India: Trader arrested on laundering charges

Officers from India’s Enforcement Directorate have arrested a man on suspicion of laundering INR190m (USD3m).  Ajit Jain, a trader from Mumbai, faces charges under the Prevention of Money Laundering Act (PMLA).Mumbai

The funds, according to reports, stem from a large scale fraud.

The case dates back to a 2013 report made by Canara Bank about a similar sum of money defrauded from some of its clients. The accused allegedly helped to channel funds to the unknown person behind the fraud, using both the banking system and hawala.

Read the story in the Economic Times.


India: Centre gets tough on terror funds

The new BJP government is set to crack down on terror financing from across the border, holding it as one of the key steps towards beefing up the internal security mechanisms in view of impending terror threats from cross-border as well as home-grown terror outfits.

For the first time since the new government has taken charge, India has had its first detailed discussion in the multi-lateral forum over terror-financing.

Notably, India has sought cooperation of member countries to crack the financial network and fund-raising activities of Pakistan-based terror outfits and individual terrorists associated with these organisations.

The move is expected to get a boost during the fresh round of meetings where India will be assuming the chairmanship of the Eurasia Group of the Financial Action Task Force (FATF), the premier global Task Force on Counter-terror Funding Operations.

A delegation from the MHA was in Russia last week on the first leg of a two-legged tour of Russia and Europe over the issue of terror-finances.

Notably, new national security adviser Ajit Doval has regularly spoken tough on the issue of countering terror financing and the security agencies have been asked to crack down on such activities to bolster the counter-terror efforts, sources said. Combating money laundering an terror financing have remained key challenges for the security establishment in the last few years.

India has told the multilateral forum that its own customs and border guarding agencies have found that the largest source from where fake Indian currency notes are pushed into the country is Pakistan. It has also raised key concerns about extensive flow of hawala funds coming in from abroad for terrorist outfits, even as cross-border fund transfers are taking place for tax frauds.

Source: Asian Age

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

Crypto-currencies, hawala and the spectre of terrorist financing

A new protocol which is based on the chain of trust system used in hawala has been developed and it has the potential to empower people to transact pretty much anything they want to someone else, anywhere else  in the world. (Probably not the DPRK though)


Most readers of this blog are familiar with the concept of hawala  – the ancient and paperless system of transferring funds to different locations based upon trust. The sender and the recipient trust that the agent of the other side of the world will hand over the required amount of cash to the right person. Used for centuries by the South Asian diaspora, hawala’s ease of use and cost effectiveness mean it has provided fierce competition to money remittance businesses in the past and even kept them out of the market in some communities. Why use a service that only runs from Monday to Friday and will cost you ten per cent of the transaction amount when there is something that is open 24 hours a day, reaches directly into the smallest villages and costs a fraction of the rate charged by banks for a poorer service?

Enter crypto-currencies. Although not exactly without an information trail, digital currencies maintain the data of each transaction made, but not necessarily the person who made the transaction and they are traceable. They can be bought, sold, transferred or used at any time of the day or night, during national holidays and there are no geographical limitations. Some countries have tried to prohibit digital currencies and others have restricted their use, but this has had little effect on the currencies and users with access to the web have continued to use them anyway. Jurisdictions can limit or restrict the opportunities to exchange digital currencies for fiat currency, but that will have little impact on the use of non-fiat currencies overall. As this article asks, ‘What if a government banned bitcoin and no one noticed?’

So while the US and other governments are busy wringing their hands to find solutions about how to regulate crypto-currency as if it were fiat currency, new protocols and new ways to exchange value are being developed and secured every day.

Bitcoin can be used for anything – yes, even terrorist financing

News reports issued at the end of last week focused on how the US government has designated bitcoin to be a potential terrorism threat. Or at least that is what the headlines are saying.

It looks like the US government’s Department of Defence might be calling upon the expertise of crypto-currency specialists to analyse why and how terrorist groups could useFCA - Bitcoin et al to fund terrorist attacks.  Although far from being a cryptographer nor an internet protocol developer, even I can shed some light on this one.

As Bitcoin and other crypto-currencies exist as methods of transferring funds, so they will be exploited by criminal elements to launder money, to defraud and to fund everything from buying a getaway car to financing terrorism. The point about decentralised crypto-currencies is that they exist and can be used for anything.

Enhanced by Zemanta

If a tree didn’t fall in the woods, could a laundryman still make money?

Bangladesh’s Anti-Corruption Commission (ACC) has charged 51 people, FCA - TIMBERincluding the Managing Director and President of a tree planting co-operative in connection with laundering BDT4,000cr – a staggering USD515m in funds embezzled from a tree planting scheme.

The story in the Daily Star alleges links to a number of illegal activities which would contribute to the money laundering charges, including:

They funds were generated by an investment scam. The group allegedly conned BDT2,433cr (USD312m) from 1.75m investors by selling 6.18bn tree saplings under the tree plantation project. In reality, the group planted only 3.2m trees. It looks like the investors, rather than being eco-warriors striving to create a green and airy Bangladesh, were lured by the promise of unrealistically high returns on investments. 

Once the money was paid to the a tree plantation cooperative, the accused allegedly syphoned it out of the books and records under the guise of paying salaries, undisclosed fees for services rendered, commissions and other staff related costs. They transferred the funds to employee’s bank accounts and to accounts of 20 other companies within the group.

The group was was already under investigation for illegal banking, according to the press, and this could mean they were using hawala. The hawala informal banking network is alive and well in South Asia and is used by businesses to send and receive funds domestically and internationally.

The funds were laundered outside of Bangladesh, according to charge sheets quoted in the press. BDT100cr (USD12m) was allegedly sent to Hong Kong to pay for the import of electrical and electronic goods, cosmetics and agro products, and leasing an aircraft. investigators claim the goods were never bought and no aircraft were leased in connection with this transaction. 

So far, five of the group are behind bars and the other 46 are reportedly on the lam.

Source: The Daily Star

CTF/Hawala: India-US crack down on Pakistan terror financing networks

India and the US held a side meeting at the Financial Action Task Force (FATF) plenary last week  to finalise plans for cooperation on identifying and closing down sources of funding to Pakistan terrorist groups. No details have yet emerged on which funding channels are being used to send money to terrorist groups which may be in Pakistan or are using Pakistan as a base for funding.

The FATF’s latest report on terrorist financing focused on the use of hawala, the traditional South Asian underground method of transferring money between cities and across international borders. Briefly, the FATF claims hawala is open to exploitation by FCA - Hawalaterrorist financiers for several reasons, principally:

  • a lack of supervisory will or resources
  • settlement across multiple jurisdictions through value or cash outside of the banking system in some cases
  • the use of businesses that are not regulated financial institutions
  • the use of net settlement and the commingling of licit and illicit proceeds.

A lack of supervisory resources and commitment to effective regulation seem to be the largest sources of concern vis a vis hawala.

This was underlined by news from the Australian Crime Commission’s Project Eligo operation last month, which identified terrorist financing channels built on the back of trafficking and selling narcotics between South America, Australia and the Middle East. The funds in the Middle East were then channelled back to South America to pay for more drugs. This could have been achieved via formal or informal remittance systems.

That said, it is worth remembering that the hawala network is vast, based on trust and used by millions of South Asians to remit money home. A friend of mine regularly received legitimate payments for group tours of India from elderly travellers via a hawala operator ensconced in a jewellery store. What is more, the term hawala is rarely used. Most people refer to the system simply as money transfer.

India-US join hands to crack down financial network of Pak group

New Delhi: India and the US have joined hands to crack down on the financial network and fund-raising activities of Pakistan-based terror outfits.

“India and USA have agreed to work together to crack the financial network and fund raising activities of Pakistan-based terror FCA - TerrorFinanceoutfits and individual terrorists associated with these organisations under the Framework of Indo-US Bilateral discussion,” Minister of State for Home RPN Singh informed Lok Sabha in reply to a written question.

The India-US bilateral meeting, held on the sidelines of the Financial Action Task Force (FATF) in October 2013, facilitated exchange of such information between concerned agencies of both the countries.

Singh said India and the US have also agreed to have cooperation between their agencies in fighting against counterfeit currency and illegal financial transactions under the aegis of the India-US Homeland Security Dialogue.

A sub group of “illicit finance, illegal smuggling of cash, financial fraud and counterfeiting” has been formed to work with the areas of information exchange, capacity building and technical/ research cooperation.

“US Homeland Security and Indian agencies are working together to investigate sources of material and technologies used in the production of FICN,” he said.
Source: ZeeNews 

Enhanced by Zemanta

Hezbollah funding scheme loops cash from crime to terrorism

ML Australia, ME, SA

ML Australia, ME, SA

Aligning criminal activity with terrorist funding is not a new concept to many anti-money laundering specialists. New research from Australia, however, has revealed the extent to which Hezbollah backed organised crime groups in South America, mainly around the Tri-Border Area of Paraguay, Brazil and Argentina, are exploiting Australian identity cards to launder the proceeds of drug trafficking.

Taskforce Eligo, a money laundering probe run by the Australian Crime Commission has uncovered 40 separate money laundering schemes in Australia which are cleaning the proceeds of drug sales, filtering the money to exchange houses in the Middle East, which are then sending the money back to the drug traffickers in South America. It is unclear from the article in The Age whether the exchange houses are traditional bureaux de change or hawaladars. Hezbollah is well known for using businesses of all kinds, including bureaux de change in South America, to launder cash but the Middle Eastern part of the network could be using the traditional South Asian hawala system of remitting money around the world to send cash back to drug producers without touching the formal, or regulated, banking system.

Sources in the US who are tuned in to underground activity in North and South America, have reported recently that Hezbollah is taking up a new strong hold in Latin America, Venezuela. Although it has been out of the news since Hugo Chavez died in March 2013, the country is in some economic turmoil and the country sadly provides little safety for its citizens; both factors provide good ground for organised crime to flourish.

Project Eligo, in operation since 2013, has so far seized AUD$26 million in dirty cash, restrained AUD$30 million of houses and other assets funded by drug money and intercepted drug shipments totalling more than AUD$530 million dollars.

Read the full report here.

AML Asia Pacific Conference – Kuala Lumpur, April 2014

The Association of Chartered Anti-Money Laundering Specialists (ACAMS) is holding its annual Asia Pacific focused AML conference in Kuala Lumpur this year.

Supported by the Malaysian Anti-Corruption Commission, the conference agenda will open the floor to discussions on tackling evolving financial crime threats, with some focus on alternative remittance systems – including hawala and hundi, virtual currencies – – Bitcoin et al, and electronic payment systems.

Click here for more information on the conference.

ACAMs ASIA PAC banner 2014

ACAMs ASIA PAC banner 2014