FI Focus – Recent Highlights from Standard Chartered by Trish Sullivan

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The Bank announced on 9th April, 2019 resolutions with US and UK authorities regarding its historical sanctions and financial crime controls, which mostly related to violations and control deficiencies pre 2012 with none occurring after 2014. More details on these resolutions can be found on the Banks’ dedicated Fighting Financial Crime website: which also includes new pieces of work on “Antiquities Trafficking,” “Understanding digital identities in a world of cyber crime and compliance ” and “Iranian Virtual Currency Activity and risks to FI’s.”

SCB’s Fighting Financial Crime website is a good source of information to implement controls and processes to modernise the fight against financial crime in the area of cyber, data management, information sharing and more.

Antiquities Trafficking

The illegal antiquities trade (IAT) is a multibillion-dollar criminal industry, estimated to be one if the largest types of black market after illegal drugs and the arms trade, and yet remains unregulated and under-addressed. The characteristics of this trade make it vulnerable to money laundering and terrorism financing – lack of clear provenance, buyer secrecy, informal and self-regulated market, non-transparent pricing, high value transactions and unscrupulous middlemen. IAT not only robs us of our past and cultural heritage, but recent cases have evidenced that looting and trafficking of art and antiquities funds criminal activities and creates conflict and extremism around the world, producing long-lasting economic damage.

Unfortunately, despite its wide-ranging cultural, economic and financial implications, awareness about IAT and the associated crimes and risks remains low with limited AML/CTF safeguards. As with other proceeds-generating crimes, this destructive trade is also driven by ‘big money’. With big money, comes the need to move, store and obtain the proceeds of the trade – which provides financial institutions with an opportunity to support law enforcement trace and disrupt financial crime. To identify illicit looting and sale of antiquities, a number of factors need to be considered – market demand, suppliers, parties selling artefacts to the market, smuggling routes to transport goods, and the networks that support this criminal enterprise, where even terrorist groups are found. SCB is raising awareness and leveraging our partnerships with clients to detect and prevent the processing of this type of illegal activity.

The recent announcement by Facebook that it will not tolerate use of its services to provide a marketplace for looted antiquities is a step forward but still more must be done to take these precious treasures out of the shadows and aid law enforcement in repatriating artefacts back to their countries of origin.  Information on sellers offering illicit goods should also be shared with relevant authorities. The introduction of EU 5MLD and proposed US legislation to include art dealers in BSA requirements will also enhance IAT detection and deterrence.

Digital Identities in the world of Cyber Crime & Fin Crime

best practice tipThe FATF Private Sector Consultation meetings in Vienna in May 2019 sought feedback on FATF’s Digital Identification and Virtual Asset Service Provider (VASP) guidance, which could not be more timely or vital to evolving financial crime trends.  Whether it be use of digital identification in the Mueller Investigation indictments related to US election interference or millions of dollars in virtual assets hacked from VASPs, there is a powerful new tool in the crime fighting arsenal. The echoes of our interactions with the digital world, combined with the unique characteristics of each of the devices we use as interfaces, can be used to create an online identity that corresponds to our physical person, known as a ‘digital identity.’ Anti-Fraud technology uses digital identity information of customers to confirm identity/detect unusual access to thwart intrusion. This though is not good enough if we aim to make a difference in fighting modern financial crime. Traditional AML uses one-to-many/many-to-one detection scenarios to alert unusual activity, whereas a modern program should combine defences with anti-Fraud and look at similar anomalous digital identity activity patterns. One identity accessing multiple accounts can reveal a stable of mule accounts receiving cyber enabled crime profit or a corrupt employer engaging in modern slavery. Many-to one patterns can reveal a sexual exploitation ring. FIs need to consider expanding investigations to include digital identity attributes wherever possible, which can then be included in relevant SAR filings. At Standard Chartered Bank our Cyber Financial Intelligence (CyFI) team works closely with Anti-Fraud specialists to minimise silos and leverage techniques across the fighting financial crime space.

Iran’s Virtual Currency (VC) activity & threats to FI’s

best practice tip 2In October 2018, the US Financial Crimes Enforcement Network (FinCEN) published a Public Advisory (FIN-2018-A006) titled “Advisory on the Iranian Regime’s Illicit and Malign Activities and Attempts to Exploit the Financial System.” The Advisory highlights that one of the main methods used by Iran to circumvent sanctions is its use of VC and/or use of VC Exchanges, including Peer-to-Peer (P2P) type exchanges operating as unlicensed money service businesses (MSBs). The Advisory informs FI’s to review blockchain ledgers for activity that may originate or terminate in Iran, including P2P exchanges. According to a 2018 Forbes article it is estimated that Iranians have moved as much as US$2.5 billion out of the country in cryptocurrency. In a paper published by SCB, we explore Iran’s interest in using VC, which started it’s believed in 2013. The paper also suggests that, “2018 has been a key year for the evolution of VC in Iran..” and that, “[Iran’s] willingness to embrace VC and to take steps to implement a national cryptocurrency presents significant risks.” Read the paper for more on these risks, and how to combat them, including investigative techniques, use of technology and a close collaboration with other stakeholders.

Trish Sullivan is Global Co Head Financial Crime Compliance at SCB.

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Kartik Soni
4 years ago

good post.