AML

Ports, pineapples and private planes

By February 14, 2018 No Comments

Ports, pineapples and private planes 

At the end of January, a private jet took off from Bogota, Colombia and landed at Farnborough airport on the outskirts of London carrying half a metric ton of cocaine. A week before, Spanish and Portuguese law enforcement discovered 1,600 pounds of Colombian cocaine hidden inside fresh pineapples destined for Madrid. Over the summer of 2017, German authorities announced their largest ever seizure (3.8 tonnes) of Colombian cocaine in three shipments at the port of Hamburg.  

What does this recent string of large cocaine seizures tell us? According to Insight Crime, it suggests that as Colombian cocaine production reaches an all time high, traffickers are becoming emboldened, trying out riskier trafficking techniques than ever before. They also confirm that Colombia is becoming the dominant force in the European market – fortunate for them, as they have been almost entirely pushed out of the US market by rival Mexican cartels. These discovered shipments are likely to be just the tip of the iceberg. Compliance officers should be on the lookout for suspicious transactions that could be linked to the laundering of the profits from the proceeds of drug sales and the movement of these funds back to Colombia.

Not done yet – The EU opens another inquiry into financial crime

After a vote in the European parliament last week a new inquiry has been formed to investigate financial crime, tax evasion and tax avoidance in the European Union. But wait a minute, hasn’t this inquiry already happened? You would be forgiven for thinking so, as this new inquiry, currently titled Taxe 3, comes hot off the heels of the PANA committee inquiry which concluded in December last year with a very similar mandate.

So what will be different about this committee? Well, on the surface it carries on a lot of the same work, but it will look specifically at what can be learned from the Paradise Papers instead of the Panama Papers. It will place greater emphasis on assessing the tax loopholes that allow for VAT fraud and tax structures like non-domiciled status in nearby tax havens such as the Channel Islands. This is all part of the EU’s mission to tackle financial crime within its borders. So far it has done well with the implementation of the 4th Money Laundering Directive and the finalized 5th Money Laundering Directive going far to correct strategic weaknesses in the Union’s AML/CTF framework. This newly announced inquiry will continue this work, cementing financial crime as a key policy area for European politicians.

Scotland’s secret companies

Scotland is famous for many things like tartan kilts and whiskey, financial crime however, doesn’t tend to spring to mind. But for criminals looking to stash illicit cash, Scotland has long been viewed as a good place to do it. This is all because of a company structure offered in the country called a Scottish Limited Partnership (SLP). A SLP is like a limited partnership offered in the rest of the UK but they allow companies to have separate legal personalities making it easier for them to obscure beneficiaries.

Scottish Limited Partnerships have been at the heart of various recent scandals. Last year’s Global Laundromat scandal, where up to $80 billion of sanctioned Russian wealth was funneled out of the country, used over 113 SLPs to move the money. Last week, a case involving an ex-Peruvian President, who is currently on the run, showed how SLPs were used to hide $6 million he received as bribes from the Brazilian construction company, Obestredt. Although the UK introduced legislation to help make SLPs more transparent when it passed the Money Laundering Regulation 2017, loopholes still persist. For this reason it is vital to continue to hold a spotlight against this structure which ultimately harms the reputation and stability of the UK financial market.

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