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Money Laundering

When India decided to remove, without warning, two large value notes from circulation and cancel their legality, Economists chugged their drinks and were delighted that India would be pulling back into some kind of order the unsustainable position that the vast majority of the money in circulation was held outside the banking sector, in cash. But behind the scenes, there was a shadow hunting through the depths of the data that the exercise generated. And now that shadow is found to have some large and sharp teeth.

Economic and Financial Crimes Commission, EFCC, really has got the bit between its teeth in a way that few other anti-corruption bodies have managed elsewhere in the world. Yesterday, it brought two very high-profile figures before the court: a Senior Advocate of Nigeria (SAN), Muhammed Dele Belgore and a former minister, Professor Abubakar Sulaiman. They have pleaded not guilty in a case that has already tested the will of government to let the EFCC act independently and will now test the judiciary with which both defendants have a long and close history.

On 30 January 2017, the NYDFS superintendent, Maria Vullo, announced that Deutsche Bank would pay a fine of USD425 million for failures in counter-money laundering systems and controls, in an investigation closely linked with a similar investigation into the same facts by the UK's Financial Conduct Authority. What the NYDFS found is disturbing.

It has long been a bone of contention in London that, in particular, US, Japanese and German banks set up local systems to comply with their head office measures, even where those fall short of requirements in the UK. In the case of US and Japanese banks, it's been a matter of arrogance. In the case of German banks, it started off as arrogance but that was complicated by the creation of "passported institutions" where a number of financial institutions have argued that home regulation trumps UK law and regulation. The FCA has had enough of that nonsense and has issued its biggest fine to date for money laundering control failures.

AUSTRAC has issued a reminder to all businesses regulated for counter-money laundering and anti-terrorist financing purposes that annual reports are now due.

Optimumbank (yes, it is all one word) is based in Plantation, Florida. It's on the watchlist of both state regulator the Florida Office of Financial Regulation and the USA's Federal Deposit Insurance Corporation, the Plan B for failing US banks that protects itself (and taxpayer's money) by an increasingly tight system of national regulation. Its actions include monitoring capital adequacy (about which it often has justifiable hissy fit with the "mom and pop" banks that seem to forget they owe multiple regulatory duties) and, because it is a relatively measurable form of compliance monitoring, failures to comply with money laundering laws. Optimum bank has come to FDIC's notice before the action apparently concluded in November 2016.

A notice from the central bank of the Philippines (Bangko Sentral ng Pilipinas, "BSP") has told operators of pawnshops that the must get their house in order with amendments to the relevant regulations.

It is a mark of the integrity of a country as to how it deals with counter-money laundering laws. Politicians who consistently vote to exclude measures that catch bribery and corruption as predicate crimes for money laundering must automatically render the whole country as suspicious, applying the argument that fish rots from the head. Kenya was one of a number of countries that suffered this problem with leaders being constantly frustrated by other members of government. A compromise Act was eventually passed. Now it's bearing fruit. And the role of the targets will ricochet around the world.

The DFSA Rulebook and Code of Market Conduct were subject to consultation and, following that, the DFSA Board has concluded the production of revisions to both documents.

The DFSA Board has passed a series of instruments (listed below) to give effect to the new versions. DSFA reminds users that, as a result of the consultation, there may be differences between the final version as published and the original drafts.

BIScom Subsection: 

When we found an advertisement for illegal downloads of Sun Tzu and the Art of Litigation, we wrote to everyone that public records showed as connected to the issue or hosting of the domain. We found, again, that Cloudflare was at the heart of the illegal operation and therefore being paid to provide services to criminals who may be generating profits for organised crime or for material support for terrorists. FCROs must consider the business practices and risk management models of their customers because, by definition, banks are receiving, harbouring and distributing the proceeds of criminal conduct received via those companies.

FCRO Subsection: 

Standard Chartered Bank has been ordered to pay SGD5.2m and Coutts (at the relevant time part of Royal Bank of Scotland) to pay SGD2.4 million for breaches of the Monetary Authority of Singapore's counter-money laundering requirements. It's also a slap in the face for Malaysia's Prime Minister Najib because the penalties arise from compliance failures relating to 1MDB, Najib's flagship project. There is also the minor matter of a Goldman Sachs employee and false statements.

The European Commission (EC) has decided that the European Union (EU) system of Directives isn't working when it comes to money laundering and terrorist financing. They are right. What's taken them so long to work it out? The question is this: have the identified the correct matters and will they get it right this time?

FCRO Subsection: 

"Banks will have clearer guidance on how to best manage risks related to money laundering and the financing of terrorism...in correspondent banking," says the Bank of International Settlements' Basel Committee.

FCRO Subsection: 

For all the nonsense that the EU gets up to, there are some, little known parts, that do extremely good and valuable work. The European Union's Judicial Cooperation Unit, which goes by the moniker EuroJust, is one of those units. There is also Europol’s European Cybercrime Centre (EC3). Add in Europol itself, plus some other agencies that combine intelligence, investigation and prosecution and the EU has a sound infrastructure for combatting intra-community crime. It's essential that this part of the EU is retained when the UK leaves for without it all will be weaker.

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