Trending Topic Updates: August 2017

 In Anti-Money Laundering, Trending

At Global RADAR, we strive to provide our readers with the most up-to-date trends and information on current topics and developments affecting the financial services sector in 2017. In this segment, we will be providing updates on two of the more notable topics that were discussed in previous blog posts from earlier this year.

In April, we reported on the charges of money-laundering and corruption brought against former Nigerian oil minister Diezani Alison-Madueke stemming from a bribery scandal that took place during the 2015 Nigerian presidential election. The bribes paid by Alison-Madueke reportedly totaled $1.4 million USD to three electoral officials prior to the start of the election in March of 2015. Alison-Madueke has become a symbol for the rampant corruption and unethical practices that plagued Nigeria throughout the presidency of Goodluck Jonathan, with a lawsuit by the U.S. Department of Justice providing even more insight into the conspiracy. The civil suit is seeking to address the large-scale thievery of Nigerian oil money that took place under the “watchful eye” of Alison-Madueke. According to reports, the lawsuit “brought by DOJ’s Kleptocracy Asset Recovery Initiative, is seeking to recover $144 million in assets, including a $50 million luxury condo apartment in New York and a $80 million yacht. Prosecutors say both assets were proceeds from bribes paid by two Nigerian businessmen for lucrative Nigerian oil contracts” (Kazeem, 2017). Prosecutors believe that these lavish purchases were made in efforts to launder money through the United States and United Kingdom real estate markets, respectively – a practice that has become quite prevalent for both financial criminals and international politicians over the past several years.

Court documents also reveal transcripts from intercepted phone conversations between Alison-Madueke and the two businessmen that show that she had close ties to these individuals, Kolawole Aluko and Olajide Omokore, and warned them that their high-profile purchases could potentially expose the scheme and all involved due to the Nigerian Oil and Gas sector being under close government watch. It has been proven that Alison-Madueke leveraged her influence as Nigeria’s petroleum minister to ensure that the companies owned by the “unqualified” Aluko and Omokore were awarded multiple oil contracts from Nigeria’s state oil company, which ended up as major losses for the country from both a financial and reputational standpoint. Alison-Madueke was rewarded for her role in facilitating the ploy by being given her choice of luxury homes across the UK, as well as with multi-million dollar furniture purchases to furnish the homes, all at the expense of Aluko and Omokore. As the lawsuit proceeds, Global RADAR will provide a third and final installment detailing its results.

In early June, Global RADAR also reported on the largest fine ever issued to a company based in Brazil. The fine of  $3.2 billion was issued against the notable Brazilian meat packing company JBS and several company officials for their respective roles in the payment of bribes to thousands of politicians throughout Brazil between 2016 and early-2017. The fine was significant because it exposed Brazilian President Michel Temer as having direct involvement with the corrupt activity, as a conversation between Temer and a key witness in the case was recorded which appeared to implicate Temer as condoning the bribery payments. It is also believed that Temer would be receiving millions of dollars for helping JBS. Fast forward two months, where following a day of court hearings, President Temer’s fate was placed in the hands of a vote amongst Brazil’s lower house of Congress on whether or not the corruption charge against him would be dropped. Needing the support of only 1/3 of the 513 members of the chamber (roughly 171 members), Temer was spared from facing Brazil’s Supreme Court and being forced to abandon his position as President after receiving 263 votes in his favor.  

While Brazil has been no stranger to graft cases throughout the last half-century, many viewed the vote as a chance to potentially start a fresh, ethical presidency following Temer’s removal. Instead, Brazilian citizens have been plunged into an even deeper level of uncertainty in regards to the economical and developmental future of the country. This holds especially true when one considers that “Attorney General Rodrigo Janot, who leveled the bribery charge against Temer, is expected to charge him with obstruction of justice by the end of the month” (Prengaman and Savarese, 2017). This action would delay the finding of a true resolution for quite some time, as it would force a second vote by the Congress on Temer’s fate. Janot believes the second go-around for the vote has a strong chance to have opposite results from the first, due in large part to the risk imposed on the political futures of the members of the chamber who have sided with Temer. Time Magazine reports that all 513 seats in the chamber are up for election again next year, making the decisions of the members carry much more weight. Nevertheless, until a plan is developed to combat the corruption that has marred Brazil’s government in recent years, the many issues facing Brazil – which include profound inflation and unemployment rates – are sure to continue.

 

Weekly Roundup

 

Guyana’s Gold A Target for Money Laundering?

Canada’s Royal Canadian Mint recently announced its desires for local authorities in Guyana to enhance the anti-money laundering (AML) protocols that govern their gold market. The Mint – responsible for the production of all coins in circulation throughout the North American country – has also refined Guyana’s gold for over 30 years, and is afraid that the metal could become susceptible to money laundering ploys developed by financial criminals unless the necessary changes are made in the coming months. While the Mint has praised some of the recently implemented due diligence efforts seen within the country, the chairman of the Guyana Gold Board (GGB) has acknowledged that “there is room for improvement through increased monitoring and greater reconciliation with its sister organization the Guyana Geology and Mines Commission (GGMC)” (Chabrol, 2017).

The calls for reform in this industry stem in part from a billion-dollar fraud case involving a local Guyanese gold dealer and two commercial banks, a case that has made global headlines recently. Since this case was made public, the Royal Canadian Mint has been critical of the GGB’s policies and actions in relation to their AML requirements, specifically in regards to the monitoring of the sources of gold purchases. The Ministry of Natural Resources also stated that the principal objective of this scrutiny “was to foster a level of assurance on the robustness of oversight processes of all gold declared from mine to market” (Chabrol, 2017). So far, the criticism has led to increased and improved compliance efforts and supervision, although there are still efforts being made to further enhance and shore up areas that are still lacking.

FinTech Investment On the Rise in Singapore

Data released by the professional services company KPMG this week shows a significant increase in fintech investment within the country of Singapore in the second quarter of 2017 when compared to data from the same quarter in 2016.  While the number of deals seen in the second quarter of 2017 was less in total than those seen in Q2 of 2016, the value of these deals increased exponentially within that time frame. According to Business TimesSingapore witnessed four fintech deals worth US$61.53 million during the second quarter, compared to US$9.53 million chalked up over five deals in the year-ago quarter” (Choudhury, 2017). While some have viewed this slight decline in number of fintech deals in a negative light, many in the financial services spectrum have simply chalked this up to the country’s recent move towards a “partnership-oriented fintech model.”

While the Monetary Authority of Singapore (MAS) has led the charge for the development and implementation of fintech-centered approaches to financial security within the country, the MAS has now reportedly begun to move towards the promotion of Singapore as a budding hotbed for the development of financial technology that could be deployed into other markets around the world. Many government officials believe Singapore can develop into a global leader in blockchain technology and other solutions related to increasing cross-border financial inclusion. With overall investment in financial and regulatory technologies reaching record highs in early 2017, the dependence on such technologies and new developments aimed at increasing operational efficiency both domestically and abroad are evident.

U.S. Fugitive Apprehended in Greece

On July 25th, Greek authorities arrested the mastermind behind a major money laundering scandal involving a reported $4 billion worth of bitcoin transactions. The man, a Russian national by the name of Alexander Vinnik, is suspected of being the head of a criminal organization that “owns, operates and manages ‘one of the largest cybercrime websites in the world’” (AP, 2017). The organization has operated since 2011, accruing funds by carrying out the conversions of bitcoin from illicit computer-based activities such as hacking, identity theft, and tax fraud.

Last week, Global RADAR reported on a fine of $110 million issued by the Financial Crimes Enforcement Network (FinCEN) against the digital currency trading and exchange platform BTC-e for their violations of U.S. anti-money laundering (AML) laws. Alexander Vinnik is the reported head of this platform. Following his arrest, authorities also seized multiple mobile phones, laptops and tablets from his hotel room, which are thought to contain key data that will aid in the investigation. Vinnik has been indicted by a grand jury in California on charges of money laundering and conspiracy to commit money laundering, among others. If convicted, Vinnik faces a maximum sentence of up to 20 years in prison. Global RADAR will provide an update on the trial following its commencement.

Citations

Associated Press. “Russian Wanted in US Caught in Greece for Money Laundering.” The Washington Post. 26 July 2017. Web. 

Chabrol, Denis. “Canadian Gold Refinery Wants Guyana to Tighten Anti-money Laundering System; Source of Gold Systems.” Demerara Waves. 30 July 2017. Web. 

Choudhury, Amit Roy. “Fintech Sees Fewer Deals but More Money in Q2.” The Business Times. 2 Aug. 2017. Web. 

Kantouris, Costas. “Greek Police See Leads in Money Laundering Suspect’s Phone.” The Associated Press. 27 July 2017. Web.

Kazeem, Yomi. “US Prosecutors Are Going after the Luxury Assets of Nigeria’s Ex-oil Minister and Her Associates.” Quartz. Quartz, 15 July 2017. Web. 

Prengaman, Peter, and Mauricio Savarese. “Brazil: President Michel Temer Survives Bribery Charge Vote.” Time. Time, 2 Aug. 2017. Web.

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