Stopping Financial Crime In 3 “Easy” Steps

Stopping Financial Crime In 3 “Easy” Steps

For years now, you have read articles from Global RADAR documenting cases involving criminal offenses such as money laundering, terrorism, and corruption. Some of the more high-profile cases that have been detailed have ultimately had significant effects on the economic and financial development of cities, countries, and entire regions across the globe. The subsequent result of many of these instances has been the implementation of new legislation that seems to always be heralded as “far more potent” than that which preceded it. Yet time and again, we have seen these “enhancements” fall short in their ability to thwart the future action of opportunistic criminals – many of whom continue to capitalize on vulnerabilities and loopholes in legislation without repercussion to this day.  While the efforts made by local and national governments and international institutions to combat unethical practices pertaining to the global financial system through the use of anti-money laundering (AML) and counter-terrorism financing CTF safeguards have been commendable over the past several years, there is still a profound amount of work to be done for these government bodies to truly gain a handle on financial crime around the world.

Earlier this week, The Huffington Post presented an interesting take on how to ensure that individual financial systems will support economic growth in different areas around the world without being misappropriated. The article, titled “Stepping Up The Fight Against Money Laundering And Terrorist Financing”, cited in BSA News Now on Friday, July 28th, 2017, highlighted three areas that have already begun to bring about improvements in the countries in which they have been applied. The first area is in the need of the United States to aid other countries in their efforts to combat corruption and tax evasion – two of the biggest hindrances to a country’s ability to maintain sustainable and inclusive growth. The article provides the example of Greece, a country that has garnered international praise recently for its latest AML updates. Greece’s implementation of AML and CTF procedures has already led to the seizure of nearly a billion euros that were the proceeds of tax-related crimes. While tax evasion and crimes are often viewed as more of a localized issue, what many fail to realize is that as countries conduct business with each other, the economic standings of one country can have a lasting impact on the other. The lack of tax funds collected also impacts government spending seen in critical areas such as education, health, and welfare.  

Another area discussed in the article is the promotion of more effective ways of combatting terror financing, which can be facilitated through the adoption of the latest financial technology (FinTech) and regulatory technology (RegTech) available today. The artificial intelligence tools that are becoming more and more prevalent in 2017 can identify patterns and connections among data that humans likely never could, and can aid in the monitoring and reporting of suspicious financial activity, including small transactions which would ordinarily be overlooked. These factors not only help to protect financial systems against cybercrime and terrorism, but also optimize efficiency and accuracy in practice, and free up funds for institutions and government bodies alike that can be utilized in other crucial areas in the fight against financial crime. This would be huge for countries of all sizes around the world and their ability to limit the crime seen within their borders.

The final area discussed for decreasing misuse of finances is in ensuring “that small and fragile economies have access to correspondent-banking services that connect them to the global financial system” (Lagarde, 2017). The trend of de-risking seen in recent years goes hand-in-hand with this topic. As financial institutions continue to eliminate their correspondent banking relationships in order to reduce their organizational and reputational risks, countries in “high-risk” areas such as the Caribbean and Middle East have seen their economies suffer. The Financial Action Task Force (FATF) recently released guidance on correspondent banking services that outlines the concerns involved with the practice of de-risking, including financial exclusion, reduced financial transparency, and greater exposure to risks such as money laundering for members of the international community. However, many believe these recommendations by the FATF have a chance to reduce the occurrences of correspondent relationships in the near future. Nonetheless, the United States has begun to aid numerous de-risked countries to “develop and implement measures to address the withdrawal of correspondent banking relationships” and incorporate national AML/CTF strategies and supervision over the last several months (Lagarde, 2017).

While these efforts are a step in the right direction for bringing financial criminals to justice and boosting the global economy, it is undeniable that there is much hard work still to be done. Until there is a global system that incorporates true cross-border cooperation between countries of both grand and poor economic standing, the world as a whole will continue to be stuck on a metaphorical hamster wheel of mediocrity in regards to the battle against financial crime

Weekly Roundup

FinCEN Fines Foreign Bitcoin Exchange

For the first time ever, the Financial Crimes Enforcement Network (FinCEN), the bureau of the U.S. Department of the Treasury that identifies and combats money laundering, terror financing and financial threats, issued a fine to a money services organization located outside of the United States. On July 26th, FinCEN levied a fine in excess of $110 million (USD) against the digital currency trading and exchange platform BTC-e for their violations of U.S. anti-money laundering (AML) laws. In addition to the civil penalty, a 21-count indictment and $12 million fine was delivered against Russian national Alexander Vinnik, who has long been tied to the platform, for his role in the alleged money laundering and other unlawful monetary practices. According to an article written on these developments, Federal prosecutors allege that BTC-e functioned as a “clearing house for illicit funds sourced from computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings” (Higgins, 2017).

The penalties issued against BTC-e will likely set the precedent for the future proceedings of international money transmitters and virtual currency platforms operating under, and defying, U.S. legislation. FinCEN director Jamal El-Handi in a statement on the indictment and fines said, “This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards” (Nation, 2017).

EU Countries Disregarding 4th AML Directive

Earlier this week, European Union (EU) Justice commissioner Vera Jourova reported that despite being granted ample time to incorporate the new anti-money laundering laws found in the Fourth EU Anti-Money Laundering Directive, approximately 17 countries in the European Union have failed to do so to date. The new legislation, which was to take full effect on June 26th, 2017, called for EU member states to establish “national registers showing the ultimate ‘beneficial owners’ of companies, which can then be accessed by authorities throughout the EU” (Brunsden, 2017). Enacted with the purpose of making it more difficult for criminals and terrorist groups to conceal their funds through complex corporate structures in Europe, the new laws also demanded financial institutions and law firms to comply with tougher due-diligence requirements.

Thus far, only 11 of the 28 countries in the EU have confirmed the full implementation of the new regulation. These countries include the UK, France, Germany, Italy, Spain, Slovenia, Sweden, Austria, Belgium, the Czech Republic and Croatia. In a statement on the issue, Jourova regarded the blatant disregard of the new legislation as “unacceptable”, stating that she has sent letters to 14 countries over the course of the past week regarding their failures in incorporating the new rules altogether. Jourova also sent an additional three letters to other countries that have only partially implemented them. She expects the countries in receipt of these notifications to move quickly to mend their failures, particularly due to the recent release of a report published by the Justice Commission which detailed areas more vulnerable to money laundering, including crowdfunding platforms, real estate markets, and cryptocurrency to name a few.

Exxon’s Response to OFAC Fine

On July 20th, ExxonMobil Corporation was issued a $2 million (USD) fine by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) for reported violations of the Ukraine-Related Sanctions Regulations that came just two months after the imposition of said sanctions in early 2014. The violations stem from a series of deals signed by ExxonMobil with Igor Sechin, the CEO of prominent Russian oil company Rosneft. The fine marks just one in a recent slew of penalties issued by OFAC against non-financial institutions, as the bureau has specifically aimed to crack down on oil and gas organizations that are actively violating U.S. sanctions through their business transactions. Since the fine was issued, ExxonMobil responded with a lawsuit against OFAC over what they have openly regarded as an unfair and inaccurate decision.

Exxon has contended that their business with Sechin was permissible due to the interactions being “professional rather than personal” and the fact that no services were provided to Exxon by Rosneft following the signing of the deal. OFAC responded with a statement saying, “that the language of the sanctions is clear and does not include a  ‘personal’ versus ‘professional’ distinction”, and added “the company’s top executives were aware of Sechin’s sanctioned status when they did business with him” (Kennedy, 2017). The lawsuit seems to be more over principle and saving face than financial loss, as a $2 million fine represents just a small fraction of the earnings made by ExxonMobil over the course of a 24-hour period. The odds are against ExxonMobil in this case, as industry experts versed on these developments have sided with OFAC thus far, and have stated that OFAC very rarely loses cases of this nature.

Global RADAR will provide an update on this case in the weeks to come.


Brunsden, Jim. “EU Warns on Not Applying Money Laundering Rules.” The Daily Star Newspaper – Lebanon. 24 July 2017. Web. 

Higgins, Stan. “$110 Million: BTC-e Fined as US Vows Crackdown on Bitcoin Exchanges.” CoinDesk. 27 July 2017. Web.

Kennedy, Merrit. “Exxon Mobil Sues After Treasury Fines It $2 Million For Alleged Sanctions Violations.” NPR. 20 July 2017. Web.

Lagarde, Christine. “Stepping Up The Fight Against Money Laundering And Terrorist Financing.” The Huffington Post., 26 July 2017. Web.
Nation, J. FinCEN Fines BTC-e For Violating U.S. Anti-Money Laundering Laws. ETHNews. 2017 July 26. Web.

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