Goldman Sachs escapes court judgment, the EU moves to consolidate its fincrime response and a wildlife trafficking ring in the US has been dismantled.

We share our financial regulatory highlights from the week of 7 September 2020.

Sachs’ Golden Acquittal

The 1MDB scandal has resulted in numerous arrests, the imprisonment of a former Prime Minister and now it has rendered judgement on one of the banks involved.

Goldman Sachs has had the court case against it withdrawn by Malaysian prosecutors. The bank had been under prosecution for the role it played in facilitating the disappearance of billions of dollars from the 1MDB sovereign wealth fund, but charges were dropped when Goldman Sachs agreed to pay $3.9 billion to Malaysia.

Three business units of the bank had been accused of misleading investors over $6.5 billion in bond sales for 1MDB. The US Department of Justice has estimated $4.5 billion was siphoned from the fund between 2009 and 2014, including funding raised by Goldman Sachs.

On granting the prosecutor’s request, High Court Judge Mohamed Zaini Mazlan commented: “Goldman Sachs International Ltd, Goldman Sachs (Asia) LLC and Goldman Sachs (Singapore) are therefore discharged amounting to an acquittal from all four charges made against them.”

The acquittal was granted due to Goldman Sachs agreeing to guarantee the return of $1.4 billion of 1MDB assets that have been seized globally on top of the billions it has already agreed to repay. At least six countries including Switzerland and Singapore have opened money laundering investigations into the scandal.

Closing Loopholes

The EU is taking steps to eliminate money laundering loopholes from across member states. Raluca Pruna, head of the European Commission’s Financial Crime Unit plans to move the fight against money laundering away from a country-by-country perspective and to a networked supranational view — centralizing financial crime fighting power in one location.

Pruna commented: “Financial Intelligence Units (FIUs) play an essential role in ensuring that the EU’s AML system works. Good communication between FIUs and other relevant authorities is key to effectively fighting against money laundering,”

She went on to emphasize the importance of coordinated activity between FIUs while maintaining their current functionality. The new centralized body would serve as a data exchange between FIUs and create a commonality between how data is interpreted and assessed.

A centralized unit should serve to ease communication between different FIUs and is an attempt to mimic the network effects that currently only work in favor of criminals. Centralizing information from 27 FIUs will hopefully mean that law enforcement is able to detect and respond to financial crime in Europe at greater speed than before and with greater clarity as to how money is moving throughout the region.

Shark Fin Ring Shut Down

US officials arrested twelve individuals and shut down two businesses on 3 September 2020 for their alleged involvement in an international crime syndicate whose activities included drug and wildlife trafficking, shark finning and money laundering. The same day, agents seized millions of dollars’ worth of cash, precious metals, diamonds and drugs and found evidence of a massive wildlife harvesting operation.

The crime ring operated for at least a decade, according to the indictment, and engaged conspirators across the US — in Georgia, California, Florida, Michigan and Arizona — as well as in Hong Kong, Mexico and Canada, among other places. The defendants are accused of illegally transporting over 1,000 kg of marijuana from California to Georgia. They are also accused of smuggling shark fins from Mexico to California before ultimately exporting them to Hong Kong.

The harvesting of fins is highly controversial and banned in many countries. But the demand for shark fins, which are used to make shark fin soup and considered a delicacy in some Asian countries, has continued to fuel demand for them.

In the US, while California has banned selling, possessing, trading or distributing shark fins, it is strictly regulated but legal to do so in Florida, and prosecutors say a front company, Phoenix Fisheries, was established in Florida to hide the illicit activity. Fake invoices, export documents and other paperwork were allegedly created to sell the story and make it seem as if the shark fin business was legitimately operating out of Florida.

The proceeds from both illegal enterprises were then allegedly laundered through dozens of third-party business accounts, opened in the US and around the world, that dealt in precious metals and precious stones.

Drug trafficking and the illegal wildlife trade are major global issues and are considered predicate offenses to money laundering — a point this case clearly illustrates. Still, wildlife trafficking, in particular, doesn’t always receive the same coordinated global attention as other offenses. The reasons for this are varied and complex. However, with FATF recently naming it a priority issue, and with cases like this one making headlines, that is hopefully set to change in the coming years.

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