Archive for June, 2007

Anti-money laundering expert warns UAE financial services firms

Saturday, June 30th, 2007

On June 14, 2007, a senior UK anti-money laundering expert based at Dubai International Financial Centre (DIFC) shared his concerns over companies that are operating in the region without appropriate protection against money laundering. He also stressed that many firms may still not be meeting regulatory requirements.

According to a senior consultant and trainer for compliance consultancy, CCL Limited, Terry Douglas, there is a danger that many employees in the financial sector have not been following procedures properly and have neglected the considerable risk that the firm might be exploited by criminals.

Douglas said that with the prospect of further recommendations from the Financial Action Task Force (FATF), the Dubai Financial Services Authority (DFSA) making efforts to tackle this problem since 2002 have been admirable, and it will by all means go on passing new laws and regulations in order to fight this international problem.

It should be reminded that all UN member states are expected to adhere to the 40 FATF recommendations related to money laundering as well as the additional 9 added after the 9/11 attacks in the USA to fight terrorist activity. In recent years, the regulators in Dubai have made strides to implement the above-mentioned recommendations.

Russia to establish new anti-corruption unit

Tuesday, June 26th, 2007

On June 22, 2007, Russian Prosecutor General Yury Chaika announced that criminal businesses and money laundering is a threat to the economic development of Russia and therefore a special anti-corruption unit will be created within his office.

According to Chaika, money laundering is conducted by carrying out deals and financial operations, which allows criminal organisations to penetrate into the legal economy and make illicit activities by producing new schemes.

The Prosecutor General said that anti-corruption unit would make use of the experience of similar units in Spain, and his recent visit to Spain was by no means accidental as Spain’s efforts in fighting money laundering and corruption were praised by the Council of Europe and its experience should be applied by other European countries.

In 2006, the number of detected crimes related to money laundering in Russia increased by 7%, and those committed by organized criminal organisations rose by 1/3.

In accordance with the data provided by the prosecutor’s office, almost USD 270 million in illegal incomes were laundered in 2006.

3 500 criminal cases were sent to court, however, just some 500 people have been convicted.

Second Life – ideal world for money launderers and terrorists

Friday, June 22nd, 2007

Second Life is a land created in 2003 by a San Francisco-based technology company Linden Lab. It is a planet of 6 million citizens with no police, no courts, no taxes, just slightly controlled fast-growing economy is lightly, banks and the stock exchange with no basic regulation.

Thanks God, it’s not the real world, as this is a haven for money launderers, fraudsters and terrorists where they can easily hide and move assets.

While Second Life is a virtual online world, it seems obvious that the criminal networks are a great threat to move from the cyberspace into our world.

A study for Britain’s Fraud Advisory Panel (FAP), a watchdog established by the Institute of Chartered Accountants in England and Wales, is advising that the Government should extend financial regulation of the real world into Second Life and some analogical games. The report warns that those who play these games could transfer large amounts of money all over the world without restriction and much risk of being detected. According to the FAP, criminals and terrorists could use the game for moving funds and avoiding surveillance as well as for money laundering, tax evasion, credit card fraud and identity theft.

The number of players of Second Life has increased from 700 000 in autumn 2006 to 6.2 million.

Users create their online characters called avatars to mingle with others all around the world. They use a pretend currency called Linden dollars to buy and sell any virtual items for fun or leaving impressions as well as to start up businesses. What is crucial, Linden dollars can be freely exchanged for real USD. In average, about GBP 750 000 changes hands a day.

In May, German prosecutors have launched a probe into allegations that child pornography was sold on Second Life.

In April, Linden Lab asked the FBI to assess whether its virtual casinos break US laws against online gambling.

A solicitor and chairman of the FAP’s cybercrime working group, Steven Phillipsohn suggests that thereis nothing virtual about online crime as it is all too real and advised the government to approach this issue seriously. According to him, the risk of money laundering is obvious and “there will be a migration of fraudsters into these sites when they see all of the opportunities”. While commerce, relationships and criminal activity are hidden in virtual online communities, the money is real and it is a real loss in case of tax evasion, fraud, or theft.

In 2006, a Chinese-born teacher living in Germany, Ailin Graef claimed to have been the 1st one to make USD 1 million on Second Life, through her avatar developing virtual properties and selling or renting them to other avatars.

A world-famous Internet search company, Google, intends to compile psychological profiles of web users by means of monitoring the way they play online games. Google expects to get information about the personalities and preferences of users by observing their online behaviour. The details on users could be sold to advertisers.

Ex-President rejects Money Laundering Amnesty

Monday, June 18th, 2007

On June 11, 2007, ex-president of Nicaragua Arnoldo Aleman rejected a proposed amnesty for his money-laundering conviction.

Aleman, who was the president of Nicaragua from 1992 to 2002, said he will back an amnesty for the sake of reconciliation, but he does not use his name in order to help the ones responsible for crimes committed under the presidency of Enrique Bolanos in 2002-2007.

He also said that he had already served several years of the imprisonment under a new penal code passed by the legislature. Ex-president is serving a 20-year sentence under the Family Cohabitation Regime. According to the regime, he is allowed to stay at home and travel within Nicaragua. Deputies from his right-wing Liberal Constitutionalist Party and the Nicaraguan Liberal Party-Conservative Party, had agreed to offer an amnesty for the ex-president Aleman.

Aleman was convicted of money-laundering, fraud and embezzling 100 million USD in 2003.

Bolanos left his post in January 2007, and currently he and Eduardo Montealegre, his finance minister, are under investigation by the nation’s attorney general for alleged corruption.

China strengthens Money Laundering Rules

Thursday, June 14th, 2007

On June 12, 2007, a Chinese news agency, Xinhua News Agency, reported that China has tightened its money laundering rules in order to prevent and stop this criminal activity and to join an international financial monitoring group.

On June 11, new rules were issued to make banks in China report any suspicious transactions to an enforcement agency run by the central bank. According to Xinhua News Agency, the government is hoping the release of the rules boost its chances of joining the Financial Action Task Force (FATF).

In May, the US agreed to support Beijing’s application to join the FATF, which will vote on Chinese membership this month.

In accordance with the information provided by Xinhua, the rules require banks to report clients suspected of the involvement in terrorist organizations listed by the government of China or the UN Security Council. If banks fail to comply, they could be temporarily closed or lose their business licenses.

UK Law Society is to change money laundering regulations

Sunday, June 10th, 2007

The UK Law Society has reached another stage in its attempt to change the draft money laundering regulations causing headaches among City lawyers in the UK.

On June 5, 2007, when meeting with the president of Law Society Fiona Wolf, Ed Balls MP informed that the Government had agreed to significantly change the definition of “beneficial ownership” in the draft bill, which has caused objections from City firms. According to Balls, the Treasury is now to consult on an extended definition of beneficial ownershipso that the necessary clarity would be given. To review the re-drafted definition that later will be provided to relevant stakeholders, the Society has 2 weeks at its disposal.

Woolf agreed that the Law Society for a long time has had concerns that the wording of the directive did not reflect the common law usage of trusts of the United Kingdom. He suggested that trusts “are used extensively in everyday life” and that “the definition of a beneficial owner was so unclear that it made it impossible for a solicitor to know who should be the subject of client due diligence”.

It also should be noted that recently the Law Society recently has won support from European Commissioner Charlie McCreevey for its attempt to change the bill. The Law Society had provided the European Union with legal advice from Matrix Chambers, according to which the definition lacked clarity.

2nd Annual Middle East Anti-Money Laundering Forum concuded

Wednesday, June 6th, 2007

On May 27-28, 2007, the 2nd Annual Middle East Anti-Money Laundering Forum took place in Bahrain, UAE to highlight the need to ensure pursuing more efforts for eliminating money laundering by financial institutions.

Annual Middle East Anti-Money Laundering Forum aims at maintaining successful anti-money laundering strategies using knowledge, teamwork and greater transparency and understanding changes in regulatory guidelines.

The 2nd Middle East Ant-Money Laundering Forum was a good opportunity for professionals to learn decisive and effective anti-money laundering strategies. The Forum offered unique information on the latest changes to guidelines and best practices on anti-money laundering strategies all over the world. The review of evolving technological solutions and training methods for financial institutions was also on the list.

The event was attended by some 60 specialists from the GCC and Middle East countries.

Head of Compliance of Oman International Bank (OIB), Hany Abou-El-Fotouh, has presented his speech at the forum. He told the delegation, that it has been agreed that Know Your Customer (KYC) procedure was very important and that this due diligence and bank regulation must be observed by financial institutions in order to identify their customers and do financial business with them.

Abou-El-Fotouh emphasized the importance of adequate staffing the compliance units of financial institutions. Also, he stressed the importance of on-going training on all aspects of money laundering control to ensure employees’ being up-to-date regarding money laundering and suspicious transactions and their identification.

Anti-Money Laundering to be strengthened in Jersey

Saturday, June 2nd, 2007

Strengthening anti-money laundering laws aimed at preventing Jersey’s usage for money laundering or terrorism financing purposes is being considered by this jurisdiction’s Council of Ministers. Recently, a public consultation on extending the law has been launched in order to invite points of view from businessmen. According to the proposals included in the consultation papers, the regulations would cover estate agents, solicitors and businesses dealing in high value transactions.

Next year, the International Monetary Fund (IMF) will publish a review of of Jersey’s financial centre performance. The above-mentioned activities are included in the preparation for the next year’s review.

In 2008, Jersey, Guernsey and the Isle of Man will be visited by the representatives of the IMF, who will assess complying with international standards regarding anti-money laundering and countering the financing of terrorism.

To prepare for the IMF visit, a group is established by the Council of Ministers. This group, entitled AML/CFT Strategy Group, will oversee Jersey’s strategy to prevent money laundering and financing terrorism by means of using the jurisdiction. Two consultation papers on updating and extending Jersey’s anti-money laundering and countering the financing of terrorism framework to comply with the latest international standards have already been issued by the group.

It is important that changes in the regulations are in line with international standards as far as the IMF will undertake the review to test it for active compliance with them.

The States Director of International Finance, Martin De Forest-Brown, has made comments on the proposals to emhasize the necessity for the jurisdiction to get a good result from the International Monetary Fund review in 2008 so that Jersey continued to be flexible maintaining its well-established reputation.