In this week’s Financial Crime Wave, Canada watchdog says lawyers face money laundering risks, China says more cross-border yuan usage could draw criminals, British police make huge cash seizure, and more.


The U.S. Treasury Department’s top anti-money laundering official is resigning to take what sources said on Tuesday was a top post at HSBC Holdings Plc, which is struggling to meet terms of an earlier settlement with the U.S. government. Jennifer Shasky Calvery announced she was resigning as director of Treasury’s Financial Crimes Enforcement Network (FinCEN), which she has headed since 2012. She is a former federal prosecutor who had also led the Justice Department’s anti-money laundering unit. The resignation is to be effective on May 27. Her move to HSBC was confirmed by two sources familiar with her plans. Shasky declined comment through a FinCEN spokesman, and an HSBC spokesman declined comment. Shasky will join HSBC in a senior global financial-crime fighting role, according to one source. It is not clear when she will begin that work. Her move to HSBC comes as the bank is working to demonstrate it has sufficiently bolstered its controls to prevent money laundering, as required by a 2012 pact with the Justice Department. Shasky left her role in the Justice Department’s money-laundering enforcement unit just months prior to its December 2012 deferred prosecution agreement with HSBC, a five-year deal requiring the bank to overhaul its anti-money laundering controls. As part of the pact, part of a $1.9 billion global settlement with the U.S. government, HSBC admitted drug cartels had pumped at least $800 million through the bank, (via Reuters).

The director of the US Treasury’s Financial Crimes Enforcement Network (FinCEN) since 2012, and a key innovator and invigorator of the country’s financial intelligence unit, Jennifer Shasky Calvery announced today that she will be leaving her position at the end of May. Under her leadership, FinCEN bolstered its policy making division and increased in aggressiveness to mete out joint or individual penalties for egregious financial crime compliance failures. In the past four years, in order to protect the U.S. financial system from criminal abuse, FinCEN has addressed challenging topics as diverse as virtual currency and banking marijuana businesses. As well, FinCEN has used its authority to issue Geographic Targeting Orders in new and effective ways to address threats from trade-based money laundering, income tax refund fraud, and most recently, money laundering via luxury real estate purchases. Under Shasky Calvery’s direction, FinCEN enhanced its reputation within the U.S. government, throughout the U.S. financial sector, and with international financial partners as a key resource in the fight against terrorist finance, money laundering, and transnational organized crime. Her work to efficiently organize FinCEN into sharply focused and dedicated divisions has led to innovative uses of existing authorities to combat financial crime, improved application of technology to derive intelligence from FinCEN’s data, and targeted regulatory initiatives to address priority threats to the U.S. financial system, (via FinCEN).

The bigger picture: I can’t say that I am surprised by this news because Jennifer Shasky Calvery is a trail blazer and I always got the sense when I talked to her and heard others speak about her that she would not just do well at FinCEN, but use that very high-profile post as a springboard to even greater public and private accomplishments. Prior to FinCEN, she headed the US Department of Justice’s Asset Forfeiture and Money Laundering Section. My sources recently told me she was even in the running to hold the top spot for IRS criminal investigations, a position now held by Richard Weber, who headed AFMLS prior to Shasky Calvery. She is known to be a strong-willed leader with a strong sense of justice who doesn’t play politics or reward people for simply being somewhere for a long time. She never lost her prosecutorial mindset and surrounded herself with likeminded and single-minded colleagues. That caused some friction at FinCEN from longtime staffers, but also re-energized the bureau, propelling it to key achievements never seen before along with garnering a new respect and relevancy across the financial crime and compliance spectrum.

Money laundering

An internal report prepared for Canada’s anti-money laundering watchdog last year found that lawyers are the second most likely profession after entrepreneurs to face money laundering charges. Details of the 2015 research paper, released in draft form to Reuters under Access to Information laws, come as the leak of millions of documents from a Panamanian law firm has caused public outrage about the role lawyers play in helping clients hide their wealth. The paper was produced for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to consider in refining its anti-money laundering regime. The regulator said it uses this type of research to strengthen compliance and inform legislators of vulnerabilities. Lawyers in Canada, unlike financial institutions and other professionals, are exempt from the obligation to report suspicious transactions, allowing them to use trust accounts to move around money for clients without notifying regulators. The exemption, won after a Supreme Court of Canada ruling, irks law enforcement and regulators, who say that while many lawyers abide by ethical standards, the lack of transparency makes it easy for others to hide illicit funds. The FINTRAC paper, which looked at 40 money laundering cases in Canada from 2000 to 2014, found court documents showing “lawyers convicted of money laundering were willing to exploit reporting exemptions in order to launder funds,” (via the Daily Mail).

Bank of China warned on Tuesday. “Risks of money laundering and terrorist financing are further increasing in line with cross-border uses of the yuan, the rise of internet financing and the opening of capital accounts,” said Hao Jinghua, deputy director at the anti-money laundering bureau at the central bank. Hao told the annual meeting of the Association of Certified Anti-Money Laundering Specialists that China was among countries under growing pressure to fight financing operations by criminal groups. Increased concerns about terrorism and money laundering meant the issues went beyond the realms of economics and finance and affected social stability and national security, said Hao. An anti-money laundering expert with a financial institution based in Beijing said the wider use of yuan as the settlement currency in global markets, the risk of the yuan being used as the transaction currency by criminals is heightened. “As China is becoming more opening, the anti-money laundering and criminal financing has expanded to more areas, from financial frauds to human trafficking and smuggling,” the expert said, (via the South China Morning Post).

British police have made the biggest seizure of cash in the country’s history as part of a global money laundering bust. A specialist group of officers known as the Fraud Squad seized £30 million ($43 million) in money orders when they arrested a 58-year old man this week. Money orders can be easily converted into cash. “We believe this man’s business account was being used by a global network of organized crime operators to launder tens of millions of pounds of stolen funds through the U.K.,” said Craig Mullish of the City of London Police. The alarm was raised when the police were alerted to huge sums of money flowing through the account. The man’s business was listed as having annual revenue of £250,000. In November 2015, $19 million was transferred into the company account, before being converted to euros and sent to Georgia in central Asia. Another 37 million euros were deposited into the account in February 2016, and the police began their investigation a month later. The suspect told police he planned to use the money to buy a Sri Lankan tea company, (via CNN).

Around 100 billion euros, or $113 billion, is laundered in Germany every year, according to a report released by the Finance Ministry. These illegal, often cash, transactions take place on the housing market, the art market and elsewhere and represent more than double the 50 billion euro, or approximately $56.6 billion, in money laundering previously estimated by the German government, the Local reported Thursday. “Germany is one of the best countries for laundering money. We’re financing criminality here,” Kai Bussmann, head of the Economy and Crime Research Center at the University of Halle, said in March. Bussmann spoke to the Wall Street Journal following the dismantling of an international crime ring that had laundered at least 5 million euros, or $5.7 million, out of Germany. Loose laws concerning the amount of cash people can bring in and out of the country have made it an easy locale for money laundering, some authorities have argued. The German government’s attempt to fight organized crime and put a 5,000 euro, or $5661.50, limit on the amount of cash someone can pay in a single transaction failed in February with citizens arguing that it was an over-step of government power. Germany is not the only European country that has seen a growing problem of money laundering in recent years. The U.K. announced Thursday that it would take on new measures to fight money laundering, particularly among its elected officials, (via the International Business Times).

Corporate transparency

The Turnbull government will create a public register revealing the identities of the beneficial owners of shell companies in an effort to quell mounting public outrage about multinational tax avoidance in the countdown to the federal election. The creation of the register – which will be announced within weeks ahead of an international tax avoidance and evasion summit convened by the UK prime minister, David Cameron, in London in mid-May – will bring Australia into line with G20 commitments on transparency. The assistant treasurer, Kelly O’Dwyer, confirmed that Australia will agree to establish the register in an interview with Guardian Australia. “We agree there needs to be a registry of beneficial ownership in our country,” O’Dwyer said. The government’s move comes in the wake of revelations in the Panama Papers that more than 800 Australians were on the files of Panama–based law firm Mossack Fonseca – and amid a strong voter backlash about businesses not contributing their fair share of tax. The UK government will require the disclosure of the beneficial owners of companies in a public register from June, despite complaints from British business. The move by the Turnbull government is also unlikely to be popular with big business in Australia, (via the Guardian).

Identity theft

 Federal authorities arrested five out of 10 defendants late Wednesday who have been charged in identity theft cases tied to an international money laundering scheme involving millions of dollars in fraudulently obtained federal income tax refunds. The criminal complaints filed Tuesday in U.S. District Court and unsealed Wednesday charge the 10 defendants with participating in a money laundering ring that used hundreds of bank accounts opened with stolen identities to launder millions of dollars in fraudulently obtained tax refunds. According to the affidavits supporting the complaints, the Internal Revenue Service has identified approximately 7,000 fraudulent tax returns related to this scheme that cumulatively sought about $38 million in refunds. The IRS issued about $14 million in refunds, and the money was deposited into and laundered through bank accounts used in the scheme. The fraudulent tax returns were filed and the bank accounts were opened with personal identifying information that had been stolen from thousands of victims. The 10 defendants, each of whom was named in a separate criminal complaint, allegedly used fraudulent foreign passports to commit identity theft by opening numerous bank accounts and mailbox addresses with the stolen identities. According to the criminal complaints, they used fraudulent passports from the Republic of Armenia, Georgia, and the Czech Republic that had the names of identity theft victims, but the defendants’ photographs, (via ICE).

 Cover payments

 Want to find out how banks can accidentally, or in some cases intentionally, misusing SWIFT MT 202 to fuel financial crime? Do you want to blow the cover of issues tied to cover payments? Well, you are in luck! Keith Furst, Founder of Data Derivatives, discusses how originating banks can intentionally or unintentionally be misusing the MT 202 SWIFT message type. In this guest post, he discusses the risk this scenario poses to financial institutions and their anti-money laundering / counter-terrorist financing (AML / CTF) programs, (via the Data Geek Blog).


 The United States has opened a new line of combat against the Islamic State, directing the military’s six-year-old Cyber Command for the first time to mount computer-network attacks that are now being used alongside more traditional weapons. The effort reflects President Obama’s desire to bring many of the secret American cyberweapons that have been aimed elsewhere, notably at Iran, into the fight against the Islamic State — which has proved effective in using modern communications and encryption to recruit and carry out operations. The National Security Agency, which specializes in electronic surveillance, has for years listened intensely to the militants of the Islamic State, and those reports are often part of the president’s daily intelligence briefing. But the N.S.A.’s military counterpart, Cyber Command, was focused largely on Russia, China, Iran and North Korea — where cyberattacks on the United States most frequently originate — and had run virtually no operations against what has become the most dangerous terrorist organization in the world. The goal of the new campaign is to disrupt the ability of the Islamic State to spread its message, attract new adherents, circulate orders from commanders and carry out day-to-day functions, like paying its fighters. A benefit of the administration’s exceedingly rare public discussion of the campaign, officials said, is to rattle the Islamic State’s commanders, who have begun to realize that sophisticated hacking efforts are manipulating their data. Potential recruits may also be deterred if they come to worry about the security of their communications with the militant group, (via the New York Times).

Despite countless headlines about companies and governments being hacked, it seems some businesses just haven’t quite gotten around to putting even the most basic security into place. The Bangladesh Bank at the center of an attempted $950 million cyber fraud was using network switches that cost $10 and didn’t even have a firewall, according to an investigator looking into the hack cited by Reuters today. The switches, which can cost hundreds of dollars each, rather than $10, were used to connect the bank’s systems to the SWIFT payment network. By penetrating the systems, the hackers could then initiate payments using the bank’s credentials. According to a statement given to Reuters, the bank was advised to upgrade the switches only after the hack had taken place. While millions of dollars were transferred successfully by the hackers, the rouse fell apart for the most mundane of reasons: a misspelling on a form raised alarm bells. Just one more reason to stay in school, kids, (via Next Web).


 MPs, councilors and civil servants suspected of corruption are to be targeted by a new law proposed by the home secretary. Theresa May intends to establish an offence of “illicit enrichment” for cases where a public official’s assets have increased significantly without satisfactory explanation. It is part of a wider shake-up of measures to tackle money laundering. But Mrs May said it was not a “knee-jerk” reaction to the Panama Papers. She said the economy was “at risk of being undermined” by money laundering, illicit finance and the funding of terrorism. Her new proposals – subject to a six-week consultation period being launched in the Commons later – plan to give the civil courts powers to impose new “unexplained wealth orders”. They would force suspected money launderers to declare their wealth, and those who fail to satisfy authorities will face having their property and cash seized. The government described the plans as “aggressive” and “the most significant change to the UK’s anti-money laundering and terrorist finance regime in over a decade,” (via the BBC).