bribery

Papua New Guinea: How good AML is pushing placement back to the gatekeepers

Effective anti-money laundering programmes in banks are moving the gateposts for placing dirty cash into the financial system back a few steps, into the offices of lawyers, accountants and other professional service providers.  Undercover reporters working with Global Witness have video-recorded two prominent lawyers in Papua New Guinea explaining exactly how to channel a large bribe to a government minister.

Corruption reaches “right to the top” in Papua New Guinea, a representative of the national anti-corruption task force states in the video posted above. Being a government minister is the fastest way to becoming a millionaire, one of the lawyers claims.

Papua New Guinea shares a resource rich island of New Guinea with the Indonesian provinces of Papua and West Papua. As noted by Global Witness,  despite its resource wealth, much of the money made from them fails to reach the majority of the population. Plagued by corruption, the people on the lowest rungs of the economy suffer while those at the top line their pockets.

Right to the top

While bribery may be a well-established norm in PNG, the method of channelling funds to corrupt politicians has evolved, largely due to more stringent anti-money laundering rules and closer transaction monitoring.

The days of  “banging a million bucks into a private account in Singapore” are over, one of the lawyers explained to the undercover reporter.

AML in banks is largely effective – huge investment in compliance expertise and monitoring software has pushed the threshold for placing dirty money into the system away from the banker and towards other professional services providers. Today’s enablers are lawyers, accountants, estate agents and others, employed to help disguise the funds before they reach the financial system.

Australia, according to Global Witness researchers, is providing an open door for anyone to place dirty cash in the country’s financial system. The Australian Federal Police have estimated that more than AUS200m (USD147m) laundered from PNG into Australia annually.

During a conversation with a prominent lawyer in Port Moresby, bribes are referred to as “ministerial improvements” and “mobilisation fees”. Paying bribes in large sums is ill-advised, as it attracts too much attention. “Small dribs and drabs”  – what some of us might call structuring – is recommended as an alternative method of getting the cash to the minister unnoticed.

False accounting – using inflated invoices for legal services – are touted as a method for sending bribe money to the intended recipient’s Australian bank account. The false invoicing method is well used to launder money, but this is the first time we’ve heard a law firm offer its own books to move the cash.

Alarmingly, this once again underscores how significant ‘gatekeepers’ – lawyers, estate agents, accountants – are in enabling financial crime. Both lawyers in this film quicky hid behind a veil of hypotheses once questioned by Global Witness after the recordings. They know how to do this, but for how long can they keep getting away with it? Lawyers and law firms for estate agents exposed in the ‘From Russia with Cash’ film know how to use the  law to protect their clients. But there is something more powerful going on here – an absence of ethics or simply the will to do anything for filthy lucre.

Being a politician provides the quickest route to becoming a property millionaire, one lawyer tells the Global Witness reporter. Well. you’ve got to stash the bribe money somewhere eh?

 

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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?

When Basic AML Training Just Isn’t Enough

Deutsche Bank is reportedly leading an internal investigation into an alleged USD6bn laundry, using ‘relatively FCAbasictrainingsimple transactions’ to clean cash. Simple transactions used to launder money should be easy to identify – if the software does not pick it up, then the employees handling the transactions should be able to spot a suspicion. Basic anti-money laundering training would guide someone to tell their AML team if something in a transaction does not look right. What if it did, and the message is still not getting through?

Cornered?

Regulated financial institutions spend money on ineffective training programmes; employees spend time attending training sessions that offer no new information on the subject or on how to approach the issue at hand. There are a myriad reasons why training programmes do not have the desired effect, but why do firms still use them?

They do so because they have little choice. A robust regulatory environment, a requirement to train all employees on the risks associated with financial crime and the spectre of a large financial penalty for not doing so have backed banks and other regulated firms into a corner. Gone are the days of leaving all knowledge of money laundering, terrorist financing, sanctions busting and bribery to the compliance department. In the present environment, we have to train all employees, management, directors and the C-suite on financial crime risks. And this, as compliance officers know, comes at a great cost to a bank.

Compliance generates no revenue – the compliance department is a straight-up cost centre. Although the argument that having an effective compliance programme in place could save you a few million dollars in regulatory fines is quickly gaining ground, compliance officers – it appears – are still bound by tight budgets. This is sometimes to the detriment of quality training, forcing compliance officers to compromise on the standard of training they want to deliver to employees.

Compliance budgets are larger than they were a few years ago. The coffers are deep enough to attract and retain talented individuals to maintain good compliance procedures in banks, and to ensure that every employee has at least a basic grasp of anti-money laundering, sanctions and anti-bribery and corruption requirements – how it works and who the ‘bad guys’ are. But compliance training where employees sit through another session on placement, layering and integration and learn nothing more relevant to their role, do not encourage anyone to think in terms of risks posed to their business line.

Beyond the money laundering cycle

Basic training has done a great job; meet bank staff from any division in a corporate, retail or investment firm and they will be able to trot out the three stages, and this was not the case five years ago. Except now, the information comes by rote – it is learned, absorbed, recalled when asked but is it really embedded into how bank employees do their jobs?

FCAadvancedtrainingAdvanced or more specific AML/CTF training courses on the market should address the particular risks posed by different areas of banking. Looking into trade based money laundering operations using examples and knowledge from people who have worked in trade financing first hand, not simply adding a few slides to a power point describing false invoicing would be a good start; but this is rarely the case.

It’s about the people, stupid

Global AML efforts are now hinged upon a risk based approach – the basic principle of applying most resources where the greatest risks lie. To do this, employees need to understand the risks – what they look like, where and when they can occur. The emphasis must be on engaging the learners.

“To combat financial crime and terrorist financing, the people who work with clients must be aware of the risks. Not just compliance and the firm’s financial intelligence unit, but front line business people in an institution.” Kim Manchester, a compliance veteran and CEO of ManchesterCF told Financial Crime Asia.

This rings true. The customer facing employees – whether private banking relationship managers or traders creating OTC derivatives – know their client well enough to offer them precisely the right product at the right time. They also should be able to know with the same precision when a deal does not add up. Compliance officers can erroneously believe that ML/TF is not an issue for some of the more sophisticated financial products. Let’s take derivatives as an example. Some compliance officers do not consider AML/CTF something that derivatives traders need to be concerned with and so they did not need training on this area.

This is a huge oversight which could end up costing a financial institution. Mis-priced derivatives contracts can be used as an instrument to launder money and to channel funds to bribe takers. If the traders who engineer these products are able to recognise and report unusual activity – such as a price that does not chime with the market – compliance training is hitting the mark. But if these traders are sitting through a course which spends only a fraction of the time looking at how financial criminals try to manipulate sophisticated products, they might never spot a suspicious transaction. AML/CTF training must reach far beyond the basic stages and into the specific business lines run by banks on the markets. Because this is where the real financial crime takes place.

What messages are bribery settlements sending out to would be briber givers and receivers?

Influential, wealthy and ‘lawyered-up’ entities are settling bribery cases with prosecutors by throwing money at the case in order to avoid admitting guilt or proving innocence. What message does this send out to the world?

Smith & Wesson, a US handgun manufacturer, agreed to pay a USD2m fine to the Securities and Exchange Commission this week to settle FCA- cartoonsmoking gunallegations of bribery. The SEC charged Smith & Wesson with breaching the Foreign Corrupt Practices Act when employees and representatives made improper payments to foreign officials in Indonesia and Pakistan to secure contracts. Further alleged attempts at the same in Bangladesh, Nepal and Turkey, failed. S&W has neither admitted nor denied the allegations, it just paid to make it go away.

In a non-Asian related case, reports in the press claim that Bernie Ecclestone’s legal team is trying to settle a bribery case by paying GBP20m in return for the charges to be dropped, reported The Telegraph.

Meanwhile in Laos, where corrupt politicians are accepting bribes from Vietnamese‘land-grabbers’ to uproot communities whose homes are on the land.  The Laotian communities have no resources to fight a case, so they deal with the awful consequences of losing their homes.

Over in Australia, a court issued a suppression order (aka a super-injunction) prohibiting anyone in the country from mentioning details related to a multi-million dollar bribery probe implicating public officials from Indonesia, Malaysia and Vietnam. Wikileaks chose to publish the order which reveals how the case reaches to the highest echelons of Asia-Pacific’s leadership. The order follows the indictment of seven employees from the Reserve Bank of Australia, who, by nature of their work are politically exposed persons. ‘National security’ is cited as the reason for the blanket ban.

Australia and the US are in the top 20 group of least corrupt countries in the world, as per Transparency International’sCorruption Perceptions Index 2013. Malaysia and Turkey linger mid table while Bangladesh, Indonesia, Nepal and Pakistan are all between 100-150 out of 175. Laos is in the same group. The jurisdictions who are perceived to be the most corrupt have fewer defences available to protect themselves from unscrupulous bribe offerers. Sure, the public officials offered money in exchange for using their political clout could always say no, but why should they when the messages coming from their less corrupt peers is to buy your way out of it?

There is always time to celebrate anti-corruption efforts. The Global Organisation of Parliamentarians Against Corruption (GOPAC) has launched an award for anti-corruption action. Cast your votes before October 31st here.

This article first appeared on the International Compliance Association blog.

Why would anyone offer GBP20m to settle a trial?

According to media reports, Bernie Ecclestone, the head of Formula 1, has offered BayernLB Bank GBP20m (USD33m) in early settlement of a bribery case in Munich. Ecclestone’s legal team have reportedly asked the court to drop the case due to what they claimed was a lack of evidence, saying the allegations are “highly questionable”.

Read the full story on Crash.net

Indian businessman jailed for bribery in Dubai

A 34-year-old Indian businessman was today sentenced for six months in jail and slapped a fine for offering a hefty bribe to a labour inspector to lift a ban on his four companies, a media report said. cropped-fca-bribery-circle1.jpg

The   of First Instance in its judgement jailed the businessman for offering a Dh30,000 (USD 8167.82) bribe to a Labour Ministry inspector,  News reported.

The accused identified as V.A will have to pay a fine of Dh30,000 (USD 8167.82) and he will be deported after the jail term, Presiding judge Ezzat Abdul Lat said. The defendant had pleaded not guilty.

The Court records said that police arrested the defendant in a sting operation after the inspector accepted Dh9,000 as part of the bribe from V.A.

The money will be confiscated, the ruling said.

The Emirati inspector told prosecutors that he had known the businessman since 2009 as he owns and manages four companies, the daily reported.

After obtaining prosecutors’ permission to arrest the defendant in a sting operation, police raided the location where V.A. Offered the bribe to the inspector in Al Qusais, the report added.

 

Source: Business Standard

Thailand set to ramp up anti-graft laws

Thailand‘s anti-graft commission has proposed a raft of legal changes giving it the power to prosecute foreign officials and coordinate with foreign government’s on asset recovery.FCA - bribes

The National Anti-Corruption Commission (NACC) has submitted the proposed changes to the National Commission for Peace and Order (NCPO), the country‘s ruling body.

Amendments also include extending the statute of limitations on corruption to 30 years; several high profile offenders have fled Thailand to avoid criminal proceedings and remain in exile until the statute on the crime has run out. The legal changes will bring Thailand in line with the UN’s anti-bribery and corruption standards.

Although news may have died down in the political situation in Thailand, the country is still under Army control. In terms of anti-corruption measures, having the army in control could have positive ramifications. As mentioned here before, the NCPO has orchestrated payments of lapsed rice subsidies to millions of impoverished farmers, forged ahead with the investigation into mismanagement of the rice pledging scheme by former Prime Minister Yingluck Shinawatra and is tackling wide spread corruption in Phuket, one of Thailand’s greatest sources of tourism revenue. Read Financial Crime Asia’s report in more detail.

Now that the NACC is no longer hamstrung by political horse-trading which has dominated Thailand’s legal framework in the past, it may have a good chance of pushing through some serious and effective reforms that will go some way to clearing up corruption in the country.

Source: Bangkok Post

New Zealand: New anti-graft rules could boost reporting

Proposed rules to ramp up NZ’s anti-corruption measures, could mean that every foreign remittance worth more than NZD1,000 (USD876)could be reported to the police.

Furthermore, new regulations would require banks and financial institutions to report physical cash transactions of more than NZD10,000 (USD8,761) to the police.

New Zealand lawmakers hope the new rules will cement the country’s position as one of the least corrupt jurisdictions. Transparency International’s Corruption Perceptions Index for 2013 listed New Zealand as the least corrupt country in the world, a place it shares with Denmark.

Source: The New Zealand Herald

PEP Alert Romania: President’s brother arrested in bribery case

BUCHAREST, Romania (AP) — Police have arrested the brother of the Romanian president on suspicion of taking a bribe and using the president’s name to promise he could get a prison sentence reduced.

The Bucharest Court late Friday approved an application from anti-corruption prosecutors to arrest Mircea Basescu for 30 days on suspicion of taking a bribe of 250,000 euros ($340,000) from the family of a well-known convict. Basescu had been detained on Thursday, but only for 24 hours.

His arrest came after a video was broadcast in which he appeared to acknowledge receiving a bribe to help reduce the sentence of Sandu Anghel, who is imprisoned for attempted murder. Mircea Basescu has denied wrongdoing.

President Traian Basescu has denied intervening in the case and has distanced himself from his brother.

Source: AP

Qatar Football: Hammam took suitcase full of bribe $$ to Trinidad

(Trinidad Express) Wealthy Qatari Mohamed bin Hammam and his nine-member delegation quite literally walked straight through Immigration and Customs to the VIP lounge of Piarco International Airport before being whisked away in an executive ride to the Hyatt Regency (Trinidad) Hotel  on the morning of May 9, 2011 with a suitcase full of bribe money.

A documents trail and eyewitness accounts reveal the former Qatar Football Association president was issued a visa exemption by then Minister in the Ministry of National Security Subhas Panday days after a request was made by bin Hammam’s buddy and the man who made the suggestion to bring cash to the Hyatt meeting, Jack Warner.

Documents obtained by the Sunday Express show Warner, the then Minister of Works and Transport and the man who arranged the infamous Caribbean Football Union (CFU) conference to facilitate bin Hammam’s 2011 presidential campaign to FIFA voting members, made the request for a visa waiver for bin Hammam and nine others on April 29, 2011, days before the Qatari’s planned arrival on a private jet at Piarco International Airport.

Visa Exemptions for AFC Delegation

On May 5, 2011, four days before bin Hammam’s arrival in Trinidad, former deputy permanent secretary in the Ministry of National Security Sandra Lynch wrote to Warner in his capacity as president of the CFU, to advice that visa exemptions had been granted for the visiting ten-member Asian Football Confederation (AFC) delegation.

Lynch signed the approval letter giving bin Hammam and his party a free pass through Immigration and Customs for the substantive permanent secretary at that time Jennifer Boucaud-Blake, who has since retired and did not immediately return messages left on her voicemail.

The letter to Warner stated in part: “I am to refer to your letter dated April 29, 2011 and wish to advise that the Honourable Minister in the Ministry of National Security acting in accordance with the provisions of Regulation 13 (13) of the Immigration Regulation has exempted the persons listed in the attached from the requirements of a visa, over the period May 9 to 11, 2011, to participate in a special meeting of the AFC. Kindly ensure that this approval is presented to the Immigration Authorities upon arrival at the Port of Entry.”

Immigration Bypassed

Guy Benjamin, the then Chief Immigration Officer, has no recollection of the May 5, 2011 ministerial order. He said no such directive came to his attention. Benjamin told the Sunday Express  such instructions are usually issued to the Chief Immigration Officer because the CIO has to facilitate the visa exemption order for the identified foreign nationals.

Flashback: Mohamed bin Hammam, right, of Qatar and then FIFA Vice President Austin Jack Warner after their meeting at Hyatt Regency (Trinidad) Hotel, in Port of Spain on May 10, 2011.

In the case of bin Hammam and his AFC football associates, no instruction of any kind was issued to the office of the CIO. The directive was issued instead to Jack Warner, the former government minister and ex-vice-president of FIFA, the world governing body for football. Oddly enough, a May 4, 2011 Warner request for visa exemptions for a three-member Haitian delegation,  headed by Yves Jean Bart, the Haitian Football Federation, and granted the following day, May 5 for the same May  10-11 conference, was copied to the CIO.

Lynch, who approved a controversial fire truck payout several times the value of the crashed tender during Warner’s tenure as Minister of National Security, also signed off on the visa exemption order for the Haitians which also went to CFU president Warner. The former deputy PS could not be reached for comment.

Panday: My Hands are Clean

Panday, however, said he “may have signed”  the  request  for  the  visa  waiver without knowledge of the subsequent bribery allegations. Panday said yesterday he had no recollection of the specific Warner request for visa exemptions and made clear he had no conversation with Warner on the matter.

“I don’t recall this one at all,” he told the Sunday Express, adding that if he did sign off on the visa waiver request, “then there must be a record of it in the Ministry of National Security”.

The former minister, who said his “hands are clean” added that no queries came to him following the subsequent cash-for-votes bribery allegations. He said by the time the police commenced investigations he was already out of the ministry.

Reginald Dumas, a career diplomat and former head of the Public Service questioned why the visa exemption letter was issued to Warner, then a Cabinet Minister wearing his CFU hat, and not to the COI as required by law to facilitate any Section 13 (13) government request. There are questions too about whether the visa exemption requests went to the Cabinet and why the authorisation letter for the bin Hammam party was not copied to immigration.

Eyewitness Reports place Warner with the Money

Warner did not immediately respond to requests for  comment but eyewitness accounts reveal that bin Hammam’s party was met as soon as they came off the tarmac on the morning of May 9 by Joan Brammer, head of Airport VIP Protocol, and taken straight to the VIP Lounge with hand luggage in tow.

They were shuttled in executive rides to the Hyatt Hotel immediately after their luggage was collected from the baggage claims area. There was no security screening of the bin Hammam delegation’s hand luggage, according to sources with knowledge of the situation. Brammer refused comment when contacted by the Sunday Express.

Bin Hammam attended a private Warner-hosted dinner at Joseph’s Restaurant in Maraval later that evening and met again with his former FIFA ExCo (Executive Committee) friend and colleague early the next morning (May 10) at the US$1,799 a night presidential suite at the Hyatt. Eyewitness reports place an empty-handed Warner entering the lobby of the hotel and later a suitcase-carrying Warner on his way out of the hotel.

Suitcase of Cash in Warner’s Office

Testimony given to the FIFA Ethics Committee investigator and former FBI director Louis Freeh by former CFU general secretary Angenie Kanhai place the bribe money in a locked piece of hand luggage with the key in the front pocket in Warner’s Works and Transport Minister’s office at the corner of Richmond and London Streets.

Kanhai, in a May 2011 statement to the FIFA Ethics Committee said: “On May 10, 2011, Mr Warner advised me that he had gifts, which were to be distributed to the delegates. Mr Warner did not tell me what the gifts were, but advised that they were to be distributed from the hotel that afternoon. After consulting with my staff, Jason Sylvester and Debbie Minguell, I suggested to Mr Warner that the gifts be distributed between 3 p.m. and 5 p.m. that day.”

The two-page statement, signed by Kanhai said: “During the morning session on May 10, Mr Warner made an announcement to the attendees about picking up the above mentioned gift.” She said she was instructed to go to Warner’s official government office to collect a locked bag and subsequently discovered that the bag contained envelopes stuffed with cash.

More Bribery Allegations

Warner quit the world governing football body following accusations of bribery in June 2011. He and bin Hammam were accused of giving Caribbean officials US$40,000 in cash to win support for bin Hammam’s presidential challenge against Sepp Blatter.

More recently, the Sunday Times reported evidence of more alleged bribe payments from bin Hammam to football officials, including Warner, in exchange for support of Qatar’s  bid to host the 2022 World Cup. The British newspaper asserted that substantial payments were funneled directly to Warner controlled bank accounts.

Warner, identified as a key benefactor to bin Hammam’s largesse had denied the newspaper claims and countered that the money he received from bin Hammam was to help with losses he suffered during an earthquake in China.

 

Source: Stabroek News