A Quick Game of Financial Crime

August 22, 2019 4 minute read

It’s been a tumultuous week for the compliance world, Australia’s regulator signals its intention to take greater action against the country’s top financial institutions, yet another Nordic bank is under review and money’s rejecting the sports world. We share our financial crime highlights from the week of 19th August 2019.

Greater Action Against Australia’s Top Financial Institutions

Commonwealth Bank in Australia is facing tough scrutiny from Austrac, the nation’s regulator. This follows a record fine of AUD$700 million ($475 million) for breaching AML/CFT laws.

Breaches in Australia rely on self-reporting from banks for investigation, a test of credibility that hasn’t always gone to plan. Austrac’s pledge to tackle the issue comes following a ‘flood’ of self-reported breaches from Commonwealth Bank in the wake of the fine in 2017.

Austrac Chief Executive, Nicole Rose, is predicting a busy year for the regulator, and Treasurer Josh Frydenberg has said: “the public’s tolerance has been exhausted.” Referencing the banking Royal Commission which uncovered a massive amount of corruption in the Australian banking system.

In a global economy that had allegedly learned its lesson on Subprime mortgages, Australian bank staff were reportedly pushing schemes designed to award mortgages to customers who could not afford them and obtaining approval with bribes and various frauds. It’s key to remember that it was bank staff committing the frauds – which made up nearly one-third of all mortgages in Australia.

The Australian banking system is not well known as a hub of regulatory strength and there’s evidence of widespread corruption since the 1980s. That reputation raises questions as to why the banks were ever allowed to self-report in the first place. However, Austrac did praise the banks for revealing Australia is set to see up to 40 new pieces of legislation go through Parliament before the end of 2020.

For money remittance firms, casinos, online payment platforms and banks in the region, becoming compliant and managing to stay future-proof is going to be difficult at best. The exact targets of the legislation have not yet been decided but those are the industries under Austrac’s remit.

Another Nordic Review

The FSA, Norway’s regulatory body, has found that the Nordic bank DNB’s compliance has significant gaps. Especially in regards to AML compliance. The investigation took place in late-2018 and the report was released on 21st August 2019.

Until the recent scandals at Swedbank and Danske, money laundering was not considered a significant risk at the Nordic banks. That’s all changed and the issue is now a major focus for Nordic compliance teams.

DNB managed to improve on issues discovered in 2016 but isn’t moving at the speed that the FSA would like. At this stage, penalties haven’t been discussed for the region’s biggest bank.

Given that no major issues or money laundering scandals appear to have occurred that may continue to be the case. DNB responded to the report by confirming its position against money laundering and noting that the FSA did not uncover any explicit cases of money laundering.

The Nordic bank’s compliance issues seem to cut across the business, with issues found at DNB’s private banking unit. The FSA has said a new inspection is on the horizon so DNB’s compliance woes won’t be over any time soon.

A Quick Game of Financial Crime

It’s been a tough week for sports in the financial crime world. Rabobank has decided to sever client relationships with football clubs due to the “unacceptable risks of money laundering, corruption, fraud and other abuses.” The bank has also forbidden staff from taking on managerial or supervisory positions at any football clubs to avoid any conflicts of interest.

80% of all football organizations in the Netherlands are Rabobank clients.

Rabobank has insisted that football clubs are treated the same as every other customer and due to the risks has had to withdraw from providing banking services to clubs. However, sponsorship and marketing relationships remain unaffected. It’s a huge move by the bank and is a remarkable show of commitment to staying compliant.

It’s not just the football world that’s been making waves. Former Major League Baseball (MLB) players have been caught up in what’s been called the largest operation against organized crime in the Dominican Republic.

Octavio Dotel and Luis Castillo, two former MLB stars were linked to the drug-trafficking and money laundering ring and arrested by Dominican authorities.

Eighteen other people are as yet unidentified but it was implied that they’re also athletes by the Dominican Attorney General. Castilo has strenuously denied any claims of ties to drugs, Dotel is yet to comment.

It seems Rabobank may have a point about certain sports having too high of a risk threshold.

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