Money Laundering Bulletin

EU & US tighten sectoral sanctions on Russia

On 12 September the European Union and United States issued new sanctions against Russia over hostilities in Ukraine. The sectoral measures target named Russian banks as well as defence and energy companies and bar provision of dual use goods and some oil project services. Susannah Cogman and Scott Balber of Herbert Smith Freehills work through the detail.

Sanctions, Europe, North America

Singapore slingshot

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.

Reporting, Tax Evasion, Practice Findings, Asia-Pacific

Standard Chartered transaction monitoring gaps cost $300m penalty & US dollar clearing suspensions

Standard Chartered Bank will pay a $300m penalty to the New York Department of Financial Services after it failed to remediate transaction monitoring deficiencies in line with a consent order agreed with the regulator in September 2012. A new consent order, signed yesterday [19 August 2014] by SCB CEO Peter Sands, also requires the bank to suspend dollar clearing through its New York branch for high-risk retail clients in its Hong Kong subsidiary and close some business accounts in the UAE.

Monitoring, Banks, Cases, North America

Citigroup settles with OFAC over Iran sanctions breaches

Citigroup will pay $217,841 to the US Treasury following eight apparent violations of US sanctions programmes.

Sanctions, Cases, North America

PwC pays $25m for changing report on wire stripping at Bank of Tokyo Mitsubishi

PricewaterhouseCoopers Regulatory Advisory Services will pay a $25m penalty to the State of New York and not undertake consulting assignments for financial institutions supervised by the New York Department of Financial Services (NYDFS) for 24 months following its alteration of a report to regulators on wire stripping by Bank of Tokyo Mitsubishi (BTMU).

Sanctions, Banks, Cases, Supervisors, North America

Call my bluff – Crimea

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.

Sanctions, PEPs, Legislation & Guidance, Europe, North America
Money Laundering

Tacking to transparency – currents in the Caribbean

US efforts to bolster its public finances by obliging foreign financial institutions to report on accounts they hold for US taxpayers or face 30% withholding tax on US-sourced payments might have initially met with loud complaint elsewhere but the Foreign Account Tax Compliance Act (FATCA) has boosted the disclosure agenda internationally and is making big waves, especially just offshore. Alan Osborn tests the tide of opinion across the Caribbean on sharing tax and ownership information.

Customer Due Diligence, Tax Evasion, Latin America and Caribbean, North America

The next act in the AML cycle

Germany was judged to have fallen sufficiently far short of Financial Action Task Force expectations in 2010 to merit regular inspection visits to check on remediation efforts to its AML/CFT regime. Sue Grossey looks at the steps it took to earn removal from the follow-up process by this June’s FATF Plenary.

Customer Due Diligence, Reporting, Government and International Bodies, Legislation & Guidance, Practice Findings, Supervisors, Europe
Risks and Controls

Russia – on the offensive

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.

Customer Due Diligence, Tax Evasion, Financial Intelligence Units, Legislation & Guidance, Practice Findings, Europe

The false positive problem - advanced statistics weigh in

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).

Sanctions, Technology

US takes a measured stride on beneficial ownership

The Financial Crimes Enforcement Network first proposed extension of existing customer due diligence obligations to identification of beneficial owners of accounts in covered US financial institutions in February 2012. After protracted consultations with industry a notice of proposed rulemaking (NPRM) was published at the end of July. Franca Harris Gutierrez, Sarah Pfuhl, Boyd M. Johnson III, Katrina Carroll and Elijah M. Alper of WilmerHale look at how much more financial institutions will need to know about who owns or controls some of their corporate and other legal entity customers.

Customer Due Diligence, Banks, Securities, Consultations and Responses, Legislation & Guidance, North America

Bank of America pays $16.6m for narcotics trafficking sanctions failings

Bank of America is to pay $16,562,700 to settle 213 apparent violations of US sanctions programmes against narcotics traffickers.

Sanctions, Banks, Cases, North America
Terrorist Financing

Warm hearts and cold crimes

Charities or non-profit organisations are often at work in conflict zones close to terrorist operations and open to direct attack. The threat of financial compromise by the same extremists, arising from NPOs’ extended communication lines, heavy reliance on volunteers, who may not always be properly vetted, large cash turnover, and perhaps weak financial controls due to a strong ethos of trust, applies, equally, away from trouble spots. In a recent typology report, the Financial Action Task Force considers these risks and how AML/CFT professionals can respond. Sue Grossey reviews the text.

Terrorist Financing, Government and International Bodies, Practice Findings

Holiday plans – after the FATF plenary

June’s Financial Action Task Force plenary yielded assorted updates, admonishments and typologies sure to spice the summer reading list of any AML/CFT professional.

Terrorist Financing, Government and International Bodies, Practice Findings
Legal / Regulatory

Bangladesh – law and practice

Extensive legislative remediation by Bangladesh may have strengthened its AML/CFT regime sufficiently for technical approval by the Financial Action Task Force but corruption and capital flight leave the real impact in doubt. A Z M Anas reports from Dhaka.

Financial Intelligence Units, Legislation & Guidance, Practice Findings, South Asia

National risk assessment on a small island

Aruba in the Caribbean began work on its money laundering and terrorist financing risk assessment even as the Financial Action Task Force’s revised Recommendations, which require it, were launched in early 2012. Bas Jennen, who managed the project, sets out the approach that was followed together with the findings and lessons for the conduct of future NRAs.

Government and International Bodies, Practice Findings, Supervisors, Latin America and Caribbean

EU & US sanctions hit Russia’s finance, energy and defence sectors

New rounds of sanctions have been announced by the European Union (EU) and United States, which reduce Russian access to their capital markets and restrict EU and US persons' dealings with Russian banks, arms manufacturers and oil companies.

Sanctions, Europe, North America

BNP Paribas pays $8.9bn, senior staff exit over US sanctions breaches

BNP Paribas (BNPP) has pleaded guilty to criminal conspiracy to violate US sanctions [1]; 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.

Sanctions, Cases