Latest Laundromat leak brings more banks into the fold

March 8, 2019 4 minute read

Head of Financial Crime, Livia Benisty shares her financial crime highlights from the week that’s past.

1. Latest Laundromat leak brings more banks into the fold

The latest release from the Organized Crime and Corruption Reporting Project shows again how a series of offshore shell companies were used to move billions of dollars of private wealth from Russia to the West. It’s been named the Troika Laundromat, after the Russian investment bank it was operated by. Shares fell of additional European banks who may have been involved in the movement of the funds, such as Raiffeisen Bank International and Deutsche bank.

I particularly liked the Guardian’s description on how the scheme worked as a class in Money Laundering 101. The number of different banks in various countries involved in the scheme shouldn’t be surprising given the nature of the global financial system, yet the frequency of these revelations has been somewhat relentless in recent weeks. Bloomberg have released a helpful summary of the banks accused of being involved so far. I’m surprised it still fits in one blog post.

Bill Browder said several of the banks ignored warning signs that could have stopped the flow. This is echoed in an article discussing how accounts had been flagged years before. Those are the details that will give us greater insight as to what the indications may have been and how we learn from them, and will add fuel to arguments calling for strong European wide supervision. In the meantime allegations come from non-governmental groups and individuals, rather than investigators. Food for thought.

2. The 9 businesses who have failed in money laundering duties

HMRC published a list of businesses fined for failing to comply with money laundering regulations, right as officers visited 50 estate agents across England suspected of not meeting requirements. Countrywide Estate Agents was one of the firms mentioned in the list; they were fined £215,000.

HMRC is named as playing a key part in the UK’s recent successful FATF Mutual Evaluation Report (MER), having carried out more than 5,000 interventions with 655 penalties in 2017 and 2018. The MER also says that ‘“particularly good results are being achieved in the areas of investigation and prosecution of ML / TF”. An article from the Times this week detailed how there hasn’t been a single prosecution brought under the 2017 Money Laundering Regulations, however this might not be surprising given how long it can take to reach conviction.

Meanwhile hedge funds have been given a month’s notice of visits by FCA AML investigators.

Following on from the strength of the UK’s AML infrastructure…

3. UK Government cancels vote on transparency in Overseas Territories

There was supposed to be a vote in parliament this week requiring Jersey, Guernsey and the Isle of Man to compile public registers of beneficial ownership. The vote on the amendments to the Financial Services Bill was moved to “give them proper and thorough consideration” although reports suggest the government were headed for defeat. The Bill is part of no-deal Brexit planning, allowing the UK to adapt to changes in EU financial services legislation. The Crown Dependencies said the amendments were ‘“contrary” to established constitutional relationships.

4. EU states block list of high risk jurisdictions for money laundering, and triple one on tax

The official statement from the EU Council on why they unanimously rejected the list of jurisdictions posing a higher money laundering risk stated the proposal “was not established in a transparent and resilient process”. Meanwhile on Wednesday the EU added 10 jurisdictions to a tax haven blacklist, tripling it in length. Three of the US territories who were originally cited on the money laundering list were already on this one (American Samoa, Guam and the US Virgin Islands). Blacklisted jurisdictions could face reputational damage and stricter controls on transactions.

5. Kim Jong Un rebuilds missile facility following Trump’s refusal to lift sanctions

Last week Trump said he had to walk away from the Summit with North Korea after they asked for all sanctions against them to be lifted. The North Korean delegation rejected that, saying they had only asked for partial sanctions relief in exchange for shutting down their main nuclear complex. It appears that partial relief focused on those impacting the civilian economy including bans on trade in metals, raw materials, coal exports, petroleum imports, and luxury goods. Kim did not appear to be looking for lifting of sanctions on armaments.

Other reports note there wasn’t clarity on exactly what would be dismantled, and that events going on at home (Cohen’s testimony to Congress for example) meant Trump had to take a particular stand. Despite this, North Korean press is portraying the summit as successful in the diplomatic gains made by their president.

Regardless of what actually happened, satellite imagery captured two days after the failed summit show North Korea rebuilding a missile launch facility that was partly destroyed last year.