Postcards from the proceeds

Thanks to the miracle of modern technology, while you read this blog at your desk, looking out at the pouring rain and contemplating turning up the heating, I am sitting on a harbour-side balcony in Crete.  And my husband is rolling his eyes because I have just suggested that we take a day trip to Zoniana.  It’s a little village, population of a couple of thousand, in the middle of the island.  I tried to sell it to him on the “typical Cretan village, nice lunch” basis but he’s on to me: Zoniana is actually the home base of the Parasyris family, one of Crete’s main criminal gangs.  You can read about the “drug-dealing shepherds” in this Guardian article from 2008.  And the reason I remembered about Zoniana is that the article was printed out and stored in my holiday folder…

Yes, I have form.  We once went on holiday to Sicily specifically so that I could visit various mafia sites – the Grand Hotel et Des Palmes in Palermo (where the mafia bigwigs meet each October to decide how to carve up the world between them), the shops with their “Addiopizzo” stickers showing that they are saying goodbye to mafia protection rackets, and – rather gruesomely – the place where anti-mafia investigator Giovanni Falcone and his wife were killed in their car as they left the airport (now renamed after the brave Signor Falcone).  And when we were passing through Miami, I insisted on seeing the outside of the Dade County Courthouse, where so many money launderers have appeared over the years.  In London recently I saw a poster advertising “Ripper Tours”, so maybe an enterprising former NCIS/SOCA/NCA officer could put together a programme to visit the homes and hangouts of some of our own leading launderers.  Sign me up!

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The ultimate mansion tax

We all value the little bolt-hole we call home – be it ever so humble, etc.  Well, for the hard-working Second Vice President of Equatorial Guinea, it’s this modest dwelling.  Overlooking the Malibu coastline in California, this mansion has six bedrooms, eight bathrooms, a swimming pool, a tennis court and a four-hole golf course.  Teodorin Obiang bought it in March 2008, when he was a mere Minister of Agriculture and Fishery on an annual salary of £32,400.  As they say in those gruesome American teen comedies, you do the math.

At the start of this month, however, events finally caught up with the SVP of EG.  After a three-year battle with the US authorities trying unsuccessfully to explain the math to them, Teodorin has agreed to hand over many of his assets, including the Malibu mansion (now valued at £19 million), a Ferrari, and a collection of Michael Jackson memorabilia (including a crystal-encrusted glove).  (I know, I know: I feel every bit as ridiculous writing this stuff as you do reading it.)  The Americans have stated that US$20 million of the seized assets will be given to a charitable organisation to be used to benefit the people of Equatorial Guinea (colour me cynical, but they’d better keep a very close eye on who’s administering that payout…) while another $10.3 million will be forfeited to the US government, which will use the money to benefit the African country’s people.

This case is legally significant, as explained by Ken Hurwitz, a senior legal officer with the Open Society Justice Initiative: “It is an extraordinary case in that this is the first case where [it is] a living person whose assets are being seized.  And it is the first case in the United States… [in which] the attempt is to seize assets that are owned by the current rulers, people who still maintain power in their countries.”  Other civil forfeiture cases have been brought against corrupt rulers – but only years after they have died or left power, often making it difficult to track down and define the assets allegedly stolen by them.  Perhaps Teodorin’s new homelessness will mark the card of other dodgy PEPs still in power.

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Paying it forward

Back in the dark ages, when I first fell in love with money laundering (and its anti cousin), I was lucky enough to meet two or three people who knew a lot about the subject and were so generous with their time and expertise – in fact, I often refer to it as my apprenticeship (thankfully without the nasty shouty man who bullies people who dare to suggest that he might be a bully).  So now that I am World Famous and Terrifically Important in Money Laundering*, the time has come for me to pay it forward by sharing my time and expertise with those who are starting out in the exciting world of AML.

Because I have a website that I update daily, and a blog to which I try to post two or three times a week, and a rather bizarre surname, I tend to do quite well in Google searches when people are looking up “money laundering” or “AML” or “AML training”.  And this means that when students or young graduates are considering a career in AML, they will often come across my name.  So at the moment I am receiving about three emails a week, asking for help with which AML qualifications I would recommend, or a review of their research proposal, or pointers as to which are the best sources of information about money laundering.  Ever mindful of the hours and hours that others were willing to devote to my education, I am always happy to help – although I do take the precaution, always, of telephoning the educational establishment quoted to make sure that I am dealing with a genuine student and not simply someone wishing to learn the dark arts for nefarious purposes.  And about once a month I get a request from someone who would like an internship with Thinking about Crime Limited.  Much as I like the idea of having an intern – well, I’ve seen “The Devil Wears Prada”, so I know how internships work – I’m not sure where I would put one.  In my office there is my chair and the cat’s chair, and that’s it.  And we’re miles from the nearest Starbucks.

* I am simply quoting here from an email I received last week from someone seeking my help – I think the capitals are a nice touch

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Chirpy-chirpy cheap tweet

From yesterday customers of Groupe BPCE, France’s second-largest bank, have been able to transfer money via tweets.  Nicolas Chatillon, chief executive of S-Money, BPCE’s mobile payments unit, explained that they are offering simple person-to-person money transfers via Twitter to French consumers, regardless of what bank they use, and without requiring the sender to know the recipient’s banking details.  Tweet payments will be managed via the bank’s S-Money service, which links to BPCE’s existing money transfer service.  Becoming a little more excited about the whole project, Monsieur Chatillon continued: “The service is instantaneous.  [Having approached Twitter over the summer] we are pioneers – we’re trying to make life easier for Twitter users.”

To send money, users (who must have a French bank account and French mobile phone number) post on Twitter with S-Money’s username, the Twitter handle of the person who will receive the money, the amount that will be sent and the hashtag ‘‘envoyer,’’ (or “send” in French).  The Twitter message then automatically directs users to BPCE’s money transfer system to complete the transaction.  All of the Twitter messages will remain open to the public, allowing anyone to see who has sent money to others on the social network.

Monsieur Chatillon reassured journalists that “we take issues about fraud very seriously” and confirmed that transactions will be sent securely over the bank’s encrypted online systems.  To address fears of money laundering, limits have been set: people will only be able to send a maximum of €250 per transaction to others using their Twitter usernames and €500 to charities or crowd-funding campaigns.  The service will be free for money transfers between individuals, but the bank will charge companies and charities between 1% and 2% of the transaction value.

Industry experts tell us that this is only the start: Twitter is racing other tech giants Apple and Facebook to get a foothold in new payment services for mobile phones or apps, and in September 2014, Twitter started trials of its own new service – Twitter Buy – to allow people to buy products on its social network.  The service embeds a Twitter Buy button inside tweets posted by sellers; early adopters include Burberry, Home Depot and the musicians Pharrell and Megadeth.  The question is: will the prospect of Twitter payments (instantaneous payments with minimal CDD…) make MLROs “Happy”, or is it the overture to a “Symphony of Destruction”?

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If you can’t stand the heat…

HSBC is not having a good decade.  First there was the 2012 money laundering prosecution and penalty.  Then one of their directors, Rona Fairhead, was grilled by MPs when she took up the post of BBC Chair.  Then it was announced that all eighty-nine HSBC directors are to be sued for their role in the laundering débâcle.  And just when you might think that HSBC and its directors should show a little humility and regret, two of those directors announced that they are resigning – because the UK’s banking supervisor and financial regulator are proposing bringing in new rules to “aimed at improving individual responsibility and accountability in the banking sector”.

I am sorry to say that Mr Thomson and Mr Trueman – the directors in question – get No Sympathy At All from me.  I am a great believer in fairness: I battle against money laundering because it is not fair that criminals should profit from the misery of others.  I decry tax evaders because fairness demands that we all contribute to the general pot at a level that is equally palatable/painful to each of us.  And I think that if you take the prestige and – let’s be honest – the significant moolah that comes with being the director of a large bank, it is only fair that you take on the responsibility for which you are being handsomely rewarded.

Going back to basics, a director is legally responsible for running the company.  So when things go wrong, the director should be questioned closely.  In recent years, fines levied on financial institutions for AML failings have been climbing steadily but – as I have commented before – such fines seem to hurt the shareholders more than anyone, and certainly don’t delve into the wallets of the directors.  And so time is ripe for this latest consultation from the UK’s Prudential Regulation Authority and Financial Conduct Authority.  It’s well worth reading in full, but to summarise, the consultation proposes (among other things) introducing a new Senior Managers Regime, which will “clarify the lines of responsibility at the top of banks, enhance the regulators’ ability to hold senior individuals in banks to account and require banks to regularly vet their senior managers for fitness and propriety”.  The intention is to introduce the new rules in early 2015, and suppose we will learn between now and then which banking directors have been earning their money and so feel confident that they can pass muster under the new regime, and which have been time-serving and know now that the gig is up.

And my opinion is shared by no less a personage than Bank of England governor Mark Carney, who last night told an audience in Washington (DC, not Tyne and Wear) that “if you are the chairman or the head of the risk committee, you have a responsibility for the activities of that institution; if you don’t think you can do it, you shouldn’t be on the board”.

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Crimes against fashion

When police forces announce their “policing priorities” for the coming year, they always preface them by saying that these are the crimes about which the public is most concerned – and it’s overwhelmingly car crime (in the UK at least).  So relying on the public to tell you which crimes are most serious is something of a gamble – but a gamble that political parties are constantly taking.  If you don’t say that your party is going to criminalise (or more harshly criminalise) the crimes that the voters are worried about, you won’t get the chance to criminalise anything.  And so we often end up with strange crimes left on the statute books, and – perhaps more worryingly – important ones left off it.

Thankfully we are in the throes of righting one terrible wrong by working on a Modern Slavery Bill.  According to the UK government website: “This Bill has now been committed to a Public Bill Committee.  The Public Bill Committee is expected to meet on Tuesday 14 October 2014 [and] will scrutinise the Bill line by line.”  This should address the crazy situation in which we find ourselves at the moment, whereby slavery is happening, people are acting as slave-masters and slave-traders, and yet we cannot penalise them for these offences because slavery has been abolished.  All we abolished, it turns out, was the offence of slavery – not the fact of it.

It’s actually not dissimilar to money laundering.  Money laundering – i.e. disguising the criminal origins of your assets – has been going on since time began.  I bet there was a caveman who pinched a leg from someone else’s woolly mammoth, swapped it for a new spear, and when questioned about the spear, said, “This old thing?  I inherited it from my dad.”  But we didn’t get around to criminalising it until the end of the last century – hence Al Capone’s incarceration for tax evasion rather than his much more extensive laundering activities.  So the law is a sluggish old beast, not quick on the uptake when it comes to what criminals are really doing.  And that’s without mentioning Bitcoin, or aggressive tax avoidance.

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Nothing to hide

As you read this, Guernsey is playing host to an evaluation team from MONEYVAL.  This is one of the first fourth-round evaluations being carried out under the new evaluation methodology, whereby jurisdictions will be rated not only on their AML/CFT regimes as they appear on paper, but also on their effectiveness.  You can read more about it here.  Guernsey has been in something of a (justifiable) fizz about this visit; an evaluation visit is stressful at the best of times, let alone one being conducted under new rules.  So Guernsey readers: my thoughts are with you.

That said, I am rather disappointed not to be there myself: being an AML groupie of distressingly large proportions, I would love to meet a team of evaluators.  And I am not alone in this.  When I was in Guernsey a fortnight ago, I spoke to at least three MLROs who were sad that their institutions had not been selected for MONEYVAL interviews.  They are proud of their AML efforts, and wanted (a) to showcase them, and (b) to hear any reactions to them straight from the horse’s mouth, rather than filtered through regulators and reports.  I remember feeling exactly the same way when I was a new teacher and the head-teacher would come and sit at the back of the class to check how I was getting on – although as my head-teacher was a nun, I did have to moderate myself somewhat.  And now that the Vatican City’s FIU is a member of the Egmont Group, I suppose it is always possible that MONEYVAL’s cadre of evaluators could include nuns…

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To be perfectly honest

Regular readers of this blog may know that I am a magistrate here in England.  (For overseas readers, here is the general explanation from the government website: “Magistrates are volunteers who hear cases in courts in their community.  Each case is usually heard by three magistrates.  A legal adviser in the court gives advice on the law and makes sure the magistrates follow the right procedures.”)  It is fascinating work, not least because of what you learn about human nature.  For instance, I am now much more compassionate than I was, as I see that the majority of people who break the law do so through inadequacy and poor decision-making rather than because they are inherently bad.  (All bets are off for money launderers, of course…)  And you also learn to decipher what people are saying.  So when someone prefaces their answer with, “To be perfectly honest…”, they are usually fibbing.  They are over-stressing their honesty, rather than assuming – as their listeners assume also – that the default is for them to tell the truth.

So it amused me highly to read this earlier this week in “The Daily Mash” (a satirical website parodying current news stories – many of them containing comments from experts at the Institute of Studies…): “Anything described as ‘totally legal’ is always the wrong thing to do, it has emerged.  Researchers highlighted tax avoidance schemes, sex with 16-year-olds and killing a Scotsman with a bow and arrow in York as examples of legal yet highly dubious behaviour.  Professor Henry Brubaker of the Institute for Studies said: ‘There is this weird category of things which the law reckons are fine but on consideration you have to say, [stuff] the law, you shouldn’t be doing that.  In each case the person suggesting the wrong action will casually emphasise how it is totally legal.  That is your trigger phrase, where you know you are being presented with a clear choice between good or evil.’  26-year-old Tom Booker said: ‘We were going on holiday to America so we had the cat put down to save paying for a boarding kennel.  Totally legal.  I know it is wrong, but that is not the point.  You don’t go to prison just for doing something wrong.’”

It could be a handy training tool.  Advise your staff that if they are conducting due diligence and the client stresses repeatedly that their structure/transaction/unusual request is “totally legal”, this could suggest that it is teetering delicately on the line and therefore worthy of a closer look.

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At your service

Last week I was updating several clients on the progress of the Fourth Money Laundering Directive, highlighting for them the changes that I have noticed.  Most proposed changes have received plenty of attention – PEP definition, register of beneficial ownership, etc. – but one quite significant change seems to have been missed by the press.  It is amendment 50,which adjusts (wait for it) Article 2(1)(3)(e) – which lists who should be covered by the AML regime and so required to put in place AML policies and procedures – so that it now says this: “Other natural or legal persons trading in goods or services, only to the extent that payments are made or received in cash in an amount of €7,500 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked.”

Did you notice that little word “services” sneaking in there?  For some years now our AML regimes have included high value dealers – those who trade in goods for large amounts of cash.  But those who trade in services for cash?  Not so much.  So who might this haul into the AML regime?  Well, €7,500 is not a great amount, so it could well include any educational establishments – schools, colleges, universities – that accept tuition and/or accommodation fees in cash.  Ditto hospitals, clinics (I am told that many people prefer to pay for cosmetic surgery by cash so that there is no documentary record of their procedure that could come out in court), therapists, etc.  Expensive brothels and purveyors of other specialist personal services…

Of course, like their goods-selling brethren, I assume that the high value dealers in services will be able to exclude themselves from the AML regime by vowing never to accept cash payments of €7,500 or more.  But it has all been suggested so quietly that I wonder how many of those who might be affected know what could well be heading their way?  And to this I add my usual question: who will be the supervisory body for educational establishments, medical facilities and brothels, visiting them regularly to make sure that procedures are in place and all staff are aware of the obligations?  Just asking…

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Not nice people at all

I am not good with violence – certainly not dishing it out, but not even watching it.  I nearly keeled over into my popcorn during the chair-whipping scene in “Casino Royale”; after all, I had grown up with Bond films where violence is suggested rather than shown, and usually mildly comic (remember the multiple uses of the piranha pool, and the metal-floor-that-turns-into-a slide?).  On many recommendations I bought the boxed set of “Breaking Bad”, but I am afraid that I have had to cede it to my husband, instructing him to watch it alone (the body-dissolving bits are just beyond me) and make a careful note of which parts of which episodes feature money laundering.  And I have just finished reading “Suspicion” by Joseph Finder, which should required reading for anyone considering – even for a nanosecond – joining the ranks of what the UK’s National Crime Agency has taken to calling the “professional enablers”.  In this thriller (don’t worry: no spoilers coming up) an investment manager is working for the Mexican Sinaloa cartel and things start to go wrong.  Who would have guessed it, with such level-headed and charitable employers?  In one scene (look away if you’re having elevenses) they tie a man to the rear bumpers of two cars and drive in opposite directions – he survives…  And in another, their tame surgeon injects someone with a drug to heighten pain sensations, then sets to work with a scalpel.  The truly horrifying thing?  These are known, real warning “techniques” used by the drug cartels to ensure “loyalty”.

Once I had recovered my equilibrium (my favourite fictional character is Paddington Bear, so you see that the Mexicans are rather outside my comfort zone), I realised that we who work in AML need to know that this goes on.  Understanding the true ruthless, callous and vicious nature of criminals – as opposed to the cuddly rogues of “Minder” and “Only Fools” – will make staff immeasurably more reluctant to do anything that might be construed as helping them.  As our investment manager finds out, working with such people rarely ends well.  And if you know what they do to “earn” their money, you would be mad to launder it.  I might start suggesting screenings of “Casino Royale” for update AML training – I bet you would have no trouble at all getting full attendance.

Posted in Money laundering, Organised crime | Tagged , , , , , , , | 5 Comments