compliance news

June and the first part of July have seen some significant developments in global compliance. Here are some of the standout stories, covering celebrities, the elite, governments near and far and more money-laundering schemes than you can shake a stick at.

U.S. Regulatory Violations, Now with Higher Penalties

“Starting August 1, violations of financial regulations will come with higher civil money penalties (CMPs). The CMP increases are in response to the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (the Act). The Act requires Executive Branch and independent agencies (Agencies) to make annual adjustments for inflation to CMP dollar amounts, as well as an initial ‘catch-up’ adjustment based on a formula set forth in the Act. Although the Act was part of the contentious budget bill that was passed on October 30, 2015 (and that avoided a government shutdown), the Act did not receive much independent coverage, and the increases may be unexpected to businesses that are potentially subject to the increased penalties.

Because the Act is applicable to all Agencies, interim final rules that implement it, including the ‘catch-up’ adjustments, have been issued by all the federal financial regulators, including the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission. Some of the ‘catch-up’ adjustments are significant. For example, FinCEN, the OCC and the FDIC had not increased some of their CMP amounts for more than a decade, and in some cases, for several decades. Consequently, some of their CMP amounts have doubled or nearly doubled. CMP amounts that were adjusted more recently are subject to a more modest increase under the Act and the various interim final rules.

In light of the overall recent heightened regulatory interest in regulatory violations, particularly bank secrecy act and anti-money laundering violations, it is possible that regulatory agencies and self-regulatory organizations that are not subject to the Act but are notably active in enforcement (e.g., the Financial Industry Regulatory Authority and state agencies, such as the New York State Department of Financial Services) will make similar or proportional upward adjustments to their penalties.”

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Panama Papers Awarded Investigation of the Year

“The Panama Papers probe, a collaborative work of more than 100 media organisations including The Indian Express, has won the Data Journalism Awards 2016 for Investigation of the Year. The award was presented at the Global Editors Network (GEN) summit in Vienna.”

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Lionel Messi Sentenced for Tax Fraud

“Argentina and Barcelona footballer Lionel Messi has been sentenced to 21 months in prison for tax fraud.  His father, Jorge Messi, was also given a jail term for defrauding Spain of €4.1m (£3.5m; $4.5m) between 2007 and 2009.

They also face millions of euros in fines for using tax havens in Belize and Uruguay to conceal earnings from image rights.  However, neither man is expected to serve time in jail.  Under the Spanish system, prison terms of under two years can be served under probation.

The footballer and his father were found guilty of three counts of tax fraud in Wednesday’s ruling by the court in Barcelona. As well as the jail terms, Messi was fined about €2m and his father €1.5m. They made a voluntary €5m ‘corrective payment,’ equal to the alleged unpaid tax plus interest, in August 2013.”

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Philippine Casinos Could Face Strict AML Requirements

“Casinos in the Philippines could be forced to adhere to strict anti-money laundering (AML) requirements if local politicians approve a new piece of legislation.

Recently, Feliciao Belmonte Jr.introduced HB 14 into the House of Representatives. The bill would remove the exemption local casinos received when the country passed its Anti-Money Laundering Act of 2001.

Belmonte said his bill was a direct response to the recent Bangladeshi bank heist scandal, in which $81m was unlawfully transferred from Bangladesh government accounts at the Federal Reserve Bank in New York and funneled through local banks, casinos and junket operators. Most of the $81m remains unaccounted for to this day, in part due to law enforcement’s inability to accurately track the money once it entered the country’s gaming industry.”

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DFS Issues Final Anti-Terrorism Transaction Monitoring and Filtering Program Regulation

“Financial Services Superintendent Maria T. Vullo announced that the Department of Financial Services (DFS) has adopted a risk-based anti-terrorism and anti-money laundering regulation that requires regulated institutions to maintain programs to monitor and filter transactions for potential Bank Secrecy Act (BSA) and anti-money laundering (AML) violations and prevent transactions with sanctioned entities. The final regulation requires regulated institutions annually to submit a board resolution or senior officer compliance finding confirming steps taken to ascertain compliance with the regulation.

‘Financial institutions doing business in New York must do everything they can to help stem the tide of illegal financial transactions that fund terrorist activity,’ said Financial Services Superintendent Maria T. Vullo.  ‘It is time to close the compliance gaps in our financial regulatory framework to shut down money laundering operations and eliminate potential channels that can be exploited by global terrorist networks and other criminal enterprises.’

The risk-based rule adopted by DFS today takes into consideration comments that were submitted by the financial services industry and others during the extended comment period for the previously-proposed regulation, which ended March 31, 2016.”

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India’s Rich Farmers not Subject to Income Tax

“Stuffed animal heads adorn the walls of Kunwar Vikram Jeet Singh’s mansion on the outskirts of Delhi, and he also owns a three-bedroom apartment in a gated condominium in the city. His children go to one of India’s most exclusive private schools. Yet Singh doesn’t pay income tax because he’s a farmer.

Singh is one of thousands of rich landowners who don’t need to pay taxes thanks to laws designed to help the hundreds of millions of poor farmers who scratch a living from India’s soil.  Worse still, some people are buying agricultural land to avoid paying taxes by declaring their earnings as returns from farming, opposition lawmaker Sharad Yadav told parliament in March. Citizens declared about $29 trillion worth of agricultural income in the year through March 2011. That’s almost 15 times the value of India’s economy.”

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Vancouver Real Estate Fueled by Money-Laundering Bubble?

“There is no denying that the real estate market in Vancouver is red hot – prices have been rising with no end in sight.  But one market analyst thinks we will see the bubble burst.

Marc Cohodes used to run one of the largest hedge funds on Wall Street. Now, he’s eyeing the Canadian housing market.  Recent headlines of real estate deals in Vancouver include a 7,200-square-foot heritage mansion for sale in Vancouver’s Shaughnessy neighbourhood for $21 million and a a $2.398-million price tag for a ‘fixer-upper’ in the Point Grey neighbourhood.

The Greater Vancouver real estate board says the benchmark price of a detached home in Vancouver hit $1.56 million in June, which is up 38.7 per cent in one year.  ‘I think it’s a money laundering-induced market,’ said Cohodes. ‘Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last.'”

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Hezbollah Has “Most Sophisticated Money-Laundering Schemes”

“Hezbollah’s finance operations are thriving across Latin America months after the Drug Enforcement Administration linked the Iran-backed Lebanese militant group to drug cartels in the region, U.S. lawmakers were told this week.

Former DEA operations chief Michael Braun said Hezbollah is ‘moving [multiple] tons of cocaine’ from South America to Europe and has developed ‘the most sophisticated money-laundering scheme or schemes that we have ever witnessed.’

The agency announced in February that it had arrested several Hezbollah operatives accused of working with a major Colombian drug cartel to traffic drugs to Europe and launder money through Lebanon. Those arrests come against a backdrop of rising fears in Washington about smuggling connections between Middle East terrorist groups and the Western Hemisphere.”

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Russian Mafia Member Arrested in Money-Laundering Probe

“The suspects – four Russians, two Ukrainians and two Spaniards – made major investments in real estate on the coast of Catalonia in northeastern Spain, police said.

The authorities seized 191 properties and 142 financial assets with a total estimated value of €62 million which they suspect were acquired with money from Russian organised crime.

The suspects were arrested in Reus and the coastal towns of Cambrils and Salou in the province of Tarragona, some 100 kilometres (60 miles) south of Barcelona.”

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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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