On 13 June 2019, the US Department of Justice, U.S. Attorney’s Office, Southern District of New York indicted four individuals, Moazu KROMAH, Amara CHERIF, Mansur Mohamed SURUR, and Abdi Hussein AHMED charged with participating in a conspiracy to traffic more than US$7 million in rhino horns and elephant ivory. In addition, KROMAH, CHERIF, and SURUR were charged with conspiracy to commit money laundering, and SURUR and AHMED were charged with participating in a conspiracy to distribute and possess with intent to distribute more than 10 kilograms of heroin. One of those charged is now in the US, another awaiting extradition in Senegal and two remaining Kenyans still at large, on the run.
This is not just important in terms of the action taken but how co operation across agencies and between public and private sectors and effective information sharing made a difference.
In February 2019, FATF issued its proposed recommendations for AML governance of the crypto industry. Under pressure from the international community, the FATF aimed to bring amendments to Recommendation 15 (New Technologies) into force at the June 2019 plenary. Within the proposals, one point was opened for consultation; colloquially known as 7(b) the proposal seeks to introduce wire transfer recommendations required of the traditional banking sector into the crypto industry. That is, originator and beneficiary information is collected, screened and transmitted between correspondent institutions with the objective to prevent criminals and terrorists having unfettered access to the financial system.
The crypto industry responded but not for the reason many thought; the response was not to fight against regulation or kick the can down the road for another day but to make sure that the regulation could be effective.
FCN Sub Saharan Africa Threat Assessment – Publication is now available: – see below
Recent FCN Publications
Financial Crime News is today publishing a Country Financial Crime Dashboard for Turkey.
The threats generating significant proceeds of crime and posing a “High” ML threat are illegal drug trafficking, migrant smuggling, human trafficking and fuel smuggling.“Medium” ML threat levels are for aggravated fraud; smuggling of tobacco, tobacco products and alcohol; illegal online betting and corruption.Turkey also faces severe threats from terrorism and has suffered from a significant number of terrorist attacks.
The sectors posing the highest ML/TF risks are related to activities involving Banking, money and value transfer services, including illegal money exchangers, Payment & E Money Institutions, Foreign Exchange Offices, Cryptocurrency Intermediaries, Real Estate Agents, Jewellers & Dealers in Precious Metals and Stones. Turkish increase in exports of critical goods to Russia raises risks that Turkish firms are targeted in connection with Western Sanctions circumvention.
The Early History of the FATF and what we can learn from the Founders and what this means for the Fight against Financial Crime, including Money Laundering
Today Financial Crime News is publishing an exploration of the early years in fighting financial crime when in the 1980’s and the early 1990’s the follow the money approach ushered in the ant money laundering era and saw the birth of the FATF.
The recent work of the FATF (Financial Action Task Force on Money Laundering Terrorism Finance and Proliferation Finance) is well known, but how and why it was established is less well understood and indeed may even be contested. It could have been a task force to tackle offshore tax havens but instead became a task force to tackle drug money laundering focused on large industrial countries and countries with large financial centres. It’s original aims were clear, – “success will provide a decisive contribution to the fight against criminal activities, and, above all against drug trafficking, & will improve the soundness of the international financial system”.
It was an honour for the author to speak at the Abu Dhabi Finance Week on a panel focussing on Financial Crime “Global Governance Frameworks – Avoiding Cracks” with: David Lewis, Chady el-khoury, Dr Reem Alshamsi and expertly hosted by Mohamed Shalo.
Rather than focus on cracks in an assumed existing comprehensive framework I raised the issue of problematic gaps that had long existed and needed tackling.
The Author suggested something new he hadn’t said in public before after many months of discussions with many colleagues at the Global Coalition to Fight Financial Crime and elsewhere.
Whilst their is an argument to be made that what is needed now is for their to be a Financial Action Task Force on Financial Crime, Fraud and Money Laundering (Including Terrorism and Proliferation Finance) and not just on ML, with monitoring powers and the ability to apply consequential measures, their is also an argument that the current FATF approach should first evolve and consider 3 important adaptations before this approach is accepted.
The United Nations (and its predecessors) have been fighting financial crime for over a century – Lessons learned and how to evolve the UN’S approach and the FATF’s too.
For more than 100 years, concern around crime and its international nature has been identified and responses to it are still being proposed. For 70 years, The United Nations has played a significant part in identifying and urging Member States to agree instruments to tackle many of the main crime types, including drugs, organised crime corruption, terrorism, human trafficking, people smuggling, arms trafficking, wildlife trade for endangered species and even recently attempting to do so on cybercrime. Before that the League of Nations was less interested but still focussed on drugs. slavery and refugees.
With a lot of the worlds focus very much on Money Laundering, including Terrorism Finance and Proliferation Finance, and to some extent Corruption, the United Nations and its agencies appear relatively diminished, and in the shadows, as do their leaders, underfunded and insufficiently resourced to really perform the roles originally intended.
Today FCN is publishing a Financial Crime Dashboard for Australia.
Main threats are from fraud, drugs and arms trafficking, corruption, people smuggling, theft and cybercrime, child sexual exploitation, green crimes including wildlife trafficking and illicit tobacco.
Areas for improvement include on prosecutions and convictions for money laundering and foreign corruption as well as on human trafficking, although significant increases in prosecutions and convictions for child sexual exploitation have been reported. in terms of asset recoveries, a target of AUD600 Million was set to be recovered in the period June 2019 – June 2024, which has alreday been achieved demonstrating targeting and prioritising asset recoveries has an effect. Nevertheless, asset recoveries in terms of %age versus estimated proceeds of crime remain low.
In the past few years, the UAE has made very significant improvements in its AML/CFT response, following its relatively poor FATF Mutual Evaluation Report (FATF MER 2020) published in 2020 and its inclusion on the so called FATF “grey-list” in 2021, followed by the EU “grey-list” soon thereafter. Whilst a number of ratings for FATF Recommendations have been improved, and FATF itself has provided positive updates on the direction of travel for the UAE, whether UAE will come off these “grey-lists” in 2024 is of interest to many. Whilst this will be a matter for the FATF, and by extension the EU, real progress has undoubtedly been made, but will it be enough?
In this article Financial Crime News considers some of the areas where improvements have been made and where more can be expected, and a forecast to where the UAE may be in relation to effectiveness at the end of 2023 and 2024.
This week, the FCN is chronicling the progress that has been made in the UAE not just to get off the FATF Grey list but to make a sizeable step change in understanding and reacting to the threats faced in a whole of government approach with the private sector also upping their game too. This effort is being led by the Executive Office for AML/CTF and the Director General Hamid Al Zaabi who deserves great credit along with the many that have dedicated themselves to these efforts.
Today financial crime news is publishing a 2 page updated financial crime dashboard for the UAE which allows direct comparisons against the many dashboards already produced for the USA, UK, France, Hong Kong, China, Canada etc.
Finishing up on a week in Canada wouldn’t be right without also publishing a 2 page Canadian Financial Crime Country Dashboard by FCN for September 2023.
Overall Canada has a strong framework to fight ML/TF. Very high threats come from capital markets fraud, commercial (trade) fraud, bribery and corruption, drug trafficking, illegal gambling, mass marketing fraud, mortgage fraud and 3rd party money laundering. High threats were from currency counterfeiting, piracy of goods, human smuggling, human trafficking, identity fraud, payment card fraud, robbery and theft, tax evasion and tax fraud, tobacco smuggling and trafficking and pollution crime. Medium threats include wildlife crime.
Terrorism remains a leading threat and Canada has listed 113 terrorist entities that pose a threat, albeit not necessarily a terrorist financing threat.
Today FCN is publishing the Hong Kong Financial Crime Country Dashboard 2023.
According to the 2022, HK NRA, the overall 2022 ML threat was rated “Medium High”. The terrorist financing and proliferations financing risks were rated at “Medium – Low”. Domestically, fraud was rated as “High” and drug trafficking as “Medium High”. Internationally, fraud was also rated as “High” while drugs, corruption and tax evasion pose “Medium High” threats. The 2022 NRA states that, “In terms of the overall assessment, the local crime rate has remained at a low level since the last NRA report, though the forms in which predicate offences are committed have seen changes. In particular, it is observed that for both domestic & external crimes, predicate offences involving the use of the Internet, email, & social media are increasingly common due to the advancement of technology, the prevalence of electronic financial services, & social distancing measures arising from the COVID-19 pandemic.
Today FCN is publishing the China Financial Crime Country Dashboard.
The main proceeds-generating predicate crimes in China are illegal fundraising, fraud, trafficking in illicit drugs, corruption and bribery, tax crimes, counterfeiting of products, and illegal gambling. China also faces a serious threat from terrorism.
Sector Vulnerabilities & Risks:
Banks (based on the nature of their products/services and volume of activity), no effective arrangements in place for registering and retaining beneficial ownership (BO) information, the lack of coverage of designated non-financial businesses and professions (DNFBPs) by the AML/CFT framework is a significant vulnerability, large underground financial sector with broad international connections, a rapid growth in the use of Fintech products, particularly in the non-bank payment sector
The main sector residual risks are: High – Banks, Internet Finance Sector, Dealers in Precious Metals, Online Lending institutions, Payment Institutions & Small and medium sized urban, rural, credit banks and cooperatives.