Anti Money Laundering Blog

A number of Caribbean countries have been assailed by the United States for their alleged continued facilitation of money laundering and financial crimes.

In the second part of the 2011 International Narcotics Control Strategy Report (INCSR), the United States’ State Department was particularly concerned about efforts made by several jurisdictions in addressing these crimes. The countries named by the authority were the Cayman Islands, Belize, the British Virgin Islands, Antigua and Barbuda, and the Bahamas.

According to an evaluation of anti-money laundering and anti-terrorist financing regime of Canada over the past decade, government authorities still do not share enough information among themselves.

A private consulting firm presented to the Finance Department the report suggesting that a lack of proactive disclosures from Canada’s financial intelligence unit hampered efficiency.

The report criticizes Canada as being on high alert for suspicious transactions from countries in North Africa and the Middle East.

According to this report, the inefficiencies in the regime’s efforts related to the Financial Transactions and Reports Analysis Centre of Canada stem from the tight rules under which the agency has to operate. The report says: “The efficiency of the regime has improved, particularly since 2008, but inefficiencies were found related to the full use of FINTRAC proactive disclosures”. It adds that “these stem from organizational mandates and perhaps the allocation of regime funds, and limitations in information sharing attributable to certain legislative and regulatory provisions.”

The current evaluation says that FINTRAC, an independent agency operating in accordance with rules set out in the Process of Crime and Terrorist Financing Act, needs consent from the Office of the Superintendent of Financial Institutions in order to share some particular information with other regime partners. It should be reminded that Canada’s anti-money laundering regime was set up in 2000, and in 2001 the anti-terrorist financing mandate was added.

On February 18, in order to step up its pressure on corruption in Afghanistan, the United States sanctioned a major Afghan money-exchange outfit as it was suspected of laundering billions of USD in drug money.

The US Treasury Department sanctioned the New Ansari Money Exchange. According to the authority, the money-exchange outfit was the center of a network of individuals, money-exchange houses and other businesses operating in Afghanistan and the UAE.

In a statement released in Washington, the US Treasury Department claimed that between 2007 and 2010, the New Ansari Money Exchange used billions of USD transferred in and out of Afghanistan for concealing illicit narcotics proceeds. New Ansari transfers money to its Dubai subsidiaries – Green Leaf General Trading LLC and Al Adal Exchange. Afterwards, they transfer money through US and international financial systems.

The US Drug Enforcement Administration Administrator Michele Leonhart said: “The New Ansari network is yet another example of money launderers exploiting legitimate financial systems to launder their ill-gotten gains, including illicit drug proceeds, as part of their criminal enterprise”. He added: “Cash is the ultimate commodity for these criminal networks, and these proceeds often fuel insurgent activity and corruption, while undermining the authority of developing governments.”

A Lebanese bank has denied accusations by the United States’ Treasury Department that claims the bank is involved in laundering hundreds of millions of USD on behalf of a drug kingpin. Also, the bank has rejected accusations that it has links with Hezbollah, the Lebanon-based militia.

On February 10, the US Treasury Department described the Lebanese Canadian Bank in Beirut as a “financial institution of primary money laundering concern.” According to the US authority, it had reason to suggest that managers at the bank were complicit in money laundering by Ayman Joumaa, an alleged trafficker accused by US authorities of shipping drugs. Also, the Treasury’s action in designating the Lebanese Canadian Bank (LCB) exposed links between the bank and Hezbollah, which is listed as a terrorist organization by the USA.

The bank’s chairman, Georges Zard Abou Jaoude, said that the bank had no relationship with Hezbollah as well as with anyone designated by the US Treasury Department.

In the past 15 years, money laundering has significantly grown in Mexico. As a result, it reached as much as USD 10 billion in 2010. This was announced by Sen. Carlos Navarrete who was quoting Attorney General’s Office figures.

During the inauguration of the “Seminario Internacional sobre Corrupcion y Lavado de Dinero” (International Seminar on Corruption and Money Laundering) held on February 9, the senator said that money laundering is a problem worsening from day to day as billions of USD have been laundered and injected into Mexico’s formal economy over several years.

He noted: “This problem has disrupted banking institutions, investment firms and businessmen, and I believe it is time for a good law that will allow us to strike a blow at the finances of organized crime groups”.

Lawmakers, other public officials and Mexican and foreign academics took part in this seminar to analyze the legislation submitted to Congress by the Calderon administration in 2010 with a view to fight money laundering.

The Federal Police’s coordinator of operations targeting ill-gotten gains, Jesus Alberto Fernandez Wilburn, said that any new rule should improve access to information between the authorities and other countries.

It should be noted that Mexico is currently conducting 15 open investigations with the US. However, Fernandez said that until the country has adequate mechanisms, there will be no exchange of information between the authorities.

Several Spanish experts were invited to the conference to evaluate efforts to struggle money laundering. University of Salamanca professor Eduardo Fabian Caparros said: “The economies of important countries have allowed themselves to be dazzled by the short-term advantages of asset laundering and have installed sinister windows to collect the foreign exchange without asking where it comes from”.

New penalties for offshore non-compliance have been announced by UK’s HM Revenue & Customs (HMRC). The new penalties come into effect on April 6, 2011 and apply to Income Tax and Capital Gains Tax.

The first Self-Assessment returns affected will be for the 2011-2012 tax year, with paper returns due to be filed by October 31, 2012, and electronic returns by January 31, 2013.

The new legislation can be found in Schedule 10 of Finance Act 2010. Under the new rule, the penalties will be linked to the tax transparency of the jurisdiction in which the income or gain arises. Penalties for failing to declare income or gains arising in another country will be higher where it is harder for HMRC to get information from that jurisdiction.

Three new levels of penalty will be introduced:
-    where the income or gain arises in a territory in ‘Category 1′, the penalty rate will be the same as under existing legislation;
-    where the income or gain arises in a territory in ‘Category 2′, the penalty rate will be 1.5 times that in existing legislation – up to 150% of tax;
-    where the income or gain arises in a territory in ‘Category 3′, the penalty rate will be double that in existing legislation – up to 200% of tax.

In an interview with Cayman’s local television news channel, the chair of Cayman Finance Anthony Travers has called Nicholas Shaxson, the author of a new book on tax havens, an imbecile.

Travers criticized the book called Treasure Islands: Tax Havens and the Men Who Stole the World as well as its author. Shaxson says that his work demonstrates no more than an 11-year-old’s understanding of offshore finance, while Travers suggested that Shaxson’s position came from the politics of envy. He added: “Now the politics of envy are exacerbated by imbeciles who don’t actually understand what’s going on in the Cayman Islands”.

Travers said the opinion that Cayman is a tax haven or a magnet for illicit transactions is no more than fiction. There are places where money laundering or tax evasion are easier, but the Cayman Islands is not such a jurisdiction. He noted: “There are simply jurisdictions where it would be more sensible to perpetuate your fraud or money laundering than the Cayman Islands”.

To respond, Shaxson said that Travers had refused to talk to him when he came to the Cayman Islands and challenged Travers to explain in detail what he does not like about the book.

It was widely discussed in 2006 that a famous Australian actor Paul Hogan had been under investigation for money laundering.

The Australian Crime Commission became suspicious that the star of one of the most successful Australian movies ever was using offshore tax havens in order to conceal his wealth. As a result, the actor was subjected to a 5-year tax investigation which was dropped in November 2010.

Recently, it has been announced that the world-famous Crocodile Dundee is planning to sue the Australian government for more than GBP 50 million (up to USD 80 million) for damaging his reputation in this tax probe.

According to Hogan’s lawyer Andrew Robinson, his client is to sue the Australian government for loss of earnings as ‘his earning potential and reputation has been decimated in the international community and it has had that level of effect on his position”.

The International Monetary Fund (IMF) has published 6 reports that were the result of the evaluations held by the Fund in March and May 2010. These were evaluations on Guernsey’s financial supervision and criminal justice frameworks that concerned anti-money laundering and counter-terrorist financing in the jurisdiction.

In accordance with the reports, Guernsey has financial sector regulation and supervision of a high standard across all sectors. These reports take into consideration Guernsey’s well-positioned basis for an effective Anti-Money Laundering/Combating the Financing of Terrorism regime, with preventative measures in line with the Financial Action Task Force (FATF) Recommendations.

As part of the IMF’s global Financial Stability Assessment Program, the evaluations were produced that assessed the jurisdiction as having a high level of compliance with the international standards. The standards were as follows:
-    the 25 Basel Core Principles for Effective Banking Supervision;
-    -the 28 Insurance Core Principles of the International Association of Insurance Supervisors;
-    the FATF 40 Recommendations on money laundering and 9 Special Recommendations on terrorist financing.

The 6 reports have been welcomed by the Guernsey government and the Financial Services Commission.

Guernsey’s Chief Minister Lyndon Trott said: “The regulatory framework and the Bailiwick’s anti-money laundering and combating the financing of terrorism regime that is now in place have been important factors in both sustaining Guernsey’s economy and developing and maintaining Guernsey’s international reputation as an excellent place to do business. This in turn has been an important driver in the continuing development of Guernsey’s international identity.”

It is worth mentioning that the reports also re-assessed the work of the Financial Investigation Unit (GBA/Police), the Law Officers Chambers and all the member organisations of the AML/CFT Advisory Committee, and reported the achievement of high international standards.

In October 2010, the Financial Action Task Force (FATF) published a report entitled Money Laundering Using New Payment Methods.

This report builds on the 2006 Typologies report on New Payment Methods (NPMs). It should be noted that there has been a significant increase in the number of transactions and the volume of funds moving through new payment methods (NPMs) since 2006. As a result, the number of discovered cases where such payment systems were misused for money laundering (ML) and/or terrorist financing (TF) purposes has gone up.

The report that can be downloaded from the FATF website compares the “potential risks” described in the 2006 report to the “actual risks” based on new case studies and typologies. A number of indicators of suspicious activity are described in the paper to help new payment methods service providers and other financial institutions to detect money laundering/terrorist financing activities. The FATF document describes the challenges faced by national legislators and regulators in these terms.

The Money Laundering Using New Payment Methods report was the result of analysis of questionnaire responses and publications about NPMs. Also, relevant private sector representatives such as NPM service providers (including the Internet payment sector, the mobile payment sector and prepaid card technology providers) made a significant input.