There have been some strange, shocking and intriguing events in compliance this week. AUSTRAC is making good on its promises, 1MDB is seeing some court time, Finma redefines its relationship with blockchain and it’s a solar system first for space crime. We share our financial crime highlights from the week of 26 August 2019.

Finma Eyes Swiss Blockchain

Finma has put cryptocurrency companies in its sights after issuing guidance on the risks posed by blockchain technology.

The Swiss regulator has decided to push blockchain businesses to comply with its existing AML/CFT regulations, following on from the widely-criticized advice regarding Virtual Asset Service Providers (VASPs) given by FATF in June this year.

Finma cited the anonymity provided by blockchain technology as a risk factor for money laundering.

Blockchain still has a chance of a strong future in Switzerland – Finma granted its first two licenses to companies offering blockchain services. It just shows that delivering cryptocurrency services will require utilizing the right compliance product.

The decision comes in the wake of scrutiny leveled at Libra, the Facebook-owned cryptocurrency. However, Libra’s examination is arguably due to the power and track-record of the social media giant.

1MDB in Court

Najib Razak, Malaysia’s former prime minister, has appeared in court over his role in the 1MDB scandal. Prosecutors have accused him of stealing billions from the sovereign wealth fund and going to great lengths to hide his involvement.

Najib apparently hid his involvement with the scandal through faked documents including letters and cheques from an Arab prince.

The 1MDB scandal broke back in 2015 but it’s only just gone to court following extensive delays. Najib was only removed from power in 2018 after an electoral defeat. He’s accused of transferring 2.3 billion ringgit ($537 million) from 1MDB – an accusation he’s denied and blames on being misled by those in charge of operating the fund.

Najib has strong links to the notorious Malaysian businessman Jho Low, the financier behind Wolf of Wall Street and Razak’s 2013 election campaign. Najib allegedly told 1MDB staff that Low be treated as his alter ego. Low is still at large despite several warrants for his arrest and allegations of having stolen money from 1MDB to fund his lifestyle and investments.

AUSTRAC Cracking Down on Dealers

AUSTRAC is in the news again. This time for powerful moves made against unregistered money transfer dealers – ostensibly because these dealers risk being exploited by organized crime.

Nicole Rose, AUSTRAC’s chief executive, warned that these operators are at risk of being utilized by international human trafficking, child exploitation, illegal firearms and drug trafficking rings. These operators tend to have small facilities with many working out of their homes.

Legitimate money transfer dealing is big business, AU$60 billion ($40.45 billion) was reported to AUSTRAC over the course of the year from registered individuals and businesses. That represents approximately 17.3 million transactions.

AUSTRAC is launching a community campaign to educate businesses on the risks and penalties of operating an unregistered money transfer dealership.

In Space No-one Can Hear You Commit Fraud

NASA is investigating what’s believed to be the first crime to have ever taken in space. And it’s a financial crime. Astronaut Anne McClain allegedly committed fraud to access her estranged spouse’s bank account while onboard the International Space Station (ISS).

Typically astronauts are under the jurisdiction of the nations they represent so if any wrongdoing is proved Ms. McClain will face US courts.

But as governments no longer have the sole presence in space it’ll be interesting to see how jurisdiction develops. Will citizens be held accountable by their home nations? Or will some version of maritime law apply to space? Will ships fly flags of convenience and be subject to the laws of those particular nations.

It’s an unlikely issue for the near future but will probably require thought sooner than you’d think.


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