Anti Money Laundering Blog

On October 29, 2008, the UK’s independent non-governmental body Financial Services Authority (FSA) announced that the same day it fined Sindicatum Holdings Limited (SHL) GBP 49 000.

The FSA also fined SHL’s money laundering reporting officer (MLRO), Michael Wheelhouse, GBP 17 500 as he did not have appropriate anti-money laundering systems and controls in place that would verify and record the identities of the customers. It should be noted that this was the 1st time the FSA has imposed a fine on a money laundering reporting officer.

A number of failings was detected by the FSA. The failings included the following:
- SHL failed to implement adequate procedures aimed to verify its customers’ identities;
- SHL failed to verify adequately the identities of a significant number of its customers;
- SHL failed to keep adequate records of the verification of its customers’ identities;
- SHL’s MLRO, Michael Wheelhouse, failed to take reasonable steps to implement adequate procedures for controlling risk of money laundering.

Head of retail enforcement at the FSA, William Amos, said that it is crucial to the integrity of the United Kingdom’s financial markets to ensure that regulated firms are not used by criminals for money laundering. He also said that senior management must implement and follow procedures that meet the requirements made by the FSA. According to Amos, this fine is a warning to firms and individuals about the importance to comply with the FSA’s rules and the Authority “will not hesitate to clamp down on failures, where necessary”.

When deciding on the amount of the fine for Sindicatum Holdings Limited, the FSA took into consideration the limited financial resources of the firm as well as its ability to pay the penalty. Otherwise the penalty is said to have been significantly larger.

In June, the Financial Action Task Force (FATF) has issued a report and issued it on its website.

This is the 19th Annual Report of the FATF.

This report summarises advances made by the FATF in combating money laundering and terrorist financing. These are as follows:

- Financial Action Task Force policies on admission of new members and observers.
- Statements regarding the anti-money laundering/counter-terrorist financing risks posed in certain countries and areas.
- Evaluations of the anti-money laundering/ counter-terrorist financing systems of:
Canada;
Finland;
Hong Kong,
the United Arab Emirates
China;
Qatar;
Russia;
Singapore.
- Guidance on implementation of financial prohibitions to combat the threat of proliferation of WMD.
- Best practices for fighting trade-based money laundering.
- Guidance aimed to assist low capacity countries.
- Typologies reports on: TF methods; money laundering and TF vulnerabilities of commercial websites and internet payment systems; and, Proliferation financing.
- Report on national money laundering threat analysis strategies that assists countries with developing threat assessments.
- Closer work with the private sector.

A 2-day sensitization workshop organized by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA) based in Dakar, Senegal, was held in Monrovia. At the workshop, the participants have advanced a number of recommendations.

The sensitization workshop was held under the theme “Enlisting the Support of the Liberian Media, Civil Society Organizations and Professional Groups for GIABA’s Strategic Action Plan to Combat Money Laundering and Terrorist Financing in Liberia.”

Some of the recommendations put forward at the workshop were as follows:

- The participants wanted the Government of Liberia to enact new laws on Money Laundering and Terrorist Financing in order to correspond to international standards and best practices.

- They recommended the Government of Liberia to pass the Anti-Drugs Law in order to help curb predicated offences that lead to Money Laundering and Terrorist Financing.

- The participants called on the Government to establish structures like a Financial Intelligence Unit (FIU) that will deal with fighting against Money Laundering and Terrorist Financing.

- They recommended to increase support (training, logistics and other technical supports) to law enforcement agencies.

- The participants called on the Government to improve the monitoring of the financial sector.

- They touched upon the roles of the media, civil society and professional groups in fighting Money Laundering and Terrorist Financing, recommending to establish stakeholder networks in order to enhance coordination, awareness and sensitization on impact of the problem in Liberia.

Previously, the Middle East and North Africa Financial Action Task Force (MENAFATF) was briefly mentioned as an anti-money laundering organization headquartered in Bahrain. However, this organization does deserve more attention.

MENAFATF is voluntary and co-operative body is established in November 2004 by agreement between its members and independent of other international bodies and organizations.

MENAFATF recognizing the Financial Action Task Force (FATF) 40 Recommendations on Anti-Money Laundering and the Special 9 Recommendations on Counter-Terrorist Financing as the international standards accepted worldwide.

Members of MENAFATF are as follows:

Jordan,
United Arab Emirates,
Bahrain,
Algeria,
Tunisia,
Saudi Arabia,
Sudan,
Syria,
Republic of Iraq,
Oman,
Qatar,
Kuwait,
Lebanon,
Egypt,
Morocco,
The Islamic Republic of Mauritania.
Yemen.

Besides 17 members, MENAFATF also has 12 observers:

The Republic of France,
The United Kingdom of Great Britain and Northern Ireland,
The United States of America,
The International Monetary Fund,
The World Bank,
The Co-operation Council for the Arab States of the Gulf (GCC),
The Financial Action Task Force,
The United Nations Office on Drugs and Crime (UNODC),
The Egmont Group of Financial Intelligence Units (Egmont Group),
Palestine,
The Kingdom of Spain,
The Asia/Pacific Group on Money Laundering (APG).

The objectives of MENAFATF member countries are the following:

adopting and implementing the 40 Recommendations of the FATF against money laundering,
adopting and implementing the Special Recommendations of the FATF against terrorist financing,
implementing the relevant UN treaties and agreements and United Nations Security Council Resolutions dealing with countering money laundering/terrorist financing,
co-operating together in order to raise compliance with these standards and measures within the MENA Region and working with other international organizations in order to raise compliance worldwide,
identifying money laundering/terrorist financing issues of a regional nature, sharing experiences of these issues and developing regional solutions,
building effective arrangements throughout the region to combat effectively money laundering/terrorist financing according to the particular cultural values, constitutional framework and legal systems of the countries which are MENAFATF members.

On July 8, 2008, the 11th Annual Meeting and the 7th Annual Technical Assistance and Training Forum of the Asia/Pacific Group (APG) on Money Laundering opened in Bali, Indonesia’s resort island. The meeting will last till July 11.

At the opening ceremony, Indonesian Coordinating Minister for Political, Legal and Security Affairs Widodo AS Widodo noted that money laundering is a multidimensional crime and that, to overcome it, all APG members should work hard. According to the minister, efforts to prevent money laundering and terrorist financing should be made not only at national level but also at regional level.

Widodo said that the increasing rate of worldwide crime as a result of globalization is the real challenge. He also added that Indonesia was committed to anti-money laundering and counter-terrorist financing efforts.

At this meeting, the APG planned to evaluate the implementation of international standards against money laundering and terrorist financing issued by the Financial Action Task Force (FATF).

On April 2, 2008, the Financial Crimes Enforcement network, FinCEN, issued a detailed report for the insurance industry.

The Report titled An Assessment of Suspicious Activity Report Filings; April 2008, reviewed Suspicious Activity Report (SAR) filings in the industry. FinCEN’s document verifies that the majority of SAR filings in the insurance sphere are for money laundering. It highlights key findings of an assessment that was conducted in one-year period from May 2, 2006 to May 1, 2007 by insurance companies as regards suspected money laundering and other financial crimes.

On February 29, 2008, the Financial Action Task Force (FATF) issued Terrorist Financing Report.

This document is the study that examines the means terrorists use to raise funds and the wide range of methods they use to move money within a criminal organisation or between organisations. According to the FATF, “the adaptability and opportunism shown by terrorist organisations suggests that all the methods that exist to move money around the globe are to some extent at risk”.

The study covers and describes such problems as the terrorist requirement for funds, raising terrorist funds, moving terrorist funds, international response to terrorist financing, and policy implications.

The study identifies 4 areas to focus efforts on in order to strengthen counter-terrorist financing activities. These are addressing jurisdictional issues, outreaching to the private sector, building a better understanding across bith public and private sectors, as well as enhancing financial intelligence to use financial investigations for fighting terrorist financing.

The document was published on the FATF website on March 14, 2008.

In the end of November, Prime Minister of Thailand Surayud Chulanont chaired the international conference on international cooperation against money laundering  at the Anoma Hotel in Bangkok.

This was the Financial Action Task Force (FATF) / Asia Pacific Group on Money Laundering (APG) Annual Typologies Meeting.

Surayud told the conference that it was a good occasion for members of the Financial Action Task Force on Money Laundering and Asia Pacific Group on Money Laundering to realise and evaluate the situation in the region. He also said that it is important for Thailand to be member of the group.

The issues under discussion at the conference were as follows:

- Money Laundering Threat Analysis Strategies,
- Weapons of Mass Destruction Proliferation Financing,
- Vulnerabilities in Gaming and Casino Sector,
- Vulnerabilities of On-line Commerce.

The Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), an international financial action task force which started in 2006, has stated that affirmative action is needed to fight economic crimes in the region.

On November 14-15, the GIABA 2007 Open House was held in Abuja. The theme of the Open House was “Preventing money laundering, terrorist financing and drug trafficking in West Africa: A collective responsibility”.

The Director General of GIABA, Dr. Abdullahi Shehu, claimed that governments are to sensitize their citizens on the threats to the economies, financial and political systems in West Africa that can be caused by money laundering.

Dr. Shehu said that GIABA must not allow West Africa to be used by criminals and therefore decisive action is needed not to let economy destroy or become vulnerable.

He said that GIABA was important at the highest echelon of governments as it assisted them to eradicate money laundering the region.

It has been discussed that money laundering and tax evasion, if not one and the same,  are closely linked.

In October, the Organisation for Economic Cooperation and Development (OECD) published 2 new reports that outlined the progress made in the organisation’s campaign against tax evasion.

The report entitled “Improving Access to Bank Information for Tax Purposes – the 2007 Progress Report” provides the description of developments in OECD countries and 6 other countries – China, the Russian Federation, South Africa,  Argentina, Chile and India. These development regard access for tax authorities to bank information.

The 2nd report is named “Tax Co-operation: Towards a Level Playing Field – 2007 Assessment by the Global Forum on Taxation”. It offers the comparison of the legal frameworks for international tax co-operation of 82 OECD and non-OECD economies.

According to the OECD, “many financial centres, both onshore and offshore, are making progress in improving transparency and international co-operation to counter offshore tax evasion, but some still fall short of international standards that have been developed over the last seven years.”

Paolo Ciocca, chair of the OECD’s Committee on Fiscal Affairs and co-chair of the Global Forum, commented that no country can address the issue of harmful tax practices on its own as this is a global challenge requiring a global response. OECD aims to achieve it in co-operation with partner financial centres.