Anti Money Laundering Blog

On June 8, AML Partners released the latest version of Country Evaluator, a list that rates countries as they pertain to Anti Money Laundering and Sanctions risk.

AML Partners is a consulting company that helps financial institutions comply with the Bank Secrecy Act.

The Country Evaluator can be utilized by financial institutions to conduct risk assessments of their customer base. It can also be used for determining the level of monitoring needed for customer transactions depending on the level of anti-money laundering risk the country possesses.

A new piece of anti-tax haven legislation has been introduced into the US House of Representatives by Lloyd Doggett (D-Texas).

HR 5328, The International Tax Competitiveness Act, includes many clauses previously included in similar pieces of legislation that did not make it to the statute book due to Republican resistance. Doggett was one of the sponsors of the Stop Tax Haven Abuse Act. That law was not passed, however, much of it was incorporated in the Foreign Account Tax Compliance Act of 2009 (HR 3933, S 1934), which became law as part of the Hiring Incentives to Restore Employment (HIRE) Act, changing the system of withholding on payments made to non-US persons.

Key points of the new legislation would be as follows:
- to tighten corporate residency rules to prevent corporations with a preponderance of US officers from basing themselves overseas;
- to make it much more difficult for corporations to receive income from IP assets in foreign (low-tax) jurisdictions;
- to repeal the 80% ‘active income’ provision;
- to repeal the ‘boot-within-gain’ rule which allows favorable tax treatment of dividends paid during corporate reorganizations.

It should be noted that previous attempts to pass clauses like the above-mentioned have met resistance from major business organizations and from Republicans in general.

Due to possible conflicts in banking regulations between Gibraltar and Spain, a considerable fine will be paid by Jyske Bank.

According to bank management, Spanish financial authorities have issued Jyske Bank a EUR 1.7 million fine for violating Spanish money laundering regulations.

Activities at a division of Jyske Bank’s in the British overseas territory of Gibraltar are at issue in the case. The Spanish authorities assume that they have been denied access to essential information.

Making the decision to fine the bank, the violations were described as “very serious”; Jyske Bank in Gibraltar was claimed to fail properly report, be unwilling to investigate certain transactions, and have inadequate control procedures.

It is worth noting that this was the 1st time a Danish bank has been fined for violating another country’s money laundering rules.

Jyske Bank has appealed the decision to the Spanish courts.

According to documentation from the Danish Financial Supervisory Authority, the case has been underway for some time. Authorities in Denmark were informed about the possible violations in November 2008 for the 1st time. Information on the case was exchanged between Denmark and Spain in March 2009.

According to Marcelo Di Bello, representative of the Latin American Federation of Banks (Felaban), Latin American banks are being threatened by money laundering.

During the Latin American Congress of Internal Audit and Risk Evaluation (Clain-Felaban 2010) that was held in Panama City on May 12-14, Bello said that drug-trafficking and weapons-trafficking are the illegal businesses seriously threatening financial institutions through money laundering. He also said that corruption and human trafficking are crimes connected with money laundering; however, they do not play the same roles as drug- trafficking and weapons-trafficking.

Bello warned that threats posed by criminal activities could eventually undermine the banks’ operations and reputations, and added that “The financial institutions related to these activities could be led to bankruptcy”.

The Clain-Felaban 2010 is sponsored by the Banking Association of Panama. The event gathers Latin American bankers and finance experts in order to discuss common policies that would improve the development of the regional financial systems.

The latest Ireland’s legislation aimed to fight money laundering has come into effect as signed by the President. The Bill was published in July 2009 and progressed quickly through the Oireachtas.

The Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009 transposes the 3rd EU money laundering directive into Irish law. It enforces certain recommendations of the international anti-money laundering and anti-terrorist financing body, the Financial Action Task Force (FATF).

The Act consolidates the existing anti-money laundering and terrorist financing laws that previously have been contained mainly in the Criminal Justice Act 1994. Also, the new legislation increases the obligations of individuals and organisations as related to disclosure regarding suspected money laundering and terrorist financing.

According to Ireland’s Minister for Justice Dermot Ahern: “This new law increases the obligations on credit and financial institutions and on lawyers, accountants, estate agents and others with regard to money-laundering and terrorist financing.” He also said that similar legislation will apply throughout the EU.

On May 10, the United Arab Emirates signed new anti-money laundering agreements with 5 Arab countries

According to a UAE Central Bank’s statement, the memoranda of understanding were signed by Mohamed al-Awadi, executive director and head of Anti-Money Laundering and Suspicious Cases Unit at the UAE Central Bank, with Morocco, Jordan, Libya, Mauritania and Sudan.

The agreements were signed at a recent meeting of the Middle East and North Africa Financial Action Task Force (MENAFATF) that took place in Tunisia. They reveal the commitment of the United Arab Emirates to enhance cooperation with its global and regional partners in order to coordinate the efforts against money laundering, terrorist financing and related crimes.

It should be noted that the country has already finalized such agreements with 36 nations and organizations, which is part of its plan to conclude deals with at least 90 nations on cooperation to fight laundered money. It is also worth mentioning that the UAE is among the first jurisdictions in the region to enact anti-money laundering laws and publicly report such cases.

In 2009, a total of 1 729 suspected money laundering cases were uncovered in the UAE. The UAE Central Bank received more than 11 800 reports on cash declaration.

On April 20, Governor of Central Bank of Iran (CBI) Mahmoud Bahmani discussed adoption of new approaches by CBI in fighting money laundering.

He said: “Gradually and upon entry of large bills to the economic system, Iran-checks, amounting to one million and half a million rials, will be collected from the market.” He added that, in the first phase, there will be an attempt to remove 500 000 rial Iran-checks from the market in order to control money laundering because large Iran-checks can cause problems as regards economic corruption and money laundering (they are not cross signed). According to Bahmani, “based on a new plan, banks will sell the remaining Iran-checks in the market with the signature of buyer so that if necessary they can be tracked down with this controlling system”.

Bahmani recalled that in the 1st half of 2009-2010 the industrial sector grew by 6.4% and the mine sector by 8.2%. However, growth of agro sector was negative – it decreased by 10% because of drought.

As all the world makes attempts to fight money laundering, many countries are now requiring insurers to get additional information from their customers with a view to screen out possible launderers. For multinationals who are interested to do business in these countries, this means providing their insurers with a variety of documents obtaining the insurance they need.

It goes without saying that most multinationals are legitimate businesses and they are unlikely to use their insurer to launder money. Still, the insurance industry is vulnerable. In its National Money Laundering Strategy for 2007 report, the US government noted that the insurance industry has undergone a transformation and that it may appear increasingly attractive to money launderers. A range of investment services featuring financial products that can be purchased and subsequently transferred, redeemed, or sold, are now offered by agents and broker, which, according to the report, provides new opportunities for money laundering. The report says that numerous money laundering methods have been used to exploit insurance products, primarily life insurance and annuities.

To remind, some countries have been taking measures to crack down on the problem and improve their reputation in the international community. So, the governments of these countries are requiring insurers to obtain documents and take other actions to ensure not being used by criminal organizations to help launder illicit funds. Imposing these requirements on insurers is carried out by Mexico, Brazil, Argentina, Colombia and Malaysia.

For example, before getting insurance, multinationals with operations in Mexico must provide a number of documents including the following: a certified copy of the act of incorporation, federal taxpayer’s registry, a document that proves the address of the company in Mexico, a certified copy of the document showing the legal authority of the company’s representatives; a copy of the official identification of the legal representative, such as passport or card of military service. If the parent company in the US or Canada is included on the Mexican policy as a named insured or beneficiary, each non-Mexican company that is included under the admitted policy also will have to provide the insurer with similar documentation.

Record numbers of suspicious financial deals were reviewed by Swiss authorities in 2010. The financial deals under money laundering suspicion totaled CHF 2.23 billion (USD 2.1 billion). Most of the reports were forwarded to prosecutors.

It should be noted that for decades Switzerland was viewed as a safe haven for money of dubious origin. However, the country started to clean up its image by introducing anti-money laundering laws in 1998.

According to the legislation, it is obligatory for financial operators to report suspect transactions, regardless of the amounts involved. In 2009, Switzerland’s Money Laundering Reporting Office received a total of 896 reports on suspicious financial activities, which was a 5.3% increase from the previous year.

Judith Voney, a spokeswoman for the Money Laundering Reporting Office, said that there had been an upward trend in suspicious activity reporting in the past 3 years. She said: “The Swiss financial place has become very attentive and the quality of the reports is nowadays very good”. Also, she noted that it was impossible to make a direct link between the financial and economic crisis and the record number of suspect transactions, but crisis situations in general tend to lead to more fraud.

Stricter reporting requirements for suspected money-laundering were introduced in Switzerland in 2009. But the Money Laundering Reporting Office said that the reports were made before these rules were introduced. The banking sector accounted for 2/3 of all reports.

For the 1st time since Bahrain got its independence in 1971, a Minister has been arrested on charges of money laundering.

Following months of investigations and close monitoring, the Minister was arrested in Manama on March 18.

According to some sources close to the investigation, the alleged money laundering operations exceeded 12 million Bahraini dinars. The Minister faces charges of money laundering operations in Bahrain and abroad.