Who Ever Needs Ongoing Risk Monitoring?

August 9, 2019 4 minute read

We share our financial crime highlights from the week of 5th August 2019.

Freeports to Protect an Economy

The UK’s new Prime Minister, Boris Johnson, announced a plan to establish up to 10 freeports across the UK. The ports would operate as a point for goods to land in the UK without incurring tax or face delays from checks and paperwork, mirroring the scheme in Singapore.

The plan comes after intense scrutiny of the financial implications of a No Deal Brexit. The government hopes that the freeports will work to buoy trade and reduce the customs red tape that would come as part of No Deal.

Unsurprisingly, there have been criticisms that the initiative will just encourage money laundering. The European commission commented on the concept as “potentially vulnerable to money laundering or terrorism financing.” It’s an interesting argument given that there are as many as 80 freeports across the EU.

The commission found that the EU has a structural issue with preventing the financial system from being used by criminals, as evidenced by the Danske, Deutsche and Swedbank controversies. With such a financial structure already using freeports and one that’s clearly been abused for financial crime, it remains to be seen what policies the UK government will roll out to combat the issue. The Economic Crime Plan announced by the outgoing government made no reference to free ports, so it will be interesting to see what guidance comes out along with this initiative.

Who Ever Needs Ongoing RIsk Monitoring?

ABN Amro has been ordered to review all existing retail clients to check against various financial crimes. ABN Amro stated it was going to improve its approach to money laundering, with plans to increase the number of staff working on client files substantially past the current thousand.

The order to check what clients are doing suggests that the bank wasn’t already doing that, ongoing monitoring isn’t a luxury – it’s a requirement. Banks admitting that their internal data isn’t clear enough to audit how customers are moving money means that there’s a worrying failure taking place. There’s no clarity at the moment as to whether this announcement by ABN Amro is due to potential fines or simply due to a review by the Dutch central bank DNB.

A potential crippling fine, or just the threat of one, is sure to move ABN Amro regardless. Last year ING had to pay out €775mn for not having client files in order and for a lack of detailed information. Without knowledge of company structure in place and asset and profit origins, banks are unable to say whether or not they’re aiding criminal cashflow or even allowing sanctioned entities to operate.
When banks allow their customer information to become disordered they stop knowing their customers. After all, knowing someone means a lot more than just seeing an ID and it seems like some banks are struggling to get even that information in place.

Crypto Under Review in Asia

Cryptocurrency seems to be getting a reprieve in some parts of Asia as Singapore proposed exempting tokens from sales tax when used to purchase goods and services. A move that’s set to benefit crypto exchanges and traders. If it goes through Singapore could see a marked boost in its blockchain investment and entrepreneurship.

The approach is in contrast to Thailand’s, where the nation’s Anti-Money Laundering Office (AMLO) is eyeing cryptocurrency as a tool for new money laundering. AMLO has admitted that they’ve not yet seen any clues of money laundering or received any complaints of it around cryptocurrency but insists that that does not mean it doesn’t occur.

They have a point, of the $2 trillion laundered each year less than 1% is captured, which proves that detecting money laundering is no easy business. The argument is that criminals will turn to digital assets to conceal their cashflows and gains. However, there’s nothing yet to prove that laundering money through the crypto space will be any easier or more beneficial than current methods.

AMLO has said that any legal changes will be in accordance with international standards on crypto exchanges, which makes it likely Thailand will implement the recommendations made by FATF that virtual asset service providers (VASPS) pass on customer information to each other during trades. Recommendations that have significant technical challenges to them and the solutions are as yet uncertain.

Love and Laundry

Money launderers have proved yet again that they’re nothing if not inventive, this week it was revealed that love has been targeted as well as schools. The FBI has warned that romance frauds have taken on a new form. No longer content with just tricking lonely hearts into sending money by committing fraud, criminals are convincing lovestruck dating site users into opening accounts. Fraud has cost 18,000 lovestruck victims at least $362mn in 2018 and an unknown amount of money has been laundered.

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