal order and to prevent such offences from being profitable. 

It said FINMA had a certain discretionary power regarding the amount that could be confiscated.  1MDB is at the center of money-laundering investigations in at least six countries, including Switzerland, Malaysia and the United States. 

The US Department of Justice has said an estimated $4.5 billion was misappropriated from 1MDB, founded by former Malaysian Prime Minister Najib Razak, who is on trial accused of pilfering millions of dollars from the fund. 

Switzerland is investigating six people on suspicion of money laundering, bribing foreign officials and other offences as part of an investigation into the Malaysian state fund, the Swiss Attorney General’s office said last year. 

The Monetary Authority of Singapore (MAS) has previously ordered Falcon’s Singapore branch to cease operating because of “a persistent and severe lack of understanding” of Singapore’s money-laundering controls. It also accused Falcon’s senior management in Switzerland and Singapore of “improper conduct,” (via Swissinfo).

Monroe’s Musings:

It’s vital governments the world over that are investigating the massive 1MDB fraud, what some call one of the largest such schemes in history, aggressively go after the assets with forfeiture and seizure orders.

One detail also jumped out: those funds should be snared with attendant penalties to any bank, company or individual involved to, as the story states, ensure that even if a bank gives back the portion of funds stolen, they must do so plus any interest gained so as to not make dealing with illicit individuals and their tainted assets profitable. 

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