Financial crime

DOJ indictment of FIFA – a quick reminder of the details

So, this morning the FIFA members are voting on who will be the next president.

In the Blue Corner weighing in at four terms on the throne at football’s governing body, 79 year old Joseph “Sepp” Blatter is expected to take the title by almost 75% of the votes, according to this round-up from the Guardian.

In the Red Corner, the only contender for the crown, Prince Ali bin Hussein of Jordan, a 39 year old royal and president of FIFA Asia. Two days before the US Department of Justice’s swoop on FIFA officials, Prince Ali’s team contacted police in the UK to report an alleged offer of 47 more votes for Ali in the FIFA election. The votes were rejected. Prince Ali’s team engaged a UK based corporate intelligence firm, headed up by a former London police commissioner, to ensure integrity and high ethical standards throughout the campaign.

Falling on their swords?

Falling on their swords?

Blatter appears undeterred by the arrest and indictment of nine FIFA officials this week and apparently has the support of the vast majority of delegates, who when asked by the BBC this morning, seemed to err on the side of caution.

The party line appears to be this: you cannot blame whoever sits at the top of the tree for the actions of the apples hanging from it.

But should he not be responsible for what happened on his watch?

The indictment

The indictment reaches back to 1991, eight years before Blatter ascended to the top job.

According to the DOJ: “The soccer officials are charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.”

Any money laundering techniques uncovered and publicised during this investigation will provide a blue-print on how to clean your dirty cash. Although, that said, if Jack Warner’s claims are correct, bribery was nothing to be ashamed of, there was nothing to hide, and maybe nobody cared where the money came from.

Jack Warner, the Trinidadian former FIFA vice president, was released from jail yesterday and has proclaimed his innocence to the press. He had resigned from the VP seat in 2011 amid allegations he had bribed Caribbean associates.

‘At the time he said he had been “hung out to dry”, insisting that the giving of gifts had been part of Fifa culture during his 30 years in the organisation.’

Could the Jack be reliving the same nightmare?

Read the full starting nine member of the FIFA executive arrested here. Banks will have screened the names of all nine as soon as the indictment sheet was published. Any half decent data link analysis software will bring up connected entities and transactions. But what will the world’s financial institutions now do with that info?



Myanmar PEP bribery probe targets property investment

Property is, without doubt, one of the preferred tools for laundering the proceeds of crime. Where better to hide the bribe money given by the fixer of a foreign arms company, or the hoards of cash made selling off a state enterprise or historical artefact you did not pay tax on than in the construction of a brand new 14 storey condominium slap bang in the heart of a developing capital city?



Myanmar‘s capital Yangon is undergoing a property boom, and the Financial Intelligence Unit, part of the Ministry of Home Affairs, is working to identify and stem the flow of dirty money into the real estate sector.

Legally, property companies are not required by law to report suspicious transactions to the FIU, however the government is encouraging them to report any transaction worth more than K100m (Kyat) (USD102,000) for investigation. New money laundering regulations scheduled to pass in the Burmese parliament in October will make suspicious transaction reporting mandatory for more business sectors.

Chinese money

The move comes hot on the heels of a report in the China Securities Journal, claiming that K31.7tr (USD32.5bn) in illegal foreign currency investment was flowing into Myanmar from China annually.

Financial exclusion keeps Asia’s poor shackled to debt

Would you ever use a loan shark to borrow money? If you have a bank account, a credit rating, an address and an identity card, the chances are you will never need to. Many people in Asia, however, have no choice and the consequences of using illegal and unscrupulous lenders are catastrophic, resulting in spiralling and impossible to pay interest payments, violence and, tragically, slavery. Providing access to fair and transparent lending schemes is slowly gaining ground in Asia. FCA-loanshark

In Northern Thailand, loan sharks prey on the stateless groups living along the Thai/Burma border. The Children of the Forest project in Sangkhlaburi, north western Thailand, works with stateless children and mothers and have seen the horrendous consequences of dealing with loan sharks.

“Many of the Burmese refugee camps are just across the border in Thailand, set in dense jungle where mosquito borne diseases such as malaria and dengue are rife. If someone in a family without papers catches dengue and requires hospitalisation they must pay the hospital in full as they cannot access the cheaper health care offered to Thai identity card holders. Without the funds to pay, people turn to the local money lender who demands swift repayment and adds high interest. When the family cannot meet the payments, which is often the case, a so-called friend of the lender will step in and offer the eldest child in the family a job in Bangkok, in exchange for clearing the debt. They may even throw in the first month’s salary as a goodwill gesture to the parents. In most cases, the ‘friend’ is a child trafficker who sends children to work in bonded labour or into sexual exploitation,”one worker told me.

This happens simply because the family had no choice but to turn to an unregistered, illegal money lender. Organisations like Children of the Forest are able to step in and rescue children if they have the right information and are there at the right time to intervene.

According to the World Bank, approximately 2.5bn people, have no access to the supervised banking sector, leaving them open to exploitation by illegal lenders. Global campaigns to promote financial inclusion – bringing fair and transparent financial services to the world’s poor – are taking off in Asia, as well as in Africa and South America. Financial inclusion is a global, G-20 endorsed campaign which aims to improve livelihoods and ultimately, to squeeze out the loan sharks who prey on the poor. The inclusion campaign is relatively new – its founding Principles were developed by the G-20 in 2010 – but it is working on improving the ability of the global poor to save, borrow and protect themselves from crime and natural disaster by developing new financial systems.

Financial inclusion means provided appropriate saving and lending services of small amounts on a large scale. It calls for innovative solutions that reach local communities without the burden of strict regulations, which exclude the poor from the banking sector. It means finding a compromise for the people who lack formal identification, have no fixed abode and may not know their date of birth.

The amounts of money earned, saved and transacted by those in need of financial inclusion are small, which makes them unattractive clients for traditional banking services. The risk/reward ratio does not make sense. So, smaller banking-lite services, such as mobile-money, micro-lending, some pre-paid debit cards and financial education projects are already working towards providing fair services to those who need them.

The Sold Project in north Thailand runs a scheme providing educational scholarships to families. The money is held in an account by the project and can only be used to pay for education, schooling, clothes, transport. The families can access their scholarship account to follow their spending.

A Sold Project worker told us:“This works really well. People are happy if the scholarship account has more money and add money to it themselves. They are encouraged to apply for other scholarships and loans and not rely on us.”

Providing some small amount of financial education and a secure savings option changes how people manage money, and in this case, changes the lives of future generations.

Back in July, Police officers in Phuket took a swing at illegal lending They arrested five enforcers of a loan shark ring, which had been charging 20 percent interest per month and intimidating people who did not pay on time. The same thing happens across the continent. Where there are people in need and little government oversight, someone will step into corner the market.

The arrests in Phuket show that Thai police are paying attention, although their reputation has not always been one of pure intentions. Often, they provide the best debt collection services. You can sell your loan to the police, minus a 20 per cent cut and allow them to recoup the monies owed, using their influence and uniform to make bad debtors cough up.

With a little more awareness, however, the campaign for financial inclusion could be hugely effective across Asia, reducing the misery brought about by poverty and creating brighter futures for Asia’s youth.

This article first appeared on

FATF raises profile in 25th year with 8 new objectives

The Financial Action Task Force (FATF) held its annual plenary session in June, announcing the latest additions and deductions to and from its country watch-lists, as well as presenting eight objectives for the coming year.FCA - FATF Logo

Iran and North Korea hold their places firmly in the utterly non-compliant list with the FATF’s 40 recommendations on anti-money laundering and counter-terrorist financing (AML/CTF). AlgeriaEcuadorIndonesia and Myanmar have not made sufficient progress to get themselves off the list of countries under strict supervision by FATF for not making enough progress to change their legal frameworks. Ethiopia, Pakistan, Syria, Turkey and Yemen have and are still being monitored but it appears their efforts are moving in the right direction.

The FATF is no longer monitoring Kenya, Kyrgyzstan, Mongolia, Nepal and Tanzania under the anti-money laundering compliance process.

The objectives

The eight objectives for 2014/15 set out by new FATF President Roger Wylie offer an insight into where the AML/CTF standard setter will focus its resources and could shed light on policy areas relevant to different business sectors.

  1. Raising the profile of the FATF in its 25th year and communicating its continued relevance – we could see the FATF having a stronger voice on the international stage, a sign that governance risk and compliance could be under the spotlight.
  2. Working with the FSRBs to address the issue of regulatory arbitrage – look out for legal changes. As the EU used to call it, ‘harmonisation’ of legal frameworks squeezes out the differences in national policies which makes it easier for an over-arching body to enforce the rules.
  3. Emphasising the effectiveness component of mutual evaluations – it is not what you do, it is the results of what you do that count. The Fourth round of Mutual Evaluations will have an effectiveness pillar; jurisdictions will be assessed on the impact their legal framework is having on achieving the standards set out in the 40 recommendations.
  4. Ensuring quality and consistency in mutual evaluation reports across the global network – FATF Style Regional Bodies (FSRBs), sometimes referred to as ‘associate members’, carry out much of the mutual evaluation legwork and the FATF wants to ensure that they are ‘clear, fair and explicit in their evaluations and reports.’
  5. Promoting meaningful engagement and open communication with the private sector – The FATF has embraced the idea of sharing information with the sector for which it sets the standards. The revision of the 40 recommendations in 2012 was at the behest of the private sector and followed lessons learned by AML/CTF practitioners. The standard setter is also working to a faster pace. Last year’s report on financial crime in new payment products and services took a few years to be researched, produced, approved and published.  In the 12 months since then, the FATF has since published a new report on ‘virtual currencies’ which is a deeper look at a sector that was skimmed in the 2013 report. Look out for more initiatives from the FATF to engage with and learn from the private sector. This training course looks the concept in greater detail.
  6. Working with the G20 on areas of mutual interest, including corruption and beneficial ownership – Financial inclusion is another pillar of the G20 which could come up in the next 12 months. We could see some more work on the financial crime risks associated with new products designed with financial inclusion as an objective.
  7. Considering the risks associated with virtual currency and potential policy responses – Financial Crime Asia goes into more detail here.
  8. Continuing the FATF strategic view discussions, including prioritisation of the FATF’s work – A three year strategy for AML/CTF standards, according to the President’s report.

Bank of China accused of laundering?

The Chinese state broadcaster has accused the Bank of China of money laundering, according to this report in Forbes .

BoC Tower, Hong Kong

BoC Tower, Hong Kong

Bank of China has gone on record to deny the allegations – “BOC said CCTV’s story based on the undercover investigation “contain discrepancies with and misunderstanding of the facts.”

Having a closer look at Macau and the gambling ships which float just outside China in international waters to see where the rest of the money is going.

Are Thai PEPs trying to smurf their cash out of the country?

This article was first published on the ICA Blog on June 5th.

Courtesy of BBC. Gen Prayuth Chan-ocha addresses nation. 30 May 2014 Gen. Prayuth Chan-ocha's first televised address since the coup.

Courtesy of BBC. Gen Prayuth Chan-ocha addresses nation. 30 May 2014 Gen. Prayuth Chan-ocha’s first televised address since the coup.

The military coup in Thailand is well publicized. As of May 31st, General Prayuth Chan-ocha, the junta chief has declared he will remain in charge of Thailand until the country is ready to elect a new civilian PM via democratic elections. He estimates this will mean at least 15 more months of army control for Thailand. So far, it does not appear to be making much of a difference to tourism. I saw no changes on the small island I live on, nor in Bangkok where bars, cafes and street side massage chairs were open after ten and full of customers, nor on the Thai Burmese border where farang pubs are closing the doors at curfew, but keeping the customers inside.  

The coup has, however, unsettled a number of politically exposed persons (PEPsfrom across the political spectrum. Days after announcing the coup, the Army arrested and detained more than 200 PEPs in military barracks for unpublicised reasons. Some of them, including the dismissed former PM Yingluck Shinawatra, the former leaders of the anti and pro Shinawatra camps, including Suthep Thaugsuban, (b. Jul 7 1949) and Jatuporn Prompan (b.  Oct 5 1965) and others have been released on condition that they do nothing to rally support for their respective movements either via actions or words. Yingluck was prohibited from leaving Thailand at the time of writing, and must inform the National Council for Peace and Order (NCPO) the ruling body, if she leaves Bangkok. The junta returned her nephew Panthongtae Shinawatra (b. Dec 2 1979)  to his home in the capital after reaching an understanding with the NCPO.

So far, there has been no mention of steps taken to prevent PEPs from accessing or moving funds and there may never be. However, as anti-money laundering (AML) compliance professionals are aware, upheaval in governments and changes in power can leave unguarded financial systems open to misuse by anyone wishing to hide or move the proceeds of embezzlement, fraud or other financial crimes. The former PM Yingluck was dismissed from office in May after the Anti-Corruption Commission found her guilty of ignoring flaws in the rice subsidy program which led to USD9.2bn in losses, leaving rice farmers out of pocket and struggling to survive.

Smurf alertFCA- smurf

One bizarrely obvious, yet not entirely unbelievable, comment appeared on a news feed which sparked some interest in Thai PEP funds. Any PEP with something to hide, say for example millions of baht in embezzled funds, would probably have placed them in the safety of an offshore secrecy haven. That is if he or she is smart; if not, they may still be trying to get them out of the country or to switch them into the name of a reliable and unconnected person or entity.

A Thai business owner friend of a friend – it always is a friend of a friend, isn’t it? – took a call from someone they knew in the past week offering a lucrative business transaction.

Would he be prepared to accept 2mTHB (USD60,000) into his bank account and immediately transfer 1.5m (USD45,000) of the sum into another account, specified by the caller? A few short calls to his bank would earn him a cool USD15,000.

This is a classic and well documented structuring and smurfing technique. It is used by drug traffickers, embezzlers and money launderers to split up a large amount of funds in a bid to avoid detection by bank surveillance systems. Two aspects immediately struck me as interesting about the offer. Firstly, it comes at a time when anyone with cash to hide will be looking to shift it so it could be a genuine offer. Secondly, the amount of commission offered, 25 per cent, is far higher than that usually offered in such deals. Somewhere between one and five per cent is standard for smurfing schemes. The sender must be pretty desperate to distance themselves from the funds.

A few years ago I wrote an AML training course for Asian financial services and during editing, I was asked why this specific typology was given emphasis over others. Perhaps because this rudimentary and obvious ML method is still used by less than savvy launderers.

Although it is a rather obvious method, it may still slip past less vigilant AML systems. Let’s not forget that this is a country with a nascent AML regime and some banks still allow account opening with only one piece of identification. I opened an account here by showing only my passport as I didn’t have a document which showed my address. A member of staff was called in to verify whether I lived where I had told the account opening officer or not. She did not recognise me but the friendly staff opened the account for me anyway.

If, as Gen Prayuth has announced, Thailand will be under military control for 15 months, there could be some plans in the offing to clamp down on laxities in its financial sector too. It might be worth keeping an eye on the national Anti-Money Laundering Office to check for any planned changes to Thailand’s financial system.

Illegal money transfers ‘not a threat’ to Western Union

Malaysia’s money services businesses — money changers and remittance agents — don’t see any business threat from those providing illegal means to transfer money outside the country, a surprising revelation at a time when flight of illegal money is a concern for most countries around the world.

While citing the availability of competitive rates for the services provided by them and the industry regulations by the banking and financial regulator Bank Negara Malaysia (BNM), the leading players in the sector are, in fact, oozing with optimism on the prospects of growing their businesses in Malaysia.

“We do not see illegal money transfers as a threat. If anything, their customer base is an opportunity for companies like ours to offer a convenient, fast, secure, cost-effective option,” Western Union Malaysian CEO Chew Mei Ling (picture) told The Malaysian Reserve (TMR).

The company, the largest industry player in Malaysia, has extensive policies, procedures and controls to spot and prevent criminal activities, as well as leading technology and processes for monitoring transactions, she added.

In fact, with rising costs, parent Western Union Co, which is the world’s largest money transfer company, had reported a drop in profits in the fourth-quarter mainly due to high costs linked to tightened regulations to prevent money laundering.

Western Union spends more than US$100 million (RM322.27 million) annually on anti-money laundering and other compliance efforts, according to an estimate.

Despite that, Western Union is facing a probe by the Federal Trade Commission and a US district court over fraud-induced money transfers, an indication as to how big the problem of money laundering remains globally.

It may be noted that despite the issue of illicit money being transferred out of the country having flared up in the past, Malaysia has no official estimates to reveal the quantum that finds its way outside the country annually and through illegal channels.

While the existence of illegal money taking off from the country cannot be denied, Malaysia has in the past affirmed that US$150 billion of illicit money have flown out of the country in the 10 years from 2002-2012, though not saying anything about the mode of transfer, mostly illegal, for such transfers.

This was a response to a report from Global Financial Integrity which estimated US$370 billion (RM1.2 trillion at that time) of illicit capital flight from the country from 2002-2012.

The Malaysian Association of Money Services Business (MAMSB) president Ramasamy K Veeran said: “We (money services businesses) are providing such competitive rates to the service users that it does not make sense to use illegal means to transfer money.”

“There is no major threat to our business from these illegal channels,” he said, adding that the industry might take off in the future due to increasing numbers of tourists and foreign workers coming to the country.

According to BNM’s annual report for 2013, the outward remittances through legal channels like banks and licensed money services firms in 2013 grew by 27% to RM25.1 billion from the RM19.7 billion recorded in 2012. Of this amount, remittance agents accounted for only about RM1 billion involving 1.1 million transactions.

Giving an industry perspective, Chew said in encouraging consumers to make use of legal remittance channels, one must first and foremost do the job right — to attract them with convenient, fast, secure, costeffective services.

In 2013, the number of licensed entities were reduced to 474 from 515 in 2012 as a result of consolidation in the industry and the surrender of licences by smaller entities, a move taken up by BNM.

“There will be further consolidation but we do not have a target for the final number. It will depend on the demand from the market and the review results of the agencies,” a BNM official told TMR earlier.


Source: The Malaysian Reserve

Nigeria: meaningless headlines in the face of barbarian acts

Nigeria Rated Highly for Curbing Money Laundering reads the headline.

Can this be the same Nigeria presided over by Goodluck Jonathan, terrorised by Boko Haram and courted by the US? More than 270 young women have been kidnapped, forced into adopting a medieval religious practice and sold into slavery while their government sits around praising itself for meaningless acts. No amount of publicity for so-called good behaviour will detract from the fact that there are vast swathes of the country which are beyond the government’s control and that it cannot be bothered to search for these young women.

Kidnapped by Boko Haram, abandoned by Goodluck Jonathan

Kidnapped by Boko Haram, abandoned by Goodluck Jonathan

The accolades for the Nigerian Financial Intelligence Unit came during a GIABA – Inter-Governmental Action Group against Money Laundering – meeting in Niger. GIABA is the West African regional body which ensures compliance with the Financial Action Task Force‘s (FATF) 40 Recommendations.

The Economic and Financial Crimes Commission may be doing a good job at clearing up financial crimes on a case by case basis , but they are powerless in the face of  the large scale corruption which keeps Nigerians in check.

Nigeria’s anti-money laundering and terrorist financing framework was last evaluated by the FATF in 2007, under the old ’40+9′ set of guidelines. The FATF issued new guidelines for mutual evaluations back in 2013. The fourth round of mutual evaluations will assess both the technical implementation of the 40 recommendations and how effective the implementation is. The first evaluations under the new methodology will happen in Autumn 2014. While the FATF has not yet set a date for Nigeria’s fourth mutual evaluation, hopefully the new basis will reveal more meaningful information about how effective the AML/CTF framework is.

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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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Indian trade based money laundering worth USD302m

More than INR18bn (USD302m) in the proceeds of crime was laundered via trade based activities in India FCA - container shipduring 2013, a report from the revenue intelligence agency claims.

The Directorate of Revenue Intelligence registered 296 cases of suspected trade-based money laundering (TBML) during the same period.

Eleven persons were arrested in 2013 for their role TBML schemes which included the misuse of various government-run schemes, such as foreign or preferential trade agreements

False invoicing – over or under valuing the worth of goods in invoices, or issuing an invoice for goods that were never traded – was a popular method of laundering cash, the report continued.

Source: Economic Times

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