Deutsche Bank gets a warning from the FCA, AML amendments could save AUD$1.3 billion and Spain is refusing the US extradition of a PEP.

We share our financial regulatory highlights from the week of 2 March 2020.

Deutsche Bank in Trouble

Deutsche Bank has come under criticism yet again for its AML controls from the FCA. And this time it might see the embattled bank withdrawn from the UK market following Brexit.

The FCA’s criticism follows a number of issues for Deutsche Bank. The bank has had AML compliance problems in the USA, Germany and was involved in a $20 billion Russian money-laundering scheme less than a year ago.

Reporting from the Financial Times has revealed that the Bank of England is receiving monthly, not quarterly, updates from Deutsche Bank. This is despite the bank supposedly tripling staff numbers focused on tackling financial crime since 2015 – a strong indication that Deutsche Bank’s compliance problem isn’t one that can be solved simply by throwing more people at it.

$1.3 Billion in Savings, Maybe

Australia could save AUD$1.3 billion in regulatory costs through the Anti-Money Laundering and Counter-Terrorism Financing Amendment and Other Legislation Bill 2019 (AML/CTF Bill) if it passes. That’s according to the Department of Home Affairs.

The legislation is an amendment to the AML/CTF Act 2006 and aims to facilitate Open Banking. Regulatory costs could be lowered by relying on CDD checks made by other entities of an appropriate standard. It will also make information-sharing significantly easier between AUSTRAC and financial institutions (FIs).

However, relying on the CDD checks of outside entities may be a cause for concern for some MLROs and senior compliance workers. Unless the legislation frees them from the ramifications of getting CDD wrong, in the event that it’s conducted by a third party through this Open Banking legislation, it’s unlikely that individual FIs will stop doing their own checks.
Outsourcing the work without outsourcing the risk will never be acceptable to compliance professionals – there’s real potential for this legislation to simply increase work for FIs.

However, if CDD can be used reliably by third-party checks then it’s a wonder why Australia would opt to use FIs instead of creating a central database. Such a database could act as a verified list of legitimate customers for all FIs and use a combination of APIs and Webhooks to deliver information quickly and effectively to those that need to conduct KYC and CDD checks.

Department of Home Affairs National Security and Law Enforcement Policy Division First Assistant Secretary Hamish Hansford supplied the figure for regulatory cost savings but neglected to share over what length of time.

American Rejects

The US government’s request to extradite a former Venezuelan public official was rejected by Spanish courts last week.

Javier Alvarado Ochoa, who served as minister of electric power development during Hugo Chavez’s administration, is wanted by US prosecutors for his alleged participation in a money-laundering scheme involving Venezuela’s state-owned oil company, PDVSA.

The ex-minister had been president of Bariven, a procurement subsidiary of PDVSA. He is charged with soliciting bribes in exchange for awarding bids, favorable contract terms and kickbacks to the oil company’s vendors in violation of the Foreign Corrupt Practices Act (FCPA) and then laundering the funds to cover up the scheme. Two European wealth managers, Daisy Teresa Rafoi Bleuler and Paulo Jorge da Costa Casqueiro Murta, were also charged.

Ochoa was arrested in Spain last May after the US government issued a warrant for his arrest, oddly enough just weeks after the Venezuelan was granted Spanish citizenship. The decision to deny extradition, which came from Spain’s High Court, upheld the ruling made last December by the National Court of Spain. Its reasoning: Ochoa is also under investigation in Spain for similar alleged crimes and is now a Spanish citizen. Even shared objectives, it seems, don’t sweep away jurisdictional disputes.

The US indictment of Ochoa is part of a larger multi-billion dollar investigation into bribery at PDVSA that has ensnared several Venezuelans in the top echelons of business and government as well as other international conspirators. The probe is far-reaching and far from over — a bad sign for the state-run oil company, which has also been crumbling under the weight of strict US sanctions and which has seen an increasing share of Venezuela’s oil projects go to foreign partners and private companies.

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