global compliance news

The Iran Cash Payment

“The $400 million foreign cash payment from the U.S. occurred as four detained Americans were released from Iranian custody. Several senior DOJ officials reportedly told the Wall Street Journal immediate concerns were sent up the chain of command.

The Obama administration claimed the timing of the payment was coincidental and the $400 million payment was part of a bigger $1.7 billion settlement from a failed 1970’s arms deal. However, the secrecy and tactics behind the payment have resulted in harsh criticism from outside observers. The money was converted to Swiss francs, euros and other currencies and then secretly airlifted to the radical regime. Reacting to the Wall Street Journal report, columnist Charles Krauthammer said the payment was essentially “money laundering.” A federal statute prohibits the U.S. from providing U.S. dollars to Iran.”

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OFAC and AXA

“In October and November 1992, AXA issued one health insurance policy that provided coverage for Leopoldo Lopez Grayeb and Noemi Lopez Fernandez, and a separate health insurance policy that provided coverage for Juan Manual Lopez Fernandez. From their inception, these policies were serviced by a U.S. insurance company serving as a Third Party Administrator (TPA), which performed a variety of functions including: servicing the policies, collecting premiums, maintaining policy records, and answering general inquiries from insured parties. On December 3, 2009, OFAC designated Leopoldo Lopez Grayeb, Noemi Lopez Fernandez, and Juan Manual Lopez Fernandez pursuant to the Foreign Narcotics Kingpin Designation Act, 21 U.S.C 1901-08, and added these parties to the List of Specially Designated Nationals and Blocked Persons (the “SDN List”). Subsequent to OFAC’s designations, neither AXA nor the TPA screened the names of the policyholders serviced by the TPA and, as a result, both companies failed to identify and block the policies and premium payments in which one or more of the above-referenced SDNs had an interest.

AXA has not received a penalty notice or Finding of Violation from OFAC relating to substantially similar violations in the five years preceding the date of the conduct giving rise to the violations; and AXA cooperated with OFAC’s investigation, including by voluntarily self-disclosing the violations to OFAC and by executing a statute of limitations tolling agreement and an extension to the agreement.”

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E.U.’s Proposed Anti-Money Laundering Directive

“Last July, the European Commission published a draft directive proposing to extend anti-money laundering (AML) regulation to both virtual currency exchange services and custodial wallet providers. The draft suggests that many Bitcoin companies operating within the European Union will need to apply know-your-customer (KYC) types of checks on their users, to be enforced by 2017.

From the perspective of the European Commission, virtual currencies present a problem as they allow money to circulate easily, and it’s difficult to know who’s transacting with whom. To address this, the E.U. wants to set up checkpoints: Custodian wallet providers and exchange services would be required to monitor transactions on their platform and report suspicious activity.”

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HSBC Regulatory Breach

“HSBC has admitted it is breaching a U.S. regulator’s order to bolster its defences against financial crime as the U.K.’s biggest bank announced a slump in first-half profits in ‘turbulent’ markets.  A series of legal disclosures alongside its interim results confirmed it had received requests for information from various regulators around the world in relation to Mossack Fonseca, the Panama law firm linked to tax-haven companies, and was continuing to be investigated for the tax avoidance activities of its Swiss arm.

Among the legal disclosures is a reference to an order agreed in October 2010 with the U.S. Office of the Comptroller of the Currency that required the bank to ‘establish an effective compliance risk management programme across HSBC’s U.S. businesses.'”

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Hawaiian Gardens Casino Fined $2.8 Million

“The Financial Crimes Enforcement Network (FinCEN) today announced a settlement with and a $2.8 million assessment against Hawaiian Gardens Casino, Inc. d/b/a The Gardens Casino, of Hawaiian Gardens, California. The Gardens, a card club, admitted that it violated the Bank Secrecy Act’s (BSA) program and reporting requirements and has agreed to future undertakings, including periodic independent reviews to examine and test its BSA Anti-Money Laundering (AML) program.

The Internal Revenue Service (IRS) examines card clubs for compliance with the BSA pursuant to authority delegated by FinCEN. In 2011 and 2014, IRS examined The Gardens and identified significant BSA violations. Many violations uncovered in 2011 were left unaddressed in 2014, despite the IRS findings in 2011 and despite the fact that the Gardens’ independent consultant identified many of these problems in 2013. From September 1, 2009 through the present, The Gardens failed to implement and maintain an effective AML program, failed to report large cash transactions, failed to file many suspicious activity reports (SARs), and failed to keep certain required records.”

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India: Money Laundering Suspected in Ponzi Schemes

“There is a ‘huge element of money laundering’ in illegal public deposit schemes across the country, a top Sebi official said today, even as he wondered why not many claimants are coming forward to get back the money in the high-profile Sahara case.

‘So far as Sahara is concerned, we have a decent amount of money but not many claimants. That is a question mark, as to why there are no claimants despite the fact that we have made multiple advertisements seeking applications to pay the money,’ Sebi Whole Time Member S Raman told reporters here.”

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U.S. Loses Trillions in Mispricing Trade Goods

“Trillions of dollars may be missing from U.S. government coffers due to widespread corporate tax evasion and criminal money laundering strategies.

IU College of Business professor John Zdanowicz conducted an analysis of 12 years’ worth of U.S. Customs data and found that abnormally priced goods imported and exported by U.S. companies are masking complex tax avoidance strategies that have cost the U.S. government more than $2.3 trillion in revenue from 2003 to 2014.  ‘Criminals and tax evaders have discovered that laundering money through the banking system is dangerous, especially with the new financial institution reporting requirements under the Patriot Act and other banking regulations,’ Zdanowicz said.  ‘However, moving money through international trade can be virtually undetectable.'”

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Canadian Offshore Tax Crackdown

“Two banks have agreed to give the federal revenue minister information from the accounts of a Caribbean financial institution to help the government crack down on Canadian tax evaders.  The Federal Court of Canada has approved federal requests for seven years’ worth of transaction information from the Royal Bank of Canada and Citibank, N.A., related to accounts in the name of Cayman National Bank Ltd.

The Royal Bank and Citibank — neither of which opposed the federal demands — have 120 days to hand over records from Jan. 1, 2009, through Dec. 31, 2015, including account statements, deposit slips, cheques, bank drafts and wire transfer orders.  The Canada Revenue Agency plans to comb through the data to see if Canadian residents are using the Canadian dollar accounts, opened by Cayman National Bank, to transfer funds to Canada and avoid reporting taxable income from their foreign holdings.”

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Miami Bitcoin Case

“Bitcoin does not actually qualify as money, a Miami-Dade judge ruled Monday in throwing out criminal charges against a Miami Beach man charged with illegally selling the virtual currency.

Monday’s decision came in a case that is being closely watched in tech, financial and legal circles as the popularity of the virtual currency has skyrocketed in recent years.  The defendant, Michell Espinoza, was charged with illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers.

But Miami-Dade Circuit Judge Teresa Mary Pooler ruled that Bitcoin was not backed by any government or bank, and was not ‘tangible wealth’ and ‘cannot be hidden under a mattress like cash and gold bars.’  ‘The court is not an expert in economics, however, it is very clear, even to someone with limited knowledge in the area, the Bitcoin has a long way to go before it the equivalent of money,’ Pooler wrote in an eight-page order.”

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Swiss to Pass on HSBC Account Data

“Switzerland said it plans to give information to U.S. tax authorities about accounts at HSBC Holdings Plc’s Swiss private bank, as part of a U.S. investigation into tax evasion.

HSBC’s Swiss unit has already paid tens of millions of dollars in fines after admitting substandard compliance on tax evasion and other issues. The Swiss government said it made the announcement about its plans on Tuesday to alert HSBC account holders whom it has been unable to locate, and to give them the chance to lodge a legal appeal if they object to having their information sent to the U.S. Internal Revenue Service (IRS).”

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FinCEN Expands Reach of Geographic Targeting Orders

“The Financial Crimes Enforcement Network (FinCEN) today announced Geographic Targeting Orders (GTO) that will temporarily require U.S. title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ for high-end residential real estate in six major metropolitan areas. FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To better understand this vulnerability, FinCEN issued similar GTOs earlier this year covering transactions in Manhattan and Miami-Dade County, Florida. The GTOs announced today will expand upon the valuable information received from the initial GTOs.”

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Ex-Executive Admits to $38M Fraud Scheme

“An ex-executive at a New York investment bank has admitted to defrauding investors of more than $38 million, blaming it on his gambling addiction.  Andrew Caspersen pleaded guilty to securities and wire fraud on Wednesday in federal court in Manhattan.

Prosecutors say he scammed clients of PJT Partners Inc. into investing millions of dollars in sham private equity investments.  They say he invented fictional financiers, created fake email addresses and arranged misleading domain names to carry out his fraud from last July through March.”

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SEC Charges Brokerage Firm With AML Failures

“The Securities and Exchange Commission today charged a Wall Street-based brokerage firm with failing to sufficiently evaluate or monitor customers’ trading for suspicious activity as required under the federal securities laws.

An SEC investigation found that Albert Fried & Company failed to file Suspicious Activity Reports (SARs) with bank regulators for more than five years despite red flags tied to its customers’ high-volume liquidations of low-priced securities.  On more than one occasion, an AF&Co customer’s trading in a security on a given day exceeded 80 percent of the overall market volume.  In other instances, customers were trading in stocks issued by companies that were delinquent in their regulatory filings or involved in questionable penny stock promotional campaigns.  Certain customers also were the subject of grand jury subpoenas received by AF&Co.

AF&Co agreed to pay a $300,000 penalty to settle the charges.”

Source

California businessman conspires with Israeli banks to hide income

“Masud Sarshar, who owned and operated Apparel Limited Inc., a business that designed, manufactured and sold clothing and other apparel, signed a plea agreement admitting that he maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created.  For decades, with the assistance of at least two relationship managers from Bank Leumi and a second Israeli bank (Israeli Bank A), Sarshar hid tens of millions of dollars in assets in these accounts in an effort to conceal income and obstruct the Internal Revenue Service (IRS).  As alleged in the information, between 2006 and 2009, Sarshar diverted more than $21 million in untaxed gross business income to these undeclared bank accounts.  Between 2007 and 2012, Sarshar also earned more than $2.5 million in interest income from these accounts.  Sarshar omitted all of this income from his 2006 through 2011 individual and corporate tax returns and he failed to report his authority over and ownership of these bank accounts in false Reports of Foreign Bank and Financial Accounts (FBARs) that he submitted to the U.S. Department of Treasury.

Sarshar signed a plea agreement to the charges in the information, agreeing to plead guilty and pay more than $8.3 million in restitution to the IRS.  If the court accepts the parties’ agreement, Sarshar will be sentenced to 24 months in prison.  In addition, Sarshar stipulated to a civil penalty in the amount of 50 percent of the high balance of his undeclared accounts to resolve his civil liability for not disclosing the existence of his Israeli bank accounts.”

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Ahmed Taimour

Feb 1 - Ahmed Taimour headshot (319x400)Ahmed Taimour is a CAMS-certified professional with more than 10 years of experience in compliance, internal audit and risk consulting with banking and international consulting firms in the Middle East. He has extensive experience in AML, internal auditing, corporate governance and risk management in the financial services sector gained from working in tier-one banks and Big 4 firms.

Ahmed can be reached at: https://ae.linkedin.com/in/ahmedtaimour

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