Posted in Financial Crime Fraud Money Laundering Sanctions

Editor’s Summary – FCN2

When I started this Newsletter, I wanted to offer a digestible collection of both interesting and relevant materials to arm financial crime fighter’s with additional tools to help enable them to do their work. Whilst there is no substitute for reading the more detailed articles in FCN2, or across the FCN website, here are short highlights in summary form:

  • Important anniversaries in 2019 include FATF at 30, the US sanctions against Iran at 40 following the taking of US hostages at the US embassy in Tehran. Reaching 100, is the use of the term “organised crime” first coined in the US in 1919 to describe the activities of mobsters such as Al Capone and it’s also a century since the criminalisation of harmful drugs worldwide agreed through the 1919 signing of the Treaty of Versailles.
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Money Laundering
Posted in Money Laundering

What is Money Laundering?

Is Money Laundering a modern phenomena?

Whilst the term “money laundering” in the sense we understand it now was first used in print in 1973 during the Watergate scandalmoney laundering as a practice reaches much further back into history. Its origins may lie as far back as 4,000BC when Chinese merchants found ways to conceal or move assets accumulated through trade in order to avoid confiscation. We can see many of the actions that form the basis for money laundering throughout history; such as the trafficking of opium after cultivation of the opium poppy began in c. 3400BC, counterfeiting of coins recorded in 640BC, the case of Hegestratos’ Fraud in 300BC, or Roman laws addressing forgery which were enacted through 80BC.

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Posted in Financial Crime Money Laundering

Laundromats by Graham Barrow

So called laundromats, like the Russian, Azerbaijani and Troika laundromats are making headlines, tarnishing once stellar reputations, and leading to serious questions about their prevalence, how they operated and for so long, why more wasn’t done and what lessons can be learned and actions taken to prevent these laundromats from washing dirty money in the future. This article on laundromats, provides an explanation and commentary on these matters.

These laundromats, are neither discreet events nor simple in construction. Indeed, the very reason they are referred to as “laundromats” rather than simple “money laundering” examples is indicative of a professionally run business rather than a one off event.  They do not represent the efforts of corrupt politicians or organised criminal gangs laundering the proceeds of their own crimes, rather they are run by separate, professional money launderers who, for a fee, will clean up ill-gotten gains for just about anyone. 

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Transparency International
Posted in Financial Crime Money Laundering

Transparency Int’s CPI Results by Hillary Rosenberg

A common thread behind much of the financial success enjoyed by criminals is the prevalence and persistence of Corruption. According to the Global Corruption Barometer 2017, 1 in 4 people still regularly pay bribes. In this article, Transparency International (TI) flagship Corruption Perceptions Index (CPI) is analysed and based on this, It’s asked whether any meaningful progress has been seen since its inception more than 20 years ago.

However described, for example whether as “graft,”“kickback”, “payoff”, baksheesh”, “hush money”, “tips”, “grease”, “bung” or “sweetener,” corruption has a long and uninterrupted history, Whether it is thirty pieces of silver, the price for which Judas Iscariot was bribed to betray Jesus Christ, the US$15-35bio, the Former Indonesian President Mohammed Suharto is estimated by Transparency International to have embezzled, or the fact according to Transparency International that still too many Countries are failing “to significantly control corruption,” corruption is part of many people’s way of life.

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Posted in Financial Crime Money Laundering

Modern Organised Crime turns 100

Whilst the term “organised crime” appears to have emerged in Chicago in 1919, the phenomenon of organised criminal activity far pre-dates this and its manifestations have developed considerably since that time. Examples include “thugs” or gangs of criminals, who terrorised 13th century India moving from town to town, looting and pillaging and “piracy” on the high seas, and highwaymen and banditry to the pre-industrial world what organised crime is to modern society. Many of today’s leading organised criminal gangs also have long histories, many tracing their origins back to feudal times, retaining links and codes from a bygone era whilst at the same time modernising and expanding their operations far beyond their traditional roots from their homelands across the world.

Whilst prohibition on alcohol in the US was presented as a victory for public morals and health, it was to prove a temporary measure being repealed in 1933.

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Posted in Financial Crime Money Laundering

EU & Americas News by Vincent Heintz

As major changes to AML/CTF are being considered and discussed, developments on both sides of the North Atlantic are of particular note, of which the following are of particular importance.

UK authorities have commenced a consultation on adopting – largely wholesale – the EU’s 5th MLD – a significant action in light of the ongoing ambiguities concerning Brexit and one that clearly signals an intent to remain aligned across the continent in terms of approaches to fighting financial crime. The UK Regulator, the FCA, has recently unveiled plans, priorities and activities for the next 20 months including on fighting financial crime. More broadly, the EU has started the process of empowering the European Banking Authority to develop strategic responses to the various scandals in EU jurisdictions, including those impacting FI’s coming out of the various Russia-linked “Laundromat” schemes and revelations from the release of the Panama, Luxembourg & Paradise Papers.

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Posted in Financial Crime Money Laundering

Corruption Perceptions from Africa by Solomon Abiakalam

Traditional African societies educated their young using folklore. By exploring folklore further, it may offer Africa insight into its corruption problems. Storytelling, has a long tradition in African societies, and has become a common medium of learning. Take the story of the tortoise and the lizard. A companion of animals were undertaking an arduous journey, sharing the load and duties. A meal was prepared for all, but before all the animals could take their share, the tortoise gobbled it up, cheating the others of their food. When they realised their meal had been eaten, the other animals deputised one of their travel companions, the lizard, to investigate and report back. As the lizard investigated he quickly suspected the satiated tortoise. However, the lizard was by now very hungry, and having still a long trek ahead, succumbed to an offer from the tortoise to eat some of his food.

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Posted in FATF Financial Crime Money Laundering

FATF Country Evaluation Results – Part 2

It has already been reported in FATF Country Evaluation Results – Part 1 that over 70 Countries were assessed based on published FATF Reports and highlights published relating to technical compliance with the FATF 40 Recommendations as well as on effectiveness based on 11 so called “immediate outcomes,” based on a simple scoring model.

Since then new reports have been issued on Finland and China, and updated reports on Italy and Norway that have re rated their technical compliance scores. Notwithstanding these new results the overall scores now based on 75 assessed Countries remain the same being an average of 64% for Technical Compliance and 31% for effectiveness.

According to FATF, “The extent to which a country implements the technical requirements…..of each of the [40] recommendations is important….but this is not sufficient” as “each country must enforce those measures and ensure that the operational law-enforcement and legal components of an AML/CFT System works together effectively …to deliver results.”

  • Here are some highlights from the Country reports issued since the Plenary in February, 2019.
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facts and figures
Posted in FATF Financial Crime Fraud Money Laundering Sanctions

Selected Facts and Figures – from 2014

global 2012 GDP or the size of the World Ec0nomy
US$70 trillion
total assets under management managed by top 500 FIs
US$62 trillion
Wolfsberg Group member banks total assets combined amounting to around a quarter of the total assets held by the World’s top 1,000 Banks
US$20.8 trillion
GDP or the size of the world’s biggest economy, US US$14.9 trillion
total value of assets held on deposit in Banks US$11 trillion
tax fraud and tax evasion losses US$4.75 trillion
total value of banknotes and coin in circulation
US$4.2 trillion
average daily turnover of FX transactions
US$3.9 trillion
total assets under management managed by Blackrock, the largest financial asset management firm US$3.3 trillion
total amount of fraud proceeds
US$2.75 trillion
total amount invested in Hedge Funds globally US$2.3 trillion
total amount of criminal proceeds
US$2.1 trillion
GDP or the size of the 8th largest economy: Italy US$2.1 trillion
total Global Military Expenditures
US$1.7 trillion
US$1.7 trillion
total amount of criminal proceeds laundered perhaps the world’s 10th largest industry
US$1.6 trillion
total amount of bribes paid US$1-1.6 trillion
total amount of criminal proceeds generated by Organised Crime
total amount of money generated from Counterfeiting & Piracy US$691.5bio
largest market generating criminal proceeds, the US
total amount of money generated from Drug Trafficking
total amount of international money remittances in 2012 largely flowing via Money Services Businesses US$400bio
total amount of money generated from Human Trafficking US$240bio
total amount of money generated from Smuggling US$162bio
total amount of money generated from Illegal Gambling US$140bio
EU VAT fraud costs States lost tax revenues US$100bio
total amount of money generated from Environmental Crime
total international trade in conventional arms US$60bio
illicit trade in Oil and Gas US$54bio
costliest man-made environmental disaster, for BP Oil Spill in the Gulf of Mexico (incl largest fine of US$4.5bio)
US$42-65bio (est)
largest corporate accounting fraud, Enron Corp US$40-45bio
illicit trade in tobacco US$40.5bio
The wealthiest Charity in the World, the Gates Charitable Foundation US$37bio
total value of wildlife smuggling & poaching US$32bio
largest amount of funds embezzled by a kleptocrat - President Suharto of Indonesia (1967-98)
fines levied against FIs since 1989 to end June 2014
costs and investments by FIs in AML Programme US$18bio
largest Ponzi Scheme, Bernie Madoff ’s Ponzi Scheme
Largest sanctions fine for BNP ParibasUS$8.9bio
value of authorised small arms & light weapons sales US$8.5bio
largest rogue trader losses by Jerome Kerviel at SG US$7.2bio
criminal proceeds seized by authorities in 2010 US$3.1bio
largest diamond producing country, Botswana US$3.25bio
largest corruption related fines and penalties for UK’s GlaxoSmithKline US$3bio
Largest fine for assisting in Tax evasion – Credit SuisseUS$2.8bio
Largest AML fine for a financial institution – JP Morgan re Madoff
Second largest AML (incl Sanctions related) fine for a financial institution - UK’s HSBC US$1.96bio
largest fine for insider dealing – SAC CapitalUS$1.8bio
total amount of money generated from kidnap and hostage taking
total amount of money generated from forgery US$1.1bio
the largest recorded robbery, the Central Bank of Iraq US$1bio
total number of credit, debit and prepaid cards in circulation
1 billion
the worlds most expensive sale of a private property, the Villa Leopolda on the French Cote D’Azure
paycheque in 1997 for Drexhel star banker Michael Milken before being charged with racketeering charges
the Cullinan Diamond is the largest and most expensive diamond ever found owned by De Beers and valued at
total number of people using illegal drugs 176-329mio
estimated annual payout to Somali pirates for kidnap for ransom
the most expensive painting sold at auction is Francis Bacon’s portrait of Lucian Freud
the world’s most expensive car sold at auction, a 1957 Ferrari Testa Rossa
total thefts, largest in the world by country is US
suspicious activity reports (SARs) filed in 2011, nearing
the no of PEPs listed in the database from Dow Jones
costs for the AQ attack on America 9/11 US$400-500,000
most expensive bottle of wine sold at auction, a 1947 Cheval Blanc Bordeaux
the largest number of murders in the world is in Brazil
most Kidnappings for Hostage annually - Mexico 18,000

Key Facts and Figures on Financial Crime and contextual comparisons, from “Red Alert” published in 2014 (not yet updated) by John Cusack.

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Posted in Money Laundering Sanctions

Wolfsberg Annual Forum 2019

This Wolfsberg Annual Forum was held in Thun, Switzerland on 22-24 June, 2019 including 3 days of a public private conversation critiquing, problem solving, information sharing and committing to actions in pursuit of furthering the fight against financial crime. This followed the Groups own summer meeting, which considered refinements to the Group’s strategic work plan, developing next steps in delivering AML/CTF programme effectiveness and the Correspondent Banking DDQ capacity building work.

The summer meeting transitioned into the Annual Forum, which welcomed a mix of over 100 global anti-financial crime leaders, who had travelled from all 4 corners of the globe and constituted Wolfsberg members, non-member banks, law enforcement, national FIUs, regulators, supranational’s and international standard setters. These leaders provided candid and insightful commentary from both public and private sector perspectives and supported panels to discuss effectiveness, modernisation, demystifying cyber-enabled crime, the Cloud and innovation trends, what is happening across the industry and current concerns.

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