Real estate and the promise of ready money – who cares if the cash is dirty?

The UK welcomes wealthy foreign investors, but does it really care where their money comes from? Estate agents in London’s super expensive neighbourhoods are apparently agreeing to house purchases with ‘corrupt’ Russian politicians.FCA London Property

If you are in the UK, tune in to Channel 4 this evening to watch a revealing documentary about what really goes on between agents and super rich buyers. In ‘From Russia with Cash‘,  undercover reporters pose as an ‘unscrupulous’ Russian government official “Boris’ who wants to buy a house in London for his mistress, ‘Nastya’. Despite ‘Boris’ making is clear to the agents that his funds are not from a legitimate source, the estate agents he deals with are apparently happy to go ahead with the sale and even recommend ways for ‘Boris’ to keep a low profile, according to the Guardian report.

Channel 4’s reporters used hidden cameras to film meetings with estate agents, who talked openly about previous dealings with foreign clients, government ministers – politically exposed persons, and the amount of deals which are made with some degree of anonymity. Politically exposed persons (PEPS) are individuals with access to national coffers, funds which belong to the electorate. They are government officials, their families, their associates and beyond.

Property, or real estate, is widely recognised as the best way to invest. So it should be no surprise that the proceeds of crime have found a natural home in bricks and mortar. Rules on investing and moving dirty cash are well publicised. In the UK and many other countries, Financial institutions, lawyers, accountants, dealers in high value goods and real estate agents are required to report transactions of dubious origin – those which could be hiding the proceeds of crime – to law enforcement. The penalties for not reporting suspicious transactions are severe for the institution and the individual.

Corruption and billionaires  

FCA - TITransparency International’s ‘Unmask the Corrupt‘ campaign looks closely at how UK property launders funds for corrupt individuals, many of whom are politically exposed persons. Funds designated for schools and hospitals – ‘Boris’ claims his money comes from a government health budget – is sent to offshore havens, shrouded in secrecy and then passed on to ‘enablers’ or gatekeepers in the UK who advise and facilitate investment. The thing is, the practice is nothing new. This is how the big money has always moved – the only difference is that now it is under scrutiny.

Forbes, the register of all things super-rich, lists London as third in the world of ‘Billionaire Cities‘.  Five of the remaining nine are Asian cities – Hong Kong, Tokyo, Shanghai, Singapore and Mumbai sit alongside Paris, Moscow, New York and Sydney. If the corrupt are managing to get money into the UK property market, they are certainly managing it in the other countries on this list.

Will the estate agencies and law firms mentioned in this programme be investigated and will this give rise to increased scrutiny of the real estate sector in the UK? Financial Crime Asia is keen to find out.


Abu Dhabi proposes 50 year zero tax zone?

A report in the Khaleej Times from 1st July on proposed regulation for the Abu Dhabi Global Market hides an interesting nugget, way down in paragraph six.

A palace overlooks Abu Dhabi Yacht Club - a high roller's playground?  Image:

A palace overlooks Abu Dhabi Yacht Club – a high roller’s playground? Image:

“Abu Dhabi financial zone will offer a zero-tax environment for 50 years. In the launch phase, the financial hub will benefit from Abu Dhabi’s natural strength, ie private banking, wealth management and asset management and will grow according to market demand to eventually become a broad based financial hub.”

Great news for private and corporate clients who want to take a break from paying taxes, but how does this sit with the rest of the world’s focus on tax crimes? Will parking funds in the ADGM and avoiding coughing up your dues in the place you make your money be OK? Time will tell.

Abu Dhabi is a part of the United Arab Emirates, a member of the Financial Action Task Force’s regional body – MENAFATF.



New documentary sheds light on FIFA corruption allegations

Yet another story connecting football with financial crime? We are in danger of a trend appearing here…

Allegations of corruption surround not only FIFA’s bid for the Qatar World Cup but also the 2018 World Cup. The head of England’s bidding committee testified in court that one FIFA executive asked for USD4m to secure a vote, another wanted a knighthood, said Jeremy Schaap, the ESPN reporter behind a new documentary on FIFA

ESPN has just aired a documentary revealing these stories and looking into the allegations of corruption within FIFA, the travelling empire which puts on the World Cup every four years, and behind FIFA President Sepp Blatter’s rise to power.

There’s a transcript of the show producer’s interview here and a link to the documentary here. Look out for Blatter’s defence of his role before the Oxford Union.

Should make for interesting viewing over the weekend.

How much do APAC’s regulators earn?

Regulators’ salaries across Asia Pacific vary enormously:some supervisors earn fortunes and others hit the pay scale at the average to low end.APAC REGULATORs - SALARIES

Some governments believe that paying politicians and civil servants high salaries should reduce the likelihood of them accepting a bribe, offered in cash or disguised as a gift. Others argue that financial regulators will be less likely to jump ship and work for a bank if they are paid competitively by the government. Some countries pay their banking regulators on the same modest scale as other government employees , pitting them against some of the highest paid people in the country – bankers.

Last April, we found out how much the head of the Hong Kong Monetary Authority brings home; Norman Chan Tak-lam was set to earn HKD$9.41m(USD1.2m), making him the highest paid central bank chief in the world.  As the HKMA is also the banking regulator, this makes Chan Tak-lam the biggest earning regulator in the world. Chan Tak-lam’s counterpart in Beijing, Shang Fulin, the head of China Banking Regulatory Commission, earns an estimated  CNY11,271 (USD1,800) per month.

The accompanying infographic details more of APAC banking regulators’ earnings.

Comparing regulators salaries with those of bankers reveals a stark difference. Since the global financial crisis took hold in 2008, we have seen a distinct change of attitude towards financial institutions. Blatant rule breaking by banks – whether money laundering, sanctions busting or tax evasion – is being punished in high-profile cases as regulators finally start to show their teeth. However, the impact on the individuals responsible have been unremarkable; a move to a less high-profile role in the bank, or early retirement as opposed to job loss or, as some have called for, criminal prosecution.

Rather than going after the bankers who allowed criminality to go unchecked at banks, or those who made good from the financial crisis, there is an element of maintaining the status quo vis a vis bankers’ salaries that is out of step with the movement to make change for the better in the financial sector.

In the post global financial crisis and post public bailout economy, can banks justify paying million dollar bonuses?

In February 2015, Ross McEwen, the head of RBS, went on record to defend bonuses for bankers in spite of government bailouts and losses:

“I need to be fair paying for our people so I can actually keep them onboard.”

Although McEwen has opted to hand back his personal GBP1m (USD1.5m) share award to the bank he will still take home an expected GBP2.7m (USD4m) in 2015. Peter Sands, the outgoing boss of Standard Chartered also waived his bonus in 2015.

Looking at Asia Pacific, four of China’s largest five banks made the Banker’s Almanac list of top ten biggest financial institutions. This includes Industrial and Commercial Bank of China, China Construction Bank Corporation, Agricultural Bank of China Limited and Bank of China. China Development Bank Corporation languished at no. 21 on the list.

“According to the half-year annual reports of the listed commercial banks, the average annual payment before deductions for the chairmen of the five biggest Chinese commercial banks was around 2 million yuan ($325,600).”Source:The Global Times 2014.

Piyush Gupta, CEO of DBS bank, Singapore’s largest, made SGD9.2m (USD 6.6m)
The CEOs of United Overseas Bank and Oversea Chinese Banking Corporation were not far behind.

Chief regulators salaries fall far short of those earned by their peers at regulated entities.
It’s unlikely they will ever be measured on the same scale. Regulators, in an ideal world, would be motivated by doing the right thing for the right reasons. That is certainly the message that some regulators are putting across. But banking is all about money, and the more you earn, the higher your status.

First published on the International Compliance Association blog in March 2015. 

Hong Kong’s wealth industry to focus on compliance and ethics

FCA - Hong Kong

Hong Kong

Imagine the scenario. Sandy, a relationship manager with a private wealth company in Hong Kong has hit only 50 per cent of her quarterly sales target. In the cut-throat world of trickle down economics, not meeting the target means that Sandy will not earn a salary-making bonus and more importantly, will lose her job. Sandy needs to hook a major client with more than a few million kicking around to invest. So when a client that Sandy has been chasing for a couple of months finally calls for a meeting and offers a deal that could take our RM over target and into the firm’s very good books, how cautiously will Sandy approach the deal? Would a private wealth relationship manager refuse the business of a multi-million dollar client if there are apparent red flags for money laundering, corruption or tax evasion? Would they try to side step customer due diligence? Would they even recognise the red flags in the first place?

The Hong Kong Monetary Authority (HKMA) has endorsed a brand new standard for private wealth managers which should go some way to answering the questions raised here. The Enhanced Competency Framework (ECF) encourages customer-facing employees – the relationship managers who often know their clients better than any other bank employee – to upgrade their skills and practice in terms of competency, compliance and ethics.

A relationship manager is best placed to identify when a client’s requests or account activity is suspicious or not in line with their usual account activity. However, incentive schemes which encourage relationship managers to sign up clients in an increasingly competitive market can raise issues around ethical behaviour.

It is important to note that the standards are non-statutory, which means that practitioners can volunteer to take the training courses to gen up on professional competency, compliance and ethics, but they are not required to do so. Although this removes some of the impact these standards could have had on the private wealth management industry, it is still a step in the right direction. The ECF will be administered by the Private Wealth Management Association, an industry group, and the framework does reflect an increased industry interest in improving and maintaining professional standards. Past attitudes to training on compliance and anti-money laundering in Hong Kong has varied between institutions.

Hong Kong, living the high life

Hong Kong, living the high life

One firm I know of has experienced great challenges in convincing HK based financial institutions of the need to train employees. Perhaps the new standards and the HKMA backing hint at a change in how institutions are approaching business. Making these standards a statutory requirement would show that Hong Kong is taking competency, compliance and ethics in the private wealth management seriously.

Cleaning up the murky world of private wealth in Hong Kong could shed light on some of the practices which have allowed some in the city to amass enormous wealth, and left others languishing.

SAC’s Steinberg gets 3-1/2 years prison for insider trading

(Reuters) – Michael Steinberg, a portfolio manager at Steven A. Cohen’s SAC Capital Advisors hedge fund, was sentenced on Friday to 3-1/2 years in prison for insider trading.

The sentence was imposed by U.S. District Judge Richard Sullivan in Manhattan, five months after a federal jury convicted Steinberg on securities fraud and conspiracy charges, in a case stemming from a broad crackdown on insider trading on Wall Street.

Steinberg’s lawyers had asked for no more than two years in prison, while prosecutors had argued for up to 6-1/2 years.

Sullivan also ordered Steinberg to pay a $2 million fine and forfeit $365,142, a sum the government says Steinberg and an SAC analyst were paid from the illegal trading profits.

Dozens of family members and friends attended the sentencing and sent letters to the judge. The letters, Sullivan said, described Steinberg in a positive light that set him apart from other defendants he had sentenced.

“If it were only based on the character of this man, it would be easy, because I do think this is a good man,” he said. “But I do have to consider the crime here.”

Prosecutors accused Steinberg of trading on illegal tips about Dell Inc and Nvidia Corp passed to him by an SAC analyst, who admitted to swapping confidential information among a group of analysts at other hedge funds. Steinberg’s trading resulted in illegal profits of $1.82 million, prosecutors said.

Steinberg, 42, is one of eight current or former SAC Capital employees to be convicted on insider trading charges.

SAC pleaded guilty to fraud charges and has agreed to pay $1.8 billion in criminal and civil settlements.

The Stamford, Connecticut-based firm has rebranded itself Point72 Asset Management as it shifts to being a family office managing Cohen’s fortune.

Sullivan granted Steinberg bail, pending an appeal.

The appeal is expected to focus on Sullivan’s not having required the government to prove that Steinberg knew the insider who originally disclosed non-public information had received a benefit for making the disclosure.

Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors, are appealing on similar grounds stemming from convictions in a separate trial Sullivan also oversaw.

During appellate arguments in Newman and Chiasson’s case last month, some judges questioned whether Sullivan’s interpretation of the insider trading law was correct.

Sullivan on Friday noted the arguments, saying the issue appeared to be “a closer call than I thought.”

Steinberg’s sentence was less severe than those of Newman and Chiasson, who in 2013 received terms from Sullivan of 4-1/2 years and 6-1/2 years in prison, respectively.

Cohen has not been criminally charged. The U.S. Securities and Exchange Commission is seeking to bar Cohen from the securities industry for failing to supervise Steinberg and another portfolio manager and prevent insider trading. Cohen denies wrongdoing.

The case is U.S. v. Steinberg, U.S. District Court, Southern District of New York, No. 12-cr-00121.

(Reporting by Nate Raymond in New York, additional reporting by Jonathan Stempel and Joseph Ax, Editing by Franklin Paul and Gunna Dickson)

Source: Reuters

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On 23 April 2014, Almaty’s first nationwide Anti-Corruption School opens its doors for students, civil society representatives, journalists and all citizens who wish to

John Cole Cartoon satirising corruption in Luzerne Schools

John Cole Cartoon satirising corruption in Luzerne Schools

learn how to counteract corruption in daily life.

Transparency International Kazakhstan – with support from the Soros Foundation-Kazakhstan and in partnership with the Agency for Fighting against Economic and Corruption Crimes (the Financial Police), the Financial Police Academy, Turan University, the Kazakhstan Association of Higher Education, and the Republican State Enterprise “Kazakhstan Temir Zholy” – will present a completely new educational format that provides students with anti-corruption instruments and tools, with step-by-step recommendations on how to apply them.

The Anti-Corruption School project aims at promoting the theory and practice of anti-corruption. Over the course of seven days, all students will get the opportunity to work with leading anti-corruption experts, government representatives, businessmen and scientists. They will also get the opportunity to see real-life examples of how to effectively fight corruption. The school’s programme includes four training modules that combine both theoretical and practical courses on topics, such as corruption research and public sector, private sector and civil society participation in combating corruption.

Within the framework of this project, we have also launched an informational campaign “I have a dream” – focusing on children’s dreams about a clean, transparent and just Kazakhstan. All of the words presented in our posters are real expressions of children from Almaty kindergartens. The dreams of these young citizens of Kazakhstan are rather small and these dreams cannot be executed by fairies or by cyber toys. Only we, adults, can make these dreams come true.

We argue that corruption is a part of a culture or lifestyle; that corruption is an integral part of doing business and that ordinary people cannot resist corruption. Corruption is a two-way street – those who give bribes have to be responsible for their actions as well as those who receive bribes.

Source: Transparency International

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Six ways corruption undermines Afghanistan

Although these six ideas are linked here to Afghanistan, they could be applied to any nation living under a severely corrupt regime. Some of the lessons serve as a warning to jurisdictions which are not post-conflict but could be tipping towards corruption.

A fair society is already on the way to breaking down when corruption is no longer considered a taboo, as in point one. When citizens of a country are able and willing to pay bribes for services as a norm, getting society and the economy back on track to fairness and transparency is an enormous challenge.

The information in this graphic comes from a Rawa News article and all credit must go to the reporter.

Infographic - Corruption in Afghanistan

Infographic – Corruption in Afghanistan

Sun is shining for Bernie, but what about the rest of sports?

Bernie Ecclestone, the billionaire owner of Formula One car racing, is on trial for bribery in a Munich court this week. The charges he denies relate to a €33m (£27.2m)

Courtesy of the Telegraph

Courtesy of the Telegraph

payment to a German banker in 2005 to ease the sale of F1 to a company of his choice. When asked if he was confident of victory on the way into court, Ecclestone replied ” I am confident the sun is shining”.

The key issues in the case, as listed in the Independent:


  • Bernie Ecclestone is being tried on charges of bribery relating to a payment of €33m to a German banker, allegedly to secure the sale of F1 shares to CVC Capital Partners in 2005.
  • Mr Ecclestone denies any wrongdoing but admits paying the sum to Gerhard Gribkowsky, who was selling on behalf of Bayern Landesbank.
  • The F1 boss alleges he was being blackmailed by Gribkowsky, who was threatening to make false claims to the British tax authorities.
  • Gribkowsky, who is expected to give evidence, was sentenced in Munich in 2012 to an eight-year term after  being convicted of taking illegal payments.
  • The trial is scheduled to last until September.
  • Mr Ecclestone faces a maximum 10-year custodial sentence if convicted.


Lighting up sports

A flurry of news stories lately has shed harsh, but needed,  light on to the world of sports and its often less than transparent dealings.

From NPR

From NPR

Qatar’s World Cup campaign has been linked to claims of bribery and corruption and the tragic loss of life. Every year, thousands of Nepalese people leave home full of hope, ready to engage in new jobs as servants and construction workers in Qatar. Qatar Airways flies directly from Kathmandu to Doha several times a week, delivering Nepalese workers to their new jobs. Funnily enough, you never see many Qatari citizens walking around Kathmandu.  The promises made to workers in Nepal are often not met and many Nepalese citizens land in Doha to find out they are working for 12 hours a day in deadly temperatures, earning less than they were offered and helpless to escape as their passports are held by their gang masters. In February, the Guardian reported that 400 Nepalese have died on Qatari building sites since the World Cup construction started.

Fifa, the international governing body of football – has acknowledged corruption allegations disclosed by the Telegraph newspaper in March and  has set up an ethics commission to look into the matter.

“The Telegraph disclosed on Tuesday [see article] that Jack Warner, the former vice-president of Fifa, appears to have been personally paid $1.2 million (£720,000) from a company controlled by former Qatari football official and executive committee member Mohamed Bin Hammam – just five days after the decision to award Qatar the 2022 tournament.”

Qatar is apparently reducing the number of stadia it had planned to build for the 2022 World Cup, and the official reason is that rising costs are proving too difficult to manage. Is this the first time a host nation has scaled down its plans because it couldn’t find the cash to pay for it?

Sochi Olympics corruption report

One country not beset by cash flow issues when hosting a world class sporting event was Russia. According to the Encyclopaedia of Spending report from the Anti-Corruption Foundation, rising costs did  not stop Russia from going all out to build stadia and infrastructure. Alexei Navalny, the head of the Anti-Corruption FoundationFCA - Navalny and wife and was found guilty of libel in Moscow on April 22. Since February, he has been under house arrest and banned from communicating via the internet or phone since then.

President Vladimir Putin has ordered an audit of spending on the Sochi Olympics and has promised to pursue wrong-doing, if he finds any evidence.


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Would you shut up and just sell the stuff anyway?

If you saw something wrong, dangerous or unethical in your work place would you stand up and tell your boss about it? If the act you reported was damaging to the company and its reputation, would you expect your boss to support your claim? What if their response was to ignore the danger, carry on regardless and just sell the stuff anyway?

Linda Almonte

Linda Almonte

One woman blew the whistle on wrong doing at JP Morgan Chase in 2009 and her news was not well received. Linda Almonte saw something was not right in a deal she was working on and refused to go on with a sale of what she saw was misrepresented debt. The firm fired her for her trouble.

As with the Wachovia whistle-blower, Almonte at first found little interest in the case from the regulators, although the US Office of the Comptroller of the Currency is reportedly now looking into it.

Keep an eye on this case; whether the regulators are looking into it or not, it will come up again and serves as a reminder about why people do blow the whistle and why some choose not to do so.

Read more on this story in the Rolling Stone and the American Banker.


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