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Senate hearings & Unexplained Wealth Orders

By February 7, 2018 April 28th, 2019 No Comments

What you need to know about yesterday’s Senate hearings

Two hearings were held yesterday in the Senate which aimed to progress the most pressing financial regulatory issues in the US right now. Here’s what you need to know:

The first hearing, held by the Senate Committee on Banking, Housing and Urban Affairs, looked at the oversight roles that the SEC and CFTC could play in virtual currency regulation. The main takeaways from this session were: that both regulators agreed that all the banking regulators in the US need to come together to identify the regulatory gaps that must be filled, they also agreed that more education for consumers needed to be provided to protect them from fraud, and that the most pressing issue right now is to protect the virtual currency market from manipulation. Although light on concrete next steps for legislation, the generally positive approach these regulators are taking should be seen as a good sign for the future of virtual currencies in the US.

The second hearing by the Judiciary committee, examined an issue gaining considerable momentum in the US – beneficial ownership and its role in tackling illicit finance. It was widely agreed that the US legislation on company structures is the greatest loophole in the country’s anti-money laundering framework. A sense of urgency was added with various witnesses warning the Senate that as the UK and Europe tighten their regulations on UBO, criminals will be looking for new places to hide their wealth, with many eyeing up the US.  But it wasn’t all support for change, there was a clear split in the room on how to balance to need for national security and the right to privacy of the individual. With matters that go right to the heart of the constitution, expect this debate to rumble on for a while longer.

The bite behind the bark – Unexplained Wealth Orders

Unexplained Wealth Orders (UWOs), the new jewel in the crown of the UK’s financial crime fighting tools, came into force last Wednesday. UWOs were a central part of the Criminal Finances Act, which was passed last year, giving law enforcement the power to order individuals to explain the origin of their asset over £50,000, seizing anything suspicious in the process. Their aim is to make the UK a less attractive place to store the proceeds of crime and corruption.

Law enforcement will have their work cut out for them, the NCA estimates that at least $127 billion is currently being laundered in London alone. If they are looking for a place to start, Transparency International helpfully released a list of cases where UWOs could be used to help identify economic crimes. Security Minister, Ben Wallace, told The Times on Saturday that the UK has every intention to use the full scoop of these new powers and is already investigating the wealth of two Politically Exposed Persons (PEPs) living in London. These new powers have allegedly caused London’s wealthiest expat communities to quack in their designer boots, with some Russians even asking the Kremlin if they could return without prosecution.

How to take down an international money laundering ring

After running an international money laundering ring for over 30 years, across six continents, Altaf Khanani probably felt pretty untouchable. From humble, currency exchange beginnings in Pakistan, he grew a network which would turn over between $14-16 billion dollars a year from laundering the money of terrorist groups, Mexican drug cartels, transnational criminal organisations and Australian outlaw biker gangs. That is, until the combined forces of the world’s largest intelligence agencies brought it all to an end in 2015.

The investigation began when Australian law enforcement noticed a series of suspicious transactions at suburban MSBs going to Dubai, all leading back in some way to Khanani. Due to the scale of international money movement they decided to get the Five Eyes intelligence network involved – the first time in the group’s history that it had been used in a money laundering investigation. The undercover sting operation was led by the Drug Enforcement Agency (DEA) posing as a drug cartel, with Australian authorities supplying $1.25 million that “needed to be laundered”. After months of building trust with Khanani and many money exchanges, the DEA managed to lure him to Panama where he was arrested and extradited to the US, eventually being given just five and a half years in jail.

During the investigation the Australian authorities uncovered that almost all of the money that is laundered in Australia at some point touched the Khanani network. 

To see the story unfold, watch ABC Australia’s full documentary here.

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