Archive for December, 2006

EU anti-money laundering laws improperly implemented

Saturday, December 30th, 2006

In accordance with a new report released on December 21, 2006, the fight of the European Union against money laundering is not as successful as it could be because its member states improperly implement EU law across the bloc.

The study says that EU member states failed to create a consistent anti-money laundering regime across the European Union implementing the 2001 2nd money laundering directive. It stresses the necessity to maintain the integrity and effectiveness of the financial system creating an effective anti-money laundering regime.

The report indicates that there were major discrepancies in the directive’s scope and interpretation across the different EU member states, as well as points out that the way member states identified and reported suspicious transactions differed between countries. Also, some members are too slow to react to fishy money movements, which makes it impossible to fight them.

The 2001 2nd money laundering directive was meant to be implemented in 2003 for the 15 old EU members and in 2004 for its 10 new members. However, Italy was 6 months late while, but Greece implemented the law 2.5 years late.

Carrying out the study, the City of London was analysing how the directive was implemented in 6 countries – UK, Italy, Spain, Poland, Greece and Lithuania.

To conclude, European policy makers and regulators will strive to implement the 3rd money laundering directive in 2007.

FID cannot handle money laundering without POCA

Tuesday, December 26th, 2006

The Financial Investigation Division (FID) considers that Jamaica cannot handle the problem of money laundering properly, which is a big problem for it, until passing the Proceeds of Crime Act (POCA). Next year, the POCA is expected to be brought for debate before the House of Parliament.

Currently, people who are found guilty of money laundering are prosecuted under the Money Laundering Act of 1998, which will be repealed as soon as the POCA is passed. Meanwhile, allegations of money laundering are investigated but, according to, very little that can be done about them except for taxing the people.

The offences are mostly fraud and larceny, and it is more difficult to work with a drug-related offence. Currently, there are 5 money-laundering cases before the courts in Jamaica, where money laundering is carried out as real construction, estate purchases, trade, used car dealership, extortion and smuggling.

In 2005, just 7 cases of money laundering were brought before the courts since 2001. And there have been only 2 convictions for money laundering since the establishment of the FID 2002. In accordance with the FID’s data, this year 8 people have been convicted of breaches of the Money Laundering Act, while there were 5 last year. The numbers are small, but the 8 convicted were responsible for 20 counts of money laundering.

In accordance with the Money Laundering Act, keeping and reporting for financial institutions on all currency transactions over USD 10,000 is obligatory. As to exchange bureaus, they have to report the threshold of USD 50,000.

In the period of January-September 2006, the FID received 18,311 suspicious transaction reports, 46,765 threshold transaction reports and 30 cash transaction reports. There was a significant increase in the number of suspicious transaction reports by 2164 as compared to 2005, while the number of threshold transaction reports decreased from 52,310. Only 12 suspicious cases were investigated for money laundering out of the 231.

The head of taxation at the Association for Chartered Certified Accountants, Chas Roy-Chowdhury, has recently participated at an anti-money-laundering seminar and told there that worldwide money laundering could amount to between 2 and 5% of the global GDP, which is approximately USD 590 billion to USD 1.5 trillion. He also indicated the possible warning signs for money-laundering activity, which include the following:

  • unusually large deposits of cash made by an individual or company whose affairs would normally generate deposits by cheque or banker’s draft;

  • substantial increases in cash deposits without apparent cause;

  • depositing large numbers of smaller cash amounts which together make up a substantial sum;

  • customer’s providing information which is difficult or expensive to verify;

  • customer’s unwillingness to provide routine information when opening an account;

  • large withdrawals from a hitherto dormant/inactive account.

China reveals Money Laundering worth USD 1.75 billion

Thursday, December 21st, 2006

Chinese authorities have recently found 7 big underground banks engaged with money laundering cases worth more than USD 1.75 billion. Police arrested 44 people suspected of being involved in the underground banks that were found in Shanghai, Inner Mongolia, Guangdong, Liaoning, Heilongjiang and Xinhua.

China has been seeking to crack down on illicit financial activities in order to reinforce the stability of its developing financial systems and prevent possible involvement in terrorist financing. Urgency to the issue has been added by suspected links between China and international drug trafficking syndicates.

The biggest case so far was reported earlier in the beginning of December. It involved a money laundering operation carried out by a Singaporean in Shanghai, suspected of handling USD 630 million. That underground bank was offering foreign exchange, transfers as well as other banking services between Singapore and 25 major Chinese cities. Authorities managed to seize frozen accounts worth USD 7.4 million.

The changes in Chinese legislature have already been discussed previously. The national legislature has recently enacted China’s 1st anti-money laundering law that gave the central bank greater investigative power. One of the biggest changes was including bribery in the list of money laundering crimes covered. The new law is to come into effect on January 1, 2007.

Money-laundering offences

Sunday, December 17th, 2006

In accordance with the information provided by International Money Laundering Information Bureau (IMLIB), there are 5 basic money-laundering offences.

The 1st offence is assisting another in order to retain the benefit of crime. This is when one person is involved in an arrangement with another one knowing or suspecting the other person’s involvement or benefiting from drug trafficking or criminal conduct, and this arrangement allows the other person to retain or control proceeds – either directly or indirectly – or to use the proceeds or to invest them for his benefit.

The 2nd offence is acquiring, possession and use of criminal proceeds. This is the offence of using or possessing property which can be reasonably suspected to be the proceeds of drug trafficking or criminal conduct, and having acquired this property cheaper than at full value. The offence prevents criminal proceeds being passed on by criminals to be enjoyed by third parties.

The next offence is concealing or transferring proceeds to avoid prosecution or a confiscation order (also called Own Funds money laundering). This offence is disguising, removing or transferring proceeds of drug trafficking or criminal conduct – either directly or indirectly – in order to avoid prosecution or help someone else do it.

Another money-laundering offence is failure to disclose knowledge or suspicion of money laundering, which relates only to drug trafficking and terrorism. This means that if a person gets to know or suspect something in the course of his trade or employment and does not report this information to police, he/she is guilty.

Finally, the last type of money-laundering offence is tipping off. It is required to report suspicions, however, this is efficient if the suspected is tipped off to the fact that he/she is under investigation. Therefore, tipping off is used to preserve the integrity of an investigation. This is when information which might prejudice the investigation is disclosed by someone who knows or suspects that either a police investigation into money laundering has begun or is about to begin, or the police have been informed of suspicious activities, or a disclosure has been made to another employee under internal reporting procedures.

Indonesia, Cayman and South Africa co-operate to combat money laundering

Wednesday, December 13th, 2006

The agreement has been signed between the Indonesian anti-money laundering watchdog and the Cayman Islands and South Africa. The agreement provides for exchanging financial intelligence and helping to fight the terrorist financing.

The cooperation of these countries is quite strategic, especially, taking into consideration the fact that Cayman is one of the world’s major financial centres. South Africa is also a key financial centre in the African region.

The cooperation agreements with the Cayman Islands’ Financial Reporting Authority and South Africa’s Financial Intelligence Centre include the exchange of financial intelligence connected with money laundering and terrorist financing.

Indonesia launched its Centre for Financial Transaction Reporting and Analysis (PPATK) in October 2003 in order to help fight money laundering. The centre has already entered similar agreements with 17 financial intelligence agencies.

It should be noted that after a year of being closely monitored, in February 2006, Indonesia was removed from the list of non-cooperative countries of the inter-governmental FATF, which believed the country was making sustainable efforts in combating money laundering and terrorist financing.

Anti-money laundering using technology

Saturday, December 9th, 2006

Various methods, techniques and procedures are used to fight money laundering – this is, actually, what most of the previous posts are about. However, money laundering can be fought not only by means of human resources, but also by means of technical resources.

It goes without saying that no information technology can replace a man – especially, well-trained, educated and competent specialist – but there are many money laundering techniques that are becoming more and more sophisticated. So, the technology can also be efficiently used to fight money laundering.

To make an example, Deutsche Bank uses a world-wide information system for monitoring potentially illegal transactions. With the help of this system, the bank has reduced the number of employees working on money laundering prevention from 50 to just four.

Anti-money laundering software packages are now what surprises nobody – they are just common for many companies and institutions. These recognize fraudulent scenarios, detect links between accounts and find suspicious behaviour.

Just some of numerous anti-money laundering software producers are STB Systems, Searchspace and ACI Worldwide.

FATF criticizes Australia

Tuesday, December 5th, 2006

Both the Financial Action Task Force (FATF) and its recommendations have already been described previously. This post, however, is more about the practical work carried out by the FATF.

A new FATF report suggests that Australia’s enforcement of laws against money laundering is falling short, delivering just few prosecutions. So, its federal government has been urged to reinforce Australia’s laws against money-laundering and terrorist financing. The FATF criticizes the enforcement regime as money laundering is seldom pursued as a separate offence outside of legislation dealing with the proceeds of crime.

The Financial Action Task Force considers the legislative framework to deal with about USD2-3 billion laundered in Australia yearly.

Australia’s laws dealing with the financing of terrorism have also been criticized by the FATF. In accordance with the report, the measures related to terrorist funding must go further. By the way, no prosecutions for terrorist financing have been seen by the FATF yet.

The report finds AUSTRAC, the national police financial crime unit, to be an effective organisation. However, it considers the agency to have failed to apply the full range of compliance tools available to it in the legislation.

The Financial Action Task Force report provides Australia with more than 90 recommendations to improve its anti-money laundering and counter terrorism financing regime.

Japanese sanctions against North Korea

Friday, December 1st, 2006

On November 21, 2006, Japanese Finance Minister Koji Omi has said that Japan plans maintaining its financial sanctions against North Korea in spite of a report that China has lifted a freeze on approximately half of assets of North Korean accounts in a Macao bank that purpotedly were connected with money-laundering operations for North Korea.

Finance Minister informed that Japan would continue imposing financial sanctions to demonstrate the international society’s attitude against North Korea’s nuclear development. Also, he claimed not to heard of the report about China’s move. Japan’s economic sanctions, including a ban on remittances to 15 entities and 1 individual are supposed to be related to North Korean programs for missiles and weapons of mass destruction.

After in September 2005 the USA declared that the bank in Macao was a prime mover in money-laundering for North Korea, China froze USD 24 million worth of assets held by North Korea at Banco Delta Asia. However, on November 20, 2006, China lifted the freeze on less than USD 12 million of the the country’s holdings.

The above-mentioned is much about politics, however, here it serves to exemplify the ways the international community is ready to fight money laundering – serious financial sanctions includingly.