Anti Money Laundering Blog

The new legislation, entitled the Stop Tax Haven Abuse Act, has been introduced by Carl Levin, the Democrat Chairman of the US Senate Permanent Subcommittee on Investigations. The Act is aimed to fight so-called offshore tax loopholes.

When introducing the legislation, Levin stated that the United States cannot afford offshore tax abuses that are robbing the Treasury of USD 100 billion in lost revenue yearly and increasing the tax burden on Americans. It should be noted that this is the 5th Congress in which Levin has introduced a comprehensive bill to fight offshore and tax shelter abuses.

A number of provisions from past bills have made it into law. Levin’s efforts also helped spur enactment of the Foreign Account Tax Compliance Act (FATCA) that is designed to obtain information on overseas investments by US residents. It is worth noting that, when Levin was a member of the Senate, he co-sponsored Levin’s offshore tax bills in 2005 and 2007.

A provision of the bill would close an existing tax loophole that allows credit default swap payments to escape taxation if sent from the US to persons offshore, such as an offshore hedge fund or foreign bank. The bill would treat credit default swap (CDS) payments sent offshore from the US as taxable US-source income.

The UK’s Financial Services Authority (FSA) has announced that 2 banks in Britain are being investigated for lax money-laundering controls. Also, other banks are likely to be handling the proceeds of corruption and other financial crime.

According to the FSA, it had referred 2 banks to its enforcement division for “serious weaknesses” in “high-risk” customer management.

The FSA published a review of how banks manage money-laundering risks adding that it is being considered “whether further regulatory action is required in relation to other banks, and further cases may be referred for enforcement”. The regulator stated: “Around a 3rd of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money-laundering risk if the immediate reputational and regulatory risk was acceptable”.

It is worth noting that ma of the failings identified by the FSA are the same as those it spotted 10 years ago when deposed Nigerian strongman Sani Abacha, his family members and associates used 42 UK bank accounts to turn over USD 1.3 billion (GBP 806.2 million) in 4 years.

The FSA said that more than 1/2 of banks visited this time around failed to have meaningful due diligence measures in higher-risk situations. Also, they failed to identify or record negative information about customers.

Around 1/3 of banks visited dismissed serious allegations about their customers without adequate review, and more than 1/3 failed to identify customers as “politically exposed persons” (PEPs), who are considered the most vulnerable to corruption because of their public prominence.

According to the FSA, 3/4 of banks did not always manage high-risk customers and PEP relationships effectively, and needed to do more to protect themselves from money laundering.

In accordance with the announcement made by the Isle of Man’s Treasury Minister, Anne Craine, a public consultation has been launched on proposals to further strengthen the offshore jurisdiction’s protection against money laundering and other financial crime.

Currently, all companies registered under the 2006 Companies Act must have a local resident agent in order to identify the beneficial ownership of the company if this is requested by the regulatory authorities in the course of enquiries. However, companies incorporated under the 1931 Companies Act are not required to have such an agent, while many of them are in fact administered by licensed Corporate Service Providers which effectively act as registered agents.

There is a proposal to introduce a requirement, similar to that already in operation in Guernsey, for all 1931 Act companies to appoint a local resident agent.

For locally-owned companies this could simply mean nominating an existing officer or shareholder of the company as the resident agent, accordingly, there will be no extra cost to the business. For companies administered by licensed Corporate Service Providers this would simply amount to the Corporate Service Provider acknowledging that they provide services to those companies. There also would be no extra costs incurred by the company or the Corporate Service Provider.

Minister explained: “The current difference in requirements between the 2006 and 1931 Acts creates an inconsistency in the island’s approach to access to information about the beneficial ownership of companies. The discrepancy means there is a perception, in the case of 1931 Act incorporations, that some companies are weak links in the chain of accountability. This perception creates a reputational risk for the Isle of Man.”

She said that this issue has been raised by the International Monetary Fund (IMF) in its assessment of the island’s defences against money laundering and other financial crime. She noted that it is in the interests of the the Isle of Man’s economy and its international reputation to maintain high regulatory standards as recognised by bodies such as the IMF.

According to the chairman of the Senate committee on banks, a move to give the Anti-Money Laundering Council (AMLC) the power to freeze suspicious bank accounts even without court approval may be approved at the committee level soon.

Senator Sergio Osmena III, who is also author of the bill and the chairman of the sub-committee on amendments to the Anti-Money Laundering Act, said that the approval might be in August. He said he sees a need to revise the law.

AMLC executive director Vicente Aquino insists on giving the council power to impose an “executive freeze.”

It should be reminded that, under the current legislation, the AMLC needs to inform the owner of a suspicious account that the council is investigating his finances.

In an investigation into the suspected laundering of more than GBP 200 million, 15 people have been arrested across England.

To achieve this, as part of a long-running investigation, more than 250 officers from HM Revenue and Customs (HMRC) and police raided properties in Greater Manchester, Merseyside, Yorkshire and Nottingham.

According to HMRC, the activity was obviously related with money laundering.

HMRC’s deputy director for criminal investigation, Alan Lee, said that this operation was an HMRC-led investigation that targeted money laundering offences. Further details were be provided because the investigation is continuing.

In accordance with police statistics, a 30% increase in the number of cases of money laundering was reported in Sweden for 2010. Such result is the reason to establish a new agency with a view to combat money laundering in this country.

The figures that were released by the financial crimes police (Finanspolisen) reveal that the number of reported money laundering cases in Sweden increased by 3 000 to a total of 12 000 reported cases in 2010.

Sweden has been criticised for not doing enough to fight the problem. Now, the Swedish National Council for Crime Prevention considers the possibility to set up a national financial intelligence centre to be shared by Swedish Police, Customs, Tax agency and Economic Crime Authority. Daniel Vesterhav, researcher at the crime prevention council, said that this way it would be possible to free up resources, make use of each of the authorities’ expertise and increase the quality of operative intelligence.

According to the report, out of the 14,500 companies in Sweden obliged to report possible money laundering crimes within their own organisation, 90% of reports come from banks, foreign exchange companies and other money handling businesses.

It should be noted that no single tax adviser out of Sweden’s 159 obliged to report potential money laundering crimes to police filed any report in 2010.

On April 28, Mexico’s Senate approved an anti-money laundering law that targets the financial structures of the drug cartels becoming increasingly powerful in the country.

According to the new legislation, the Attorney General’s Office is required to establish an investigations unit. The new unit will target money laundering and require that financial institutions develop better identification and monitoring of their clients’ activities.

The law provides that cash transactions in buying real estate, vehicles, boats, airplanes, jewelry and stocks with a value of more than 200,000 pesos (USD 7 300) are forbidden.

According to a press release issued by the Senate, USD 25 billion dollars are estimated to be laundered in Mexico every year.

Thailand’s Anti-Money Laundering Office (AMLO) and Office of Insurance Commission (OIC) have joined with a view to control insurance businesses in Thailand. This move was announced following some drug dealers found to have bought policies for already deceased persons for drug money laundering purposes.

The acting secretary-general of AMLO, Seehanat Prayoonrat, and OIC secretary-general, Jantra Buranareuk,  signed a Memorandum of Understanding. This document is aimed at strictly supervising insurance firms and prevent criminals from using them as channels for money laundering or terrorist financing.

According to AMLO secretary-general Seehanat, the collaboration would be helpful for anti-money laundering work as insurance companies are obliged to report operating results to the OIC every 30 days.

A number of Caribbean countries have been assailed by the United States for their alleged continued facilitation of money laundering and financial crimes.

In the second part of the 2011 International Narcotics Control Strategy Report (INCSR), the United States’ State Department was particularly concerned about efforts made by several jurisdictions in addressing these crimes. The countries named by the authority were the Cayman Islands, Belize, the British Virgin Islands, Antigua and Barbuda, and the Bahamas.

According to an evaluation of anti-money laundering and anti-terrorist financing regime of Canada over the past decade, government authorities still do not share enough information among themselves.

A private consulting firm presented to the Finance Department the report suggesting that a lack of proactive disclosures from Canada’s financial intelligence unit hampered efficiency.

The report criticizes Canada as being on high alert for suspicious transactions from countries in North Africa and the Middle East.

According to this report, the inefficiencies in the regime’s efforts related to the Financial Transactions and Reports Analysis Centre of Canada stem from the tight rules under which the agency has to operate. The report says: “The efficiency of the regime has improved, particularly since 2008, but inefficiencies were found related to the full use of FINTRAC proactive disclosures”. It adds that “these stem from organizational mandates and perhaps the allocation of regime funds, and limitations in information sharing attributable to certain legislative and regulatory provisions.”

The current evaluation says that FINTRAC, an independent agency operating in accordance with rules set out in the Process of Crime and Terrorist Financing Act, needs consent from the Office of the Superintendent of Financial Institutions in order to share some particular information with other regime partners. It should be reminded that Canada’s anti-money laundering regime was set up in 2000, and in 2001 the anti-terrorist financing mandate was added.