Money Laundering Among Regulators' Top Priorities

      

 

 

 

 

By: Kenneth Corbin

Anti-money laundering policies were identified by both FINRA and the SEC as a top priority for examinations of broker-dealers in 2013. In its exam guidance, FINRA noted "an increase in foreign currency conversion transactions." It also stressed that there are no exemptions from the AML requirement for member firms, even if the company holds no customer funds.

What this means for advisors is clear. Although, by statute, an advisor isn't required to have his or her own individual AML policy, all advisors are covered by—and expected to uphold—their firm's AML policy. And FINRA is paying close attention to how well advisors execute the task.

"Anybody who works at a broker-dealer will have an obligation to implement the policies that the firm is under," says Sarah Greene, senior director of AML compliance with FINRA's enforcement division. "An employee of a firm cannot ignore their responsibilities under this rule. For a firm to comply, its people have to comply."

Broker-dealers came under the Bank Secrecy Act's AML framework under the provisions of the 2001 Patriot Act aimed at curbing money laundering and terrorist financing. The SEC's authority is limited to firms' reporting and record-keeping, while FINRA has a broader enforcement mandate that covers a complete AML program and generally operates as the lead regulator.

At a minimum, FINRA expects firms to set policies and procedures to detect and report suspicious transactions. They must also conduct independent testing of the program, designate an AML officer and provide advisors, broker-dealers and other personnel with ongoing training.

Although advisors aren't likely to be the focal point of an AML enforcement action by FINRA, it does happen. A recent case involving Raymond James Financial Services suggests that regulators are taking a broader view of money laundering cases and raising their expectations that financial firms establish a culture of vigilance.

The case, which Raymond James settled without admitting guilt, involved an investor who was moving large volumes of funds through his brokerage account and then writing checks for round dollar amounts from a money market account. It was a Ponzi scheme that amounted to losses of $17.8 million for investors, and the account holder received a prison sentence of 20 years.

FINRA cited Raymond James for failing to maintain an adequate AML policy, and while the company's AML officer and legal team were not exempt from blame, some of the sharpest criticism was leveled at staffers in an Ohio branch office. The letter described a string of inquiries from the AML officer asking about suspicious transactions that were not addressed by a registered representative and office manager. At one point late in the game, the investor told branch staffers that he had committed fraud and was headed to jail. No one relayed that information to Raymond James' AML officer.

Know Your Laundry
Experts stress that advisors' obligations under AML policies vary from firm to firm.Each company's policy must be tailored to the nature of the practice, accounting for the risks associated with clients, geographic footprint and business model.

For advisors, much of the risk involved with money laundering sits at the front end, in the process of onboarding new clients. Advisors must adhere to the procedures in their firm's customer identification program, a required element in FINRA's AML program template. Advisors should ask prospective clients for representations about their identity and assets and then do their own background checking based on the information provided.

Advisors should be checking prospective clients against the Treasury Department's Office of Foreign Assets Control list of foreign countries, terrorists, drug traffickers and others barred from trade with U.S. firms, as well as other relevant overseas databases. Commonly firms will engage a third-party vendor to perform those onboarding cross-checks.

Then, too, an AML program should aim to ensure the investor is not moving money through a shell bank, which can sometimes be verified by obtaining a foreign bank certificate. Likewise, advisors might probe investors' political connections to determine whether a prospective client may be deemed a "senior foreign political figure" under the Patriot Act.

Much of that monitoring can be automated, with reports of high-volume trades, large cash transfers and other exceptional activity routinely delivered to the firm's AML officer. But any effective AML program also counts a strong human element provided by advisors who often know their customers and their investment objectives best. This is a crucial line of defense in flagging suspicious activity.

Look for Danger Signs
Advisors have a fair amount of discretion in how they handle dubious activity, although experts note that some flags are redder than others. "If they are asked to facilitate sending a wire out of the account to an Iranian bank, that's clearly some suspicious activity," says Byron Bowman, general counsel at consulting firm fi360.

Other potential warning signs include investors who move large volumes of cash equivalents through their accounts and do so frequently.

Call for Backup
That's not to say that there aren't false positives. What if a customer puts in an order to liquidate all of his or her assets and arrange for a wire transfer to Costa Rica? Although this might appear to be an unusual transaction, it's not necessarily one to send the advisor running to the Feds. Often, the first call will be to compliance.

Compliance, in turn, might tell the advisor to get in touch with the client and find out what's going on. After all, the client requesting the wire transfer could have just bought a house in Costa Rica, where he or she plans to retire.

If an advisor can't obtain a reasonable explanation and concludes that the matter should be escalated—often a wrenching decision when a longstanding client is involved—the next stop will be back at the compliance department. At that point, compliance would determine whether the case warrants the firm filing a suspicious activity report with the Treasury Department's Financial Crimes Enforcement Network.

Once the matter is in the hands of compliance, the advisor is often shut out of the process due to the highly sensitive nature of filing a report. Then the firm must make the call, often in consultation with law-enforcement authorities, about whether to keep the account open or cut ties with the client.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney also http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

HSBC still in crosshairs of intrest group

By The Huffington Post

Everett Stern didn't realize that becoming a whistleblower would change his life. Not only did he lose his job and career at HSBC, and become blacklisted from the banking industry, he now sleeps with a gun by his bed after receiving death threats on a regular basis. He can barely afford a ticket to New York City to speak at a press conference this Thursday Aug. 29, at noon on the steps of the New York Public Library. But he isn't worried. According to the former bank employee, he will stop at nothing to expose HSBC's continued actions of laundering money for terrorists groups. Although the  bank paid a 1.9 billion penalty in 2009,Stern claims he has evidence that HSBC continued to launder money during his tenure after they admitted that they had stopped in 2010.

"The public needs to know that money is still being funneled through HSBC to directly buy guns and bullets to kill our soldiers. Fines are not acceptable. I want a criminal indictment of HSBC executives," he asserts. "And if I die because of this, my life will have been worthwhile."

A noble cause doesn't mean people will listen to you. During his employment with HSBC as an AML (Anti-Money Laundering officer), Stern found discrepancies and brought them to the attention of his supervisors. Through an Internet search, Stern found a Saudi fruit company was sending millions to a high-ranking figure in the Yemeni wing of the Muslim Brotherhood. Stern also uncovered that HSBC was allowing millions of dollars to be moved from the Karaiba chain of supermarkets in Africa to a firm called Tajco, a company that had been singled out by the US Treasury Department as major financiers of the Lebanese Shiite group, Hezbollah. Stern's supervisors, however, told him to not make waves and keep "clearing the quota of 72 alerts per week."

Stern then took his evidence further, notifying appropriate government agencies such as the FBI, CIA and SEC, about violations of US money laundering laws. All efforts fell on deaf ears -- the excuse being that prosecuting the Too Big To Fail bank would precipitate a financial collapse. Frustrated with the lack of action, Mr. Stern recently decided to take the case public, approaching various media outlets, in addition to Occupy Wall Street. By doing so, he has given up a multi-million dollar whistleblower award.

"This is not a Democrat or Republican issue," he said. "Banks financing drug cartels and terrorists affects every single American. I went to Occupy not because I am a major supporter of the movement. I went because they care enough to hit the streets, carry signs and send a message that I also believe in."

The OWS Alternative Banking Working Group, working in conjunction with Stern for tomorrow's protest, agrees. "Everett Stern is able to give us a mountain of information and point us in the right direction to apply effective pressure," says Cathy O'Neil, the Alternative Banking lead organizer. "In turn, we are able to give him an army of supporters and a populist megaphone with a proven ability to get the public's attention." 

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney  and http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Money is oxygen for terrorism

 

 

By bdnews24.com

The US Ambassador to Bangladesh, Dan Mozena, has stressed the need to cut off money supply to terrorists, saying it acts like oxygen for terrorism. “Money and terrorism can be two sides of the same coin. Money [is] the facilitator of terrorism. Money [is] the enabler of terrorism. Money [is] the oxygen of terrorism,” he said on Monday.Mozena was speaking at the inauguration of a three-day SAARC Regional Judicial Conference on ‘Money Laundering and Terrorist Financing’ being held in a hotel in capital Dhaka. The conference has been organised in collaboration with the Counter-terrorism Bureau of the US State Department.

“To defeat terrorism, we must cut off the oxygen supply. We must cut off the flow of money, and that is where you come in,” he told attending judges. He said, “You [are the] brave judges from across South Asia. Your critical task is to suffocate terrorism, to deprive terrorism of the money. It’s needed for the people, our societies and our countries. Nobody said this is easy, it is not. Nobody said this is without risk.”
But he emphasized the importance of attacking and stopping the flow of money to terrorists to enable “the people of our respective countries to live in peace, in harmony. So they can build better lives for themselves and for their children”.

The US Ambassador, however, said judges were not the only players in this battle against money laundering.

He said, “Parliament must enact robust laws targeting financial crimes and money laundering, and bringing these laws up to international standards.” He said the US and Bangladesh had partnered to craft powerful laws, providing the tools needed to put money launderers behind bars.

Parliament had enacted them, and they were now being enforced, he said.

“Parliament must provide law enforcing agencies and the judiciary the resources needed to defeat money laundering,” he observed. He said the police, other law-enforcing agencies, intelligence agencies, and the military must play their part in apprehending money launderers and in gathering evidence needed for conviction.
He said as money launderers and terrorists became more sophisticated, security agencies, too, were expected to develop new skills and adopt new technologies.

“Countries of the region and beyond must better cooperate with each other, must better share information, must better appreciate that while borders and questions of sovereignty have historically constrained nation’s ability to work together, criminal and terrorists are not limited by such thinking,” he emphasized.
He said the nations of the region and beyond, must commit themselves to deeper cooperation in fighting money laundering and terrorism. He felt it was important for prosecutors to be professionals of integrity, capable of effectively presenting their case in court.

“And that brings us full circle back to you,” he said, referring to the judges, whom he described as linchpins in bringing money launderers and terrorists to justice. “You may have the toughest role to play,” he said, pointing out that judges had to ensure fairness, prevent violation of rights, and make sure that anti-terrorism and money-laundering laws were not used a political tools. He appealed to judges to encourage international cooperation “in this battle and admit into court evidence from international partners, to the fullest extent of law”. Judges should also ensure that their sentences, aimed at protecting people and deter criminals, were properly executed, he added

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney  and http://moneylaunderingworld.blogspot.com/  and  http://launderingmoney.com/

Chinese-Canadian refugee admits laundering $12m in four years; He used three different passports to open bank accounts

 

 

By Province News Services

 

A Chinese-Canadian man admitted laundering more than HK$95 million (about $12.8 million) over four years through bank accounts he had opened using three different passports. Xie Jing-feng, also known as David Chow, 56, pleaded guilty in the Hong Kong District Court to one count of money laundering, the South China Morning Post reported.
Prosecutor Leslie Parry told the court that Xie was born on the Chinese mainland. He entered Canada in 1997 as a refugee and was granted citizenship after five years. Xie and his wife, Zhu Li-chang, both hold Canadian passports, the paper said. Xie, who is not resident in Hong Kong, used a Canadian passport to open an integrated account at HSBC in June 2005, the court heard. The following year, he opened a savings account at Hang Seng Bank using a second Canadian passport that was also in his name but with a different number.
In May 2007, Xie produced a third Canadian passport to open two accounts at Standard Chartered Bank for his company, Civil Finance Limited. He stated that he was a director of the company. Between June 2005 and April 2009, the court heard, Xie used the four accounts — along with five others that were held by his companies or wife — to launder more than HK$95 million.
No tax returns were submitted to the Inland Revenue Department by either Xie or his companies during this period, The South China Morning Post said. Police began investigating Xie in 2008. He was jailed for eight months in November 2011 after being stopped at the mainland border for using a fake Malaysian passport. He pleaded guilty to the charge in Sha Tin Court. After further investigation, Xie was arrested for money laundering when he was released from jail on April 30 last year. Judge David Dufton adjourned sentencing until Thursday.

 

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney  and http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Armenian gets 6 years, 4 months for laundering money from phony Medicare claims

By Terry Dickson
Florida Times Union

A Los Angeles man will serve six years, four months in prison for laundering money through a Brunswick storefront in a nationwide Medicare fraud scheme and will face deportation to Armenia when he is released.
Chief U.S. District Judge Lisa Godbey Wood also ordered Avetik Moskovian to pay nearly $309,000 in restitution and to serve three years on probation. Moskovian pleaded guilty in April to conspiring to launder money with Shahak Tumanyan and others in a scheme that was based in Los Angeles and operated shell corporations in Brunswick, Savannah, Buffalo, N.Y., Albuquerque and Chicago among other places.
Moskovian begged Wood for mercy.

“I plead with you not to destroy my family. I have children. This will have a great impact on their future,’’ he said.

But Wood went well above the 20-month sentence that Moskovian’s lawyer, George M. Mgdesyan asked for and said she went toward the top of the advisory sentencing guidelines. Wood noted Mgdesyen’s assertion that Moskovian had worked hard.

“He worked very hard at laundering money,’’ she said.

The mastermind of the scheme, Arthur Manasarian, is serving 14 years in prison and must repay $1.8 million of the more than $7 million that he and others gained by submitting and collecting on false Medicare claims for medical devices. The defendants stole the Medicare identities of patients and providing physicians and used them to bill the government for wheelchairs, canes, walkers and other devices that were never delivered to anyone. In Brunswick, the bills were submitted from a company called Brunswick Medical Supplies, which was nothing more than a storefront with a phone.

During Moskovian’s sentencing hearing Monday, FBI Special Agent Tony Alig testified that the FBI and Department of Health and Human Services investigators had identified 15 businesses that Moskovian had created solely to launder money. Mgdesyan, also of Los Angeles, said that Moskovian had come to the country in 1988 and had worked ever since to support his family. Moskovian told the court when he pleaded guilty in April that he had driven a cab and limousine and had owned a service station, a cell phone business and recycling business.

Wood said the government had trouble verifying some of his work history. It appeared that a lot of his employment was on a cash basis, she said. Mgdesyan said that unlike Tumanyan, who had fled from the government, Moskovian had admitted his guilt and that he was worried about supporting his wife and their three daughters, two of whom will be in college in a few days.

“He feels embarrassed he’s let them down,’’ Mgdesyan said.

Moskovian did not hide anything and laid out all he knew to investigators, Mgdesyan said. Although Moskovian’s admissions made the government’s case stronger, Assistant U.S. Attorney Brian Rafferty told Wood, the case resulted from five years of hard work by government agents.

“The truth is, we were going to be here anyway,’’ Rafferty said.

The money laundering scheme that Moskovian set up was very sophisticated with multiple bank accounts and shell businesses: Once the Medicare checks came in, Moskovian began moving the money between accounts until it came out as cash, Rafferty said. Mgdesyan asked that he be allowed to go home to Los Angeles for two weeks before reporting to the Bureau of Prisons, but Wood remanded him immediately to the U.S. Marshals Service.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at:  http://twitter.com/#!/LaunderingMoney  and http://moneylaunderingworld.blogspot.com/   and  http://launderingmoney.com/

It is predicted that digital currency wil lead to cyber laundering

By The Economist

The growing use of digital currency will result in rise in cyber laundering as hacking attacks and online scams take centre stage on Internet says a latest report. It said the Indian banks and authorities may wary as money laundering using online black-marketing route and other techniques will expand with the use of digital currency.

"This new techniques of money laundering (using digital currency) includes opening accounts with low cost and little known payment gateways, buying digital currencies, purchasing stolen data, setting up online shops with payment gateways, using the bank accounts of money mules to transfer so earned money to different countries," said the report by Pune-based 'Indiaforensic'. The firm, which conducts fraud examination and forensic accounting among others, has helped the country's investigating agencies like CBI in several high-profile cases including multi-crore Satyam scam.
Digital currency is the alternative to the traditional currency, which is used in online transactions. It is very similar to the operations of the loyalty points.

The report -- 'Laundering in Cyber World- The Digital Currency Way' -- cited a recent case in the US involving 'Liberty Reserve' -- a digital currency website which was used for laundering at least USD 6 billion by data thieves, drug dealers, child pornographers, identity thieves, hackers and other criminals.

"Traditional money laundering has often been a secondary process - preceded by an illegal activity, such as drug trafficking but the liberty reserve case shows that data thefts, hacking attacks and online scams are replacing the traditional crimes and the digital currency is now at the centre of the laundering operations," said Mayur Joshi, head of Indiaforensic.

According to the research conducted by Indiaforensic in 2011, the estimated size of money laundering in India was Rs 18.86 lakh crore for the 2000-2010.

"Now the money laundering is expected to grow even faster with the digital currencies," it said.

Currently, digital currencies are neither produced by government-endorsed central banks nor necessarily backed by the national currency. Digital currency is decentralised, controlled by its users rather than the governments.

"This means it is anonymous, and that, unlike credit cards and PayPal, which block payments from a number of countries, it enables instant payments to anyone, from anywhere in the world.

"That's why criminals along with some online retailers love it. It is money without any sort of safety net underneath. There's no legislation to protect your investment and you can't predict fraud," said the report. Ripple, Microcash, Litecoin, Bitcoin, BBQCoin, Novacoin, RuCoin, Terracoin are some of the popular forms of digital currencies used across the world wide web.

"Many Indians have just begin to hear the term digital currency but the growing international use of digital currency will pose a bigger challenge before the Indian law enforcement agencies and the regulators," the report said. Indian regulators and the law-enforcement agencies are unprepared to deal with the new reality of cyber-laundering and the sophisticated methods organised-crime groups use for money laundering.

"Extensive training and education at all levels are needed, including small-town and rural police departments," it added.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/

Former SWAT team member and Officer Survival Instructor Michael Hearns offers school survival tips for educators and students faced with a deadly scenario

Many people who read this blog know of me as a former undercover police detective who worked within the Medelin and Cali drug cartels. Among other things I am a certified Officer Survival Instructor and a former lead penetrator on the SWAT team. Below are my suggestions to make a school enviornment safer for educators and students,
and what to do if a Newtown/Columbine situation should arise:


1.     Office gossip is a mess and we all  understand that but if a
co worker is having marital problems or other domestic issues that
can be transcended to work just keep abreast of it all. Bring some wooden
 wedges (no not the shoes ....the little triangle pieces of wood) to the office
 and keep them in your desk.  Something breaks bad you can
wedge the door as well as lock it.  If the lock gets opened or broken
they still can't open the door. When I was on the entry team
with SWAT I carried 3-4 of them in my cargo bdu's and there were times
when we as a team had to keep moving and could not check every
 door, so I would wedge them and then we would come back and check them.

2.     Know your exits, and know the alternative exits as well.
Count the steps to the exits so that in a smoke filled environment
you can count your way to the door.

3.     Know your fire extinguishers too...a blast of CO2 smoke can
maybe be enough to get you out in the concealment. Plus those
exstinguishers  hurt when you clang someone with them. Keep a
good large can of aerosol Lysol in the classroom, it blends in
well, so no one will question it being there but stings the crap
out of eyes when sprayed into them

4.    Be cognizant of your reflection in glass, aquariums, coffee pots
etc..you could be hiding and not know that you are being reflected
in the glass to the bad guy.

5.   Phone lines can be cut. Keep a cell in the classroom. put it on
silent but keep it on. It will take too long to boost up if you
have to turn it on.

6.   If your classroom door has a window have a ready to use
shade.piece of paper, contact paper, shelf liner etc precut and
ready to sticky tack up to cover the window so that an offender
can't look in and see you and your students.

7.   Keep 5-6 good size unopened soup cans in the classroom. Once
again it blends nicely no one will suspect anything. Put the cans
in a pillowcase and twist the case, makes a heck of a swing type
weapon or you can throw the cans  at either an offender or a stuck
window to break it open.


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com/   and http://launderingmoney.com/