FINANCIAL CRIME DIGEST March 2015

FINANCIAL CRIME DIGEST
March 2015
MAKE INFORMED DECISIONS

Welcome to the March 2015 Financial Crime
Digest covering key updates from February 2015.
This months digest covers updates in relation to the
Serious Crime Act 2015, the FATF Plenary meeting in
Paris, progress on the fourth EU Money Laundering
Directive, and the launch of the Joint Money
Laundering Intelligence Taskforce. It also provides a
summary of key press and media coverage relating to
fraud, money laundering, bribery and
corruption, data security, and sanctions
news, plus a look ahead to upcoming
events and publications in March 2015.
TECHNICAL AND REGULATORY UPDATES

The new Section 37 of the Serious Crime Act 2015 provides civil
liability exemption for money-laundering disclosures.
The Home Office has announced that the Serious Crime Bill has received
Royal Assent, making it the Serious Crime Act 2015. Section 37 places civil
immunity for money laundering disclosures on a statutory footing. The
exemption provides that where an authorised disclosure is made in good
faith, no civil liability arises in respect to the disclosure on the part of the
person or on whose behalf it is made. Karen Bradley MP, Minister for Modern
Slavery and Organised Crime, had previously explained that the
Government was obliged under Article 26 of the EU Third Anti-Money
Laundering Directive to protect those who report suspicions of money
laundering in good faith from incurring civil liability for doing so.
www.aperio-intelligence.com

She said that, whilst the common law currently provides such protection, the
Government had concluded that placing civil immunity on a statutory footing
would be advantageous in providing greater legal certainty. The Opposition
supported the new clause and it was later added to the Serious Crime Bill.
The announcement is HERE. The Serious Crime Act is HERE.
The FATF Plenary meeting took place at the

OECD in Paris from 25 - 27 February 2015.
The public statement can be found HERE.
The Plenary considered a number of matters,
including:
l Terrorist financing, and the issue of a report
on the financing of the Islamic State in Iraq
and the Levant (ISIL)
l Jurisdictions with AML/CFT deficiencies
l Fourth round mutual evaluation reports
l Collaboration between the Egmont Group of
FIUs and FATF
The City of London Police has announced the

launch of the Joint Money Laundering Intelligence
Taskforce. The taskforce will run for an initial
period of 12 months, with a view to improving
intelligence sharing arrangements and building on
l An ongoing review of de-risking, in line with

the risk-based approach
l Building on the FATF 2014 report on
virtual currencies
national leadership against organised economic

and financial crime. Representatives from the
financial sector, NCA and City of London Police
will be based in a single hub to develop an
operational level understanding of money
laundering risks.
FATF listed Iran and the Democratic Peoples

Republic of Korea (DPRK) as two jurisdictions
The banks involved are: Lloyds, Santander, HSBC,
with on-going or substantial money laundering
Nationwide, Post Office, RBS, Barclays, Citigroup,
or terrorist financing risks. Algeria, Myanmar
BNP Paribas, and Standard Chartered. Information
and Ecuador are considered to have strategic
and intelligence will be processed and
AML/CFT deficiencies and have not made
disseminated via the British Bankers Associations
sufficient progress in addressing the
Financial Crime Alerts Service. Other law
deficiencies, or have not committed to an
enforcement agencies and financial institutions
action plan to address the deficiencies.
include HMRC, Financial Fraud Action UK, and

Cifas (UK's independent fraud prevention service).
The FATF Plenary session discussed

the mutual evaluation reports of Australia
The press release is HERE.
and Belgium.

The Council of European Union has endorsed the political agreement reached
with the European Parliament on the proposed Fourth Money Laundering
Directive and proposed regulation on information accompanying transfer of
funds (the Wire Transfer Regulation). The strengthened rules reflect the need
for the EU to adapt its legislation to take account of the development of
technology and other means at the disposal of criminals.
The main elements are:
l Extension of the directive's scope, introducing requirements for a greater
number of traders. This is achieved by reducing from EUR15,000 to
EUR10,000 the cash payment threshold for the inclusion of traders in
goods, and also including providers of gambling services.
l Application of a risk-based approach, using evidence-based decision
making, to better target risks. The provision of guidance by the European
supervisory authorities.
l Tighter rules on customer due diligence. Obliged entities, such as banks,
are required to take enhanced measures where the risks are greater, and
can take simplified measures where risks are demonstrated to be smaller.
l Member states will have two years to transpose the directive into
national law.
l The press release is HERE.
l The texts of MLD4 and Wire Transfer Regulation are HERE.
l The procedure file for MLD4 is HERE.
l The procedure file for Wire Transfer Regulation is HERE.
The UK Cabinet Ofce has published the Terms of

Reference for the second phase of its review to
improve the coordination and effectiveness of the
UKs enforcement response to bribery, corruption
and related fraud, through a full consideration of
the powers, capabilities and organisations
involved. The FCA is supporting the review.
The Terms of Reference are HERE.

HM Government, the Department of Business

Innovation and Skills (BIS) and other
Government bodies have announced new
measures to help UK businesses face cyber
security challenges.
New Government support to keep UK
businesses stay safe in cyberspace includes:
l A new cyber security envoy has been
appointed to help British small businesses
and first time exporters promote their
business interests across the US. Andy
Williams will be based in the British
Embassy in Washington to help boost UKUS cyber security deals
l An updated 10 Steps to Cyber Security
guide, which shows businesses how to
GCHQ has issued a report detailing the nature of cyberattacks and how to stop them, which focuses on:
combat cyber threats

l The threat landscape - the types of attackers, their
l New research published by the Department
motivations and their technical capabilities
for Business, Innovation and Skills (BIS),

which demonstrates how top UK companies
are improving their responses to cyber
threats. The results of the annual Cyber
Governance Health Check for FTSE350
l Vulnerabilities - what are they, and how are they

exploited?
l Cyber-attacks, stages and patterns - what is the
typical structure of a cyber-attack?
companies shows increased awareness and

action, along with areas for improvement
l Publication of a new report from GCHQ
l Reducing the impact of an attack - what controls

are needed to reduce the impact of common cyberattacks?
detailing the common cyber-attacks used

against industry by cyber criminals, and
how to stop them.
l The press release is HERE.
l The 10 Steps to Cyber Security guide can
be found HERE.
l Case studies - real world examples that

demonstrate how cyber-attacks have caused
financial and reputational damage to major UK
businesses
l The GCHQ Report is HERE.

The FTSE 350 Cyber Governance Health Check
l The World Bank announced it has imposed
Tracker Report offers significant insight into the
sanctions in relation to fraud and corruption
cyber governance of the UKs highest-performing
against four companies, including two in
businesses. The Cyber Governance Health Check
Bolivia - Empresa Constructora y Consultora
(the Tracker) is a questionnaire comprising of 37
LAPTUS S.R.L. and Ingenieria en
questions which assesses the extent to which
Construccines Orleans (ICOR), one in
boards and audit committees of FTSE 350
Bangladesh - Globe Pharmaceuticals Ltd
companies understand and oversee risk
(Globe) and one in Cambodia - Seng Enterprise
management measures that address cyber
Co., Ltd.
security threats to their business.

The Tracker is HERE.
l New York State banking regulator Benjamin

Lawsky has proposed measures requiring bank
l The European Union has implemented new

sanctions against a number of Ukrainian and
executives to personally attest to the adequacy

of their money laundering controls.
Russian nationals after a reported increase in

violence in late January. The sanctions
focused on organisations and individuals
supporting the continuing unrest in Eastern
Ukraine.
PRESS AND MEDIA: MONEY LAUNDERING

Swiss prosecutors raided the ofces of HSBC Private
Bank (Suisse) and opened an enquiry into possible
aggravated money laundering. The raid followed
disclosures by Washington-based International
Consortium of Investigative Journalists.
The UK Government has been criticised over its

investigation of just one person in connection with
the HSBC money laundering scandal, which
French prosecutors recommended
implicated up to 1,000 individuals. A petition has
pursuing criminal charges against Royal
been set up to compel the authorities to investigate
Bank of Canadas wealth management
the cases further, and has so far collected over two-
arm in the Bahamas. RBC Bahamas is
thirds of the required one million signatures.
accused of conspiring to commit tax fraud

and money laundering in relation to a trust
FinCEN has launched a probe into Citigroup-owned

bank Banamex USA. The US arm of the second
largest bank in Mexico is being investigated over
compliance with the Bank Secrecy Act. In 2012,
Banamex USA faced enforcement actions in relation
it managed in Bahamas. RBC has recently

retreated from most of Latin America and
the Caribbean, following numerous money
laundering probes in the last 18 months
into its wealth management arm.
to flaws in the banks customer due diligence and

internal control systems. In 2014, the bank suffered
losses of USD 500 million in relation to corporate
loan fraud.
In Virginia, US-based Capital One Financial
announced it was under investigation by the
Department of Justice and FinCEN, relating to its
anti-money laundering protocols.
The Supreme Court of Nigeria gave permission to
the Economic and Financial Crimes Commission
(EFCC) to bring charges on 23 counts of money
laundering and illegal diversion of public funds
totalling NGN1.5 billion against former governor of
Plateau State, Joshua Dariye.

PRESS AND MEDIA: MONEY LAUNDERING
In exchange for maintaining a
Italys most senior anti-Mafia prosecutor, Franco Roberti, has said
EUR240 billion nancial
that Calabrian crime syndicate 'Ndrangheta has beaten the Sicilian
lifeline, Greeces Government
Mafia for control of organised crime in northern Italy. Roberti warned
outlined a plan to tackle
that the influence of Italian organised crime groups had already
corruption, including going
spread beyond Italy to Germany, France and Spain, and there was
after wealth tax evaders.
evidence of Mafia-related activities in the UK.
PRESS AND MEDIA: DATA SECURITY

The second largest US health insurance firm,
Anthem Inc. (formerly WellPoint), faced one of
the largest data breaches in corporate history,
after it admitted that hackers stole information
on 80 million of its customers. The breach
sparked a class action case against the insurer,
which will also seek to ensure that Anthem
customers, including their children, receive
adequate protection and compensation.

PRESS AND MEDIA: BRIBERY & CORRUPTION
Petrobras CEO Maria das Graas Silva Foster
Brazilian authorities are investigating Rolls-Royce
stepped down and was replaced by Banco de
for alleged bribery of Petrobras executives to
Brasil CEO Aldemir Bendine, following fresh
secure a USD 100 million contract. The
probes into what is believed to be Brazils biggest
allegations came from one of Petrobras former
ever corruption scandal. In November 2014, it was
executives, Pedro Barusco, who agreed to be an
revealed that Petrobras was being investigated
informant in return for leniency. Barusco revealed
over dubious transactions between the firms
in a testimony that he had personally received a
directors, contractors and public officials,
kickback of USD 200,000 from Rolls-Royce.
estimated at USD 8.9 billion. The firm also

witnessed a USD 100 billion fall in its market
value from its September high. A former geologist
of the company, Venina Velosa de Fonseca, is said
to have filed a case against Petrobras after being
taken to Singapore and threatened at gunpoint for
her role in exposing the corrupt scheme.
Goodyear Tire & Rubber Company reached a USD 16 million

settlement with the Securities and Exchange Commission
for its violation of the Foreign Corrupt Practices Act (FCPA).
Goodyear was charged with bribing Kenyan public and
private sector officials. Around USD 3.2 million was
distributed to various employees at Kenya Ports Authority,
the Armed Forces Canteen Organization, Nzoia Sugar
Company, the Kenyan Air Force, the Ministry of Roads, the
Ministry of State for Defense, East African Portland Cement
Co, and Telkom Kenya Ltd, in order to secure tire sales.
Canadian police have charged leading Canadian engineering
and construction firm SNC Lavalin Group Inc. with fraud and
bribery linked to payments to Libyan Government officials
totalling USD 49 million. The case demonstrates how,
although corruption investigations are acquiring a global
character, different jurisdictions employ different
approaches. For SNC-Lavalin, it may not be possible to
resolve the issue with a settlement, currently the most
common approach used in the US for big corporations.

PRESS AND MEDIA: FRAUD
SCA Promotions won a successful

fraud dispute claim against Lance
Armstrong. An arbitration panel has
ordered the disgraced sportsman
and Tailwind Sports Corporation to
pay SCA USD 10 million in
damages. It is also the largest ever
sanction of its kind given to an
individual in America. Armstrongs
dispute with SCA dates to 2005,
when he lied under oath by stating
that he had never used
performance-enhancing drugs.
Cayman Islands-based Caledonian
Bank Ltd filed for bankruptcy in
New York after the SEC sued the
bank over claims it profited from
stock sales of invalidly registered
shell companies. The SEC action
reportedly led to a run on the bank
by customers.
Yves Bouvier, the owner of Luxembourg Freeport, a vast

repository for billions of pounds worth of fine art and other
treasures, was detained in Monaco along with two other
Swiss nationals. He is suspected of having sold dozens of
works by Picasso, Modigliani, Gauguin, Degas and Leonardo
da Vinci to the family of Dmitri Ryboloylev (owner of
Monaco football club) at inflated prices or with false
documents. A source with knowledge of the affair said that
it was a long-running probe and that a number of high networth individuals in Britain, the United States and Asia may
have been victims of the alleged fraud.
Freeports, previously known

as bonded warehouses, were
initially used to store
commodities and other
manufactured goods.
However there is evidence
that they are increasingly
being used for smuggling, tax
evasion and other illicit uses.

PRESS AND MEDIA: SANCTIONS
According to Western diplomatic and intelligence sources,

around USD 1 billion in cash has entered Iran as the country
seeks to bypass Western sanctions. The Iranian
Government allegedly began exploiting the mechanism in
March 2014. Since then, there has been an explosion in the
number of front companies being opened in Dubai, with
Irans central bank said to be giving them orders to buy
dollars. The money is then transported by couriers
on flights.
Authorities in Somaliland, the self-declared Republic in
north-western Somalia, reported offloading from a ship
weaponry, whose destination was unclear. Other reports
suggested that the shipment originated in the UAE. Somalia,
including Somaliland, is subject to a UN-imposed arms
embargo. The Somaliland Minister of Interior reported that
Sudan contacted the Somaliland government regarding the
arms found on the ship.
The UK announced its renewed move to block the sale of UK
Dea assets by German RWE to Letter1 (Mikhail Fridman),
citing risks he could become subject to economic sanctions
on Russia , if they are tightened. In October 2014, the UK
attempted to block the RWE Dea deal, which would also see
the sale of UK North Sea assets. In December, RWE had
agreed to look into ways of safeguarding the UK assets.
The UN Security Council has distributed a draft resolution
envisaging sanctions on South Sudan, in relation to
KEY UPCOMING EVENTS

MARCH 2015
repeated ceasefire failures in the area.

The UN found that a North Korean shipping company, Ocean
Maritime Management Company, has renamed most of its
vessels in a bid to avoid western sanctions. The company
was sanctioned last year for attempting to smuggle MiG-21
fighters disguised under thousands of tonnes of Cuban
sugar. The UN also found that the shipments were linked to
members of the North Korean intelligence agency, the
Reconnaissance General Bureau (RGB), many of whom had
worked at international organisations.
10
Transparency International is due

to release a report detailing its
ndings on corruption in the UK
real estate sector. The report
follows coverage by the New York
Times in February of wealthy
individuals use of shell
companies to acquire exclusive
properties in Manhattan.
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For further information, please contact:
Adrian Ford - 020 7073 0432

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Aperio Intelligence Limited

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FINANCIAL CRIME DIGEST March 2015

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FINANCIAL CRIME DIGEST

MAKE INFORMED DECISIONS