Singapore and Australia form a stronger relationship, Swedbank gets hit with what may be the first fine of many and a woman from New York tries to support ISIS.

We share our financial regulatory highlights from the week of 23 March 2020.

Stronger Connections Between Singapore and Australia

Singapore and Australia have planned to increase data connectivity between the financial services sectors in both nations.

The DEA has had a quick turnaround for an international agreement. Talks began in October 2019 and operations have already been agreed.

The plan comes in the form of the Singapore-Australia Digital Economy Agreement (DEA) an exercise in allowing financial institutions (FIs) operating in both countries to transfer data across the border without incident.

It’s akin to Open Banking on an international scale and with the potential for significantly more impact. However, it will also include AI and e-payments in addition to the cross-border data flow. The focus for the plan appears to be future-forward with a desire to make digital interoperability a key issue.

APIs are going to be a major feature of the technological practicalities of the DEA. In order to make this level of digital inter-connectivity work, FIs are going to need to work hard to make sure that their data is reader-friendly and can interact across borders with internal business units that may not often speak to each other.

Using the DEA, FIs in Singapore and Australia can forego data localization procedures, driving down the cost of storing data. FIs will be able to choose where their data is stored. It’s welcome news for an industry that has been moving to cloud-focused storage for years now.

Ravi Menon, Managing Director of the Monetary Authority of Singapore, said: “The DEA with Australia is Singapore’s first binding bilateral agreement to facilitate data connectivity in financial services. It will ensure that financial institutions in Singapore and Australia can move financial data across the two jurisdictions to support their risk and business decisions. MAS will continue to promote the development of international rules for data connectivity in financial services.”

Baltic Breaches Result in $386 Million Fine

Swedbank has been hit with a $386 million fine by the Swedish regulatory authority, Finansinspektionen (FSA), following AML issues with the bank’s Estonian operations.

“Swedbank has had serious, systematic shortcomings in its work to prevent money laundering in the Baltics,” FSA Director General Erik Thedeen said at a news conference.

The fine came down for the catastrophic failures in AML controls that the bank was in the press for last year, the bank’s fine was also made more severe due to withholding information from the regulator. The bank also saw its share price drop by a third thanks, in large part, to the scandal.

“Swedbank has withheld information from the FSA, information that clearly showed how big the problems, in fact, were. We look on that as particularly serious,” Thedeen added.

Fines like this are not handed out without due consideration, Swedbank was given numerous warnings. One report commissioned by the bank in 2017 revealed a high volume of entities accepted by the bank’s operations in Estonia without proper KYC procedures. Despite the report, insufficient action was taken according to the FSA.

The Baltic nation’s proximity to Russia, a high number of foreign clients and membership of the EU were all indicators for suspicion.

More problems lay ahead for Swedbank, Estonia’s FSA is now launching a criminal inquiry to decide whether or not money laundering took place. The bank is accused of processing gross transactions of up to €20 billion, these transactions should have raised alarm at Swedbank as they were from mostly Russian non-residents of Estonia. The transactions took place over six years, from 2010 to 2016.

Swedbank may also have breached US sanctions by allowing this money to pass through the bank. But analysts estimate that potential breaches would have been small. However, the US can be severe with sanctions violations, BNP Paribas made headlines and set records for sanction violations in 2015 when it settled for $8.9 billion on claims that it allowed avoidance of sanctions on Cuba, Iran and Sudan.

New York Woman Sentenced for Providing Support to ISIS

Even though coronavirus is dominating the headlines, it’s important not to overlook the financial crime stories still happening.

On March 13, a woman from Long Island, New York, was sentenced to 13 years in prison for financing a terror group. She was found to have supplied ISIS with material support worth at least $150,000 — money she obtained by defrauding several different financial institutions — before attempting to join the Islamic State of Iraq and al-Sham (ISIS) in Syria.

It’s the latest, and likely final, installment in a case that made headlines back in late-2017 when Zoobia Shahnaz, then 27 years old, was intercepted at John F. Kennedy International Airport, en route to personally join the terror organization, and arrested. According to an indictment unsealed in December 2017, she was charged with bank fraud, money laundering and conspiracy.

Shahnaz, a US citizen, stood accused of misrepresenting herself when taking out a $22,500 loan. She was also said to have applied for and received over 12 credit cards, which were then used to buy $62,000 worth of cryptocurrencies – her behavior is consistent with ‘maxing out’ a practice where would-be terrorists move to maximize their cash liquidity in order to buy supplies to commit terrorist attacks or fund terrorism in other ways.

Lastly, Shahnaz was charged with transferring those ill-gotten funds via wire to beneficiaries in Pakistan, China and Turkey — beneficiaries that, the Department of Justice asserts, provided Shahnez with a direct line to ISIS. The ISIS sympathizer initially pleaded not guilty, but then changed her tune and entered a guilty plea in late November 2018.

While her crimes may have occurred nearly three years ago, her sentencing this month should serve as a reminder that the global financial system can and will be exploited by bad actors, and this is true even when our collective attention is focused elsewhere. These financing efforts also often involve several different types of fraud so as to avoid detection and it’s critical that companies remain vigilant.


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