Biggest bank forfeiture ever: HSBC to pay USD 1.9 Billion to settle money-laundering case

December 20th, 2012

HSBC will pay USD 1.9 billion to settle a US. money-laundering probe to avoid a protracted legal battle that would have further embarrassed the British banking giant.

The probe of Europe’s largest bank by market value focused on the transfer of funds through the US financial system from Mexican drug cartels and on behalf of nations such as Iran that are under international sanctions.

HSBC said in a statement that its anti-money laundering measures were inadequate and it had since made strides in beefing up its controls. The bank also said it has reached agreements over investigations by other United States’ government agencies. Also, it expects to sign an agreement with British regulators soon.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” HSBC Chief Executive Stuart Gulliver said in a statement.

Guernsey amends AML Legislation

November 22nd, 2012

The Guernsey Financial Services Commission (GFSC) has announced preparing revisions to the regulations and rules governing anti-money laundering (AML) standards for financial services businesses and for prescribed businesses (firms of lawyers, accountants and estate agents) in the jurisdiction. This was done taking into consideration numerous on-site inspections and comments received from the industry.

Amendments are to include:

- The adoption of a more sophisticated approach for firms in risk profiling their customers to take into account international and local developments in best practices in the area.

- The removal of general insurance from the AML regulations and rules.

- Revisions to the “likely to benefit” rules so that, other than in high risk situations, there will be more flexibility for firms in the timing of verification of identity of beneficiaries of trusts falling within the rules.

- A new chapter providing guidance for firms in relation to bribery and corruption, which are of increasing international concern as crimes in their own right as well as motivations for money laundering.

The GFSC said that the revisions would be issued early in 2013. It confirmed that firms would be allowed a transitional period to amend their policies, procedures and controls before the changes come into effect. In some areas no transitional period is needed, such as the removal of general insurance from the detailed requirements for firms.

According to Richard Walker, Director of Policy and International Affairs, “It is crucial that Guernsey’s work in preventing the products and services we offer from being used by money launderers is focused as much as possible, and industry’s efforts put to the best effect possible. The current AML framework has been in place for several years. The experience of both the Commission and industry with it is enabling us to take the positive steps of revising the framework and enhancing its focus.”

Guernsey establishes Anti-Money Laundering (AML) Division

November 1st, 2012

As part of its recent drive to achieve operational efficiencies, the Guernsey Financial Services Commission (GFSC) has announced that it is to delegate its supervisory function to a newly-established department – an Anti-Money Laundering (AML) Division.

The creation of an AML Division will enable the GFSC to apply a Commission-wide risk-based approach to money laundering and financial crime surveillance, consistent with the revised international standards published by the Financial Action Task Force (FATF).

According to the Commission, licensees will benefit from more efficient on-site visits.

The cost-cutting exercise comes following a government-commissioned report from Ernst and Young, which presented recommendations on streamlining the regulator’s costly operations. There is to be no change in the Commission’s headcount as a result of the change, the Commission confirmed, only a restructuring.

Mexico passes new AML legislation

October 13th, 2012

On October 11, Mexico’s Congress approved a long-awaited law aimed at cracking down on money laundering in a bid to attack the finances of the country’s powerful drug cartels.

This legislation was proposed in 2010 years ago by outgoing President Felipe Calderon as part of his offensive against drug gangs. On October 11, 2012, it was passed by the Senate.

The new federal law puts restrictions on cash purchases of real estate, jewelry, armored cars and other assets that criminals use to launder illicit funds.

Companies will be required to report large cash purchases under the law. Car sales of more than 200,000 pesos (about USD 16,000) and real estate purchases of more than 500,000 pesos (about USD 39,000) must be reported.

The bill carries a minimum penalty of 5 years in prison.

Vatican bank opens its doors to demonstrate Anti-money Laundering efforts

June 28th, 2012

One of the most secretive institutions in the secrecy-obsessed Vatican, the Vatican bank, opened its doors to journalists in order to show that it is serious about fighting money-laundering and being more financially transparent.

During a 3-hour PowerPoint presentation, the director of the Vatican bank Paolo Cipriani outlined the peculiar nature of the Institute for Religious Works, the bank’s official name, and sought to refute media allegations that it has been not enough cooperative with requests for financial information from Italian authorities.

On March 7, 2012, International Narcotics Control Strategy Report was published where Washington’s list of 190 countries was revealed. The list countries 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 because it is vulnerable to money laundering.

Philippines avoids Money Laundering Blacklist

June 24th, 2012

It was announced by the Philippines that it had avoided an international blacklist on money laundering and terrorist financing after passing two 2 laws in June 2012.

The Financial Action Task Force (FATF) has upgraded the Philippines to its “grey list” of countries that make sufficient progress in their action plans. Previously, the Philippines was in the FATF’s “dark grey list” of jurisdictions deemed not to be making sufficient progress.

President Benigno Aquino’s spokeswoman Abigail Valte said in a statement: “These reforms prevented the Philippines from being classified and downgraded to the ‘black list’, which would have resulted in stricter inspections of financial transactions in the country”.

The Philippines’ Anti-Money Laundering Council said the FATF had urged Manila to include bribery, public funds misuse, human trafficking, tax evasion and environmental crimes as grounds for a financial investigation.

Brunei introduces new Legislation to prevent Money Laundering

June 20th, 2012

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 hosts Major Anti-Corruption Conference

June 12th, 2012

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.”

Guernsey seeks comments on proposed Anti-Money Laundering guidance

June 8th, 2012

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.

Financial fraud was highest in 2011

April 12th, 2012

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”.