fraud

Bitcoin foundation sues for common sense in Florida laundry sting trial

Back in February, Florida police officers posed as money launderers hoping to wash cash by buying bitcoin (BTC) from two men they found on FCA - Bitcoinan on-line bitcoin marketplace. Officers arrested the man and one other after they agreed to convert $30,000 in laundered money into bitcoin, according to reports. The men face charges of unauthorised money transmission.

The Bitcoin Foundation has stepped in with an amicus curiae which intends to protect the wider community of users in Florida from being closed down by ‘laws that put undue restrictions on their ability to transact with the digital currency.’ In short, if the defendants are tried for not being authorised money transmitters, the consequences for bitcoin use in the state could be significant, forcing all users to register as money transmitters.

The Bitcoin Foundation’s legal advocacy committee chair clarified the stance: “The foundation’s position at its core is this: state prosecutors are improperly applying Florida statutes regulating ‘money service businesses’ to individuals conducting peer-to-peer sales of bitcoins.”

Sting in the tail

FCA- stingThe foundation is clearly pushing to protect genuine BTC users and the use of the world’s fastest growing crypto-currency  from regulators who have not yet figured out how to manage the currency and are looking at sledgehammer tactics to close it down before it gets out of their reach. Some would argue that it already is out of their reach, it was designed that way. The only place regulators have in a BTC transaction is when it is exchanged for fiat currency.

But here is something equally important worth noting. Although the men were willing to trade BTC for funds they thought were the proceeds of fraud, and greed usually trips up the unscrupulous (see Ponzi and Advanced Fee Fraud), the cash offered never existed in the first place. It was invented for the purposes of a sting operation, a trap set by Florida State Police. I question the legitimacy of sting operations which are use widely in the US to entrap people who may never have committed a crime in the first place.

 

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Australia: cash smuggling ex-banker jailed

A judge in Sydney has sentenced a former Bank of China employee to four months behind bars for attempting to shift AUD800,000 (USD751,000).

The court used Australia‘s anti-money laundering laws to prosecute the woman and an unnamed co-accused who had used a password to collect the cash from a third party at a Sydney railway station. There were no details of money laundering as we know it, but the judge did comment on the woman’s personal financial situation.

Source: The Age

 

China: Gov funds used to buy vineyards, Vegas trips

An audit report from the Chinese government has revealed how funds were misappropriated to buy vineyards in France and to pay for trips to Las Vegas.

Viva Las Vegas

Viva Las Vegas

In 2012, the French financial intelligence unit – Tracfin – reported cases of Asian and Eastern European criminal gangs buying vineyards in South West France as channels to launder money. The growing appetite for wine in Asia lends itself perfectly to financial crime. Local banks in Asia are unlikely to know whether a transaction related to buying a vineyard or even shipments of European wine are over or under priced. Wine is valued differently in different parts of the world, due to demand, supply and import taxes which can be particularly high in Asia.

If the audit report is correct, it looks like it was not only criminal gangs cashing in on the rising popularity of wine-drinking in China.

Read on: ASIAN AND E.EUROPEAN GANGS TURN FRANCE’S VINEYARDS INTO WASHING MACHINES

China reveals 300 corruption cases

 

Thailand: AMLO publishes list of rogue bank accounts

Thailand may be in the midst of political turmoil but the Anti-Money Laundering Office is still on track. The AMLO scored a victory yesterday in publishing details of more than 200 suspicious bank accounts. The accounts appear to have been opened in connection with a large-scale fraud.

Secretary of the AMLO, Pol Col Sehanart Prayoonrat

Secretary of the AMLO, Pol Col Sehanart Prayoonrat

The scam looks like a boiler room set up using a nation-wide campaign to contact potential victims. The con-artists convinced people to cough up cash, for unknown reasons, and send it to one of the 203 bank accounts uncovered in the AMLO probe. The accounts were all set up by a group of smurfs, probably unconnected to the fraudsters.

Contact the AMLO for the list of accounts.

Source: National News Bureau of Thailand

Egypt court sentences ousted leader Mubarak to 3 years in jail

CAIRO May 21 (Reuters) – An Egyptian court on Wednesday sentenced ousted president Hosni Mubarak to three years in prison on charges of stealing public funds.

“The court orders Mohamed Hosni Mubarak to be sent to jail for three years,” said the judge as Mubarak looked on from a cage flanked by his sons, who were sentenced to four years in jail on the same charges. (Reporting By Cairo newsroom; Writing by Maggie Fick; Editing by Michael Geory)

 

Source: Reuters Africa

Dying to tell the story

A decade ago, when I started writing about money laundering, organised crime and corruption, my editor told me this was sometimes a dangerous job. Aside from a few scrapes with sub-editors and the occasional less then co-operative government press officer, I have had few misgivings about the subject I write about and have never been in any danger (that I know of…).

I do recall once finding a series of internal memos from a multi-national bank that had been leaked on-line. The file was made up of letters, emails and account ledgers with hand written comments from the institution’s compliance officer, claiming emphatically that certain transactions did not constitute money laundering. I quietly showed file to a colleague, who  added a healthy dose of scepticism to the conversation. He questioned the file’s legitimacy, it could have been posted by a disgruntled employee, and pointed out to me that as the CO in question had just been announced a member of our firm’s advisory board, it might be prudent not to follow it up. To my great shame, I did not pursue it.  Fortunately, several other people did and the CO in question stood down from his post. Unfortunately, I did not save the link to the files so cannot share that with you.

The real heroes of corruption journalism are out there exposing embezzlement, graft and politically exposed persons who abuse their positions whenever they can.  Tetyana Chornovol, the Ukrainian FCA - Tatyana Chornovilinvestigator who was brutally assaulted by members of the ex-Ukrainian president‘s security force, and her peers have done so in Ukraine and their efforts have borne fruit; a corrupt regime was ousted. Chornovol survived the attack and is now the head of the new Ukrainian government’s anti-corruption bureau.

Gone but not forgotten

Here is a list of prominent anti-corruption writers who have felt the might of their opposition.


FCA - CardosoCarlos Cardoso, affectionately referred to as the Patron Saint of Corruption Journos by some, is one such hero. Back in November 2000, Cardoso was gunned down in Mozambique. Cardoso published a corruption news letter which he circulated to 400 subscribers from diplomatic, government and business circles. Six men were put on trial for Cardoso’s murder. Journalists in Mozambique were cautious about reporting sensitive stories since then.

 

Then we have figures such as Anna Politkovskaya, the Russian reporter with Novaya Gazeta, a paper which criticised the Russian government and questioned the sources FCA - Politkovskayaof wealth owned by rising oligarchs, was shot and killed outside her home in November 2006. Politkovskaya was reporting on the war and atrocities in Chechnya, as well as the sources of ‘new Russian’ wealth.

FCA - LitvinenkoAleksandr Litvinenko was poisoned by polonium-210 in London, almost one month after he accused the Russian government of murdering Politkovskaya. Litvinenko, a former secret service agent who spoke out against a corrupt regime in Russia, was arrested and jailed twice before fleeing to the UK where he was granted political asylum in 2000, and from where he continued to speak and write about corruption.

 

Further back, we have the woman whose work and sadly her death, gave rise to the asset seizure structure employed by governments and the law globally to freeze and confiscate assets bought with the proceeds of crime. Veronica Guerin spent years pursuing major crime bosses in Ireland to expose the real nature of their money making enterprises. She was shot twice and injured before the bad guys finally killed her on June 26th 1996 as she waited in her car at a traffic light in Dublin. Her murderers came from the major drug traffickers in Dublin who she had doggedly pursued, questioning their lavish lifestyles with no apparent sources of income.

FCA - Guerin

Within a week of her murder, the Oireachtas, the Irish parliament, enacted the Proceeds of Crime Act 1996 and the Criminal Assets Bureau Act 1996, which allowed the government to seize assets suspected of being acquired with the proceeds of crime. This legislation was the blueprint for similar legislation in the UK (POCA 2002).

The title of this blog is taken from the Freedom Forum conference Guerin was due to speak at on June 28th 1996.

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Football: Birmingham’s Yeung faces money-laundering verdict

Hong Kong businessman and Birmingham City owner Carson Yeung faces up to 14 years in jail if found guilty at the close of his multi-million dollar money-laundering trial on Friday.

Hairdresser-turned-football tycoon, Birmingham City owner Carson Yeung leaves the Wan Chai district court in Hong Kong on October 28, 2013. (AFP/Alex Ogle)

HONG KONG: Hong Kong businessman and Birmingham City owner Carson Yeung faces up to 14 years in jail if found guilty at the close of his multi-million dollar money-laundering trial on Friday.

For over two years, the case has been in the courts, with the 53-year-old denying five charges totalling $93 million and repeatedly trying to have the proceedings halted, claiming irregularities.

Yeung was arrested and charged with ill-gotten gains in the southern Chinese city in June 2011, throwing the legitimacy of his rags-to-riches rise from hairdresser to top-flight English football club proprietor into doubt.

The prosecution claims around HK$720 million ($93 million) passed through bank accounts connected to Yeung between 2001 and 2007.

Under Hong Kong law, anyone found guilty of money laundering can be sentenced to up to 14 years in prison.

Yeung, who acquired the “Blues” in 2009, pleaded not guilty to all the charges in April last year. He has maintained his innocence from the start and has tried to have the case postponed at least twice.

Throughout the trial, Yeung and the prosecution have painted differing pictures of how the businessman’s wealth was amassed.

Yeung said he accumulated hundreds of millions of dollars through stock trading, hairdressing, business ventures in mainland China and a keen interest in gambling.

He said he made HK$20 million as a hairdresser between 1989 to 1994, when he ran five upmarket hair salons in hotels, including Hong Kong’s five-star Peninsula Hotel.

Yeung described himself as a “very famous” hairdresser, claiming his salons catered to movie stars and businessmen.

He also said he spent “all” of his time trading stocks after the 1998 Asian stock market crash, accumulating a stock portfolio of around HK$300 million by 2007.

Yeung told the court he made up to HK$30 million from gambling in Macau between 2004 and 2008, adding that he gambled as if he were “running a business”.

Prosecutor John Reading argued that Yeung’s accounts showed that before 2001 he was a man of “modest means”.

Between 1997 and 1999 Yeung earned around HK$335,000 ($43,000) from his hair salon, while his father made only a tiny profit from a vegetable stall he ran from the public housing estate where he lived, Reading said.

Prosecutors also suggested a link between Yeung and Cheung Chi-tai, an alleged triad boss. Yeung denied any knowledge of Cheung belonging to a triad group.

The verdict in the long-delayed trial will be watched closely by Birmingham City fans, who have protested in their hundreds against Yeung’s ownership.

Yeung, who was little known prior to his emergence in English football, took control of the club in October 2009 in an 81-million pound ($130 million) takeover from David Sullivan and David Gold, now the co-owners of West Ham.

Earlier this month, Yeung resigned as chairman and executive director of Birmingham International Holdings Limited (BIHL), which owns the struggling second-tier club.

The Blues won the League Cup in 2011, but their fortunes have gone downhill since they were relegated later that year.

BIHL chief executive Peter Pannu has said the future of the club is “bright”, saying a new chairman will lead the club “in the right direction”.

– AFP/fa

 

 

Source: Channel News Asia

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Crypto: What does the Mt.Gox closure mean?

The cyber attack yesterday which closed Mt.Gox, the heretowith largest bitcoin exchange, has realised some of the concerns felt by Compliance and AML specialists. What will you tell clients who lose their funds via cyber-theft? While Mt.Gox has closed – its webpage is blank – other crypto-businesses and exchanges are working to restore trust in crypto-currencies and reassure investors. Many observers I have spoken to in the past few months have erred on the side of caution in terms of investing in bitcoin. Crypto-currencies are vulnerable to attack, but they are also developing rapidly. At the time of publishing, the exchange rate was XBT1 = USD441.9.

Bitcoins, other digital currencies stolen in massive ‘Pony’ botnet attack

Cybercriminals have infected the computers of digital currency holders, using a virus known as “Pony” to make off with account credentials, bitcoins and other digital currencies in one of the largest

FCA - Bitcoinattacks on the technology, security services firm Trustwave said.

The attack was carried out using the “Pony” botnet, a group of infected computers that take orders from a central command-and-control server to steal private data. A small group of cybercriminals were likely behind the attack, Trustwave said.

Over 700,000 credentials, including website, email and FTP account log-ins, were stolen in the breach. The computers belonging to between 100,000 and 200,000 people were infected with the malware, Trustwave said.

The Pony botnet has been identified as the source of some other recent attacks, including the theft of some 2 million log-ins for sites like Facebook, Google and Twitter. But the latest exploit is unique due to its size and because it also targeted virtual wallets storing bitcoins and other digital currencies like Litecoins and Primecoins.

Eighty-five wallets storing the equivalent of $220,000, as of Monday, were broken into, Trustwave said. That figure is low because of the small number of people using Bitcoin now, the company said, though instances of Pony attacks against Bitcoin are likely to increase as adoption of the technology grows. The attackers behind the Pony botnet were active between last September and mid-January.

“As more people use digital currencies over time, and use digital wallets to store them, it’s likely we’ll see more attacks to capture the wallets,” said Ziv Mador, director of security research at Chicago-based Trustwave.

Most of the wallets that were broken into were unencrypted, he said.

“The motivation for stealing wallets is obviously high—they contain money,” Trustwavesaid in a blog post describing the attack. Stealing bitcoins might be appealing to criminals because exchanging them for another currency is easier than stealing money from a bank, Trustwave said.

There have been numerous cyberattacks directed at Bitcoin over the last year or so as its popularity grew. Last year, a piece of malware circulating over Skype was identified as running a Bitcoin mining application. Bitcoin mining is a process by which computers monitor the Bitcoin network to validate transactions.

“Like with many new technologies, malware can be an issue,” said a spokesman for the Bitcoin Foundation, a trade group that promotes the use of Bitcoin, via email. Wallet security should improve, the spokesman said, as more security features are introduced, like multisignature transactions, he said.

Digital currency users can go to this Trustwave site to see if their wallets and credentials have been stolen.

Source: Zach Myners for PCWorld

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SEC policy expected to encourage whistle-blowers in Asia

ImageThe number of whistle-blowing cases in Asia, including China, is expected to continue rising with a new policy by the US Securities and Exchange Commission (SEC) to protect whistle-blowers, analysts say.

The global crackdown on corruption and greater financial incentives to report wrongdoing could lead to a spike in the number of whistle-blowing cases involving US and British companies in Asia, according to a report by AlixPartners, an international business advisory firm.

“Our firm has seen an increase in the number of whistle-blower matters raised within China as a result of an increased focus on governance as well as the Chinese government’s focus on corporations such as GlaxoSmithKline [Pharmaceuticals],” said Mike Murphy, managing director at AlixPartners.

The Chinese government is investigating GSK, the biggest British drug firm, for suspected bribery on the mainland.

“The allure of rewards through SEC represents a source of concern for companies,” the AlixPartners report said.

Under a US whistle-blower programme established by the Dodd-Frank Act, those who report wrongdoing may receive financial rewards of 10-30 per cent of the fines imposed on a company by US authorities if their tips lead to successful enforcement.

In November 2011, Britain’s Serious Fraud Office launched its whistle-blower hotline but does not offer financial rewards for tip-offs.

Hong Kong’s Independent Commission Against Corruption also encourages whistle-blowing in corruption cases, the report said.

In late January, Sean McKessy, chief of the SEC’s Office of the Whistleblower, said the US regulator may soon file cease-and-desist orders as well as impose penalties against companies that punish employees who blow the whistle on them.

This month, the SEC will file an amicus curiae brief – evidence that may change a court decision – in support of Taiwanese whistle-blower Liu Meng-lin, which may reverse an earlier US court ruling, Main Justice, a US anti-corruption publication reported.

Liu, a former compliance officer at Siemens’ health care unit in China, had accused the German conglomerate of making inflated bids for medical imaging equipment sales to public hospitals and then selling the equipment at lower prices to intermediaries who gave kickbacks to hospital officials.

Siemens fired Liu in March 2011, which he claimed was illegal under the Dodd-Frank Act.

In October last year, US judge William Pauley ruled that provisions to protect whistle-blowers under Dodd-Frank did not extend outside the United States. In that court case, Pauley threw out a lawsuit by Liu that alleged Siemens had funnelled kickbacks to Chinese and North Korean hospital officials.

Following similar cases last year, concerns were raised that whistle-blowers in subsidiaries of American companies outside the US would not be afforded protection from the anti-retaliation provisions of the Dodd-Frank Act.

“This was likely to make it much more difficult for an employee in a Chinese subsidiary of a US business to blow the whistle on inappropriate acts,” said Keith Williamson, head of forensic and dispute services for Asia at Alvarez & Marsal, an international professional services firm.

Given that McKessy recently indicated the regulator may take action against employers that retaliate against whistle-blowers, this threat appears to have receded, said Williamson.

“I expect this to embolden whistle-blowers in China in bringing matters to their employer or the SEC, knowing the SEC may protect them,” Williamson said.

The number of whistle-blowing tips the SEC received from China soared from 10 in 2011 to 27 in 2012 and 52 last year, according to the regulator. China was the third largest source of tips to the SEC outside the US last year, behind Britain and Canada.

Globally, the number of tips jumped from 334 in 2011 to 3,238 last year, according to the SEC’s annual whistle-blower report.

Source – SCMP

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Hong Kong launderer cleaned $860m in three years

A Hong Kong court has found a woman guilty of laundering an estimated US$86om (US) between 2002 and 2005. That works out at roughly US$286m per year. To put this ridiculous figure into perspective, the median wage for a US employee in 2011 was US$26,965.43, or less than 10,000 times the amount the woman laundered in one year.  The median salary for a Hong Kong domestic household in 2010 was HKD$18,000 (US$2,319.15), or 12,000 times the amount laundered annually.

The BBC story about Lam Meiling’s 40,000 bank transfers gives the basic staggering details.

  • Lam, 61, was instructed to transfer money through her accounts by a woman who formerly babysat her children
  • The babysitter went on to become a factory owner
  • Local media say that the money was laundered through nine banks, and that Lam laundered an average of HK$155m (US$20m) every month.
  • The case came to light after a Dutch citizen filed a fraud complaint that led to the investigation of two of Lam’s many bank accounts.
  • Lam said she received occasional monthly payments of HK $4,500 (US$580) in return for her services. She also said that she was illiterate.

The South China Morning Post named the banks, who all closed the accounts connected to the laundry in 2005.

Alarm bells ringing

There are many alarming points in this story. The scale of laundering, the number of bank deposits and enormous sums involved. Lam received a paltry sum for her services and will spend the next ten years behind bars for her part in this crime.

Most alarmingly, this low profile woman who received telephone orders from mainland China to carry out this laundry managed to transfer an enormous amount of money from her own bank account to several others.  This was only detected when an independent person reported her for suspected fraud. The press reports make no mention of any suspicions or reports made from the banks about the level of transactions before that.

Good customer due diligence – although in 2002 this was only a twinkle in the FATF‘s eye – could have spotted the discrepancy between the woman’s income and the deposits made into her account. Decent transaction monitoring would have flagged up the frequency and volume of the transfers.

While this laundry was on top spin almost a decade ago, I would be interested to find out how Hong Kong banks are managing customer due diligence today. Would counter staff in a retail bank raise a red flag if a Chinese mainland client walked in and issued a series of high value transactions?

Training – whether on-line or face-t0-face – is the only way to raise awareness of financial crime among bank staff. Generating and maintaining a culture of compliance with the law within banks will go a long way to re-enforce training within banks.

The scale of the laundry in this story is enormous, yet the method used to operate it – an occasional phone call from a mysterious voice in a different country – smacks of a mass operation. The babysitter-cum-factory owner could have a string of low paid strawmen and women, just like Lam, who are willing to make a few transactions in return for a few extra dollars.  And after all, where’s the harm in that?