anti-money - afma … · anti-money laundering magazine inaugural anti-money laundering and...

Pincer movementBeating the launderers at their own game

MONEY OR THE GUNOperation Wickenby shoots first

RUN AND HIDEOffshore’s multiple outlets

FUND GUARDIANWatching the wealth managers

anti-money launderingCOMBATING MONEY LAUNDERING IN FINANCIAL SERVICES

APRIL / MAY 2007

EDITOR’S LETTER

ANTI-MONEY LAUNDERING 1APRIL / MAY 2007

T HINK BACK to the submissions madelast year by financial services providersprior to the tabling of the AML/CTF

Bill and you will recall that much of the prevail-ing thought characterised superannuation as oneof the lowest risk areas requiring minimal moneylaundering control. Super was for retirees andthus needed to be treated with kid gloves –analysing super for suspicious transactions andchecking identities was a bit far-fetched andsomething of an imposition on both customersand the super fund providers.

Nothing, in essence, has changed aboutsuper since – it is no more or less able to be usedby launderers than any other investment conduit,but the vast flows of money now entering supermust act as a wake-up call for the industry.

Everyone is concentrating on the changes to superannuation, with many exploiting theopportunity to make up to $1 million in post-taxcontribution before the 30 June 2007 deadline.The result is an industry now working at a frantic pace to accommodate these extra inflows.

Despite this sudden inflow of funds intosuper, there has been no call for providers to beextra vigilant in checking the sources of funds or the calibre of customers. Indeed, by the timesuper funds are required to be compliant in identifying the money that comes to them – inDecember this year – the big inflows wouldalready be long invested and pooled.

Australia has the fourth-largest fund management industry in the world based on size,and the largest per capita, due to the country’sunique mandated superannuation system.

Rice Warner Actuaries predicts thatAustralians will have about $2.1 trillion invested in superannuation by 2020 whileMacquarie Equities forecasts that Australiansuper funds will total $1.8 trillion in 2011 and$3 trillion by 2016. The industry has just passed the $1 trillion mark.

Fund manager Perpetual Investments argues that the sheer weight of money enteringthe Australian market is inflating the prices and valuations of stocks, as more and more superannuation money battles for fewer andfewer opportunities. What this will lead to,it says, is a greater amount of money beingplaced in alternative and overseas assets,and thus further from regulatory scrutiny.

From December this year, super funds arerequired to be more careful identifying moneythat is paid out, just as new rules come into

effect that allow members of pension age towithdraw funds without tax penalties.

KPMG superannuation expert Sean Hill was quoted this month as saying that the firm did a risk assessment for one major fund, whichincluded an attempt to hack into its website –something fraudsters or money launderers may undertake. This uncovered “massive risks”he was reported as saying.

Fraud and money laundering pose fresh challenges for super funds and they may require anew approach. The new approach demands morethan compliance people checking that the rulesand laws are being followed. Funds may nowneed to be on red alert – their very popularitymust take them off the low risk radar. ■

A super way to wash money?

By Adam CourtenayEDITOR

Upcoming AFMA anti-money laundering events

■ Risk-based AML/CTF program & risk-based identification and verificationPresenter: Thomas Story, Executive General Manager, AUSTRAC17 April 2007 * 12:30pm - 2.10pm * Blake Dawson Waldron, Grosvenor Place, 225 George Street, Sydney

■ Section 47 Compliance Reports Presenter: Paul Ryan, General ManagerRegulatory Compliance, AUSTRAC

Blake Dawson Waldron, Grosvenor Place, 225 George Street, Sydney

■ AUSTRAC's audit and feedback processPresenter: Paul Ryan, General ManagerRegulatory Compliance, AUSTRAC15 May 2007 * 12:30pm - 2.10pm * Blake Dawson Waldron, Grosvenor Place, 225 George Street, Sydney

■ Detecting and managing terrorist financing riskPresenter: John Visser, General ManagerIntelligence, AUSTRAC29 May 2007 * 12:30pm - 2.10pm * Blake Dawson Waldron, Grosvenor Place, 225 George Street, Sydney

■ Anti-money laundering magazine inaugural anti-money laundering and counter-terrorist financing congress and dinner13 & 14 June 2007, Sydney

For more information or to register contact Diana Zdrilic on 02 9776 7923 or [email protected]

20 June 2007 * 12:30pm - 2.10pm *

CONTENTS


REGULARS & CONTRIBUTORS

6 LONDON CALLING BY MARCUS SIMPSON

Now the Brits are after Mr Big and they have had some success

8 IN EUROPINION BY JULIE BEESLEY

A modern day Al Capone who barely got his just desserts

12 INSIDE STORYBY KENNETH RIJOCK

Transfer pricing is one of the most difficult laundering methods to detect

13 OPINION BY JOY GEARY

Why Section 47 (2) is the cleverest section in the Act

24 IDENTITY FRAUDBY GARY GILL AND PETER KIM

There are strong links between identity crimes, money laundering and terrorism financing

26 LEGAL UPDATEBY PHILIP TRINCA

The most important part of the whole AML exercise is getting the program right

30 REGIONAL REVIEW: THAILANDBY EMILY BRAYSHAW AND NIGEL GERREYN

It looks complete, but Thailand’s AML effort leaves much to be desired

34 PROFILE: PAUL FLEMINGBY JOHN KAVANAGH

Fund managers’ education has only just begun, says Paul Fleming.

37 RISK TRIGGERSBY MICHELLE HANNAN

Rolling out new technologies without the proper due diligence

38 BINDING TECHNOLOGYBY VICTOR BENNETTS

How case management technology can make the difference when reporting

COVER STORY:OUTMANOEUVERING THE LAUNDRYMENThe AFMA conference in June will bring together the country’s best experts to helpfirms understand what moves the launderersmay make next

OFFSHORE AT YOUR SERVICEBY NICK KOCHAN

Despite intergovernmental efforts to clampdown on the world of offshore finance and its propensity to hide illicit wealth, it remains a strong and flourishing sector

TAXMAN COMETHBY ALEXANDER CAIN

If the zeal of Operation Whickenby is anythingto go by, tax is the big one they’re looking for,and your clients may be next

MONEY BY MULEBY ROB MCCUSKER

What used to be a highly dangerous game of carting money across borders is now a scam that can be perpetrated from home – and it’s happening here

FEATURES

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NEWS REVIEW

I N MARCH the Australian parliamentsigned off on a law that permits Austracto hand over information to Australia’s

overseas spy agency, ASIS.The lower house approved senate

amendments to the Anti-Money Launderingand Counter-Terrorism Financing AmendmentBill, which will allow ASIS to access Austrac’srecords on suspicious financial transactions.

The government says the amendmentsbring ASIS in line with domestic spy agencyASIO and will help in the fight against thefinancing of terrorism. The Bill was broadlywelcomed by both major parties.

However, there was some opposition to the Bill. Greens senator Kerry Nettle raisedconcerns about the impact of the amendmentson privacy. “ASIS is Australia’s most secret spy agency . . . Its job is to spy on overseasgovernments and organisations, notAustralians,” she said.

She said ASIS had been mired in controversy about alleged spying onAustralians and the government seemed to be “formalising ASIS’s ability to do so”.

The policy co-ordinator at the AustralianPrivacy Foundation, Nigel Waters, said ASISmight legitimately need to survey some people’sfinancial records. But he advocated a system ofaccountability in providing the information.

Attorney-General Philip Ruddock said theamendments made the law more effective in the fight against money laundering andfinancial support for terrorist organisations.

The Labor party proposed further changes

which would give Austrac power to share intelligence with the United Nations andInterpol, as well as further powers to trace the finances of international criminals.

According to Labor’s legal affairsspokesman Joe Ludwig the legislation as it is was only “half baked”.

Justice Minister David Johnston saidAustrac has the power to share information, buthe stopped short of saying that power includedsharing intelligence with global security forces.

“The Austrac CEO has to be satisfied . . .that the use to be made by the government of another country . . . was within all of the consideration thresholds of the CEO,” senatorJohnston said.

Senator Johnston said the agencies affected by the bill had been consulted and did not believe any changes were needed.

Banks shut out of smartcard informationIn April the federal government agreed to blockbanks from accessing personal informationheld on the smartcard’s chip.

The move is considered a big concessionto privacy advocates who believe the card is little more than an identity document whichcould be used by financial institutions andother commercial entities to extract personalinformation such as a person’s name, date ofbirth and residential address.

The restrictions mean banks and otherbusinesses will be forced to manually recordcustomer identity details from the surface of the smartcard for a range of activities,including proof-of-identity tests and filling in application forms.

Several banks had hoped they would beallowed to validate the identity details of customers who volunteered their smartcardsthrough a government-controlled electronicdocument verification service.

This would have removed the need to copyand store the large volume of paper-based personal information of customers. Banks need to collect this information under the 100-point proof-of-identity scheme.

The Australian Bankers’ Association hadlobbied the government to drop legislativerequirements that compelled institutions toobtain the express written consent of customerswho volunteer the card as a form of identity.

APRIL / MAY 2007 ANTI-MONEY LAUNDERING4

ASIS to have potential use of Austrac suspicious transactions reports; privacy campaigners prevail on the smartcard front; Austrac releases long-awaited final rules; Wickenby powers enhanced; US StateDepartment’s narcotics report criticises all and sundry

Austrac opens records to spy agency

EDITORIAL

EDITOR: Adam [email protected]

CONTRIBUTING EDITOR: Emily Brayshaw

SUB-EDITORS: Siobhan Brahe, Pauline Buckland

REGULAR CONTRIBUTORS: Nick Kochan, John Kavanagh, Alexandra Cain

PRODUCTION AND DESIGN

CREATIVE DIRECTOR: Jo Fuller

PRODUCTION MANAGER: Fiona McLennan

PHOTOGRAPHY: Craig Newell, See4

PUBLISHINGREGIONAL SALES MANAGER: Diana Zdrilic – Tel: + 61 2 9776 [email protected]

ANTI-MONEY LAUNDERING MAGAZINE IS PUBLISHED SIX TIMES A YEAR BY

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Nettle: ASIS mired in controversy

Image courtesy UNE (University of New England Photo Database)

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NEWS REVIEW


Wickenby powers further increasedAgencies working on tax evasion task forceOperation Wickenby will have far greateraccess to targets’ tax records under new lawspassed by the Senate in early April.

The laws will allow the AustralianTaxation Office (ATO) to disclose taxpayerinformation to five government agenciesincluding the Australian Crime Commission,the Australian Federal Police and the AustralianSecurities and Investments Commission.

They will also allow the ATO to share tax information with the Attorney-General’sDepartment, the Australian GovernmentSolicitors and Austrac.

The new laws are part of an overhaul ofconfidentiality arrangements for tax information.

The ATO has always been obliged to keepindividuals’ tax affairs private except in casesof indictable fraud offences.

But further reforms planned for later thisyear will allow the ATO to release individuals’tax information to law enforcement agencieswhere the public interest benefits are deemed tooutweigh privacy concerns. These reforms areaimed at helping agencies fight money launder-ing, identity theft and terrorist financing. Butthey have prompted warnings from commenta-tors, including the Tax Institute of Australia,that some taxpayers will be less likely to dis-close their financial affairs fully to the ATO.

Long awaited rules finally released Late in March Austrac finalised a series ofAML/CTF Rules which are designed to provide reporting entities with greater certaintyin their bid to comply with the anti-moneylaundering laws.

The Rules set out the requirements with which industry must comply under theAML/CTF Act and include requirements for customer identification and verification procedures, correspondent banking as well as guidance on setting up AML/CTF programs.

The rules contain guidance on customeridentification procedures for different kinds ofcustomers and provides that subject to certainminimum requirements, each reporting entitymust determine in its AML/CTF program whatcustomer information it will collect, and howthe information will be verified.

“To develop the AML/CTF program, areporting entity needs a good understanding of the money laundering and terrorism financing risks that may be posed by its customers and products,” says legal firmMallesons Stephen Jaques.

The law firm also says that groups ofreporting entities that wish to form a “designatedbusiness group” are given more guidance onhow an AML/CTF program can work across the whole group.

Austrac chief executive Neil Jensen said ina statement that the rules “filled in a lot of thepractical detail of what is required of industryto ensure they comply with the legislation”.

“However, the requirements are risk based, and reporting entities must design their programs to manage and mitigate theirown risks,” he said.

Jensen advised reporting entities not towait until December to put their plans intoaction. “Industry needs to start work now inapplying resources to the areas of their operations which they consider put them atgreatest risk of exposure to money laundering.”

The rules group together all the AML/CTFRules made to date into a single document andthe substance of the rules is similar to the draftRules released in July 2006.

One insider said: “These rules have beenlong awaited and we have had 90 per cent oftheir content since July 2006.

“So why was there so much more delaygiven they made little change to most of it?The industry does need to ask why it has taken so long just to re-hash much of what is already known.”

Narcotics report criticises friends and foes alikeThe United States believes that its top anti-terrorism allies Afghanistan, Pakistan and Colombia, have fallen short in the war on drugs, despite enhanced counter-narcoticsefforts, and it criticised perennial foes Iran, North Korea and Venezuela for not co-operating.

The US State Department also noted backsliding in some key Latin Americancountries like Bolivia, while it praisedimproved performances by Mexico and traditional Asian transshipment points

China and Thailand, but slammed neighbour-ing Myanmar for illicit drug production.

In its annual global survey of the drugwar, the 2007 International Narcotics ControlStrategy Report, the department said massiveopium poppy production in Afghanistan,long the world’s top producer of the mainingredient in heroin, continued to pose amajor threat due to its links with groups such as the Taliban.

“Afghanistan’s huge drug trade undercutsefforts to rebuild the economy and develop a strong democratic government based on the rule of law,” the department said in the report.

“There is strong evidence that narcoticstrafficking is linked to the Taliban insurgency.These links between drug traffickers and anti-government forces threaten regional stability,” the department said.

It added that endemic “corruption”and prevailing “dangerous security conditions” were seriously hindering efforts to combat Afghan poppy productionthat shot up 59 per cent to a record 5644 tonnes from 2005 to 2006.

The INCSR is an annual, congressionallymandated report published by the StateDepartment’s Bureau for InternationalNarcotics and Law Enforcement Affairs.

Many financial institutions use the reportwhen assessing geographic risks for privateand correspondent banking activity.

The report cites Canada as a significantproducer of high-quality marijuana, a sourcecountry for ecstasy and a transit point for precursor chemicals and over-the-counterpharmaceuticals used to produce illicit synthetic drugs.

The report only has a little to say aboutAustralia. “Australia is a committed partnerin international efforts to combat illicit drugs,and gives high priority to drug-related issues,both internationally and domestically.”

Although it does say that Australia hasone of the highest uses of methamphetamineuse and that marijuana remains the “mostabused drug”.

Australia was mostly a consumer – and not exporter – of illicit narcotics,however there existed clandestine laboratoriesproducing methamphetamine and MDMA(ecstasy) which are increasing in number and sophistication and which continued to be seized throughout the country.

“It appears that the narcotics produced at these sites are consumed domestically andthere is no evidence indicating that narcoticsdestined for the US are produced in Australiaor transit Australia,” the report said. ■■

News review compiled by Adam Courtenay

Jensen: ‘rules fill in practical detail’

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NEWS


I T SEEMS that almost monthly in Britain, the government launches a new initiative against money launderers

promising oceans more than the last initiative.The recent Serious Crime Bill proposes newmeasures and announces the demise of theAssets Recovery Agency (ARA), the agencyoriginally launched as a much-vauntedscourge against the “Mr Bigs” of crime.

Most recently, HM Treasury launched itsnew anti-money laundering strategy. Variousplans were announced, including:• Increased asset seizure targets and

additional asset-freezing powers. One can only hope that results will bebetter than those achieved by the ARA,established at the beginning of February2003 ostensibly for seizing assets from the crime’s “Mr Bigs”. The ARA has spent £65m (A$158m) torecover just £23m (A$56m) over itsfour-year existence. It is due to bemerged with the Serious OrganisedCrime Agency in 2008.

• An additional £1m (A$243,000) fundingfor the Charities Commission to protectnon-profit organisations from exploitationby terrorist financiers. This money mighthave been better aimed at addressing the lack of proper regulation of NorthernIreland’s charities. The government hasmore or less admitted that charities in theprovince have been used by paramilitariesto launder money, yet it has still notlaunched a coherent plan to create a proper regulator for the region. TheCharities Commission covers Englandand Wales only.

• The creation of an asset-freezing unit at the Treasury to target criminal and terrorist accounts. Again, this must betaken as an admission that the ARA

was not found “fit for purpose”, to use an in-vogue phrase in political circles.

• A proposal that money-sending businesseswill need to be licensed in the future inorder to operate, as well as an increase inthe stringency of identity checks on thesebusinesses. Given how easy it is at presentfor these businesses to register with HMRevenue & Customs (HMRC), it is nosurprise that case studies have establishedthat launderers are attracted to this type of business. Currently, HMRC’s Londonteam has only six members which visitMSBs to check their systems only onceevery four years.

Head of ‘A-Team’ crime empire gets seven years

One recent “result” against a criminal Mr Bigis worthy of reporting here. Many expertsregarded his gang as among the most signifi-cant criminal organisations in Britain in recentyears. He was eventually caught on a singlemoney laundering count and sentenced toseven years’ imprisonment.

Terry Adams, the 52-year-old Londonerand head of the notorious “A Team” gang,ran a criminal empire with his two brothers,that has been active since the 1980s. The gangwas suspected of being involved in variouscrimes including murder, extortion and drugdealing. He lived in a £2m house despite hav-ing little tax or employment history and nobank accounts in his name (like his brothers).His fortune was estimated at between £3mand £11m. He is said to have “retired” at 35.

Adams managed to escape prosecution formany offences he was suspected of havingcommitted. He pleaded guilty as part of a dealin which prosecutors would abandon charges

against his wife and co-defendant, Ruth,who had been seriously ill with a perforatedulcer. He must pay back £750,000, as well as£50,000 in court charges, only a fraction of the£1.7m cost of the protracted prosecution. Hemay yet leave jail on parole after four-and-a-half years, to the undoubted chagrin of many.

The '419' attack on the Met Police that came from Australia!

Does their brazenness know no limits? Some “419” scammers recently hit the UK’sMetropolitan Police with another version of advance-fee fraud. A syndicate created a mirror-image site with an address very like the Met’s, complete with its own bogus “anti-terrorist hotline”.

The site sought to make money by selling “anti-terrorist certificates”, which it claimed were needed to secure paymentsfrom abroad. The attack on the Met is notablebecause the Met has been at the forefront ofco-ordinating action against this type of crime.

The Met revealed that on this occasion thesite was hosted in, of all places, Australia, andhas reported it to Australia’s High Tech Crimeunit. This kind of attack has been increasing in frequency in recent times. Over the last year,advance-fee scammers have launched fake websites for other law enforcement agencies,including Interpol, the Securities and ExchangeCommission and the US Secret Service.

The “419” fraudsters have also recentlylaunched mirror sites for companies such as DHL and Lufthansa Cargo, as well as several prominent banks; in each case,offering people services from the organisationthat would never materialise. These occurrences serve as a warning that the issue is still very much a live one. ■■

Britain’s newest new initiatives

LONDON CALLING

By Marcus SimpsonCOMPLINET REPORTER

There have been new plans afoot, especially from the Treasury, toget the “Mr Bigs” of British Crime. At the same time, it seems thatthe biggest Mr Big of all won’t get anything like his just desserts.

BLAKE DAWSON WALDRONL A W Y E R S

BrisbaneCanberraMelbournePerthSydney

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Stephen CavanaghPartnert > (02) 9258 6070e > [email protected]

Phil TrincaPartnert > (03) 9679 3258e > [email protected]

Jonathan GordonPartnert > (02) 9258 6186e > [email protected]

Our dedicated anti-money laundering team can adviseyou on all aspects of the AML legislation and equip yourbusiness to deal with its impact.

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NEWS


T HIS SORDID TALE highlights therole of financial advisers, jewellersand diamond merchants in facilitating

money laundering.

Terry Adams, aged 55, ran a £200 millionempire – known as the A-Team – built overdecades from extortion, drug dealing and murder. Terry made so much money from his criminal empire he apparently retired at35, having run it with his brothers Tommy and Patsy. This Adams family had links toColombian cocaine cartels and Russian mafiagroups, loan sharking, protection rackets, and money laundering through the Hatton Garden gem district in London.

Tommy Adams, Terry’s brother, wasjailed for seven and a half years in 1998 for a cannabis smuggling plot, while his otherbrother, Patsy, lives in Spain with his family.Despite their huge wealth, the brothers havevirtually no tax or employment history andseemingly no bank accounts.

The prosecuting QC said: “It is suggestedthat Terry Adams was one of the country’smost feared and revered organised criminals.He comes with a pedigree, as one of a familywhose name had a currency all of its own inthe underworld.”

Terry was finally convicted in the UK and jailed on 9 March 2007. Like Al Capone,police were unable to make any seriouscharges stick against the crime kingpin, and itwas a financial scam that proved his downfall.Terry, who pleaded guilty to a single charge of money laundering, admitted that he had

hidden £1 million of criminal proceeds – only a tiny part of the fortune he actuallymade from organised crime.

When passing the sentence, the judgesaid: “Your plea demonstrates that you have a fertile, cunning and imaginative mind capable of sophisticated, complex and dishonest financial manipulation.”

For crime reporters, Terry seemed a semi-mythical figure as there were no photostaken of him.

The family name was said to have beenso feared that other criminals would pay hundreds of thousands of pounds to ‘hire’ it,

ie pay for the right to tell others that theywere working on behalf of the Adams family.Their terrifying reputation struck fear into thehearts of rival gangsters, while police, lawyersand even judges would tread carefully whendealing with them.

For example, one judge was reportedlygiven 24-hour armed police protection beforethe trial of Tommy Adams on the £8 millioncannabis smuggling charge. The family’sfinancial adviser and diamond merchant,Solly Nahome, 41, alleged to have arranged for £25 million to be hidden in property deals and offshore accounts, was eventuallymurdered by a contract killer.

The Adams family lived in a £2 millionmansion, but Terry told the taxman he wasonly earning £200 a week. After decades of cheating justice, Terry was caught after the UK’s Inland Revenue Service probed his lifestyle in the mid-90s. He offered to settle with them for £95,000 in 1996, but the National Crime Squad launched a £10 million joint investigation with MI5. A team of police spent 21 months buggingTerry’s home 24-hours a day. The tapesproved he was living off the proceeds ofcrime, and using bogus companies to claim he had a legitimate income. In 2003,the police finally raided Terry’s home,where they found £50,000 worth of art andantiques and £60,000 in cash.

In addition to the jail term, Terry – who had received legal aid and used various delaying tactics to hold up the case for fouryears, such as sacking his legal teams – was also ordered to pay back his full defence costs and £750,000 compensation, or faceanother four years’ jail. He may also have to contribute to the £4 million prosecution costs.

A detective summed up the case:“We couldn’t get him for the serious stuff. In the end, we offered him a retirement package he couldn’t resist.” Like Al Caponebefore him. ■■

Sources: skynews.com, dailyrecord.co.uk

Meet the Adams familyJulie Beesley takes a look at Terry Adams, known as “the British Godfather” – a modern-day Al Capone jailed recently for seven years for money laundering.

IN EUROPINION

By Julie Beesley

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AML CONFERENCE

8.00am Registration and coffee

8.20am Welcome from Duncan Fairweather, Executive Director, AFMA

8.25am Welcome from the chair

8.30am Congress opening by Senator David Johnston, Minister for Justice and Customs

8.50am My life as a laundryman: Current and future trends in money laundering Kenneth Rijock, Financial Crime Consultant World-Check

9.20am The new regulatory environment: Feedback from the regulator on implementation process to dateNeil Jensen, Director, AUSTRAC

9.40am Q & A with AUSTRACNeil Jensen, Director and Liz Atkins, General Manager Regulatory Compliance, AUSTRAC

10.00 am Morning tea


The fight-back begins

Anti-Money Laundering Magazine’s Inaugural Congress and DinnerThe Westin Sydney, 1 Martin Place

13 & 14 June 2007 ■ 13 June 2007 AML Annual Congress DinnerRegulatory and Compliance CE hours = 14

DAY ONE: 13 June 2007

I T WILL HOST an array of speakers andpundits from all parts of the globe andfrom all sides of the laundering divide.

The congress kicks off with a message fromthe Minister for Justice and Customs, SenatorDavid Johnston, who will be followed by oneof the world’s leading experts on the problem –the former money launderer, Kenneth Rijock.

The congress is intended to be a forum ofideas and has been designed, through a number of panel sessions, to allow vigorousdebate among speakers and delegates.

It also includes a master class serieswhich will look at setting up effective trainingprograms, offering the latest thinking onknowing your customer management andlooking at the intricacies of surveillance andmonitoring of suspicious activity.

Among the highlights include an addressby Austrac chief executive Neil Jensen,who will be bringing delegates up-to-date on the new regulatory environment, since the AML/CTF Act was passed in December.Jensen told Anti-Money Laundering thathe will be covering a range of issues relevant to the AML/CTF Act and how it affects industry.

“This includes an update on the recentlyreleased AML Rules, an overview of Austrac’sapproach to compliance and enforcement, adiscussion of the risk-based approach and anoverview of AML/CTF programs,” he said.

Kenneth Rijock, whose speech is entitled“My life as a laundryman” has been lecturing,training and assisting law enforcement, as wellas the banking and financial industries, since hewas released from prison in 1992, after servingtwo years for money laundering. He now worksas a crime consultant for World-Check.

Rijock also participated in the USCongress Office of Technology Assessment in1994, which involved groundbreaking researchinto the use of artificial intelligence for AML.

Financial crime consultant MichelleHannan will be heading up two panel debatesduring the course of the conference. The first,entitled “Building better partnerships betweenreporting entities”, looks at the importance of forging relationships between reportingentities and how these relationships can beused for information exchange.

“This means information sharing regard-ing money laundering and terrorist financingmethods, channels, targets, links to the

predicate crimes and in particular emergingtrends in these activities,” says Hannan.

The other panel – “Identifying trends inmoney laundering, terrorist financing and theirpredicate crimes” – will look at the respectiveroles of Austrac and law enforcement in identi-fying trends. These agencies view money laun-dering and terrorist financing activity across thefinance sector and the wider economy, and haveaccess to global information, Hannan says.

“The other issue to be discussed is how the identification of trends should be ‘opera-tionalised’ into a reporting entity’s risk-basedAML/CTF approach, including incorporatingprocesses to update risk triggers and risk assess-ment methods to incorporate new and emergingtrends, and alterations in existing trends.” ■

The Anti-Money Laundering congress in June brings togethersome of the world’s experts on controlling money launderingand terrorism financing.

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INSIDE STORY

T HE PURPOSE OF THIS continuingseries is to give those of you who aremoney laundering reporting officers

and compliance officers some practical insidetips and tricks that will enable you to performyour duties more efficiently. We are constantlylooking for solutions to those persistent compliance problems that you must deal with on a daily basis. This month, we have a new item for your compliance toolbox.

A dozen years ago, two university professors amazed the compliance world with the ground-breaking discovery, based on their expert analysis of US government statistics, that trade-based money launderinghad become one of the most popular methods of global money movement, and that it was going largely undetected in the financial world.

While transfer pricing for tax avoidance,or even evasion purposes was (and still is)rampant, the massive extent to which trade-based money laundering was operatingwas unknown at that time.

Money launderers were boldly alteringimport and export prices on internationaltrades and successfully cleaning and transferring millions of dollars in narcoticsprofits, arms trafficking and other illicit activities. Compliance officers at financialinstitutions remained blissfully ignorant about these activities.

The problem was that there was nomethod of identifying this efficient form oftransnational money laundering, as onlyexperts in those particular trade fields couldtell whether certain import or export prices

paid for specific goods were over- or under-valued. How could an internationalbanker working with letters of credit obtainauthoritative information on abnormal priceson a real-time basis, so that suspicious transactions could be reported and riskyaccount relationships terminated?

When I would discuss trade-based money laundering during lectures on moneylaundering tactics, I was not able to offer ananswer to those whose clients were involvedin international trade. My audience wanted to

know how they might separate the legitimatetransactions from the illicit ones, but therewere no solutions.

The situation became graver after 9/11,when the risks associated with trade financingactivities expanded beyond money launderingof the proceeds of crime to terrorist financing.The risk characteristics of international tradetransaction prices were compounded, due tothe global war on terrorism and the addedresponsibilities of financial institutions. What is a banker to do?

I can now report that a solution hasarrived. Professor John Zdanowicz, one ofthose two pioneers in the field of trade-basedmoney laundering who originally showed ushow it operates, has created a program knownas the International Price Profiling System

(IPPS). This web-based system evaluates an international trade price, and produces a“risk index” that can be used as an indicatorin determining whether trade-based moneylaundering is occurring. One simply enters the client information on the specific type ofgoods, using a uniform product code, and thelisted price to obtain the desired risk index.

In as much as the revised Bank SecrecyAct Anti-money Laundering Manual requiresfinancial institutions to have policies, proce-dures and processes in place to monitor and

report suspicious activity, the IPPS representsa major new tool for compliance officers. Itcan also be employed to ferret out customsevasion schemes, also known as import dutyfraud, and transfer pricing.

The IPPS utilises current US Departmentof Commerce trade transaction data, which is regularly updated whenever new statisticsare released. I would suggest that complianceofficers at financial institutions who haveclients involved in substantial internationaltrade business take a good look at this product. The company is International Trade Alert Inc., and their website ishttp://www.internationaltradealert.com/ ■■

Kenneth Rijock is a financial crime consultantfor World-Check. For more information, visitwww.world-check.com


By Kenneth RijockFINANCIAL CRIME CONSULTANT

WORLD-CHECK

When the priceis just not rightTransfer pricing has been one of the most rampant forms of laundering and hitherto extremely hard to detect. Here KennethRijock explores a new tool that can be used to risk weight goods forimport duty fraud, as well as laundering through fraudulent pricing.

MONEY LAUNDERERS WERE BOLDLY ALTERING IMPORT AND EXPORT PRICES ON INTERNATIONAL TRADES ...

OPINION


The cleverestsection in the ActSection 47 (2) reports, which are a summation of the reportingobligations of designated entities, are among the most important parts of the implementation process, says Joy Geary

By Joy M GearyAML/CTF ADVISER

T HE RELATIVELY FEW WORDS in section 47(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) will, in this writer’s opinion,

single-handedly drive the quality of AML/CTF implementation inAustralia. It is the cleverest section in the AML/CTF Act.

Reporting entities have no choice but to include in the implementationplanning they are doing today the controls they will need to put in place to attend to their reporting obligations under section 47(2) after implementation. A reporting entity that leaves decisions about how to manage the obligations under section 47(2) until after implementation is completed will inevitably have to revisit aspects of this work andupgrade it. This kind of repeat work is costly, usually done in a hurry and leads to add-ons that do not sit comfortably with the processes they are attached to.

At the time of writing, the content requirements of the section47(2) report are unknown. These requirements are unlikely to be extensive; it is anticipated that the report will simply call for a positiveassertion of compliance with requirements. The hard work will be inthe supporting material that the CEO of a reporting entity shouldrequire before he or she is prepared to sign off the report.

Reporting entities that do not cover how they will handle section47(2) reporting as part of their implementation planning will face atough challenge when it comes time for preparing each report. Ideally,controls will be put in place to gather regular data about the consistencyand quality of compliance with the AML/CTF Act, any relevant regulations, the AML/CTF Rules, and the reporting entity’s own risk-based approach and AML/CTF program.

Without such controls, reporting entities will need to historicallyvalidate the quality of their compliance before they can complete theirsection 47(2) reports. Readers will all have had experience with proce-dures implemented but not followed. AML/CTF will be no different —procedures will be implemented, business processes will be changed,but there will be systemic failures in their operation. No CEO should be signing off section 47(2) reports without testing the quality of compliance beyond mere assertions that the procedures are in place.

Implementation plans being prepared now should be informed by therequirements of the controls that will be used to support section 47(2)

reporting. It will be cost effective to design the controls at the time thatbusinesses processes are changed so that the mechanisms delivering the required data are embedded into the business process. The classicexample of such a control is the review of the quality of the processes for establishing a relationship or opening an account. This is a criticalobligation in the AML/CTF Act, and represents a unique combination ofa legislative obligation, backed up by detailed requirements in Chapter 2of the AML/CTF Rules, and then further defined by the reporting entity’sown risk-based approach. A reporting entity that has no plans to measurethe quality of the procedures performed by staff to establish new relationships and open accounts will struggle to find a genuine basis forasserting compliance with these requirements in its section 47(2) report.

Other examples of controls that reporting entities should bedesigning as part of their implementation plan include: management of workflows following trigger events; end-to-end metrics aroundinternational fund transfer instructions and threshold transactionreporting; metrics around review of the KYC of existing customersunder the ongoing customer due diligence obligations; data abouttraining; data about probity checks and actions taken as a result ofmovement in staff between roles.

If section 47(2) had not been included in the AML/CTF Act there would have been no mechanism that would have forced reporting entities to take stock of the quality and scope of their compliance with requirements. Business processes would have been changed,new procedures introduced, but there would have been no specificimpetus to drive regular self-assessment of whether all these changeswere working as they should. Those reporting entities that already use compliance plans to control and oversee their compliance obligationswould have expanded these to include AML/CTF. Not all reportingentities use such plans and even those that do might not have appliedthe degree of rigor that section 47(2) will force.

The transparency that has been delivered by section 47(2) is indeed clever. ■■

Joy M Geary is an independent consultant and the developer of the AML Master templates. AML Master is designed to equip reporting entities with the tools to implement enterprise-wide AML/CTF activities.See www.amlmaster.com or email [email protected] for more information.

AFMA/KPMG TRAINING PROGRAM

T HE GOVERNMENT’S AML/CTFAct is among the most comprehen-sive and detailed pieces of legislation

ever produced in this country. Passed as legis-lation just four months ago, it is now expectedthat AML practitioners have interpreted it, aredesigning a program around it and know howto put the tenets of the law into action.

The legislation places implicit demands onpractitioners to be fluent in a broad range ofcompetencies related to anti-money launderingand counter-terrorism financing. By Decemberthis year, the regulator Austrac will expectreporting entities to have well-developed com-pliance programs in place, as well as the abilityto assess and manage the risks to which theirorganisations may now be exposed.

This is why KPMG and AFMA – publisher of Anti-Money Laundering – haveco-designed a practical, comprehensive pro-gram, starting in May, to help practitioners tounderstand the risks, demystify the new legis-lation and its rules, understand its possibleimpact on their business lines, and considerhow to effectively respond to its challenges.

How is this program structured?The program is in two stages. In the first stageit offers a comprehensive study guide that willinform you of the legislation and rules, and pro-vide many case studies and practice questions toconsider. The second comprises a practical,hands-on one-day workshop that will bring thetheory to life. Within this workshop you will beassessed as proof of your competence in thisemerging area. Effective completion of yourassessment will earn you three competenciesfrom the Diploma of Financial ServicesFNS50104, a level 5 qualification under theAustralian Qualifications Framework, whichcan be put towards further study.

What will I learn?Completing this program will equip you to:• describe money laundering and terrorist

financing (ML/TF)• explain the responses being developed at

a governmental, regulatory, law enforce-ment and industry levels – both overseasand in Australia

• detect the ML/TF risk exposure inherentin wholesale financial market products

• investigate the Anti-money Laundering andCounter-terrorist Financing Act and theassociated rules in Australia, and analysethe fundamentals of a risk-based approach

• consider the requirements your organisa-tion will need to adopt for customer duediligence, and any third parties you utilise

• assess the practical implications for estab-lishing an AML/CTF environment withinyour organisation/business unit and devel-oping an effective resource and accounta-bility framework

• discuss the requirements for staff aware-ness and training, and pitfalls to avoid

• communicate effectively with stakehold-ers, both external and internal, regardingthe identified ML/TF risk, and the impactof the new regime

• identify the factors to consider whenimplementing internal monitoring, soft-ware and reporting procedures.

A six-stage programTopic 1: The foundations of money laun-dering and terrorist financing This topic examines the fundamentals forunderstanding the process of money launder-ing and terrorist financing. We’ll investigatehow it’s done, who participates, where they do it and what it costs society.

Topic 2: Money laundering and terroristfinancing risk in wholesale financial marketproducts Here we’ll illustrate how money launderersand terrorists, directly or indirectly, use financial market products in the course oftheir operational activities. We will alsoexplain how guidance in this sector remainsan emerging field, and consequently, theimportance of applying accepted risk

principles when assessing individual businesslines. Finally, we will provide a detailedbreakdown of the risk factors associated withspecific product families.

Topic 3: Understanding your organisationalobligations under the AML/CTF Act and RulesIn this topic, we’ll delve into the new legislationand its rules to establish what it may mean foryour organisation. Your AML officers willalready be apprised of this, but this topic takes apractical perspective to explain the differentareas of the legislation with case studies to high-light possible tricky areas or common mistakes.

Topic 4: Practicalities – establishing a ‘risk-based approach’ and customer due diligence In this chapter, we’ll examine the fundamen-tals of taking a risk-based approach to knowyour customer procedures. We’ll discuss theimpact that issues such as politically exposedpersons can have on customer due diligenceprocedures and what enhanced due diligenceyour firm may need to conduct as a result.

Topic 5: Practicalities – managing yourAML/CTF Program In this topic, we’ll examine the practical con-siderations you need to take into account whendeveloping your AML/CTF policy and proce-dures and implementing your program — andthe options you have available for each.

Topic 6: Practicalities – internal monitoringsystems, post-reporting issues and staffawareness and training In this topic, we’ll examine the role ofAML/CTF software, and key internal andexternal considerations and organisation mustmake during the investigation, purchase andimplementation phase. We’ll also investigatereporting issues, analysing the art of makingsuspicious matter reports, and the best ways to shape staff awareness of the issues.

The cost of the program is $1050 ex GST for a full one-day workshop per person. For further information, contact Diana Zdrilic on (02) 9776 7923 [email protected] ■■


Fit for the regulator – getting with the programAFMA and KPMG have co-designed a training program to equip candidatesto translate the demands of the new AML/CTF legislation into a complianceprogram fit for the regulator.

SPONSORED FEATURE


I T IS DIFFICULT to remember a worldbefore 9/11, before Enron and corporate scandals, and before

the arrival of the USA Patriot Act. In the United States in the past fiveyears, banks have had to respond to a number of social and politicalupheavals, which has changed theirway of doing business. These changeshave only increased in importance as time has passed.

The changes have been reflected inboth regulations and the attitude ofregulators. U.S. banks now talk about“a more energised Office of ForeignAssets Control”, and have to deal withnew international accounting rules, the arrival of Sarbanes-Oxley corporategovernance standards and the rigoursof risk management that come withBasel II compliance.

Banks and their compliance teamsnow face a very different environmentfrom five years ago. The Patriot Act ushered in a host of new provisions innumerous areas as well as a new focuson detecting, rather than monitoringfor, activity that might be indicative ofmoney laundering or terrorist financing.

Not surprisingly, the complianceteams have had to develop a new inter-est in tools and technologies to satisfythe Act’s mandates. In this new world,banks must confront and conquer a variety of challenges that are part of anew payments and banking landscape.

Rob Curry, 38, who heads AMLcompliance at Fifth Third Bank in theUnited States, has been involved in theindustry for the past 18 years. He hasno misconceptions about the need forAML compliance teams to change.

It was not that long ago, he says,when the major preoccupation of the AML compliance officer was simply meeting Bank Secrecy Act mandates. This involved dealing with well-understood record-keepingand reporting requirements for currency structuring, and checking certain funds transfers over certainamounts that might be indicative of money laundering.

“When I started we were morefocused on cash transactions andwhether or not these transactionsamounted to suspicious behaviour,”says Curry.

“What is different now is that youneed to have a comprehensive picture

of your bank’s entire portfolio to gainany insight into the extent of a possiblemoney laundering problem.”

Curry says most of the originalmonitoring of cash transactions used torelate to classic drug money launderingbut now “the mind boggles” as to thedifferent types of suspicious activity anAML compliance officer has to monitorand detect.

“We’re now looking to find moneylaundering from illicit gains derivedfrom any illicit activity and really your imagination can go from there,”he remarks.

Chief among these changes hasbeen the ability to identify terrorismfinancing, which before 9/11 was amuch neglected side issue for banks –and governments. Now it is among themost prominent of problems an AMLcompliance officer has to deal with.

“Terrorism financing is a specialtype of activity and I don’t know if you

Responding to a tougher environment

Anti-money laundering compliance has undergone enormous upheaval in the United Statessince 9/11. Compliance heads such as Rob Curry at US bank Fifth Third have had to respond to the challenges of the US Patriot Act, Sarbanes Oxley and the Basel II, all of which have transformed the payments and banking landscape.

“... you need to have a comprehensive picture of yourbank’s entire portfolio to gain anyinsight into the extent of a possiblemoney laundering problem.”

Rob Curry

SPONSORED FEATURE


can truly define the full scope of whatit is,” says Curry.

“You may have the knowledgebase of what law enforcement peoplehave determined is a pattern of illicitactivity in this area. We have to fullyunderstand those patterns and thenapply them to our institution as awhole. Only in this manner can weattempt to find any similar patterns.”

Technology has been critical tofinding the patterns and has been thetool that has made the difference inthe past 10 years. But the evolution inthe systems has been most marked inthe last five, he says.

“About eight years ago, peoplestarted implementing ad hoc reportingprograms and different data miningpractices. Move forward to about fiveyears ago and you started seeing someinstitutions embracing technologywhich could give you a picture of thepatterns occurring within their entireportfolios,” he says.

“Now you really can’t comparetoday with what it was even five yearsago. Back then you weren’t able toscale – you couldn’t have a system that could scale to your portfolio. Now we have one system which cangive us a much clearer picture of allclient relationships and provides uswith the flexibility to see the transientpatterns moving forward.”

Fifth Third opted for Fortent anti-money laundering technology,which Curry says has been able to help the bank identify different trends and activities throughout and within client portfolios and acrossdifferent business lines. It uses both an intelligent framework and a rules framework. Both of these aspects are needed to identify problematic activity.

“Often we will use the intelligenceaspect of our system to help us developnew rules and identify new patterns.And when the rules became more obsolete over time, we have then beenable to re-evaluate what new rules areneeded to be placed into the system,”says Curry.

Fifth Third is one of the biggestbanks in the United States, offering thefull gamut of services to both retail andcommercial customers and this includesthe traditional treasury operations,investment advisory services, wealthmanagement and brokerage.

Curry says the technology has had tobe able to look into millions of accountsand most importantly, be able to putmovements within them into some kindof scale which allows the AML team togain a clear picture of all activity.

“It’s a significant accomplishmentin today’s environment to be able to do that,” he says.

How do staff deal with the complexities of this kind of new technology? Curry says that when heputs on new staff for the AML group,they tend to have a learning curve ofaround four to six months.

“The system helps them to under-stand the entire education process but it is done in conjunction with ourinvestigative supervisors, all of whomare extremely experienced in AML techniques,” he says.

“But it seems to be pretty amazingto think that within that time we canget all the staff trained and onboard onthe many different lines of business.”

Curry is in charge of a team of 14 inthe AML area, who specialise in suspi-cious activities investigations. There arealso another 10 staff in the bank whichmake up the currency transaction report-ing team and Bank Secrecy Act team.

As the bank is actively measuringits results on a monthly basis, it is also reviewing what Curry calls the“transient patterns across all lines.” For this reason the system needs to beregularly calibrated.

He says refining the system everymonth is not an intense amount ofwork “but helps us to do a check to see if we are doing the best job wecould possibly do.”

Curry says that while Fortent has aservice to help tweak the system, theAML team have been successful in making changes to the system largelyindependently.

“We’re pretty independent as to how we do things and how we calibrate,” Curry comments.

All the same, he says Fortent havebeen instrumental in helping FifthThird generally get the system up and

running and have helped all the waythrough it to deliver results. He alsosays that partnership was able to beddown the system in record time, putting in the retail lines of business in a six to seven month period.

“People are surprised as to howquickly we implemented this. We contracted Fortent on December 312002 and by July 2003 we were up andrunning. I think that’s extremely quick.”

After the first six month period,Fifth Third was then able to bring innew lines of business every three tofour months, says Curry. “So it did take a couple of years in all.”

Curry says that there have beensome progressive enhancements toAML systems since they were firstinstalled, but he believes the greatquantum leap in technology hasalready been made. He does not foresee any major evolutions in systems– at least not in the near future.

“I think we may have reached aplateau. There will be some improve-ments but it won’t be anything likewe’ve seen in the past five years.” ■

For more information on Fortent please contact Nigel Peach at 02 8216 0900

“We’re now looking to find money laundering fromgains derived from any illicit activity and really yourimagination can go from there."

FEATURE

I S THE NET CLOSING IN on the offshore world? The bevy of 70 or so taxhavens that pepper the globe relish their

anonymity and invisibility. But a US cam-paign is gathering momentum against taxevaders and the tax havens will take the brunt.

Politicians have discovered that thoseevading tax are little loved by the hard-pressed taxpayer in a mainland jurisdictionand a tax-evader chase serves everyone’sinterest. No less a politician than presidentialcontender John Kerry said in 2004: “There areenough brass-plate companies down inGeorgetown, the Cayman Islands, differentplaces, to make anybody in America sickwhen they look at their own tax bill.”

The British government does not just railat the evaders, it also wants to make them abit poorer. It recently announced it was forc-ing four UK banks to disclose assets held off-shore in a bid to retrieve some £250 million intax revenues.

It did not say where it would look, butJersey and the other Channel Islands, whichare also signatories to information-sharingtreaties with the British government, are themost likely targets for the trawl. But how farwill the British government go?

Its recent decision to close down aninvestigation by the Serious Fraud Office intothe way British Aerospace allegedly usedJersey companies to pay bribes to the ‘greatand good’ of Saudi Arabia shows how sensi-

tive politicians are to extra-judicial interestswhen the stakes are high enough.

These payments were made as part of adefence contract and the government cited the‘national interest’ in putting the police onhold. The criminal classes will relish the daywhen tax evasion or even criminal moneylaundering – with the exception of terroristfunds – becomes a mater of national interest.

Those tax evaders who decided that homewas best may rue the day they did not take theSwiss shilling. It is expected that Switzerlandwill remain – as it has long been – lessamenable to sharing information with theBritish (or anyone else) about tax evasion concerning income made in another countryand payable to a foreign government.

If the money was made in Switzerlandand owed to the Swiss government, well, thatmay well be a different story. Fraudsters anddictators, like the Nigerian General, SaniAbacha, have long sought and found refuge inSwitzerland. Switzerland, now a member ofthe European Economic Space, might be giv-ing more thought to its reputation and openingup to requests for assistance and informationfrom so-called onshore governments whenhigh profile investigations are underway.

But will the British government look fur-ther afield to countries in the Caribbean, forexample, South America or even parts of Asia,which have set up tax havens to add anotherrevenue stream to their economies? Wealthy

people with income to shelter or criminal cashto hide are not concerned with the age or pedi-gree of the legal systems that govern their fundsso long as those systems ask no questions.

One place the UK Government is lesslikely to investigate is Nauru, an offshorehaven. It is the world’s smallest independentrepublic, an unlucky island occupying eightsquare miles barely above the Pacific Ocean.This was the first stepping stone for criminalfunds en route from Russia to the UnitedStates which made use of the Bank of New York’s money remitting system.

The system became infamous after Benex,a company run by associates of Bank of NewYork, Lucy Edwards (who worked for BoNY)and her husband Peter Berlin, had been able toopen up the system to move money betweenRussian banks seeking to hide money for theircorrupt clients and other corrupt enterprises inthe United States and Italy. The money remit-ting system, which was domiciled in Nauru,was closed down in 1999. Noteworthy clientsof the system included the daughter ofPresident Yeltsin and Colombian drug cartels.

Nauru is an extreme example of the‘loosey goosey’ tax haven. But Will Brittain-Caitlin, author of Offshore: The dark side ofthe global economy, cites one investigatorlooking into Enron, who reported: “We found441 entities set up in the Cayman Islands mostof which were inactive shells.


You can still run and you can still hideThe offshore world is growing despite intergovernmental efforts to clamp down on it. There is stillno better way to layer, integrate and launder money for both crooks, tax evaders and fraudsters.In the first of a two-part series on the offshore tax world, Nick Kochan looks at the regular abusesof these “hidey-hole” jurisdictions

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FEATURE

“Even the islands’ essential selling points– tax-free banking, adventurous financialinstruments (of the not-legal-in-some-statesvariety), sweeping secrecy laws – seem tocarry the whiff of, well, prison.”

Let us move now to the much more estab-lished clime of Bermuda, where a fund hasbeen established to hide assets believed tobelong to Leonid Reiman, the Russian Ministerof Telecommunications. Bermuda has not mere-ly allowed itself to be used for the apparentlynefarious purpose of laundering a major chunkof Russia’s telecommunications assets, but itwas also used by a fraudster to double-cross theRussian Minister’s representative on the island.

The scam has placed a $1 billion shadowover the beneficial ownership of a quarter ofRussia’s third largest mobile phone company,MegaFon. A Russian oligarch, MikhailFridman, lays claim to the stake and iswrestling with the Bermudan authorities tohave the case opened up.

The authorities quickly caved in to the oli-garch’s pressure. They appointed accountantsKPMG to investigate it. But that was only thetrigger for further drama, as private investigatorsallegedly working for Fridman then broke intothe accountants’ office and removed papers.

The Bermudan Government, not to men-tion the accountants themselves, have moreegg on their faces than can be healthy. Therecan be no safety in secrecy, however attractivethe paperwork and the legal structure mayappear. As the clients of the UK banks nowrequired to open their books are set to discover, money does not buy anonymity.

Yet the amount the British governmentexpects to extract from the tax havens is tri-flingly small compared to what is hiddenglobally. According to the Taxjustice Network,a group campaigning against the use of off-shore havens by corrupt governments andleaders, this ‘secrecy space’ “creates an effec-tive barrier to investigation of activities byexternal authorities, and facilitates the laun-dering of proceeds from a wide range of crim-inal and unethical activities, including fraud,embezzlement and theft, bribery, narco traf-ficking, illegal arms trafficking, counterfeit-ing, insider trading, false trade invoicing,transfer mispricing, and tax dodging.”

“According to one estimate, US$1 trillionof dirty money flows annually into offshoreaccounts, approximately half of which origi-nates from developing countries. Despite theplethora of anti-money-laundering initiatives,the failure rate for detecting dirty moneyflows is astonishingly high,” it reported.

For example, a Swiss banker has claimedthat only 0.01 per cent of dirty money flowing

through Switzerland is detected. It is unlikelythat other offshore finance centres are any bet-ter. Crucially, the techniques used for taxdodging and laundering dirty money involveidentical mechanisms and financial sub-terfuges: tax havens, offshore companies andtrusts, foundations, correspondent banks,nominee directors and dummy wire transfers.

In this process, Paul Pacifico, a UK taxadviser says that: “Legal institutions grantedspecial status and privilege by society havebeen subverted to purposes for which theywere never intended.

“For example, the original purpose oftrusts was to promote the protection of spous-es and other family members who are unableto look after their own affairs, and to promotecharitable causes.

“Incredible as it must appear to those notfamiliar with the offshore economy, charitabletrusts are regularly set up in offshore tax havensfor the purposes of owning ‘special purposevehicles’ used for international tax planning andfor hiding both assets and liabilities offshore, ashappened with Enron and Parmalat.”

The authorities were able to force govern-ments in jurisdictions such as the British VirginIslands and Netherlands Antilles to open up the special purpose vehicles facilitating thesefrauds and hiding corrupt assets. But imaginethe problem onshore regimes have when thequestionable jurisdiction is virtual and has no physical space.

That was the challenge facing Americanlaw enforcement in the 1990s, when it startedcoming across frauds where the documentationcited the Sovereign Republic of Melchizedek.Created in 1986 by two convicted fraudsters,David Pedley and his son Mark Pedley. Thisso-called ‘ecclesiastical sovereignty’ claims to be similar to the Vatican.

It has no established church or formallyconstituted religion, and most external

observers reject the assertion of ecclesiasticalsovereignty. During the 1990s, the Dominionof Melchizedek (DoM) began to claim sover-eignty over a number of Pacific islands, all of which were already the possessions ofrecognised States. The DoM claims includeMalpelo Island (a possession of Colombia,inhabited by a military garrison). None of these claims are recognised by any established government.

While the DoM website claims that it is arecognised sovereign entity, mainstream mediaoutlets have characterised it as a ‘ruse’, and ithas been described as ‘non-existent’ by theUnited States Securities and ExchangeCommission. As far as is known, DoM doesnot maintain a diplomatic mission or any otherform of representation in the Central AfricanRepublic, nor is there evidence confirming theexistence of a formal bilateral relationship ofany substance. DoM’s website claims that ithas since been ‘recognised’ by Burkina Faso.

Over 300 investors in various parts of theworld have lost money in purported investment,passport and employment scams run by several‘banks’ licensed by DoM, including one operat-ed by a supposed ‘diplomatic representative’.

DoM has maintained a post office boxaddress in Canberra. Coincidentally, one ofthe individuals identified by Philippineauthorities in November 1998 as the ring-leader of a series of frauds perpetrated in thename of DoM was John Gillespie, a formerAustralian felon who was convicted on thebasis of his involvement in the Fine Cottonhorse substitution racket during the 1980s.

Hundreds of Filipinos, Chinese andBangladeshis are understood to have paid up toUS$3500 to Gillespie’s gang for worthlessMelchizedek travel documents and some alsopaid significant amounts of money to obtain‘government jobs’ on one of the uninhabitedPacific islands claimed by DoM. The totalamount defrauded was estimated at one milliondollars. While the other gang members werearrested, Gillespie himself eluded capture.

Another fraud involving DoM is tied toJeffery Thayer, who was the governor of theBar Association from 1997 to 1999 and thecurrent General Counsel and HumanitarianProjects Co-ordinator. Thayer practices lawunder a license granted by DoM, although hewas disbarred in California. Thayer teachesseminars on how to organise and operate achurch or ministry as a tax-exempt, non-profitreligious corporation. As a result of his fraudulent activities, Thayer served time in a US federal prison.

The facility of these fraudsters to create a bogus haven demonstrates the infinite flexibility of the global economy.


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... A SWISS BANKER HAS CLAIMED THAT ONLY 0.01 PER CENT OF DIRTY MONEY FLOWINGTHROUGH SWITZERLANDIS DETECTED

FEATURE

The challenge to law enforcement ispowerful. For all the numerous anti-money laundering and anti-terroristfinancing laws now in place across the globe, havens offering hidey holesare multiplying. Pacifico says that,“Capital has become almost totallymobile and the ability to police cross-border dirty money flowsremains largely nationally based.”

For example, The FinancialAction Task Force formed by the G-7 Heads of State in 1989 to spearhead global anti-money launderingprograms, has resolutely turned ablind eye to capital flight and tax evasion and has probably worsenedthe situation by appearing to legitimise tax havens which have co-operated with its efforts to trackthe proceeds of narcotics traffickingand terrorist funding.

The unsurprising outcome hasbeen a massive increase in cross-borderdirty money flows, conservatively estimated by Raymond Baker, anauthority in offshore finance, at US$1 trillion annually. The vast majority of these funds have been laundered via complex offshore ladders operating through the globalbanking system.

Baker estimates the scale of theflows out of developing countries ataround $500 billion annually, whichtotally overwhelms the value of annualaid budgets flowing from North toSouth. One study of 30 countries insub-Saharan Africa has estimated totalcapital flight from that region between1970 and 1996 at about $187 billion.

The same study concludes thatSub-Saharan Africa is a net creditor to the rest of the world in the sense that external assets, ie the stock offlight capital, exceeds external liabilities. The problem is that theassets are largely held in private hands,whilst the liabilities belong to theAfrican public.

US Senator Joe Liebermansummed up his frustration with theglobal policing of the offshore world,when he commented to the UN SenateCommittee that: “Ranks of lawyers andfinancial accountants have abused thelaw and their professional ethics simplyfor the sake of huge sums of money to be made helping their clients evade taxes.” And so it continues. ■■


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WHO GUARDS the guards in Nigeria? That is the question perplexing the

country’s people as they see Nigeria’s Economicand Financial Crimes Commission (EFCC) beingmisused by the very man who brought it into exis-tence and who trumpets its integrity. PresidentOlusegun Obasanjo created the EFCC in the wakeof the money laundering and financial abuses perpetrated by the previous leader, the late SoniAbacha. It was his flagship for a new and moreethical Nigeria that would root out corruption inits political ranks, and fraud and financial crimi-nality in the ranks of its businesspeople, includingthose who created the ‘419 letter’ industry that sodiscredits the country’s good name.

The EFCC describes itself as the agencycharged with the responsibility for investigatingand enforcing all economic and financial crimes.It is the designated financial intelligence unit in Nigeria, with responsibility for co-ordinatingthe various institutions involved in the fightagainst money laundering and the enforcementof all laws dealing with economic and financialcrimes in Nigeria.

So far so good, but no sooner is the EFCCcreated than it is being used as a political tool byObasanjo to intimidate and uncover the dirt onhis political enemies. The EFCC vehicle is susceptible to such misuse because its powers –to require banks and others to surrender confi-dential and sensitive information – significantlyexceed those of any other government agency.

The misuse of such a powerhouse hasbecome starkly evident as Nigeria prepares for apresidential election. Obasanjo is very keen forhis party to win and there are fears that he mayunleash the EFCC on anyone who might unseathim. Only recently, he threatened to turn theagency against the former Minister of Housing,Olusegun Mimiko.

But that was a flea bite compared to the campaign that the president and his agency havewaged against his own vice-president, AlhajiAtiku Abubakar, with whom he has fallen out.

Abubakar has been accused of divertingfunds from a government agency over which hehad control to other purposes in order to winpolitical points. Obasanjo accused Abubakar

of corruption only to find that he turned thetables, making the same charges of corruption.The EFCC is busy furnishing police with evidence for a case against Abubakar. This case is likely to result in Abubakar’s exclusionfrom the political process.

Corruption is, of course, Nigeria’s vice,and no amount of systems or judicial structuresseems to be able to uproot it. Nigeria is ranked152 out of 159 countries in TransparencyInternational’s Corruption Perceptions Index and placed 94 out of 155 countries in the WorldBank’s 2006 “ease of doing business” Index.

The country still suffers from the legacy ofAbacha. He stole some $3.5 billion between1993 and 1998, in one of the biggest moneylaundering and fraudulent operations ever seen.The country received financial support from theWorld Bank to regain the stolen assets, but it has had limited success. By September 2005,$458 million in illicit funds had been recoveredfrom Swiss banks. The campaign to regainAbacha’s assets continues but much remains in British banks, which have so far largely resisted pressure from Nigeria.

Yet the wealth that has disappeared intofraudulent Nigerian pockets for so long is almostexclusively derived from the sale of oil. About 80 per cent of Nigeria’s energy revenues flow to the Nigerian government. However, the WorldBank has estimated that as a result of corruption,80 per cent of energy revenues benefit only onepercent of the population.

Resentment about the disappearance of thecountry’s oil wealth is rampant. But the impover-ished people of the Niger Delta, ‘the NigerianTexas’ where the oil is drilled, have demonstratedtheir displeasure in a particularly tangible andalarming way. They are waging war with theNigerian government and the international oilextracting companies in an effort to draw attentionto their demands for a share of the revenues.

Only with a firm crackdown on corruptioncan these legitimate demands be met. That willrequire the Augean stables at the EFCC and else-where in Nigeria to be thoroughly cleaned. ■■

– Nick Kochan

A nation of oil and greasy palms

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TAX EVASION

F OR THOSE who haven’t switched ona television or read a newspaper in thelast six months, the Australian Tax

Office, in co-operation with a number of othergovernment crime agencies, is in the middleof a series of investigations into the tax affairsof high profile Australians.

Almost daily, we have been (and continueto expect to be) treated to images of starsattending court rooms to answer questionsabout just where they hold their riches. It’s allpart of the Operation Wickenby investigation,which is investigating systemic tax fraud.

So far Wickenby has had a substantial haul.This includes Michael Brereton, the so-calledcelebrity lawyer, who is under investigation bythe ACC over the use of offshore companiesand accounts in business ventures that offeredbig tax deductions. He denies any wrongdoing.

Glenn Wheatley will plead guilty later thisyear to defrauding the Commonwealth. Heused offshore accounts to claim $400,000 infalse tax deductions and could possibly facejail. Then there’s film stars Paul Hogan andJohn Cornell, both of whom have been ques-tioned over the use of offshore accounts tobank royalties from Crocodile Dundee films.Both have denied any dishonest dealings. Tax officials have also questioned cricketers

Alan Border and Shane Warne and severalother cricketers about money earned inEngland and banked in offshore tax havens.They are not facing any criminal charges andhave denied any wrongdoing.

Aside from the high profile nature of thepeople under investigation, there’s one otheraspect of these investigations that makes them unique: they take a shoot-first, ask-ques-tions-later approach.

This means investigators can freeze suspect accounts without having to prove thecustomer has perpetrated a tax fraud. Innocentuntil proven guilty? Not any more.

Indeed, soon agencies working onWickenby will soon have far greater access to targets’ tax records under new laws passedby the Senate in early April.

The laws will allow the AustralianTaxation Office to disclose taxpayer informa-tion to all Wickenby officers, which cover the five government agencies including theAustralian Crime Commission, the AustralianFederal Police and the Australian Securitiesand Investments Commission.

They will also allow the ATO to share taxinformation with the Attorney-General’sDepartment, the Australian GovernmentSolicitors and Austrac.

The ATO was once obliged to keep individuals’ tax affairs private except in cases of indictable fraud offences but furtherreforms planned this year will allow the ATOto release individuals’ tax information to law enforcement agencies where the publicinterest benefits are deemed to outweigh privacy concerns.

When a tax fraud is a laundering offenceTax fraud is considered to be money launder-ing because under section 400 of the CriminalCode 1995, dealing with the proceeds of anindictable offence is considered to be moneylaundering. If the tax evasion committed is considered an indictable offence, it would beclassified as money laundering.

While the new laws don’t change existingresponsibilities, financial institutions have to report incidences of tax fraud or money laundering (and there’s actually little evidenceto suggest tax fraud is increasing).

The federal government has allocated$305 million in joint agency funding over six years to Operation Whickenby.


The money or the gun Operation Wickenby is the biggest ever attempt by Australian tax and crime authorities to wheedleout systemic tax fraud and it’s only just getting going. Alexandra Cain looks at the extent of theoperation and what it may mean for AML compliance

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TAX EVASION

The number of investigations under wayis also evidence that the tax office is seriousabout stopping tax fraud. Tax commissionerMichael D’Ascenzo told a Senate EstimatesCommittee Hearing in February 2007 that:“We and ASIC together have in excess of 100… civil and criminal inquiries under way.”

The volume of cases through the courts is another pointer to the government’s focuson tax fraud.

“At the end of June 2005 there wereapproximately 270 briefs with theCommonwealth Director of PublicProsecutions and the Australian GovernmentSolicitor awaiting prosecution for tax andexcise fraud,” says John Davison, a partner at accounting firm Grant Thornton.

The ATO’s improved “big brother’capabilities are another reason why tax fraudis an area of focus. Andrew Ross, a partner at accounting firm Ferrier Hodgson says theATO “now has the ability to identify everytransaction involving a transfer of fundsbetween Australia and overseas”.

What to do?The ATO’s focus on tax evasion has hugeramifications for Australia’s financial institutions. What is their responsibility toidentify and report tax fraud and money laundering? Who bears the cost this increasedregulatory focus will place on banks to createand maintain systems to identify suspicioustransactions? And, most importantly, howshould banks deal with angry customers whowant to know where their money is?

As mentioned previously, institutions’responsibilities to report tax fraud and moneylaundering have not changed even with the newlaws. In layman’s terms, any employee of abank who finds evidence of fraud must report itto their superior, and the bank has a responsibil-ity to report any criminal activity to Austrac.

This means that in some ways, nothing haschanged – although the volume of requests andqueries from the authorities is likely to increase.

“Banks should deal with [authorities’]requests in the same way they deal with theirother requests … for financial institutions,their job is just to comply,” says Ross.

Despite the concept of client confiden-tiality, there is no responsibility for the bankto protect customers who are found to have

committed a crime related to the funds theyhold with the institution.

“Client confidentiality is not offset bystatutory obligations,” says Deloitte’s forensicpartner, Chris Cass.

Although their responsibilities to reportfraud may not have changed, given the ATO’sincreased focus on tax fraud, consultants saymost financial institutions will find it worthwhile proactively training staff andimplementing systems to identify it.

Gavin Coles, Ernst & Young’s director incharge of anti-money laundering, says “firmsare going to have to consider carefully thetraining their staff require – especially whenone considers the frequently held misunder-standing that money laundering funds are allabout drugs and organised crime.”

Coles says firms should also ensure their monitoring systems and customer identi-fication processes are reasonable. “Failure todo so may hand … Austrac an easy target for enforcement,” he says.

Davison says the establishment of a telephone hotline “provides a neutral andanonymous way of reporting suspect actionsor known fraudulent activity”.

“Whistle blowing is one of the mosteffective ways of detecting all fraud, not justtax fraud,” he says.

But Davison says there is often an associ-ated reluctance by employees and stakeholdersto report fraudulent behaviour, especially in thecircumstances involving an employee in a moresenior position than theirs, for fear of not beingtaken seriously or retribution.

Davison also advises banks to carefullyconsider how they will deal with internal taxfraud. “Put in place a fraud deterrenceprocess where you can eliminate the opportu-nity for employees to commit fraudulentactivities by introducing strong internal

controls and employee awareness of the com-pany’s pro-active fraud detection methods. It is crucial to highlight consequences in the event an employee is discovered to beperpetrating fraud,” he advises.

New “know your employee” obligationsintroduced as part of the new AML/CTF lawswill also help financial institutions to identifyjob candidates who may have criminalrecords or a history of fraudulent behaviour.

In terms of the cost of compliance forfinancial institutions, it’s hard to know whatthe final fee will be. Most institutions willalready be putting in place AML/CTF programs, and the major costs to do withcompliance with the ATO’s program – in the form of responding to queries and requests – is not likely to be too high.

Generally, says Ross, the experience of overseas financial institutions has been to over-report potentially suspicious transac-tions and flag to the regulator anything that looks even vaguely suspicious. “The consequence has been that the regulatorshaven’t investigated most transactions thathave been reported,” he says.

This approach should also cut compli-ance costs for Australian banks, but asOperation Wickenby will run for six years,there could be a more substantial cost toinstitutions over time.

Although the cost of compliance forfinancial institutions is an unknown, what is sure is that the focus on tax fraud by theATO is unlikely to decrease any time soon.

Tax commissioner Michael D’Ascenzowas unable at a February 2007 SenateCommittee to quantify the level of tax eva-sion in Australia. With no idea of its spread,who’s to know when the investigative processwill be complete? Certainly not the ATO orAustralia’s financial institutions. ■■


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“Client confidentialityis not offset by statutory obligations”

Chris Cass

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IDENTITY FRAUD

C RIMINALS USE false identities tocommit crimes and conceal theirtracks. Identity crime is an enabler

for a wide range of offences including drugtrafficking, smuggling, tax evasion, moneylaundering and terrorist financing. The identi-ties used can be completely fictitious, or theycan belong to real people who are unawaretheir identities are being fraudulently misused.

Of course, identity crime is not new:there is a long history of impostors who havecreated elaborate false identities, the end purpose of which was to separate people fromtheir money. One need only think of the 2002movie, “Catch Me if You Can”, based on thetrue story of Frank Abagnale Jr who – duringthe 1960s – successfully conned millions ofdollars by passing bad cheques in the namesof several assumed identities, including a Pan Am pilot, a doctor and a legal prosecutor.

However, identity crime trends today meanthat fraudsters are reaching into more areas ofthe economy and exploiting weaknesses in thetechnology that people increasingly rely on intheir business and personal lives.

Organisations can become the victims ofcrimes involving the use of false identities,for example through the provision of financeor designated services to fictitious applicants.According to KPMG’s Fraud Survey 2006, themost common form of identity fraud involvesobtaining loans using false identities. Over 60per cent of survey respondents said identityfraud was a problem for businesses generally.

Organisations can also fall foul of legislative measures aimed at reducing the

number of identity crimes. In particular,Australia’s recently enacted AML/CTF Actrequires a range of organisations to identifyand verify their customers and report any suspicions that a customer is not the personthey claim to be.

Caught in the ActThe new legislation covers businesses operating in the finance sector, the gamblingindustry, bullion dealing and certain otherbusinesses or professional practitioners whoprovide ‘designated services’. Affected organisations must design, build and maintainan AML/CTF program to identify, mitigateand manage their laundering risks.

Although it’s easy to see the newAML/CTF Act as yet another compliance burden, there are real benefits to be gained by implementing a robust and effectiveAML/CTF program. Organisations can use it as an opportunity to address their overallvulnerability to identity crime risks because:

• affected organisations will enjoy someflexibility in how they implement theirAML/CTF programs based on theirrespective risk profiles

• AML/CTF programs must include risk-based customer identification andcustomer due diligence processes

• due diligence must be undertaken ofprospective employees and employeeswho may be in a position to conductand/or facilitate ML/TF

• organisations will need to keep accurate and detailed records concerningcustomer identity

• organisations will need to place greaterreliance on independently verifiable documentation.

In addition, there are stiff criminal penalties in the AML/CTF Act of which areporting entity may fall foul if it does notremain vigilant to the threat of identitycrimes. For example, section 41 of theAML/CTF Act requires reporting entities to inform Austrac, Australia’s AML/CTF regulator, if it has reasonable grounds to suspect that a person (and/or an agent of thatperson) is not who they claim to be.

Additional criminal offences aimed atcombating identity crime may be found inPart 12 of the AML/CTF Act, which makes it illegal to:


The customers youthought you knewFinancial losses for organisations and individuals associated with identity crime are on theincrease, but there is more than money at stake when an identity is stolen or fraudulently created.Gary Gill and Peter Kim from KPMG explore the links between identity crime, money launderingand terrorist financing and the subsequent implications for reporting entities under the new Anti-Money Laundering and Counter-Terrorism Finance Act 2006.

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IDENTITY FRAUD

• knowingly produce false or misleadinginformation or a misleading document to Austrac, law enforcement and/or areporting entity or its agent

• provide or receive a designated service to a customer who is using a false nameor who remains anonymous

• make a false document for use in an appli-cable customer identification procedure.

The penalties for producing false or misleading information or documents andmaking false documents are the harshest,with those convicted facing a maximum sentence of ten year’s imprisonment, or a fine of $1,100,000, or both.

Linking identity crime and ML/TFAn effective AML/CTF program may improve the prevention and detection of identity-related crimes being perpetratedagainst an organisation, as well as deter theuse of its products and services to laundermoney and finance terrorist activities.Criminals use false identities to make it moredifficult to trace the proceeds of illegal activi-ties back to them, or in the case of terrorismfinancing, to move money anonymously.

For example, if a customer tries to openan account using suspicious or unusual identification documents that are not readily verifiable, a forensic examination of suspicious transaction activity should beundertaken. Instances of suspicious transaction activity could include:

• the use of multiple accounts with the samebank for no apparent legitimate purpose

• abrupt changes in account activity• deposits which are followed within a short

period of time by wire transfers of funds• the structuring of deposits at multiple

branches to avoid threshold reportingrequirements.

Identification attributes (eg. names,addresses, tax file numbers, drivers’ licencesand Medicare numbers) should be comparedwith the attributes of the customer presentingthe suspicious documents.

Discrepancies with customer informationcould mean that the organisation is potentiallydealing with a money launderer or terrorist, orwith an identity thief or fraudster seeking, say, acredit card or a loan. Remember, much identity

crime relies on organisations taking only a cursory approach to identity verification,allowing sometimes quite obvious discrepanciesand inconsistencies to escape detection.

The following case from the Middle Eastillustrates the importance of taking a robustapproach to identification and verification. In this case, however, the teller was on the ball and the obvious discrepancy wasdetected immediately.

A Jordanian man attempted to defraud abank in Dubai of US$22,000 in June last yearby using a false identification to access an existing client’s funds. The fraudster created theforged documentation, which included an imagedownloaded from the internet of a person.

However, despite his best endeavours,the fraudster was quickly arrested when hepresented himself at the bank branch with his false identification because the tellerrecognised the person in the photo – Brad Pitt.The fraudster later confessed that he did notknow who Brad Pitt was and Dubai’s publicprosecutors charged the man with forgery and embezzlement.

The AML/CTF Act seeks to address thisissue, by requiring reporting entities to verifythe identities of their customers and if theyhave suspicions concerning the identity of acustomer, to report their suspicions to Austrac.In addition, the draft AML/CTF Rules, oncefinalised, will require reporting entities tohave risk-based systems and controls in placeto determine what information they will relyon to establish a customer’s identity.

The draft AML/CTF Rules will alsorequire reporting entities to have risk-basedsystems and controls to determine whether acustomer’s documentation may be forged,tampered with, cancelled or stolen; andwhether the reporting entity will use anyauthentication service that may be available inrespect of a document. Having robust ‘knowyour customer’ procedures in place will alsohelp a reporting entity to protect its legitimatecustomers against the threat of having theiridentities stolen and reduce costs associatedwith investigating and rectifying cases of identity theft against honest customers.

Know your customer, know your employeeReporting entities must not ignore the risk thatcriminals may be aided by employees or otherinsiders within their organisations. The draftAML/CTF Rules require reporting entities to

include an employee due diligence programwithin their AML/CTF program. This meansthat reporting entities must have risk-basedsystems and controls to determine whetherand how they should screen and re-screenemployees who may be in a position to launder money or help finance terrorism.

The disclosure of sensitive customer infor-mation is an important factor in identity crimeand, as such, access to customer data needs tobe closely controlled and monitored. Reportingentities need to know who is accessing sensi-tive data and also to detect instances in whichthat information may have been compromised.

The draft rules also require reporting entities to train their employees about theirobligations under the AML/CTF legislation and about the types of risks the reporting entities might face. Wise reporting entitieswould include information within anyAML/CTF risk awareness training about identity crime and false documents to ensurethat it reduces the risk of falling foul of fraudsters and of the regulator.

Meeting the challengeIt would be unrealistic to expect the problemof identity crime and laundering and terrorismfinancing activities to diminish any time soon.As such, reporting entities need to rememberthat their AML/CTF programs are not merelya compliance burden with some harsh penalties attached for non-compliance; rather, they should be used to address theirML/TF and identity crime risks.

Practical considerations should not beneglected. AML/CTF and identity crime riskmanagement operations should be adequatelyresourced and have the support of senior management, responsible staff carefullyscreened and trained, customer identificationverified and authenticated where necessary,and systems modified to manage significantlyincreased volumes of identity information.Remember, it is unlikely that criminals will attempt to operate accounts or access designated services using their own identities.

Most importantly, a robust AML/CTFprogram designed to combat risks associatedwith ML/TF activities as well as identitycrime may also help to protect a reportingentity’s reputation. Regulatory and lawenforcement agencies will not look kindly onan organisation with lax AML/CTF controls,especially if that environment has enabledserious organised criminal and terrorist groupsto flourish, albeit unwittingly. ■■


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LEGAL UPDATE

B Y 12 DECEMBER 2007, eachreporting entity will need to have its AML/CTF program in place.

The AML/CTF program should be approvedby the entity’s board and senior management(or equivalent) prior to that date.

Setting up an effective AML/CTF program will not be easy. The new anti-moneylaundering and counter-terrorism financinglaws (AML/CTF laws), including the draft AML/CTF Rules, detail a number of components that an AML/CTF programshould contain. These are better viewed as a general specification for the framework of an AML/CTF program, rather than a recipe with particular ingredients.

Understanding the risks to be managedA compliant AML/CTF program will be thesum of many separate elements. It will need toinclude the underlying systems, processes andstaff training necessary for the entity to avoid,or at least minimise, the risk that its designatedservices may be used in conjunction withmoney laundering or the financing of terrorism.

Before designing and implementing thesesystems, processes and training, the entitymust first understand the practical risks that itfaces. Only then can the necessary risk-basedsystems and processes be contemplated,designed and implemented. The immediateand greatest challenge for the entity,

therefore, is the need to have an understandingof the types of risk that it faces in providingits designated services.

The problem, of course, is that criminalactivity will be disguised and intended to avoiddetection. It will also vary and develop inaccordance with opportunity and need.Consequently, the entity will need to ensurethat it has identified known risks and otherpotential risk indicators. It will also need tohave systems and processes in place to identifythe circumstances or instances where theserisks or risk indicators are present. Finally, itwill need a plan to deal with any risks or poten-tial risks identified. Staff training will be anessential ongoing element as the application ofjudgement or “instinct” will often be required.

How do the AML/CTF lawsapproach the risk managementexercise?Under the AML/CTF laws, the risk management exercise will be dependant on the following two factors:• the reporting entity’s ability to identify

the risks that are (or will be) inherent in providing its designated services tocustomers, and

• its ability to identify the risks that mayarise when providing such designatedservices to each customer.

Because these risks are interrelated, the individual requirements under the AML/CTFlaws need to be dealt with collectively.

Customer risk — identificationand verificationClearly, there will be a risk trigger where theRE becomes aware that a person is not whothey say they are. The requirements for Part Bof an AML/CTF program come closest to setting out the required risk management strategy for this risk, when dealing with customer identification and verification.

Customer risk — generallyAt a broader level, the AML/CTF laws requirethe RE to monitor its dealings with its cus-tomers in conjunction with the identification,


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An AML/CTF program will be the key to a reporting entity’s risk management strategy. To ensure the efficacy of such a program, it is imperative that you first understand how yourproducts or services can be used illegally, says Philip TrincaThat understanding – together with an understanding of thecustomer monitoring requirements – will be critical to the successful development and implementation of your program.

Getting down to tin tacks

PHILIP TRINCAPhilip is a partner of Blake Dawson Waldron and practices in its financial services group. Philip operates a broadly based practice but has specialisedfor many years in working with clients who operate in areas connected with retail finance and regulatorycompliance. He also has an extensive background in litigation and dispute resolution.Philip’s practice requires him to provide strategicassistance to commercial clients in relation to many areas of regulatory compliance, including FSR,privacy and AML.Philip is a key adviser to the ANZ Bank, Esanda andthe GE Money group of companies. He has also undertaken significant compliance projects forNational Australia Bank and the Bank of Queensland.In addition, Philip provides advice and assistance to a range of other commercial and consumer lenders,both at a regional and national level.

LEGAL UPDATE

management and mitigation of launderingrisk. This risk is defined as the risk the REmay reasonably face that the designated serv-ices it provides might (whether inadvertently or otherwise) involve or facilitate money laundering or financing of terrorism.

First understand the inherent risksAs part of the identification of any

ML/TF risk that it faces, the RE is required to consider the following:• its customer types, including any

politically exposed persons (PEPs)• the types of designated services it provides• the method by which it delivers

designated services• the foreign jurisdictions with which it

deals, and• the provision of designated services

overseas, through any permanent establishments.By doing this, the entity should gain a

better understanding of the inherent risksinvolved in offering its designated services. Asnoted above, however, a useful consideration ofthese potential risk factors will be much fullerif the RE understands the ways in which itsproducts or services might be used to facilitatemoney laundering or the financing of terrorism.The consideration of the risks inherent in particular designated services will alert the RE to the product or service offerings that may be used, or more readily used, for money laundering or financing of terrorism. Thisinformation is of a preliminary nature only and will need to be considered in the context of particular customers and transactions.

Then monitor individual customers and transaction.

The real purpose of understanding theinherent laundering and terrorism financingrisks of a given designated service will be to better enable the entity to meet the following obligations:• to monitor its customers in relation to the

provision of that designated service witha view to identifying, mitigating and managing any ML/TF risk involved, and

• to identify and report suspect transactions.A range of factors may be taken into

account by the RE when it is monitoring acustomer in relation to a designated servicebeing provided to that customer, including:• level of inherent ML/TF risk involved

in the provision of a particular product or service

• nature or identity of the particular customer, and/or

• particular nature or features of the transaction (or proposed transaction).

The ability to use the nature or identity of the customer will be limited if the RE isonly required to collect minimal know yourcustomer information.

More commonly, it will be a combinationof the particular nature or features of the transaction being monitored, in combinationwith a consideration of the risks inherent in thedesignated service being provided, that mayalert the reporting entity to the existence of a potential risk. Matters of judgement are likely to be involved and the exercise of thatjudgement will be greatly assisted by anunderstanding of why particular facts or cir-cumstances should be seen as risk indicators.

It is expected that transaction monitoringwill be required under the AML/CTF laws toalert the reporting entity to any transactionsthat are unusual, unusually large, or are suspicious because they have no apparent economic purpose. Because suspect transactions are likely to be disguised and tolook apparently innocent, effective monitoringwill need to be more than superficial.

Curiously, there is no specific guidancegiven as to how the general Part A objective of an AML/CTF program (of identifying,managing and mitigating ML/TF risk) is to be accomplished. In contrast with the requirements for Part B (dealing with customeridentification), there is no express requirementfor Part A of the AML/CTF program to include‘appropriate risk-based systems and controls’to achieve the objectives of Part A. Perhaps it‘goes without saying’, but it would be better ifthe full scope of the requirements for Part A ofan AML/CTF program were better explained inthe AML/CTF Rules (when finalised).

There are currently strong indications that the specific requirements for Part A of an AML/CTF program will be directed at controlling the inherent risks involved in theprovision of the designated services generally,rather than the management of ML/TF risk atan individual customer level.

It would be a mistake, however, to soconfine an AML/CTF program. It is expectedthat the rules (when finalised) will require atransaction monitoring program to be includedin the AML/CTF program and that such a pro-gram will be required to include appropriate

risk-based systems and controls to monitor the transactions of customers.

The rules will provide that when develop-ing and implementing such systems and con-trols, the reporting entity must have regard tothe types of laundering and terrorism financingrisks that it might reasonably face. It is expect-ed that this, combined with the requirement forongoing customer due diligence in section 36of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, will round out the scope of the requirement to considerknown inherent risk in conjunction with individual customers and transactions.

Additional KYC information?It is also appropriate to make a few commentson the limitations placed on the generalrequirement to consider obtaining additional(or enhanced) KYC information.

If the RE has collected only the minimumrequired KYC information (eg where the “safe harbour” is available for an individualcustomer using a designated service that has a low to medium inherent risk), there will be limited customer information to use inmonitoring ML/TF risk.

However, under Chapter 6 of the consoli-dated draft rules released in July 2006 the entitymust put in place appropriate risk-based sys-tems and controls to determine whether any further KYC information should be obtained for ongoing customer due diligence purposes.(Separately, enhanced due diligence on a cus-tomer will be required if a reportable suspicionis formed for the purposes of section 41, or ifthe ML/TF risk is considered to be high.)

What is currently less clear is whether the RE will need to collect any further KYCinformation during the relationship to assist itto carry out ongoing customer due diligence— where a suspicion has yet to arise.Arguably, there is no such requirement.Nevertheless, where there is more than a lowlaundering risk inherent in a designated serviceprovided to a customer, the reporting entitywould be wise to collect more than the minimum required KYC information, both atthe outset and as the transaction progresses. ■■

Philip Trinca, Partner, Blake Dawson Waldron.Phone: 03 9679 3258 Email : [email protected]


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necessary investigations; and case management – to manage

and prioritize individual cases and the collection of evidence.

With NetEconomy’s help, the bank added new capability that

would automate the time consuming manual process of

teller/branch SAR investigation.

Solution

Implementing NetEconomy’s new Modules to Abbey’s existing

ERASE Compliance Manager anti-money laundering solution:

• Automated Alert Investigation (AAI) Module

• Advanced Peer Group Analysis (APG) Module

NetEconomy accepted the challenge and quickly developed

a proof of concept for testing before implementation. Together

with the bank’s internal IT staff, NetEconomy deployed the

Automated Alert Investigation (AAI) Module. The AAI Module

filters out false positives automatically through a series of checks

and a scoring mechanism and presents the compliance officer

with a recommended action, reducing manual intervention.

NetEconomy Case Study: Abbey

“Using the AAI Module we are quickly able toevaluate and assess our SARs, reducing thetime taken to investigate them, making best use of existing resources and resulting in significant cost savings.”

Richard Moody, Deputy MLRO, Abbey

SPONSORED FEATURE


The solution considerably reduced the number of man-hours

required to investigate manual alerts generated at the teller or

branch level. Each morning, ERASE delivers to the Abbey

compliance team a list of alerts flagged from unusual banking

activity. Alerts are then managed, tracked and reported through

a step-by-step, start-to-finish workflow environment. ERASE’s

fully-integrated case management system significantly speeds

processes for both manual and system generated SARs, keeping

all records and evidence within one environment for easy access,

investigation, and reporting.

For this implementation, the AAI Module was also combined

with the new Advanced Peer Group Analysis (APG) Module.

The APG Module uses a risk scoring calculation to identify

extreme deviations, flagging alerts only when a customer’s

behavior is significantly different from others in its peer groups.

By leveraging this dynamic calculation method at Abbey,

exceptionally high-quality alerts are generated.

Within two months, these modules were seamlessly

integrated into the existing ERASE Compliance Manager

solution. Abbey benefited from immediate results within a short

time span. Richard Moody, explained, “Using the AAI Module

we are quickly able to evaluate and assess our SARs, reducing

the time taken to investigate them, making best use of existing

resources and resulting in significant cost savings.”

The combined ERASE system at Abbey tracked and closed

more than 40 percent of the organization’s SARs without any

manual investigation, saving the need to hire extra compliance

officers and reducing costs by almost £750,000 a year.

Results

• Speeds up the process of analyzing manual alerts

by filtering out false-positives

• Approximately 60% of the investigations are being

performed without any manual intervention

• Eliminated the need to hire 18 new staff members

to the compliance team

• Saving approximately £750K a year

About NetEconomy

NetEconomy is the leading provider of financial crime

management and compliance solutions to financial institutions

worldwide. With more than 130 implementations across

58 countries, NetEconomy has over a decade of experience

delivering highly effective, innovative and easily deployable

solutions for anti-money laundering, compliance, fraud

prevention and trade surveillance. ■

NetEconomy Case Study: Abbey

For more information on NetEconomy please contact Peter Steendijk at +612 9004 7240 or [email protected].

Citigroup Building, Level 39, 2 Park Street Sydney, 2000 Australia F +612 9004 7070

www.neteconomy.com

Automated Alert Investigation (AAI) Module

Highly flexible and easily configurable, the AAI Module can be used for front-line

teller/branch Suspicious Activity Report (SAR) analysis as well as post-alert investigation

and analysis – designed to simplify and streamline compliance staff investigation.

The AAI Module automates investigation by performing hundreds of checks

then presenting a recommendation for follow-up.

“We are very pleased with the results using the Advanced Peer GroupAnalysis capability withinERASE. By using thistechnology, we were ableto further narrow downalerts to significantly minimize the amount of investigation time for analyzing suspiciousactivity.”

Richard Moody, Deputy MLRO, Abbey

REGIONAL REVIEW

T HE US STATE DEPARTMENTreleased its annual InternationalNarcotics Control Strategy Report

(INCSR) in March this year. The report provided an in-depth review of Thailand’sAML/CTF efforts, quoting impressive statistics on the country’s asset seizureefforts. It noted that the Thai Anti-MoneyLaundering Office (the country’s financialintelligence unit) prosecuted 79 cases of civil asset forfeiture and reclaimedUS$11.8m during 2006. In addition,Thai authorities seized the equivalent ofUS$18.7 millionin what the INCSR called“nonterrorist [sic] assets” during 2005,up from US$16.52 million in 2004.

The report also shed some light on the Thai regulatory regime under its Anti-Money Laundering Act, which requires the country’s financial institutions to conduct customer identification, keeprecords and report large and suspicious transactions. The Act also empowers theBank of Thailand, the Securities andExchange Commission and the Anti-MoneyLaundering Office to supervise and audit financial institutions’ AML/CTF compliance.

Thai insurance companies are regulatedby the Thai Department of Insurance,under the Ministry of Commerce, and the Co-operative Promotion Department

regulates credit co-operatives. Thai remittance and money transfer agents,including formal remittance businesses,may not operate without a licence from the Ministry of Commerce.

Further improvementsThailand has also recognised that its Anti-Money Laundering Act (AML Act),passed in 1999, required some updates. Forexample, the country recently lowered its currency-reporting threshold, while the Bank of Thailand requested in January this year thatfinancial institutions screen foreign politicallyexposed persons (PEPs).

In particular, the PEP-related request sug-gested that financial institutions should monitor’special’ accounts and related transactions, andkeep records relating to each account for fiveyears. The request also stated that financialinstitutions should pay special attention toabnormally large, complicated or illicit transactions, and that senior managementapproval should be necessary when PEPs look to open accounts.


Improvements maskdirt beneath the surfaceThailand has one of the brightest anti-money laundering andcounter-terrorism financing (AML/CTF) regimes in South EastAsia. A fully functioning financial intelligence unit, robust AMLlegislation and strong police powers to confiscate criminalassets. However, KPMG's Emily Brayshaw and Nigel Gerreynuncover many flaws in Thailand’s AML/CTF efforts.

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REGIONAL REVIEW

The apples that upset the cartHowever, Thailand still faced some harsh criticism from the INCSR, which noted itsAML Act is now dated, and requires signifi-cant updates to bring Thailand into line withthe 2003 Recommendations of the FinancialAction Task Force on Money Laundering(FATF).

For example, the Act does not apply the crime of money laundering to all seriousoffences, nor even with the FATF’s minimumlist of acceptable designated categories of offences.

Proposed amendments to the AML Act toexpand the list of predicate offences for money laundering have been with the Thai Cabinet since 2004, and the parliamentappears in no great hurry to pass them.

More tellingly, while the Bank ofThailand does have regulatory powers, theseare extremely limited. For example, the Bankof Thailand examiners are prohibited from examining the financial transactions of private individuals, except under limited circumstances. This should surely call intoquestion the efficacy of its AML/CTF audits.

In addition, the INCSR found that theBank of Thailand does not currently examineits financial institutions for anti-money laun-dering compliance and, in spite of their being authorised to do so, the Stock Exchange andthe Co-operative Promotion Department do not conduct AML compliance audits duringtheir reviews.

The institutions they audit, the report said, do not generally have AML/CTF measures in place.

Drugs, human trafficking, terrorism and ID fraudThe INCSR also highlighted some of the significant criminal activity that takes placewithin Thailand. It stated that Thailand is vul-nerable to money laundering from its signifi-cant underground economy, and from transna-tional crime that includes drug trafficking and smuggling.

In addition, even though drug productionin the so-called “Golden Triangle” hasdecreased in recent years, the production ofillegal chemical narcotics in Thailand, includ-ing methamphetamines, has risen sharply.

“Thailand is a significant destination and source country for international migrantsmuggling and trafficking in persons,a production and distribution centre for counterfeit consumer goods and increasinglya centre for the production and sale of fraudulent travel documents.

Banks and alternative remittance systemsare illegally used to shelter and move fundsproduced by all of these activities as well asby illegal gambling and prostitution,” theINSCR revealed.

Australia’s Department of Foreign Affairsand Trade recently upgraded its travel advisoryfor Thailand following a series of terroristbombings in Thailand in February.

“We advise you to exercise a high degreeof caution because of the high threat of terroristattack. We continue to receive reports that terrorists may be planning attacks against arange of targets, including tourist areas andother places frequented by foreigners . . . further attacks cannot be ruled out,” the DFAT advisory said.

CorruptionThailand also suffers from serious corruptionproblems, as highlighted in the 2006Transparency International CorruptionPerception Index. Thailand scored a low 3.6/10on a scale, where 0 is extremely corrupt andten is ‘squeaky clean’. The recent military coup(in September last year) also appears to haveuncovered some inconsistencies and concernsthat the conduct of the previous governmentwas not entirely without question.

A sub-committee established under themilitary junta’s National Counter CorruptionCommission has recently completed a series of investigations into three cases of suspectedcorruption in Thailand, in which the formertransport minister and chairman of AirportsThailand were implicated. Thai media reportshave suggested the three cases are related tomajor infrastructure projects.

The military’s corruption commission hasalso reviewed share transfers connected to thefamily of the deposed Thai president, ThaksinShinawatra, in another high-profile corruptioncase known as the Shin Corp Tamasek deal.

The commission found the transfers “to bepart of a network”, media reports have stated.Other hints of corruption have come as a resultof Shinwatra’s October 2006 visit to London,where the bulk of the cash of one of his majorassets, Thailand’s largest mobile telephoneoperator, Advanced Info Service, is held. Mediareports have also speculated that Shinwatramay seek access to these UK-based funds.

In the light of this activity, therefore, itcomes as no surprise that the Bank of Thailandhas suddenly shown an interest in PEP activity.

The moral of the storyMany a seasoned AML/CTF practitioner maynot be surprised that money laundering andcorruption are serious problems in Thailand.However, the recent military coup, combined

with information from the latest INCSR,emphasise the need to monitor for launderingrisks constantly.

For example, a change in the circum-stances in Thailand may elevate the level ofmoney laundering and terrorism financing riskthat it poses to a reporting entity, which meansthat the entity may need to conduct enhanceddue diligence on transactions to or from thatjurisdiction in order to manage and mitigatelaundering risks effectively.

Alternatively, the sudden dramatic changein Thailand’s government in September lastyear indicates that an entity may need to screen its customer base as soon as possible for PEPs linked to the former Thai governmentand to the new Thai government, rather thanduring a routine customer due diligence review(which that may be otherwise scheduled laterin the year).

The other key issue this case raises is thatthe best AML/CTF systems must incorporatededicated AML/CTF staff who can keep up todate any risk tools that the reporting entity may have. Such staff may also recognise, forexample, that transfers to Australia from theUK in the name of Advanced Info Servicecould potentially be the proceeds of corruptionand would know that any automated transac-tion monitoring systems in place may need tobe adjusted in order to detect such transactions.

As with every jurisdiction, AML/CTF staff will need to dig below the surface ofThailand's AML/CTF efforts to find the realroots of money laundering and terrorismfinancing risk. Fortunately, the risks are oftenmore easy to discern than in other jurisdictionswith apparently ‘comparable’ AML/CTFregimes to Australia.

This does not mean, however, that the risks will be easier to manage or mitigate.Unfortunately, the hard lesson is that the onus to fight financial crime in many corruptjurisdictions lies on Australian reporting entities and law enforcement alone, becausethose jurisdictions are unable, or unwilling,to do so themselves. ■■


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DEPOSED THAIPRESIDENT,THAKSINSHINAWATRA

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INTERNET CRIME

T HE USE OF PEOPLE to transferdrugs and/or money, a long standingpractice of the criminal fraternity, is

being replicated in the high tech crime environment. ‘Money mules’ (ostensibly innocent people unrelated to the criminal

activity that creates the illicit funds) transferrelatively small amounts of money lodged intheir bank accounts to overseas accounts heldby criminals. Money mules are a consequenceof the need for criminals to transfer, and dis-guise the origins of, illicit proceeds of crime.

The recruitment of money mules Money mules seem to be recruited largelyfrom the US, UK and Australia and transferillegal funds to criminals located primarily,in the former Soviet Union (iDefense 2006).The basic process of muling itself is relatively simple:• job advertisement offers work as

‘financial agent’ or similar• job seeker signs up and opens, or allows

access to, domestic bank account• fraudsters transfer victims’ money to job

seeker’s account• job seeker transfers money to fraudster’s

overseas account• job seeker receives ‘commission’• job seeker is open to prosecution by

domestic authorities for money laundering.

Mules are recruited primarily through theuse of cyber fronts (fictitious online companieswhich appear legitimate) or spam advertise-ments (offering bogus employment opportuni-ties via email). Titles for muling positions varybut have included ‘Private Financial Receiver’,‘Money Transfer Agent’, ‘Shipping Manager’and ‘Sales Representative’ (iDefense 2006).Emails containing such advertisements aresimilar to phishing scams in that they aim to facilitate control over a bank account(Beardsley 2005). Unlike phishing scams however, where the aim is to ensure that theaccount holder is unaware that their accounthas been compromised, the aim of muling is toobtain the full consent and cooperation of theaccount holder. Muling is further assisted bythe fact that unlike the more common Nigerianfraud scams, the muler does actually receivepayment for their services.

In September 2005, Clearswift noted that‘work at home scams’ had accounted for 0.5per cent of spam emails and in October 2005that percentage had risen to 1.2 per cent(Leydena 2005). In 2004, MessageLabsreported that more than 20,000 copies of ascam phishing mule email purportedly fromICG Commerce (a legitimate company whosename was being used to add credibility to the scam) were sent. Further credibility wasprovided by the fact that a formal applicationprocess (including interviews) had to beundertaken and by a statement provided on the website linked to the email which stipulated that ‘…we are NOT going to askyou to do ANY initial investments or sendANY kind of initial payments.’

In Western Australia, the Department of Consumer and Employment Protection's“WAScamNet” database recorded 1709


Muling money across the globeMoney muling was once about the physical transport of cash across porous borders, but it’s now the ultimate scam-at-home for those seeking a quick buck. Rob McCusker looks at the state of internet muling

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INTERNET CRIME

employment and money mule email offersreported by consumers in October 2006 alone. This was 59 per cent of all scam emails reported. This category now recordsthe most scam emails reported to the department each month.

Spotting the scamTell-tale signs of money muling operationsexist. Having been informed by the roguecompany that payments can only be made bydirect deposit, the applicants are typicallyrequired to provide their personal bankaccount details, and many of the job offerscontain grammatical and other errors. Earlyphishing scams were replete with such errorsbut have improved dramatically and it seemslikely that money muling scams will followsuit. In addition, it is possible to detect amoney mule operation by checking the hiringcompany’s WHOIS data which may providewarning indicators. The WHOIS data for theWeb site kflogistics.biz (used in mulingscams), for example, lists the registrant asMichael Birman who has a New York mailingaddress and telephone number. However,the last two letters of Birman’s listed e-mailaddress, [email protected], indicate aRussian base which might have raised suspi-cions, given the propensity for muled funds tobe transferred to the former Soviet Union.

UK banks NatWest, Halifax and Barclayshave introduced a security measure whichinvolves imposing a one-day delay to paymentsmade by and to their customers. It is hoped thatthe transfers made by mules to and from theirbank accounts will be spotted before the scamcan be completed (Leyden 2005b).

Examples of money mules In January 2005, 60 people were arrested in Australia for allegedly laundering moneyfrom bank accounts in Russia and collecting a commission based on the amount of money laundered. Mules reportedly earned$200–$500 per day for moving up to$100,000 per day (AllBusiness2006).

In November 2005, three people in theUK involved in a phishing operation againsteBay customers were arrested duringOperation Apple. Thirteen bank accounts wereutilised to hide and launder the proceeds.Victims of the eBay operation made transfersto the criminals’ money mules who handledmultiple transfers ranging from £1500 to£15,000 (Out-Law 2005).

In February 2006, Russian thieves stolemore than €1m from personal bank accountsin France. The thieves then transferred thevictims’ funds to the accounts of money mules

who allowed the money to transit throughtheir accounts (Willsher 2006).

In September 2006, the Spanish NationalPolice detained 23 people in relation to thetheft of €2m from online banks and onlineshops. The funds were siphoned off into intermediary accounts in Spain and then transferred to Russia and the Ukraine via 19 money mules (Kornakov 2006).

ReshippingReshipping (or postal forwarding) is a well-used variation of muling in which the mulereceives packages at home (containing goodsobtained illegally by criminals) and then reshipsthem overseas in exchange for a fixed fee perpackage. An advertisement placed in a USnewspaper illustrates the basic approach taken.

Arrangements are made so that the mulereceives payment directly into their bankaccount. The mule may then also be used fortransferring money to and from that account.Reshipping exploits:• the ease with which online payments

can be made and also the popularity andprofitability of online marketplaces

• the natural reticence showed by merchantsin shipping expensive goods overseas

• the belief that once an online transactionis approved, shipments made to domesticaddresses are not subject to any realscrutiny especially during periods ofexpected high traffic like Christmas

• limited oversight of parcels being shippedoverseas by domestic citizens.

Reshipping recruiters tend to use well-crafted company websites. There are estimated to be between 50 and 100 ringsbased in Moscow alone, each receiving about$20,000 worth of stolen goods a month(Acohido & Swartz 2005b). A typical reshipping ring in Russia is purported to consist of six operatives in their 20s and 30s.

In 2004, it was estimated that reshippinggroups had set up approximately 44,000 postoffice boxes and residential addresses in theUSA as package handling points (Acohido &

Swartz 2005a). Internet job hosting sites such as Monster.com and CareerBuilder.com claim that they deploy teams to screenadvertisements but re-shippers are adept atskirting that rudimentary screening process bychanging their names and websites every fewmonths. Indeed, very sophisticated postingpatterns have been discerned in particulartowns or regions including the strategic testingof new company names for vulnerability todiscovery by website hosts (Dixon 2006).

ConclusionMoney muling via online job sites and/orspam email is a key example of a movementfrom syntactic (targeting the computer) tosemantic (targeting the computer user)attacks. Krenn of the US Postal Service has noted that muling ‘is driven by desperatepeople looking for jobs…Most of them don’task questions’ (Acohido & Swartz 2005). Inessence, money muling is an advanced formof fraudulent work at home schemes, since itexploits the gullibility of the participants in asimilar fashion. The danger of money mulinglies in the facts that, unlike those otherschemes, the participants actually receive aform of payment and are liable to prosecutionfor money laundering activities. ■■

Rob McCusker is the Research Analyst inTransnational Crime at the Australian Instituteof Criminology.

The views expressed in this article are those ofthe author and do not necessarily reflect theviews of the Australian Government.


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REFERENCES

Acohido & Swartz 2005a. Cybercrooks lure citizensinto international crime. USA today, 11 July

Acohido & Swartz 2005b. An inside look at a Nigerianreshipping ring. USA today 7 November

AllBusiness 2006. Money mules: an investigative view.www.allbusiness.com/print/890852-1-3471218.html

BBC News 2003 Q&A: Online jobs scam.www.news.bbc.co.uk/1/hi/business/3208703.stm

Beardsley T 2005. Phishing detection and prevention.http://www.planb-security. net/wp/503167-001_PhishingDetectionandPrevention.pdf LINK NOTWORKING

Dixon P 2004. A year in the life of an online job scam.World privacy forum. www.worldprivacyforum.org/job-scamreportpt1.html

iDefense 2006. Money mules: Sophisticated globalcyber criminal operations. Source or URL?

Kornakov K 2006. Cyberfraudsters detained in Spain.VirusList.com 18 September.www.viruslist.com/en/news?id=198811138

Leyden J 2005. Email 'get rich quick' scams double inOctober. The register 10 November. http://www.theregis-ter.co.uk/2005/11/10/email_scams_diversify/

MessageLabs 2004. Job seekers beware: phishingrecruiting mules for money laundering, 23 November.http://www.nl.messagelabs.com/news/pressreleases/detail/default.asp?contentItemId=1237&region

Out-Law 2005. Follow the evidence. Winter no. 13: 7–9Willsher K 2006. Sleeper bugs used to steal 1m in

France. Guardian, 7 February.www.guardian.co.uk/print/0,,5393279-110633,00.html

Look at this! WORK at Home!Correspondence manager vacancies.MAIL PACKAGES from home without leaving your current job.Easy! Ship parcels from our clients.Get Paid $24 per parcel! Info:http://kflogistics.biz/vacancies.asp.htm

(Source: Acohido & Swartz 2005a)

PROFILE

W HEN PAUL FLEMING surveys the wealth managementindustry he sees a lot of what he calls swashbucklers –investment managers with big egos who live and die

by their stock-picking ability and who see any attempt to regulate them as an imposition. Fleming is the risk manager at fund managerVanguard Investments Australia, with responsibility for the group’santi-money laundering program. Vanguard is an index investment house creating funds which replicate equity, bond and other marketindexes. It manages $42 billion of assets in Australia.

“We work in a very structured environment that lends itself to acertain amount of regimentation . . . the culture is receptive to the ideaof something like an anti-money laundering program,” says Fleming.

Before joining Vanguard two years ago, Fleming was at insurerCGU, where he began as legal counsel but ended up running its riskand compliance activities. CGU, which is now owned by IAG, was partof Aviva, a UK financial services group. It implemented an anti-moneylaundering program along with its parent some time ago.

Prior to CGU, Fleming worked in Asia with the global bank,HSBC, another organisation that had been through the implementationof an anti-money laundering program.

Having been exposed to anti-money laundering in his two previousroles, Fleming was surprised to discover that there was a shortage of


Watchman amongthe swashbucklers

PAUL FLEMING

Fund managers tend to think AML is little more than animpediment to wealth creation. And as John Kavanaghfound out talking to Paul Fleming of Vanguard, their education is only just beginning.

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PROFILE

people working in the Australian wealth management industry withexperience in this area.

“We have had to recruit our AML people from the banking industryand from regulators such as ASIC [The Australian Securities andInvestments Commission],” says Fleming, who manages a team of six.

The problems created by a lack of experienced people in the industry are compounded by an attitude that AML is for bankers andcasino operators, not fund managers.

According to British banking technology consultant, Steve Lock,who visited Australia last year, when AML regulations were introducedin the UK in the mid-1990s, wealth managers adopted the attitude thatbecause they were low risk, AML was not really an issue for them.Lock saw much the same attitude in Australia.

“Wealth management companies figure that if 80 or 90 per cent of their business is in superannuation they are not going to be troubledby money launderers …

But there are products, such as immediate annuities and at-call non-superannuation funds, where you can put money in and take it out soon after. That is where the risk lies …

“Compared to banks, where there is a history of risk managementbeing taken seriously by senior management, wealth managers have no history and no culture of this type of risk management. They have no existing controls. They actually need to work harder to get it right,” says Lock.

Fleming agrees and comments that the failure of many in the industry to engage with AML means that some conflict will arise.

“There is tension between fund managers and advisers about whowill take responsibility for the ‘know your client’ obligations. Financialplanners don’t want to pass on client information to fund managers.They don’t want us to have any direct contact with their clients. There is a fight coming over that,” says Fleming.

Fleming is member of a working group established by the fundmanagement industry’s peak body, the Investment and FinancialServices Association, which is consulting with the Attorney-General’sDepartment about a set of operational AML rules for the industry. “One of the things we are looking at is the type of information fundmanagers and financial planners will share,” says Fleming.

Fleming describes Australia’s AML regime as highly legalistic,despite the government eschewing a black letter law approach, and one that is “hard to deconstruct” for the staff at the front line.

According to Fleming, it has been relatively easy to get Vanguardto buy into his team’s AML program. The company is part of a multinational group and the same issues are being worked on in other parts of the group. “I think because we are very systems orientedhere, people don’t see this as an imposition. It is just part of the business,” says Fleming.

The big danger Fleming sees in developing an AML complianceprogram is that it will be too onerous. “You have to be careful not tocreate a monster,” says Fleming. ■■


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Case Management for AML Fraud Risk Management Compliance

www.ngxsolutions.com [email protected] Contact our Business Development Manager on 61 3 9642 0053

Minimise the impact of financial crime and reduce your compliance costsWhen you implement an AML system into your environment, the level of suspicious transactions generated is likely to overwhelm your investigation team. You will need to capture data from numerous sources, in a variety of formats; you will have to evaluate that data for accuracy, and provide a secure environment in which to carry this out; you will have to generate detailed reports to comply with stringent compliance obligations; and you will have to do all this under significant time constraints.

How are you going to achieve this?

NGX Case Manager is a state-of-the-art Enterprise Case Management solution, featuring innovative technologies such as a workflow engine, customised ‘smartforms’ and ‘intelligent agent’ technology. It was developed from the ground up especially to meet the regulatory needs for AML, risk and fraud compliance.

Solutions

“WEALTH MANAGEMENT COMPANIES FIGURE THAT IF 80 OR 90 PER CENT OF THEIR BUSINESS IS IN SUPERANNUATION THEY ARE NOT GOING TO BE TROUBLED BY MONEY LAUNDERERS …”

STEVE LOCK, FORTENT

RISK TRIGGERS


N EW TECHNOLOGY and new methods or processes based on existing technologies can generate significant advantagesto financial institutions. These advantages can include faster

transaction processing, greater connectivity, global banking access, real-time information and greater data collection and processing capabilities.

A good example of this is electronic value transmission systems,including electronic payment and internet banking systems. These systems provide a number of benefits to businesses, including: fast anddirect account transactions, computer-based processing and verification,global transmission and the use of online accounts held anywhere in the world. However, these are benefits which may also be enjoyed by money launderers. For instance, electronic payments or transfersbetween accounts held domestically or overseas provide an avenue to launder large amounts of money quickly through single or multipletransactions for layering that are difficult to trace, efficient and do not involve person-to-person contact.

Risk AssessmentIncreases in the efficiency of global wholesale banking and funds management through improved technology has also meant that moneylaundering activities can be undertaken more efficiently and anonymously.Despite this, when new technologies, processes or systems are developed and then implemented, the potential for these to be utilisedfor illegal purposes is often not evaluated in the development process as part of the risk assessment or security assessment. Where the risk ofcriminal activity utilising the technology or processes is considered,the focus of this evaluation tends to be on the technology being abusedmore directly, rather than in the context of wider criminal activity. For instance, an assessment of the potential exposure of electronic payments systems to possible criminal activity tends to focus on thesecurity of the system from computer-based attacks, such as denial ofservice, intrusion and illegal access and use of data. Often the potentialuse of electronic payment systems for money laundering or terroristfinancing is either not well considered or not considered at all.

Therefore, technological development processes need to incorpo-rate a risk assessment of the potential for the new technology, processesor systems to be exploited in a wide range of criminal activity ratherthan simply limited to a risk assessment of computer-based crimes or security threats.

New TechnologiesNew technologies, in particular, present considerable opportunities for exploitation for criminal activities. Often when new technology is introduced some outcomes are not foreseen in the developmentprocess. There is an expectation that over time the technology will need to be modified depending on experience, and/or in response tothreats as they occur. This gap between the introduction of the newtechnology and full implementation (following modifications) providesan opportunity for money laundering and terrorist financing activities(as well as other criminal activities) to be undertaken with reduced risk of detection or traceability.

An example of this is the growing use of wireless technology.Because it is not limited by physical connections, the risk that this technology may be utilised for criminal activity is very high. Access is possible to anyone within the effective range with an ability to bypass security measures. In other words, the lack of physical connection provides full mobility, anonymity and a reducedability of detection; which are all highly advantageous for criminalactivity, especially for money laundering and terrorist financing (as well as fraud and identification theft).

ConclusionWhen financial institutions develop new technologies, processes or systems, it is not sufficient for these processes to be evaluated only in terms of their business benefits and costs, or to limit the risk assessment to security threats. The development process for new technologies, processes and systems must incorporate a risk assessmentof how they may be used for criminal activity (ie. how they can be used for illegal purposes or to facilitate illegal transactions).

In other words, the development process should incorporate a risk assessment of the new technology, processes or systems for thepotential use of these for money laundering and terrorist financing – the AML officer should be involved in this risk assessment.

It would be unwise and potentially costly to wait until the technology is introduced and then to assess it for the risk of moneylaundering or terrorist financing activities. ■■

Shock of the newNew technologies may be a bonus for institutions wanting tostreamline processes, but therein lie the seeds for layering andintegration of illicit monies, says criminologist Michelle Hannan

By Michelle HannanFINANCIAL CRIME CONSULTANT

CASE MANAGEMENT TECHNOLOGY


T RANSACTION MONITORING is the first thing you mightthink of when costing out an AML/CTF compliance program.It is often assumed that implementing transaction monitoring

will be the most expensive stream of the program, but spare a thoughtfor the little brother of transaction monitoring, the humble case manage-ment system. Often case management will be seen as just another module of the transaction monitoring suite. It may be wrapped up in the one product evaluation exercise with transaction monitoring, but that is not giving it due attention.

This paper will examine how a case management implementationmay, in fact, be a more strategic investment than transaction monitoring.A successful case management implementation will address many ofthe same fundamental issues that need to be addressed in other businesscritical processes, such as account opening and product provisioning.Contrast this with transaction monitoring, which is a niche solution for a fairly narrow problem area.

Why case management is importantPut yourself in the position of a financial institution’s AML/CTF compliance officer on the first day after commencement of the new suspicious matter reporting provisions. There will be little time for quiet reflection. Once a suspicion arises, the reporting entity will need to proceed very carefully but extremely quickly. The AML/CTF legislation1 provides for a three business day window for reporting sus-picions of most crimes. In the case of terrorism, there is only 24 hours inwhich to report2. The penalties for failing to report are significant andthe requirement to keep the report secret from the customer (or anyoneelse for that matter) adds a further dimension to the regulatory risk3.

A case management system with standard features such as dashboards, configurable workflows, automated report generation and electronic lodgement to Austrac will help ensure that these veryshort and inflexible time limits are not missed. A system that enforcesseparation of roles and responsibilities backed by strong security willhelp ensure there is no “tipping off”.

What the legislation requiresCase management is not mentioned in the AML/CTF legislation or thecurrent draft rules. The requirement to manage cases effectively isimplicit rather than explicit. It is a natural consequence of the followingsubstantive obligations:

• correspondent banking due diligence• ongoing customer due diligence• enhanced customer due diligence• suspicious matter reporting• record keeping, and• control and audit around all of the above specified in the

AML/CTF program. A case, for the purposes of the AML/CTF legislation, can be defined

as a suspicion to be investigated or due diligence process to be completed.Typically, a case management system will include the following

components:• an interface to the transaction monitoring system for the receipt of

alerts• a user interface, including a means to initiate cases manually• a dashboard allowing analysts and others to conveniently manage

their workloads• configurable workflow• content management functionality• security infrastructure• reporting• an interface to the regulator for the electronic lodgement of reports,

and• a repository of data associated with a case, including the lifecycle

data which tracks its progress through its workflow.

A logical model for some of the high level entities which wouldcomprise a case management repository is shown below as figure 1.

Nothing in the legislation or the current draft rules indicates that anyparticular system of case management is required. It is open to reportingentities to adopt either a manual or an automated system. In its simplest,non-automated form, a ‘case’ could be one in a sequentially numberedset of paper files. The lifecycle data associated with the case would bekept as a paper document attached to the file and the procedures associ-ated with actioning the case would be covered by a written manual.

The ‘risk based approach’ to AML/CTF compliance adopted in thelegislation means that each reporting entity will need to decide on whetherto implement a manual or automated system of case management, basedon its own AML/CTF risk. For most banks, a manual system is unlikely tobe sufficient, due to the size and the scale of their businesses.

The glue that binds the program togetherA well implemented case management system is likely to makethe difference between meeting the deadline to report a moneylaundering event or missing it and risking fines. It may not bethe sexiest part of AML implementation, but it can be effective,says Victor Bennetts

By Victor BennettsINFOSYS AUSTRALIA

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Boundaries of case managementA case management system obviouslydoes not provide the entire AML/CTFsolution from a technology perspec-tive. Conveniently, this system would be available through a portal,which would also provide access toother systems and documentation relevant to AML/CTF. The portalcould also provide the links to business intelligence tools used to investigate suspicions.

Case management is not areplacement for the customer relation-ship management (CRM) changesneeded to accommodate AML/CTF.CRM systems are optimised to capture structured data and facilitateinteractions with the customer. CRMtypically addresses interaction withcustomers in a particular context. Byway of example, the customer riskprofiling and identification changesrequired by AML/CTF will need to beimplemented as CRM changes.

Case management has a very different purpose and audience to CRM. Case management needs to handle unstructured data and constantly evolving workflows. It will need to be optimised for analysisof suspicions and rapid regulatory reporting, but only ever for a verysmall subset of the overall customers. Customer facing teams are probably not going to be given direct access to case management systems, due to the risk of tipping off.

Also, it is important that the case management tool and its underlying repository do not become a de facto data warehouse. Thedata requirements of AML/CTF can be implemented as an isolated silo,but this will not lead to cost effective scalable systems. There is signifi-cant overlap between data extraction requirements of AML/CTF andthose of other initiatives, such as credit risk and Basel II generally.

Also, many of the business intelligence reporting and analysisrequirements for supporting AML/CTF will be conveniently leveragedfrom a general business intelligence reporting capability. Realising acommon platform for such data services is extremely difficult in practice, but very necessary for achieving efficient use of informationassets across the enterprise.

Case management optionsAssuming an automated system is required, there are two possibleapproaches to selecting a case management solution. One approach is toselect a product which is closely coupled to associated transaction moni-toring software. This means the case management product evaluationwould be dictated by the result of the transaction monitoring productevaluation. Either it would be the same vendor or a third party supplierwith whom the transaction monitoring vendor has a close relationship.

Advantages of this approach are:• reduced implementation cost if there is a pre-built interface

between transaction monitoring and case management • ideally (if available) a feedback loop from case management to

the transaction monitoring system, so that scenarios which generatealters will be automatically adjusted by the outcome of case investigation, and

• transaction monitoring products will typically bundle a case management solution, so that conducting a separate evaluation and procurement will be an added cost.

Disadvantages with this approach are:• integration effort will still be required in relation to other impacted

systems such as risk profiling, CRM and data warehouse, and • the solution may not represent all the best of breed features of

Business Process Management (BPM) solutions.

The alternative approach is to build case management functionalityusing mainstream BPM software. This approach requires some explana-tion. BPM is an emerging area of software innovation likely in future to rival the current prominence of CRM and Business Intelligence. The concept is fairly simple. BPM represents a structured approach toimplementing business processes where they are treated as assets.

Some of the goals of the BPM software vendors and the promise of utilising such software is to:• allow analysts, rather than programmers, to define and modify

business rules and process flows using graphical tools, thus reducing development time and effort

• greatly increase efficiency due to superior process modelling andanalysis

• provide self documentation of processes through linked meta datarepositories, and

• provide a standards-based approach to workflows and businessrules through use of such technologies as business process execution language (BPEL).

When selecting a more generic BPM offering, the case management software would then be logically represented as a hub that sits between all the other systems making up the compliance solution. Advantages to this approach are:


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Analyst

Workflow

Transaction

Business Unit

KYC Data

CustomerRisk Profile

Customer Type

Geography

Red Flag

Suspicious Matter Report

Channel

Product

Alert

Case

Document AttachmentTask

Figure 1 – High Level Case Management Logical Data Model


• sharing infrastructure and capability costs with other critical business functions within the enterprise (eg. account opening,loan origination, credit control)

• availability of mainstream BPM tools and expertise for processmodelling and monitoring, and

• potentially a more standards-based solution rather than a proprietary one.

The major disadvantage of this approach is that initial configura-tion and integration costs are likely to be higher due to the need to create workflows and interfaces which would be available from a dedicated case management vendor out of the box. This may be mitigated where the BPM vendor offers some preconfigured compliance workflows.

Product evaluationEvery reporting entity, which decides that it requires automated case management, will need to conduct a product evaluation. The functional and non-functional requirements to be considered on the product evaluation should include both AML/CTF specific matters and common features of best of breed BPM solutions. Typical features to be considered when evaluating a case management solution include:• richness of template workflows and frameworks available,

particularly those for compliance in a financial services context• a flexible process modelling tool allowing visualisation of

workflows and automated generation of code• a flexible repository model covering tasks, alerts, cases, customers

and transactions• the repository should be extensible to allow for variations between

different business models whilst maintaining core upgrade ability• there should be support for cross references and dependencies

between cases so that if, for instance, the transaction monitoring system generates two alerts for the same customer on similar transac-tions, they are linked in the same case to avoid duplication of effort

• multiple approaches available to allocation and prioritisation oftasks (eg. role-based, employee-based, group-based, weighted-based on existing workload4) allowing the setting of deadlines,escalation of cases and their re-assignment

• pre-built interfaces to major transaction monitoring software fromvendors such as Mantas, Norkom, Neteconomy, Actimize and Fortent

• pre-built interfaces to major CRM packages• pre-built interfaces to best of breed core banking applications• ideally the tool should support a feedback loop back into the transac-

tion monitoring and risk scoring systems so that scenarios and riskratings are dynamically adjusted based on the actual outcome of cases

• secure storage of all associated documents, in other words, a general content management capability or integration with the preferred enterprise content management product

• maintains a full and secure audit trail• generates necessary regulatory reports (or at least the analytical

input for such reports) and in the case of the time critical suspicious matters reports, generates them in the required statutory format automatically

• out-of-the-box interface with Austrac electronic lodgement system

• supports internal reporting both for internal oversight and audit and toallow operational optimisation of workloads (in BPM parlance suchoperational reporting is called Business Activity Monitoring (BAM))

• the internal reporting and analytical functions should allow simulation and optimisation of the workflows

• standards-based architecture, for instance utilising a BPEL orchestration engine and developed on SOA principles

• works with industry standard databases, web servers and application servers, BPM orchestration engines and rules engines

• does not need to replicate or remap existing customer and transaction data – preferably it would interface with the reportingentity’s data schemas where that data is already available in anexisting data warehouse, and

• developed in technologies with some longevity such as C++,Java or .Net.

Software vendorsThere are many players in the rapidly evolving BPM area, but the fieldcan be narrowed significantly if only those vendors that specificallyoffer compliance workflows are considered. Vendors that specificallyoffer preconfigured compliance workflows or frameworks include:• Pegasystems• FileNet (now owned by IBM).

Other well-regarded BPM vendors, but who don’t specifically indicate they have a compliance framework, include:• Fuego (now BEA Aqualogic)• Savvion• Lombardi.

Document management vendors who also have products with similar functionality include:• EMC (Documentum)• Vignette.

ConclusionImplementing case management is not exciting. There are far more sexyareas of AML/CTF compliance, such as the analysis of criminal typologies.Senior management is unlikely to have much enthusiasm for spending onthese systems which, in truth, will contribute little to the enterprise’s bot-tom line. However case management systems deserve our careful attention.They will be the day-to-day face of AML/CTF compliance for many finan-cial services staff. When the last few hours of the three day deadline toreport a suspicious matter are looming, a well implemented case manage-ment system is likely to make the difference between meeting the deadlineor missing it and risking fines, loss of reputation and significant censure.

More important still is the opportunity that case managementimplementation affords to move an enterprise towards a well architectedplatform for exception management and business process management.Ostensibly, AML/CTF compliance is not about competitive advantage,but there is no doubt that a well implemented AML/CTF program willimprove the customer experience in relative terms. This will be a pointof difference for financial institutions in an increasingly competitivecommercial landscape. ■■

Victor Bennetts is a senior consultant with Infosys Australia.

Contact: [email protected]


FOOTNOTES:1 Anti-Money Laundering and Counter Terrorism-Financing Act 2006, see alsoAnti-Money Laundering and Counter Terrorism-Financing (ConsequentialAmendments) Act 2006 and Anti-Money Laundering and Counter Terrorism-Financing Amendment Bill 2007 (still a Bill as at 20 Feb 2007).

2 Section 413 Section 123 – tipping off 4 Different methods for allocation of tasks is a topic covered exhaustively in standard BPM texts and typically a feature of best of breed BPM tools.

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© 2006 KPMG, an Australian partnership, is part of the KPMG International network. All rights reserved. August 2006. VIC10327FAS.

AML legislation.In-depth

knowledgeworking for you.

The Government’s new anti-money laundering(AML) legislation is upon us. At KPMG, we can help you assess clearly and pragmatically theimpacts for your business.

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So when it comes to understanding the new AMLlegislation, contact the professionals in the know – KPMG Forensic.

For more information please contact Gary Gill on +61 2 9335 7312 or [email protected]

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