Deutsche Bank fined US$630 million for inadequate anti-money laundering controls

Deutsche Bank has been fined by both UK and US authorities for failing to implement proper anti-money laundering control frameworks, which resulted in clients illegally moving US$10 billion out of Russia.

Britain’s Financial Conduct Authority (FCA) fined Deutsche Bank US$204 million and the New York Department of Financial Services fined them US$425 million. The authorities cited significant deficits in Deutsche Bank’s global anti-money laundering framework, including inadequate customer due diligence processes and deficient anti-money laundering policies and procedures.

Without sufficient customer information, risk assessment processes and transaction monitoring are ineffective.

As a consequence of these failings, unidentified customers were able to transfer around US$10 billion from Russia to offshore bank accounts using ‘mirror trades’. These trades involved clients purchasing shares in roubles in Moscow then the same stocks were sold through Deutsche Bank’s London branch for US dollars.

Whilst ‘mirror trades’ can be legal, the FCA said that the “covert transfer of those funds out of Russia” and lack of economic purpose was highly suggestive of financial crime. The trades also highlighted the lack of anti-money laundering controls in place at Deutsche Bank.

In imposing the largest penalty for anti-money laundering control failings ever, the FCA highlighted that Deutsche Bank’s actions had exposed the UK and global financial systems to serious risk. As such, the size of the fines is reflective of the seriousness of the anti-money laundering failings.

Criminal investigations by the US Department of Justice and other regulators and law enforcement authorities are ongoing.

This case highlights the complexity of anti-money laundering regulations. GRC Solutions offers an extensive library of online compliance training courses, including Anti-Money Laundering training. Contact us today for more information about our off-the-shelf and customized course offerings.

For the Love of the Game: Corruption & Sports NGOs

tennis-player-1246768_1280This article, written by GRC Solutions Expertise Panel member Jeremy Sandbrook and co-authored with Liz Burton,  examines some of the types of corruption that has taken place within sports NGOs, why they are so susceptible to it, and what some of the potential solutions are to solving the problem.

While sport is now the dominating source of entertainment worldwide, it has a darker, shadier under-belly it just can’t seem to shake-off – Corruption.  Sports NGOs are particularly vulnerable with bribery, match-fixing, extortion, doping and money laundering now common place.


Sports NGOs and ‘Corruption as usual’

It seems that barely a month passes without yet another report of corruption in sports being splashed across newspaper headlines.  These include members of FIFA’s executive committee accepting bribes, a former president of CONCACAF charged with fraud and money laundering, hosting nations paying bribes to win Olympic hosting rights, match-fixing, and the IAAF’s involvement in corruption and cover ups.

This phenomenon isn’t just limited to football and athletics however, with the following examples showing just how wide spread the issue is:

  • Cricket has witnessed allegations of both spot-fixing and match-fixing involving players from Pakistan, England, New Zealand, India, South Africa, Sir Lanka and Kenya.  There have also been on-going match-fixing allegations made in relation to the Indian Premier League (the most lucrative cricket event in the world), with two of the league’s eight teams recently suspended for two years over a corruption scandal;
  • Tennis is also currently undergoing a crisis as allegations of match fixing engulf the sport;
  • Cycling has for many years been dogged with allegations of illegal doping, with the issue only coming to a head when the International Cycling Union was accused of knowingly protecting Lance Armstrong – cycling’s long time poster boy – against doping allegations; and
  • Badminton, boxing, handball and other sports, including US collegiate sports, have all suffered from similar credibility gaps.

It is clear from this that there are serious underlying issues that sports NGOs need to address in order to clean up their respective sports.

Asia Update

Sam Gibbins, General Manager Asia has spent the last few weeks travelling to meetings across Asia accompanied by Julian Fenwick our Managing Director who was visiting from Australia.

Together they also exhibited at the International Conference on Financial Crime and Terrorism Financing 2014, held in Malaysia.

The event was positive with a crowd of 490 delegates visiting the conference in Kuala Lumpur. The pool of delegates consisted of Senior Executives from large organisations across Asia.

This important yearly event is one that brings Senior Management and the Board of Directors at various organisations together to discuss corporate governance, risk and compliance and to consider the effectiveness of their current methodologies, technologies and systems on minimising financial crime, terrorism financing and the like.

As a corporate Anti-Money Laundering expert, Sam was also asked to Chair a discussion on Anti-Money Laundering & Crypto Currencies (Bitcoin). You can read our article on this topic here.

We were also able to do some quick demonstrations of our Salt Compliance training technology and content for Asia.

Seeing as this conference was in Malaysia, we understand that many of you were unable to attend. We would like to extend our invitation for an obligation free Salt Compliance demonstration to you.

Simply contact us to set-up a time that is most convenient for you.

panel discussionSam does demojulian at standphoto 3conference room

Cryptocurrencies: The Bitcoin

In light of Sam Gibbins, General Manager Asia moderating the “Virtual & Cryptocurrency, Future and Challenges for Financial Sector” panel discussion at the International Conference on Financial Crime and Terrorism Financing in Malaysia, we thought we’d explain the nature of cryptocurrencies on the market.

Cryptocurrencies are a virtual, unregulated currency used to consume ecommerce items. It uses cryptography to control its distribution, as opposed to a central authority i.e. a government or a bank. This makes it completely immune to government interference or manipulation.

Cryptocurrencies allow consumers to fulfil online transactions between two parties pseudonymously and with minimal processing fees. The currency exchange rate is also a reflection of supply vs. demand with no central regulatory system controlling it. It has no intrinsic value and its extrinsic value is based on whatever the person trading with it believes its worth at that particular point in time. Once purchased, cryptocurrencies can be stored on the user’s computer in digital ‘wallets’, until used or converted back to a fiat currency.

These characteristics have given cryptocurrencies the reputation of being strongly linked with the purchase of illegal substances, money laundering and tax evasion.

The first and most widely used cryptocurrency to this day came about in 2009. It is known as the Bitcoin. Some cryptocurrency experts believe that this currency was more of a phase and as it is being used less the price is declining.

However, last night the Bitcoin cryptocurrency experienced a big jumping causing a 12-month low of $US286, down from $US375 last week.

As the price of bitcoins are simply based on supply and demand and have no central repository that monitors it, the rate at which the cryptocurrency can be exchanged for another currency can fluctuate widely in a short period of time. It is believed that this low has come about from an attempt to manipulate the market with a sell wall. Around 30,000 bitcoins were offered for sale on bitcoin exchange at $US300.

Bitcoins Reserve founder, Sam Lee explains:

“A sell wall is essentially someone who places a sell order at a specific price, and because it’s a very large sell order, it cannot be filled by the average buy order so it sits there in the data feed, and everyone can see that this is someone with big money manipulating the price. Usually you don’t go against someone that has this kind of money, so you go with the flow, therefore the price of bitcoin drops.”

The Bitcoins Reserve has now moved it bitcoins to Bitstamp in attempt of purchasing bitcoins at a rate that is 4% lower than other cryptocurrency exchanges. Bitstamp is based in Slovenia and claims to voluntarily comply with anti-money laundering and terrorism legislation.

Risks of using cryptocurrencies

  1. Large banks, monetary authorities and government bodies often issue warnings to consumers trading cryptocurrencies due to price and security risks. These warnings can cause the price of cryptocurrencies to fluctuate dramatically and cause huge losses in short periods of time.
  2. Digital wallets can be hacked, their passwords forgotten, computer equipment lost or stolen, taking the cryptocurrency with them.
  3. Bitcoin does not comply with anti-money laundering and counter-terrorism financing laws across the globe. Bitcoin has had a strong link with online criminal activity such as illicit drug markets e.g. Silk Road.
  4. As a business, although you may be trading lawfully, you have no idea of who is purchasing your products and services or where they are going and risk involvement in illegal activity.
  5. Business could also face risk of fraud by suppliers taking advantage of Bitcoin’s permanent transactions. For example if an overseas supplier is attempting to avoid paying foreign currency exchange rate fees, bank fees or tax liabilities, using Bitcoin could be the solution for them.

If your organisation is going to go down the path of trading with Bitcoin be sure to consider compliance with anti-money laundering and counter-terrorism financing laws relating to your jurisdiction. Falling trap to Bitcoin’s non-transparent transactions will come with high reputation damage.

The globe has definitely seen a move towards domestic or global authorities attempting to regulate cryptocurrencies in the future.

Regulatory change in Singapore; the pre-emptive strike

anti-money laundering singapore

The last few years have been, to say the least, turbulent times for the global financial services industry. What seems like a long and endless list of regulatory breaches, fines, court cases and senior industry leaders losing their jobs shows few signs of abating. New and updated legislation has become commonplace, with firms worldwide looking at what rules they have to comply with and how best to do so.

It is customary that when a regulator announces changes to regulation, or additional guidance and notices, large sections of industry denounce the change as unnecessary, burdensome, and an additional cost that doesn’t need to be borne (at least in the immediate future).

The recent announcement by the Monetary Authority of Singapore with regards to the tightening of the current Anti-Money Laundering regulations[1] was met with optimistic overtures from industry and analysts alike, marking an unusual moment when financial services firms actually seem happy to see changing, and indeed more, regulation.

How can we explain this?

Largely this is an issue around perception and timing. Singapore is already perceived as a major global financial centre, a place where banking on an institutional as well as a retail level is well developed and well supported. Over recent years, as places such as Switzerland have increasingly come under threat from foreign authorities, most notably in this instance the US, Singapore has gained a new moniker; the Switzerland of the East[2].

It is fairly widely acknowledged that nobody wants to be branded the Switzerland of the East. In an effort to rebuff these sentiments and prove that issues around money laundering and tax malpractice are taken seriously, Singapore made tax evasion a predicate offence against money laundering in 2013. And with the most recent proposals, Singapore is further enhancing its claim to be stringent in the global fight against money laundering. Many firms here already apply the standards being brought in under the new guidelines, but formalizing these lays down a marker externally that tells people Singapore is doing its job properly. Enhanced steps around the identity of beneficial owners, especially for companies and trusts, as well as additional screening and due diligence for certain transactions, lends credence to the notion of doing a thorough job to weed out unsavoury incidents from the system.

Industry practitioners, senior financial figures, compliance officers and academics have all come out in support of the changes. Indeed, many have pointed to the fact that the new proposals are already in place across large swathes of the Singapore finance industry and so these amendments will serve to formally put in place regulation that is already in action. The perception here is not one of creating unnecessary and burdensome work for the financial services sector, but instead one of the regulator demonstrating that it understands the changing nature of finance and what this means in practice for various organisations.

With the next Financial Action Task Force mutual evaluation of Singapore due in 2015[3], the timing couldn’t be better. Singapore has made significant progress, as reported by FATF, following the last mutual evaluation report in 2008, and has since been active in working to minimize money laundering and terrorism financing risks. With the changes in June 2013 to tax evasion as a predicate offence, and the recent consultation paper coming out a year later and just over a year in advance of the FATF visit, keeping the PR initiative at the forefront of people’s minds is a good strategy to highlight the proactive nature of the Monetary Authority, demonstrating a continued ability to safeguard industry, albeit in a manner that the industry was already largely adopting. The positive reception from across the board only serves to highlight the view that this is a good move on behalf of MAS.

Ultimately the proposed changes will not mean a huge amount, in practice, for many firms here. There has been a flurry of activity, with articles, editorials, roundtables and commentary from a wide range of sources, almost unanimously agreeing that this is a positive step. Will it be enough to remove the idea of Singapore being the new Switzerland? Only time will tell, but this is a strong step in the right direction.




France’s largest bank faces penalty of $8.9 billion

France’s largest bank, BNP Paribas, will pay $8.9 billion in penalties for transferring over $190 billion in transactions on behalf of clients that are under U.S. sanctions. The clients included Sudan, Iran and Cuba.

anti-money laundering

The transactions occurred between 2002 and 2012. The French bank failed to comply with the laws despite receiving several internal warnings from the US government from as early as 2005. While no employees were criminally charged, New York’s Department of Financial Services required BNP to terminate 13 employees.

In addition to its fine, BNP is suspended from clearing dollar transactions from its New York branch and other US affiliates where the misconduct occurred. The suspension applies for a year, starting from 2015.

By pleading guilty, the bank has entered an undertaking which reflects a broader US Justice Department strategy. Further revelations of money laundering or sanctions violations by other major banks are expected to follow.

BNP is listed as one of the top five banks in the world.

Mitigating risk

Compliance training of employees plays a crucial role in mitigating the risk of breaching anti-money laundering and counter-terrorism financing laws.

In the words of Benjamin Lawsky from New York’s DFS, “It is important to remember that banks do not commit misconduct – bankers do.”


Source: The FCPA Blog

1 June is Looming – Are you ready for the latest Anti-Money Laundering changes?

The AML/CTF regime implements Australia’s international AML/CTF obligations under the international Financial Action Taskforce (FATF).  The regime aims to provide a balance between efficient conduct of business and effective regulation to combat money laundering and terrorism financing.

Over 13,000 Australian organisations have enrolled with AUSTRAC since 2007 as reporting entities that are vulnerable to exploitation for money laundering and terrorism financing.

The latest amendments to the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 were released on 9 December 2013.

These amendments primarily relate to the AML/CTF Rules for customer due diligence and will come into effect from 1 June 2014.

Are you prepared?
The amended laws require businesses to comply with enhanced customer due diligence procedures for politically exposed persons and beneficial owners, as well as requiring organisations to find out the customers’ source of wealth and funds, nature of the business relationship with the customer and the customers’ corporate control structure.

Beyond this, each business must assess the risks of potential money laundering or terrorism financing when providing a designated service to a customer. These new amendments are designed to assist regulated businesses to identify suspicious matters and report them, regardless of their own perceptions of risk.


GRC Solutions
We have now updated our AML/CTF online compliance course content to reflect the latest amendments to the AML/CTF Rules. We have also improved accessibility of the course for users in order to promote speed to competence. Our courses explain the rules in plain English, accompanied by rich visual designs and layers of interactivity.

Are you finding remaining compliant with the AML/CTF laws a challenge today?