FINANCIAL CRIME DIGEST March 2015

MAKE INFORMED DECISIONS

FINANCIAL CRIME DIGESTMarch 2015

www.aperio-intelligence.com

FINANCIAL CRIME DIGEST

The new Section 37 of the Serious Crime Act 2015 provides civilliability exemption for money-laundering disclosures.

The Home Office has announced that the Serious Crime Bill has received

Royal Assent, making it the Serious Crime Act 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. Karen Bradley MP, Minister for Modern

Slavery and Organised Crime, had previously explained that the

Government was obliged under Article 26 of the EU Third Anti-Money

Laundering Directive to protect those who report suspicions of money

laundering in good faith from incurring civil liability for doing so.

Welcome to the March 2015 Financial CrimeDigest covering key updates from February 2015.

This months digest covers updates in relation to theSerious Crime Act 2015, the FATF Plenary meeting inParis, progress on the fourth EU Money LaunderingDirective, and the launch of the Joint MoneyLaundering Intelligence Taskforce. It also provides asummary of key press and media coverage relating tofraud, money laundering, bribery and corruption, data security, and sanctions news, plus a look ahead to upcoming events and publications in March 2015.

TECHNICAL AND REGULATORY UPDATES

1




She said that, whilst the common law currently provides such protection, the

Government had concluded that placing civil immunity on a statutory footing

would be advantageous in providing greater legal certainty. The Opposition

supported the new clause and it was later added to the Serious Crime Bill.

The announcement is HERE. The Serious Crime Act is HERE.

2

The FATF Plenary meeting took place at the

OECD in Paris from 25 - 27 February 2015.

The public statement can be found HERE.

The Plenary considered a number of matters,

including:

l Terrorist financing, and the issue of a report

on the financing of the Islamic State in Iraq

and the Levant (ISIL)

l Jurisdictions with AML/CFT deficiencies

l Fourth round mutual evaluation reports

l Collaboration between the Egmont Group of

FIUs and FATF

l An ongoing review of de-risking, in line with

the risk-based approach

l Building on the FATF 2014 report on

virtual currencies

FATF listed Iran and the Democratic Peoples

Republic of Korea (DPRK) as two jurisdictions

with on-going or substantial money laundering

or terrorist financing risks. Algeria, Myanmar

and Ecuador are considered to have strategic

AML/CFT deficiencies and have not made

sufficient progress in addressing the

deficiencies, or have not committed to an

action plan to address the deficiencies.

The FATF Plenary session discussed

the mutual evaluation reports of Australia

and Belgium.

The City of London Police has announced the

launch of the Joint Money Laundering Intelligence

Taskforce. The taskforce will run for an initial

period of 12 months, with a view to improving

intelligence sharing arrangements and building on

national leadership against organised economic

and financial crime. Representatives from the

financial sector, NCA and City of London Police

will be based in a single hub to develop an

operational level understanding of money

laundering risks.

The banks involved are: Lloyds, Santander, HSBC,

Nationwide, Post Office, RBS, Barclays, Citigroup,

BNP Paribas, and Standard Chartered. Information

and intelligence will be processed and

disseminated via the British Bankers Associations

Financial Crime Alerts Service. Other law

enforcement agencies and financial institutions

include HMRC, Financial Fraud Action UK, and

Cifas (UK's independent fraud prevention service).

The press release is HERE.

The UK Cabinet Ofce has published the Terms of

Reference for the second phase of its review to

improve the coordination and effectiveness of the

UKs enforcement response to bribery, corruption

and related fraud, through a full consideration of

the powers, capabilities and organisations

involved. The FCA is supporting the review.

The Terms of Reference are HERE.




3

The Council of European Union has endorsed the political agreement reached

with the European Parliament on the proposed Fourth Money Laundering

Directive and proposed regulation on information accompanying transfer of

funds (the Wire Transfer Regulation). The strengthened rules reflect the need

for the EU to adapt its legislation to take account of the development of

technology and other means at the disposal of criminals.

The main elements are:

l Extension of the directive's scope, introducing requirements for a greater

number of traders. This is achieved by reducing from EUR15,000 to

EUR10,000 the cash payment threshold for the inclusion of traders in

goods, and also including providers of gambling services.

l Application of a risk-based approach, using evidence-based decision

making, to better target risks. The provision of guidance by the European

supervisory authorities.

l Tighter rules on customer due diligence. Obliged entities, such as banks,

are required to take enhanced measures where the risks are greater, and

can take simplified measures where risks are demonstrated to be smaller.

l Member states will have two years to transpose the directive into

national law.

l The press release is HERE.

l The texts of MLD4 and Wire Transfer Regulation are HERE.

l The procedure file for MLD4 is HERE.

l The procedure file for Wire Transfer Regulation is HERE.




4

HM Government, the Department of Business

Innovation and Skills (BIS) and other

Government bodies have announced new

measures to help UK businesses face cyber

security challenges.

New Government support to keep UK

businesses stay safe in cyberspace includes:

l A new cyber security envoy has been

appointed to help British small businesses

and first time exporters promote their

business interests across the US. Andy

Williams will be based in the British

Embassy in Washington to help boost UK-

US cyber security deals

l An updated 10 Steps to Cyber Security

guide, which shows businesses how to

combat cyber threats

l New research published by the Department

for Business, Innovation and Skills (BIS),

which demonstrates how top UK companies

are improving their responses to cyber

threats. The results of the annual Cyber

Governance Health Check for FTSE350

companies shows increased awareness and

action, along with areas for improvement

l Publication of a new report from GCHQ

detailing the common cyber-attacks used

against industry by cyber criminals, and

how to stop them.

l The press release is HERE.

l The 10 Steps to Cyber Security guide can

be found HERE.

GCHQ has issued a report detailing the nature of cyber-

attacks and how to stop them, which focuses on:

l The threat landscape - the types of attackers, their

motivations and their technical capabilities

l Vulnerabilities - what are they, and how are they

exploited?

l Cyber-attacks, stages and patterns - what is the

typical structure of a cyber-attack?

l Reducing the impact of an attack - what controls

are needed to reduce the impact of common cyber-

attacks?

l Case studies - real world examples that

demonstrate how cyber-attacks have caused

financial and reputational damage to major UK

businesses

l The GCHQ Report is HERE.




5

The FTSE 350 Cyber Governance Health Check

Tracker Report offers significant insight into the

cyber governance of the UKs highest-performing

businesses. The Cyber Governance Health Check

(the Tracker) is a questionnaire comprising of 37

questions which assesses the extent to which

boards and audit committees of FTSE 350

companies understand and oversee risk

management measures that address cyber

security threats to their business.

The Tracker is HERE.

l The European Union has implemented new

sanctions against a number of Ukrainian and

Russian nationals after a reported increase in

violence in late January. The sanctions

focused on organisations and individuals

supporting the continuing unrest in Eastern

Ukraine.

l The World Bank announced it has imposed

sanctions in relation to fraud and corruption

against four companies, including two in

Bolivia - Empresa Constructora y Consultora

LAPTUS S.R.L. and Ingenieria en

Construccines Orleans (ICOR), one in

Bangladesh - Globe Pharmaceuticals Ltd

(Globe) and one in Cambodia - Seng Enterprise

Co., Ltd.

l New York State banking regulator Benjamin

Lawsky has proposed measures requiring bank

executives to personally attest to the adequacy

of their money laundering controls.



6

PRESS AND MEDIA: MONEY LAUNDERING

Swiss prosecutors raided the ofces of HSBC Private

Bank (Suisse) and opened an enquiry into possible

aggravated money laundering. The raid followed

disclosures by Washington-based International

Consortium of Investigative Journalists.

The UK Government has been criticised over its

investigation of just one person in connection with

the HSBC money laundering scandal, which

implicated up to 1,000 individuals. A petition has

been set up to compel the authorities to investigate

the cases further, and has so far collected over two-

thirds of the required one million signatures.

French prosecutors recommended

pursuing criminal charges against Royal

Bank of Canadas wealth management

arm in the Bahamas. RBC Bahamas is

accused of conspiring to commit tax fraud

and money laundering in relation to a trust

it managed in Bahamas. RBC has recently

retreated from most of Latin America and

the Caribbean, following numerous money

laundering probes in the last 18 months

into its wealth management arm.

FinCEN has launched a probe into Citigroup-owned

bank Banamex USA. The US arm of the second

largest bank in Mexico is being investigated over

compliance with the Bank Secrecy Act. In 2012,

Banamex USA faced enforcement actions in relation

to flaws in the banks customer due diligence and

internal control systems. In 2014, the bank suffered

losses of USD 500 million in relation to corporate

loan fraud.

In Virginia, US-based Capital One Financial

announced it was under investigation by the

Department of Justice and FinCEN, relating to its

anti-money laundering protocols.

The Supreme Court of Nigeria gave permission to

the Economic and Financial Crimes Commission

(EFCC) to bring charges on 23 counts of money

laundering and illegal diversion of public funds

totalling NGN1.5 billion against former governor of

Plateau State, Joshua Dariye.



7

In exchange for maintaining a

EUR240 billion nancial

lifeline, Greeces Government

outlined a plan to tackle

corruption, including going

after wealth tax evaders.

Italys most senior anti-Mafia prosecutor, Franco Roberti, has said

that Calabrian crime syndicate 'Ndrangheta has beaten the Sicilian

Mafia for control of organised crime in northern Italy. Roberti warned

that the influence of Italian organised crime groups had already

spread beyond Italy to Germany, France and Spain, and there was

evidence of Mafia-related activities in the UK.

The second largest US health insurance firm,

Anthem Inc. (formerly WellPoint), faced one of

the largest data breaches in corporate history,

after it admitted that hackers stole information

on 80 million of its customers. The breach

sparked a class action case against the insurer,

which will also seek to ensure that Anthem

customers, including their children, receive

adequate protection and compensation.

PRESS AND MEDIA: MONEY LAUNDERING

PRESS AND MEDIA: DATA SECURITY



8

Petrobras CEO Maria das Graas Silva Foster

stepped down and was replaced by Banco de

Brasil CEO Aldemir Bendine, following fresh

probes into what is believed to be Brazils biggest

ever corruption scandal. In November 2014, it was

revealed that Petrobras was being investigated

over dubious transactions between the firms

directors, contractors and public officials,

estimated at USD 8.9 billion. The firm also

witnessed a USD 100 billion fall in its market

value from its September high. A former geologist

of the company, Venina Velosa de Fonseca, is said

to have filed a case against Petrobras after being

taken to Singapore and threatened at gunpoint for

her role in exposing the corrupt scheme.

Brazilian authorities are investigating Rolls-Royce

for alleged bribery of Petrobras executives to

secure a USD 100 million contract. The

allegations came from one of Petrobras former

executives, Pedro Barusco, who agreed to be an

informant in return for leniency. Barusco revealed

in a testimony that he had personally received a

kickback of USD 200,000 from Rolls-Royce.

PRESS AND MEDIA: BRIBERY & CORRUPTION

Goodyear Tire & Rubber Company reached a USD 16 million

settlement with the Securities and Exchange Commission

for its violation of the Foreign Corrupt Practices Act (FCPA).

Goodyear was charged with bribing Kenyan public and

private sector officials. Around USD 3.2 million was

distributed to various employees at Kenya Ports Authority,

the Armed Forces Canteen Organization, Nzoia Sugar

Company, the Kenyan Air Force, the Ministry of Roads, the

Ministry of State for Defense, East African Portland Cement

Co, and Telkom Kenya Ltd, in order to secure tire sales.

Canadian police have charged leading Canadian engineering

and construction firm SNC Lavalin Group Inc. with fraud and

bribery linked to payments to Libyan Government officials

totalling USD 49 million. The case demonstrates how,

although corruption investigations are acquiring a global

character, different jurisdictions employ different

approaches. For SNC-Lavalin, it may not be possible to

resolve the issue with a settlement, currently the most

common approach used in the US for big corporations.



9

PRESS AND MEDIA: FRAUD

SCA Promotions won a successful

fraud dispute claim against Lance

Armstrong. An arbitration panel has

ordered the disgraced sportsman

and Tailwind Sports Corporation to

pay SCA USD 10 million in

damages. It is also the largest ever

sanction of its kind given to an

individual in America. Armstrongs

dispute with SCA dates to 2005,

when he lied under oath by stating

that he had never used

performance-enhancing drugs.

Cayman Islands-based Caledonian

Bank Ltd filed for bankruptcy in

New York after the SEC sued the

bank over claims it profited from

stock sales of invalidly registered

shell companies. The SEC action

reportedly led to a run on the bank

by customers.

Yves Bouvier, the owner of Luxembourg Freeport, a vast

repository for billions of pounds worth of fine art and other

treasures, was detained in Monaco along with two other

Swiss nationals. He is suspected of having sold dozens of

works by Picasso, Modigliani, Gauguin, Degas and Leonardo

da Vinci to the family of Dmitri Ryboloylev (owner of

Monaco football club) at inflated prices or with false

documents. A source with knowledge of the affair said that

it was a long-running probe and that a number of high net-

worth individuals in Britain, the United States and Asia may

have been victims of the alleged fraud.

Freeports, previously knownas bonded warehouses, wereinitially used to storecommodities and othermanufactured goods.However there is evidencethat they are increasinglybeing used for smuggling, taxevasion and other illicit uses.



10

PRESS AND MEDIA: SANCTIONS

KEY UPCOMING EVENTS MARCH 2015

According to Western diplomatic and intelligence sources,

around USD 1 billion in cash has entered Iran as the country

seeks to bypass Western sanctions. The Iranian

Government allegedly began exploiting the mechanism in

March 2014. Since then, there has been an explosion in the

number of front companies being opened in Dubai, with

Irans central bank said to be giving them orders to buy

dollars. The money is then transported by couriers

on flights.

Authorities in Somaliland, the self-declared Republic in

north-western Somalia, reported offloading from a ship

weaponry, whose destination was unclear. Other reports

suggested that the shipment originated in the UAE. Somalia,

including Somaliland, is subject to a UN-imposed arms

embargo. The Somaliland Minister of Interior reported that

Sudan contacted the Somaliland government regarding the

arms found on the ship.

The UK announced its renewed move to block the sale of UK

Dea assets by German RWE to Letter1 (Mikhail Fridman),

citing risks he could become subject to economic sanctions

on Russia , if they are tightened. In October 2014, the UK

attempted to block the RWE Dea deal, which would also see

the sale of UK North Sea assets. In December, RWE had

agreed to look into ways of safeguarding the UK assets.

The UN Security Council has distributed a draft resolution

envisaging sanctions on South Sudan, in relation to

repeated ceasefire failures in the area.

The UN found that a North Korean shipping company, Ocean

Maritime Management Company, has renamed most of its

vessels in a bid to avoid western sanctions. The company

was sanctioned last year for attempting to smuggle MiG-21

fighters disguised under thousands of tonnes of Cuban

sugar. The UN also found that the shipments were linked to

members of the North Korean intelligence agency, the

Reconnaissance General Bureau (RGB), many of whom had

worked at international organisations.

Transparency International is dueto release a report detailing itsndings on corruption in the UKreal estate sector. The reportfollows coverage by the New YorkTimes in February of wealthyindividuals use of shellcompanies to acquire exclusiveproperties in Manhattan.

Aperio Intelligence Limited125 Old Broad StreetLondon EC2N 1AR

t: +44 (0)20 7073 0430e: [email protected]

ABOUT APERIO INTELLIGENCEWe are a corporate intelligence advisory firm based in theCity of London. We specialise in: conducting enhanceddue diligence on high risk customers; integrity duediligence on critical acquisitions and investments; marketentry and political risk analysis; and investigations. Ourclients include some of the worlds leading regulatedfinancial institutions. Our team has decades of collectiveexperience in gathering and assessing intelligence to helpclients to make more informed decisions.

For further information, please contact:

Adrian Ford - 020 7073 0432Greg Brown - 020 7073 0433

Registered Address: Carlton House, 101 New London Road, Chelmsford, Essex CM2 0PP. Registered in England & Wales: 09164101 VAT: GB 195 2320 10 Aperio Intelligence Limited 2015. All rights reserved. Aperio Intelligence and the Aperio logo are registered trademarks of Aperio Intelligence Limited.

FINANCIAL CRIME DIGEST March 2015

Documents

Transcript of FINANCIAL CRIME DIGEST March 2015