Small Success Shows Bigger Failure to Stop US-Mexico Cash Smuggling

U.S. authorities celebrated the confiscation of more than a million dollars in cash along the Mexican border, unwittingly illustrating the overall failure to stop billions of dollars in drug money that flow south into Mexico each year.

Custom officials made the first seizure Friday, when a Mitsubishi SUV was discovered with $600,000 in the spare tire while waiting to cross the border from Laredo, Texas. A day later, authorities in Eagle Pass, Texas, found almost $550,000 beneath the seat of a Mazda trying to drive into Mexico, Excelsior reports.

“This is the largest seizure of outbound currency in the history of Eagle Pass Port of Entry,” said customs director Cynthia O. Rodriguez.

Rodriguez’s comment unintentionally illustrates the general failure of U.S. and Mexican efforts to stop the southward flow of drug profits. According to the Washington Post, American officials grabbed just $85 million in illicit cash at the border in 2009. This is overshadowed by the $18-$39 billion in drug profits that the U.S. government estimates to cross the border each year. The figure appears to conflate cash shipments with other forms of money transfer, but even the lower end of the range would mean that U.S. authorities’ cash seizures are a fraction of a percent of the total.

The authorities are hailing the seizure of $1.15 million in illicit cash over two days as a success. But even if the pace was maintained for an entire year, and the government managed to confiscate $209 million, this would still be only a small fraction of the total estimated flow.

This lack of effectiveness reflects the difficulty of spotting cash shipments. Hundreds of thousands of cars cross the U.S. border with Mexico every day, and a thorough inspection of them all is not feasible. A million dollars in one hundred dollar bills occupies a space not much larger than a shoebox, so authorities are in search of the proverbial needle in the haystack.

Once cash makes it over the border into Mexico, drug trafficking organizations have to launder it. Here the authorities also fail; Mexican prosecutors secured just 37 convictions on money-laundering charges from 2008 through mid-2010, according to the Associated Press. This is despite the fact that in many cities it is common knowledge which businesses are connected to organized crime.

An asset-seizure law passed in 2009 was supposed to be an enormous step forward in the fight against money laundering. However, not a single case has been brought using the law in its two years of existence.

The problem with the law, according to the AP, is that it requires prosecutors to divulge the entire scope of their evidence against a suspect when seeking the seizure of an asset. This can throw future criminal prosecutions into jeopardy, a risk many are unwilling to take.

Mexico has also enacted stronger restrictions on dollar deposits in banks, which makes it more difficult to process drug money smuggled over the border. However, with the nation’s economy heavily based on cash, it is difficult to enact regulations strict enough to significantly limit the flow of dirty money.

A robust money-laundering effort would also depend on the participation of the banks where capos keep their money. However, banks have a strong financial incentive to avoid asking tough questions of people who do business with them. Consequently, they often don’t. U.S. bank Wachovia’s lax monitoring of $378.4 billion in cash transfers over several years illustrates this problem, as detailed in an investigation by British newspaper The Observer. As a result, the bank failed to identify the cash used to purchase of 22 tons of cocaine.

Source: Insight Crime

The Economics of Money Laundering

Money laundering is a massive global problem. It allows criminals to infuse billions of dollars of black money into the stream of commerce and business, corrupting financial institutions and officials. However, the precise scale of money laundering is much disputed.

In 1996, the IMF came up with the vague estimation that 2-5 % of the global economy involved laundered money. But, the Financial Action Task Force (FATF), an inter-governmental body set up to combat money laundering, said: “Overall, it is absolutely impossible to produce a reliable estimate of the amount of money laundered.”

The estimate most often bandied around in the media is $1.5 trillion a year, but Dr Dionysios Demetis, the author of the book Technology and Anti-Money Laundering, disputes the figure.

“The broader system of money laundering operations exhibits such a degree of complexity that it is impossible to determine the amount being laundered. The most commonly cited figure of $1.5 trillion is for media consumption alone,” he said.

Few academics will give estimates. But there is one distinguished expert who believes it is possible to give more accurate figures. John Walker, the CEO of Crime Trends Analysis in Australia, has produced analysis which suggests that the scale of money laundering is much larger than had been thought. Using a comparatively simple crime-economic model constructed from readily available international databases, he estimated a total of $2.85 trillion per year, heavily concentrated in Europe and North America.

Walker said: “I’ve been contracted by the UN Office on Drugs and Crime to update those 1998 figures, but sadly, the project has stalled due to the fear of upsetting member countries’ sensitivities. But I would stand by the 1998 figures if we factor in the rise in the value of the dollar. The major criticism of my 1998 figures was that my estimates were way too high. Subsequent events have shown that any criticism along those lines was laughably wrong,” he said.

The reason the figures still stand up is that recent attempts to combat money laundering have been ineffective, Walker argues.

“I do not believe that anti-money laundering has had any significant impact on rates of global crime, except to have forced changes in the way that the proceeds of crime are laundered. If I had money to launder right now, I would take advantage of the lack of oversight of international trade prices – particularly in services. The Global Financial Integrity Project led by Raymond Baker focuses on flows of finance illicitly removed from developing countries, concluding that for every dollar of aid ‘given’ to developing countries, there are $10 going the other way due to corruption, multi-national company tax evasion and straight out fraud,” he said.

In Walker’s model, the US was responsible for 46.3% of money laundered ($1.32 trillion). Two other well-known centres of organized crime came next: Italy ($0.15 trillion, 5.3%) and Russia ($0.147 trillion, 5.2%). There followed China, whose share one would expect to have grown since 1998, along with the rest of its economy ($0.13 trillion, 4.6%). The rest of the top 10 consisted mainly, though not exclusively, of Western countries: Germany, France, Romania, Canada, the UK , Hong Kong. The model’s total for money laundering of $2.85 trillion would need to be increased by 38% to allow for dollar inflation, making it $3.933 trillion. The figure for the US would be $1.82 trillion.

In Walker’s model the destinations of money laundering are sometime different from the sources. The US is top again, but with 18.9%, followed by one of the world’s major offshore financial centres, the Cayman Islands (4.9%), Russia (4.2%), Italy (3.7%), China, Romania, Canada, Vatican City, Luxembourg and France.

One necessary update to Walker’s models is that both the City of London and Wall Street now play a bigger part in global money laundering than they did in 1998.

“The capacity of these financial centres to carry out financial operations at larger scales makes them vulnerable despite the perceived strong regulatory initiatives. Also, there is a further perceived legitimacy to the laundering of funds if they go through London or New York,” said Dr Demetis.

In recent years, the banks have been implicated in a number of major money laundering scandals. One of the most shocking involved the Miami-based Wachovia Bank, which admitted responsibility in 2009 for moving $420 billion for account holders thought likely to be involved in the laundering of drug proceeds. Some of the money was traced to the purchase of aircraft used by trafficking organizations to smuggle more than 22 tons of cocaine.

“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said Jeffrey Sloman, the federal prosecutor. Yet, the total fine of $160 million was less than 2% of the bank’s $12.3bn profit for 2009.

Read the FULL STORY: Black Money: The Business of Money Laundering

Source: Business Insider

Tunisians, Swiss Target Family Cash

Bank accounts, properties and holdings owned by Tunisia's ousted leader and his family came under scrutiny Wednesday in Tunisia and Europe, intensifying what promises to be a long battle over assets that activists and Tunisians officials say the family illegally gained during the ex-president's 23-year rule.

Tunisian officials said Wednesday they had opened an investigation into allegations that former president Zine al-Abedine Ben Ali and his relatives illegally transferred assets and currency overseas, according to the state news agency. The probe targeted Mr. Ben Ali, his wife, Leila Trabelsi, and dozens of their relatives.

Federal authorities in Switzerland announced Wednesday an immediate freeze of all Swiss assets belonging to Mr. Ben Ali, his wife and about 40 family members.

In France, anticorruption activists said they filed a complaint with Paris prosecutors Wednesday, urging judicial officials to freeze French assets of Mr. Ben Ali and about 12 family members—which they say includes bank accounts and real estate in Paris and the French Riviera—alleging misappropriation of Tunisian public funds and money laundering.

Mr. Ben Ali and an unknown number of his relatives fled Tunisia for Saudi Arabia on Friday. Their surprise exit followed a month of popular protests against the president that included allegations that their lavish lifestyle was funded by corruption.

The exact whereabouts of Mr. Ben Ali and his wife in Saudi Arabia weren't known. Mr. Ben Ali has made no public statements since fleeing to Saudi Arabia. It is unclear whether Mr. Ben Ali or other relatives have engaged legal representation. Calls to several Tunisian businesses owned by Mr. Ben Ali’s relatives went unanswered.

Tunisian state television reported Wednesday that authorities in Tunisia's new caretaker government have arrested 33 members of Mr. Ben Ali's extended family. It wasn't immediately clear who the individuals were, when they were arrested or why they were detained.

Members of Mr. Ben Ali's immediate family control stakes in at least three major banks and hold significant shares in at least two Tunisian cellphone companies and at least one airline, according to local lawyers, officials and others with knowledge of the businesses. Holding companies controlled by family members have partnerships with foreign firms operating in Tunisia, which include branches of European car makers and retailers, these people say.

Daniel Lebègue, head of the French arm of anticorruption group Transparency International, estimated Mr. Ben Ali and his clan controlled an estimated 35% of Tunisia's economy. Tunisia's gross domestic product reached an estimated $44 billion last year. Mr. Lebègue's estimate wasn't immediately verifiable.

The Tunisian actions represents the latest in a series of decrees by the North African country's new caretaker government aimed at meeting public demands for widespread political reform and justice. On Tuesday, Tunisia's former ruling party revoked the membership of Mr. Ben Ali, its founder. On Wednesday, the caretaker government started work, with multiple members taking oaths of office.

Earlier this week, Prime Minister Mohammed Ghannouchi announced commissions to investigate corruption and alleged illegal enrichment by Tunisians during Mr. Ben Ali's rule, a position that became clearer with Wednesday's government's announcement that authorities were looking into alleged transfers of assets and currency overseas.

"An investigation in illegal acquisition of personal property, real estate and stock-market investments abroad has been opened by the Public Prosecutor," the statement said, according to state news media.

Switzerland's immediate freeze covers assets that belong to Mr. Ben Ali and dozens of members of his extended family. The Swiss government said it doesn't have a precise picture of these assets but that its order binds bankers, traders or real-estate agents to take note when they come into contact with suspected Ben Ali assets. "We've ordered all financial intermediaries not to touch this money; they must also declare it," said Valentin Zellweger, a director at the Swiss Foreign Ministry.

Anti-corruption activists in France say their complaint with Paris prosecutors urges judicial authorities to freeze Ben Ali family assets in France. The complaint's aim is to return these assets to their owners—the Tunisian state, in most cases—said Mr. Lebègue of Transparency International, which filed the complaint.

An official at Paris prosecutor's office said she had not yet seen the complaint. The French government has said it was standing by to assist Tunisia in recovering any of Mr. Ben Ali's assets found in France and deemed fraudulent.

Much of the public outrage against the old regime focused on the president's wife and a son-in-law, Sakker el-Materi. Protesters last week hurled insults against Mrs. Ben Ali and over the weekend, people looted mansions that neighbors said belonged to Mr. El-Materi.

The Central Bank has placed under administrative control a bank owned by Mr. El-Materi, Bank Zitouna, according to the state news agency. Mr. El-Materi's whereabouts aren't known.

A 2009 U.S. diplomatic cable leaked by the website WikiLeaks included a diplomat's description of a home of Mr. El-Materi, which its author said was staffed by at least a dozen people—an expensive rarity, the cable noted—and was home to a caged tiger named Pasha that ate four chickens a day.

"The situation reminded the Ambassador of Uday Hussein's lion cage in Baghdad," the author wrote, referring to the late son of Iraqi strongman Saddam Hussein.

"The opulence with which El Materi and [his wife] Nesrine live and their behavior make clear why they and other members of Ben Ali's family are disliked and even hated by some Tunisians," the author wrote. "The excesses of the Ben Ali family are growing."

Separately Wednesday, Moody's Investor Service Inc. downgraded Tunisia's sovereign rating by one notch, to Baa2 from Baa3, and changed the country's outlook to negative from stable, citing political instability.

By MARGARET COKER in Tunis and DAVID GAUTHIER-VILLARS in Paris

Write to Margaret Coker at margaret.coker@wsj.com and David Gauthier-Villars at David.Gauthier-Villars@wsj.com

Source: The Wall Street Journal

Jersey to target money laundering and terrorism

A wholesale review of the Island’s ‘vulnerabilities’ to money laundering and terrorist financing is likely to be carried out soon.

The authorities responsible for combatting financial crime believe there is a need for the review as a result of the economic downturn.

Jersey firms are venturing further afield to secure new business and are now commonly working with individuals and firms from jurisdictions considered of a high risk.

Changes were announced last week to the strategy that is designed to stop Jersey being used by crooks and terrorists to clean up cash.

Source: This is Jersey

Money laundering in Colombia surpasses 8 billion dollars

Money laundering operations in Colombia involving funds from drug-trafficking amount to close to 8.7 billion dollars per year, authorities said Wednesday.

There were more than 42,000 suspicious operations from January 2006-December 2010, according to the Financial Information and Analysis Unit (UIAF) of the Finance Ministry.

A figure for the underground economy was calculated based on the behaviour of criminals on a global scale, said UIAF director Luis Edmundo Suarez.

Money laundering distorts the economy and pushes up inflation so that the whole country pays 'a tax created by criminals,' he said.

'This illegal business has professionals who work for them permanently, as they would for any investor, advising on whether they should invest in stock, in fuel, wherever we give them the chance,' Suarez explained.

Colombia is the world's largest producer of cocaine.

Source: Deutsche Press

UAE to toughen up money declaration rules from September

The United Arab Emirates will require those leaving the country to declare large amounts of money from September as part of an effort to improve monitoring of suspicious cash flows, officials said on Sunday.

Dubai, a Gulf trade and finance hub, has been fighting a reputation as a haven for money laundering since the Sept. 11 attacks of 2001 drew attention to the relative ease of moving money through the city.

"The UAE... has put in place a strong legal, regulatory and institutional framework to counter money laundering and combat terrorist financing and thereby protect its institutions from any reputation risk," Central Bank Governor Sultan Nasser al-Suweidi told a conference on the new measure.

The current regulation only applies to arriving passengers.

The central bank said it is also bringing the minimum declaration amount in line with international standards, raising the requirement to declare cash and bearer instruments such as cheques to 100,000 dirhams ($27,230), or the equivalent in foreign currencies, from 40,000 dirhams. ($1=3.673 UAE Dirhams) (Reporting by Martin Dokoupil and Martina Fuchs; Editing by Nick Macfie)

Source: Reuters

Occurrence of Money Laundering Grows by 29% in Switzerland

There have been over 1000 cases of suspected money laundering activity or suspicions of serious financial crimes reported to authorities in Switzerland.


According to the figures made available in the latest report published by the Money Laundering Reporting Office of Switzerland (MROS), in the year 2010 there were 1 159 reports submitted to the Office of suspicious financial activity and transactions. Analysis of the report shows that the number of occurrences represents a 29.4 percent increase in the volume of suspicious activity reports (SAR) filed in the year 2009.

The newly published report, drew attention to the particularly high number of filed suspicions submitted regarding the banking sector, with a nearly 71 percent of all SARs being based on perceived offences committed within the industry. The payment services sector was the next most significant contributor to the number of SARs, although it only accounted for 16 percent of all complaints. 55 percent of all cases of dubious financial activity reported to the Office were classified as crimes against property, and 39 percent were regarded as fraud.

The total value of assets covered by the reported SARs was approximately CHF 847 million, which is approximately the same level as in previously analyzed periods.

According to the MROS 86.5 percent of all SARs were forwarded to for legal investigation by the appropriate authorities, with the banking sector seeing over 90 percent of all SARs now undergoing further legal action.

The number of SARs related to terrorist financing in Switzerland was reported to be 13 in 2010, compared to the 7 seen in 2009.

Source: TaxationInfoNews

Pope names head of Vatican finance watchdog

Pope Benedict XVI named the president of the Vatican's investment agency to head a new watchdog agency charged with monitoring all Vatican financial operations.

Italian Cardinal Attilio Nicora, 73, is president of the new Financial Information Authority, which the pope instituted Dec. 30 to oversee the monetary and commercial activities of all Vatican-related institutions, including the Vatican bank.

The pope also named the members of the four-person executive board, which together with Cardinal Nicora, will monitor such Vatican agencies as the Vatican City State, the Vatican bank, the Vatican's investment agency and the Congregation for the Evangelization of Peoples, and smaller agencies such as the Vatican pharmacy, supermarket and the Vatican Museums.

The Vatican released the names in a written statement Jan. 19.

Cardinal Nicora and the executive board will name a director and additional staff by April 1, according to Jesuit Father Federico Lombardi, the Vatican spokesman.

The new executive council members are:

• Claudio Bianchi, a professor of accounting at Rome's La Sapienza University. He has served as a member of an auditing board for various agencies connected with the Vatican.
• Marcello Condemi, a lawyer and professor of commercial and banking law at Rome's Marconi University. He has worked for the international Financial Action Task Force, which designs policies to combat money-laundering and terrorist financing.
• Giuseppe Dalla Torre del Tempio di Sanguinetto, chancellor of a university in Rome and a professor who teaches church-state relations at various pontifical universities in the city.
• Cesare Testa, who had served as president of the Italian bishops' office for the financial support of clergy and worked on the revision of the Italian-Vatican treaty, specifically in matters dealing with how clergy are paid.

Pope Benedict established the oversight agency after Italian treasury police, in a money-laundering probe, seized 23 million euros (US$30 million) that the Vatican bank had deposited in a Rome bank account. The Vatican criticized the confiscation, saying the deposit was legitimate and that the Vatican bank was committed to "full transparency" in its operations.

The Vatican has been working for some time with Italian and international authorities to comply with procedures to ensure funds are not used for terrorism or money laundering.

Source: NCR Online

Western Union Hosts 6th Annual AML, Anti-Fraud Event in Denver

The Western Union Company will host the sixth annual Anti-Money Laundering & Anti-Fraud & Compliance Conference -- one of the biggest events of its kind -- Sept. 19-22, 2011 in Denver. 

The event, held each year for compliance and fraud professionals from across the United States and Canada, is an interactive experience teaching best practices in preventing fraud and money laundering. This year's event will include more than 200 attendees. 

More than 40 experts from a variety of government organizations will speak, including the Federal Trade Commission, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department, the Financial Transactions and Reports Analysis Centre (FINTRAC) of Canada's Ministry of Finance, the Internal Revenue Service (IRS) and law enforcement from across the U.S.

"Western Union is committed to protecting our customers and the financial system from potential abuse," said Joe Cachey, Western Union's Acting General Counsel and Chief Compliance Officer. "This event is a unique learning experience, allowing professionals from a wide variety of financial services firms to better identify and protect their organizations against fraud." 

The conference was introduced in 2006 as a way to provide continuing education to Western Union Agents on anti-money laundering best practices, regulations and law-enforcement trends. It has since grown into one of North America's largest anti-money laundering/anti-fraud conferences for professionals from a variety of industries. 

About Western Union 

The Western Union Company is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders. The Western Union, Vigo and Orlandi Valuta branded services are offered through a combined network of approximately 470,000 agent locations in 200 countries and territories. In 2010, The Western Union Company completed 214 million consumer-to-consumer transactions worldwide, moving $76 billion of principal between consumers, and 405 million business payments. For more information, visit http://www.westernunion.com 

Source: Market Watch

Mobile banking vulnerable to laundering, terror funding: RBI

Reserve Bank Governor D Subbarao today said mobile banking should be driven by banks, not telecom operators, considering money laundering

and terror financing threats.

"The Reserve Bank has a clear preference for the bank-led model," RBI Governor D Subbarao said at a Banking Technology Excellence awards function hosted by the Institute for Development and Research in Banking Technology (IDRBT).

"Given the growing concerns about money laundering and financing of terrorism, a bank-led model is decidedly safer and more sustainable," he said, adding, however, that a mobile operator-led model helps accelerate financial inclusion.

Subbarao also said the central bank wants financial inclusion to be more than just a remittance facility, which is only possible through banks.

"We want our customers to get minimum services like deposit insurance, access to affordable credit and the payment system which only banks can offer," he said.

However, the governor said that the RBI recognises that mobile telephony has an important role in the value chain and that it is keen that mobile service providers collaborate with banks to provide value-added services.

Speaking on the use of technology in banking, he said protection of customer information and confidentiality is on his priority list as there are growing concerns about the increase in cyber crimes, phishing-related frauds, identity fraud and misuse of customer information.

"We proposed to set up a working group on information security, electronic banking, technology risk management and tackling of cyber frauds," Subbarao said.

Further, the statistics about financial inclusion do not convey the true picture of the situation, he said.

"Even where bank accounts are claimed to have opened, verification has shown that a significant portion of these accounts are dormant. Very few conduct any banking transactions and even fewer receive any credit," he explained.

RBI has asked all domestic commercial banks, public and private, to prepare their own financial inclusion plan.

Source: The Economic Times

Qatar praised for dirty money curbs

Following an 18-month intensive review of Qatar’s legislative framework on anti-money laundering and combating financing of terrorism, the National Anti Money Laundering (NAMLC) has commended the collective efforts of those involved in developing a regulatory infrastructure in line with the NAMLC’s AML/CFT national vision and strategy and the highest demands of AML/CFT international best practice.

The culmination of this work was the enactment of Qatar’s new Law No. (4) of 2010 on Anti-Money Laundering and Combating the Financing of Terrorism (the Law) which commenced April 30, 2010. However, both in prior to this law and following its enactment, a tripartite committee of financial sector regulatory bodies, formed by the Qatar Central Bank (QCB) and including the Qatar Financial Markets Authority and the Qatar Financial Centre Regulatory Authority were involved in a highly collaborative exercise to coordinate and harmonise their respective AML/CFT rules and regulations.

Each body’s AML/CFT rules and regulations have now been brought into force and have been designed to ensure alignment both with the new law and their compliance with FATF recommendations and standards. NAMLC Chairman, Sheikh Fahad Faisal Al-Thani, said: “Qatar has made giant strides in its ability to continue to successfully fight against financial crime. Such an achievement is a reflection of the ability of our highly professional financial organisations to work together.”

Source: The Peninsula

India: RBI issues warning on banking transactions with Iran

Perceiving a threat of money laundering and terror-financing in banking transactions with Iran, the Reserve Bank of India (RBI) has asked banks and other financial entities to be cautious in their dealings with entities and funds from the Middle East country.

The RBI circular issued to banks and other entities operating payment systems in India contained a global market caution notice issued by the Financial Action Task Force (FATF) on Iran.

The FATF is an inter-governmental body responsible for making policies at national and international levels to combat money laundering and terror-financing.

As per the FATF warning, all financial institutions have been advised "to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions."

The FATF has also warned against efforts to bypass or evade counter-measures and risk mitigation practices and urged financial institutions to take into account the risk of money laundering and terror-financing when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction.

A similar circular has been issued by market regulator Sebi to the stock exchanges, with the objective of ensuring that Indian markets are not used by Iran-based firms for money laundering or terror-financing activities.

In turn, the stock exchanges have asked brokers to ensure compliance with the Sebi circular.

India became a member of FATF last year. Following the nation's accession into the global body, it is required to follow the global standards prescribed by the FATF to check money laundering and terror-financing activities.

Paris-based FATF informs the central government of its member countries about all its cautionary notices and policies, which in turn are forwarded to the concerned enforcement and regulatory agencies.

The latest caution notice on Iran was issued by the FATF to the Indian government late last year. The notice was later forwarded to Sebi, based on which the regulator issued a circular to market intermediaries.

Iran has been subjected to various sanctions by the US and some European countries to thwart the flow of funds allegedly used to finance the country's nuclear weapon ambitions and sponsor terror-related activities. There have been demands in the US for all listed companies to mandatorily disclose their links with Iran.

In its latest notice, FATF has named Iran as a 'jurisdiction' for which the countries need to apply counter- measures to protect the international financial system from substantial money laundering and terror financing risks.

FATF said it will consider asking its members to strengthen counter-measures in February, 2011, if Iran fails to take any concrete steps in this regard.

Source: The Economic Times

France Investigating Money Laundering Linked To Ben Ali, Mubarak

By Joe Palazzolo

Public prosecutors in Paris are investigating suspected organized money-laundering linked to Tunisia’s ousted president, Zine El Abidine Ben Ali, and Egypt’s Hosni Mubarak, AFP reported.


The Paris prosecutor’s office told the news agency it opened the probes on Tuesday. The move followed a request by non-governmental organizations Sherpa and Transparency International-France earlier this month for a preliminary investigation of assets linked to Ben Ali and his clan.

France has been searching for assets belonging to Ben Ali since he fled Tunisia for Saudi Arabia in mid-January amid protests. The U.S. is also looking for assets in its jurisdiction belonging to Mubarak, Ben Ali and their associates.

Source: The Wall Street Journal

Spain freezes assets of Mubarak associate

Spanish police said Friday they have frozen more than 30 million euros in bank accounts and properties valued at 10 million after arresting a close associate of ousted Egyptian president Hosni Mubarak on fraud charges.

Hussein Salem, detained along with his son and a suspected frontman, was accused of money laundering, fraud, bribery and corruption, police said in a statement.

Police said they froze suspected illicit gains of 32.5 million euros ($46 million) in bank accounts, two buildings in Madrid and seven in the southern resort of Marbella, a popular destination for wealthy people, worth a total of about 10 million euros, and five luxury cars.

A court in Madrid set bail for Salem at 12 million euros, six million for his son and 18 million for his associate.

An Egyptian security official said Salem was accused of corruption in a gas deal and of giving properties to Mubarak and his family in return for huge swathes of land in Sinai.

Spanish police alleged the suspect and his family had received more than 17 million euros in funds he had obtained illegally in Egypt.

Egypt's prosecutor general's office said Friday it had sent the foreign ministry a full dossier on the investigation of Hussein Salem.

The file must now be sent to Spanish police before they can hand Salem over to Egyptian authorities.

The prosecutor general's office said Salem had "acquired Spanish citizenship despite dual nationality being illegal under Spanish law".

Magdi al-Shafei, Interpol's Egyptian bureau chief, was quoted by Egyptian state television as saying Salem's dual nationality could make it "very complicated" to try him in Egypt.

Source: AFP

New anti-money laundering trends being discussed in Azerbaijan

First regional conference on Anti- Money Laundering and Countering Financing of Terrorism is taking place in Baku on 17-18 February.

Director of Financial Monitoring Service (FMS) under the Central Bank of Azerbaijan Adishirin Gasimov has reported that the conference is attended by representatives of financial intelligence units of 20 countries and Expert group of Council of Europe on Anti-Money Laundering and Countering of Financing of Terrorism(Moneyval).

"Among the participants there are also executive director of Basel Management Institution, UNO commission on drug and crime fight and about 40 experts. The conference is discussing new challenges of anti- laundering , international cooperation, new trends and typology as well as national informative bases",- A.Gasimov said.

Source: ABC

'Hot Money' from China Escalates House Prices in Hong Kong

Hong Kong stock and real estate markets have recently soared simultaneously. Experts believe it was caused by an influx of “hot money” from mainland China, and worry that it will lead to economic bubbles.


"Hot money" refers to funds that are controlled by investors who actively seek short-term returns. Often, hot money is laundered to “cool” it down, or make it appear legitimate.

The luxury housing market in Hong Kong has risen to as high as 712,800 Hong Kong dollars (US$91,930) per square meter. According to statistics from an intermediary organization, prices for luxury housing in Hong Kong this year have been restored to the level before the financial crisis, and have even exceeded the peak price before the 1997 Asian financial crisis.

An influx of hot money is one of the reasons causing high real estate prices, according to associate Professor Li Kui-Wai from the Department of Economics and Finance of the City University of Hong Kong.

”Many people say that the money came into Hong Kong from mainland China,” Li said. “Though China imposes control over foreign currency, many people are able to bring money [with them] when they come to Hong Kong. Some people say they basically bring money in bags. When someone buys a luxury house, they do not even need to consider a mortgage from a bank, as they would pay in full, in cash.”

Joseph Y.S. Cheng, a professor of political science at the City University of Hong Kong says a significant amount of the money comes from “disgraceful” sources.

“Hence, they want to seek a way out, and hope to transfer money out of China,” he said. “Under such circumstances, we see the wealthiest class in China sending their families to reside abroad, and then try to get a foreign passport, even multiple foreign passports. They also purchase real estate abroad as a way of retreat, and a kind of insurance.”

Cheng also described it as money laundering; “transferring money to somewhere where the Chinese regime does not have jurisdiction.”

“So we have indeed seen such people come to buy luxury housing in Hong Kong,” he said. “Their way of purchase is mostly paying by cash, or paying in one lump sum, unlike ordinary residents, who would buy through a long-term, ten- or twenty-year mortgage.”

The latest data shows that since the beginning of the financial crisis, the total amount of money flowing into Hong Kong has reached 532.6 billion Hong Kong dollars (US$68.69 billion), and is mostly traced to mainland China.

Sung Lap-kung, a program coordinator of the School of Continuing and Professional Education at the City University of Hong Kong, said that much of this hot money has entered Hong Kong from the Pearl River Delta area.

“Much of the hot money is from the 4,000 billion yuan (US$ 585.82 billion) stimulus fund, handed out from the Chinese government, at the end of last year and the beginning of this year,” Sung said. “Much of it has been released from the banks.”

Financial expert Lew Mon-hung said that mainland China’s total credit provided this year is close to 10 trillion yuan (US$1.46 trillion)—more than double the target set by the authorities.

“Some large state-owned enterprises are not short of money,” Lew said. “However, in order to fulfill their credit quota, the banks give many large state-owned corporations excessive amounts of money. They then invest them into the real estate market and the stock market; hence the inflow of hot money.”

Lew suggested that this sudden influx of hot money into Hong Kong is mainly due to distrust of the communist dictatorship.

“Though they used many capitalist ways to develop the economy, it is still under the banner of Marxism,” Lew said. “So people have concerns about this. Mainland China has a market economy that is distorted by power, particularly from the perspective of rule of law. Its law and rule of law do not match international standards.”

Lew said corruption was also a big problem. “Many links provide opportunities for these corrupt officials,” Lew said. “That is, they are eager for high credit quota, the higher the better for them. So as far as the politics is concerned: the GDP has increased; as far as individuals are concerned: they have more opportunities to seek money.”

“Of course there will be money laundering, which is a method of covering up one’s own economic crime,” Lew added.

Many financial experts and scholars are concerned whether such soaring prices in the real estate market will cause an economic bubble.

Once a large-scale outflow of capital occurs, it will impact Hong Kong's dollar interest rate and exchange rate, and the real estate price will drop accordingly. It is estimated that the pressure for lowering the real estate price will be greater and greater after December.

Source: The Epoch Times

Estonia progress report adopted by Moneyval Committee at Romania’s proposal

The progress report on Estonia was unanimously adopted on Romania’s proposal by the Council of Europe’s Committee of Experts on the Evaluation of Anti- Money Laundering Measures and the Financing of Terrorism (MONEYVAL), the Romanian Ministry of Justice and Civic Freedoms announced on its Web site.


It added that the 31st plenary meeting of Moneyval Committee was held in Strasbourg, France on Dec. 7-11, with Romania being a rapporteur country.

The Romanian delegation was made up of Justice Ministry experts and experts of the National Office for the Prevention and Combat of Money Laundering (NOPCML).

The meeting also elected the Moneyval Office president and vice president, with NOPCML official Alexandru Codescu being elected an Office member.

Moneyval Committee was set up in 1997 as part of the Council of Europe, with its goal being to make sure that the states have efficient systems of combating money laundering and the financing of terrorism in line with the international standards. Moneyval has 28 standing members, Romanian included, two temporary members and two observers.

Source: Financiarul

Foreign students used as front to launder money

A Wellington businessman was today sentenced to nine months' home detention for tax evasion, fraud and money-laundering using foreign students as a front and involving more than 350,000.

Walter Law, also known as Xu Liu, 45, had earlier pleaded guilty in Wellington District Court to five charges of tax evasion, six charges of providing false income tax returns, 21 charges of aiding a company to file false GST returns, one charge of aiding a company to file false income tax returns and five charges of aiding a company to evade tax.

Law also pleaded guilty to one charge of money laundering under the Crimes Act.

Tony Morris, Inland Revenue's assurance manager investigations, said Law conducted his activities using separate companies and unregistered entities which he owned or controlled.

"Our initial investigation into one of Mr Law's companies, Holiday KTV Entertainment Limited, revealed that significant amounts of cash were unaccounted for and the company had only reported its Eftpos transactions to Inland Revenue. Our subsequent analysis showed the company had evaded GST amounting to just over $68,000, PAYE of over $41,000 and Income Tax amounting to over $29,000," Mr Morris said in a statement.

Inland Revenue's investigation into Law's foreign exchange and travel businesses found he deposited $2.5 million into bank accounts in the name of two overseas home-stay students. The students said Law had control of these accounts and they had no knowledge that the funds were used to repay loans on properties owned or controlled by Law.

"Mr Law's foreign exchange and travel businesses made a surplus of $540,000 between 2004 and 2010," Mr Morris said.

"These entities not only failed to return around $170,000 in income tax to Inland Revenue but these funds were deposited into the students' bank accounts and recharacterised as loans from a private trust in China. This money was the undeclared income from the business transactions and this action amounted to money laundering," Mr Morris said.

Law's offending resulted in a loss to Inland Revenue of just over $350,000, which had since been recovered.

"Mr Laws deliberately tried to evade his tax obligations by not declaring his income and hiding cash in other people's bank accounts. This case is a further reminder that Inland Revenue is using increasingly sophisticated analysis to detect those trading in the hidden economy," Mr Morris said.

"Businesses and individuals doing the right thing can be confident that Inland Revenue will detect those evading their obligations and those cheating on their taxes should be aware that we will take action when we detect deliberate non-compliance."

Law was also sentenced to 200 hours' community service.

Source: NZ HERALD

Uganda Bankers worried over passing of AML Bill

Bankers have expressed disappointment for the delayed passing of the Anti-Money Laundering Bill, which has been gathering dust on the Parliament shelves for about five years now.

The Bill, bankers say, is aimed at protecting Uganda’s money markets that are hugely susceptible to money laundering.

Speaking at a meeting in Kampala yesterday, Mr Lamin Manjang, the chairman of the Uganda Bankers Association and the chief executive officer of Standard Chartered Bank, said the law is needed to harmonise operations within the banking sector and protect it against fraud, theft and illegal acquisition of property.

He said: “There are guidelines that govern the banking sector; however the anti-money laundering law will provide a level playing ground and security while dealing with customers.”

The law also seeks to protect small and medium enterprises, one of the fastest growing bankable segments; however, much cannot be implemented without a functioning law.

Speaking at the same event, Mr Herman Kasekende, the head of consumer banking at Standard Chartered Bank, said the banking sector has developed a number of services including one-stop banking points, debit cards, borderless banking and online banking, however, such services need to be protected from fraudsters.

The banking sector has improved its penetration, especially in the SME segment, growing almost twice the rate of GDP in most markets across Asia, Africa and the Middle East.

Source: Daily Monitor

Mexico limit cash transactions to fight money laundering

The Mexican government, under fire for not doing enough to starve powerful drug dealers of billions in cash, said Tuesday it would limit cash transactions in U.S. dollars as a way to fight money laundering that helps to feed Mexico's spiraling violence.

Mexico's Finance Minister Ernesto Cordero said new rules, to be published Wednesday, will limit dollar bank deposits, the payment of loans and services as well as well as foreign-exchange transactions in cash to between $1,500 and $7,000 a month.

The tightening of banking rules comes as Mexico's government finds itself in an increasingly bloody struggle with the country's powerful and ever more daring drug lords who exert control over large parts of the country. Violence escalated Tuesday as 15 gunmen were killed in a battle with Mexican soldiers in Taxco, a popular tourist town that has become a battleground for rival gangs, and where authorities last month discovered a mass grave in an abandoned silver mine.

On Monday, twelve federal police were killed in an ambush by suspected drug traffickers in the western state of Michoacán who blocked the highway with buses to stop help from reaching the embattled policemen.

More than 23,000 people have been killed in drug-related violence since President Felipe Calderón ordered the military and federal police to battle drug traffickers shortly after assuming the presidency in December of 2006. Since then, Mr. Calderón has come under increasing fire from critics who say his military approach hasn't worked, and should be supplemented by more measures to strip drug traffickers of their financial assets.

"We are protecting our banking system from dollars that might be from illegal sources," Mr. Cordero said at a news conference. "The measures are designed so they don't affect formal, legal economic activity."

Mexican banks receive more than $10 billion a year in suspicious dollar flows in cash that can't be explained by legitimate economic activity, Mr. Cordero said. U.S. analysts say the amount of drug-related cash coming into Mexico from the U.S. could be as high as $29 billion.

Some analysts welcomed the measures as a necessary first step, but others said they were not enough.

Edgardo Buscaglia, who teaches law and economics at Mexico City's ITAM University, said the measures would increase costs to bank clients while doing little to fight money laundering.

He urged the Mexican government to conduct audits on thousands of companies that the U.S. and the European Union have identified as having connections to organized crime.

Under the new rules, individuals can make deposits or payments for up to $4,000 a month through their bank, while those same transactions are limited to $1,500 in the case of foreigners and Mexicans who don't have bank accounts. Cash dollar deposits and payments by businesses will be restricted to those operating in tourist and northern border areas, and limited to $7,000 a month.

Banks will be allowed to continue to sell dollars to the public, Mr. Cordero said. In recent months, a number of banks have restricted or stopped providing cash dollar transactions, including the sale of dollars to the public. The government said it does not expect the new measures to disrupt Mexico's second and third most important sources of foreign currency—remittances and international tourism, Mr. Cordero said.

Mr. Cordero said the rules affecting businesses will take effect after 90 days.

The government also plans to eventually restrict and regulate local currency transactions related to the purchase and sale of real estate and other goods and services in Mexico as part of a broad push against money laundering, Mr. Cordero said.

"Until real-estate purchases are channeled through the financial system, Mexican drug dealers will continue to launder money as was done in Miami during the 1980s," said Alberto Islas, president of Risk Evaluation Ltd., a Mexico City security consulting firm. Mr. Islas said that about 45% of real estate transactions in Mexico are done in cash. "The measures taken are timid."

Douglas Farah, senior fellow at the Washington-based International Assessment and Strategy Center said the Mexican measures would likely be difficult to enforce. "I think it will add a temporary layer of difficulty to attempts to launder dollars in Mexico, but one that will soon likely be circumvented by corruption or narco adaptation," Mr. Farah said.

Mr. Cordero said that Mexico's banks have agreed to expand the number of ATMs in Mexico by 12% this year and provide more credit card and debit card terminals to retail concerns operating in tourism and border areas, reducing the need for cash transactions. Hotels and other retailers will also have to obtain authorization to operate as banking agents to provide foreign exchange services, Mr. Cordero said.

Banking agents are third parties hired by a bank to perform basic financial transactions.

Write to Ken Parks at ken.parks@wsj.com and José de Córdoba at josedecordoba@wsj.com

Source: Wall Street Journal