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FINANCIAL CRIME DIGEST
MAKE INFORMED DECISIONS
June 2015
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
1
TECHNICAL AND REGULATORY UPDATES
The Fourth Money Laundering Directive (2015/849/EU) has been
published in the Official Journal of the European Union and came into
force on 25 June 2015. Article 67 states that ‘Member States shall
bring into force the laws, regulations and administrative provisions
necessary to comply with this Directive by 26 June 2017’.
The Directive brings about significant changes in the definition of
Politically Exposed Persons, the Beneficial Ownership requirement
and the Penalties regime.
The Wire Transfer Regulation also came into force on the same date.
The Regulation lays down rules for payment service providers, who are now
required to send information, not only on the payer, but also on the payee.
The text for the Fourth Money Laundering Directive is HERE
The text for the Wire Transfer Regulation is HERE
Fourth Money Laundering Directive and Wire Transfer Regulation published in the Official Journal
In this edition, we cover information regarding the imple-mentation of the EU fourth money laundering directive, the British Banker’s Association coverage of a World Bank survey on de-risking, Transparency International’s discussion document on ‘unexplained wealth orders’, recent judgements, and regulatory actions - as well as news and updates relating to money laundering, bribery and corruption, sanctions, and terrorist financing.
Welcome to the June 2015 edition of the Financial Crime Digest, which covers updates from May 2015.
FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com2
Empowering the UK to recover corrupt assets- Transparency International UK publishes discussion paper
Transparency International UK has published a discussion paper suggesting that a new ‘Unexplained
Wealth Order’ (UWO) power be conferred on UK law enforcement. It advocates that suspects issued with a
UWO would have to explain legitimate and legal sources of wealth for suspicious UK assets or transactions,
provided there was sufficient suspicion of criminality. If the trigger for a UWO is a suspicious activity report,
then the 31-day timeframe for refused consent would be paused while the UWO is being responded to.
The task force found, after talking with law enforcement and legal experts, that the 31-day time period is
insufficient for investigating complex corruption cases.
Failure to respond to a UWO, or an inadequate response, together with the initial grounds for suspicion,
may then be used to facilitate a civil recovery process against the asset. Transparency International
further recommends that an appropriate governing body, such as the Law Commission or a Parliamentary
Committee, considers this paper as the basis for a wide-ranging review of powers to tackle corruption and
money laundering associated with corruption in the UK.
The discussion paper is HERE
FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
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De-risking - BBA publicises World Bank Group’s survey
The British Bankers’ Association (BBA) is publicising a survey by the World Bank
Group, which has been launched to collect data from banks on the key drivers and
consequences of de-risking. The survey is divided into a set of common questions,
with a secondary section geared to each participant’s particular sector. The results
of the survey will have extremely high visibility, and will feed into the production of a
report for the G20, which will include the perspectives of money transfer operators,
banks, and national governments worldwide. The findings will further shape wider
discussions taking place in a range of international fora, including the FATF and Financial Stability Board.
The deadline for responses is the end of June, and the BBA encourages all banks to respond.
The press release is HERE
The survey on de-risking is HERE
Swedish banks fined over lax anti-money laundering controls
Sweden's financial regulator has fined the
two biggest banking groups, Nordea and
Handelsbanken for breaching laws on money
laundering and terrorism financing. The
Financial Supervisory Authority (FSA) said
Nordea had lacked an effective system to detect
and prevent money laundering for several years,
whether identifying high-risk individuals, sus-
picious transactions and counterparts in tax
havens, or countries linked to terrorism. With
regard to Handelsbanken, the FSA said the
deficiencies were significant and meant the
bank ‘ran a high risk of being used by people to
launder money or finance terrorism’.
Nordea Bank was given a warning and
the maximum administrative fine of 50
million kronor (USD 6 million), and Svenska
Handelsbanken AB was fined 35 million kronor.
The press release is HERE
FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
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Forex - FCA fines Barclays GBP 284 million
The Financial Conduct Authority (FCA) has
imposed a financial penalty of GBP 284,432,000
on Barclays Bank Plc (Barclays) for failing
to control business practices in its foreign
exchange (FX) business in London. This is the
largest financial penalty ever imposed by the
FCA or its predecessor, the Financial Services
Authority (FSA).
The FCA found that between 1 January 2008
and 15 October 2013, Barclays’ systems and
controls over its FX business were inadequate.
These failings gave traders in those businesses
the opportunity to engage in behaviours that put
Barclays’ interests ahead of those of its clients,
other market participants, and the wider UK
financial system. These behaviours included
inappropriately sharing information about
clients’ activities and attempting to manipulate
spot FX currency rates, including doing so in
collusion with traders at other firms, in a way that
could disadvantage those clients and the market.
The final notice is HERE
The press release is HERE
Recent judgements - Bank Mellat v HM Treasury [2015] EWHC 1258 (Comm)
This judgement follows the UK
Supreme Court’s decision in June
2013, which held that the UK
Treasury had unlawfully applied
sanctions against Bank Mellat.
This decision is significant in that
it establishes that the UK can be
held financially liable for sanctions
measures that are unlawfully applied
against an entity.
The UK Financial Restrictions (Iran)
Order 2009 (which was introduced by
the Treasury under powers conferred
upon it by Schedule 7 of the Counter-
Terrorism Act 2008), came into
force on 12 October 2009, and was
part of the UK’s efforts to curtail the
financing of Iran’s nuclear weapons
programme. Under the 2009 Order, all
persons operating in the UK financial
sector were banned from entering
into or continuing any transactions
or business relationships with certain
entities associated with Iran. Bank
Mellat, one of Iran’s largest private
commercial banks, and its branches
were subject to these sanctions.
The judgement is HERE
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: MONEY LAUNDERING
5
Finma, the Swiss financial market regulator, said that virtual currency Bitcoin should be treated as a serious medium for illicit activity, such as money laundering. The comments were reported to be a sign of a widening acceptance and use of the digital payments system. Bitcoin’s ability to be used anonymously and internationally increases the risk it could play a role in terrorist financing. Finma completed a two-month consultation in April 2015, and will incorporate feedback into its revised Anti-Money Laundering Ordinance.
The U.S. Financial Crimes Enforcement Network (FinCEN) assessed a USD 700,000 civil money penalty against
Ripple Labs, Inc. and its wholly-owned subsidiary XRP II, LLP for wilful violations of several requirements of the U.S.
Bank Secrecy Act, by acting as a money services business and selling its virtual currency, known as XRP, without
registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering programme.
FinCEN Director Jennifer Shasky Calvery said ‘innovation is laudable, but only as long as wit does not unreasonably
expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.’
State Street Corp. has said that
it expects to face enforcement
by the Federal Reserve and the
Massachusetts Division of Banks,
after it failed to comply with the
Bank Secrecy Act, anti-money
laundering rules and U.S. economic
sanctions. In a regulatory filing,
the bank said that, as part of a
‘written agreement’, it expects to
be required to improve its compli-
ance programme, and to retain an
independent company to review
account and transaction data.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: MONEY LAUNDERING
The Vatican’s Financial Intelligence Unit (AIF), formed by
Pope Benedict in 2010 to help set up a regulatory system
to combat money laundering within the Vatican Bank, has
presented its first report on the bank’s progress. The AIF
said the bank, formally known as the Institute for Religious
Works (IOR), has toughened regulatory standards and
closed thousands of accounts. It found the bank has made
good progress on improving transparency, but needs more
changes to consolidate anti-money laundering reforms. The
Vatican Bank is seeking to repair its public image following
a series of financial scandals, and has been undergoing
massive reforms over the last three years.
Jennifer Shasky Calvery, director
of the U.S. Treasury Department’s
Financial Crimes Enforcement
Network (FinCEN), stated in a
recent speech that she expected
a greater focus on money laun-
dering activities through the real
estate sector. She said this type
of money laundering ‘is not a new
issue’ – however, she added that
‘FinCEN continues to see the use
of shell companies by interna-
tional corrupt politicians, drug
traffickers and other criminals to
purchase luxury residential real
estate in cash.’ Her speech follows
a series of articles published by
The New York Times in February
2015, which uncovered the use
of shell companies to purchase
high-value real estate at The Time
Warner Center in New York City.
A foundation established by former Nigerian President Olusegun Obasanjo has sacked its London-based Chief Executive Officer, after video evidence emerged showing that she had been involved in money laundering activities for many years. Video footage shot discreetly by a participant at a London meeting in December 2014 showed Anne Welsh, the former CEO, had plotted a USD 4.9 million scheme to exploit the deadly Ebola virus tragedy in West Africa, by helping a group of ‘Lebanese businessmen’ who wished to donate some money to the Olusegun Obasanjo Foundation for work in Sierra Leone. The group said it would donate USD 2 million if the foundation arranged to launder the balance of USD 2.9 million.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: MONEY LAUNDERING
An ex-director of Petroleo Brasileiro SA (Petrobras), Brazil’s state-owned oil company, was sentenced to five years in prison, in the latest development in the multi-billion dollar corruption investigation. According to a document published by a court in Curitiba, Brazil, Nestor Cervero, who left Petrobras in 2014, set up a front company in Uruguay to purchase an apartment in an upscale Rio de Janeiro neighbourhood with illicit funds. Cervero is the second former director of Petrobras to be convicted in relation to the corruption case, the first being Paul Roberto Costa, the company’s former head of refining, who is due to serve two years under house arrest after turning state’s witness in the case.
Deutsche Bank announced
that it had launched an
internal investigation into its
investment division in Russia. The statement
followed a report in a German weekly magazine,
which stated that several of the bank’s
employees in Russia were suspected of
laundering important sums of dubious origins
for Russian clients, by carrying out complex
transactions on the derivatives market.
Deutsche Bank said in a statement: ‘We are
committed to participating in international
efforts to detect and combat suspicious
activities, and we take strong action where
we find evidence of misconduct’.
Plus500, a London-
listed trading platform,
announced that its UK
arm had been subject to an external review
by the Financial Conduct Authority at the
beginning of the year. Following the review,
Plus500 agreed with the FCA to halt all client
transactions until customers could provide
proof of their status. Plus500 said that it had
frozen about 55% of its client accounts while
it assesses their status under anti-money
laundering regulations. The firm said that
new customers could still sign up through its
Cypriot subsidiary, and was working to resolve
the issues within as short a time as possible.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: MONEY LAUNDERING
Caesars Entertainment
Corp., owner of Caesars
Palace casino in Las
Vegas, announced in a
quarterly filing that it was in discussion with U.S.
federal authorities to settle allegations of money
laundering at Caesars Palace, and the casino
company could pay a fine of between USD 12
million and USD 20 million. Caesars said it had
met with federal government officials to discuss
‘in general terms the results of their
investigations, and had proposed a range of
potential settlement outcomes.’ FinCEN was
investigating Caesars for potential violations
of the U.S. Bank Secrecy Act. In recent years,
FinCEN has focused on anti-money laundering
procedures and policies, and has taken a
particular interest in the gaming industry.
U.S. authorities are reportedly investigating Venezuela’s powerful parliamentary head, Diosdado Cabello, and other senior officials, for possible cocaine trafficking and money laundering. The Wall Street Journal reported that federal prosecutors in New York and Miami, and a Drug Enforcement Administration unit, were gathering evidence from former cocaine traffickers, Venezuelan military defectors, and people once close to top Venezuelan government officials. Cabello has repeatedly denied allegations that he has been involved in drug trafficking.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: BRIBERY AND CORRUPTION
Press reporting has been dominated by
coverage of the FIFA bribery scandal. At the
instigation of the U.S. Department of Justice,
Swiss police arrested seven officials from FIFA.
Swiss officials later opened a parallel investi-
gation concerning the bidding process for the
2018 Russia World Cup and the 2022 Qatar
World Cup. In the first investigation, the U.S.
Department of Justice alleges that sports mar-
keting executives paid USD 150 million in bribes
to FIFA officials to secure broadcasting rights.
Nine football officials and five sports executives
were charged. Former FIFA official Chuck Blazer,
acting as an informant, admitted taking bribes
in exchange for awarding the 1998 World Cup to
France and the 2010 World Cup to South Africa.
In a second investigation, Swiss authorities are
investigating bribery during the bidding process
for the 2018 and 2022 World Cups. In response,
FIFA president Sepp Blatter abruptly announced
his resignation. A number of banks in the UK
have reportedly launched reviews into whether
corrupt payments were processed through
their accounts. They were named in the U.S.
Department of Justice indictment, which does
not alleged wrongdoing on their part.
Following an investigation by the The Serious Fraud Office (SFO) and the City
of London Police into the awarding of contracts in a series of high-value
infrastructure projects, Graham Marchment pleaded guilty and was
sentenced to 2.5 years imprisonment for his role in the conspiracy. Between
2004 and 2008, Marchment conspired with his co-defendants, Andrew Rybak,
Ronald Saunders, Philip Hammond, and others, to obtain payments by
supplying confidential information in relation to oil and gas engineering
projects in Egypt, Russia and Singapore. Marchment worked as a
procurement engineer, and deliberately leaked confidential information to
bidders in exchange for payments disguised as commission. The contracts
that Marchment was involved in were worth around GBP 40 million.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: BRIBERY AND CORRUPTION
The SFO has brought further charges as
part of its ongoing investigation of Alstom
Network UK Limited. In addition to the
charges that were announced as part of phase
three of its investigation into Alstom in April,
the SFO has charged Jean-Daniel Lainé, and
he appeared, together with Michael John
Anderson, and representatives of Alstom
Network UK Ltd, at Westminster Magistrates’
Court. The matter has been sent for trial at
Southwark Crown Court.
China Telecom Corp Ltd, the third largest mobile telecoms company in China, said in
a statement that it had taken action against 31 executives involved in extravagant
banquets and prostitution. It said that the executives had spent RMB 79,500 (around
USD 12,800) of public funds on lavish banquets and entertainment in a restaurant
in Hebei province. Executives were punished for holding ‘small coffers’, a common
practice amongst government agencies and state-owned enterprises, to keep certain
public funds off the books, to fund their banquets and related ‘recreational’ activities.
The U.S. Securities and Exchange Commission
(SEC) has charged global resources company
BHP Billiton with violating the Foreign Corrupt
Practices Act (FCPA), when it sponsored the
attendance of foreign government officials at the
Summer Olympics. BHP Billiton agreed to pay a
USD 25 million penalty to settle the SEC’s charges.
An SEC investigation found that BHP Billiton failed
to devise and maintain sufficient internal controls
over its global hospitality program connected to
the company’s sponsorship of the 2008 Summer
Olympic Games in Beijing. BHP Billiton invited 176
government officials and employees of state-
owned enterprises to attend the Games at the
company’s expense, and ultimately paid for 60
such guests, as well as some spouses, and others
who attended along with them. Sponsored guests
were primarily from countries in Africa and Asia,
and they enjoyed three- and four-day hospitality
packages that included event tickets, luxury hotel
accommodations, and sightseeing excursions
valued at USD 12,000 to USD 16,000 per package.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: SANCTIONS
The Canadian Senate has adopted
the Magnitsky sanctions motion,
and condemned those involved
in the cover-up of the USD 230
million corruption exposed by Sergei Magnitsky.
Senator Andreychuk, who introduced the motion
in the Senate of Canada, said: ‘Joining with
parliaments around the world, the Senate’s
adoption of this motion expresses our commit-
ment to accountability for foreign nationals who
commit the most serious violations of human
rights.’ The Resolution encourages sanctions
against any foreign nationals who were
responsible for the detention, torture or death
of Sergei Magnitsky, or who have been
involved in covering up the crimes he exposed.
Comparable resolutions, motions and acts have
been adopted by the European Parliament,
the British House of Commons, the Dutch
Parliament, the Organisation for Security and
Cooperation in Europe, and others.
Russia has blacklisted 89 prominent individuals from
the European Union who will not be allowed to enter
the country. The EU condemned the move, which
came after a number of EU politicians were recently
denied entry when arriving in Russia, with authorities
saying their names were on a confidential ‘stop list’.
The EU did not confirm who was on the list, nor did
Russia’s embassy in the EU. However, Jacek Saryusz-
Wolski, a Polish member of the European Parliament,
tweeted a list of 89 names that included himself.
U.S. authorities took punitive measures
against an Iraqi airline and a Syrian
businessman relating to the sale of aircraft to
Iran’s Mahan Air, a sanctioned Iranian airline.
The Financial Times reported that Western
governments suspect Iraq-based Al-Naser
Airlines to have been a front for Mahan Air to
acquire the planes. A U.S. official said that
Mahan Air took delivery of nine Airbus aircraft
early in May. The U.S. has imposed sanctions
on Mahan Air three times since 2011 for alleg-
edly shipping arms to the Syrian government;
transporting members of Iran’s elite Quds
Force of the Islamic Revolutionary Guards
Corp; and providing transport for Hezbollah,
the Lebanese militia, which Washington
designated as a terrorist organisation. The
U.S. Treasury Department said that the nine
aircraft have been designated as ‘blockable’
interests, increasing the risk for Mahan Air to
fly them on international routes.
FINANCIAL CRIME DIGEST
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PRESS AND MEDIA: TERRORIST FINANCING
The U.S. Department of Treasury Office of Foreign Assets Control (OFAC) has issued its 23rd Terrorist
Assets Report, covering the year to December 2014. During the year, terrorist assets blocked in the United
States totalled USD 21.8 million. These blocked funds belong to, or are controlled by, terror groups -
including Al-Qaeda, Hamas and Hezbollah. The report also identified blocked funds and non-blocked funds
relating to Iran, Cuba, Syria and Sudan, which the report identifies as ‘state sponsors of terrorism.’ OFAC
identified around USD 2.3 billion in assets in the United States as belonging to state sponsors of terrorism,
most of which belong to Iran. Blocked Iranian cash and assets in the United States are valued at around
USD 1.9 billion. This includes eleven diplomatic and consular properties.
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For further information, please contact:
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ABOUT APERIO INTELLIGENCE We are a corporate intelligence and financial crime
advisory firm based in the City of London. We specialise
in: conducting enhanced due diligence on high risk cus-
tomers and third parties; integrity due diligence on critical
acquisitions and investments; market entry and political
risk analysis; and investigations. We provide tailored
training and advisory services relating to financial crime,
in particular anti-money laundering and sanctions com-
pliance. Our clients include some of the world’s leading
regulated financial institutions. Our team has decades of
collective experience in advising clients on financial crime
and intelligence gathering, helping them to manage risk
and maximise potential.
Aperio Intelligence Limited125 Old Broad StreetLondon EC2N 1AR
t: +44 (0)20 7073 0430e: [email protected]
www.aperio-intelligence.com
Registered Address: Carlton House, 101 New London Road, Chelmsford, Essex CM2 0PP. Registered in England & Wales: 09164101 VAT: GB 195 2320 10© Aperio Intelligence Limited 2015. All rights reserved. Aperio Intelligence and the Aperio logo are registered trademarks of Aperio Intelligence Limited.
For further information, please contact:
Adrian Ford - 020 7073 0432Greg Brown - 020 7073 0433
ABOUT APERIO INTELLIGENCE We are a corporate intelligence and financial crime
advisory firm based in the City of London. We specialise
in: conducting enhanced due diligence on high risk
customers and third parties; integrity due diligence on
critical acquisitions and investments; market entry and
political risk analysis; and investigations. We provide
tailored training and advisory services relating to financial
crime, in particular anti-money laundering and sanctions
compliance. Our clients include some of the world’s
leading regulated financial institutions. Our team has
decades of collective experience in advising clients on
financial crime and intelligence gathering, helping them
to manage risk and maximise potential.