Anti Money Laundering Blog

Brunei has introduced anti-money laundering laws that grant enforcement agencies extensive powers to seize businesses, freeze accounts and compel individuals to list their assets through “unexplained wealth declarations”.

The Criminal Asset Recovery Order and amendments to Anti-Terrorism Order will be created to provide authorities with stronger tools for addressing financial crime

The new legislation significantly strengthen the powers of the Financial Intelligence Unit (FIU), giving them the authority to suspend transactions, access and review information related to the government, financial institutions or non-financial businesses and professions (NFBP) such as realtors, lawyers, accountants and jewellers. All cash transactions above USD 15 000 made through these agents must be reported to FIU, failing which the individual could be jailed for up to five years and fined up to USD 50 000.

So, Know Your Customer (KYC) and Customer Due Diligence (CDD) guidelines used in banks currently become legally binding requirements.

The new rules aim to increase transparency as well as remove procedural complexities contained in previous laws. This legislation repeals the Anti-Money Laundering Act, the Drug Trafficking (Recovery of Proceeds) Act and the Criminal Conduct (Recovery of Proceeds Act) Order.

Guernsey’s latest conference, titled ‘Puppet Masters’, was organised by the jurisdiction’s Anti-Bribery and Corruption Committee. It included an examination of legal structures and entities used in a number of corruption cases, on the back of a report on the matter from the World Bank.

Over 450 delegates attended this event. Among them, many international and local speakers presented at the conference. Domestic speakers included Guernsey organisers, the Law Officers’ Chambers, the Guernsey Border Agency and the Guernsey Financial Services Commission (GFSC). International speakers included representatives of the World Bank and other experts who have covered subjects such as bribery, corruption, politically exposed persons, sanctions, international standards, criminal and civil law issues, and the practical effects of these on companies and individuals.

The Authority organised this conference with a view to provide industry with a deeper understanding of the wider impact of corruption, and increase awareness of corruption issues within the finance industry of Guernsey. The GFSC will soon issue new anti-corruption guidance for consultation on the back of areas discussed.

Nik van Leuven, Director General of the Guernsey Financial Services Commission, said: “The theft of public assets from the Third World is an immense problem, with a staggering impact. In more advanced economies, bribery and corruption are, but not infrequently, understood to be the usual way of life and commerce. The consequences for jurisdictions such as Guernsey should not be underestimated. The corrupt and their agents require financial facilities. It is therefore important for all jurisdictions with a significant finance industry to actively counter corruption.”

Mark de Garis, Assistant Chief Officer, Head of Cross Border Crime, Guernsey Border Agency added that the event provided a good opportunity to better define the escalating risk that local financial services face from overseas bribery and corruption and what can be done to help prevent or mitigate it. He noted: “It was extremely pleasing to see the conference so well attended, which in turn demonstrates how seriously financial services businesses treat this risk.”

The Guernsey Financial Services Commission (GFSC) has written to the managing directors of all financial services businesses to ask for comments on proposed changes to Anti-Money Laundering and the Countering the Financing of Terrorism guidance and handbooks.

The consultation in respect of requirements on financial services businesses relates to amendments to the Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations, 2007; the Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing; Schedules 1 and 2 to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999; and Schedule 1 to the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008. Also, comments are awaited on the proposed changes to the Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) (Bailiwick of Guernsey) Regulations, 2008; and the Handbook for Legal Professionals, Accountants and Estate Agents on Countering Financial Crime and Terrorist Financing.

The above-mentioned publications are provided by the Authority with a view to ensure that money launderers, terrorists, those who finance terrorism and other criminals cannot launder the proceeds of crime through Guernsey or its finance sector.

The Commission endorses the Financial Action Task Force (FATF) on 40 Recommendations on Money Laundering and the 9 Special Recommendations on Terrorist Financing.

According to suspicious activity reports (SARs) submitted to the Financial Crimes Enforcement Network (FinCEN), 2011 was a year all-time high in alleged claims of money laundering, debit card fraud, mortgage loan fraud, consumer loan fraud, and casino fraud.

Since 2007, the SAR numbers have ranged from 1.2 million to 1.3 million. In 2011, their number increased to more than 1.5 million. According to analysts, these fraud cases can be directly related to the financial meltdown.

Curt Novy, a mortgage and real estate analyst in San Diego, Calif, said that the financial meltdown lasting from 2007 to 2009 “uncovered all the skeletons” that were present in the marketplace, from mortgage financing to Ponzi schemes. He also noted that these frauds are overlooked in a good economy, but, during an economic downturn, people take a closer look at the books. “Massive fraud isn’t discovered in good times,” he explained. “It’s when the market changes, and financial institutions start looking closer, when the checks stop coming in, they take a closer look at what’s going on.”

Many of the fraud cases are large and complex, therefore investigators suspect it may take the next decade for reviewing them. Some cases involve hundreds of properties, which can take 3-4 years to compile evidence in preparation for a trial.

While fraud peaked in 2011, the FBI is only pursuing 3% of the total 90 000 suspected mortgage loan fraud cases. The FBI is choosing to investigate the large-figured cases.

FBI financial crimes chief Tim Gallagher told ABC News said: “About 70% of our cases are more than a million dollars. We are going after big fish as far as putting cases together, and we’re going after people on the inside because of fiduciary responsibility and the element of trust that they’re violating and doing the most damage”.

According to the annual International Narcotics Control Strategy made by a State Department, Argentina, Curacao and St Maarten have been designated as “major money laundering countries”.

These jurisdictions were moved up on a money laundering watchlist. The report said the three have become “major money laundering countries,” or those “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.”

The report moved Argentina and the two Caribbean island countries to the list of “jurisdictions of primary concern” from the less acute “jurisdictions of concern” category. So, Argentina, Curacao and St Maarten join a wide-ranging list of 66 countries that includes Australia, Brazil, China, Japan, Russia, the United Kingdom, etc.

The Vatican has appeared on the State Department’s list of money-laundering centres. However, the city-state is not rated as a high-risk country.

On March 7, the 2012 International Narcotics Control Strategy Report was published. Washington’s list of 190 countries classifies them in 3 categories: of primary concern, of concern and monitored.

The Vatican was included into the 2nd category, along with 67 other nations including Poland, Ireland, Hungary, Egypt and Chile.

The Vatican was added to the list as it is vulnerable to money laundering. “To be considered a jurisdiction of concern merely indicates that there is a vulnerability to a financial system by money launderers. With the large volumes of international currency that goes through the Holy See, it is a system that makes it vulnerable as a potential money-laundering center,” Susan Pittman of the State Department’s Bureau of International Narcotics and Law Enforcement said.

In 2011, the tiny city-state adapted internal laws to comply with international standards on financial crime.

It is seeking inclusion on the European Commission’s so-called “white list” of states complying with international standards against tax fraud and money-laundering. A decision on its inclusion is expected in June 2012.

The Financial Action Task Force (FATF), an international financial watchdog, says that all the governments should systematically consider tax crimes as a potential signal of money laundering.

The FATF wants governments around the world to require greater openness about the real owners of companies, so that it would be harder for financial criminals and terrorists to conceal their identities or hide their assets.

In February, the Financial Action Task Force (FATF) added Pakistan, Indonesia, Ghana, Tanzania and Thailand to its blacklist of jurisdictions that do not meet international standards.

According to FATF findings, the 5 above-mentioned countries were flaunting recommendations made to them toward fighting money-laundering and financing terrorism.

FATF removed no countries from the blacklist. However, Honduras and Paraguay were removed from an intermediary “grey-list” of countries as falling behind on international standards despite having committed to them.

The international watchdog can make recommendations to any of the 36 countries that have signed a membership charter, as well as to other nations, but it has no power to carry out sanctions. The recommendations made by FATF reach more than 180 countries through regional networks. According to the body’s estimations, money laundering and related financial crimes cost 2-5% of global GDP (gross domestic product).

The FATF blacklist currently includes 17 countries: Bolivia, Cuba, Ethiopia, Iran, Kenya, Myanmar, Nigeria, North Korea, Sao Tome and Principe, Sri Lanka, Syria, Turkey, Pakistan, Indonesia, Ghana, Tanzania and Thailand.

The FATF grey-list includes 22 countries: Algeria, Angola, Antigua and Barbuda, Argentina, Bangladesh, Brunei, Cambodia, Ecuador, Kyrgyzstan, Mongolia, Morocco, Namibia, Nicaragua, the Philippines, Sudan, Tajikistan, Trinidad and Tobago, Turkmenistan, Venezuela, Vietnam, Yemen and Zimbabwe.

Having released consultation conclusions, Hong Kong’s Securities and Futures Commission (SFC) has announced that gazetting of a new set of guidelines on anti-money laundering (AML) and counter-terrorist financing (CFT).

The new AML guidelines will take effect on April 1, 2012. They serve to replace the existing Prevention on Money Laundering and Terrorist Financing Guidance Note published by the SFC. The new guidelines provide guidance to the financial sector that include the operation of the relevant provisions of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO).

Gazetted on July 8, the enacted AMLO was conducted by Hong Kong’s Financial Services and Treasury Bureau with a view not only to enhance the AML/CTF regime in Hong Kong’s financial industry but also meet the latest international standards as regards customer due diligence (CDD) and record keeping.

A consultation launched on September 30 invited comments on the proposed guidelines from industry practitioners, trade associations and professional bodies. It ended on November 18, 2011.

Following the release of a set of consultation conclusions, Hong Kong’s Securities and Futures Commission (SFC) has announced the gazetting of a new set of anti-money laundering and counter-terrorist financing guidelines. The new guidelines will take effect on April 1, 2012.

The new guidelines will replace the existing Prevention on Money Laundering and Terrorist Financing Guidance Note published by the SFC. They are to provide guidance to the financial industry relating to the operation of the relevant provisions of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO).

On July 8, 2011, the enacted AMLO was gazetted after 2 rounds of consultation conducted by Hong Kong’s Financial Services and Treasury Bureau. Its is aimed at enhancing the anti-money laundering and counter-terrorist financing regime in Hong Kong’s financial sector, whoch is neede in order to meet the latest international standards, especially in respect of customer due diligence (DD) and record keeping.

On September 30, 2011, the SFC launched a consultation and welcomed comments on the then-proposed guidelines, and then received submissions until November 18. In general, respondents found the guidelines helpful.