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Reg Report: Two banks pay more than $1 billion each on sanctions gaps, US guidance deluge, and more

Wednesday, July 10, 2019   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
July 10, 2019

Welcome to a monthly feature from ACFCS to help you keep up to date on the latest rules, guidance and enforcement trends: The Regulatory Report! 

In this feature, ACFCS highlight’s key current, upcoming or potential changes in the global financial crime landscape, so compliance professionals, investigators and regulators can better keep abreast of pressing vulnerabilities, issues and legislative fixes. Enjoy! 

In our latest ACFCS Regulatory Report, covering the second quarter, the U.S. hits Standard Chartered and UniCredit with billion-dollar fines for dealing with rogue regimes, DOJ, OFAC and FinCEN guidance geyser, and more.


In April, the showers came not to help the flowers, but originated from U.S. federal investigative and regulatory agencies issuing a deluge of sanctions penalties against two foreign banks in a week totaling more than $2 billion.

U.S. authorities fine Unicredit Bank $1.3 billion for Iran violations, second massive fine in a week

U.S. federal and state authorities in mid-April 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 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 that 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 a week prior 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.  

Investigative, regulatory scrum: Didactic documents detail UniCredit failings

·       To read the full OFAC action, click here.

·       DOJ To read the full DOJ action, click here.

·       To read the full Federal Reserve action, click here.

·       To read the full NYDFS action, click here.

·       To read the full Manhattan DA’s Office action, click here.

·       To read ACFCS coverage of the Unicredit penalty, click here.

Investigative, regulatory pile-on: Dollop of documents detail StanChart failings

·       To read the full OFAC action, click here.

·       DOJ To read the full DOJ action, click here.

·       To read the full Federal Reserve action, click here.

·       To read the full NYDFS action, click here.

·       To read the full Manhattan DA’s Office action, click here.

·       To read the full FCA action, click here.

·       To read ACFCS coverage of the StanChart penalty, click here.


Japan’s largest bank pays NYDFS $33 million after it jumps state charter for federal, kicks out examiners, sues regulator

After nearly two years of battling New York state regulators, Japan’s largest bank will pay its adversary $33 million to settle a lawsuit the institution started after kicking local examiners out and preventing them from coming back in after switching to a federal charter.

The New York State Department of Financial Services (NYDFS) negotiated the settlement late last month with MUFG Bank, closing a lawsuit started by the institution against the state regulator in November 2017 – a day after the U.S. Treasury’s Office of the Comptroller of the Currency (OCC) granted the group a federal charter for branches in New York, Illinois and California, along with offices in Texas.

At issue is that MUFG believed it could prevent New York regulators from entering the building after its conditional charter approval in 2017, even though it was still juggling two NYDFS orders focusing on financial crime compliance failings – even suing to keep them out.

But the NYDFS at the time countered in a counter suit that it still had authority to oversee financial crime compliance issues that occurred under its charter prior to the conversion.

That is a vital point for state and federal examiners as the MUFG banking group has paid more than a half a billion dollars for similar fincrime compliance failings in years past.

To read the NYDFS action, click here. To read ACFCS coverage of the action, click here.


New DOJ guidance on corporate compliance programs shifts focus to ‘effectiveness,’ executive-level culture, tone, training, tip lines

The U.S. Department of Justice has updated guidance related to what is expected of corporate and financial crime compliance programs to gain credit when failings occur – a key shift toward the effectiveness of company efforts, rather than just having detailed policies and procedures.

The guidance, which applies to the whole of the department’s Criminal Division, including corporate and banking compliance settlements, builds on 2017 guidelines, which included a list of sample topics and questions for prosecutors to calculate when deciding if a company has demonstrated a true commitment to compliance and should get credit in a corporate settlement.

The guidance document released in April sets “forth topics that the Criminal Division has frequently found relevant in evaluating a corporate compliance program, organizing them around three overarching questions that prosecutors ask in evaluating compliance programs: 

·       First, is the program well-designed? 

·       Second, is the program effectively implemented?  

·       And, third, does the compliance program actually work in practice? 

The guidance is laid out in three parts:

·       Part I – Risk assessments, training tip lines: Discusses various hallmarks of a well-designed compliance program relating to risk assessment, company policies and procedures, training and communications, confidential reporting structure and investigation process, third-party management, and mergers and acquisitions.   

·       Part II – Effectiveness, tone at the top, resources: Details features of effective implementation of a compliance program, including commitment by senior and middle management, autonomy and resources, and incentives and disciplinary measures. 

·       Part III – Effectiveness in action, failings, remediation: Analyzes metrics of whether a compliance program is in fact operating effectively, exploring a program’s capacity for continuous improvement, periodic testing, and review, investigation of misconduct, and analysis and remediation of underlying misconduct.

To read the full DOJ guidance, click here.

To read ACFCS coverage of the DOJ corporate compliance guidance, click here.


OFAC issues detailed guidance, sanctions compliance expectations, best practices, pitfalls of past failures

The U.S. Treasury arm tasked with administering the country’s sanctions programs has issued its most detailed and prescriptive piece of guidance yet on what it considers a strong compliance program to prevent banks and corporates of all stripes from running afoul of the ever-changing requirements to not deal with blacklisted entities and rogue regimes.

The Office of Foreign Assets Control (OFAC) in a historic May missive laid out the key pieces of a sanctions compliance program (SCP) it believes can help large organizations that are headquartered in the U.S. or do significant business in the country to better prevent sanctions failings, identify gaps more quickly and uncover and report potential sanctions violations.

OFAC for the first time has framed a formalized sanctions compliance program (SCP), mirroring many of the tenets of the anti-money laundering (AML) compliance program, including prongs such as crafting internal controls, engaging in OFAC risk assessments, adequately training staff and testing and auditing systems and human decisions to ensure gaps are closed quickly.

OFAC states that while each risk-based SCP will vary depending on a variety of factors — including the company’s size and sophistication, products and services, customers and counterparties, and geographic locations — each program should be predicated on and incorporate at least five essential components of compliance:

·       Management commitment: Promotes a culture of compliance by ensuring SCP staffers have adequate authority, autonomy, resources and executive responsiveness for failures. 

·       Risk assessment: Similar to the AML risk assessment, but done through the lens of U.S. sanctions policies, cognizant of the propinquity to rogue regimes, sanctions evaders. 

·       Internal controls: As in the case of the AML transaction monitoring system, these can include the actual automated sanctions screening systems and the policies around investigating and escalating potential hits. 

·       Testing and auditing: This is typically a group outside of sanctions, either internal or external, that can review both sanctions screening inputs and outputs and scrutinize the decisions of staff to ensure potential hits are analyzed, escalated and dispositioned.

·       Training: Without training on how regimes evade sanctions policies, what regions of the world this happens and in what ways – such as through trade and co-opted correspondents – there is no way analysts can make the right decisions. Training has to be expansive, relevant, nuanced and infused with the geopolitical power shifts driving sanctions evaders.

To read the full OFAC guidance, click here.

To read ACFCS coverage of the OFAC guidance, click here.


FinCEN offers crypto currency guidance to clarify AML rule obligations, highlight red flags on heels of first P2P exchanger penalty

If you use a person-to-person (P2P) crypto exchange and transfer virtual coins into money and back for others as a business, you are a money transmitter and must have a financial crime compliance program.

If you are the administrator of an exchange that allows people to do this, you are likely also a “money services business” for fincrime compliance purposes.

But if you are a person who “infrequently” trades value on a P2P exchange without attempting to make a profit, you haven’t officially tripped anti-money laundering (AML) rules under the U.S. Bank Secrecy Act (BSA).

Those are just some of the revelations in just-released interpretative guidance by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to help the “convertible virtual currency” (CVC) sector better understand their own obligations if and when AML rules get tripped and, just as importantly, when they don’t.

FinCEN also detailed “red flags” for crypto exchangers – formal exchanges and platforms that allow individuals to buy and sell with each other – to understand when transactions could be tied to illicit groups or darknet sites, with further transactional tells to help financial institutions uncover that an account is tied to a crypto exchange, but the operation never told the bank.

The guidance comes on the heels of a key penalty in the crypto space.

In April, FinCEN in its first foray against a peer-to-peer crypto exchange, fined a tiny, one-person operation $35,000 for buying and selling millions of dollars in Bitcoin over a roughly two-year period for a bevy of individuals with virtually no financial crime compliance program to speak of – including failing to file on any large or risky transactions.

To read the full FinCEN crypto guidance, click here.

To read ACFCS coverage of the FinCEN crypto guidance, click here.


OFAC designates Russian financial institution for helping North Korea evade sanctions – second action targeting Kremlin banks

The U.S. Treasury’s sanctions arm last month designated a Russian financial institution for helping a blacklisted North Korean trading firm get access to the international financial system – the second time the agency has targeted the Kremlin’s banking sector at a time when tensions between the two world powers are rising.

The Office of Foreign Assets Control (OFAC) targeted the Moscow-registered Russian Financial Society (RFS), for providing material support to the already sanctioned North Korean trading firm, Dandong Zhongsheng Industry & Trade Co. Ltd (Dandong Zhongsheng), an entity that is owned and controlled by, directly or indirectly, U.S.- and United Nations (UN)-designated Foreign Trade Bank (FTB), North Korea’s primary foreign exchange bank.

The move comes just weeks after OFAC also penalized money remitting Giant Western Union more than $400,000 for violating terror sanctions when a sub-agent in Gambia dealt with a designating shopping center, resulting in nearly 5,000 violations and a potential penalty of more than $1 billion.

But because Western Union self-disclosed the penalty, cooperated with officials and remediated aggressively, OFAC chose a much lower fine.

To read the full OFAC action, click here.

To read ACFCS coverage, click here.

US judge holds three Chinese banks in contempt for refusing to comply with probes into violations of North Korea sanctions, as institutions face ‘death penalty’ of losing access to dollars

A US judge has found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations. The order triggers for the first time a provision that could cut off one of China’s largest banks from the US financial system at the demand of the US attorney general or treasury secretary.

The three banks are not identified, but details in court rulings align with a 2017 civil forfeiture action in which the Justice Department alleged that China’s state-owned Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank (SPDB) worked with a Hong Kong front company accused of laundering more than US$100 million for North Korea’s sanctioned, state-run Foreign Trade Bank.

The bank at risk of losing access to US dollars, the lifeblood of international finance, appears to be SPDB, China’s ninth-largest bank by assets, whose roughly US$900 billion makes it comparable in size to Goldman Sachs. Matching details include SPDB’s ownership structure, limited US presence and alleged conduct with the other banks.

To read more coverage, click here.

To read further ACFCS coverage, click here.


FinCEN in Congressional hotseat over oversight of Facebook’s planned crypto coin, Calibra, use of AI to counter fincrime

Key economic and national security congressional powerbrokers are ardently querying the country’s financial intelligence unit on how it will oversee, analyze and mitigate the potential threat of Facebook’s new crypto coin – and how proactively government analysts are using new, innovation technologies to do so.

Those are just some of the issues covered in a bipartisan briefing between U.S. Representatives Emanuel Cleaver, II (D-MO), Chairman of the Subcommittee on National Security, International Development, and Monetary Policy, Trey Hollingsworth (R-IN), Bill Foster (D-IL), and French Hill (R-AR) along with members of the House Financial Services Committee and Ken Blanco, Director of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

The briefing was held to discuss FinCEN’s use of AI and ML technology to detect illicit financial activity and how the bureau is working with regulators to encourage the use of these technologies among financial institutions.

To read the full briefing, click here.

To read ACFCS coverage, click here.

Elder financial abuse

Elder Abuse Awareness Day 2019: ACFCS highlights tips, tactics to counter scammers targeting elders

June is Elder Abuse Awareness Month, and June 15 is Elder Abuse Awareness Day, a designation meant to highlight the ongoing criminal tactics targeting one of the world’s most vulnerable populations, and better sensitize financial crime compliance professionals, law enforcement and caregivers about an issue growing in scope.

The issue of how to protect the elderly and spot fraudsters attempting to take advantage of the elderly is also very important to the Association of Certified Financial Crime Specialists (ACFCS).

We have extensively covered the dynamics at play in detailed stories, webinars and during live events, a challenge as standard anti-money laundering (AML) compliance risk assessments may miss the more nuanced red flags at play in this crime.

For instance, in most cases, direct relatives and caregivers are low-risk entities tied to certain accounts, where compliance analysts typically look for risky entities outside the bank trying to break in – but that changes when the elderly are involved.

Ironically, for many cases of elder abuse, it is a close family member or stated caregiver attempting to take advantage of an elder parent or relative that is incapable of saying no to certain transactions when individuals attempt to drain their savings, investments or run up credit card debt in their name.

That was the alleged case in a recent high-profile incident of elder abuse, proving that anyone can become a victim of elder abuse – even a famous celebrity known for creating the world’s most popular superheroes. To read ACFCS coverage, click here.


Small cities, weak cybersecurity, and insurance policies – The perfect target for cybercriminals

Ransomware has run amok in the systems of smaller cities, with devastating results in recent months. Here are some critical snapshots:

·       Lake City in Florida paid $460,000 in ransom, weeks after Riviera Beach paid more than $600,000

·       Spate of attacks on victims with similar profiles across the US

·       Big ransoms, but cost of refusal can also be high – Atlanta paid estimated $7 million in remediation after refusing $51,000 ransom

·       FBI received 1,500 reports in 2018, but real figures likely far higher

Corporate transparency

Jersey, Guernsey and Isle of Man to set up public registers of firms' owners, a turnabout from former stern statements they would not comply

Jersey, Guernsey and the Isle of Man have announced they will voluntarily adopt public registers of the true owners of offshore companies incorporated in their jurisdictions – an about face from statements just months ago they would fight new requirements to capture and publicly share beneficial ownership details to prevent criminals from hiding behind impenetrable corporate structures.

In a joint statement, the three islands said they would introduce fully public registers by 2023. Campaigners welcomed the announcement as a victory for transparency and an “important first step” in the fight against tax evasion and money laundering, though they said key details needed clarifying.

The announcement follows years of scandals about the use of offshore companies. Public registers identifying the owners of anonymous shell companies are widely regarded by anti-corruption campaigners as essential to tackling economic crime.

The UK’s network of crown dependencies and overseas territories have been exposed as havens for dark money in recent years through the release of the Panama Papers and subsequent offshore scandals. Britain has come under pressure to impose reforms on its territories and former colonies.

To read more analysis, click here.

To read ACFCS coverage, click here.

Tax evasion 

New index ranks havens behind broken global tax system: $18 trillion booked in just 10 countries

Many large corporates are parking nearly half of current cross-border direct investments representing trillions of dollars in value in only a handful of countries – jurisdictions offering single digit tax rates that one watchdog group states are contributing to an overall broken global tax system.

Some 40 percent of today’s cross-border direct investments reported by the International Monetary Fund (IMF) – $18 trillion in value – are being booked in just 10 countries offering corporate tax rates of three per cent or less, the result of decades of tax wars among the world’s richest countries unravelling the century-old global corporate tax system, new research finds.

The Corporate Tax Haven Index, published in late May by the Tax Justice (TJN), has identified the United Kingdom (UK) and several Organization for Economic Cooperation and Development (OECD) countries as the jurisdictions most responsible for the breakdown of the global corporate tax system. 

The UK, according to the ranking, “bears the lion’s share of responsibility through its controlled network of satellite jurisdictions,” according to TJN. “These countries have aggressively undermined the ability of governments across the world to meaningfully tax multinational corporations.”

To read more about the tax haven index, click here.

To read ACFCS coverage, click here.


Europol, EU authorities crush crypto laundering site in historic action

European authorities have taken down what they are calling one of the world’s largest cryptocurrency mixing services, a virtual money laundering machine used to muddy the trail of $200 million in transactions to make it harder for investigators to track criminally-tinged digital assets – a historic move sending a message to dark web denizens everywhere.

Europol, the Dutch Fiscal Information and Investigation Service (FIOD) and authorities in Luxembourg last week attacked in the real and online worlds after a nearly year-long investigation, seizing six servers in the Netherlands and Luxembourg and taking the site itself offline.

Europol describes Bestmixer as “one of the world’s leading cryptocurrency mixing services,” one of the three largest mixing services for cryptocurrencies and offered services for mixing the cryptocurrencies bitcoins, bitcoin cash and litecoins.

The company even released a whimsical animated YouTube video with nearly 10,000 views detailing how mixing services work and the best way to ensure transactional anonymity, a roughly three-minute movie that is still up.

The takedown of the mixing site occurs after the U.S. and international authorities in recent years have teamed up to identify and crush many of the dark web’s largest darknet marketplaces and related virtual currency exchanges – operations that in many instances had little to no anti-money laundering (AML) compliance procedures in place.

To read more, click here.

To read ACFCS coverage, click here.


Under new Chinese presidency, FATF to focus on terror finance, beneficial ownership, ‘consider’ wildlife trafficking

After closing its high-profile U.S. Presidency releasing influential and heavily-scrutinized virtual currency counter-crime compliance guidance, incoming FATF President, China, stated the global standard-setting body will continue to focus on the core mission of countering terror and unwrapping beneficial ownership bastions – with potential work to come on the wildly profitable wildlife trafficking.

In 2019-20 FATF’s priorities will “include closely monitoring and reporting on the financing of ISIL, AQ and Affiliates; work on confiscation and asset recovery; best practices to improve the transparency of beneficial ownership; the mutual evaluations of Russia, Turkey, United Arab Emirates, Korea, Japan and South Africa; and the first 5th year follow-up assessments of effectiveness for Norway, Spain, Australia, Belgium and Malaysia.”

FATF also touched on, without directly addressing, the massive money laundering scandals hitting the Nordic and Baltic regions, noting that the group will look internally and externally to improve the effectiveness of its own exams to better uncover such failures, along with cooperating to create online training available to countries to better build capacity.

FATF to better help countries understand international vulnerabilities and buttress regional operations will develop an e-learning package to be available to all countries.

In addition, the Presidency will be promoting the development and coordination of high-quality training on the FATF Standards throughout the 205 jurisdictions that have committed to implement and be assessed against them.

Finally, the FATF “may consider the opportunity for work on money laundering from illegal wildlife trafficking,” the group noted.

The crime is estimated to be the fourth most profitable criminal trafficking enterprise, generating revenues of between $7 billion and $23 billion a year, with links to modern slavery, narcotics and the arms trade, according to FATF. To read more, click here.  

Updated guidance for gatekeepers: the legal profession, accountants, trust and company service providers

FATF also issued three new pieces of guidance on gatekeepers that are international focal points for both complex financial crime investigations and capturing bodies with anti-money laundering requirements.

Through nearly 300 pages of text, FATF called on these bodies to more aggressively police themselves, rigorously review customers by capturing, and keeping up to date, beneficial ownership information, and exhorted regulators – particularly self-regulatory bodies – to not shirk their duties to instill a culture of compliance and penalize entities flouting the rules.

Here are some snapshots:

·       It is the responsibility of the senior management of legal professionals to foster and promote a culture of compliance.

·       Legal professionals should design their policies and procedures so that the level of initial and ongoing CDD measures addresses the ML/TF risks to which they are exposed.

·       The Guidance thus explains the obligations for legal professionals regarding identification and verification of beneficial ownership information and provides examples of standard, simplified and enhanced CDD measures based on ML/TF risk.

·       Supervisors and self-regulatory bodies (SRBs) need to enforce licensing or registration requirements, have mechanisms for on-site and off-site supervision, enforcement, guidance, training and foster information-exchange between the public and private sector.        

·       The Guidance highlights the importance of supervision of beneficial ownership requirements and nominee arrangements. It underscores how supervisory frameworks can help ascertain whether accurate and up-to-date beneficial ownership information on legal persons and legal arrangements is maintained and made available in a timely manner. To read more, click here.  

If you exchange virtual value to fiat for others as a business, full gamut of AML rules apply: FATF  

A global watchdog group has issued the first ever broad international recommendations to cover virtual value with financial crime compliance rules, including stringent requirements to capture and share customer data with related crypto-enabled entities, risk assess customers and businesses for illicit inclinations, monitor for aberrant activity and file reports to law enforcement.

In much-anticipated guidance, the Paris-based Financial Action Task Force (FATF), which sets global anti-money laundering (AML) and counter financing of terror (CFT) standards, issued a framework for how financial crime compliance rules should ensconce crypto exchanges and an individual, entity or company exchanging virtual value to fiat currency and back for others and as a business.

In the roughly 60 pages of text, FATF has ushered in a new order for the nascent sector, in some ways helping in its search for legitimacy, in other ways making new challenges as firms of all sizes must now create, staff, run, report on and remediate AML programs – and have those programs graded by applicable regional regulatory authorities.

The guidance and related interpretative note to its recommendations covers virtual asset (VA) activities and virtual asset service providers (VASPs) – think formal crypto currency exchanges – and even smaller operations, which could face difficulties in capturing, analyzing and sharing the details of customers and users with other service providers, brick-and-mortar institutions and investigators.

To read the full FATF guidance, click here.

To read ACFCS coverage of the FATF crypto guidance and plenary, click here and here.


Canada strengthens AML rules, captures more sectors, including crypto, tightens time frame for suspicious filings, and more

Canada, under intense pressure to curb money laundering reports citing its real estate, casino and certain financial institutions are a leaky spigot when it comes to dodgy cash, this week released a bevy of updates to its AML regulations, tightening many of the foundational procedures of the compliance program. Almost all amendments phase in over time – June 2020 and June 2021.

Here are some snapshots:

Changes related to:

·       Virtual Currencies

·       STR Filing

·       PEPs

·       Verifying Identities

·       Prepaid Products

STR Filing – Changes in Timing Expectations

·       From 30 days down three days in proposed regulations. This was changed to “as soon as practicable.”

·       New details expected to be captured, if available at the institution – Type of device, IP addresses, device IDs, and much more

·       If you have it, you may be expected to report it

·       Processes, procedures and documentation for examinations – Inherently subjective

Additional requirements under travel rule

·       Rule requires international electronic funds transfers (EFTs) to include name, address and account number of requesting client

·       Now requires beneficiary name and address, and account number if applicable

·       Also requires risk-based consideration of whether to “suspend or reject” international EFTs without required info

Virtual currency regulations

·       Dealers in virtual currency considered as MSBs

·       Includes representation of value for “investment purposes” – May cover ICOs

·       Must keep records and report on transactions at or above C$10,000 – Very similar to CTR

·       Record-keeping for transactions at or above C$1,000

·       PEP requirements and more

To read the full posting in the Canada Gazette, click here.

United Kingdom

Roughly half of SARs filed by UK financial institutions are of ‘low quality,’ banks need more guidance to prevent ‘defensive filing’

Nearly half of the hundreds of thousands of suspicious activity reports filed by United Kingdom financial institutions in recent years have little value to law enforcement, either too short without relevant information or too long with extraneous details, because they are more worried about getting dinged by regulators than creating rich relevant intelligence for investigators.

Those are some of the findings by the U.K. Law Commission in a report published Tuesday that reviewed 463,938 suspicious activity reports (SARs) between April 2017 and March 2018, a jump of 9.6 percent on the volume of SARs in 2016-17. The U.K. National Crime Agency (NCA), a critical customer of those filings, describe it as a “record number.”

The study, spearheaded the UK Home Office, uncovered that only 52.4 percent of the financial institutions reviewed by the commission could clearly and precisely detail objective and “reasonable grounds” for submitting SARs.

That is a problem because the overall number of SARs filed by institutions have more than doubled over the last decade.

At issue: needless filings are clogging up the system with reports that are filed “defensively,” meaning that the banks filed reports with little information in the narrative as a shield against regulatory scrutiny – rather than taking the time to investigate the alert, understand the full picture and craft a report that could be the foundation of a criminal case.  

To read the full report, click here.

To read ACFCS coverage, click here.


Norway FSA fines Santander bank $1 million for AML breach

Norway’s Financial Supervisory Authority has ordered Spanish bank Santander to pay a fine of nine million crowns ($1 million) for violations of the country’s anti-money laundering laws, continuing an increased focus on compliance in the region in the wake of still-roiling financial crime scandals.

The fine was imposed in relation to violations found at Santander Consumer Bank in Norway, the regulator said in a letter dated June 28 and published on its website on Tuesday.

A failure in the bank’s electronic monitoring system stemming from merging legacy and new systems meant that some 1.6 million transactions, affecting around 300,000 customers, were not controlled for money laundering between Oct. 30, 2014 and Dec. 6, 2018, the letter said.

After the problem was solved, it added, Santander backchecked all the transactions that had not been checked in the period and found no violation worth reporting to police. To read more coverage, click here.   To read the full letter, (not in English), click here.


Prosecutors charge ex-Denmark financial regulator, former Danske Bank director, in money laundering scandal

Danish authorities have charged a former top official at scandal-plagued Danske Bank, who also held a high position at Denmark’s financial regulator, related to the institution’s sprawling money laundering debacle.

Economic prosecutors have charged Henrik Ramlau-Hansen, a former Danske Bank finance director, who chaired Denmark’s Financial Supervisory Authority between 2016 and 2018, with crimes tied to the bank’s estimated $230 billion money laundering scandal.

He resigned in 2018 at the same time a scathing Danske report from the regulator was issued. He has recused himself from the investigation. He’s been working as an assistant professor at Copenhagen Business School, reported The Financial Times.

In September Danske disclosed that €200 billion worth of money flowed from Russia and ex-Soviet states to the Danske Estonia branch. The money laundering went on from 2007 to 2015. To read more coverage, click here.

Nordic, Baltic regulators boosting cooperation, oversight on AML as banks pool resources to appease examiners, battle fincrime

Nordic and Baltic regulators are working to better communicate, coordinate and cooperate in fighting massive money laundering scandals rocking the regions, as many of the banks in their charge similarly band together to share resources, better know customers and more quickly uncover financial crime and compliance risks.

In April, financial regulators in Denmark, Estonia, Finland, Iceland, Latvia, Lithuania Norway and Sweden have agreed to craft a permanent working group to bolster cumulative efforts to identify, investigate and prosecute money laundering, terrorist financing and other financial crimes.

Baltic AML snapshot


       Major package of AML reforms shelved earlier this year in run-up to elections

       Estonian regulator (Finantsinspektsioon) has taken action on its own – Effectively shut down Danske Bank branch, revoked license of payments firm Good Finance Company

       Swedbank suspended chief executive, finance director in country amid internal investigation

       Agency head has stated Danske Bank was not alone in non-resident account activity – Likely more to come


       In wake of ABLV Bank scandal, passed laws in June to strengthen AML regulation

       Ousted head of Financial and Capital Market Commission, laid out explicit duties for agency


       Has avoided major scandals so far, but still taken action

       Central bank created new agency for money laundering prevention and increased spending on AML supervision

       Growing fintech and virtual currency industry; adopted virtual asset regulation earlier this year

The regulators will “maintain regular contact and exchange experiences and information with the goal of being more effective in the prevention of money laundering,” in their home jurisdictions and countering larger, multi-country schemes, as a result of the agreement, working group, and related memorandum of understanding.

To read the full joint regulatory release, click here. To read more coverage, click here.

To read the joint banking release on the KYC utility, click here. To read more coverage, click here.


Malta creating new unit to tackle complex, international financial crimes, seize, freeze assets: Finance Ministry

Malta is creating a new unit to more aggressively uncover and prosecute large-scale, complex financial crime cases, and increase the power authorities have to freeze the assets of illicit entities, according to the country’s Ministry of Finance.

Taken together, the “sweeping reforms” will reinforce the country’s “commitment to fighting the scourge of financial crime and money laundering,” according to written and public statements by Finance Minister Edward Scicluna.

In all, the new measures – from several new dedicated new units, to more powers and resources for investigators and prosecutors – are designed to “boost the resources available to regulators and law enforcement,” and finally, their effectiveness to produce prosecutions and convictions.  

The changes cover three main areas:

·       Complex money laundering cases: Creation of new Financial Organized Crime Agency to investigate and prosecute the most serious cases of money laundering and financial crime 

·       Speed up case closures: New Police Prosecution Unit to accelerate the prosecution of serious cases

·       More seized, frozen assets: Enhanced powers for the Asset Recovery Bureau

·       Separation of duties: State Advocate Bill to separate Attorney General’s civil and prosecution functions 

The moves are in response to growing internal and external pressure on Malta from U.S. and European authorities over extensive gaps in the country’s anti-money laundering (AML) compliance defenses, lax oversight and enforcement by regulators and prosecutors and few investigations of large money laundering cases currently plaguing the region.

In November, the European Commission took rare and drastic steps to increase legal pressure on Luxembourg and Malta for not adequately implementing bloc-wide financial crime compliance regulations, while pulling back similar actions against Spain after a range of recent improvements.

To read the full Malta release, click here.

To read ACFCS coverage, click here.


Hungary establishes government watchdog body to better counter money laundering, terror financing, craft stronger AML rules

Hungary’s government has issued a resolution for setting up a body of experts to make anti-money laundering recommendations and measures to combat terrorism funding.

The members of the Anti-Money Laundering (AML) Coordination Council will include government ministers as well as the heads of the tax office, the police, the TEK counter terrorism centre and the Central Statistical Office, according to the resolution published in the latest issue of the official gazette Magyar Közlöny. Members will also be delegated by the central bank, the chief prosecutor and the Hungarian Chamber of Accountants, among others.

The Council, whose members will receive no remuneration, will meet at least three times a year. To read more, click here.


Switzerland strengthens AML rules for gatekeepers, subjecting lawyers, notaries to full customer risk screening protocols

The Swiss government has updated its counter-financial crime and compliance laws against gatekeepers, including lawyers, notaries and trust and company service providers, subjecting them to the full range of customer due diligence duties.  

Swiss officials stated they made the anti-money laundering (AML) changes to address criticisms and apply recommendations by the Paris-based Financial Action Task Force's (FATF) 2016 mutual evaluation report, which cited weaknesses in the oversight of gatekeepers and other groups.

The Swiss Federal Council is also informed by the “Panama Papers” and “Paradise Papers” leaks that shone a harsh light on attorneys and company formation agents, groups that create vast empty shell firms to shield criminals, tax evaders corrupt oligarchs and other unsavory characters.

Switzerland has also engaged in a broad country risk assessment, hastening these latest AML changes.

The stronger rules will also “promote the transparency of associations,” according to the Swiss government, noting that firms now will not just have to capture and verify the accuracy of customer and company ownership information, but also report it.

After a consultation, Swiss officials updated requirements for a bevy of sectors: persons providing services in connection with companies or trusts (advisors), for trading in precious metals, precious stones and old precious metal, as well as for financial intermediaries.

The moves could result in some banks losing customers if individuals and firms tarry in their responses to due diligence inquiries.

“Financial intermediaries will now be able to terminate a business relationship if they do not receive any feedback within 40 days of a report being submitted to the Money Laundering Reporting Office Switzerland (MROS),” Swiss officials said.

To read more click here.


Indian banking regulator imposes AML fines on four public sector banks for failing on KYC duties

The Reserve Bank of India (RBI) has imposed penalties ranging between Rs 25-50 lakhs on four state-run lenders for violating Know Your Customer (KYC) norms and anti-money laundering standards.

Punjab National Bank, Allahabad Bank, and UCO Bank were fined Rs 50 lakh each while Corporation Bank was fined Rs 25 lakh. 50 lakh is equally to 500,000 rupees or just more than $73,000.

The banking regulator, which recently sought and was approved for more powers and oversight of non-bank operations that move money, found irregularities in current accounts opened by these banks after receiving a complaint.

India has been receiving more international pressure related to banking scandals in the hundreds of millions of dollars and has faced criticism to prove its financial crime compliance laws are being implemented effectively and weaker banks penalized appropriately.

To read more, click here.

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