European Parliament passes Fourth Money Laundering Directive

Members of the European Parliament have added their endorsement to the Fourth Anti-Money Laundering Directive, confirming tougher rules to fight tax evasion and terrorist financing, including a few measures which were not in the European Commission’s initial proposed directive.

Key points of the new directive:

– Ultimate beneficial owners to be listed on a database open to authorities, banks performing due diligence checks and people with a ‘legitimate interest’ – investigative journalists, non-governmental organisations are mentioned. Information to be included: beneficial owner’s name, month and year of birth, nationality, country of residence and details of ownership.

– New rules to ease tracking the flow of funds by financial investigators – a “transfers of funds” regulation, which aims to improve the traceability of payers and payees and their assets.

– Special measures for Politically Exposed Persons – enhanced due diligence to establish the source of funds and source of wealth. While many anti-money laundering professionals may already do this as best practice, the 4MLD clarifies the position.

Member states have two years to transpose the directive into national law.

Read the EP’s press release here.


Blacklists, PEPs, corruption and regulation. How is 2015 looking so far?

January 15th saw a round of face to face meetings for jurisdictions found to be lacking in the last FATF plenary, with the APG ML in Sydney.

Cambodia, Lao PDR, Pakistan, Afghanistan and Papua New Guinea  all made the last list.  Of the four countries on the high risk list three are in the Asia Pacific region – DPRK, Myanmar and Indonesia. The DPRK  has written to the OECD affirming its commitment to anti-money laundering and has apparently joined the APG as an observer.

Cuba managed to wriggle off the list of high-risk jurisdictions. While we have heard nothing much about its AML efforts, we can only assume that its new found close friendship with the White House has bought the former closed state a little wiggle room. Expect more news on trade barriers opening with Cuba.

ABC – Anti-bribery and corruption

This first ABC story provides a barometer for how the anti-corruption campaign is taking effect in Turkey. A parliamentary committee in Turkey has voted not to pursue investigations into four former ministers accused in a corruption scandal that implicated former Prime Minister Erdogan. Nine members of the 14-strong commission were members of Erdogan’s AK Party. Read more here.

The former president of Taiwan, Chen Shui-bian , currently in the fourth year of a 20 stretch for corruption, has been granted medical leave for brain surgery. But it’s not all rosy for Chen, who is facing a new round of money laundering charges. This time, charges allege he laundered TWD10m (USD321,000) in the proceeds of a bribe through his brother-in-law.


The scale of illegal logging –

Transparency International calling for a bit of light to be shed on what the Solomon islands is doing. A man with close
connections to the logging industry has just been named the new Minister of Forestry for the island nation. Anyone else smell a conflict of interests?

ML and capital flight

Bangladesh – Bank Bangladesh, the central bank and financial intelligence unit has set up a new arm to tackle the high risk areas of TBML and terrorist financing. The move is part of the BB’s initiative to stop capital flight from Bangladesh.


CapGemini is predicting a new era of regulation – which is great news  for regulatory professionals. Simplified operations, e-banking,  mobile  banking and other new forms of banking will take prominence, according to the report.

It also echoes a call for a reduction of banker bashing – an easy sport for many, especially those who are not employed in banking. Banker bashing may soon become a thing of the past; not because they all stop taking cocaine and becoming good people , although according to this  Guardian report it has happened , but because new financial firms, relying on new technology, will supersede banks.

Banks are like enormous cruise ships once built in Europe’s shipyards – requiring millions of hands to operate, weighed down by tonnes of heavy metal and taking aeons to change course. New smaller, lighter firms can evolve, develop and zip around the market with as much flexibility as new millennial customers require.

China’s regulators have published new AML guidance to help insurers to play their part in the fight against money laundering. More details are available via a subscription here. Also check the China Insurance Regulatory Commission for more updates.

A sombre note to conclude, and remind us of the battles some of our colleagues face when reporting financial crime to the authorities. Three policemen are under arrest in Vietnam charged with plotting to murder a witness in a bribery case.

First published on the ICA blog in January 2015.

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

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

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

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

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

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

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

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

Smurf alertFCA- smurf

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

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

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

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

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

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

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

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

Mining magnate’s bribery trial reveals graft techniques

A visibly upset Liu Han on trial, courtesy of SCMP

A visibly upset Liu Han on trial, courtesy of SCMP

A Chinese businessman with high level political connections could be sentenced to death if found guilty of murder and running an organised criminal gang in Hubei province, central China. Liu Han, 48, is suspected of building a vast network of political and official connections which have helped him to do business in the past.

Sources report that the ” long list of senior cadres who may have received money from Liu included high-ranking current or former officials from Hainan, Yunnan and Chengdu, capital of Sichuan.” Although ties between politicians and the business world are not unusual, Liu’s trial has shed light on the extent of his networks.

While this may not be a blue-print for every wealthy-politico network the details do expose the depth of these connections.

Connections Sources reported in the South China Morning Post revealed several of Liu’s connections including: Zhou Bin, the eldest son of Zhou Yongkang retired former member of the Politburo Standing Committee. According to the New York Times, the Zhou family is the subject of an investigation into their ties to the China National Petroleum Corporation, the state run entity formerly run by Zhou Yongkang.

Allegations around their relationship involved the over-priced sale of companies and making gifts or cash and rare artefacts to politicians to secure their favour, and using friendly mah-jong games with officials to lose money and hand over more cash. Investigators are also claimnig more gifts were made to senior officials in Inner Mongolia, state-owned China Development Bank and the Political and Law Commission. Some of those involved in the far reaching tentacles of the web are still in office, others are on trial.

Although they remain unpunished so far, polticial advisers in China believe their days are numbered. and the top leadership – read President Xi Jinping – needs more time to settle disputes among the Communist Party top echelons. Under China’s criminal code, officials who “abuse their authority by enabling profit for others” or taking bribes worth more than 100,000 yuan can be sentenced to death.

Zhang Ming, a political scientist with Beijing’s Renmin University, said the decision not to punish certain officials showed that Liu’s case was entirely political, not judicial. “The worlds of business and official power are so entwined, and every single official in the country could be punished if the top leaders ordered complete scrutiny,” said Zhang. “To choose which officials should be punished depends on political requirements.”

A member of Liu Han’s family spoke to the post to profess his innocence: “You could charge him with anything, including economic crimes. But he is not a gangster,” he told the Post earlier.


Source: SCMP

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China: Zhou’s House of PEPs Infographic

Think that Frank Underwood from Netflix‘ House of Cards series and his network are ruthless in their relentless pursuit of power? Wait until you read about one of China’s FCA - Zhoupolitico-business families. Sanctions officers might consider placing this infographic on their desktops as a reminder of who is who and who they have done business with.

Meet the Zhous, China’s very own House of PEPs, which is odd given they have thrived in a Communist country which expounds the virtues of equality for all and no citizen being better than the next. The infographic shows the prominent politically exposed persons in the clan, how they are related, and shows the business investments they have made and lists the companies connected to them via investment or other business dealings.

The thirteen members of the Zhou family depicted in this New York Times Infographic appear to have stakes in more pies than they have fingers. Seven of the clan have been detained by Chinese authorities,  the whereabouts of six of them is reported ominously as ‘unknown’. One of the clan lives in California and is presumably, for now at least, safe from prosecution by China. Two more are on the lam; they are not under arrest, as far as we know, but no one knows where they are.

The Zhous at a glance 

Zhou Yongkan, the patriarch of the family sits at the top of the tree. He has held various positions in government and state entreprises. His is under arrest and Chinese authorities have already seized USD14.5bn in assets belonging to Zhou and his associates.

Wang Shuhua, his first wife, is deceased, but their son Zhou Bin took an 80 percent stake in the energy investment company, Zhongxu, in 2009. He is also underarrest.

Jia Xiaoye, his second wife, us under arrest – location unknown.

Zhou Bin’s wife Huang Wan and her father Huang Yusheng are both being detained for questioning in undisclosed locations, while her mother Zhian Minli is in California.

Zhou Yuangqing, Yongkang‘s brother, his sister-in-law Zhou Lingying and nephew are also mentioned on this ominous family tree; while mum and dad are under arrest, the whereabouts of Zhou Feng, the nephew, is unknown.

Source: The New York Times

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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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Sanctions: EU heads meet to discuss Ukrainian sanctions, PEP names discussed

The Crimean crisis gained considerable ground over the weekend, as Russian military troupes seized control of the Black Sea peninsula, the Russian naval fleet’s stronghold on the Black Sea. The EU has responded by calling an emergency meeting of Heads of State in Brussels to discuss the latest developments in Ukraine and how to facilitate the necessary de-escalation of the situation. John Kerry, the US envoy will land in Kiev for talks with leaders today, as announced on Twitter.

International envoys to Kiev

As of Tuesday, the US, backed by some Eastern European nations and Sweden, wants to impose punitive measures on Moscow and Washington is reportedly reviewing its trade packages with Moscow. The US, via the Office of Foreign Assets Control, has mentioned imposing diplomatic – travel,communications, closing embassies – and economic – trade, account and asset freezes, transaction prohibitions – sanctions against Russia if it does not pull out of the Crimea. FCA - KYIV Sanctions banner

The Foreign Ministers of France, Germany, Italy and Spain are downplaying trade sanctions in favour of halting travel visa easing rules with Russia. It is notoriously difficult, still, to get a visa to travel independently and without a planned itinerary in Russia. Reciprocally, the EU makes acquiring a Schengen visa difficult for average Russians. Oligarchs, however, appear to have no difficulty in getting visas to stay in the UK.

UKs embarrassing damage limitation

The UK’s position on Russian sanctions was leaked in a document on Monday this week. Unsurprisingly, but rather disappointingly nonetheless, Number 10 Downing Street is carefully trying to figure out how it can limit the damage EU sanctions may cause to the Russian owned billions floating around the City of London. This must have been quite a snub to the EU, coming only days after HSBC in London revealed its plans to circumvent EU bonus rules.

One of the UK government’s objectives was noted in an exposed secret document as: “Not support, for now, trade sanctions … or close London’s financial centre to Russians.”

Ukrainian cash flows

While the political games are playing out in cabinet rooms, banks and money laundering reporting officers should be on high alert for funds surging out of the Ukraine or transferring between the accounts of Ukrainian politically exposed persons (PEPs).

Yanukovich and Sons,

Yanukovich and Sons,

Switzerland, Liechtenstein and Austria have already frozen accounts linked to ousted President Viktor Yanukovich and his son Aleksandr (also spelled  Oleksander) and 12 other Ukrainians. Prosecutors in Geneva are investigating transactions between firms connected to Aleksandr in Ukraine, Switzerland and the Netherlands.

Austria has frozen the assets of  18 Ukrainian citizens including Viktor Yanukovich, “former chief of staff Andriy Klyuev, but not his brother Serhiy.” In the same Reuters’ article, one veteran Austrian banker estimated that while Austria is of interest, far more Ukrainian money has been placed in Switzerland and the UK.


The EUObserver portal posted a list of potential sanctions targets last week. Importantly, this is not the final list of targets; the identities of the individuals sanctioned by the EU will appear in the EU’s official journal once they had been decided. Economic and financial sanctions from the EU could include export and/or import bans (trade sanctions which may apply to specific products such as oil, timber or diamonds), bans on the provision of specific services (brokering, financial services, technical assistance), flight bans, prohibitions on investment, payments and capital movements, or the withdrawal of tariff preferences.

The list includes 38 names of individuals suspected of using force against the Ukrainian people in the recent revolution and members of the so-called Yanukovich ‘familia’ – a close group of contacts which surrounded the ex-President – suspected of embezzling more than EUR9bn from the national coffers since 2010.

Anyone reading the list for information should bear in mind the following caveat:

“The following names were given to this website by Ukrainian civil society activists and opposition leaders, some of whom advised the EU diplomats who drew up the draft list of eight names. EUobserver does not know who is currently designated in the confidential EU text.”


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Philippines: Corruption witness pledges to return loot

A star witness in a corruption scandal implicating powerful Philippine lawmakers publicly acknowledged her role Thursday in FCA - silver bribedeals that defrauded the government of large amounts of anti-poverty funds and pledged to return nearly $1 million in kickbacks she received from corrupt deals.

Businesswoman and socialite Ruby Tuason testified at a televised Senate committee hearing that she decided to tell the public what she knew of the corruption and the alleged involvement of two prominent senators after watching the misery of many poor Filipino survivors of a powerful typhoon last November.

Originally among those facing corruption complaints, Tuason later was allowed by the Department of Justice to become a state witness after offering to disclose details of the alleged large-scale graft. She said she decided to return recently from the United States, where she hid for months, despite the risks because she felt so guilty.

“I really actually even felt like I was Judas Iscariot,” Tuason said when asked by senators why she had a change of heart. “I don’t want to die with 80 million Filipinos hating me. I don’t want to die with my grandchildren being ashamed of me.”

Tuason told the senators she handed kickbacks from bogus government livelihood projects to prominent Sen. Jinggoy Estrada, son of an ousted president, and Sen. Juan Ponce Enrile’s chief of staff. She said she personally delivered stacks of money that were so heavy she once had to use a trolley bag to deliver them.

The two senators have strongly denied any wrongdoing.

The corruption scandal has outraged many in the poverty-stricken Philippines. TV footage and images of those implicated basking in luxury sparked such an uproar that hundreds of thousands of ordinary people joined a protest in Manila last August.

Department of Justice officials filed the first major corruption complaints in September against Estrada, Enrile and a third senator, Ramon Revilla Jr., who also denied any wrongdoing, following the public outcry over the alleged plunder of millions of dollars intended for anti-poverty and livelihood projects. Others facing corruption complaints were former lawmakers and a wealthy businesswoman.

Justice Secretary Leila de Lima said at the time that the complaints accused the lawmakers of conspiring with dummy aid organizations to funnel millions of dollars in government funds to non-existent agriculture and livelihood projects and received huge kickbacks in return.

The kickbacks were part of $141 million transferred from 2007 to 2009 to dozens of questionable private organizations, according to a government audit that was part of the evidence used against the lawmakers.

 Source: AP

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