The AML Watchman

The world of AML has changed out of all recognition over the last decade. Old crimes are subject to new laws, professional firms and financial institutions are subject to criminal sanctions and regulatory review as never before. Yet the individual client has virtually no say over what various national governments and their competing departments are doing to their rights and liberties in their name. This blog attempts to address the dilemma posed by the question “Quis custōdiet ipsōs custōdēs?”

Sunday 27 November 2011

Asset Seizure vs Human Rights Act

Image via Wikipedia

According to the Daily Mail (you may have your own views on Tabloids) a convicted drug baron is to resist an order to stop running his criminal empire from inside prison on, yes you guessed it, Human Rights grounds!

Here is the link: It's my right to run my business???

Who do you think the courts will rule in favour of?

I feel another Golden D'oh coming on!

Saturday 26 November 2011

Customer Due Diligence (KYC); Reliable Information Sources

Image via Wikipedia

Firms and professionals who are covered by AML and Coutner Terrorist Finance (CTF) are encouraged to look for adverse media reports to help monitor their ‘know your client’ (KYC)profiles and to use typologies as the basis for risk review /red flag identification.

The most excellent financial crime journalist, Helen O'Gorman, is currently working in Asia and has started an excellent blog. Financial Crime Asia: Typology or Rumour Mongering

The above link is a very useful article on some of the advanatges and pitfalls of using the web to supplement your knowledge of your clients activites, alleged or otherwise.

BTW, Helen's articles are always worth following as a reliable source.

All the best

Friday 25 November 2011

Olympus Cameras 3: Will the the Whistleblower win?

Image via Wikipedia

Michael Woodford, the former CEO of Olympus Cameras, appears to be in a very strong position, following his return to Japan.

Their are numerous articles with the one from the Financial Times giving the most succinct update on what has been happening. Hollywood return for Olympus man driven out of Dodge

Mr Woodford's whistleblowing efforts really appear to have achieved some traction. However, I feel that we are all still at the beginning of this story.

As the FT article states:

"Although Olympus has admitted wrongdoing, many mysteries remain, including the size and origin of the investment losses it says it covered up and the role of outside financiers in the deception – as well as how much its enablers were paid for their help."

Let us not forget that from an Anti-Money Laundering (AML) point of view, Olympus would have been regarded as a low risk of money laundering ( publicly listed on an international stock exchange), assisted by very well respected international advisers and financial institutions, (who may have been complicit, or asleep at the wheel or totally innocent) and loaded with seemingly legitimately earned cash.

I wonder, how many firms declined business opportunities with Olympus after 2008 on a risk based approach? How many AML experts sent up a warning flag after this disclosure started? How many firms blamed their AML departments for failing to see this coming?

Oh and by the way, before we get carried away by the Hollywood analogy and the possibility of the whistleblower winning, check out the third reference article in the list below.

Watch this space.

Related articles

Wednesday 23 November 2011

Olympus Cameras & the "Good Guys": A study in divergent agendas?

The word Yakuza written in Katakana

As promised, I'm back on the developing story of Olympus Cameras (OC).

There have been rumours circulating that Japanese Organized Crime gangs (The Yakuza) have been involved in helping conceal the investment losses that have occurred in the OC. Take for example this story from Reuters: Yakuza crackdown may derail effort to Olympus listed

On the other hand, there are quite clear denials that there has been any evidence found of organised crime involvement, in this case in the Financial Times: Olympus panel says no Yakuza involvement

The first point I would like to make is that different Government agencies and regulators have different agendas. An intelligent whistleblower may, at least in the beginning, try to match their disclosure to the agency that most closely reflects the area of public concern.

But it would be rash to assume that once the disclosure has been made that the receiving agency has the interests of the whistleblower at heart and/ or that they will support the whistleblower going forward.

Secondly, I’ve had some experience with Japanese culture and, together with the Sony information debacle, the leaks form the nuclear power plant, and the commercial property fiasco of the mid-1990's, I'm tempted to add a few personal observations.

• When things first go wrong, a Japanese corporate culture tends to close in against the outsider.

• The tendency to deny everything triumphs to begin with and then the truth dribbles out.

• Regulators who may have appeared to be asleep at the wheel then go into overdrive to prove their worth.

• Exasperated international shareholders start to exert pressure to get an independent report

• The firm involved usually ends up doing the right thing.

• The Yakuza show up somewhere along the food chain (NB Nothing yet re the Fukushima incident).

As ever, your comments are welcome.

Related articles

Friday 18 November 2011

Asset Seizure: Would following American Practice Help Boost The Amounts Recovered?

As you know, one of the most disappointing aspects of the UK's AML regime has been the widely acknowledged under performance of the asset recovery systems put in place by POCA.

The following information is from SOCA's 2010/2011 Report (I've removed the footnotes for ease of reading).

Category Value at 31 March 2011

Cash seizures £5.7m
Restraint orders £45.8m
Assets frozen (civil and tax powers) £13.7m
Confiscation orders obtained £33.8m
Civil recovery orders £2.0m
Consent orders £7.5m
Value of assets denied by partners in £44.8m
the UK as a result of SOCA referrals
Value of assets denied by partners £174.3m
overseas supported by SOCA

Total assets denied to criminals £327.6m

Now I tend to use estimates of Money Laundering occurring in the UK: £20-£40bn per annum.

That asset recovery is so miserable is bad enough, however, IMHO the UK Government should resist any siren calls to relax procedures because we could end up with an American style system. Check out paragraphs 7 and 8 of this story in The Daily Mail: Cynical but true?

So, as SOCA evolves, my advice would be to keep an eye on changes to the Asset Recovery system.

Thursday 17 November 2011

Olympus Camera: A cautionary story for potential whistleblowers...

Moments after the whistle is blown????

Some tips and useful links for potential whistleblowers and whistleblowees!

This link ( The Independent: Friday 21 October 2011 ) is to an article that should be read by any potential whistleblower before they act.

If you accept the facts and the timeline as reported as accurate, (N.B. There are always two sides to any story and we are not at the end yet of this saga) then the point I would like to make is don't expect the recipient of "the bad news" to be grateful.

The whistleblower’s firm might indeed adopt the policy of shooting the messenger and attempting to explain away the incident as a cultural or personality clash.

What is worse, in my experience, is the fact that the regulators and or law enforcement won’t “ride to your rescue” and they may well make your position utterly untenable.

In all too many cases, as in this current affair, it is not until the whistleblower has ”kicked” the authorities in different countries that they will act.

As I’ve been involved in a number of whistleblowing events, before you act, please remember that:

1. You should seek legal / specialist advice ASAP.

2. Your professional circumstances may well change very fast.

3. Your family and friends might be the ones who bear the brunt of any comeback.

4. In extreme circumstances, your personal safety might be at risk.

5. Where possible, keep written evidence of what you believe has been going on.

6. Anything you do may well end up taking far longer to resolve, sometimes in terms of years, for the situation to be resolved.

Instead of the usual links to other related stories, you will find below some links to websites that

Now some quick tips for firms (or the whistleblowees) :

1. Make sure that your staff have access to effective, simple and (in the beginning) anonomised whistleblowing systems and procedures

2. Don’t shoot the messengers, who bring you an inconvenient truth, they may be the people who are actually trying to help save the long term future of the company.

3. Resist the siren calls of the advisors who recommend that you target the informer rather than fixing the issue.

4. In my view, serious incidents of any kind are almost inevitable in the current tough business environment. But just like politicians, it is not the issue itself that kills you but any attempt to cover it up!

Your comments are, as always welcome.

Public Concern At Work: Contact Details

The Financial Services Authority Whistleblowing Section of the website

Direct Gov Website on whistleblowing

US SEC Adopts Rules to Establish Whistleblower Program

US SEC Office of the Whistleblower Website

Wednesday 16 November 2011

Olympus Cameras (Background):

This article from the Daily Telegraph, A quick overview (with some interesting links) sets out both where the Olympus Cameras story was at the start of this month, what the UK connection is to this and just how complex this could get.

Enjoy,

Olympus Cameras 2

The camera never lies 2. (Image via Wikipedia)

I’ve written on this blog before on this interesting story of the former UK CEO of Japan’s Olympus Cameras and this $1 billion of obscure (suspicious?) payments. Well Reuters (please see attached story) has just reported that the Serious Fraud Office has launched an investigation (not confirmed by SFO at the time of writing) into what has been going on. Given that this story will probably run and covers whistleblowing, ethics, internal controls, different cultures and what POCA might consider “criminal property”, I’ll be following this story, plus background in more detail on this over the coming days.

Please feel free to comment / feedback,

Sunday 13 November 2011

Are UK AML laws & regulations removing enought of the proceeds of crime?

Image via Wikipedia

Is the Colombian president speaking truth to power?

For those of you who remember the introduction of the draconian AML laws and regs in the early part of this century, you will recall that among the reasons given for such radical changes in the practice of AML was the stated target of allowing the Government to remove the proceeds of crime (and therefore the motivation for lots of crime) from the equation.

IMHO, not enough cash and assets are being siezed by the UK's authorities but those changes do allow government to police the compliant.

However, the President of Colombia, thinks that the USA, UK and EU should be doing more in terms of dealing with the global drug trade, including the possible legalisation of drugs:

The Observer: Colombia's president calls for governments around the world, to debate legalising certain drugs – inc. cocaine

Now I might not agree with that approach, but I'm certainly open to hear your views.

Saturday 12 November 2011

Well done the Derbyshire Police!

Image by i be GINZ via Flickr

What price effective policing!

This kind of sting has been used before, nevertheless it still makes me smile.

Free beer offer snares suspects

According to one ranking officer from the Derbyshire Police, some of these suspects / brain boxes were still asking for their "free beer" as they were being booked at the station!

Friday 11 November 2011

Is POCA being used to take the cash out of crime? I fear not...

UK Border official gave away visas for tens of thousands of pounds

The Linked article from today's Telegraph (link above) neatly illustrates a number of points:

1) If POCA was meant to take the cash out of crime, why didn’t the CPS go after the cash in this important and high profile case? (Please see article from the Mail: Prosecution could not prove he took bribes?

2) You can have the best CDD systems in the world, which are absolutely useless if Government issue "correct" but illegally obtained visas

3) IMHO, money launderers are not stupid and they will always go after the weakest link in any chain, even if they are Government officials.

4) The UK's Border Agency simply is not fit for purpose.

Feel free to comment.

Wednesday 9 November 2011

UK Bribery Act 2010: A useful independant source of information

This is a view of a Corruption Index FYI

One of the issues for those fighting financial crime is the location of reputable, independant on certain subjects.

I like to remind my client's that Transparency International (a global civil society organisation involved in the fight against corruption, Transparency International's Website) exists to help.

The recent publication of the Bribe Payers Index 2011 is a useful tool for those firms with international clients in the relevant countries, especially the perception rankings of the 19 business sectors listed as engagaing in bribery.

The press release is here, Press Release: But have a good poke around the site at the same time.

How many firms have checked their Politically Exposed Persons lists to see if there is any overlap? Hmmm.....

Tuesday 8 November 2011

Did the questioning of Suspicious Transactions cost the Olympus CEO his job?

Image via Wikipedia

The Camera Never Lies?

This story will continue to develop but, IMHO, is a useful example of the price (risks?) that effective senior managers, including MLRO's and Nominated Officers, when questioning unusual or suspicious payments.

At first blush, it does appear that the UK's ex-CEO of Olympus Cameras (Mr Michael Woodford), who has been campaigning since being sacked (on October 14) to force the Japanese firm to come clean on $1.3 billion in questionable payments was right.

See details here: Today's story from Reuters

If you are not directly involved, this story has all the classic problems:

An outsider (in this case a Brit) questions the logic and reasoning behind an established practice
The outsider is right
It is a senior management issue that does not want to be resolved
Doing the right thing rather than the culturally acceptable thing costs you your job.

Fair comment?

You be the judge.

Sunday 6 November 2011

US Mortgage Fraud: Is that the sound of a stable door being bolted?

FINCEN has it's eyyes on us

You sometimes come across press articles in the strangest of places that add to your general enjoyment of life.

This report from The Cypress Times (FINCEN PROPOSES ANTI-MONEY LAUNDERING/SUSPICIOUS ACTIVITY REPORTING RULES FOR FANNIE MAE, FREDDIE MAC, FEDERAL HOME LOAN BANKS) outlines FINCEN's proposals to bring Freddie Mae and Fannie Mac into the Mortgage Fraud reporting system.

Given where the 2008 global financial crisis started in the US with some truly ridiculous mortgage products, I can only say, better late than never.

Saturday 5 November 2011

Were the Met Police regularly hacking communications by using a suitable interpretation of RIPA?

Image via WikipediaI found this interesting article from The Spectator's Jonathan Jones.

I particularly liked the first two comments from reader's feedback.

Were the police hacking phones too?

I suppose the key questions are:

What have the Met Police been doing in our name?
Who has or should have been supervising their activities?
Should RIPA be reviewed?

I find myself agreeing with the article's conclusion that this story has quite a long way to run.

Friday 4 November 2011

Feel safer now?

Security camera at London (Heathrow) Airport. ...

Image via Wikipedia

Why police criminals when you spy on the compliant?

The evidence that UK has built a society based upon suspicion, distrust and government spying during the period that the Labour Party and its public "service" clientele last governed the UK continues to emerge.

The report published today by Justice entitled "Freedom from Suspicion. Surveillance Reform for a Digital Age" supplies both the evidence of widespread disproportionate use of covert surveillance for the most minor of civil issues, a wholly unsatisfactory oversight regime and a clarion call for a sensible review of how the innocuous sounding RIPA Act of 2000 has been used.

I'll return to this report later on, but in the meantime here are some of the most germane points from the Executive Summary of the report:

"• Surveillance is a necessary activity in the fight against serious crime. It is a vital part of our national security. It has saved countless lives and helped convict hundreds of thousands of criminals.

• Unnecessary and excessive surveillance, however, destroys our privacy and blights our freedoms.

• RIPA has not only failed to check a great deal of plainly excessive surveillance by public bodies over the last decade but, in many cases, inadvertently encouraged it. Its poor drafting has allowed
councils to snoop, phone hacking to flourish, privileged conversations to be illegally recorded, and CCTV to spread. It is also badly out of date.

• RIPA is neither forward-looking nor human rights compliant. Piecemeal amendments are no longer
enough for what is already a piecemeal Act. Root-and-branch reform of the law on surveillance is needed to provide freedom from unreasonable suspicion, and put in place truly effective safeguards against the abuse of what are necessary powers.

• This report, therefore, outlines a series of recommendations to serve as the basis for a draft Surveillance Reform Bill. "

Here is the link to the report: JUSTICE-Freedom from Suspicion .Surveillance Reform for a Digital Age

Thursday 3 November 2011

Police, Aircraft, Action! Well done those Brazilians!

Image via Wikipedia

Quite by accident, this blog seems to be developing something of a flying theme.

This is just a quick well done to the work of Brazilian Federal Police in Ribeirão Preto. Their assertive police style leads to a Hollywood type intervention in the pursuit of five drug smugglers attempting to flee in a small private plane.

So enjoy the video clip, (it's at the bottom of the article).

In the meantime:

"Batteries to power, engage thrusters, Ramming Speed!"

Read more: http://www.dailymail.co.uk/news/article-2056874/Brazilian-police-ram-moving-plane-arrest-drug-smugglers.html#ixzz1cdKyf0RR

Wednesday 2 November 2011

Into the wild blue yonder (never to return)

On the other hand, I may be worrying a bit too much about Police Forces being able to utilise modern technology to spy on their own citizens.

The loss of the £13,000 Unmanned Aerial Vehicle (following a close encounter with the River Mersey) and the decision to not to replace it may mark a return to common sense. Detials from the Daily Mail:

Police Drone Lost At Sea!

To be fair, the Merseyside Police has had problems with the liscensing of this "eye in the sky" even when it helped nab suspects on the run (as this extract from the Daily Telegraph from last year demonstrates).

http://www.telegraph.co.uk/technology/news/7248756/Eye-in-the-sky-arrest-of-a-teenage-thief-could-land-police-in-court.html

Any force thinking about purchasing a UAV might like to at least consider one the advice given in one of the less well known verses of the US Air Force Song:

"Off we go into the wild sky yonder,
Keep the wings level and true;
If you'd live to be a grey-haired wonder
Keep the nose out of the blue! (Out of the blue, boy!)"

Related articles

Tuesday 1 November 2011

Can't account for the cash? You can still be convicted....

Image by ROSS HONG KONG via FlickrA story from Bristol in which a pair of non-UK nationals could be deported, if the UK is allowed to under the Human Rights Act!