Anti Money Laundering Blog

On July 23, 2007, the General Manager of a large American construction and engineering corporation in the oil and gas industry, Willbros Group Inc., was charged with violating the Foreign Corrupt Practices Act, money laundering and money laundering conspiracy. Jason Steph, a US citizen residing in Kazakhstan, purportedly paid USD 6 million in bribes, allegedly, this money was laundered through consultants and front companies to Nigerian officials, Nigerian national oil company executives and a political party. This was allegedly done to ensure that Willbros Group Inc. would obtain a USD 387 million contract regarding building a pipeline in Nigeria.

The funds were transferred into bank accounts outside the US, and were allegedly paid for services never provided. The consultants, the shell companies that utilised to move the bribes as well as the recipients of the corrupt payments have not been identified yet.

The indictment suggests a conspiracy might last from late 2003 up to March 2005. The defendant could be sentenced to as much as 20 years in prison for each of the money laundering charges.  He can also be fined up to USD 500 000 or twice the value of the funds involved in the transfer.

On July 19, 2007, UnionBanCal Corporation, the holding company for Union Bank of California, issued a press release to disclose that it has reserved $10 million for possible regulatory fines and penalties for Bank Secrecy Act /Anti-Money Laundering (BSA/AML) violations.

In 2005, the bank had an agreement with the Office of the Comptroller of the Currency (OCC) to cure BSA/AML weaknesses. Now it announced having committed substantial resources in order to resolve issues raised by regulators. Also, Union Bank of California informed that it faced possible penalties both from the OCC and the financial Crimes Enforcement Network (FinCEN), a part of the US Treasury Department.

In accordance with the press release, “the Bank has been advised by the OCC that the OCC will institute a procedure for a cease and desist order against the Bank with respect to its BSA/AML controls and procedures and will assess civil money penalties with respect to BSA/AML matters”. It has received notice from the FinCEN that it is going to access civil money penalties on BSA/AML matters. Although the bank is not aware of what final terms, conditions or monetary penalties will be imposed by the agencies, it believes these will not affect the business operations, earnings, capital or liquidity. So, the Bank established a reserve of $10 million.

On July 18, 2007, US banking regulators issued a joint statement aimed at improving the consistency of anti-money-laundering enforcement actions among oversight agencies.

To cut the long story short, the statement is intended to bring clarity to the process of anti-money- laundering enforcement by means of issuing a guidance encompassing the expectations and views of banking regulators, so that banks would use this guidance.

According to US Federal Reserve Governor Randall Kroszner, it is very essential to be uniform and transparent about policies, especially when it comes to enforcing anti-money-laundering regulations.

Director of the American Bankers Association’s Center for Regulatory Compliance Richard Riese said that “it’s a good thing for banks to have a clear and consistent statement across the agencies about how they’re going to use a very specific power”.

In the statement, the agencies’ current practices on enforcement with respect to (Bank Secrecy Act) compliance are reflected as well as the circumstances under which the agencies are to issue a cease-and-desist order in compliance with the statutory provisions are described by the financial regulators.

Also, the statement describes the way banks can step afoul of anti-money laundering laws.

The fact that a Russian oligarch Boris Berezovsky was alleged of money laundering in connection with the deal between Media Sport Investment (MSI) and Corinthianshas already been described. Now a court in Brazil has issued an arrest warrant for Berezovsky on charges of money-laundering in a case related to this deal.

On July 13, Berezovsky denied the allegations and claimed that he had no idea of being the subject of an arrest warrant. According to him, his lawyers also had no contact with the Brazilian authorities regarding the allegations. The mathematician-turned-entrepreneur, wanted in Russia for a number of criminal offences and living with refugee status since 2003 in the UK claimed that the Brazilian story is “an extension of the Kremlin’s politicized campaign” against him.

The Brazilian case in dates back to 2004, when MSI spent millions to acquire new players.

According to the study carried out by KPMG, the demand for more focused regulation is growing and it costs banks more to train staff. The study reveals that the cost necessary to fight money laundering and terrorist-related funding schemes has dramatically risen for banks all over the world.

The results of the global study involve 224 banks in 55 countries.

KPMG provides information that banks’ resources spent on anti-money laundering systems and processes have risen by about 58% in the world over the last 3 years. The spending of North America, the Middle East and Africa has increased by more than 70%.

According to KPMG, the biggest costs were spent on transaction monitoring and staff training.

The banks suggest that governmental and international regulation has to be more effectively targeted. About 8% of banks consider that regulation is to be actually increased.

It should be noted that the results of the study significantly contrast with what was expected by financial institutions in 2004 when a similar KPMG study revealed that most banks expected costs to rise by 43% over the 3 years.

Two world leaders in anti-money laundering controls – the Union of Arab Banks (UAB) and the Association of Certified Anti-Money Laundering Specialists (ACAMS) – have united in order to host joint Middle East/North Africa(MENA) conference in Dubai. These two top expert organisations are to inform large audience on the best practices on combating terrorist funding and fighting money laundering.

At the conference, the floor will be given to more than 25 world’s top anti-money laundering experts from different countries. They will share their knowledge in 18 general sessions, workshops and seminars.

Among others, speakers of the conference will be Dr. Muhammad Baasiri, who is the president of the US-MENA Private Sector Dialogue initiative with the US Treasury Department and former president of MENA FATF, and Charles Intriago, who is the founder of ACAMS and publisher of Money Laundering Alert launched in 1989.

According to Dr. Fouad Shaker, Secretary General of the UAB, “the UAB and ACAMS are two powerful, dynamic organizations that have taken a premier leadership role in the world effort to crack down on financial crime, an issue of primary importance to the Arab banking sector”.

The 3-day conference will be held in Dubai on December 9-11, 2007 as the 1st collaborative effort of the 2 organisations.

On June 29, 2007, China was approved as a full member of the Financial Action Task Force on Money Laundering. This is definitely a sign of international confidence in China’s financial system.

China’s membership in this respectable organization that deals with fighting money laundering was approved in a plenary meeting of the Financial Action Task Force in Paris. For Chiha, the membership will facilitate the expansion of its cash-rich state banks overseas.

It is a fact that many banking regulators, including the US Federal Reserve, consider FATF’s endorsement of the money laundering efforts of a bank’s country to be a key measure of its safety and soundness to operate abroad.

Before being approved as a full member, China was an observer of the FATF since 2005.