Featured Case Studies

EU investigation into “golden passports” reveals money laundering, tax evasion risks

The European Commission has published the findings of its investigation into EU members’ citizenship and residency schemes.

The probe revealed financial crime risks, such as money laundering and tax evasion, associated with the programmes.

Here’s an outline of some of the facts and issues pertaining to the schemes and the study, or a Q and A, sourced from the European Commission which can be downloaded here.

Analysis: FATF’s assessment of the UK’s anti-money laundering systems draws criticism

HM Treasury Minister John Glen, commenting on the recently published Financial Action Task Force’s (FATF) evaluation of the UK’s anti-money laundering (AML) and counter terrorist financing (CTF) systems, said: “The report recognises that the UK’s AML/CTF regime is the strongest of the over sixty countries assessed by FATF and its regional bodies.”

However, within a few days of the report’s publication, FATF’s conclusions have attracted criticism, such as that raised by the Bond Group, and raised some important questions, rather than answered them.

Are the points justified?

Combating money laundering in European banks: Highlights of a key whistleblower’s testimony

Anti-money laundering (AML) expert Denis O’Connor looks at some of the main points raised at an EU Parliament hearing by Danske Bank whistelblower Howard Wilkinson, and recommends AML and compliance professionals take note of the issues discussed. The €200 billion Danske Bank money laundering scandal is considered to be the biggest laundering scandal in banking history.

The British government claims to be focussing on its ability to seize the proceeds of organised crime, but the response remains piecemeal, underfunded and poorly coordinated

Access the full case study here.

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At the end of January the UK’s Financial Conduct Authority announced its largest ever penalty for anti-money laundering failures. It fined Deutsche Bank £163 million ($204 million) for lacking ‘an adequate AML control framework’ between 2012 and 2015. US regulators levied an additional $425 million against the bank for the same issue.

Specifically, Deutsche is alleged to have facilitated $10 billion in Russian ‘mirror-trades’ which could have been used to launder money and evade Russian capital controls.

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Transaction laundering is a catch-all term for a wide range of money laundering methodologies involving ecommerce sites.

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Hawala (Arabic for ‘transfer’ or ‘trust’), is an informal system of money transfer that predates the modern banking system by many centuries. It is defined by the Financial Action Task Force as an ‘alternative remittance system’ for transferring money from one location to another outside banking channels. Dating back to 8th Century Silk Road traders, or perhaps even earlier, it has had a significant influence on the development of modern financial systems, particularly on the legal principle of the ‘agent’.

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As part of their recent, highly detailed investigation into Russian involvement in brutal deaths on British soil, BuzzFeed News described an interesting methodology for disguising the source of funds for investing in a legitimate venture.

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A graphic showing the AML fines levied against financial institutions around the world in the last 5 months.

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Financial crime risk is generally thought of as being associated with banking and real estate, but no professional services firm is immune.

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The ‘Russian Laundromat’ (a term coined by the team of journalists at the OCCRP who uncovered it) was a complicated scheme, run between 2010 and 2014, to launder up to $80 billion out of Russia. It was based on fictitious debts between companies in the jurisdictions to which criminals and corrupt Russian officials wanted to send their money. The debts between these companies were authenticated by Moldovan judges, such that all transfers were backed by a European court order and appeared exceptionally ‘clean’.

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An investment fund can be utilised by those seeking to launder money. Investment funds are particularly suitable for money laundering where a large sum of illicit money is already within the financial system.

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The attached case study and infographic explains the abuse of syndicated loans for money laundering purposes.

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