The Financial Conduct Authority’s second AML annual report arrives as the regulator meditates how it will oversee the financial crime controls of an additional 50,000 firms, which provide consumer credit. Charlotte Hill of Covington & Burling reviews progress in 2013/14 and the heavy agenda ahead.
On 16 July 2014, the US Office of Foreign Assets Control (OFAC) imposed new Ukraine-related sanctions. Notably, the measures restrict specific types of dealings by US persons with named Russian energy, defence and financial services entities. The EU has also signalled that it will decide on significant expansion of its list of designated (asset-frozen) persons by the end of July. Scott Balber and Susannah Cogman of Herbert Smith Freehills draw out the detail in the latest constraints.
Bank of America is to pay $16,562,700 to settle 213 apparent violations of US sanctions programmes against narcotics traffickers.
BNP Paribas has pleaded guilty to criminal conspiracy to violate US sanctions; the French bank will pay $8.9 billion to US authorities for systematically disguising more than $190 billion of transactions with clients from Iran, Sudan and Cuba. In addition, commencing 1 January 2015, BNP Paribas will be subject to a one-year suspension of its US dollar clearing services for selected business lines and offices. For two years it will also be prohibited from US dollar clearing as a correspondent bank for unaffiliated third-party institutions in New York and London.
Opposing financial crime and money laundering is serious stuff, writes David Coates. Budgets, salaries, corporate fines, new requirements and press exposure are all on the up. Enhanced personal exposure for MLROs and sanctions types is a train coming down the same tunnel. So it was appropriate that participants at the ACAMS 10th Annual European AML & Financial Crime Conference in London should have been able to catch one last glimpse of blue sky, Big Ben and Westminster Bridge before entering the bowels of the Park Plaza Westminster Hotel for a packed two-day programme on current challenges and how to meet them.
Sanctions, on the hard edge of international diplomacy, are presently ratcheting up over Crimea, with US and EU asset freezes and visa bans prompting retaliation in kind by Moscow, but there are good reasons to think they won't go much further, says Timon Molloy.
Firms, and so their AML compliance teams, are under intense scrutiny by competent authorities as they seek to rebuild business and balance sheet after the financial crisis. Practitioners, a UK regulator and law enforcement candidly discussed areas of specific focus and how their organisations are responding at Tavistock Media’s London AML & Financial Crime conference. Timon Molloy took notes.
Acutely conscious of accusations that hitherto the AML regime has served as little more than window-dressing, Singapore, by its own calculation, the world’s fourth largest offshore financial centre, is tightening up its controls – and not just on paper, reports Mark Rowe.
Risks and Controls
Rosfinmonitoring, Russia’s financial intelligence unit, charged with development and direction of the country’s anti-money laundering and counter terrorist financing regime - and reporting straight to President Putin - is working on a raft of stricter controls and penalties. Eugene Vorotnikov spoke to Yuri Chikhanchin, head of Rosfinmonitoring; Additional reporting by Alan Osborn.
Financial institutions have to scrutinise money transfer messages for illicit activity, that’s a given, writes Jacob Novak of EFT Technologies, but conventional sanctions screening software tends to generate large volumes of false positives (legitimate transactions stopped by a trigger reference to an official list designation). The extracted transactions then have to be manually verified before the funds are released, which prevents timely processing, puts strains on staff resource, and raises the risk of inconsistencies in decision-making. But recent advances in machine learning are now pointing the way to more optimised straight through processing (STP).
In July 2013, Panamanian customs officials boarded and searched a North Korean- owned and-flagged vessel, the Chong Chon Gang, during its passage through the Panama Canal. Having sailed from Puerto Padre, Cuba, the Chong Chon Gang was carrying over 10,000 tons of sugar for delivery to North Korea as part of a trade agreement between those two countries. On boarding the ship, however, Panamanian authorities discovered trailers and containers full of military equipment hidden beneath the 200,000 bags of sugar in the vessel’s cargo hold. The shipment was part of an elaborate scheme to circumvent United Nations prohibitions on arms shipments to North Korea. David Carlisle picks up the trail and draws the lessons for deeper due diligence in trade finance if sanctions evasion is to be detected.
Bitcoin, the best-known of the new cryptocurrencies, has already survived use by criminals to transact on the dark web and implosion of Mt. Gox, its largest exchange. Brian Stoeckert and Timothy O’Brien examine an innovative AML/CFT risk that isn’t set to go away.
During its February 2014 plenary meeting, the Financial Action Task Force approved a bumper crop of follow-up evaluation reports, writes Sue Grossey. Last month, we looked at the fate of Luxembourg, now it is the turn of their lowland friends in the Netherlands.
Legal / Regulatory
Financial institutions may be paying the price of past neglect, if not, on occasion, downright disregard of AML and sanctions obligations, but it’s a good time to be in Compliance as they are having to pay more, much more for talent as well. Alan Osborn reports on a thriving market.
A cash-intensive economy with a significant untaxed component, Argentina also has to contend with a thriving black market in its currency, the peso. Pacifica Goddard finds reasons, even so, for optimism in its recent approach to AML.
The US and EU have launched ‘phase 2’ sanctions – selective asset freezes and travel restrictions – against Russian and Ukrainian targets, both individuals and companies, but their impact in question, our correspondents sought expert opinion on whether the measures are working: reporting by Paul Cochrane, in Beirut; Kitty So, in Ottawa; Carmen Paun, in Brussels; and Eugene Vorotnikov, in Voronezh, Russia.