Treasury places blockers for North Korea, the FCA orders a suspension and there’s an alleged cover-up going on in Australia.

We share our financial regulatory highlights from the week of 10 February 2020.

An Australian Cover-up

It’s emerged that up to 95% of registered gambling clubs in New South Wales, Australia are non-compliant. The information was discovered via an internal ClubsNSW board report.

This would perhaps not be newsworthy if not for the response by the Australian government, which blocked the document detailing the extent of non-compliance from being discussed in parliament. A move that has been branded as a “cover-up” by MP Andrew Wilkie who attempted to table the issue.

Poker machines in NSW are able to take up to AUS$32,000 in cash, yet staff are not receiving training to recognize these machines being abused for money laundering.
Police agencies are aware of the money laundering issue, briefings from law enforcement to Troy Stolz, who was in charge of AML and CFT at ClubsNSW from 2014-2019, had explicit details. Money launderers would carry up to AUS$80,000 in their pockets or AUS$250,000 in a small backpack – they were also content with losing up to 30% of the cash in order to launder it.

When suspicious transaction reports were made to AUSTRAC they were met with little if any action and it appears as though the issue was well-known by the clubs involved given that the details were in a board report.

MP Andrew Wilkie commented: “It is a cover-up pure and simple, and what happened today is more hard evidence of the protection racket that the major parties are running for the gambling industry.”

Stopping Funds to North Korea

North Korea has been facing secretive blocks on payments from the US over the past two years according to reporting from ACAMS moneylaundering.com.

The action has been part of an attempt to block North Korea from accessing the global financial system.

OFAC has been blocking payments under Executive Order 13810 – allowing the regulator to prevent any payments to any accounts controlled by North Korea. How those accounts are identified is another matter.

It’s an effort that has been largely unsuccessful in the past as the North Korean regime has been effective at moving money into the country. Some estimates have the DPRK’s illicit holdings from cybercrime and other vectors at over $2 billion.

The Executive Order works by freezing any transfers related to North Korean accounts when they touch the US financial system. North Korea has experienced sanctions and a general embargo since 1988 and has proved adept at maneuvering around them.

A public display of this ability to flout sanctions occurred in 2018 when Kim Jong Un’s bodyguards famously jogged around his Mercedes to protect him in Vietnam, but it’s not a car that should have been able to be bought by North Korea in the first place.

FCA Suspends Electronic Money Company

An electronic money company that services online payments for affiliate marketers, ePayments, has been ordered to suspend operations following lapses in AML compliance.

The order has seen thousands of customer accounts frozen and unable to access their money. The decision was made due to a regulatory review that uncovered an untenable number of weaknesses in the eyes of the FCA.

Suspension of service was demanded by the regulator until stricter checks were implemented to prevent criminals from using the company to clean their illicit cash.

Unfortunately, the suspension means that legitimate customers will be unable to interact with their funds, however, the company has been quick to reassure customers that their funds are being safeguarded as per usual.

The exact reasoning behind the suspension has not been made clear.

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