North Korea Update: New AML Measures and the Trump Effect

 In AML Surveillance, Anti-Money Laundering, Compliance

Following a string of frightening nuclear missile tests, the Financial Action Task Force (FATF), an intergovernmental body that promotes the implementation of adequate regulatory and operational measures for combating financial crime at the international level, recently challenged its member states to apply stringent countermeasures against North Korea. North Korea as a whole poses legitimate threats to international security, as various entities continue to spawn and develop throughout the country, engaging in large-scale money laundering and terror financing activities. The FATF has urged its members involved financially with the East Asian country to resolve any AML/CTF deficiencies that they may currently have as soon as possible. They have also asked for these jurisdictions to “take necessary measures to close existing branches, subsidiaries, and representative offices of North Korean banks within their territories and terminate correspondent relationships with North Korean banks” (Yonhap, 2017).

Given the events transpiring in North Korea and the growing international tension that has resulted, the FATF had seemingly no other choice than to further tighten the reins on the volatile republic. North Korea has made promises in the past to introduce strategies to meet global AML standards, however these promises for the most part have not been kept. The latest sanctions against North Korea have led many to wonder the repercussions that could potentially ensue given that the country is led by supreme leader Kim Jong Un, a notoriously headstrong individual who has become synonymous with controversy. While U.S. citizens and elected officials alike are on edge due to the threat of being involved in yet another large-scale war, the country’s newly-elected President, Donald Trump – who celebrated the one year anniversary of his election victory on November 8th – has seemingly reached wits end in regards to the management of relations with North Korea and its erratic leader. The nuclear blackmail that the U.S. others have been subjected to for the better part of the last decade has taken a toll on multiple countries in different regions of the world, and Trump has stood firm in his stance on how swift action is necessary in order to rein in North Korea’s weapons programs. Trump has urged Chinese President Xi Jinping to address some of the key issues in North Korea, as well as to continue promoting peace and stability, areas that the president committed to solving primarily through dialogue and negotiation.

In a statement released during his recent diplomatic excursion through Southeast Asia, Trump discussed his hopes to work alongside China in the coming years to develop a more mutually beneficial trade partnership that would boost the respective economies of both countries immensely. Trump also did not downplay the pressing need for cooperation between international bodies to cease the arming, financing, and even trading, with the North Korean regime. In closing a powerful speech that was received quite positively by his Asian comrades, Trump stated, “Together, we have in our power to finally liberate this region and the world from this very serious nuclear menace. But it will require collective action, collective strength, and collective devotion to winning the peace” (Phillips, 2017). Trump has also garnered praise for bringing to light other problematic issues found in North Korea that have been swept under the rug, including severe human rights issues, the “slave-like conditions North Korean workers face, the malnutrition among children, the suppression of religion and the forced-labor prison camps where he said North Koreans endure ‘torture, starvation, rape and murder on a constant basis’” (Fifield, 2017). Many advocates for the rights of North Korean citizens hope that the President’s latest comments shed light on a problem that is just as, if not more, severe than the issue posed by the nuclear weapon attacks that have received so much publicity in recent years.

In speaking to South Korea’s national assembly last week, Trump took a more solemn approach when discussing current matters in Southeast Asia, in sharp contrast to past speeches made at other international assemblies where he threatened to destroy North Korea while patronizing Kim. However, this latest speech did not spare Kim from the personal criticisms that we have grown accustomed to seeing. “North Korea is not the paradise your grandfather envisioned,” Trump said, speaking to Kim through the microphones of the countless international media outlets on hand. “It is a hell that no person deserves” (Fifield, 2017).

Nonetheless, the ultimate goal of denuclearization in North Korea is still a work in progress that appears to only be getting further from a potential resolution. Reports had indicated that prior to Trump’s visit to the west, representatives from the Kim administration had shown an interest in negotiating with the United States, although they preferred that any talks would not include the topic of nuclear weapons. Many believe that given the amount of emphasis Trump placed on isolating the country and discussing its many pitfalls, “North Korea is highly likely to take Trump’s address as a declaration of war and call for a holy war of its own against the U.S” – a scary thought indeed (Fifield, 2017).

 

Weekly Roundup

 

Mexico Continues Uphill Climb Against Laundering

Recent classified reports from the Mexican government hit international media outlets earlier this week, as information accessed by Reuters highlighted the true severity of the problem that is illicit financial flows in Mexico. Due to a number of factors, including the general lack of proper legislation and enforcement seen on infractions of this variety, authorities continue to have issues combatting the money-laundering epidemic that has plagued the country for several decades. While the report did demonstrate that significant progress has been made since Mexico’s last Financial Action Task Force (FATF) review nearly a decade ago, the ”risk represented by illicit funds susceptible to money laundering in Mexico generated within the jurisdiction is HIGH” (Albaladejo, 2017). The FATF has estimated that the drug trade and other illicit activities accrues roughly $58.5 billion annually in Mexico, and all of these funds are susceptible to money laundering.

While Mexican authorities are identifying more and more cases of financial crime each year, the investigations and trials that ensue have rarely led to prosecutions, a trend that is rather puzzling. According to reports from the Attorney General’s Office Financial Intelligence Unit, the number of high risk suspects of financial crime cases more than doubled from 2013 to 2016, but “less than 5 percent of all cases filed in 2016 were resolved by the end of the year, and more than half were rejected by the Attorney General’s Office based on determinations that they had not been properly filed” (Albaladejo, 2017). This is due in large part to the lack of proactive measures made by federal police to hinder this type of crime. A special Mexican police unit tasked with combatting and preventing money laundering launched a reported 286 investigations in 2016, with less than ¼ of these leading to the worthwhile identification of criminal entities. Many believe that the inability to put an end to, or at least slow the crime rates down, has led to increased risk for both the financial sector and the general public as well, as laundering of money only aids criminal organizations in continuing their negative activities.

 

High-Ranking Saudi Arabians Arrested in Corruption Crackdown

Continuing to implement its new, bold approach to corruption, Saudi Arabia’s future king, Mohammed bin Salman, recently battened down the hatches throughout the country, arresting a total of thirty-eight royals, ministers, and investors suspected to be involved in criminal offenses. Surprisingly found among the group of apprehended individuals is a billionaire investor and philanthropist who happens to be a member of the Saudi royal family, Alwaleed bin Talal, who was detained on charges of money laundering, bribery, and extorting officials according to reports. Talal, known as the “Arabian Warren Buffet”, is joined by yet another prince, Miteb bin Abdullah, who is facing serious charges of his own, including “embezzlement, hiring ghost employees and awarding contracts to his own companies including a $10 billion deal for walkie-talkies and bulletproof military gear worth billions of Saudi royals” (Kalin & Paul, 2017). The initial probe began just days after Saudi King Salman created a committee for anti-corruption, one that is led by the aforementioned Crown Prince Mohammed bin Salman. Among the powers granted to the heir to the throne through his position as head of the committee are the power to “investigate cases, issue arrest warrants and travel restrictions, and seize assets” (Kalin & Paul, 2017). Breaking from previous Saudi traditions that have shied away from targeting royals in cases of financial crime, both King Salman and Prince Mohammed have received mixed reviews for their stern stance.

A decree released regarding the arrests demonstrated just how firm the King’s stance on the current state of affairs are, and provided a glimpse into his ultimate goal of cleaning house by removing powerful figures believed to be involved in serious offenses. The decree stated, “the homeland will not exist unless corruption is uprooted and the corrupt are held accountable” (Kalin & Paul, 2017). Talal’s arrest has been viewed by many in the financial sector as ironic, especially when considering his past criticisms of bitcoin, opining that the cybercurrency is synonymous with fraud, and also stating that he believes the trend will inevitably implode.

 

 

Florida “Doctor” Sentenced for Healthcare Fraud

After admitting to signing fraudulent doctors orders and filing paperwork for patients that were never evaluated, Dr. Joaquin Mendez was sentenced to four years in prison in addition to having to pay back $2.1 million in restitution for his role in a multimillion dollar health care fraud scheme that ran from 2014 to 2016. Prosecutors believe that the actions of Mendez were vital in aiding the money laundering and fraud ploy, one that saw the founder of the now-notorious Reflections Treatment Center, Kenny Chatman, overcharge and over-order unnecessary laboratory tests and subsequently bill insurance companies for millions of dollars for the fraudulent procedures. It was also discovered that Chatman sickeningly supplied drugs to the patients who came to his clinics seeking treatment for their respective addictions, all for Chatman to continue cashing in at the expense of his clients.

Chatman, the primary operator of the drug treatment centers, which are scattered throughout South Florida, pleaded guilty to charges of conspiring to commit healthcare fraud, money laundering, and sex trafficking, and is currently serving a 27 ½ year sentence in federal prison. Although many in the medical community vouched for Mendez as a trustworthy individual and doctor during his trial, many believe that the sentencing against him could have been far more strict. Prosecutors say Mendez left the scheme when he gained knowledge that Chatman began forging his signature on medical forms, but prior his departure, Mendez had been collecting $2,500 a month from Chatman for simply signing false documents. Mendez will now be forced to cough up his medical license in addition to the aforementioned repercussions he is set to face. Assistant U.S. Attorney Marie Villafaña summed up the case as a whole, stating, “This was a health-care fraud scheme that was one of the most cruel and calculating I’ve seen in my 17 years (as a prosecutor)” (Mower, 2017).

 

Citations

Albaladejo, Angelika. “Mexico Still Struggling to Combat Money Laundering: Reports.” InSight Crime | Organized Crime In The Americas, 6 Nov. 2017.

“Anti-Money Laundering Body Calls for Countermeasures against N. Korea.” Yonhap News Agency, 4 Nov. 2017.

Fifield, Anna. “Trump Strikes at the Heart of the North Korean Regime with Speech .” The Washington Post, 8 Nov. 2017.

Kalin, Stephen, and Katie Paul. “Future Saudi King Tightens Grip on Power with Arrests Including Prince Alwaleed.” Reuters, Thomson Reuters, 6 Nov. 2017.

Mower Palm Beach Post Staff Writer 5:28 p.m Tuesday, Nov. 7, 2017 Local News, Lawrence. “Doctor in Kenny Chatman Case Gets 4-Year Prison Sentence.” Palm Beach Post, 7 Nov. 2017.

Phillips, Tom. “Donald Trump Calls on China to ‘Act Faster’ over North Korea Threat.” The Guardian, Guardian News and Media, 9 Nov. 2017.

 

 

 

 

 

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