Livia Benisty shares her financial crime highlights from the week of 8th July, 2019.

Gulf Widens as Tensions Rise

Tensions are continuing to increase in the Gulf region as Iran has called for Britain to release an oil tanker seized last week that’s believed to have been headed for Syria in breach of European Sanctions. A spokesperson for Iran’s foreign office commented that: “This is a dangerous game and has consequences…The release of the tanker is in all countries’ interests.” Iran suggested that it will retaliate if the tanker is not released.

A British warship trained its guns on three Iranian vessels trying to block the passage of a UK flagged oil tanker through the Persian Gulf. This follows several accusations of assaults on vessels in the region but is the closest action there has been to military engagement. The British Navy issued verbal warnings to the vessels to back away and the blockade complied. Although Iran denies that Iranian ships tried to block any movements.

Iranian officials have threatened retaliation for mounting US sanctions, including suggesting seizing a British ship in the Gulf after UK forces commandeered an Iranian ship off the coast of Gibraltar they believe was delivering oil to Syria in breach of EU sanctions. The US has accused Iran of attacking tankers in the Gulf of Oman, which Tehran has denied, although they did shoot down a US spy drone which they said was in Iranian airspace. The US disagreed with their assessment.

Trump has issued fresh threats to increase sanctions against Iran as the country announced they had breached limits on both the stockpile of Uranium and its levels of enrichment. An Iranian Foreign Ministry spokesman has said Iran is prepared to take harder measures to expand its nuclear program if it doesn’t receive relief from US Sanctions.

European countries have predominantly tried to remain in the 2015 nuclear accord which the US left last year, however recent actions could make it difficult to continue to do so. It’s not clear what further sanctions by the US could look like. One possible measure is sanctions against Instex, the special purpose vehicle set up by European countries to allow for continued trade with Iran.

The situation in the Gulf is set to become more difficult with neither side giving ground and it’s anyone’s guess as to what increased sanctions will do to issues in the region.

Shearing the Sheep of Wallstreet

The US Department of Justice (DoJ) is investigating Deutsche Bank for possible corruption and money laundering violations. New ones. The embattled bank appears to have overstretched itself in an attempt to compete with Wallstreet, damaging itself in the process.

This time the focus of the investigation is on work done for the 1Malaysia Development Bhd (1MDB) fund which has already brought down former Prime Minister Najib Razak and former Goldman Sachs executive Tim Leissner.

The DoJ said at least $4.5 billion was stolen from the state economic development fund between 2009 and 2014. $248 million of that is said to have gone to Risa Aziz, co-founder of Hollywood Production firm Red Granite and Najib Razak’s stepson. He was charged last week with money laundering and released on bail. Red Granite is accused of financing three films with the stolen funds, including Wolf of Wall Street. The company paid $60 million to US authorities to settle charges.

Tim Leissner pleaded guilty to money laundering last year, having worked extensively on 1MDB whilst at Goldman Sachs. The investigation into Deutsche Bank is helped by his cooperation with authorities. The focus is on a former colleague of his, Tan Boon Kee, who left Goldman to become Head of Banking for FI clients at Deutsche Bank. She was fired from that position when communications were discovered between her and a Malaysian Financier – Jho Low – a central figure in the 1MDB scandal according to the DoJ.

Deutsche is already under investigation for AML failings, including issues with monitoring systems and involvement with the Trump family’s business dealings. This week they announced 18,000 job cuts as part of a drive to cut costs to compete with US institutions, combined with pressures from added regulation in equity markets and the impact of Brexit.

VCA Vies for Congressional Affirmation

A self-regulatory body for the crypto industry is preparing to seek Congressional affirmation. The Virtual Commodity Association is modeled after FINRA and backed by 4 major exchanges (Gemini, bitFlyer, Bittrex and Bitstamp) in collaboration with consultants, lawyers and regulatory experts.

The organization has launched 6 committees to issue white papers and consider best practices; one committee is focused on BSA and KYC controls. VCA President Yusuf Husain says the organization is already “in conversation with supportive regulatory bodies” and aims to develop “well-informed, sensible regulation”. I’m sure conservative regulators will particularly enjoy the implication of the word ‘sensible’. He added that the VCA is “not a replacement for but a supplement to traditional regulatory bodies.”

It’s probably important to remember that the long-anticipated FATF guidance released last month states that “Regarding VASP supervision…only competent authorities can act as VASP supervisory or monitoring bodies, and not self-regulatory bodies”. Of course, FINRA still acts in conjunction with traditional regulators and it’s possible this could work in the same way, but I look forward to seeing how Congress reacts in the first place, and how it develops further.

Some light further reading

Always a fan of a good real-life case study, I’ve read two reports this week which bring AML to life.

Firstly a story on EUobserver about €4 million of the €200 million stolen funds taken from Russia and funneled all over Europe via Danish and Cypriot banks. The article focuses on the Belgian arm of the trail but details how funds purchased real estate and luxury items but were also transferred through trade deals IT equipment and diesel generators. The funds came into Belgium via Danske Bank’s Estonian branch or via FBME Bank in Cyprus. The accounts there were held by companies registered in the UK, Belize, the British Virgin Islands and Panama. The article is lengthy but the details paint a rich picture of the scheme which has been made public by Bill Browder and the recent EU investigations.

Secondly, Eurojust, the European Union’s Judicial Cooperation Unit, issued a release detailing its role in targeting an organized crime group operating across at least 15 countries. The group was found to be pimping on a large scale and laundering the proceeds. The Finnish leader of the group was based in Marbella, Spain, managing websites to advertise prostitution in Nordic countries. Other groups also used the sites to advertise.

The group owned several companies and bank accounts and often registered entities abroad to disguise the flows. Assets flowed through intermediaries into international bank accounts and multi-currency IBAN accounts. The group also detailed the use of European Investigation Orders and Mutual Legal Assistance requests which you don’t often hear about in the press (or at all unless studying for CAMS or working in government).

Highly recommend a read!

Get the latest regulatory
and compliance news

Sign up now

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close