FINANCIAL CRIME DIGEST
April 2015
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FINANCIAL CRIME DIGEST
Welcome to the April 2015 Financial Crime Digest,
covering updates from March 2015.
This month’s updates include Serious Crime Act 2015
exemptions from civil liability for money laundering
disclosures, the application of AML rules to digital
currencies, the first inspection report of the NCA, and
the FCA’s 2015/16 business plan. We also provide a
round-up of recent press and media coverage of
Anti-money laundering, sanctions,
bribery & corruption, fraud, and
insider trading issues.
TECHNICAL AND REGULATORY UPDATES
The Serious Crime Act (Commencement No.1) Regulations
2015 (SI2015/820) were made on 19 March 2015.
Under Regulation 3, section 37 of the Serious Crime Act 2015,
relating to exemption from civil liability for money laundering
disclosures, will come into force on 1 June 2015.
Section 37 places civil immunity for money laundering
disclosures on a statutory footing. The exemption provides that
“where an authorised disclosure is made in good faith, no civil
liability arises in respect to the disclosure on the part of the
person or on whose behalf it is made.”
The Regulations and explanatory notes are HERE.
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FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
Anti-money laundering and counter-terrorist
ﬁnance supervision report is published by
HM Treasury
HM Treasury has published its fourth anti-money
laundering and counter-terrorist finance
supervision report. Chapter 5 of the report lists
good and bad practice by UK supervisors on the
following themes:
l How supervisors adopt a risk-based approach
l Monitoring activity
Financial Sanctions - Chancellor announces
government implementation review
In the Budget report (paragraph 1.102), the
Treasury has announced that the government
will review the structures within HM Treasury for
the implementation of financial sanctions and its
work with the law enforcement community to
ensure these sanctions are fully enforced, with
significant penalties for those who circumvent
them. This review will take into account lessons
from structures in other countries, including the
U.S. Treasury Office of Foreign Assets Control. It
l Enforcement action and deterrence
will consider how to maintain and improve the
l Advice and outreach
service that HM Treasury provides to the private
l Information sharing
The report is HERE.
sector, maintain the integrity of, and confidence
in, the UK financial services sector, and
strengthen the government’s ability to implement
and help enforce this vital tool in the UK’s
national security interests.
The Budget report is HERE.
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FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
Anti-money laundering rules to apply to digital
currency exchanges in the UK
The Treasury's digital currency plans were outlined in
a document which also summarised the 120
responses it received to its earlier call for
information on digital currencies. In the report, it said
that it plans to review whether the police are
equipped with "effective skills, tools and legislation
to identify and prosecute criminal activity relating to
digital currencies".
Work to develop new voluntary standards for
consumer protection in the area of digital currencies
will also be undertaken by the government in
collaboration with the British Standards Institution
and the digital currency industry.
"The government notes the nascent state of the
technology and the surrounding industry, and
HMIC issues ﬁrst inspection report of
recognises that users of digital currencies are
the NCA
potentially exposed to a number of risks," the
Treasury said. "In response, the government
considers that a framework for best practice
standards for consumer protection is the right step
to take at this stage, in order to address the risks
identified, but without imposing a disproportionate
regulatory burden on the industry."
Her Majesty’s Inspectorate of the
Constabulary, an independent inspectorate
that is required to carry out inspections of
the UK National Crime Agency, has issued
its first report to the Home Secretary on the
efficiency and effectiveness of the NCA.
Amongst other matters, the report noted
An additional GBP 10 million of funding has also
that the NCA is receiving around 330,000
been earmarked for new research into the
suspicious activity reports per year, and that
"opportunities and challenges for digital currency
this number is increasing. As a result, the
technology". In recent months, financial services
current SAR database is now reaching the
regulators have taken an increasing interest in
end of its life, which may create risks. HMIC
digital currencies because of the growing popularity
noted that the NCA is fully aware of the
of 'Bitcoin'.
issues surrounding the database and is
currently working to find a replacement
The response to the call for information is HERE.
system.
The HMIC report of the NCA can be found
HERE.
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FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
Home Ofﬁce issues Call for Information on Suspicious Activity Reports
The UK Anti-corruption Plan, published on 18 December 2014, announced a review of the Suspicious
Activity Reports regime under the Proceeds of Crime Act 2002 and the Terrorist Act 2000. The purpose of
this review is to develop ways of better identifying money laundering and the financing of terrorism, and to
prevent the movement and use of the proceeds of crime.
The Home Office has now issued a call for information. It seeks responses to the questions in Section 3 of
the Call for Information document. The scope of this Call for Information is the overall operation of the
SARs regime, including its legislative foundation, and the way the system operates in practice. The Home
Office is seeking views on both money laundering and terrorist finance, particularly from those with
responsibilities under POCA or the Terrorism Act 2000 for reporting suspicious transactions, and those with
responsibility for oversight or supervision of the regulated sector.
Responses to the Call for Information were due on 25 March 2015.
The Call for Information is HERE.
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FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
The Clearing House calls on FinCEN to allow
The Clearing House criticised existing restrictions
greater sharing of SARs
which it said “impede the ability of globally-active
U.S. depository institutions to conduct effective and
The Clearing House, the oldest banking
efﬁcient enterprise-wide AML risk management, risk
association and payments company in the United
assessment, and activity monitoring”. The Clearing
States, has called on FinCEN to allow U.S.
House added that, in the context of SARs in
headquartered depository institutions and U.S.
particular, “we continue to be strong proponents of
branches of foreign headquartered depository
the ability of banks to share information across their
institutions to lift restrictions on the sharing of
organisational structures.”
suspicious activity report data.
The Clearing House letter to FinCEN is HERE.
The Financial Action Task Force publishes a
speech by Je-Yoon Shin, FATF Vice President
Egmont Group publishes compilation of
100 cases
The FATF has published a speech by Je-Yoon Shin,
FATF Vice President on the current FATF agenda
The Egmont Group of Financial Intelligence
and priorities. The speech covered the following
Units has released a compilation of 100
themes:
cases. The cases have been subdivided into
six categories containing five general money
l The global regulatory arena
laundering typologies and one chapter
l The risk-based approach
focusing on intelligence exchange successes.
l De-risking
The categories used were:
l FATF’s mutual evaluation process
l Concealment within Business Structures
l FATF action on terrorist ﬁnance
l Misuse of Legitimate Businesses
With reference to terrorist ﬁnance, Je-Yoon Shin
l Use of False Identities, Documents, or
stated that the UN has published, and recently
updated, a consolidated sanctions list on its
website, and requests feedback from the private
sector.
Straw Men
l Exploiting International Jurisdictional
Issues
l Use of Anonymous Asset Types
The speech is HERE.
l Effective Use of Intelligence Exchanges
The consolidated sanctions list published by the
The compilation of cases can be found HERE.
UN is HERE.
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FINANCIAL CRIME DIGEST
TECHNICAL AND REGULATORY UPDATES
HM Treasury issues Advisory Notice
HM Treasury has issued an Advisory Notice regarding the risks posed by unsatisfactory money laundering
and terrorist financing controls in a number of jurisdictions. This advice supersedes previous advice issued
by HM Treasury in connection with deficiencies in these areas.
HM Treasury advises to consider the following jurisdictions as high risk for the purposes of the Money
Laundering Regulations 2007, and so advises firms to apply enhanced due diligence measures in
accordance with the risks: Algeria, DPRK, Ecuador, Iran and Myanmar.
Additionally, it is advised to take appropriate actions in relation to the following jurisdictions to minimise
the associated risks, which may include enhanced due diligence measures in high risk situations:
Afghanistan, Angola, Guyana, Indonesia, Iraq, Lao PDR, Panama, Papua New Guinea, Sudan, Syria, Uganda,
and Yemen.
The notice can be found HERE.
OFAC sanctions updates
The U.S. Treasury Office of Financial Assets
Control has added a number of individuals and
entities to its sanctions lists for VENEZUELA,
UKRAINE and SYRIA. A number of individuals
and entities associated with CUBA have been
removed from the OFAC sanctions list.
FCA publishes its 2015/16 business plan
The FCA has published its business plan for
2015/16, which includes a key focus on financial
crime risk. The FCA said: “Financial crime poses a
significant threat to the realisation of our objective
to promote and enhance the integrity of the UK
financial system”. It added that financial crime risks
arise from steps not being taken to address money
laundering, bribery, and corruption. The FCA stated
that it would continue to challenge the “often poor
anti-money laundering systems and controls we see
in firms of all sizes”.
The 2015/16 FCA business plan can be found HERE.
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FINANCIAL CRIME DIGEST
PRESS AND MEDIA: MONEY LAUNDERING
The Bank of Beirut has been fined GBP 2.1 million by the Financial
Conduct Authority and stopped from acquiring new high risk
customers for 126 days. The bank was found to have repeatedly
provided the regulator with misleading information after it was
required to address concerns relating to its financial crime systems
and controls. Anthony Wills and Michael Allin, respectively the
former compliance officer and former internal auditor at the bank,
were also fined. The final notices can be accessed HERE.
Banca Privada d’Andorra, one of five
HSBC has announced that it is reviewing
customer accounts held in Jersey for
sufﬁciency of client identiﬁcation
documentation. The bank is said to have exited
customers where there are concerns over tax
compliance issues. HMRC reportedly began an
investigation into certain customers’ tax affairs
in Jersey three years ago, following a tip-off
from a whistle blower.
national banks in Andorra, has been
designated a foreign financial
institution of primary money laundering
concern by FinCEN. Subsequently to
the announcement, Andorran
authorities have reportedly taken direct
control of the bank. Andorra’s credit
rating has been reduced by Standard &
Poor’s as a direct result of the FinCEN
action. The FinCEN notice is HERE.
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FINANCIAL CRIME DIGEST
PRESS AND MEDIA: BRIBERY & CORRUPTION
Kenya has brought charges against 12 people
Romania’s anti-corruption chief has been arrested,
accused of involvement in what has become
on corruption charges. Horia Georgescu, director
known as the Anglo Leasing bribery and
of Romania’s National Integrity Agency, was
corruption scandal. The case centres on a
detained on suspicion of overvaluing property
Liverpool-based company that, in 2004, was
seized by the communist government before it
linked to 18 allegedly inflated state security
was returned to its previous owners. The alleged
contracts reported to be worth USD 700 million, in
crimes were committed in 2008 to 2009, when he
some cases awarded to phantom entities. The
was on the committee for National Authority for
case led to public outrage, but a legal case fell
Property Restitution, and they may have
apart in 2005 due to a lack of evidence. The
defrauded the state of some GBP 54 million.
country’s political elite were accused of being
complicit in the schemes.
China’s Ministry of Public Security has launched
a new round of its campaign, code-named
operation “Fox Hunt”, to track down foreign
assets of corrupt Chinese officials. In a
statement by the ministry, it announced that the
new “Skynet” operation would focus on arresting
corrupt officials or suspects involved in similar
crimes who fled to major Western countries,
including the U.S., Canada, and Australia. The
ministry said it would be working closely with the
People’s Bank of China and the State
Administration of Foreign Exchange to monitor
suspicious flows of monies remitted to foreign
bank accounts. It also said it would launch a
crackdown on underground banks.
Switzerland’s Ofﬁce of the Attorney
General has announced it has frozen
around USD 400 million in assets
relating to the bribery and corruption
scandal at Petrobras, and that ongoing
probes have identified more than 300
accounts at more than 30 "banking
institutions" in the country that the
officials say were apparently used to
process bribery payments now under
investigation in Brazil.
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FINANCIAL CRIME DIGEST
PRESS AND MEDIA: SANCTIONS
Commerzbank AG agreed to pay USD 1.45 billion
to settle actions relating to charges that it
processed payments on behalf of entities
designated by US sanctions on Iran and in
relation to accusations that the bank enabled
Olympus Corporation of Japan to orchestrate a
huge accounting fraud. In addition to the USD
1.45 billion penalty — divided among the New
York Department of Financial Services, the
Manhattan district attorney’s office, the United
States attorney’s office in Manhattan, the
Treasury Department, the Federal Reserve, and
the Justice Department’s criminal division — the
bank agreed to admit to its conduct in a
statement of facts. The deal with the New York
regulator, Benjamin M. Lawsky, also required the
bank to install an independent monitor and
dismiss individual employees tied to the case,
leading to the resignation of the person in charge
of money laundering and sanctions compliance in
the bank’s New York office.
A U.S. Justice Department official has said that
some banks that have non-prosecution
agreements over failures to police actions to
control financial crime could see those deals
withdrawn or be forced to plead guilty. Assistant
Attorney General Leslie Caldwell said: “The
criminal division will not hesitate to tear up that
agreement when that action is appropriate". In the
last three years, HSBC Holdings Plc, Standard
Chartered Plc, JPMorgan Chase & Co, and
Commerzbank AG have entered into either nonprosecution agreements or deferred-prosecution
agreements. The agreements allow cases to be
settled in return for fines and pledges by banks to
prevent a recurrence of the violations.
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FINANCIAL CRIME DIGEST
PRESS AND MEDIA: FRAUD
A court in Israel found Ehud
Olmert, the country’s former
Prime Minister, guilty of fraud
and breach of trust after a
retrial of the corruption case
that had forced him to resign
six years ago. The court ruled
that Olmert had accepted
cash stuffed in envelopes
totalling approximately USD
150,000 from American
businessman Morris
Talansky between the period
of 1992, when Olmert first
ran for mayor of Jerusalem,
Two U.S. federal ofﬁcials involved in the investigation into Silk
and 2005 when he was
Road, a digital marketplace known for its association with payments
minister of trade. In 2014,
in Bitcoins, have resigned and been charged with money laundering
Olmert was sentenced to six
and fraud. Former DEA agent Carl Mark Force IV is alleged to have
years in jail for accepting
stolen and converted, for his own use, approximately USD 776,000
bribes in a real estate deal
worth of Bitcoins. Former Secret Service agent Shaun W. Bridges is
while he was mayor of
alleged to have diverted more than USD 800,000 to his own
Jerusalem. Olmert is
account. A lawyer for the alleged mastermind behind Silk Road has
currently appealing the 2014
called the federal investigation flawed. Force reportedly had
sentence, whereas he is due
moonlighted as a compliance officer for CoinMKT, a currency
to be sentenced for the fraud
exchange firm, whilst working as a DEA agent.
case in May.
The UK’s Serious Fraud Ofﬁce began a probe into the
Bank of England’s emergency lending measures taken
during the 2007-2008 ﬁnancial crisis, amid fears that
the central bank may have been affected by the Citywide rigging scandal. The probe was initiated after the
Bank of England passed on ﬁndings to the SFO of its
own investigation which focused on whether senior
central bankers were aware that money-market
auctions may have been rigged in 2007-2008.
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FINANCIAL CRIME DIGEST
PRESS AND MEDIA: INSIDER TRADING
Julian Rifat, a former trader at Mayfair hedge fund
The Financial Times reported that the Financial
manager Moore Capital, was sentenced to 19
Conduct Authority has experienced a sharp
months’ imprisonment for his part in an insider
increase in the number of suspicious transaction
trading scheme that made nearly GBP 1 million.
reports (STRs) in 2014 that flagged possible
Rifat was targeted as part of the FCA’s Operation
instances of market abuse. A total of 1,626 STRs
Tabernula, the UK’s largest ever insider trading
were filed in 2014, up from 1,308 in the previous
investigation. He was found to have colluded with
year. The number of STRs also contrasted sharply
Graeme Shelley, a trader at Novum Securities, and
with those made during the pre-financial crisis
Paul Milsom, an equities trader at Legal & General.
era: in 2007, only 328 STRs indicating possible
Milsom and Rifat, with senior responsibilities for
market abuse were filed, according to statistics
dealing with market-sensitive information, would
from the FCA. Commentators stated that the
pass this information on to Shelley, who would
FCA’s policy of “credible deterrence” had led to a
proceed to make heavy spread-bet and contract-
culture of “if in doubt, raise an STR”. The FCA has
for-difference trades via his brokers, making
levied penalties against a number of banks for
profits as soon as the market moved.
failures to properly report transactions (although
these were not necessarily suspicious in nature).
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