Date post: | 06-Nov-2015 |
Category: |
Documents |
Upload: | adrian-ford |
View: | 11 times |
Download: | 0 times |
MAKE INFORMED DECISIONS
FINANCIAL CRIME DIGESTMay 2015
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
FCA publishes one-minute guide on Market Abuse Regulation
The FCA has published a one-minute guide on the Market Abuse
Regulation (596/2014/EU) (MAR), which will repeal and replace the
current Market Abuse Directive (2003/6/EC) and its implementing
legislation from 3 July 2016. The one-minute guide contains
information on the objective of the regulation, its application and
key requirements.
MAR aims to strengthen the existing UK market abuse framework
by extending its scope to new markets, new platforms, and new
behaviours. It contains prohibitions for insider dealing and market
manipulation, and provisions to prevent and detect these.
The one-minute guide is HERE.
Welcome to the May 2015 Financial Crime Digest,covering updates from April 2015.
This month, we cover a number of updates from theFCA, including guidance on market abuse regulations,further clarification on the FCAs approach to de-risking, and guidance on financial crime systems andcontrols. We also cover updates on the fourth MoneyLaundering Directive and the Wire Transfer Regulation,as well as a recent Supreme Court ruling on themeaning of criminal property under the Proceeds ofCrime Act 2002. In addition, we provide a round-up ofrecent press and media coverage of anti-money laundering, sanctions, bribery & corruption, fraud, and insider trading issues.
TECHNICAL AND REGULATORY UPDATES
1
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
2
European Commission publishes communication to Parliament concerning the Councils position on MLD4
In the communication, the Commission recognises that the Councils position reflects the political
agreement that was reached between the European Parliament and the Council on 16 December 2014,
which represents a delicate but acceptable balance, as part of the overall compromise, regarding:
The provisions related to beneficial ownership
information: This information will be held in a
central register in each Member State, which
constitutes an enhancement of transparency in
line with the Commission's broader policies.
However, as regards the specific provisions on
the access to this information, the Commission
considers that the notion of legitimate interest"
must be construed and understood in the light
of the requirements flowing from Articles 7 and
8 of the Charter of Fundamental Rights, in full
respect of the rules on protection of personal
data and the right to privacy.
The provisions related to the level of
administrative pecuniary sanctions applicable
to financial institutions and to non-financial
institutions: in the case of financial institutions,
as regards legal persons, the level of maximum
pecuniary sanctions shall be at least EUR 5
million or 10% of the total annual turnover, and,
as regards natural persons, the maximum of
pecuniary sanctions is to be of a least EUR 5
million; in the case of non-financial institutions,
the maximum pecuniary sanctions is at least
twice the amount of the benefit derived from the
breach, or at least EUR 1 million; and
The use of delegated acts, and not
implementing acts, to identify third-country
jurisdictions which have strategic deficiencies in
their AML/CTF regimes.The Commission supports the results of inter-
institutional negotiations and can therefore
accept the Councils position at first reading.
The procedure files for MLD4 and the Wire
Transfer Regulation have been updated and
now indicate a vote in plenary on 20 May 2015.
The European Parliament has published a draft
legislative proposal to approve the Councils
position on MLD4, at second reading.
The communication from the Commission on
MLD4 is HERE
The procedure le on MLD4 is HERE
The draft recommendation for MLD4 is HERE
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
3
European Commission publishescommunication to Parliament concerning theCouncils position on Wire Transfer Regulation
Similar to its communication on MLD4, the
Commission in this communication recognises that
the Councils position reflects the political
agreement that was reached between the European
Parliament and the Council on 16 December 2014.
The Commission states that the proposed Funds
Transfers Regulation lays down rules for payment
service providers to send information not only on the
payer, but also on the payee, throughout the payment
chain, for the purposes of prevention, investigation,
and detection of money laundering and terrorist
financing - and is, to a large extent, based on the new
Recommendation 16 on wire transfers adopted by
the Financial Action Task Force (FATF). It aims to
ensure that this international standard is transposed
uniformly throughout the Union and, in particular,
that there is no discrimination between situations
involving national payments within a Member State
and cross-border payments between Member States.
The Commission supports the results of inter-
institutional negotiations and can therefore accept
the Councils position at first reading.
The European Parliament has published a draft
legislative proposal to approve the Councils position
on the Wire Transfer Regulation, at second reading.
The communication from the Commission on the
Wire Transfer Regulation is HERE
The procedure file on the Wire Transfer Regulation is
HERE
The draft recommendation on the Wire Transfer
Regulation is HERE
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
4
FCA Final Guidance FG15/7 - guidance onnancial crime systems and controls (andfeedback on GC14/7)
The FCA in GC14/7 proposed including in its
Financial Crime Guide examples of good practice
from the FCAs thematic review of smaller banks
AML and sanctions systems and controls, and the
anti-bribery and corruption systems and controls
in small commercial insurance intermediaries.
The FCA has now published a summary of the
feedback received, along with the Financial Crime
Guide (Amendment No. 3) Instrument 2015
(FCA2015/16), which contains some changes
from what was proposed. The instrument came
into force on 27 April 2015. The FCA is in the
course of amending the Financial Crime Guide as
provided in the instrument.
Section 3 of Annexure A notes the new text that
has been added with regards to Source of Wealth,
Source of Funds and Enhanced Due Diligence.
The legal instrument is HERE
The feedback summary is HERE.
Derisking: FCA sets out its expectations
The FCA has released a statement regarding its
expectations of banks in relation to derisking.
It has stated that effective risk management need
not result in wholesale derisking, and that it
expects banks to take an effective risk-based
approach. A risk-based approach does not require
banks to deal generically with whole categories of
customers or potential customers. Instead, the
FCA expects banks to recognise that the risk
associated with different individual business
relationships within a single broad category
varies, and to manage that risk appropriately.
The FCA also states that it will consider whether
firms derisking strategies give rise to consumer
protection and/or competition issues. It
encourages banks to consider the FCAs Financial
Crime Guidance, and also makes reference to its
approach to enforcement of breaches of AML
obligations.
The webpage is HERE.
TECHNICAL AND REGULATORY UPDATES
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
5
Recent case - R v GH, [2015] UKSC 24:Supreme Court case on the meaning ofcriminal property for the purposes ofsection 238(1) of the Proceeds of Crime Act 2002
The Supreme Court has allowed the prosecutors
appeal in a case concerning Section 238(1) of the
Proceeds of Crime Act 2002 (entering into or
becoming concerned in an arrangement which he
knows or suspects would facilitate the retention,
use, or control of criminal property). The
judgement also has consequences for sections
327 and 329 of the legislation.
A fraudster, B, established four ghost websites,
falsely pretending to offer cut-price motor
insurance. In order to carry out this plan, he
recruited associates to open bank accounts for
channelling the proceeds. H was one such
associate, who opened two bank accounts.
Members of the public paid money into the bank
accounts for a non-existent motor insurance. The
prosecution alleged that H must have known, or
at least suspected, that B had a criminal
intention. The judge had ruled that H had no
case to answer on the grounds that at the time
H entered into the arrangement, no criminal
property existed.
The Supreme Court held that:
l Criminal property in sections 327-329 of
POCA refers to property which already has the
quality of being criminal property (as defined
in section 340 of POCA) by reason of prior
criminal conduct, distinct from the conduct
alleged to constitute the commission of the
money laundering offence itself;
l The Court of Appeal was correct to hold that it
does not matter whether criminal property
existed when the arrangement was first made;
l The character of the money paid by victims
into the accounts although lawful at the
moment of payment changed on being paid
into the bank accounts. The money became
criminal property in the hands of B by reason
of the fraud perpetrated on the victims. As
such, it is legitimate to regard H as entering
into or becoming concerned in an arrangement
to retain criminal property for the benefit of
another. Consequently, the ruling that H had
no case to answer was erroneous.
l The same reasoning applies to sections 327
and 329 of the Proceeds of Crime Act.
The judgment is HERE
The press release is HERE
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
6
TECHNICAL AND REGULATORY UPDATES
Transaction reporting failures - FCA nesMerrill Lynch International GBP 13.2 million
The FCA has fined Merrill Lynch International GBP
13,285,900 for transaction reporting breaches
between November 2007 and November 2014.
The FCA final notice describes 11 different
breaches, and states that the firm reported a
number of less serious breaches that have also
been taken into account. The FCA finds the
breaches particularly serious in light of the fact
that the firm had previously received a private
warning in 2002 and a fine of GBP 150,000 in 2006
for failures in transaction reporting compliance.
The fine is the highest imposed by the FCA for
transaction reporting failures to date. The
Regulator states that it has increased the penalty
per line of incorrect or non-reported data from
GBP 1.00 to GBP 1.50 because it felt that the past
fines had not been high enough to achieve
credible deterrence. The firm received an early
settlement discount of 30%, without which the
fine would have been GBP 18,979,876.
The final notice is HERE
The press release is HERE
LIBOR and EURIBOR - FCA nes DeutscheBank GBP 227 million
The FCA has fined Deutsche Bank AG GBP
226,800,000 following its London Interbank
Offered Rate (LIBOR) and Euro Interbank Offered
Rate (EURIBOR) investigations. The firm qualified
for an early settlement discount of 30%, without
which the fine would have been GBP 324 million.
The FCA notes that serious misconduct by
Deutsche Bank led to breaches of Principles 5, 3
and 11 of the Authoritys Principles for
Businesses: first, through Deutsche Banks
attempted manipulation of LIBOR rates and
improper influence over LIBOR submissions;
second, through its systems and controls failings;
and third, through serious deficiencies in the way
Deutsche Bank dealt with the Authority in relation
to LIBOR matters. The direct involvement of
managers and senior managers in many aspects
of Deutsche Banks misconduct aggravated the
seriousness of the breaches.
The final notice is HERE
The press release is HERE
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
7
PRESS AND MEDIA: MONEY LAUNDERING
A Spanish investigative magistrate has opened a probe into possible money laundering at Banco de Madrid, a
unit of Banca Privada dAndorra, which is accused by U.S. authorities of having assisted groups from China,
Russia and Venezuela to launder money. The National Court said that Judge Fernando Andreu had opened an
investigation into the bank and its seven directors following a complaint by a client stating that the bank made
itself available for clients to launder money, and minimised internal controls.
Panamas national legislature has
approved a proposed law to
significantly tighten supervision of
more than a dozen non-financial
sectors involved in receiving the
proceeds from the sale of
narcotics, terrorism and
corruption. The Financial Action
Task Force last year placed
Panama on its grey list of
jurisdictions with major
deficiencies in tackling money
laundering and terrorist financing.
The former head of the International MonetaryFund, Rodrigo Rato, was detained by customsagents in Madrid in connection with possiblemoney laundering offences after he tookadvantage of a tax amnesty in 2012 to repatriatefunds previously held offshore. His arrest followsa wave of corruption allegations involving seniorSpanish politicians.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
8
The Financial Action Task Force has issued
Mutual Evaluation Reports of Australia and
Belgium. FATF found that Australia has a mature
regime for combating money laundering and
terrorist financing, but certain key areas remain
unaddressed. In relation to Belgium, FATF found it
also had a well-established regime for combatting
money laundering and terrorist financing, but
some elements are not in line with the 2012 FATF
Recommendations.
Switzerlands Money Laundering Reporting Ofce
(MROS) said it had received a record number of
suspicious activity reports in 2014. 1,753 reports
were filed in 2014, a 24% increase on 2013 - and
the highest number recorded since MROS was
founded in 1998. The office forwarded 72% of
suspicious activity reports to prosecutors.
PRESS AND MEDIA: MONEY LAUNDERING
The U.S. Appeals Court has ruled by a narrow
margin that the European Union can pursue a
lawsuit against R.J. Reynolds, part of the U.S.
tobacco company, for allegedly running a global
money laundering scheme that involved drug and
cigarette smuggling. The European Union
accuses R.J. Reynolds of having directed a
decade-long scheme from the United States
involving the smuggling of illegal narcotics into
Europe by Colombian and Russian organised
crime groups, laundering the proceeds of sale of
these drugs, and the use of these proceeds by
importers to buy R.J. Reynolds cigarettes. The
European Union claims that R.J. Reynolds
violated the Racketeer Influenced and Corrupt
Organizations Act, a U.S. anti-racketeering law.
The lawsuit began in 2002.
Crdit Agricole must pay USD 9.8 million to a
wealthy Greek family after losing a long-running
court battle involving allegations it failed to ask
enough questions about a suspicious transaction
nearly 15 years ago. Under a UK Privy Council
decision in the case of Crdit Agricole
Corporation and Investment Bank (Appellant) v
Papadimitriou (Respondent) (Gibraltar), the court
found that the use of a complex network of legal
entities including companies in Panama, a
Liechtenstein trust, and a BVI company should
have alerted the bank to the risk of money
laundering. As a result, the bank should have
made enquiries about the underlying legal
purpose of the arrangement, not just the source
of funds.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
9
PRESS AND MEDIA: BRIBERY & CORRUPTION
The SEC charged FLIR Systems, a large imaging
technology company, with violating the FCPA by
financing a world tour of personal travel for
Middle East government officials who were
influential in decisions to buy FLIR products.
FLIR, which made more than USD 7 million in
profits from the sales, agreed to pay USD 9.5
million to settle the charges.
United Technologies Corp. said it received a
second subpoena from U.S. authorities seeking
information about potential foreign bribery
violations. The subpoena from the U.S. Securities
and Exchange Commission seeks information
relating to potential payments by an agent in
China that may have violated the U.S. Foreign
Corrupt Practices Act.
Sinopec president Wang
Tianpu was the latest oil
executive to be caught up in
Chinas widening corruption
probe. Tianpu was detained
by Communist party officials
on 27 April for suspected
serious violations of
discipline and law, and has
been detained by
Communist party officials as
Chinas corruption probe
widens further.
A judge in Austria has refused an extradition
request from the U.S. for Dmitry Firtash, a
Ukrainian billionaire oligarch who is closely
associated with former Ukrainian president, Viktor
Yanukovych. Fitash made his fortune in the
notoriously corrupt Ukrainian gas industry and
has been charged by prosecutors in Chicago with
racketeering and other crimes. Firtash and his
associates are accused of having paid USD 18.5
million in bribes to officials in India to secure a
titanium-mining deal that never materialised.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
10
PRESS AND MEDIA: SANCTIONS
Iranian President Hassan
Rouhani has said on state
television that Iran would not
accept a comprehensive
nuclear deal with the major
powers unless all sanctions
imposed on Tehran were
lifted. Iran wants sanctions
that include nuclear-related
UN resolutions, as well as
U.S. and EU nuclear-related
economic sanctions, to be
lifted immediately. The U.S.
says sanctions against Iran
will be removed gradually.
Meanwhile, Russia has said
that it will go ahead with the
sale of S-300 missile
equipment to Iran in defiance
of UN sanctions. Russia had
originally blocked the sale in
2010 following imposition of
UN sanctions.
The European Union has re-imposed sanctions on Bank Tajerat, an
Iranian bank, and 32 Iranian shipping companies, using new legal
grounds, after the measures were struck down by a European court.
The move came days after Iran and six major powers reached a
framework agreement to end a long-running dispute over Iran's
nuclear programme. The EU's move is a signal that the 28-nation
bloc will keep up sanctions pressure on Iran until a final nuclear deal
is sealed.
The U.S. Treasury announced in a statement that the Kodo-kai, a
major second-tier affiliate of the Yamaguchi-gumi, the largest of
Japans Yakuza crime syndicate, has been added to the United
States sanctions list. The sanctions freeze all U.S.-based assets
belonging to the 4,000 member Kodo-kai, and prohibit United States
persons or entities from dealing with the organisation and its
chairman, Teruaki Takeuchi.
U.S. President Barack Obama has
ordered the creation of a programme
that would allow the government to
impose sanctions on foreign hackers.
Mr Obama said cyber-threats are "one of
the most serious economic and national
security challenges" that the U.S. faces.
The U.S. did not announce any specific
new sanctions, only the authority to
impose them in the future if it is
deemed necessary.
The U.S. has removed a prominent businessman from its Myanmar sanctions list, in spite of doubts about
reforms in the Southeast Asian country. Win Aung, the head of Myanmar's chamber of commerce, whose
Dagon International construction firm won contracts to help build the country's capital of Naypyitaw, was
removed from the Specially Designated Nationals (SDN) and Blocked Persons list, the U.S. State
Department said in a statement.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
11
PRESS AND MEDIA: SANCTIONS
The U.S. Treasury and Saudi Arabia have
imposed sanctions on a charity fund alleged to
provide financing to "terrorist" groups including
Al-Qaeda, the Taliban, and Lashkar-e-Taiba. The
sanctions aim to disrupt the financing and
operations of Al-Furqan Foundation Welfare
Trust, a charity group based in Peshawar,
Pakistan. The Treasury said Al-Furqan is the
successor to the Pakistan branches of the
Afghan Support Committee and Revival of
Islamic Heritage Society. Both were designated
as global terrorist entities and listed on the
United Nations' Al-Qaeda sanctions list in 2002.
The General Court of the European Union has
upheld the EU sanctions on Zimbabwe, saying
the EU fairly targeted people and companies
linked to the government there. The courts
decision comes after many of the EUs sanctions
against Zimbabwe have been removed. Only
President Robert Mugabe, his wife, and one
defence company remain subject to the asset
freeze and travel ban. An EU arms embargo also
remains in effect. The sanctions challenge was
lodged in 2012 by Zimbabwes Attorney-General
Johannes Tomana and 109 other individuals,
many of them senior-ranking government, police
and army officials.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
12
PRESS AND MEDIA: FRAUD
An Indian court has sentenced the former head of
Satyam Computers and nine others to seven
years in prison in one of the country's biggest ever
corporate scandals. B Ramalinga Raju, who
founded the software services giant, denied
charges of conspiracy, cheating and forgery, but
admitted to accounting malpractices. Raju was
also fined USD 800,000. The collapse of Satyam
Computers in 2009 cost shareholders more than
USD 2 billion and rocked India's IT industry.
The heiress of the fashion and perfume house
Nina Ricci was sentenced to a year in prison and
ordered to pay heavy fines and back taxes for
having hidden millions of euros in HSBC bank
accounts in Switzerland. It was the first case
involving a famous name in the so-called Swiss
Leaks scandal.
U.S. authorities have arrested a former
investment adviser for JPMorgan Chase, Michael
Oppenheim, on charges he stole some USD 20
million from clients and put most of the money
into losing investments. Oppenheim faces federal
criminal charges of embezzlement and fraud in
the alleged scheme. The former New York City-
based investment adviser and broker advised 500
clients of the largest U.S. bank by assets, most of
whom were high net worth, according to a
Securities and Exchange Commission complaint
filing parallel fraud charges.
www.aperio-intelligence.com
FINANCIAL CRIME DIGEST
13
PRESS AND MEDIA: INSIDER TRADING
The U.S. Supreme Court has denied a legal
submission by attorneys for Rajat Gupta, the
former Goldman Sachs director and managing
partner of McKinsey & Co., in his bid to have the
court review his 2012 conviction on insider
trading charges. Gupta will continue to serve his
two-year prison term. He was found guilty of
illegally feeding non-public tips about Goldman
Sachs to Raj Rajaratnam, the co-founder of the
Galleon Group hedge fund. Rajaratnam is serving
an 11-year prison term for his role at the centre of
a broad insider trading scheme.
The Financial Conduct Authority has charged
three individuals, Manjeet Singh Mohal, Reshim
Birk, and Pal Singh Sappal in relation to insider
dealing by dealing in securities. The FCA states
that the offences relate to trading in multinational
IT firm Logica PLC shares in May and June 2012.
The Securities and Exchange Commission has
filed fraud charges against Ifty Ahmed, a general
partner with venture capital firm Oak Investment
Partners, accusing him of participating in an
insider trading scheme that netted him USD 1.1
million. Also charged was Amit Kanodia, a long-
time associate of Ahmed, who is described by the
SEC as an entrepreneur and private equity
investor. The SEC alleges that, by April 2013,
India-based Apollo Tyres was engaged in serious
negotiations to acquire Cooper Tire, of Findlay,
Ohio. Although the acquisition was never
completed, the complaint alleges that Cooper
Tires stock price jumped 41 percent when the
acquisition was announced in June 2013. The
SEC alleges that Kanodia tipped Ahmed and
another friend prior to the acquisition
announcement after learning of the deal from his
wife, then the general counsel at Apollo, who was
intimately involved in Apollos efforts to acquire
Cooper Tire.
The Monetary Authority of Singapore has handed
down its largest ever penalty for insider trading
against the brother of a prominent businessman.
Lim Oon Cheng will pay a civil penalty of SGD
9.597 million for breaches of the Securities and
Futures Act. The amount includes a separate
penalty of SGD 50,000 for false trading. His niece,
Lim Huey Yih, will have to pay SGD 2.241 million.
Lim Oon Cheng is reported to be the brother of
Lim Oon Kuin, founder of oil trading firm Hin
Leong Group, who was ranked No. 14 on Forbes'
list of Singapore's 50 richest people last year. Lim
Oon Cheng, who admitted insider trading, bought
2.27 million shares in Singapore Petroleum
Company and 101,000 shares in Keppel
Corporation between 15 May and 22 May 2009.
He did so while in possession of price-sensitive
and non-public information relating to the
acquisition of SPC shares by PetroChina
International (Singapore) from Keppel, and
PetroChina's mandatory general offer for
SPC shares.
Aperio Intelligence Limited125 Old Broad StreetLondon EC2N 1AR
t: +44 (0)20 7073 0430e: [email protected]
ABOUT APERIO INTELLIGENCEWe are a corporate intelligence advisory firm based in theCity of London. We specialise in: conducting enhanceddue diligence on high risk customers; integrity duediligence on critical acquisitions and investments; marketentry and political risk analysis; and investigations. Our clients include some of the worlds leading regulatedfinancial institutions. Our team has decades of collectiveexperience in gathering and assessing intelligence to helpclients to make more informed decisions.
For further information, please contact:
Adrian Ford - 020 7073 0432Greg Brown - 020 7073 0433
Registered Address: Carlton House, 101 New London Road, Chelmsford, Essex CM2 0PP. Registered in England & Wales: 09164101 VAT: GB 195 2320 10 Aperio Intelligence Limited 2015. All rights reserved. Aperio Intelligence and the Aperio logo are registered trademarks of Aperio Intelligence Limited.