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 on the horizon. Enjoy!

In this month’s ACFCS Regulatory Report, a top regulatory official overseeing the nation’s largest and most complex banks says anti-money laundering reg relief is on the horizon, and the people rejoice, battles continue in Congress on beneficial ownership, Europe looks at the intersection of terror finance and virtual currencies, and more.



AML Reg relief incoming: More flexibility to improve efficiency, more guidance from, better intel for law enforcement – OCC head

Federal regulators have sent more than a dozen updates, tweaks and improvements to the country’s financial intelligence unit in a bid to improve the efficiency and intelligence of financial crime compliance programs while at the same time lowering the incredible resource drain on institutions in terms of time, money and elbow grease, according one top official.

Those are some of the key takeaways when it comes to potential incoming changes related to anti-money laundering (AML) regulations, according to Comptroller of the Currency Joseph Otting, who covered an expansive range of topics in a series of Congressional hearings this month.

He also touched on how the regulator, under fire for its oversight of bank insider sales abuses, is aware of dozens more banks that took advantage of customers, opening accounts without their consent beyond industry lightning rod, Wells Fargo. Otting detailed several ways, including:

  • Allowing regulators to schedule and scope BSA/AML examinations on a risk-basis and identifying ways to conduct associated examinations in a more efficient manner.
  • Considering changes to the threshold requiring mandatory reporting of Suspicious Activity Reports (SARs) and currency transaction reports and simplifying reporting forms and requirements.
  • Working with law enforcement to provide feedback to banks so that they understand how SARs and other BSA report filings are used and can provide the most useful information.
  • Exploring the use of technologies to reduce reporting burden and provide more effective access and information to law enforcement and national security personnel.
  • To watch the hearing and read witness statements, please click here and here.


OCC levies more than $12 million penalty against Bank of China on AML failures, OFAC foibles

The U.S. Treasury’s Office of the Comptroller of the Currency (OCC) penalized the domestic operations of Bank of China (BOC) for a host of anti-money laundering (AML) deficiencies, including lapses related to correspondent banking, trade finance and missed suspicious activity reports.

The lender, one of the world’s largest, is just the latest in a string of foreign banks, particularly from China, that have come under the regulatory compliance microscope. The OCC also noted deficiencies related to the screening of blacklisted entities designated by the U.S. Treasury’s Office of Foreign Assets Control (OFAC).

The action, originally leaked by Bloomberg in January 2016, mirrored deficiencies highlighted by the Federal Reserve in mid-2015 in a separate action against another massive, state-owned Chinese bank, China Construction Bank Corp.

The bank has operated in New York since 2009. In the earlier joint action by the Federal Reserve and New York State Banking Department, the regulators cited the Construction Bank of China, the country’s second largest, for deficiencies across the AML program and issues related to correspondent oversight, properly responding to law enforcement and other requests for information, (via OCC).


FinCEN issues guidance nudging financial institutions to uncover connections between corrupt PEPs, serial human rights abusers

FinCEN issues advisory reminding financial institutions about connections between corrupt, powerful foreign PEPs, particularly those in risky regions with weak rule of law, their lackeys and facilitators and how they can be inextricably intertwined with wide-scale human rights abuses, (via FinCEN).


 U.S. AML bill losing steam, strength as it goes through committee

The U.S. House of Representatives Committee on Financial Services has scheduled a Thursday markup on the Counter Terrorism and Illicit Finance Act (H.R. 6068), which has been stripped of provisions that would require collection of beneficial ownership information at the time of company formation, a necessary step to address this widely-recognized and well-documented vulnerability in the U.S. AML regime.

A November 2017 version of the same bill included a section to address this critical issue, (via GFI).

OCC grilled over broad practice of unauthorized account openings in banking industry, decision not to name dozens of offenders beyond Wells Fargo

The nation’s top banking regulator has found evidence that institutions other than Wells Fargo & Co. may have created accounts without customers’ authorization — and a prominent Democrat wants the regulator to name names, according to Congressional hearings and news reports.

The revelations have also raised questions as to what group inside financial institutions must own oversight of insider abuses, with some stating it should be anti-money laundering compliance teams.

Ohio Sen. Sherrod Brown, the ranking Democrat on the Senate banking committee, said earlier this month he wants the Office of the Comptroller of the Currency (OCC) to release more details of a review, spurred by the Wells Fargo accounts scandal, of sales practices at more than 40 large and mid-size banks that also apparently took advantage of customers, opening accounts without their consent.

Comptroller Joseph Otting faced intense scrutiny from Brown and other lawmakers. The OCC’s review found that some banks had opened accounts without proof of customers’ consent, but the agency has declined to name those banks saying the results of regulatory exams are private.

The results of the review, completed at the end of last year, were first reported by the publication American Banker. To read more analysis, click here. To view Wednesday’s hearing, click here.

U.S. Congress tackles intersection of virtual currencies and money laundering, honing in on risks of anonymous privacy coins

The U.S. Congress this week tackled the vexing issue of how virtual currencies, including centralized, de-centralized and peer-to-peer enabled, could be used for a wide selection of financial crimes, including laundering funds stolen from cyber frauds, hacks and other crimes, but also could be a funnel to illicitly influence geopolitical outcomes – particularly if those funds can’t be linked back to anonymous donors.

The US Subcommittee on Crime and Terrorism held a congressional hearing entitled, “Protecting Our Elections: Examining Shell Companies and Virtual Currencies as Avenues for Foreign Interference,” led by Senator Lindsey Graham. Scott Dueweke of DarkTower, Sheila Krumholz of the Center for Responsive Politics and David Murray of the Financial Integrity Network attended as witnesses.

Senator Sheldon Whitehouse, who introduced the Shell Company Abuse Act to protect US elections from foreign corporations and foreign nationals that are trying to influence US elections, referred to future attempts by political meddlers as a “clearly predicted threat” and honed in on the risks created by privacy coins in particular.

Because some cryptocurrencies have anonymous features, they’re regarded as being particularly attractive to anyone trying to circumvent campaign finance laws.

They can also facilitate peer-to-peer transactions, eliminating banks, and allowing a foreign adversary to conceal its location outside the US – issues also brought before lawmakers by U.S. investigative agencies that too often are getting stymied when fiat money trails jump into the virtual world. To read more analysis, click here.


Perennial U.S. company formation foil, Delaware, changes tune, endorses bill tackling anonymous companies – but only to deflect stronger transparency reforms

Delaware’s top government official overseeing company formation in the state endorsed a bipartisan federal proposal to require companies to disclose their true owners at the time of formation in new a new letter to Congress.

The correspondence from the Delaware Secretary of State comes as the U.S. House of Representatives Committee on Financial Services risks derailing a bipartisan effort to counter illicit finance by dropping the key transparency proposal from a package of reforms that will be voted upon in committee this week.

Without the key beneficial ownership disclosure provisions, several portions of the remaining bill would weaken safeguards against terror finance and criminal money laundering, according to the Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of more than 100 state, national, and international organizations promoting policies to combat the harmful impacts of corrupt financial practices, (via the Fact Coalition).

Three dozen former national Security officials urge Congress to end criminal magnet of anonymous shell companies

A coalition of dozens of former military and civilian national security leaders have sent a bipartisan letter to Congress urging legislators to address the problem of anonymous shell companies in order to better defend U.S. national security interests and defeat a currently gaping criminal vulnerability.

The letter is addressed to the leaders of the House Financial Services and Senate Banking Committees. Some excerpts of the letter include:

“As you and your colleagues look to curb rogue nations, kleptocrats, and transnational criminal networks from using America as a safe harbor for their ill-gotten gains, we urge you to take action against the use of anonymous shell companies,” the letter said.

“Drug cartels and human trafficking operations have long understood the benefits of corporate secrecy to launder money from criminal enterprises,” officials wrote. “More recently, anonymous companies are implicated in terror financing, fraudulent contracting with our military, and even sanctions evasion.”

To read the full letter, click here.


Gotham dives into the Matrix by advancing crypto taskforce bill

The New York state legislature has advanced a bill to create of cryptocurrency task force, with the goal of divining how to improve financial crime compliance countermeasures and user transparency in the virtual currency space. To read a copy of the bill, click here.

NYDFS cyber rules coming into effect in various tranches with a deadline this month, phasing in until 2019. 

In late August 2017, the first in the nation cybersecurity compliance rules came into effect requiring certain financial institutions to bolster cyber protections and training, rapidly report breaches and attacks and designate a top officer to manage, with a CCO, or board member, certifying effectiveness.

To read more about what is needed to comply with the first deadline, click here.

Here are some passed or upcoming deadlines:

  • March 1, 2018 – One-year transition period ends, first batch of requirements must be implemented
  • September 3, 2018 – Eighteen-month transition ends, second batch must be implemented
  • March 1, 2019 – Two-year transition ends, compliance with all requirements



Malta becoming a hub for crypto exchanges due to softer regulations, enforcement

Why is Malta becoming a hub for many of the world’s crypto currency exchanges? Very smart regulators and regulations, say analysts. For instance, recent bills would give Malta Financial Services Authority the regulatory power to publish, and even monitor, firms while enforcing rules on digital currencies.

The authority’s tasks include certifying blockchain platforms while ensuring the credibility and provision of legal assurances when it comes to digital currencies.

The bills also provide a framework to ensure that registration of technology service providers while clarifying technological arrangements and conducting audits on various platforms. To read more analysis, click here.

Japan taking stronger stance, getting strict about controls around virtual currency exchanges

The Japanese Financial Services Agency (FSA), the team behind the new exchange regulation movement, are allegedly imposing further restrictions on a number of exchanges within Japan, who are failing to meet up with their new, strict regulations, raiding at least a half dozen and question a broad array of controls, including financial crime counters. To read more analysis, click here.


ACFCS Resource Spotlight: FATF consolidated assessment rankings list

Ever wanted a quick, condensed version of the Financial Action Task Force’s (FATF) mutual evaluation results for the countries it has reviewed so far? Well here you go!

The Paris-based group, which sets global counter-financial crime standards, has released a handy, dandy nine-page docu-drama covering more than four dozen countries that evaluation teams have reviewed under updated standards.

The more stringent processes grade both technical compliance, or laws on the books and effectiveness, including such metrics as large, complex cases closed, convictions, forfeited assets and anti-money laundering penalties against recalcitrant financial institutions.

The document covers from Armenia to Australia, the Bahamas to Bangladesh, details that could be a great reference guide for compliance officers when risk-ranking countries, corporates and individuals, (via FATF)


EU tackles terror financing through virtual value

New EU study explores the terrorist financing (TF) risks of virtual currencies (VCs), including cryptocurrencies such as Bitcoin. It describes the features of VCs that present TF risks, and reviews the open source literature on terrorist use of virtual currencies to understand the current state and likely future manifestation of the risk, along with AML and other regulations at play to mitigate risks and aid law enforcement. To read the findings, click here.

EU agrees to new rules strengthening penalties for money laundering offenses, including linked legal entities

On Thursday, the EU Council confirmed the agreement reached between the Bulgarian presidency and the Parliament on new rules to better counter money laundering and penalize any individuals and shady corporates involved. The main objectives of the new rules are to:

  • Establish minimum rules, definitions, penalties for criminal money laundering offenses.
  • Remove obstacles to cross-border judicial and police cooperation, information sharing.
  • Bring EU rules in line with international obligations related to freezing, seizing assets.

The final compromise agreed between institutions establishes that:

  • Money laundering activities will be punishable by a maximum four-year prison term.
  • Judges can add further sanctions to convicted launders, including individual penalties.
  • Authorities can increase sanctions for money laundering done by organized criminal groups, corrupt gatekeepers and through expensive real estate.
  • Legal entities can also be held liable for certain money laundering activities and face bans related corporate monitors or being shut down.

As for next steps, the text will now undergo linguistic revision before formal adoption by the Council and Parliament. Member states will then have up to 24 months to transpose the new provisions into national law. To read the official release, click here.


SocGen to pay U.S., French authorities more than $1 billion in historic global corruption, FX rate rigging settlement

French banking giant Societe Generale will pay $1.3 billion in a global settlement related to corruption and currency manipulation charges in the United States and France related to allegations of bribing Gaddafi-era Libyan officials and illicitly influencing the Libor interest rate benchmark, federal investigators stated Monday.

The penalty is further evidence that global regulators are teaming up to tackle major corruption investigations to see all the pieces of the far-flung puzzle.

The bank, based in Paris, is expected to plead guilty in the U.S. while agreeing to pay French authorities nearly $300 million in what both countries are calling the first ever such resolution coordinated and negotiated by both countries simultaneously.

The actions are further evidence evincing that world powers are more closely coordinating on what large international banks are doing in their riskiest jurisdictions, following a trend of record U.S. corruption-related penalties in 2016. To read the release, click here.

In a related action, the Justice Department engaged in a rare venture into the investment management space, penalizing Maryland-based Legg Mason for actions related to a subsidiary’s connection to a Libyan broker bribing government officials. To read more, click here.


Canda taken to task in report on money laundering through casinos

British Columbia is going to crack down on large-scale transnational money laundering in its casinos that is tied to the opioid trade.

“Money laundering isn’t a victimless crime,” said Attorney General David Eby on Wednesday. “It’s linked to the opioid crisis, and deaths on our streets.” The announcement came after an independent report from Peter German, a former Canadian Mounted Police Commissioner, showed the extent to which casinos are being used to launder drug money.

At a news conference on Wednesday, German said it is hard to put a number on how much has been laundered in the past years but suggested a minimum of CA$100 million (US$75 million), and added it could be much higher.

The laundering scheme is based on the “Vancouver Model,” where money is relocated to Canada from China by loaning dirty money to gamblers who pay it back after they cash out, sometimes using offshore accounts.

German found that criminal organizations from China, Colombia, Mexico and elsewhere were using this scheme to launder drug money.

To read more analysis, click here. To read the independent report, click here.

Canada’s new cyber strategy identity crisis: on one hand begs for stronger data security standards, then bemoans uncrackable encryption used by hackers, criminals

Canada’s much anticipated cyber security strategy, released this month, has exposed one of the key problems facing the federal government in the digital age: the dilemma of caterwauling about the need for stronger encryption to thwart hackers, but that also inadvertently stymies law enforcement.

The strategy warns of the need for better encryption to safeguard data — particularly against the lightning advances of quantum computing.

But it also places an extraordinary emphasis on increased national security and combating an explosion in cybercrime, which often hamstring’s authorities by exploiting some of the best encryption available. So the federal government has to somehow strike a balance between securing data and fighting the encryption used to secure it. The strategy unveiled today suggests that it hasn’t struck that balance yet. At the same time, Canada, like the rest of the world, is facing a massive tech and cyber savvy shortage, estimated to be in the hundreds of thousands of workers, To read more analysis, click here.


Britain fines India bank more than $1 million on extensive, longstanding AML failures

Britain’s banking regulator has fined the U.K. division of India’s Canara Bank $1.2 million and barred it from accepting new deposits for nearly six months for systemic anti-money laundering (AML) failures, affecting almost all levels of its business and governance structure, including senior management, despite regulatory warnings dating back to 2012.

To read the full order, click here.


British territories still chafing, straining against incoming beneficial ownership regulations, obligations

British Overseas Territories are in surreptitious talks to keep tax haven secrecy, despite a U.K. plan to impose public registers to publish and share beneficial ownership data – a move that in some regions sparked protests and calls for constitutional separation. The move comes as part of Avalon’s update to AML rules.

But while many global watchdog groups applauded the move to evaporate corporate opacity, the territories themselves have, in some cases, vowed to fight the mandatory cracking open of coveted ownership details, To read more, click here and here.

U.K. SFO prosecuting Monaco-based Unaoil on corruption charges related to payments to secure Iraq-based contracts for firms

The United Kingdom’s Serious Fraud Office has announced it is criminally prosecuting an oil company following a two-year investigation into alleged grand graft in the energy industry. On Tuesday, the SFO announced that it was bringing four charges of corruption against Unaoil, a Monaco-based oil consultancy. The company is accused of conspiring to making corrupt payments to secure Iraqi construction contracts for two multinationals.

The charges against the company follow the SFO’s previous decision to prosecute four executives with conspiring to make corrupt payments to secure Iraqi contracts, in one casing attempting to call a payment in the tens of millions of dollars a “facilitation” payment.

The SFO initiated its investigation into Unaoil in March 2016. According to the SFO’s announcement, the first pair of charges relate to alleged corrupt payments to secure the award of a more than $700 million contract to build two oil pipelines in southern Iraq for Leighton, an Australian construction firm.

The second pair of charges relate to alleged corrupt payments to secure the award of contracts in Iraq to SBM Offshore, a Dutch firm that manufactures oil platforms. For more analysis, click here. To read the SFO press release, click here.


Denmark’s new minister taking a tough stance on country’s largest bank for control failures, money laundering scandal tied to Estonian, Russian illicit funds

On April 24, Denmark’s new business minister signaled he would take a hard line on allegations of money laundering, making reference to the country’s largest lender, Danske Bank, which is embroiled in a scandal stemming from one of its Eastern European branches.

In a tweet, the newly appointed business minster, Rasmus Jarlov, said: “Danske Bank’s money laundering in Estonia is a shame and a scandal. I do not yet have an overview of what options I have as a minister, but I can guarantee that I will not hold my hand over them.”

The statement also puts mounting pressure on Danske Bank, Denmark’s largest bank, which had been under investigation by financial regulators in both Estonia and Denmark since February, after it was revealed that the bank may have withheld information during inspections carried out in its Estonian branch.

The investigation was sparked by news reports that the bank’s Estonian branch was being used by family members of Russian government leadership and security agencies to launder money through British companies.

Regulatory officials have stated the bank failed to properly monitor transactions, file suspicious activity reports and monitor risky politically-exposed persons and their known associates.

To read more analysis, click here.