fter Taiwan’s state-run Mega Financial Holding Co was fined $180 million by U.S. authorities for lax enforcement of anti-money-laundering rules at its New York branch, the bank started a rigorous training program for its staff.
Now, like Mega Financial, companies across Taiwan are working to get staff and systems up to speed after the island passed laws to meet international standards on combating money laundering and was taken off a watchlist by the Asia Pacific Group on Money Laundering (APG).
“Unfortunately, Taiwan has earned a name for itself as a paradise for money laundering,” Deputy Justice Minister Tsai Pi-chung told Reuters.
Money laundering and cybercrime connections to Taiwan, which is also in the process of pushing through a cyber security bill, have grabbed global headlines.
A casino south of Vancouver favored by wealthy Asian gamblers is under scrutiny for potential money laundering as large amounts of cash flow through the Pacific Coast city’s thriving real estate and gaming industries.
The British Columbia government released on Friday a previously confidential July 2016 report that had investigated the River Rock Casino Resort after it accepted C$13.5 million ($11 million) in C$20 bills in just one month in July 2015, capturing the attention of B.C.’s Gaming Policy and Enforcement Branch.
“I received a series of briefings that caused me to believe that our province could do more to combat money laundering at B.C. casinos,” B.C.’s new Attorney General David Eby, whose New Democratic Party-led government took office in July, told reporters. “I am making that report public today.”
Great Canadian Gaming Corp., the owner of River Rock, said in a statement late Friday that it strictly adheres to all regulatory requirements.
In 1970, legislators supporting the Bank Secrecy Act (BSA) emphasized that the new law would not be a burden to financial institutions because they already kept most of the records required and the Secretary of the Treasury would have broad latitude to provide exemptions in cases where regulatory costs exceeded benefits.
Since then, each of the 11 additional laws has added more requirements for banks and money transmitters. Today, this compendium of regulation is generally referred to as the anti-money laundering (AML) and know-your-customer (KYC) rules.
In addition to reporting transactions above certain levels, banks are now required to know who their customers are, and to report any ‘suspicious activity’. Ask any financial institution today what its largest burden is, the answer is invariably “compliance”.
Uncertainty and de-risking
Regulatory burdens on financial institutions are expensive, and growing bank fees and service charges have reflected this. However, after the financial crisis of 2008, regulators added uncertainty to the mix.
They began to use the broad authority granted them by Congress to impose large fines, levying $321bn in penalties on banks between 2009 and 2016. The perceived randomness of who might be fined next and how much, added enormous uncertainty to the world of banking.
In addition to the financial impact of nine- and 10-figure fines, being singled out as a supporter of terrorism and organized crime carries an enormous reputational risk for any company.
Banks got the message. Their response was to sever ties with virtually any foreign correspondent bank with customers that regulators might deem ‘suspicious’ using 20/20 hindsight.
They are also careful not do business with customers or industries that might later turn out to be ‘suspicious’. It’s a rational course of action with devastating results.
Money laundering is surely one of the most persistent and pervasive risks faced by banks. The practice is said to be just as common in the Middle East as anywhere else. So how do financial institutions there train their staff to deal with this threat?
The firm’s employees eventually arrive. They explain that staff received anti-money laundering training the previous day and did not clear the table after the session. They also describe the answer one of the board members gave: “I’d convert the money into diamonds; that way it’d be easier to ship out of Dubai.” A joke, Euromoney is certain. When the tale is repeated to the chief executive of a Kuwaiti bank, he rolls his eyes and sighs. “That’s not money laundering training, that’s just basic ethics!” He is astonished anyone would need to be taught what to do in such a case.
South African President Jacob Zuma signed the anti-money laundering Financial Intelligence Centre Amendment (FICA) [text, PDF] on Saturday to combat tax evasion and money laundering in the country. The global Financial Action Task Force (FATF) [official website] organization had threatened to oust South Africa if the amendment had not been passed before June 20. Supporters say the law is a tool against international financial crime, making it easier to identify the actual owners of accounts around the world and would apply to Zuma and other prominent figures in South Africa. The legislature passed the bill last year, but Zuma originally refused to sign it, citing concerns about its constitutionality [Bloomberg report]. In February the Legislature approved changes to the bill to meet Zuma’s concerns.
As banks and payments companies endeavor to meet anti-money laundering (AML) regulations to avoid hefty fines for non-compliance, easily identifying customers in the digital channel becomes paramount to their success. Some “old school” methods that worked in the past aren’t working anymore. Sarah Clark, GM of identity at Mitek, joined Karen Webster to discuss what process and technology can do to help meet AML requirements to truly authenticate who people are.
Though money laundering is a dangerous and enormous aspect of fraud, it’s often overshadowed by high-profile data breaches and other cybercrime activities.
However, both regulators and authorities around the globe are cracking down on businesses who are failing to adequately prevent money laundering activities. Despite the fact that many institutions are investing heavily in their anti-money laundering activities, bad guys are still slipping through.
Clark explained that many businesses continue to fall short in this area because the status quo of AML solutions are no longer cutting it.
The Monetary Authority of Singapore, the country’s central banking authority, has stepped up its plans to issue an overhaul to its internal infrastructure and systems in a bid to help curb money laundering, given the recent cropping of incidents worldwide, according to a recent Wall Street Journal report.
A couple months ago, the central bank of Bangladesh learned a painful lesson as it was targeted by a $1.0 billion heist that succeeded in hacking SWIFT systems, resulting in the theft of $81.0 million. Since then, a panel of international banks have all instigated probes and overviews into their respective payments systems, given the vulnerabilities uncovered via the Bangladeshi incident.
COMPANIES that facilitate or enable money laundering will be taken to task by the government as it looks to declare war on those who move, hide or use the proceeds of crime or corruption.
The Treasury and the Home Office have announced a new action plan for anti-money laundering and counter-terrorist finance, three weeks before the prime minister speaks before a global anti-corruption summit.
The action plan intends to create an ‘enhanced law enforcement’ against the threat the UK finance system faces, including passing through ‘tough new legal powers’ to tackle criminals and the financing of terrorist organisations.
Also on the agenda is to reform the supervisory regime so the government can bring companies that facilitate money laundering to task, as well as increasing the ‘international reach’ of law enforcement agencies.
Irish betting operator Paddy Power has been hit with nearly £310k in fines and penalties following a UK Gambling Commission probe into the company’s anti-money-laundering and know-your-customer practices.
On Monday, the UKGC released a statement detailing “failures in anti-money laundering controls” at Paddy’s online and land-based betting businesses. The UKGC said it was spotlighting Paddy’s “serious failings” in the hope that other UK-licensed operators would take note and avoid a similar trip to the regulatory woodshed.
In the first case detailed by the UKGC, Paddy’s retail operations were slammed for not properly ascertaining the source of the funds a high-value customer was wagering via fixed-odds betting terminals (FOBT).