As always we seek to bring you the biggest stories in the world of financial crime. This week we look at news coming out of the UK – including a possible volte-face on tax-haven laws – Korea, Kenya, Australia, and Dubai.
In a stunning attempt to keep their tax regime secret, representatives of some of the UK’s tax havens have been meeting with British Ministers, reports the Guardian. The delegation from the British Virgin Islands is being represented by law firm Withers. Hussein Haeri, partner and head of Withers’ public international law team, said:
We are confident that there are constitutional grounds for challenging the imposition of a public register of the beneficial ownership of companies and human rights issues raised by public access to the register. The BVI’s consistent position is that it will not introduce public registers unless and until they become a global standard.
Dai Bedford of EY has written in Global Banking and Finance that better ID and verification checks, along with better data analysis is the key for big banks in their fight against financial crime.
Meanwhile, law firm Pinsent Masons has been researching convictions for white collar crime and found that there has been a decrease in convictions over the last 12 months, linking this to a reduction in police budgets. Pinsents report that there were 7,786 in 2017, down from 8,304 the year before.
In Forbes, contributor Steve Culps argues that shared utilities are the most effective method for banks to reduce the risk and cost they face in their Anti-Money Laundering checks. He writes:
Banks taking advantage of compliance utilities harnessing the collective data and input of other member banks will be able to explore these technologies to update their capabilities as new and ever-more complex risks emerge. In the future, we expect to see more banks collaborate and share data across noncompetitive functions to improve risk management and reduce compliance costs.
Lawyers continue to run the risk of falling foul of Anti-Money Laundering legislation, in the form of the Fourth Money Laundering Directive (4 MLD), passed last year. Research revealed that 24% of law firms do not have a dedicated AML officer in place, and 37% are using a paper-based storage system for filing their AML data.
The Organisation for Economic Cooperation and Development (OECD) has launched a programme in Africa to try and eradicate fraud and money laundering, citing the millions of dollars that it costs the continent every year. 48 investigative officers from 18 African countries will come together to learn new techniques and methods to conduct modern financial investigations.
We have written over the last few weeks of several Asian states tightening Anti-Money Laundering (AML) legislation, and this week Korea has become the latest to do so. In preparation for an assessment by the Financial Action Task Force (FATF) in 2019, the Korean Government is pushing forward with a bill which will explicitly cover non-financial service organisations such as law firms and professional service firms.
429 financial scams took place in the month of May in Australia, costing Australians $5.8m. It was one of the busiest months ever for Australian financial investigators. Scammers are increasingly using scams involving digital currencies such as Bitcoin.
The Central Bank of the United Arab Emirates (UAE) downgraded the licences of seven exchange houses on Monday after the companies violated regulations such as anti-money laundering rules.
In Dubai, the Washington-based Center for Advanced Defense Studies alongside Transparency International, has written a report based on leaked information, suggesting the country is a haven for drug traffickers and arms dealers to buy property.
Among the highest profile individuals named in the report is Rami Makhlouf, a cousin of embattled Syrian President Bashar Assad and one of that country’s wealthiest businessmen. Makhlouf and his brother, also sanctioned by the US, own real estate on the Palm Jumeirah, according to the report. They also have ties to two UAE-based free-zone companies.
It’s a slimmed down fintech section this week, as only one major story made it to our ears. It’s well worth a read however, as Finextra reports that the UK Government is to launch a £2.5 billion fintech investment, designed to bring foreign experts to work with British firms. In conjunction with the startup fund, the Government is also to launch a streamlined visa route to make it easier to hire from outside the EU.
Launching the scheme, Home Secretary Sajid Javid said:
The UK can be proud that we are a leading nation when it comes to tech and innovation but we want to do more to attract businesses to the UK and our migration system plays a key part in that.
This week in technology we look at who will win the World Cup, reviewing the fortunes of techs latest behemoth, and good news for technology firms in the UK.
Hundreds of gigabytes of information related to secret projects being designed by the US military have reportedly been stolen by Chinese hackers. The Verge reports that the it was a contractor working with the Naval Undersea Warfare Center, on a naval contract, who was hacked.
In good news for UK technology firms, foreign investment in UK firms was reported to have doubled over the last year, write the Telegraph. British tech businesses attracted $7.8bn of funding last year. The Prime Minister announced Tuesday that technology firms investing in the UK, including US company Salesforce, would bring an additional 1,600 jobs to the UK.
US cloud provider Salesforce said it will invest £1.9bn in the UK over the next five years. The company confirmed it planned to create 900 jobs as part of the investment programme. Meanwhile, UAE investment fund Mubadala will launch a new £300m fund based in the UK and Japanese telecoms company NTT will invest £41m in a new office, creating 200 jobs.
As part of its new “growth strategy” HSBC is promising to invest $15 – $17 billion in new technology.
The tech world has had eyes glued to the fortunes of Dutch company Adyen, who after floating last week were valued at EUR 15 billion, making it more valuable than established banks such as Commerzbank. Adyen is a Dutch based payment company who processed more than $1 billion of payments last year. Bloomberg asks whether this is a throwback to the dot.com “bubble”. Marketwatch asks whether this could prompt other FinTech companies to go public.
Finally, if you’re considering having a bet on who will win the World Cup – which kicked off yesterday with a 5-0 win for Russia over a very disappointing Saudi team – then the big banks can now advise you. Using a mixture of AI, portfolio analysis, statistical modeling and economic analysis, four different banks have given their predictions. UBS have predicted Germany; Goldman Sach’s predict Brazil; ING say Spain; while Nomura say Spain and France will meet in the final.
Disappointing to see my sweepstake team, Egypt, not make the cut here…
In a busy week for blockchain, we look at its applications across industry, as its use is proposed in banking, elections, and in ending the role of private property…
CCN report that the National Archives will begin to use blockchain technology to ensure the veracity of records.
Cryptoslate has reported on some of the major companies who are investing in blockchain, including Maersk and Samsung, and recently Mastercard.
Meanwhile, the Swiss city of Zug is to test the use of blockchain in elections.
The Korea Federation of Banks will shortly roll out a new blockchain-based ID system to help domestic banks in their customer identification.
And could blockchain lead to the end of private property? Wired has been speaking to proponents of the idea.
As Theresa May and Business Secretary Greg Clark give presentations extolling the virtues of AI at London Tech Week, it was always going to be a busy week in AI related news.
For AI to succeed, and critically for humans to succeed, it needs to be ethical, write Livemint.
The Brazilian Government is considering using AI to help flush out fake news, particularly around elections.
London based Eigen Technologies has raised $13m from Goldman Sachs. The AI firm is able to read and analyse complex contracts and documents in fields such as law and finance.
An AI and blockchain accelerator is to be launched by the University of Edinburgh and Wayra UK, creating almost 400 jobs in what will be the first of its kind in Scotland.
The Business Secretary, Greg Clark gave a speech at London Tech Week, highlighting some of the work that was being carried out by UK businesses. He said:
AI is at the centre of a thriving digital tech sector now worth £184 billion to the UK economy. Tech-related investments in Britain surged nearly 90% last year, more than in France, Germany and Sweden combined.
The Financial Conduct Authority (FCA) have written to banks urging them to be cautious in their dealing with cryptoassets.
There are many non-criminal motives for using cryptoassets. These include using them as high-risk speculative investments or as a means of funding innovative technological development. However, this class of product can also be abused because it offers potential anonymity and the ability to move money between countries. You should take reasonable and proportionate measures to lessen the risk of your firm facilitating financial crimes which are enabled by cryptoassets.
South Korean exchange Coinrail has been hacked and lost about £28m of virtual currency. The news has impacted upon Bitcoin’s share price, forcing it down 10%.
In Canada, the Government has drafted new regulations in relation to cryptocurrencies which it is believed will curtail the attempts of fraudsters and money launderers dealing in virtual coin.
In China, trading has resumed on shares of troubled firm, ZTE. Last month, its shares were suspended after it was found to be in breach of sanctions from the US and forced to pay a $1billion penalty. After resumption of trading, its shares fell by 39%. ZTE will moreover have to hire a US based compliance team and replace its management board.
No one’s quite sure where the eye of the US President will fall next, as Iran and Europe have over the last month felt his ire. For the moment however, following the historic meeting between Donald Trump and Kim Jong-Un, trade sanctions with North Korea will stay in place.
The EU is formalising measures to mitigate America’s latest sanctions against Iran. The Independent reports that a “blocking statute” may be used that will see off the threat of sanctions against European companies operating in Iran, and compensate them for any losses enacted by the US.
Fallout from last week’s G7 meeting continues. After a hugely confrontational meeting in which Trump castigated the Europeans and Japan, and embraced Russian reintegration into the group, he provoked further threats of a trade war with the Europeans, saying they had been “brutal to the United States”. Relations with Canadian Prime Minister Justin Trudeau appear to continue to sink after Trump unleashed another tirade against him on Tuesday, threatening the Canadians with further future tariffs, a move that would have massive detrimental impacts on both economies. CNBC report that his strategy is not helping the United States.
The New York Times reports Thursday, that the White House is likely to sign-off on the final list of Chinese goods that tariffs will be applied to. This raises the spectre that the United States could embark in trade wars with multiple jurisdictions at the same time, unprecedented in history.
In the Spectator, Fraser Nelson asks whether this could lead to a security crisis with a meeting of NATO members on the horizon.
Following the US’ threatened sanctions against Iran, the Iranian national Parliament has suspended discussions on signing up to the United Nations’ International Convention for the Suppression of Financing of Terrorism. Iran and North Korea are the only two states marked as “high risk” jurisdictions by FATF. While the Iranians were working towards signing up to the Convention, FATF had suspended any sanctions against the country.
The UN Security Council sanctioned six people on Thursday for involvement in human trafficking, a year after CNN footage showing smugglers in Libya auctioning migrants off as slaves sparked worldwide outrage report the Organised Crime and Corruption reporting Project.
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