The Petrobras scandal touches London, Singapore moves to update regulations in alignment with global watchdogs and Canada cracks down on cannabis.
We share our financial regulatory highlights from the week of 20 July 2020.
London Property Connected to Petrobras Scandal
In the UK a high court judge has permitted the seizure of a £5 million apartment in London. The move came thanks to allegations of the property being purchased using illicit funds connected to the Petrobras money laundering scandal in Brazil.
The scandal, also known as ‘Operation Carwash’ was a multibillion-dollar bribery scheme that involved over 80 Brazillian politicians and business executives. It serves as a strong reminder of the importance of performing efficient enhanced due diligence checks on politically exposed persons (PEPs) — Petrobras is a state-run oil company.
Law enforcement operating under the Serious Fraud Office took possession of the flat which is connected to a middleman, Julio Faerman, accused of moving ten of millions of dollars into Swiss accounts as part of the bribery scheme. Faerman has already agreed a plea bargain with prosecutors and is committed to returning $54 million and those funds have been recognized as obtained through criminal activity.
Judge Johannah Cutts commented: “The SFO claims that the funds used to purchase the property were linked to corrupt funds obtained by Mr Faerman,” with the seizure providing further concrete proof of the London property market as a resting place for illicit cash.
Cutts went on to say: “The SFO has been investigating the Swiss bank accounts which, through a series of offshore companies and other accounts, are believed to have received some of the proceeds of Mr Faerman’s criminal activity.” And a portion of those funds are believed to have been used to purchase the London property.
Singapore Improves Security
The Monetary Authority of Singapore (MAS) is proposing to increase obligations to prevent those with a history of misconduct from working in the financial sector. The reasoning behind this is to expand MAS powers to prevent bad actors from entering the financial system through working for financial institutions.
It also proposed strengthened requirements for cybersecurity and data protection in financial institutions and attaching a maximum fine of S$1 million for those who do not comply.
From an AML view, the proposal includes specific provisions to expand AML/CFT requirements for digital token service providers located in Singapore that offer their services abroad. This will bring Singapore’s regulation on cryptocurrency in line with FATF recommendations.
The proposal has been set out in a consultation paper issued on 21 July 2020.
The MAS commented: “The new powers will enable MAS to holistically assess whether a person’s misconduct renders him unsuitable to perform one or more roles or activities within the financial sector and the appropriate action that should be taken under the prohibition order powers.”
BC Seeks to Seize Million-Dollar House
The British Columbia Civil Forfeiture Office is seeking to seize a $1.3 million house in Burnaby that was allegedly used for illicit activity.
The request, which was filed with the BC Supreme Court earlier this month, is based on an investigation conducted by the Burnaby Royal Canadian Mounted Police in late 2019. While responding to a routine check on an unsecured property, police uncovered 500 cannabis plants — over three times the 146 plants permitted under the Health Canada license associated with the property — and other supplies used to cultivate marijuana.
A search warrant revealed a total of 2,688 cannabis plants on-site, as well as 10.77 kg of marijuana, just over CA$5000, transaction records, a scale, and a money-counting machine.
No criminal charges have been brought against Quang Luat Do, presumably the owner of the property. Nevertheless, officials suspect Do was illegally selling marijuana and laundering money, among other offenses.
In any case, civil forfeiture laws don’t depend on criminal charges. The controversial practice generally requires evidence of illegal activity, but unlike a criminal case, where the government must prove guilt, the onus is on the defendant to prove the property was not used in a crime.
While many citizens have expressed concerns over the program’s reach and absence of due process, officials maintain it’s a valuable tool to combat illicit activity. Further, as British Columbia — and particularly the Vancouver metro area —has distinguished itself as a hotspot for money laundering, we’re likely to see these types of cases increase in the future.