China publishes gallery of alleged financial fugitives

FCA china-financial-fugitives

China’s Ministry of Public Security has released information about economic fugitives (pictured) who were believed to be at large in other countries, including Australia. China Ministry of Public Security

The Communist Part of China’s crackdown on corrupt officials has created a wave of economic fugitives, who are fleeing China to escape trial. The Ministry of Public issued the photos above of alleged economic fugitives from China, many of whom are thought to be in Australia.

The Chinese diaspora is widespread. Since President Xi Jinping began his campaign to root out corruption from the Chinese Communist Party, stories of alleged financial criminals fleeing China to live with relatives in other countries have cropped up in the media. Last year, the focus was the US, thought to be a safe haven from extradition. Now the focus is Australia, another country which has an extradition treaty with China, but which has yet to ratify it.

In March this year, China reportedly gave the US a list of allegedly corrupt officials, thought to be in the US and asked for help in tracking them down. The Chinese government launched Operation Foxhunt  in summer 2014, in a bid to track down suspects on-the-run beyond China’s borders.

Back in February 2014, Financial Crime Asia reported on the expected surge of fugitives to Australia. Canada had apparently been the migrant’s destination of choice, until it scrapped an investment immigration programme for Chinese citizens after noticing a marked increase in the number of applications by wealthy Chinese Mainlanders.

In 2013, China’s anti-corruption body, the Central Commission for Discipline Inspection, investigated 51,000 people for corruption, bribery, embezzlement and abuse of power. It claimed a total of 30,420 officials were punished for violating new party rules aimed at avoiding pomp and ceremony, according to a report in the Sydney Morning Herald.

How to spot an economic fugitive

Government officials are politically exposed persons and, thereby, subject to enhanced due diligence measures by banks and other regulated institutions in Australia, Canada and other jurisdictions. Whether the alleged criminals will be subject to extradition or not for the crimes they may or may not have committed, their inclusion on the ‘wanted list’ is enough to merit further enquiries by financial institutions.  The photo gallery above presumably gives the names of the officials in Pinyin. Any list monitoring software worth its salt will be able to translate the names into the Latin alphabet and should be able to identify whether any of the names above correspond to accounts held at a financial institution.



Indonesia bans use of dollars, foreign currency

As of July 1st, Indonesian banks and businesses can no longer accept foreign currencies. Stable currencies, with the

US dollar leading the pack, were widely used across the country to sidestep fluctuations in the Indonesian Rupiah (USD1=IDR13,300).

New rules brought in by Bank Indonesia, the central bank, with the aim of re-enforcing ‘macro-economic stability‘ in the country.

The stability of the US dollar and the euro also makes them appealing to financial criminals, from black marketeers to bribe payers. In Indonesia, paying for a hotel in USD, or other luxury goods or services, was widespread. Dollars and euros come in higher value denominations and are easier to transport. The ban on using foreign currency for domestic transactions within Indonesia will have some impact on financial crime. How will the drug lords and corrupt officials spend their cash in Bali and Jakarta if the can’t use dollars? It will be interesting to see how this is enforced and to what extent. Will the first people to be prosecuted be the high-rollers who live by the dollar? Or smaller businesses and individuals trying to save a few rupiah?

A mansion fit for a PEP

FCA mansion-on-the-heath-3-small

Who lives in a house like this? The dining room at Kenwood Gate

The brilliant Organised Crime and Corruption Reporting Project has published a ‘through the keyhole’ report into the USD25m home owned by the family of Ilham Aliyev, the President of Azerbaijan and the former vice-president of the Azerbaijan’s State Owned Oil Company (SOCAR).

Delving into ownership registers, the OCCRP has unearthed that the house is in fact owned by an Isle of Man registered company called Beckforth Services Limited.

Beckforth Services Limited is owned by President Aliyev, his wife Mehriban and their daughter Leyla Aliyeva. Leyla is registered as owning all of the shares in Beckforth. All three list their address in Baku as 73 Neftchilar Avenue, Baku which is also the SOCAR registered office in the capital. Neft means oil, Neftchilar apparently means Oil Workers.

Aliyev reportedly earns a salary of around USD230,000 per annum. As an elected official, neither he nor his wife can run businesses, which seems fair enough. The report doesn’t mention whether they can own property or not.

The house on Hampstead Heath was acquired in 1998. This was seven years after the fall of the Soviet Union, which had governed Azerbaijan from Moscow for the previous seventy years. At the time President Aliyev was the VP at SOCAR; Azerbaijan’s oil and gas sector. This year, Aliyev spoke at the Caspian Oil and Gas Exhibition. The President’s ties to the sector are still strong – unsurprisingly as this has been responsible for the country’s high economic growth, according to the CIA World Factbook.

Watch this video for the full picture.

Readers could be forgiven for thinking that the high economic growth and booming Azeri prosperity symbolised by the emblematic Flame Towers, and the clutch of extremely high value goods outlets opened in Baku has been spread across the country.

FCA Italian ShoesThis  2012 report from the New York Times offers an insight into Baku’s luxury goods market, with Italian high-end designer goods topping the scale.  It makes an interesting observation which sheds light on how different countries record trade levels. ‘Between 2003 and 2009, Italy recorded exports to Azerbaijan of roughly $1.6bn ; during the same period, Azerbaijan recorded imports from Italy of $857m.’ If the figures are correct, some USD143m in imports went astray. That’s a lot of hand-stitched shoes.


Do we need to redefine predicate crimes?

A report from the Arab News portal this week looks at the Deutsche Bank AG probe into possible money laundering via FCR - Laundromattransactions made by some of its Russian clients.

“Transactions conducted over a period of years are being investigated, and the sum could exceed $6 billion, the source said, adding that the internal probe of the possible abuse being conducted by Deutsche Bank is in its initial stages.”

The article mentions that launderers used ‘relatively simple transactions’ in USD and RUB, but does not elaborate on the details. But this admission is, in itself, telling. Launderers have not needed to create sophisticated constructs to clean the proceeds of crime. So will this be a wake up call for all financial services firms to start paying more than lip service to anti-money laundering? Or perhaps we need to redefine criminality, to reinforce the message on what is allowed and what is not.

New Zealand agents halt cash for property payments

Real estate agents in New Zealand have stepped up their commitment to stemming the flow of illegal funds, by refusing to sell to buyers who cannot produce proper identification documents.

From Investine.com

From Investine.com

The move comes after several attempted purchases of homes in Auckland with cash deposits for several hundred thousand New Zealand dollars.

Now, cash deposits on homes used to be the stuff estate agents were built on. In a world where transactions take a long time and are often dependent on the agreement of several different parties, cash up front for a property was a welcome offer. No questions were needed when money did all the talking, and no-one cared who was behind the cash.

This voluntary change of practice brings New Zealand’s estate agents in line with other money laundering reporting sectors, according to a spokeswoman. Moreover, it indicates how far financial crime awareness has penetrated into business. Business owners have shifted their priorities from going all out to bring in sales, to discerning between sales to credible buyers, supported by identification.

Real estate, as AML veterans know well, has provided an ideal sluice for dirty cash in the past. Organised criminals have often turned to bricks and mortar to conceal the proceeds of crime, buying homes outright or with hefty cash deposits from estate agents who asked no questions about the source of funds. But if a lack of ID is the only obstacle to making a purchase, any number of fake identification documents could be produced to back up the buyer. Estate agents would be well placed to look for any number of red flags that might raise suspicion in a real estate sale.

Click here for the full article from the New Zealand Herald.

South Asia: Reserve Bank of India fines and anti-bribery law amendments

FCA - Bank India

A bank in India

The Reserve Bank of India, the national banking regulator, has issued INR1.5cr (USD165,276) fines to three public sector banks and issued to cautions to eight more for failure to implement appropriate measures to prevent and detect AML/CTF. The censure comes in the wake of a thematic review of KYC in banks which found a lack of due diligence carried out in public sector banks and a concerning use of intermediaries to open and operate accounts.

Public sector banks in India are those which are part of the national State Bank of India network, the largest banking group in the country. AML/CTF practitioners in India have in the past lamented the apparent multi-tiered system of regulatory enforcement employed by the Reserve Bank of India. International private organisations received the most attention – although they were more likely to have the highest AML/CTF standards, Indian private banks came in second and Indian public sector banks were treated most leniently.

In real terms, this caused huge discrepancies in how each group of banks managed clients. For example, a non-Indian citizen looking to open a bank account with an international bank in India would be heavily scrutinised without any apparent risk assessment. In my own experience, transactions were declined if my signatures did not match exactly the one on my original on-boarding documents, even if a bank employee had witnessed it; account opening itself was fraught with difficulties, including producing far more documents than the ‘one plus one’ often acceptable for low risk accounts;  two months before my visa expired, the bank contacted me personally to find out whether I would be leaving India, and thereby closing the account.

The level of attention and resources given to a personal account which could only by law receive payment from an agreed source – my employer – was astounding.

A British Indian friend of mine had a vastly different experience. His employer called the local bank, gave over my friend’s details and convinced the bank to open an account for a person they had never met. No doubt the business owner used his considerable influence at the bank to ease the account opening process.

Meanwhile, the Indian government has amended the anti-corruption law, increasing the penalty for corruption to a maximum 7 year jail term, and crucially extending the provisions to cover both the offerer and recipient of the bribe.

Finally, a sad note to end this month’s blog.


Photo – Juliette Rousselot/IRIN


The devastating earthquake which hit Nepal in late April has killed 6,000 people at the time of writing and will leave hundreds of thousands more injured, homeless and without access to water. We have yet to read about the full consequences of the disaster. Volunteers across Nepal are working hard to help save lives; there are many worthy causes out there and many requests for aid flooding into email inboxes and social media pages.Donate directly, if you find an organisation you trust. The people on the ground need support from the outside world to help Nepal’s population.

I have spent time in the Kathmandu Valley; it is an astounding place, populated by people of many religions and cultures living peacefully together. Nepal is one of the world’s poorest countries. Many of the villages in the valley are inaccessible by road under normal circumstances; the earthquake has left them entirely isolated and help is not able to reach them.
Horribly, some fraudster or other will take advantage of this, in a bid to steal funds, just as they did with the 2004 tsunami. Please be vigilant for fraudsters, and alert your customers to any scams, while directing them to genuine causes.

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

South East Asia is about to become borderless

South East Asia is about to become border-less; someone is keeping tabs on the North Korean leadership apparatus and campaign financing is under the spotlight.

Asean Logo

Asean Logo

January 2015 sees the establishment of the Association of Southeast Asian Nations (ASEAN) Community which will attempt to harmonise the security, economics and socio cultural communities of ten nations. Naturally, some parties are concerned about the impact that removing borders will have on the region. What does this mean for financial services?

The reduction of border controls in Asia is likely to lead to an increase in transnational organised crime, experts have warned. The primary objective of organised criminal activity – drug and human trafficking, counterfeiting, environmental crimes – is to make money and it does, in abundance. As organised criminals want to appear legitimate, they try to make their money appear clean and do so by getting it into the financial system. Although direct placement of the proceeds of crime is becoming more difficult as banks become more aware of money laundering typologies and build better defences, gaps in the system may become apparent in ASEAN if the national borders are eliminated.

Cross border crime in South East Asia alone generates close to USD100m and this is a conservative estimate according to specialists from the UN Office on Drugs and Crime.

On a small scale, the border between Thailand and Burma is porous; I’ve seen holes in the fence and gaps where people

Three Pagodas Border betweenThailand and Burma www.acrosstheburmaborder.blogspot.co.uk

Three Pagodas Border betweenThailand and Burma http://www.acrosstheburmaborder.blogspot.co.uk

climb through from one side to the other in plain view of Thai border guards. These areas are used by locals travelling for work or to see family.

Further south, stories are rife of border patrols taking bungs to allow the trafficking of sex workers across the border from Thailand into Malaysia.

On a larger scale, might it be feasible for the proceeds of a bribe or tax evasion paid in one ASEAN nation to be lost in the financial system of an ASEAN neighbour?

North Korean PEP names

For almost the entire month of October, Kim Jung Un, the North Korean leader was missing from view and the subject of speculation on his whereabouts and status.

Kim Jong Un and a submarine

Kim Jong Un and a submarine

Broken ankles due to a fall, gout or imprisonment by his own generals for some re-education were all touted. But due to the limited amount of information published by the Democratic Peoples’ Republic of Korea (DPRK), we can only speculate.

North Korea is the subject of sanctions and sits in permanent residence on the FATF’s Non-Cooperative Countries list since it was reopened in February 2010.

The North Korean Leadership Watch blog promises to provide ‘accurate and precise information’ on North Korea’s politically exposed and senior public officials. Starting at the top with the Kim family, the blog lists the Secretariat of the Party Central Committee, changes in the Party Central committee and where possible the names of the most senior people in various departments,

including administration and the military. It’s worth reading through this to glean names and an idea of how the DPRK isDPRKPartymembers set up. The real pay off, though comes in the biographies section,  which lists details on more than 100 DPRK PEPs. They are probably on your screening lists already, and the likelihood of them actually having accounts in their own names may be limited, but again, worth adding to your databases

First published on the ICA blog in November 2014.

The winds of change have rolled in with the Asian Autumn

Since early October, students in Hong Kong have protested against China’s reneged promise of free and fair elections. This coming from the country who protested last when its citizens lost money en masse due to the misselling of minibonds in 2008. They used to say that HK only protests if the people lose their money. Clearly, this is no longer the case.

Protesters in Hong Kong

Protesters in Hong Kong

Demonstrators are congregating under Occupy Central movement in Hong Kong’s financial centre – the home to massive private banks and numerous boutique finance houses and wealth management companies. they want the monied and the money managers of Hong Kong’s financial and business districts to sit up and take note.

The protests, marred by violent clashes this weekend, are garnering global attention. If Hong Kong succeeds in its bid for elections that are not controlled by business and political interests from Beijing, what developments can we expect in how financial services are supervised?

A PEP with more than one account….

Meanwhile, in the Philippines a large scale corruption case is hitting the headlines. Senator Ramon “Bong” Revilla Jr., his wife, children and siblings held 81 bank accounts which they used to hide the proceeds of corruption, the Philippine prosecutors have alleged in court.

Ramon Revilla Jr - www.imgsoup.com

Ramon Revilla Jr – http://www.imgsoup.com

Having a large number of bank accounts, according to an expert witness from the Anti-Money Laundering Council (AMLC) is a sign of a ‘money laundering scheme.’ While the number of accounts held may be significant in this case, simply having a few bank accounts is not always an indication that the account holder is a money launderer, but incidences of this nature are always worth a closer look. Finding out why a client has several accounts, and then carrying out some link analysis between accounts to verify that their reasons make sense should clear up any suspicions. Of course, if your client is politically exposed person, as Senator Revilla Jr is, there is an even greater urgency to investigate.

Strictly Pacific..

The Asia Pacific Group on Money Laundering (APGML) has issued a statement expressing its concern about Vanuatu, the tiny Pacific island jurisdiction. APGML is concerned that Vanuatu has not criminalised ML/TF adequately, is unable to screen for sanctioned terrorists, does not undertake adequate customer due diligence and has no AML framework for non-banking entities. Vanuatu is a weak link in the APGML’s regional armour, but in terms of the big tax secrecy havens, it is a small player. It did not even rank in Forbes’ 2010 list of the Top Ten Tax Havens. London and Singapore were on the list.

De-risking vs exclusion

The Financial Action Task Force has reacted to warnings that stronger regulation for anti-money laundering and counter-terrorist financing could result in financial exclusion as institutions pull services from jurisdictions and groups deemed not worth the risk. Some on the sector claim that de-risking – as the process is known – would drive the so-called ‘shadow economy’, the use of alternative financial systems which can be both beneficial and nefarious, but are almost certainly unregulated. Now that the banking sector has spent vast resources developing regulatory systems that are meaningful and effective, is there a real fear that the users will turn to unregulated systems simply because they are scrutinised less? Regulators, it appears, are struggling with balancing how to do their job and not stifle innovation.

For Hong Kong, the struggle is a little more pressing. They are balancing their freedom to vote, with Beijing’s desire for control. China may turn out to be a risky partner for Hong Kong, but for the Special Administrative Region, de-risking may not be an option.

First published on the ICA blog in October 2014.

Digital Financial Services: Where Are We Headed?

Positive news on financial inclusion from LatAm, Africa and Pacific. Can we apply this to lifting poverty and financial exclusion in the UK & US?

Alliance for Financial Inclusion Blogs

John Owens

Participants take part in the "Digital Financial Services: Where are we Headed?" panel at the 2014 GPF in Trinidad and Tobago. Central Bank of Kenya Governor Njuguna Ndung’u, center, takes part in the “Digital Financial Services: Where are we Headed?” panel at the 2014 GPF in Trinidad and Tobago.

The 2014 Global Policy Forum (GPF) and the Digital Financial Services Working Group meeting held in Trinidad and Tobago in September gave many policymakers the opportunity to share various digital financial inclusion trends from several regions around the globe.

African Perspective

Africa continues to innovate in the area of digital financial inclusion, primarily via mobile-enabled electronic money services. Digital financial services have continued to dramatically expand both access as well as the range of options to further support not only for financial inclusion but economic growth opportunities as well. In addition to e-money being utilized as a money transfer service, it is now being used as the rails to increase access to a broader variety of financial services, from banking…

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Money and brains are flowing into Asian FS compliance

This report from Reuters touches on why Asia is providing new fertile ground for Western lobbyists and public affairs consultants in financial services regulation. Spending on compliance in financial services reached USD89bn for firms operating in Hong Kong, Singapore, Japan and China in 2013, according to estimates by law firm Berwin Leighton Paisner and Oxford Economics research group. In more mature regulatory regimes – UK, Germany, France, Spain, Italy – the spend for the same period was USD68m.FCA - framework

This phenomenon is a boon for more than just the public affairs coterie. Anyone in the financial services learning domain – training, e-learning, events – should have one eye on the Asian market for a couple of reasons.

As pointed out in the Reuters piece, regulation in Asia is still conducted behind closed doors. The government decides what it wants, the regulator creates the rules and the regulated firms are the last to know. Information flows from the practitioners up to the authorities, the authorities interpret it and hand back the results. The regulatory process is not open for discussion and this goes against the grain of statutory developments in Europe and the US, where practitioners are more involved in the process, ideas are shared, and there are specialists on both sides of the table. For regulation to take hold and become effective in Asia, it needs to become a more open process and Western trainers, lawyers, consultants and lobbyists can help Asian firms to meet this.

Furthermore, while the European regimes are advanced, developed and based upon the existing legal and operational structures, their Asian equivalents are newer and, in some jurisdictions, undeveloped. A culture of compliance exists in the bigger, multi-national and non-Asian firms who may already follow the higher standards of compliance set by the US, for example. But in many firms, a culture of compliance simply does not exist. Employees know there are rules in place to prevent insider trading, market manipulation, money laundering, bribery and corruption, but many think the rules do not apply to them, or that breaking the rules is without consequence. And the legal advice they receive may be skewed towards hiding rule breaches, rather than applying the regulations.

Education on compliance is fundamental to building a compliance culture. The  different cultural approaches to diplomacy and relationships in East and West, however, underpin the success or failure of new approaches.