In AML Surveillance, Anti-Money Laundering, BSA, Trending

New Casino Laws In Germany: A Worthwhile Gamble

In early May, Global RADAR reported on a growing trend in the gambling industry that has gained serious traction in much of Southeast Asia to date. This trend has come to be known as “proxy betting”, and it has evolved into a point of emphasis for high rolling, international criminals looking for quick, painless, and under the radar ways to launder their illicit funds. Proxy betting has emerged as a means for financial criminals, drug lords, and other offenders to gain access to casinos around the world without even having to be in the same country as the respective institution at the time bets are placed. Instead, trusted cohorts of said individual who are present inside these casinos take the instructions they are given and place bets on behalf of their boss and collect possible winnings, cleaning dirty funds in the process. While the practice has been banned in several countries around the world, many have yet to develop a stance on the topic, let alone legislation governing it. This leaves these countries, their financial institutions, and their other entities through which money moves open to potential risks given the anti-money laundering (AML) and “know your customer” (KYC) loopholes that can be created and exposed through such operations.

Many believe that the casino & gaming industry sets the standard for the compliance procedures found in other industries across the globe, specifically in regards to customer due diligence (CDD), reporting requirements, and the adoption of potent anti-money laundering programs and procedures. The United States has raised the global bar as it pertains to regulatory compliance, with both public and private financial service providers of all sizes within the U.S. investing time, money, and other resources to the AML/financial security movement at an unprecedented rate. The same could be said for the gaming industry, which has become one of the most important pieces to the puzzle that is the domestic battle against money laundering and terrorism financing. U.S. casinos have begun to effectively perform suspicious activity report filings, and incorporate measures such as the promotion of greater financial awareness, and implementation of advanced staff training techniques to help meet the demands of monitoring important financial activity, as well as aiding law enforcement officials with investigations. With such a benchmark being set, other countries around the world have taken notice, incorporating the U.S. model for managing and monitoring financial activity and the influx of the oft-illicit funds commonly seen in casinos.

The article “New AML Act for Germany – impact on gambling operators” cited in BSA News Now on Tuesday, May 23rd, discusses newly agreed upon amendments to the German Anti-Money Laundering Act that will bring about several important changes for German gambling operators. Germany’s new and improved AML act is set to be extended from online gambling to include offline gambling operators who are likely to “be faced with challenges like restrictions in payment methods and new administrative offenses with administrative fines of up to 1 million Euro” for the first time (DLA Piper, 2017). The law will also reportedly apply to online lotteries being run by foreign operators, however slot halls and state lotteries are exempt from the new amendments – a decision that has drawn criticism from many in the German Federal Assembly due to the money laundering risks raised through slot operations. Nonetheless, many in the financial services sector in Germany share the optimism of sanctions expert and fellow countryman Matthias Spitz, who believes that the new legislation will enhance the AML efforts in German casinos immensely. In an article on the subject from GamblingCompliance, Spitz stated, “German regulators have already expressed that they consider the new legislation to be an effective instrument to act against unregulated gambling operations on the internet. In other words: where the enforcement efforts under the Interstate Treaty on Gambling have failed, the new AML law kicks in” (Grabbe, 2017). Many also believe there will now be less of a reliance on AML officers to perform their respective duties, and more emphasis placed on internal safeguards and other similar functions that will increase financial security at a greater rate with less variability involved.

In addition to these changes, the decisions to issue fines will “now be made public according to a new provision which first introduces ‘naming and shaming’ for non-compliance with AML duties”, raising the stakes for financial institutions and casinos who want to avoid negative publicity against their brand (Grabbe, 2017).. The amendments will also punish offenders worse than ever before, as fines and other repercussions for infringements are set to be increased drastically. These changes are likely to have a significant impact on both the way casinos are operated, as well as the success rate in catching those attempting to launder funds through casinos. It is also think to say that other countries could potentially be soon to follow in Germany’s footsteps by enacting similar measures based on the overall success of the new German AML amendments.

Citigroup in Hot Water

Due to what has been deemed a lack of internal controls and negligence by the U.S. Department of Justice, Citigroup will now be forced to pay approximately $97.4 million for criminal violations of the Bank Secrecy Act discovered in one of its North American subsidiaries. These compliance failures at the Mexico-based branch called Banamex USA were found to have allowed bank customers to launder illicit funds that were sent to Mexico from different sources across the globe. Although Banamex took the brunt of the blame for willfully failing to maintain their AML responsibilities, Citigroup’s reputation has undoubtedly taken a significant blow as a result. Additionally, this latest scandal comes on the heels of a $140-million civil penalty Citigroup/BanamexUSA paid in 2015 for similar circumstances.  

According to an LA Times article on the settlement, “the Justice Department said that from at least 2007 until at least 2012, Banamex USA processed more than 30 million remittances to Mexico valued at more than $8.8 billion. Those remittances prompted more than 18,000 alerts involving some $142 million in potentially suspicious transactions” (Darmiento, 2017). However, due to complications with an undersized compliance department, the bank only filed a total of nine suspicious activity reports and followed through with less than ten total investigations into the aforementioned alerts.

Banamex’s operations in the United States are set to draw to a close by June 30th of 2017. As a result of their cooperation with federal authorities, the unit will not be federally prosecuted in addition to the set financial penalty it will pay.

Yet Another 1MDB-Related Conviction

In early January of 2017, Global RADAR reported on a money-laundering scheme based in Malaysia which involved the pooled accounts of multiple firms in the United States that were being used to make high-profile purchases within the U.S. real estate market. Malaysian businessmen from the Malaysian Development Fund, which is now notoriously referred to as simply “1MDB”, siphoned the majority of the funds found in these accounts. Altogether approximately $3.5 billion in funds were reportedly misappropriated. Earlier this week, Singapore convicted its fifth person involved in cases related to the 1MDB scandal. Kelvin Ang Wee Keng, a former broker with Kim Eng Securities, was charged with what “authorities said was corruptly giving S$3,000 to a research analyst to speed up the preparation of a favorable valuation report” (Tan, 2017).

It was discovered that the S$3,000 payment was made by Ang in an attempt to speed up a report for a “$2.4 billion valuation for PetroSaudi Oil Services Ltd. Assets” (Tan, 2017). It has also been found that Ang made approximately $235,000 in referral fees from a deal with the Saudi Arabian-based company.  The initial charge against Ang does not tell the entire story however, as Singapore’s Attorney General’s office found him to be directly involved in numerous illicit transactions over the course of the past several years. In total, Ang was fined S$9,000 by a Singapore court for his payment of the bribe. Ang joins a group of four other financial service providers who have faced repercussions for their roles in the 1MDB scandal, although Ang is the only member of this group who will avoid jail time.

Qatar Seeks to Halt Organized Crime & Money Laundering

A Gulf Times article cited in BSA News Now on Wednesday, May 24th examined Qatar’s goals for the near future that include combatting several pervasive, country-wide issues such as corruption, terrorism financing, the drug trade, and money laundering. The article explains that several major political figures of the sovereign country recently spoke on the subject at the Commission on Crime Prevention and Criminal Justice, which took place in Vienna last week. Major General Dr Abdullah Yusuf al-Mal, adviser to the Minister of Interior, spoke on the implementation of a program that looks to prevent youth crime through sports, as well as aid in other aspects of society such as the “rehabilitation and reintegration of prisoners, education for justice, in addition to the integrity of the judiciary and the prevention of corruption” (Gulf Times, 2017).

Working alongside the United Nations Office on Drugs and Crime, many in Qatar believe that these joint efforts will put the country in line with other international movements aimed at increasing financial transparency and fighting global corruption and financial crime.

 

Citations

Darmiento, Laurence. “Citigroup to Pay Nearly $100 Million to Settle Banamex Money-laundering Claims.” Los Angeles Times. Los Angeles Times, 22 May 2017. Web. 

DLA Piper LLP -Dr Michael Stulz-Herrnstadt and Christoph Engelmann. “New AML Act for Germany – Impact on Gambling Operators | Lexology.” New AML Act for Germany – Impact on Gambling Operators – Lexology. 18 May 2017. Web. 

Grabbe, Elisa. “German Parliament Adopts Wide-Ranging AML Amendments.” GamblingCompliance. 25 May 2017. Web. 

“Qatar Calls for Measures to Curb Organised Crime, Money Laundering.” Gulf-Times. 22 May 2017. Web. 

Tan, Andrea. “Singapore Convicts Fifth Person Involved in 1MDB-Related Cases.” Bloomberg.com. Bloomberg, 24 May 2017. Web.

 

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