MLRO Faces Legal Troubles

May 29, 2020 5 minute read

The FCA is rushing through consultation on payments, Ghosn’s conspirators get caught and an MLRO is in court over 1MDB.

We share our financial regulatory highlights from the week of 25 May 2020.

Consulting on Payments

The global pandemic has caused all sorts of concern and the FCA has been no exception. The UK financial regulator is pushing out a two-week consultation on extra safeguarding measures concerning payments companies and e-money institutions for their customers.

Improving risk management and safeguarding customer funds are the key areas of concern. Presumably, this is due to the increase in online purchases as online shopping increased by 129% week-on-week across the UK and Europe as consumers shift to shopping that requires less interaction. While that should be good news for payments firms, the FCA recognizes that many of them are nascent and reliant on VC cash for operation as they establish themselves in the market.

The FCA commented: “We are also concerned that the pandemic will affect these firms’ financial strength and may affect the availability of their external funding.”

Payments companies also appear to be struggling with their regulatory obligations as the FCA revealed that some in the market have failed to implement the Electronic Payment Regulations 2011 or Payment Services Regulations 2017.

As the industry surges in strength, it will be vital for firms to stick to their regulatory obligations properly and avoid any investigation or penalties. At such a sensitive time any scandals that damage reputations and results in customer drop-off may see a company fail in the market as competitors grow beyond their ability to compete.

The consultation will be open until 5 June 2020 with a view to publishing the guidance at the end of June.

No Escape for Ghosn Associates

US authorities arrested two Americans in Massachusetts on May 20 who are suspected of helping former Nissan chairman and ex-CEO of Renault SA, Carlos Ghosn, escape from house arrest in Japan last December.

Court documents detail how former US special forces soldier Michael Taylor and his son, Peter, allegedly helped smuggle Ghosn, who had been awaiting trial for charges of financial wrongdoing, onto a private jet bound for Turkey. A few days later, Ghosn confirmed he had made it to Lebanon.

A timeline pieced together via video surveillance tapes offers up a peek behind the curtain at Ghosn’s Houdini-esque escape. It appears that, in the months leading up to the escape, Peter Taylor had made at least four trips to Japan, during which he and Ghosn met on at least eight different occasions, including one meeting on December 28 — the day before Ghosn fled.

That next day, on December 29, Michael Taylor and another man, George Zayek, flew into Kansai International Airport in Japan under the pretext that they were musicians. With them, they carried two large boxes that appeared to be for audio equipment.

All four convened at the Grand Hyatt Hotel in Tokyo. Afterward, Michael Taylor, Zayek and Ghosn made their way to Star Gate Hotel in Osaka. Upon arriving at the hotel, the three men were seen entering Room 4609, but only two — Michael Taylor and Zayek — were seen leaving, their hands full with the two large boxes, and heading to the airport. It is presumed that Ghosn was smuggled out of the country in one of those boxes.

The arrests of the father-son duo came nearly four months after Japan issued warrants for the Taylors and Zayek. The timing on the part of the authorities couldn’t have been better; Peter Taylor had planned to catch a flight from Boston to Beirut, with a stopover in London, that same day, May 20. Although Japan has yet to formally request their extradition, US prosecutors say that request is forthcoming.

MLRO Facing Legal Troubles Over 1MDB

An ex-Coutts MLRO is in court for his role in enabling money laundering in a Swiss Court.

Switzerland has begun its first case into the 1MDB scandal, a decade after the money was first funneled into Swiss accounts. The money laundering reporting officer is in court on charges related to a $700 million transfer into an account controlled by Jho Low, the infamous financier and main figure of controversy around the 1MDB affair.

Jho Low has been accused of being the influencing force behind the money laundering plot by other conspirators. Low established a Seychelles-registered company Good Star in May 2009 and opened an account at Coutts’ Singapore branch less than a month later according to prosecutors in the indictment.

Unusual behavior by Low, including a request to only communicate with Coutts’ Swiss branch via a gmail address and a request to transfer $700 million to Good Star from 1MDB, caused some concern at Coutts. Low flew to the bank’s Swiss branch to settle concerns, describing Good Star as an investment firm that 1MDB was choosing to utilize despite how recently it had been formed and the deposit was approved.

Unfortunately for the ex-Coutts MLRO (who remains anonymous), he was pursued by authorities due to an email he wrote asking for the transfer to be made. Prosecutors found an email he wrote on 2 October 2009: “Please unblock the account 11116073 Good Star Ltd. The due diligence is so far good and we have sufficient evidence that the payment is true and valid.”

In the prosecutors’ opinion, this action makes the MLRO considerably at fault for the transaction being made. Coutts has already paid a fine of $6.5 million in 2017 for allowing $2.4 billion worth of assets from 1MDB to flow through its accounts, the fine followed the sale of Coutts from Royal Bank of Scotland to Union Bank Privee.

Jho Low remains at large.