A barrister has accused HSBC of trampling on the concept of personal privacy by demanding the power to snoop on customers’ safe deposit boxes and dump “offensive” items.

According to a letter sent to clients last month, a copy of which was obtained by the Post, the bank said that under new conditions of its leases for the lockers it had the right to dispose of any items it considered illegal, of an “offensive” nature or likely to be a “nuisance”, in any way it saw fit and without prior notice or consent.

The letter did not clarify what HSBC meant by “offensive” or “nuisance”, and did not explain under what circumstances bank staff would be able to inspect the boxes.

It asked clients to sign and return the letter within one month to confirm their acceptance of the updated conditions, so “we [HSBC] can continue providing you with the Safe Deposit Locker services”.

Barrister Neville Sarony, SC, said the updated conditions gave HSBC “totalitarian rights” over the contents of the boxes and offended against the concept of personal privacy. He said the effect of the terms was to give the bank a contractual right to open the boxes for inspection and deal with the contents at their absolute discretion.

“This is a ridiculous and grossly invasive power which makes a nonsense of the whole purpose of a safety deposit box,” Sarony said.

“Granting HSBC the unlimited right to snoop in your box and dispose of its contents without prior warning makes a total nonsense of the word ‘safe’.”

An HSBC spokesman confirmed the bank had updated the lease conditions of its safe deposit boxes for customers who acquired the service before December 2004 to keep its policy in line with lease conditions since then.

He said the nature of the safe deposit locker service meant it had the potential for “misuse for criminal purposes”.

“HSBC has a clear commitment to defend the integrity of the financial system against activities such as money laundering,” the spokesman said.

He added that conditions had been updated to strengthen the bank’s defences against financial crime and to facilitate cooperation with law enforcement agencies.

“We want to reassure … these changes to the terms and conditions will not in any way reduce the security and privacy of our safe deposit locker service.

”The changes also give HSBC the right to terminate a lease with immediate effect in the event of a client’s failure to comply with any of the conditions.

The spokesman stressed that only the client and his or her appointed representative would have access to the locker.

But the bank failed to provide affected clients with a copy of the old lease conditions for comparison, citing difficulties sourcing the previous terms and conditions, the Post has learned.

“Why they wouldn’t have a record of legal documents going back to this date is simply beyond me,” a client who received the letter lamented to the Post, saying he was worried that HSBC would terminate the lease on his locker if he failed to sign the letter.

“Would a customer’s collection of autographed pornography be considered ‘offensive’ by the bank and be disposed of?” he asked.

“Does it mean that the staff can now access any of our safe deposit boxes at will, rifle through our personal belongings and make a subjective decision of what they might consider ‘offensive’ and then dispose of the items without our consent?”

He said his confidence in HSBC had been badly shaken.

Safe deposit boxes are in short supply, with long waiting queues at most banks, which charge up to HK$20,000 a year for the service. It was reported a number of years ago that some clients had used them to store the ashes of relatives.

A spokesperson for the Consumer Council said banks should consider providing guidance with relevant examples to demonstrate the rationale for the amendments, and give ample time for customers to make informed decisions.

A Hong Kong Monetary Authority spokesman declined to comment on individual cases but said the authority expected banks to be highly transparent in their dealings with customers, and “treat all customers fairly at all stages of their relationship with the banks”.

Source: South China Morning Post

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One of the City’s biggest banks is embroiled in a row with five analysts it made redundant last month after alleging that they breached company email policies.

Sky News understands that Nomura, the Japanese group which bought the London-based operations of Lehman Brothers in 2008, is taking action against the analysts, who it alleges sent research notes they authored to personal email accounts.

Nomura is understood to be considering a range of disciplinary measures including withholding elements of the analysts’ redundancy packages, according to City sources.

The Japanese bank is said to believe that three of the unnamed analysts contravened company policy before they were put ‘at risk’, or served notice that they were at risk of losing their jobs, the sources added.

Nomura declined to comment on Tuesday on the disciplinary proceedings or on the potential sanctions against the individuals affected.

News of the dispute comes amid a jobs bloodbath in the City, with major banks axing thousands of jobs because of the industry’s tough trading conditions.

Nomura is shedding roughly 500 members of its London-based workforce, a move which includes the closure of much of its equities division, reflecting the difficulty it has had competing with Wall Street and European banks since 2008.

Other institutions, including Barclays, Credit Suisse, HSBC and Royal Bank of Scotland, are also implementing deep job cuts as regulatory compliance costs mount and many revenue-generating activities perform weakly.

Source: Sky News

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The Hong Kong Securities and Futures Commission (SFC) announced today that its Chief Executive Officer (CEO), Ashley Alder, was appointed as chair of the new Board for the International Organization of Securities Commissions (IOSCO), according to an SFC press release.
The Board of IOSCO is represented by 34 securities regulators and it acts as the governing and standard-setting body for IOSCO – a leading international policy forum for regulators which represents 115 jurisdictions or 95% of the world’s securities’ markets.
IOSCO just concluded its annual conference in Lima Peru yesterday. At the end of the five-day event, the inaugural meeting of IOSCO’s new board took place, immediately preceding a panel about fintech and blockchain challenges – before the closing remarks wrapped up the event.

Mr. Alder was previously Vice Chair of the IOSCO board, and had also served as the Chair of IOSCO’s Asia-Pacific Regional Committee over a three-year span until 2016, and had also chaired the organizations’ task force on cross-border regulation. In addition, the press release noted that he currently heads the task force on market conduct.

Commenting on the appointment, SFC Chairman, Carlson Tong, said in the press release: “I am delighted with Ashley’s appointment to chair the new IOSCO’s Board which demonstrates Hong Kong’s standing as a leading international financial centre.”

According to information on the SFC website, Mr. Adler’s appointment as CEO of the SFC is set to expire on September 30th of 2017, representing a term of nearly six years after his initial appointment on October 1st 2011.
He had previously worked as an executive director with the SFC in 2001 for a nearly four year period and contributed to a number of initiatives ranging from work related to public company listings to futures trading related ordinances, policy initiatives and efforts to help improve corporate governance.
Compliance Background
Initially starting his career as a lawyer in London, after graduating with a Bachelor of Laws degree from the University of London in 1982, and with first-class honours from the University of Cambridge with the Master of Laws degree in 1983, according to an SFC profile description.

Mr. Adler practiced law in Hong Kong for over 20 years, and was Head of Asia of the international law firm Herbert Smith LLP in Hong Kong, and focused within capital markets on equities, mergers and acquisitions, and private equity and venture capital, as well as handling compliance and regulatory matters.

Source: Finance Magnates

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A Manhattan federal judge on Thursday revived a whistleblower claim by a former Agricultural Bank of China Ltd (601288.SS) chief compliance officer in her $8 million (6 million pounds) discrimination lawsuit against the Chinese state-owned bank.

U.S. District Judge Paul Engelmayer said Natasha Taft may try to show that AgBank reduced her authority and disparaged her in retaliation for her reporting a possible violation of the Bank Secrecy Act, an anti-money laundering law, to the Federal Reserve Bank of New York.

Engelmayer had in January rejected the whistleblowing claim, but revived it after Taft’s amended complaint added “substantial new allegations” about what she told the New York Fed.

Taft claimed that AgBank drove her to quit last June, after just 10 months on the job, by discriminating on the basis of her whistleblowing and her gender, including comments by senior colleagues about her physical appearance. She said she had been the only non-Chinese female manager in AgBank’s New York office.

Glenn Kurtz, a White & Case partner representing AgBank, did not immediately respond to requests for comment.
The amended complaint outlined communications between Taft and a New York Fed supervisor over whether AgBank might have been violating the Bank Secrecy Act’s “Travel Rule” by concealing customer identities on many transactions.
Taft said that after the New York Fed in February 2015 urged AgBank to improve its screening, management “became furious” and sought to punish her for “impacting their business and exposing the bank to potential compliance and regulatory consequences.”

AgBank countered that Taft had merely sought guidance from the New York Fed, that it could not have retaliated against her because she never revealed what was said, and that a report to the New York Fed did not qualify for whistleblower protection.
But Engelmayer said Taft alleged that the New York Fed “clearly had concerns” about AgBank, and that he could not say these concerns “did not bespeak a possible violation of law.”
He also said it was “more consistent” with the purpose of the Bank Secrecy Act for someone like Taft to report concerns to a local regulator she might already be familiar with.
“Compliance officers act as arms of the government, and this decision reinforces the rights that these individuals have in the workplace,” said Brian Heller, a lawyer for Taft.

The case is Taft v. Agricultural Bank of China Ltd, U.S. District Court, Southern District of New York, No. 15-05321.

Source: Reuters

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Companies should no longer be accepted as being from the British Virgin Islands without having a significant share of their revenue and assets actually produced there.

Hong Kong serves as a hub for the operations of Mossack Fonseca, the law firm at the centre of the Panama Papers leaks that revealed how the world’s wealthy store their money in secretive offshore investments. Almost 25 per cent of the firm’s clients originate from or through Hong Kong-based affiliates. HSBC alone has created more than 2,000 shell companies.

The leaks unearthed the Panamanian firm’s connections to tycoons Li Ka-shing and the Kwok brothers, and even to Polytechnic University. Our city manages more than HK$15 trillion from around the world, with close to HK$3 trillion of that in private banking assets. Almost 160 out of every million people in Hong Kong have a net worth of more than HK$230 million.

So what can Hong Kong’s legislators do to stop Hong Kong appearing on future blacklists of tax havens along with Panama?
Some of the work simply involves speeding up initiatives already under way. The government has already required corporate directors to know exactly what their companies do or answer personally for those companies. The entire Hong Kong financial and professional services industry has spent years and about US$11 billion a year to comply with the ever-growing anti-money-laundering laws coming out of Tamar.

Depressingly, however, these represent only baby steps on a longer road.

As we discuss the options in the months and years ahead, we may wish to look at proposals from noted legal scholars. Many of these regulations already exist in other jurisdictions, and aim to refine regulations to separate legitimate practices from unsavory ones.
One proposal deals with tackling shell companies. Reforms to the Companies Ordinance could prevent the formation or use of companies without a “significant business purpose based on the direct offer of goods and services”. As such, firms would no longer be able to set up companies with the sole purpose of protecting them from legal liability, hiding final ownership, or reducing tax liability.
Companies could be automatically dissolved if they did not have “an annual meeting and directors’ deliberations” conducted “in a way that a common person might deem that the business engages in a substantive, economic purpose”.
And what about the “special purpose vehicles” that make up a large share of incorporated companies in jurisdictions like Hong Kong? Some academics might require that special purpose vehicles (corporations that simply hold assets and issue shares which different people can hold) have an “SPV” designation. Any limited liability companies or limited companies without employees and income derived from the transformation of inputs into outputs should have the acronym “SPV” in their official name. In this way, investors in minibonds would have known that a company called Pacific International Finance Limited SPV was not a “real” company.

A “real premises rule” would mean “postbox companies” could no longer register, list, or take on financial obligations in Hong Kong. Nor could companies set up in so-called postbox warehouse jurisdictions. You already know where these jurisdictions are – they host the buildings you see on television with thousands of companies registered in them but with few employees or little office work taking place. Any company from a jurisdiction allowing such postbox warehouses would need to prove their official address corresponds to a site of significant economic activity.
How can Hong Kong clean up listed companies? A large share of the city’s listed companies come from the British Virgin Islands, the Cayman Islands and other secretive jurisdictions. One proposal might include dividing the main board of listed companies into two – a Hong Kong main board and an offshore board. Companies registered in, or doing business through, the British Virgin Islands, the Caymans, Bermuda or Panama could only list on the offshore board. Such a move (in advocates’ minds) would at least let investors discern which companies the Securities and Futures Commission and Hong Kong Monetary Authority can really supervise from those it only kind-of supervises.
Doesn’t anyone else think it was crazy to include British Virgin Islands and Panamanian rules in Hong Kong’s own Company Secretary’s Handbook

(which was at least the case until recently)?

Other possibilities abound. Rules could require listed companies to publicly post online all their professional services agents for commercial transactions, or at least require their disclosure if they use “industrial corporate services agents”. These agents derive at least 80 per cent of their income solely from incorporating and registering business entities. Imagine if companies everywhere had to put the name Mossack Fonseca on their list of service providers, or face delisting?

Why doesn’t the Inland Revenue Department just require the withholding of 5 per cent of the value of revenues derived via jurisdictions allowing industrial-sized postbox premises hosting virtual companies? If a vehicle is set up in a jurisdiction which allows the industrial-scale use of the vehicles Mossack Fonseca dealt in, they would be made to leave a fee at the door (much like the much-reviled withholding scheme in the United States). The profitability of shell structures would then evaporate quickly.

What would then happen to Hong Kong’s company incorporation and secretarial services businesses? They would need to move up the value chain – offering more advisory business. The incorporation agents standing on Wan Chai bridge would go out of business. The directors and secretaries theyprovide would face personal criminal liability.

At the heart of all these reforms lies the ending of the automatic recognition of entities incorporated offshore. Companies could no longer come from the British Virgin Islands without having a significant share of their revenue and assets actually produced there.
If Legislative Council members could pass reforms through a sexy-sounding law such as the Panama Papers (Companies Reform) Ordinance, so much the better.

Sorce: SCMP

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DHAKA, Bangladesh—Bangladesh’s central bank is trading accusations with the Society for Worldwide Interbank Financial Telecommunication, or Swift, over who is responsible for the theft by hackers of $81 million from the bank’s account at the Federal Reserve Bank of New York.

Bangladesh authorities said their central bank’s decision last year to connect its international and domestic fund-transfer systems inadvertently led to the February heist. Swift carried out the work, which Bangladesh police said left the combined network vulnerable to infiltration from the Internet.

Experts have found traces of multiple hacker groups, including ones from North Korea and Pakistan, active in the bank’s network in the run-up to the heist, according to a person close to the investigation. But, the person said, it was a third group, whose origins remain a mystery, which is believed to have stolen the money.
The North Korean embassy in Dhaka and Pakistan’s Foreign Ministry didn’t immediately respond to emails seeking comment. The U.S. Federal Bureau of Investigation last year accused North Korean hackers of breaching Sony Corp., something the North Korean government denied.

The cyber thieves used Bangladesh Bank’s Swift credentials to divert money from Bangladesh’s foreign-reserve account at the New York Fed to fraudulent bank accounts in the Philippines. The bulk of the money disappeared into the Philippines’ murky casino industry, according to a criminal case filed by the Philippines Anti-Money Laundering Council. Bangladesh police officials say some of the stolen funds may have been moved out of the casinos to Hong Kong and China.

On Friday, Swift, whose network is used by financial institutions world-wide to transfer funds, warned customers that cybercriminals had carried out a similar breach at an unnamed commercial bank. A Swift notice said the two cases were “part of a wider and highly adaptive campaign targeting banks.”

Swift also said software used by its members to check transaction statements had been compromised by malware, sparking concerns about security at the heart of the international banking system. Swift urged banks to urgently review all controls in “messaging, payments and ebanking channels.”

Muhammad Shah Alam, deputy inspector general of Bangladesh Police’s Criminal Investigation Department, said Swift technicians had “deviated from the approved plan of installation” when connecting the computer systems, causing the Swift server at the central bank to be connected to “internet-facing computers.”
In February, around $100 million went missing from Bangladesh’s account at the New York Federal Reserve. Authorities are still piecing together what happened. This is what we know.

Mr. Alam also said Swift had used third-party vendors for some of the work, which could have led to an increased risk.

Natasha de Teran, a spokeswoman for Swift, said, “All services are and were performed on the instructions of Bangladesh Bank.” She added that “No deviation from an agreed assignment could” have been made by Swift without the consent of Bangladesh Bank.

Ms. de Teran said Swift, along with a contractor, “provided support services.” She declined to identify the contractor. Swift has previously said the attack was related to an internal operational issue at Bangladesh Bank and that Swift’s core messaging services weren’t compromised.

Subhankar Saha, a spokesman for Bangladesh Bank, said he couldn’t comment on whether the agreed scope of work required a server link to the Internet.
“We never knew and Swift never told us there should be firewall segregation between the Swift server and our internal network,” a former employee of the central bank’s information-technology department, who declined to be named, said.

People close to the investigation said this week the FBI had found evidence that one or more Bangladesh Bank employees aided in the theft. That possibility was played down by some of the cyber investigators, who said the evidence suggests the entire operation could have been carried out remotely.
Mr. Saha, the spokesman for Bangladesh Bank, said previously: “The central bank is pursuing this case with the utmost vigor and if anyone within the bank is found to be involved, we will take legal action as appropriate.”

The person close to the investigation said the probe has focused on a suspected criminal gang that has a history of attacking banks, usually casting a wide net by launching a “phishing campaign” that uses malicious emails to see which banks they could find with inadequate security controls in place.
A report by cybersecurity company FireEye Inc., hired by Bangladesh Bank to investigate, described the perpetrators as an “uncategorized threat group.” A FireEye spokesman declined to comment on the continuing probe.

Investigators believe this gang stumbled onto the Bangladesh Bank network and quickly realized the potential financial gain as Bangladesh had amassed record foreign reserves at the beginning of the year, driven by garment exports and remittances from migrant workers.
Bryce Boland, chief technology officer for Asia Pacific at California-based FireEye, said the pattern of attacks was a wake-up call for financial institutions world-wide.
“Attackers know that targeted attacks on banks can be lucrative and now the advanced malware they need is available. I expect copycat groups to launch similar attacks,” he said.

Source: WSJ

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An insider at a Swiss bank warned Britain’s financial watchdogs that bankers in its UK office were offering services that could facilitate tax evasion and money laundering. Did the regulators turn a blind eye? The FT investigates the City’s role as a global hub for illicit finance

One Monday in March last year, an announcement by the US justice department caught the attention of a former employee of the Swiss bank BSI. BSI’s bosses had agreed to violate the first rule of Swiss banking. To escape prosecution for abetting tax evasion, the bank would disclose the names of its clients and reveal the tricks it had used to hide their wealth.
The former BSI employee, who asks to be referred to only as Andrea, had worked in the bank’s UK office on Cheapside in the heart of the City of London. In 2008, Andrea was among the industry insiders who were starting to worry about London’s role as a global hub for illicit finance. That September, Andrea had warned the UK’s financial watchdogs that BSI bankers were using secretive techniques that could allow clients to conceal assets, potentially facilitating tax evasion and money laundering. The regulators took no public action against the bank and, as far as Andrea knew, no private action either.
Andrea had been spurred to contact the City’s regulators by a US Senate inquiry into tax evasion. Drawing on the testimony of a whistleblower from UBS, the biggest Swiss bank, the inquiry had exposed some of the chicanery that Swiss bankers used to help their clients hide money. A criminal investigation followed and in 2009 UBS paid a $780m fine to avoid prosecution for complicity in tax evasion. From there, the prosecutors’ campaign widened dramatically. Credit Suisse, UBS’s main rival, pleaded guilty to conspiring to help Americans evade tax and paid a $2.6bn fine. The onslaught brought down Wegelin, the oldest Swiss bank, which closed its doors in 2013 after 272 years in business. Its final act was to plead guilty to US charges of tax fraud.
In the wake of Wegelin’s demise, the US justice department launched a scheme that encouraged Swiss banks to make a clean breast of their complicity in tax evasion. In exchange, the US would forgo criminal charges. Dozens of banks applied. At the time, BSI’s owners were trying to close a deal to sell the bank. They knew they would only be able to do so once it had settled with the US. So BSI became the first Swiss bank to come to terms under the new scheme. The bank agreed to pay a fine of $211m, nearly three times its 2013 net profit. It also consented to hand over the account details of clients who should have been paying US tax, to make a “complete disclosure” of its cross-border banking activities, and to inform US prosecutors about any other banks that it knew had moved money into secret accounts.
The settlement documents laid out some of the techniques BSI had used. They closely resembled those described in Andrea’s tip-off to the Financial Services Authority, the City watchdog, and HM Revenue & Customs, the UK’s tax authority.
BSI bankers, the US settlement documents revealed, had registered client accounts to “sham entities”. These were essentially front companies, registered in places such as the British Virgin Islands and Liechtenstein. They used a series of legal manoeuvres to conceal the fact that their true owners were the bank’s American clients. When clients wanted to shift money back into the US, BSI bankers used a variety of subterfuges. In one, the bank would issue clients with prepaid debit cards loaded up with money from their Swiss account. The client’s name did not appear on the card. That left clients free to spend without leaving clues for the taxman. When clients needed BSI to top up the cards, they sent word in code. “Could you download some tunes for us?” asked one. Another winked, “Gas tank still running on empty.”
It was crucial to avoid a paper trail that might allow the authorities to spot a connection between a US taxpayer and a secret account. For an extra quarterly fee, the bank would refer to clients only by a code name on all documents relating to their Swiss accounts. More than a third of the bank’s American clients — there were 3,500 in total, with $2.8bn in declared and undeclared accounts — used this service. Two-thirds gave “hold mail” instructions, meaning that nothing should be sent by post to the client’s home address. If necessary, BSI bankers would fly from Switzerland to the US to hand-deliver account documents.
Announcing BSI’s settlement, Stuart F Delery, then number three at the justice department in Washington, called the initiative to settle with Swiss banks “an innovative effort to get the financial institutions that facilitated a massive fraud on the American tax system to come forward with information about their wrongdoing — and to ensure that they are held responsible for it”.
In an age of austerity, protesters had railed aqainst financial structures that they believed kept the rich wealthy at the expense of other taxpayers. Now here was what might have felt to them like a counterpunch against “the 1 per cent”. It was as if Thomas Piketty, the economist whose book on inequality had been a runaway bestseller, was meting out justice.
For Andrea, the contrast between the American and British responses to BSI’s activities was striking. A 2002 UK statute obliges anyone who suspects they are witnessing transactions involving the proceeds of crime to notify the authorities, even if they have no hard evidence of wrongdoing. That is what Andrea had done in 2008 — and received assurances from the watchdogs that they were on the case. “Rest assured,” wrote one investigator, “we are taking your information seriously and will use this as the basis for further investigation.” Andrea handed over internal BSI documents to them and sent emails expanding on the initial warnings.
Andrea left BSI shortly after first contacting the regulators but continued to press them to act. Over the months and years that followed, however, Andrea came to the conclusion that the City’s watchdogs were not going to bite. It seemed to Andrea that they were content to turn a blind eye to conduct that their American counterparts considered to be serious crime in the US.
Founded in 1873 in the lakeside Alpine city of Lugano as Banca della Svizzera Italiana, BSI ranks among the top 10 Swiss banks. It manages $80bn for some 125,000 clients. It has 2,000 staff and 400 “relationship managers” in offices in Europe, Asia, Latin America and the Middle East. On its website, BSI says it seeks to be “vitally important” to its clients. Until 2008, scores of those clients, including Russian oligarchs and an Arab prince as well as Britons, dealt with the bank’s London office. Internal documents from that office, seen by the Financial Times, reveal details of the financial secrecy services that were on offer, just 300 metres from the Bank of England, to the rich, the powerful and, possibly, the criminal.
Through his investigation into the London operations of Swiss bank BSI, Tom Burgis has looked into the nuts and bolts of how some banks help clients hide their money from tax authorities. He talks to Christine Spolar and Ralph Atkins about what he found
Many clandestine financial structures are legal to create but, in unscrupulous hands, they can be tools for all manner of financial misdeeds, from bribery to tax fraud. A succession of scandals has raised awareness of the ways in which the western banking system has assisted the world’s kleptocrats and tax dodgers. International reforms to force greater transparency on the most secretive offshore centres are gathering support. After last month’s Panama Papers leak, David Cameron felt first-hand the public anger about hidden financial dealings as his own family’s offshore interests were exposed. On Thursday, the prime minister will seek to burnish his legacy by advancing the transparency campaign as the host of an anti-corruption summit in London.
Cameron has spoken out in the past about tackling abuses of the financial system. In a speech last year, he declared: “I’m determined that the UK must not become a safe haven for corrupt money from around the world.”
But those whose job it is to fight corruption raise a troubling question: what if that is precisely what has already happened?
By the time they graduated from the economics department of Essex university in 2000, Khofiz Shakhidi and Abdumalik Mirakhmedov had already dabbled in business together. They served as directors of a shortlived venture called Newman Solutions Ltd. It is not clear from corporate filings what this company did and it was struck off as defunct in 2001. But the pair, both of whom appear to be of central Asian origin, were destined for bigger things. Over the years that followed, Shakhidi and Mirakhmedov would travel the world, mingle with magnates — and have ringside seats at a scandal that would shake the City. Slim and ambitious, Shakhidi took a job in 2002 as a private banker at BSI’s London office. Mirakhmedov, close-cropped and serious-looking, found employment closer to his roots. In 2000, he signed up to work for three central Asian businessmen who had made billions by snapping up chunks of resource-rich Kazakhstan’s economy as communism collapsed in the 1990s. They were laying the foundations for a multinational mining company called Eurasian Natural Resources Corporation (ENRC). Mirakhmedov was assigned to the ferro-alloys division.
Shakhidi and Mirakhmedov’s paths remained entwined after leaving Essex. Mirakhmedov’s day job may have been at ENRC but he was also, the BSI documents reveal, under contract to the bank. He and his old classmate formed a sort of double act.
The currency of private banking is personal connections. To keep up the flow of new clients, BSI’s London office recruited what it called “promoters”. These were essentially intermediaries between the bank and the rich. Promoters’ contracts stipulated that they were not allowed to present themselves as BSI employees but were guaranteed a share of the proceeds the bank made managing the money of clients they brought in. In the US, these middlemen were called “external asset managers”. Prosecutors there identified them as having played a key role in the tax evasion schemes BSI provided for its clients.
In 2002, Mirakhmedov joined BSI London’s roster of promoters. And he was not just any old promoter. Mirakhmedov was a star. “He’s a friend of everybody, a fixer,” says a person familiar with BSI’s London operation.
Mirakhmedov used an address in Uzbekistan and, at some point, acquired a passport from St Kitts and Nevis, Caribbean islands that sell citizenship to wealthy foreigners (a practice the US describes as “attractive to illicit actors”). Evidently, Mirakhmedov enjoyed access to the global class of what bankers call “high-net-worth individuals”. He brought in at least 19 clients with $47m in assets, making him one of BSI London’s most valuable promoters, according to internal documents.
By 2006, Mirakhmedov had earned a raise. Under a new contract, he would receive 35 per cent of the income on client accounts he brought in for BSI, rising on a scale until, for client assets of more than $500m, bank and promoter would split the takings 50/50.
And there was a sweetener in the contract, one that indicates that BSI preferred to use a promoter even when it had already identified the new clients it wanted. According to the contract, Mirakhmedov would automatically receive a 50 per cent share of revenues if he signed up any of four named Russians, two of whom ranked among the wealthiest tycoons in Vladimir Putin’s Moscow. (At least one appears to have become a BSI client, with a Swiss account held via a Guernsey trust.)
Sometimes working in tandem with Mirakhmedov, sometimes on his own, Shakhidi demonstrated a talent for courting clients from the former Soviet Union. By 2006, he had his sights on some new, heavyweight targets — Mirakhmedov’s employers. That September, Shakhidi boarded a KLM flight for Almaty, the Kazakh metropolis framed by snow-topped mountains. On arriving, he checked in to the luxury Hyatt hotel and prepared to attend a high-society wedding. The 24-year-old groom was called Davran Ibragimov; his father, Alijan, was Shakhidi’s target.
Alijan Ibragimov was one of the three oligarch founders of ENRC. The trio, as they were known, were riding high. Prices for the commodities that ENRC mined were booming. In 2006 it reported revenues of $3.3bn.
BSI emails show Shakhidi was confident that a plan to list ENRC’s shares on the London Stock Exchange the following year would prove a spectacular success. He believed that winning Ibragimov as a client and securing other business connected to ENRC could bring in at least $85m of assets for the bank. But his bosses were nervous.
BSI had taken on lots of clients from Russia and other post-Soviet states where the mixture of politics and business tainted many a fortune. It had already managed accounts for members of Ibragimov’s family, partly thanks to an introduction from Mirakhmedov, but had closed them in 2004. A background check by a British business intelligence firm in 2003 had warned about suspicions of money laundering in relation to Ibragimov. (Similar allegations against the trio by Belgian prosecutors would be settled in 2011 with the payment of a fine and no admission of guilt.)
The private investigators reassured BSI that “our contacts advise that [Ibragimov] should not be seen as worse than any other” leading businessman in the region. Nonetheless, around the start of 2006, when Shakhidi tried to get BSI’s Lugano headquarters to approve Ibragimov as a client, the bosses had deemed it too risky. Shakhidi was not deterred. In emails, he repeatedly urged them to change their minds. Following ENRC’s London listing in December 2007, he appears to have convinced them to accept funds linked to the trio.
The internal BSI documents do not confirm that the bank signed up Alijan Ibragimov himself. But they reveal that BSI’s London office gave a work placement to another of his sons in May 2008. The documents also indicate that BSI won business from other relatives of the ENRC trio. And they show that BSI’s UK unit handled offshore vehicles for Mehmet Dalman, a Cyprus-born investment banker who became a non-executive director of ENRC when it listed in 2007 and chairman in 2012.Ibragimov and Dalman did not respond to questions from the FT.
ENRC’s London flotation propelled the company into the FTSE 100. But the trio’s triumph soon soured. Their tussles for control of the company with the directors appointed following the listing triggered messy boardroom battles. Investors lost heavily as the shares tumbled. Some, including City analysts and business professors, took the admission of ENRC and other contentious companies to the British bourse as a sign that London was letting its standards slip in its eagerness to win business from fast-growing emerging markets.
Worse was to follow. In 2013, the UK’s Serious Fraud Office announced a criminal investigation into allegations of fraud, bribery and corruption at ENRC. The company denied any wrongdoing — and departed London. The trio, along with the Kazakh government, took ENRC private again, buying back shares at half the price at which they had listed six years earlier.
The criminal investigation is still ongoing. It relates in part to ENRC’s acquisition of African mining assets following its London listing. Those deals have attracted attention — including from a panel led by former UN chief Kofi Annan — to a series of secretive offshore transactions through which ENRC bought Congolese copper rights from Dan Gertler, an Israeli mining tycoon close to the country’s president. Gertler has denied any wrongdoing.
There is nothing in the BSI files to show that the bank played a part in any alleged wrongdoing at ENRC. But they do offer a glimpse into an opaque financial world linked to the company — a glimpse that the UK authorities might have gained had they followed Andrea’s tip in 2008.
Between 2000, when BSI signed up Mirakhmedov as a promoter, and 2008, when the leaked documents end, the files show that the bank helped him construct and maintain an offshore network wrapped in layer upon layer of secrecy. During this period, Mirakhmedov was rising through ENRC’s ranks. He spoke for the company at conferences, dressed in a pinstriped suit.
Files from BSI’s London office show that Mirakhmedov was linked to at least three offshore companies. One of them changed names, from Mayfair Solutions Ltd to Private Equity Group Ltd, while maintaining its registration in the British Virgin Islands, a favoured destination for those seeking to disguise their ownership of companies. Wealth Management Group Ltd, the vehicle through which Mirakhmedov signed his 2006 promoter agreement with BSI, was registered to a post-office box at an address used by multiple companies in Belize.
Shell companies behind shell companies, as well as nominee directors provided by law firms, added more disguise to Mirakhmedov’s holdings. For him as for other clients, BSI turned to a Panamanian law firm to supply the nuts and bolts of secrecy. Not Mossack Fonseca, whose files formed the vast Panama Papers leak of the past month, but another leading firm in the former Spanish colony, Alemán, Cordero, Galindo & Lee.
In one typical example, Alemán lawyers conducted a series of five interrelated transactions in a single day. First, they incorporated a new company in the British Virgin Islands, where corporate records are closely guarded. Next, they appointed Alemán agents as directors. Those directors arranged for the BVI company to issue 50,000 shares and transferred them to a company in Panama controlled by Alemán. That Panama company then signed declarations that it held those shares on behalf of Mirakhmedov and an associate. Finally, the BVI company granted the two men power of attorney over its affairs. By the end of the day, Mirakhmedov enjoyed control of an offshore company in which his interest was visible only to those privy to the law firm’s confidential files. Alemán did not respond to questions about its work for BSI clients.
In 2008, another BVI company linked to Mirakhmedov signed a confidential deal under which it would receive $150,000 a year from a company in the Marshall Islands in the Pacific as consultancy fees for an unspecified “project”. The Mirakhmedov company signed with a BSI address in Switzerland; the Marshall Islands company provided a Latvian account number at the Ukrainian-owned Privat Bank, an institution that would years later become notorious for its alleged role in one of eastern Europe’s biggest money laundering scandals. The two-page agreement does not name a single person.
Mirakhmedov’s relationship with BSI appears to have continued beyond 2008, when the documents end. They indicate he was among the promoters the bank was keen to retain. By 2013 he had been elevated to ENRC’s executive committee, in charge of sales, marketing and logistics. He stepped down in 2015, reportedly moving to another company owned by the trio.
Although the documents do not show Mirakhmedov as having done anything illegal, they invite questions about why City bankers and their clients feel the need to add so many opaque veneers to their activities.
Eurasian Resources Group, the successor company to ENRC, did not respond to questions from the FT, including ones about whether ENRC made use of any of Mirakhmedov’s offshore companies. It did not respond to a request to pass questions to him and the FT was unable to reach him directly. Attempts to obtain comment from Shakhidi were unsuccessful.
The BSI files provide an insight into a phenomenon that was widespread before 2008 but has only begun to stir public outrage in the years since the financial crisis: very large amounts of money moving around the world incognito.
Clients of BSI’s London office took advantage of services that could hide their identities. They asked for “hold mail” secrecy, the technique that avoids a paper trail. Many London clients, the documents show, also had American Express or Barclays credit cards linked to an offshore company, some with credit limits in six figures.
Experts on financial secrecy tend to agree that the key to understanding whether such secretive services are likely to be used for nefarious purposes is this: how much did the bank know about the client and the source of his or her funds?
Client lists for BSI’s London office are peppered with names that might have been expected to cause concern. They include those of a construction magnate from the Balkans implicated in an alleged kickback scheme tied to Boris Yeltsin’s Kremlin and an art-dealing Qatari royal described as a “modern-day Medici”, who faced corruption allegations (though only after his BSI account was closed in 2004).
One London-based BSI banker ran an account (via Zurich and Gibraltar) for a Russian-Ukrainian businessman. A 2002 due diligence report on the client informed the bank that, while there was no further information linking the client to “criminal activities or associations”, he had a known connection to the St Petersburg mafia. A handwritten note in the margin, apparently penned by a BSI banker, dismisses the “tenuous link” as “not relevant”.
By definition, we do not know how much money passes through the hidden conduits of the global financial system. Gabriel Zucman, a French economist who studied under Piketty, estimated last year in his book The Hidden Wealth of Nations that tax havens hold $7.6tn, equivalent to the entire US budget for two years. While the vast leak of confidential documents from Panama has reinforced the notion that such outposts are the core of the secrecy industry, some experts argue that the real capitals of clandestine finance are in much less exotic places.
Britain’s private bankers manage $1.65tn of client assets, according to the professional services firm Deloitte, the biggest tally after Switzerland. That is enough money to buy Apple three times over. The City is intimately connected to British Crown dependencies and overseas territories such as Guernsey and the Virgin Islands that supply front companies, anonymous trusts and other types of financial camouflage.
“If you lump them all together,” says Alex Cobham, head of research at the Tax Justice Network campaign group, “the British secrecy network is the biggest in the world.” The National Crime Agency estimated in a report last year that “hundreds of billions of US dollars of criminal money almost certainly continue to be laundered through UK banks, including their subsidiaries, each year”.
Defenders of offshore secrecy argue that it can have legitimate purposes, such as, say, allowing a politically active businesswoman in Belarus or Egypt or Venezuela to ensure that, even if the authorities come for her, they will not be able to track down the funds she has hidden away to provide for her family.
But Andrea, for one, struggled to think of legitimate reasons why clients of BSI’s UK unit went to such trouble to shroud their banking affairs in secrecy. Even before Andrea contacted the British regulators, BSI had attracted the authorities’ attention. Between 2003 and 2005, the FSA reviewed the private banking operations of the bank’s London office. According to a person with knowledge of that investigation, a 10-strong team from the regulator pored over the bank’s client records. The investigation ended with no public sanction, but the bank was ordered to improve its procedures for screening clients from “high-risk jurisdictions”, a term used to refer to countries where corruption is rife.
By the time of Andrea’s disclosures to the City’s watchdogs in September 2008, BSI’s London office was in its final weeks, the internal documents show. The bank had already moved all client money held in the UK to Swiss accounts. Then, Generali, the Italian insurer that owned BSI at the time, decided to end the bank’s formal presence in London altogether (though it retained its own UK office).
BSI did not, however, sever relations with the clients it had served from London. On the contrary, bankers in the London office wrote to clients and promoters telling them that their relationship with the bank as a whole would not be affected. Shakhidi and some of his colleagues in London moved to BSI’s Monaco office. Others from BSI London went to Dubai or took redundancy.
Perhaps the reason any investigation into BSI stemming from Andrea’s warning came to nothing was that the regulators deemed that the bank had done nothing wrong.
“We do not comment on our interactions with the authorities,” BSI told the FT in answer to questions about whether the regulators had contacted the bank following Andrea’s warnings. “But we can confirm that BSI is strongly committed in [anti-money laundering] controls and co-operates with the authorities if and when requested.”
Hundreds of billions of US dollars of criminal money almost certainly continue to be laundered through UK banks each year
The FT also asked the bank about the ENRC trio and its relationship with politically connected clients, about Mirakhmedov’s offshore vehicles and about other secrecy services that BSI provided. The bank responded that “it is not our practice to give such details” and that BSI was “prohibited by [Swiss] law” from commenting on whether or not a particular person or entity is a client.
The FT sent questions to the Financial Conduct Authority (the FSA’s successor) and HMRC about their promises to Andrea to investigate BSI’s activities in London.
The City watchdog said: “The FCA, and previously the FSA, cannot confirm or deny any investigation. We are also prevented [from] commenting on any specific firm issues or any dealings we may or may not have had with individual employees.”
The tax authority said it received 86,000 leads last year, adding: “HMRC do not comment on individual taxpayers. We receive information from a very wide range of sources and we always use this information to identify abuse and intervene to ensure the tax laws are respected and that everyone pays what they owe.”

Concerned that the regulators were not going to act, in July 2014 and twice thereafter Andrea wrote to Margaret Hodge, who then chaired parliament’s public accounts committee. Hodge had used the committee to vent public anger over tax dodging. In one memorable exchange, she roasted tax officials after only a single prosecution resulted from the revelation that thousands of Britons had held undisclosed accounts at HSBC’s Swiss bank. But Andrea’s correspondence was overlooked in the hectic final months of Hodge’s tenure, which ended at last year’s election. Hodge says she regrets a missed opportunity.
One person familiar with BSI’s operations (who, like many of the bank’s clients, insisted on anonymity) says Swiss banks have been unfairly singled out for criticism. He points out that the US state of Delaware allows the incorporation of vast numbers of companies whose true owners are hidden. “The real problem in the City of London”, he contends, “is not Swiss banks but the US and UK ones.”

Source: ft.com

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Frank Tong Fuk-kay, chief executive of the government-funded Hong Kong Applied Science and Technology Research Institute, say Hong Kong at ‘serious risk’

A Hong Kong cyber crime research centre has flagged the need to step up resources and efforts as, with an average of 7 million hacking attempts daily worldwide, Hong Kong, a global financial centre, is certainly a target.

Frank Tong Fuk-kay, chief executive of the government-funded Hong Kong Applied Science and Technology Research Institute (ASTRI), said Hong Kong and the rest of the world were at “serious risk”.

Last week, ASTRI warned that the Hong Kong Monetary Authority and People’s Bank of China were among a long list of central banks hacking group Anonymous identified as top targets in May.
Hacking your account: Still as easy as ‘123456’

Tong said the research institute and the Hong Kong Monetary Authority would join forces to set standards to qualify cyber experts in Hong Kong in a bid to increase talents supply.

“More resources are needed in ensuring cyber security if Hong Kong keeps up its position as the global financial centre,” he told the Post in an exclusive interview on Friday. “[Hong Kong] needs to train its own experts. Even some banks have a chief technology officer on director boards, which shows how important cyber security is.”
China, US anti-hacking group holds first talks since September pact
Tong spoke ahead of a cyber security summit organised by ASTRI and Hong Kong Police Force from Monday to Wednesday, which draws cyber experts from Interpol and countries like the United States, Australia, Ireland, Japan, Singapore and Hong Kong to share the latest trends and intelligence.
The widespread use of financial technology, or “fintech”, on banks, stock brokerages, insurance companies, public utilities, airlines, public transport service provides and hospitals, for example, involve large amounts of personal data and could fall prey to hackers.
Duncan Wong, ASTRI’s director, security and data sciences, cited statistics from Norse, a cyber threat intelligence network service provider, that on average there are 7 million hacking attempts worldwide a day varying from web page hacking, individual machine infection through malware, to critical infrastructure attacking.
UK police arrest man over mass hacking of Hong Kong toy maker VTech
These activities are for financial gain, political reasons, or just for the sake of hacking, he said.
Financial losses arising from cyber crime in Hong Kong jumped about 51 per cent to HK$1.82 billion last year while the number of cases were up 1.2 per cent to 6,778 cases, police statistics showed.
The Hong Kong Monetary Authority said there are 11 million online banking accounts in the city, which generated 17 million transactions worth HK$7.3 trillion on an monthly average last year.
ASTRI, which was set up in 2000 and develops applied research for industries to raise the city’s competitiveness, has about 500 staff. But Tong said every year there were about 100 staff, or one in every five, leaving for the private sector, underlying how chronic the demand is for cyber experts.
He said Hong Kong needed a bigger talent supply. To the contrary, Singapore’s state-owned research body – Agency for Science, Technology and Research, has 6,000 staff.
VTech’s hacking and a Hong Kong culture which pays little attention to IT security
Tong said a key task for ASTRI is exchanging intelligence with law enforcement bodies and regulators such as the police, the Monetary Authority, Securities and Futures Commission and even Interpol.
“One of the difficulties is hackers will not tell you where they are and who they are,” he said. “But what we can do is our team can trace which vendors of printers and routers are hacked and we will alert the vendors and users right away.”
At ASTRI’s headquarters at Hong Kong Science Park in Sha Tin, there is a training centre called ‘cyber range,’ which has an electronic world map displaying locations of instant hacking attempts. At Friday noon, the billboard showed China was the top origin of hacking attempts with the United Arab Emirates and the United States as top targets.
Hacking of Hong Kong’s VTech may prove worst cybersecurity breach of 2015 in Asia
Wong said it did not necessarily mean the hackers were located in China even though it was shown as the hacking origin.
Although it was hard to tell how many were successfully hacked, there were serious breaches and cyber incidents every single day, he said.
And those hacking attempts could be correlated to each other, he added.

Source: SCMP

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Covered financial institutions have been aware of its imminence since March 2012 when the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued the Advanced Notice of Proposed Rulemaking concerning customer due diligence.
After four years addressing the myriad legal and operational challenges of such a proposal, FinCEN issued the final rule on May 5, 2016. The timing is likely no accident: the federal government acted urgently to adopt the proposed customer due diligence rules in response to the leak of the so-called “Panama Papers,” which aroused a good deal of public uproar over the purported use of offshore shell companies to hide personal financial information for illegal purposes.
The final rule imposes two requirements on covered financial institutions: (1) to identify beneficial owners of legal entities for which a covered financial institution provides an account (“legal entity customers”), and (2) to add risk-based customer due diligence procedures to the existing “four pillars” of AML program requirements.
The first part of the final rule is designed to address a long-standing problem for AML compliance personnel – beneficial ownership validation. The ability of those who control and profit from the accounts of legal entity customers to hide their identities is the soft underbelly of AML because it deprives financial institutions of information critical for effective basic customer due diligence; this is a major gap through which money launderers, tax evaders, drug traffickers, and terrorists can, and as the Panama Papers show often do, slip. This high-risk information gap was pointed out as early as 2001 by the Basel Committee on Banking Supervision in Switzerland which warned that financial institutions “need to be vigilant in preventing corporate business entities from being used by natural persons as a method of operating anonymous accounts.”
FinCEN’s final rule requires, with some exclusions, covered financial institutions to collect and verify the identities of those who own 25% or more of legal entity customers as well as those who “control” the entity. Connected to this requirement is the mandate that covered financial institutions establish and maintain written procedures that are reasonably calculated to identify and verify beneficial owners of a legal entity customer.
The final rule also amends the long-standing “four pillars” of the Bank Secrecy Act and the foundation to all compliant AML programs: written policies and procedures, a designated AML compliance officer, independent testing of the AML program, and suitable employee training. The “fifth pillar” of compliance requires covered financial institutions to establish and maintain risk-based customer due diligence procedures. In short, this provision requires the institution to (1) understand the nature and purpose of customer relationships in order to develop a customer risk profile, and (2) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. According to FinCEN, the customer risk profile consists of information collected at account-opening to create a baseline against which activity is assessed for suspicious activity reporting.

Without question, FinCEN’s final rule will pose challenges to covered financial institutions. For instance, the standard by which such a financial institution may rely on the beneficial ownership information provided by the customer is not entirely clear. Moreover, while the 25% threshold for beneficial owner verification is required, FinCEN advises that “covered financial institutions may establish a lower percentage threshold for beneficial ownership . . . based on their own assessment of risk in appropriate circumstances.” The fact is that any regulatory threshold sends a signal to those with criminal intent: stay under 25% and you can evade detection. The sophistication of those who seek to use the financial system for illegal ends should not be underestimated. As Global Witness, a London-based organization that exposes international corruption, has demonstrated in numerous reports, corruption, money laundering, tax evasion, and terrorist financing thrive on institutions that don’t ask too many questions.
All covered institutions must comply with the final rule by May 11, 2018.

Source: JD Supra

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Emma Hunter, founder and Supporting Chair of Baker & McKenzie’s Global AML/CTF Group and our resident AML/CTF specialist, has recently returned from speaking at the 8th Annual Association of Certified Anti-Money Laundering Specialists (ACAMS) Asia Pacific Anti-Money Laundering and Financial Crime Conference in Beijing. In this post we share:
First hand insights on the upcoming compliance challenges facing reporting entities throughout Asia Pacific; five key take-aways from the Attorney-General’s Department Report on the Statutory Review of the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the AML/CTF Act); and thoughts on the recent finalisation of the Privacy Impact Assessment (PIA) on the draft amendments to Chapter 4 of the AML/CTF Rules.
FIRSTHAND INSIGHTS FROM THE 8TH ANNUAL ACAMS ASIA-PACIFIC AML CONFERENCE
It is clear that many financial service providers operating throughout Asia-Pacific are struggling with basic know your customer (KYC) obligations and more specifically, are facing difficulties in carrying out adequate beneficial owner identification/verification. Striking a balance between regulatory expectation and internal customer due diligence (CDD) protocols was a hot topic throughout the ACAMS Conference. Many organisations are working with regulators and are fine-tuning existing policies and procedures to balance compliance and an ability to continue doing business in regions where beneficial ownership information is particularly difficult to obtain/verify.
Fellow speakers discussing this topic included FATF, SWIFT, the Malaysia Anti-Corruption Commission, the People’s Bank of China and various banks.
Many regulators appear to support the concept of beneficial owner registers (the register recently announced by the Australian Government that will list beneficial owners of shell companies was mentioned more than once) and are continuously working to clarify regulatory expectation in relation to this often confusing area of compliance.
Other difficulties facing the industry include the financial inclusion/de-risking balancing act most notably impacting correspondent banking relationships and the money service business (MSB) sector. Specific processes to mitigate and manage risks posed by trade-based money laundering, ISIS and other terrorist organisations as well as new technologies was discussed with many financial service providers seeking specific guidance on how to mitigate and manage the risk of ‘loan wolf’ terrorists exploiting financial services and products.
5 TAKE-AWAYS FROM THE ATTORNEY GENERAL’S RECOMMENDED REFORMS TO AUSTRALIA’S AML/CTF REGIME
Below are five key take-aways from the Attorney-General’s 84 recommendations on reforming Australia’s AML/CTF regime:
1.Offshore entities to be captured by Australia’s AML/CTF regime
The report recommends enhancing the scope of the AML/CTF regime to cover offshore-based entities offering designated services to customers in Australia. The Attorney-General’s recommendations in this regard range from a voluntary opt-in model to regulation of any foreign provider of designated services either offered or advertised in Australia. While it is unclear which of these regulatory models will be adopted, what is certain is that offshore entities will need to keep an eye on this space.
In addition, the report proposes that Australian entities with foreign branches and subsidiaries be required to perform a gap analysis between the AML/CTF requirements applying to them in the foreign country and the AML/CTF regime in Australia and apply the higher standard.
2. Increased regulation of remittance providers
The report comments that changes to regulation in this space need to be balanced against the risk of displacement (whereby high-risk customers, remitters and suspicious financial activities moves underground and out of AUSTRAC’s regulatory oversight). In relation to remittance providers, the report recommends:
(a) that a government-industry working group be established to develop options for strengthening the regulatory oversight of remitters;
(b) that remittance network providers be explicitly required to monitor their affiliates’ compliance and report to AUSTRAC on breaches and remedial action as required;
(c) that the definition of a designated remittance arrangement in the AML/CTF Act be amended to ensure that non-remittance businesses are not unintentionally regulated as remitters; and
(d) that the AUSTRAC CEO be allowed to:
(i) deregister remitters that are not conducting remittance activities;
(ii) ban individuals from involvement in the management of a remitter based on a demonstrated lack of suitability; and
(iii) publish refusals and notices detailing the circumstance of a cancellation of the registration of a remitter.
3. The rise of RegTech and FinTech
In a bid to modernise and simplify the existing AML/CTF regime, the report recommends:
(a) that new and emerging regulatory technologies (RegTech) be used to simplify reporting entities’ KYC obligations (facial recognition, voice recognition, fingerprints and retinal scanning are mentioned);
(b) that e-currencies (like Bitcoin) be added to the list of designated services, and that AUSTRAC consider adding cheque cashing facilities and stored value cards to the list of designated services (where those facilities currently fall under existing thresholds and are not captured); and
(c) that the AML/CTF regime adopt the technology neutrality principle, to ensure that future technologies can be accommodated into the regime easily and without one technology being favoured at the expense of another.
4. Correspondent banking
The report recommends:
(a) that the AML/CTF regime be streamlined so that the correspondent banking obligations are commensurate with FATF standards (including a one-step process for conducting due diligence assessments on respondent financial institutions);
(b) that financial institutions be required to consider the quality of ML/TF supervision conducted in the country of the respondent institution as part of the due diligence assessment; and
(c) the AML/CTF Act be amended to:
(i) broaden the definition of correspondent banking so that it is consistent with FATF standards;
(ii) require financial institutions to undertake specific due diligence in relation to payable-through accounts consistent with FATF standards; and
(iii) prohibit financial institutions from entering into a corresponding baking relationship with an institution that is capable of entering into such a relationship with a shell bank.
5. Tranche two
Finally, the report recommends that designated non-financial businesses and professions (DNFBPs) (for example casinos, real estate agents, dealers in precious metals, lawyers and notaries) be regulated.
FATF highlighted the lack of regulation of DNFBPs as an area of concern in its Mutual Evaluation Publication on Australia (published in April 2015) so this recommendation is not a surprise. Regulation of DNFBPs has always been proposed as the second tranche of the AML/CTF Act, but was put on hold during the global financial crisis. The report discusses options for regulation ranging from applying the existing regime to these sectors, partially applying the existing regime to these sectors or establishing self-regulation of the sector by relevant industry bodies.
It is worth noting that the Attorney-General’s report is only comprised of recommendations to Parliament, and while the report will guide the Government’s regulatory priorities in the space moving forward (particularly given AUSTRAC has endorsed all 84 recommendations), the recommendations are not binding.
Finalisation of the PIA on AUSTRAC’s Chapter 4 amendments
The PIA examining the implications under Australian privacy law of the proposed amendments to Chapter 4 of the Anti-Money Laundering and Counter-Terrorism Financing Rules (Rules) was finalised on 28 April 2016.
This brings the Chapter 4 amendment allowing reporting entities the discretion to collect KYC information ‘about’ a customer, rather than ‘from’ a customer, one significant step closer to becoming law. Other amendments in Chapter 4 that were caught up in the PIA review (clarifying the simplified verification procedures) are also closer to finalisation.

Source: Global Compliance News

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Key executives of scandal-hit 1Malaysia Development Bhd and a linked entity – SRC International (Malaysia) Limited – had authorised a transfer of US$11.95 million (S$16.4 million) to a firm beneficially owned by Tan Kim Loong or better known as Eric Tan, a close business associate of Malaysian tycoon Low Taek Jho, according to documents submitted in Singapore’s state court on Thursday.
The transfer of funds to Affinity Equity International Partners Ltd (a firm beneficially owned by Mr Tan) was done through Pacific Harbour Global Growth Fund AA4 – a fund that SRC International Malaysia had subscribed to – which was overseen by 1MDB’s executive director of finance Terence Geh and authorised by Nik Faisal Ariff Kamil, managing director of SRC International Sdn Bhd (SRC International) and 1MDB’s former chief investment officer, documents submitted by Singapore prosecutors revealed.
Mr Tan and Mr Low, who is better known as Jho Low, had been mentioned in an earlier case related to the 1MDB probe involving Swiss bank BSI’s senior private banker Yak Yew Chee. Yak, who was private banker to Mr Low and several 1MDB entities, had in his affidavit said that he believed Singapore’s white collar crime buster had frozen nearly S$10 million in his bank accounts due to ongoing investigations into both men. Mr Yak has not been charged but he had filed a motion which was heard in February to unfreeze his assets which was later withdrawn.
These intriguing details which underscored the “massive complexities” of the 1MDB case being probed by Singapore investigators who have been “working round the clock without any breaks” over the past eight weeks emerged during a mention of the case against BSI’s former wealth manager Yeo Jiawei during which Singapore’s Second Solicitor-General Kwek Mean Luck slapped the seventh charge against Yeo, this time for forgery in order to facilitate the funds transferred into Mr Tan’s firm.

Yeo was alleged to have fraudulenty signed a reference letter addressed to Citigroup Inc’s Europe, Middle-east and Africa (EMEA) head of anti-money laundering operations with the intention to mislead that the letter was signed by the authority of BSI Bank Ltd, Singapore.
The latest charge is related to an earlier one filed against Yeo for dishonestly concealing from BSI in 2013 that he would receive through Bridgerock Investment (a firm beneficially owned by Yeo) a portion of fees paid to Pacific Harbor Holdings Ltd (PHHL) – the investment manager of Pacific Harbor Global Growth Ltd – and dishonestly inducing BSI to enter into an agreement with PHHL.
Court documents revealed an email forwarded by Mr Geh to Yeo which was copied to Nik Faisal, Yak and several other senior executives of BSI including managing director Yvonne Seah in which Yeo had requested Nik Faisal to sign off and revert on the documents to proceed with the subscriptions into the funds managed by PHHL involving some US$12.2 million.

The documents also included a letter signed by Nik Faisal on behalf of SRC International Malaysia acknowledging that Pacific Harbor Global Growth Fund has advanced US$11.95 million to borrower Affinity Equity. (It was reported last year that Malaysian authorities probing business deals and monies transferred from 1MDB and its related units including SRC International were unable to determine the whereabouts of Nik Faisal who has been barred from leaving the country.)

In a letter to Citigroup’s EMEA head of anti-money laundering operations, BSI’s Seah and ex-director Yeo had signed a letter declaring that SRC International Malaysia has been the bank’s client since 2011 and that the beneficial owner of the company is the Malaysian Government.
This company’s name SRC International Malaysia, a British Virgin Islands registered firm, is almost identical to a firm set up by 1MDB in 2010 called SRC International which had borrowed RM4 billion from a government pension fund and a year later was transferred to MoF.

Source: Asiaone

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HSBC Private Bank (Suisse SA) has appealed against a record HK$605 million fine and the revocation of its advisory licence by the Securities and Futures Commission (SFC) over alleged misconduct related to the sale of Lehman Brothers-related structured products and some other forward accumulators between 2003 and 2008.

The hearing started on Wednesday and will last until at least May 12. It is being heard by Mr Justice Michael Hartmann, chairman of the Securities and Futures Appeals Tribunal. It follows a disciplinary decision by the SFC regarding the private banking arm of HSBC, the biggest lender in Hong Kong and Europe.

The HK$605 million fine is the largest ever imposed by the SFC on any broker or investment bank.

The SFC issued a statement in October saying HSBC Private Bank had applied to appeal against its decision.

In the statement, the SFC said the disciplinary action “concerns the bank’s internal controls and sales practices in connection with its sale of structured products – namely, Lehman Brothers-related notes and leveraged forward accumulators between 2003 and 2008”.

HSBC woes show no let-up as US finds banking giant coming up short of money laundering vigilance.

Former SFC chairman Anthony Neoh, the lawyer representing HSBC Private Bank, told the tribunal on Thursday that the penalty was excessive.

Besides the record-high fine, the SFC penalty also revoked the lender’s licence to advise on securities. HSBC Private Bank now has two licences from the SFC, include a type 1 licence for dealing in securities and a type 4 licence to advise on securities-related business.

HSBC under SEC probe for ‘princeling’ hiring in Asia; shares suffer after worse-than-expected earning.

During the hearing, Neoh said private bank clients were different from retail customers because private bank clients usually had more assets with the bank.

Lehman Brothers, the US investment bank, collapsed in 2008. That led to the derivative products linked to the bank becoming worthless and investors suffering losses.

Source: SCMP

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Singapore’s biggest banks are in talks about setting up a system for sharing information on prospective clients, in an effort to combat money laundering in the city-state.

DBS Group Holdings Ltd., Oversea-Chinese Bank Corp. and United Overseas Bank Ltd. are exploring the possibility of a countrywide model for anti-money laundering and enhanced client knowledge, according to Loretta Yuen, the head of legal and regulatory compliance at OCBC. The bank believes the new model “will bring significant control and operational efficiency benefits to the industry and Singapore,” Yuen said by e-mail, adding that it’s premature to discuss details of the initiative.

The model under review would see the three banks pool data at a newly-created registry, according to people familiar with the matter, who asked not to be named because the talks are private. The banks would use the information when deciding whether to approve applications for new accounts, the people added.

The pilot project may start with corporate accounts, according to one of the people. The talks come as Singapore has frozen bank accounts as part of probes related to 1MDB Development Bhd., the embattled Malaysian state fund, and charged a former BSI SA private banker in the city with money laundering. The Singapore unit of the Swiss private bank was the custodian of fund units, which were valued at $2.32 billion as of March 31, 2015, for a 1MDB subsidiary.

There is no timeline on when the registry would be set up, said the people. The plan may be expanded to international banks in Singapore if a pilot proves successful, they said.

Banking Secrecy
One of the main hurdles in planning the project is the sharing of potentially sensitive customer information because of Singapore’s strict banking secrecy laws, according to the people. A requirement to get applicant consent is among the possible solutions, they added.

Banks in Singapore and elsewhere already share client data for the purpose of assessing their creditworthiness. Singapore’s credit bureau, for example, compiles records of consumer loans based on information contributed by the banks.

A spokesman for DBS confirmed that it was involved in an exploratory study on the initiative, but declined to comment further. UOB didn’t immediately respond to a request for comment.

1MDB has been the subject of overlapping investigations in Malaysia and Singapore, as well as in countries such as Switzerland and the U.S., amid allegations of financial irregularities. 1MDB has consistently denied wrongdoing.

The Monetary Authority of Singapore said in March it has been conducting a “thorough review of various transactions as well as fund flows” related to the case through its banking system.

Tougher Rules
The MAS last year boosted its anti-money laundering rules, requiring financial institutions to have more comprehensive checks on customers. Singapore in July 2014 raised the maximum jail term for money laundering to 10 years from seven years.

Spending by Asian financial-services companies on technology for anti-money laundering and customer screening may rise to $300 million this year from 2015’s estimated $260 million, according to Boston-based research firm Celent.

Source: Bloomberg

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The Securities and Futures Commission (“SFC”), Hong Kong’s securities regulator, recently released comprehensive guidance on suggested cybersecurity controls within Licensed Corporations (“LCs”). Although it only applies to LCs regulated by the SFC, it represents the most comprehensive guidance issued by a Hong Kong authority on cybersecurity, and provides useful insight on how organisations can effectively guard against cybersecurity threats.

The Circular to all Licensed Corporations on Cybersecurity (“Circular”) issued on 23 March 2016, followed a review by the SFC of the effectiveness of cybersecurity controls within certain larger sized LCs in Hong Kong.

While the SFC’s review revealed most LCs had proactive cybersecurity control frameworks in place, deficiencies in five key areas were identified.

FIVE KEY AREAS OF CONCERN

1. Inadequate coverage of cybersecurity risk assessment exercises: The review found that standard cybersecurity risk assessments (such as control gap analysis and benchmarking) were often conducted on Internet-facing systems and infrastructure, rather than systems and networks residing in internal environments or other non-Internet facing systems, which could still be enticing targets for cyberattacks. Further, tests were only conducted against basic types of cyberattacks, and were not frequently updated to cover the latest threats.
2. Inadequate cybersecurity risk assessment of service providers: LCs were found to heavily rely on the attestations of service providers, rather than scrutinizing the scope, approach or results of their risk assessments. They did not take a proactive approach to integrate the systems and control environments supported by service providers into the LCs cybersecurity risk management frameworks. Formal procedures/guidelines detailing the requirements of conducting risk assessments or on-site audits were missing.
3. Insufficient cybersecurity awareness training: The cybersecurity awareness training provided to employees was not updated in accordance with the latest cybersecurity related issues.
4. Inadequate cybersecurity incident management arrangements: Cybersecurity incident response plans and drills were inadequate to address the latest cybersecurity threats. Some serious yet common cyber-attack scenarios were not covered in cybersecurity incident response plans, and Hong Kong was often not included in global drills/ simulation exercises.
5. Inadequate data protection programs: Data protection programs were inadequate to address the latest cybersecurity threats. For example, some LCs did not identify data flows, tailor processes and technologies to avoid data leakage or implement appropriate responses based on the sensitivity of data.

EIGHT SUGGESTED CYBERSECURITY CONTROLS

Following the review, the SFC identified eight areas where LCs could improve and update their cybersecurity controls.

1. Establish a strong governance framework to supervise cybersecurity management, including by ensuring cybersecurity is regularly covered in senior management meetings and all staff are regularly trained in the latest threats.
   Implement a formalized cybersecurity management process for service providers, with cybersecurity requirements incorporated into agreements and require regular cybersecurity risk assessments.
2. Enhance security architecture to guard against advanced cyber-attacks, with respect to processes, networks and operating systems. Cybersecurity should be considered early in the software development cycle. Multi-tiered network defences and multi-layered security should be implemented, with security zones considered within networks. Privileged user access and additional safeguards to prevent execution of unauthorized applications should also be considered.
3. Formulate information protection programs to ensure sensitive information flow is protected, including (a) recertification to be performed periodically on removable media access (b) implementing mobile secure containers in staff mobile devices; and (c) enforcing data wipe functions to remove firm applications and information where loss of a mobile device is reported.
4. Strengthen threat, intelligence and vulnerability management to pro-actively identify and remediate cybersecurity vulnerabilities, including both for internet facing and internal systems.
5. Enhance incident and crisis management procedures with more details of latest cyber-attack scenarios.
6. Establish adequate backup arrangements and a written contingency plan with the incorporation of the latest cybersecurity landscape, and such plans should be periodically tested. All backup tapes to be encrypted and physically protected.
7. Reinforce user access controls to ensure access to information is only granted to users on a need-to-know basis. Ensure secure remote access from external networks.

NEXT STEPS

The SFC urged LCs to recognize the importance of cybersecurity within their organisations. In view of their findings and suggestions, they recommended LCs ensure that:

• Cybersecurity risks are comprehensively and effectively reviewed and assessed.
• Any weaknesses identified are rectified.
• The enhancement of cybersecurity controls are treated as a matter of priority within the organization.

The Circular only applies to LCs and does not apply to other organizations. Nevertheless, if your company holds sensitive data or is in an industry vulnerable to cyberattacks, the Circular is a useful guide representing the best standard with respect to protecting data from cybersecurity incidents in Hong Kong.

Source: Global Compliance News

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Banks and financial institutions in Hong Kong must “strictly comply” with existing money laundering laws requiring them to disclose the identities of their customers and what they intend to do with their money.

The move comes after the city was named the “top centre for secretive offshore financial services” in the Panama Papers leak earlier this month.

More than 11 million documents were leaked from Panamanian law firm Mossack Fonseca, revealing how individuals and companies set up offshore firms to avoid paying tax.

The centre for offshore advice
The leaked data, analysed by The International Consortium of Journalists (ICIJ), found 2,212 intermediaries in Hong Kong worked with Mossack Fonseca in offering to set up offshore shell companies for wealthy clients looking to shelter money – by far the highest in the world.

In a letter picked up by the local media, Hong Kong’s secretary for financial services and the treasury, professor Chan Ka-keung, said banks and other financial institutions must record their customer’s “objectives” and verify beneficial owners to tackle money laundering as outlined in the existing Anti-Money Laundering (AML) and Know Your Customer (KYC) laws.

“Financial institutions must strictly comply with the requirements of customer due diligence and record keeping to ascertain the objectives and business information of customers and apply reasonable measures to identify and verify the beneficial owners of customers for mitigating the risk of money laundering and terrorist financing in accordance with the anti-money laundering and counter-terrorism legislation,” he said.

“Hong Kong has a role and responsibility to tell the international business community and foreign governments that Hong Kong is not a tax haven nor a centre for money laundering”.

The written statement was in response to questions posed by local lawmaker Kenneth Leung, who said that Hong Kong had “a role and responsibility to tell the international business community and foreign governments that Hong Kong is not a tax haven nor a centre for money laundering”.

However, Chan argued that setting up trusts in offshore tax havens was not illegal in Hong Kong.

“There is no law in Hong Kong prohibiting companies or commercial entities from setting up companies in jurisdictions outside Hong Kong,” he said.

Criminal investigations
Meanwhile, Chan also urged individuals and institutions to report any property or wealth obtained illegally by filing suspicious transaction report (STR) or by filing a complaint Joint Financial Intelligence Unit (JFIU).

New figures disclosed by the city’s legislative council showed the number of cases referred by the JFIU for criminal investigation soared to 42,500 last year, compared with 37,200 in 2014 – with the majority of cases reported by banks.

“Deliberate lack of due diligence”
Chan’s comments come as research by Accuity, a firm that provides sanctions screening software to banks and other financial institutions around the world, identified 24 wealthy individuals in Malaysia, China and Cambodia named in the Panama Papers for their links to tax evasion.

Of those identified, nine had been previously red-flagged for similar offences – a fact described by Accuity’s global head of strategic affairs, Henry Balani, as a “deliberate lack of due diligence” of some Asian financial centres.

“The reputation of these countries are subsequently damaged when these practices are exposed and high net worth individuals are affiliated with these countries,” he told International Advsier.

Increasing transparency
Last week, The South China Morning Post reported that former civil service minister Joseph Wong Wing-ping said Hong Kong had no choice but to follow the global trend to improve transparency as a result of the scandal.

The leak led to several nations announcing measures aimed at increasing transparency and tackling tax evasion.

A week after the scandal broke, British prime minister David Cameron revealed that all crown dependencies and overseas territories will now provide company ownership data to UK tax and law enforcement authorities. He also unveiled a new tax evasion law, making companies criminally liable for employees who aid tax evasion.

The Isle of Man and Gibraltar also joined Europe’s five largest economies — Germany, Britain, France, Italy and Spain — and 17 other jurisdictions in signing up to a confidential beneficial ownership register which would automatically share information on the ultimate owners of companies.

Source: Intl. Adviser

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With its continued focus on cybersecurity, the Hong Kong Securities and Futures Commission (SFC) recently issued a circular to all its licensed corporations (LCs) identifying key areas of concern and suggesting cybersecurity controls.

Hong Kong does not have any overarching cybersecurity legislation, and industry-specific regulatory activity in relation to cybersecurity has been limited to date. The Hong Kong Monetary Authority and the SFC have been the most active regulators on the topic. The SFC’s circular is the most comprehensive statement on cybersecurity by a Hong Kong regulator to date.

Key Areas of Concern
The Circular to All Licensed Corporations on Cybersecurity (“Circular”) was issued by the SFC following its review of a number of large LCs. The Circular identifies the following key areas of concern:

1. inadequate coverage of cybersecurity risk assessment exercises;
2. inadequate cybersecurity risk assessment of service providers;
3. insufficient cyber awareness training;
4. inadequate cybersecurity incident management arrangements; and
5. inadequate data protection programs.

Of particular note are the SFC’s findings that LCs are not:

• properly assessing risks associated with mission critical systems and networks within its internal systems;
• taking a “pro-active” approach with service providers to include them in risk management frameworks, but instead are relying on contractual assurances;
• updating staff regarding the latest security threats;
• addressing new threats through breach response plans or conducting drills to test the plans; and
• including appropriate controls in data protection programs to monitor and protect data flows and respond to leakages.

Suggested Cybersecurity Controls
The Circular describes eight suggested controls:

1. Establish a strong governance framework to supervise cybersecurity management;
2. Implement a formalized cybersecurity management process for service providers;
3. Enhance security architecture to guard against advanced cyber-attacks;
4. Formulate information protection programs to ensure sensitive information flow is protected;
5. Strengthen threat, intelligence and vulnerability management to pro-actively identify and remediate cybersecurity vulnerabilities;
6. Enhance incident and crisis management procedures with more details of latest cyber-attack scenarios;
7. Establish adequate backup arrangements and a written contingency plan with the incorporation of the latest cybersecurity landscape; and
8. Reinforce user access controls to ensure access to information is only granted to users on a need-to-know basis.

Our Take
Although the SFC presents its cybersecurity controls as suggestions, these suggestions are prescriptive in nature and represent the SFC’s expectations for LCs. While the Circular is not a binding legal document, a LC’s failure to follow the suggestions could lead the SFC to investigate, and possibly sanction, the LC. Therefore, LCs may wish to compare the SFC’s suggested controls against their own current practices. The SFC’s emphasis is on LCs formalizing their internal governance on cybersecurity and practices regarding the protection of information, and ensuring that the LC has a framework in place to respond to threats and incidents. Following the SFC’s guidance is imperative for LCs in the current cyber risk environment.

Source: Data Protection Report

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Online commerce-based giant Alibaba is considering whether to appeal against a Hong Kong regulator’s finding that it breached takeover rules by buying an effective majority stake in a health-care firm in 2014 without extending the offer to all shareholders.

The Hong Kong Takeovers and Mergers Panel, which comes under the Securities and Futures Commission, found Alibaba Group broke rules by arranging a deal with certain investors in CITIC 21CN now known as Alibaba Health Information Technology (0241) at beneficial terms not extended to other shareholders.

The SFC ruled that the breach of code in the 2014 investment meant an original waiver to a requirement to launch a general offer to all investors was invalidated. But Alibaba said yesterday the regulator issued a new waiver in view of the sharp rise in Alibaba Health stock since 2014.

That meant Alibaba is not currently required to launch a full buyout, and the firm believes it fully complied with the takeover code regarding the investment, worth US$170 million at the time, which gave it a 54 percent stake in the health-care business after buying newly issued shares in the company.

Alibaba also noted it was granted a waiver by the full offer requirement, given that the stock has soared more than sixfold since the 2014 offer.

Alibaba Health shares fell 6.2 percent to HK$5.26 yesterday.

Source: The Standard

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Malaysia’s central bank said on Thursday (April 28) that it has fined troubled state fund 1Malaysia Development Berhad (1MDB) for failing to comply with bank rules.

It did not specify the amount that 1MDB had to pay.

Bank Negara Malaysia said 1MDB had to repatriate funds remitted abroad after the central bank revoked three permissions it had granted for the fund transfers.

The statement said 1MDB failed to submit evidence to justify its inability to comply with the repatriation order, and has until May 30 to pay the fine which would mark the end of central bank’s investigations.

Central bank governor Zeti Akhtar Aziz said in March that it would pursue administrative action on 1MDB, after it missed a deadline to submit documents on its finances abroad.

The bank has been pressuring 1MDB over US$1.83 billion that the company has said was previously remitted abroad.

Bank Negara has said the company failed to prove the ultimate use of the money or comply with previous instructions to repatriate the $1.83 billion.

The bank’s order requires “1MDB to repatriate monies remitted abroad”, it said, adding that the company has “failed to submit evidence and documentation specified by the bank to justify its inability to fully comply with the repatriation order”.

No 1MDB response was immediately seen.

The fund, founded in 2009 by Prime Minister Najib Razak, is teetering on the brink of collapse amid multiple investigations around the world into allegations that billions were looted from it.

Datuk Seri Najib also has been under pressure over US$681 million that he received from overseas in 2013.

1MDB, whose advisory board is chaired by Mr Najib, earlier this week defaulted on a US$1.75 billion bond issue after missing a US$50 million interest payment, triggering fears that the government will have to step in and bail out 1MDB, which could rattle markets and hurt Malaysia’s credit rating.

1MDB, which ran up more than US$11 billion in debt in a series of much-questioned investments, has steadfastly denied money was stolen or that it was in financial trouble. But earlier this month a Malaysian parliamentary committee said at least US$4.2 billion in questionable overseas money transfers were made by 1MDB.

Mr Najib was plunged into the crisis last year when the Wall Street Journal revealed that US$681 million in transfers to his personal bank accounts. He claims the money was a gift from the Saudi royal family, most of which he returned. A Saudi official recently said that was true, but only after weeks of silence that cast doubt on the claim.

In a series of more recent investigative reports, however, the newspaper said Malaysian investigation documents indicate more than US$1 billion in 1MDB-linked money had been funnelled to Mr Najib. Mr Najib and 1MDB vehemently deny that claim.

Mr Najib has faced calls to resign, but he has tightened his grip on the ruling party and thwarted domestic investigations. His position is not seen as under imminent threat.

Here is the Bank Negara statement in full:

Following receipt of the consent of the Attorney General today, Bank Negara Malaysia has issued a letter of administrative compound to 1MDB for failure to fully comply with directions issued under the Financial Services Act 2013. This includes requirement for 1MDB to repatriate monies remitted abroad following the revocations of the three permissions granted by Bank Negara Malaysia to 1MDB in 2009, 2010 and 2011. 1MDB has also failed to submit evidence and documentation specified by the Bank to justify its inability to fully comply with the repatriation order. 1MDB has been given until 30 May 2016 to pay the compound. The payment of the compound marks the conclusion of the investigation by Bank Negara Malaysia on the contraventions to the rules and regulations of the Central Bank.

Source: Straits Times

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The caseload of Hong Kong’s lead agency in the battle against money laundering and terrorist financing has soared to a record levels as a global crackdown on dirty money fuels an explosion in reports of suspicious activity from city law firms.

As pressure mounts to stamp out dirty money deals, new official figures obtained by the Sunday Morning Post reveal that the number of reports of suspicious financial activity made to the Hong Kong authorities by law firms in the city jumped from 222 in 2014 to 894 in 2015.

Overall, the number of reports of suspected dodgy financial dealings – known formally as suspicious transaction reports – made to the government’s Joint Financial Intelligence Unit has also climbed to an all-time high of 43,000.

The new data has prompted financial crime experts to warn that in wake of revelations made in the so-called Panama Papers – at the centre of which is the law firm Mossack Fonseca, which does significant business in the SAR – the number of suspect cases is set to escalate.

The latest figures from the unit, whose mission according to its official website is to “protect Hong Kong from the illicit activities of money laundering and terrorist financing”, come as Hong Kong starts to feel the chill of the global crackdown on dirty money.

That crackdown began with investigations into world soccer governing body Fifa, continued with the scandals involving Malaysia’s state-owned fund 1MDB, followed by the latest Panamanian revelations.

Top criminal defence advocate Jonathan Midgley said Hong Kong’s anti-money-laundering laws weighed in favour of prosecutors and law firms may have become nervous as the crackdown on dirty money gains ever more traction.

“Also, continuing education for solicitors keeps awareness levels high. Accordingly, any funds with even a hint of a suspicion results in a report. The Panama revelations are likely to make solicitors more nervous and therefore reporting to the Joint Financial Intelligence Unit may escalate,” said Midgley.

Another factor could be an upcoming court judgment on the appeal of a solicitor convicted of money laundering in August 2014.

University of Hong Kong law professor Simon Young Ngai-man suggested that conviction may have shaken the legal profession into reporting more cases.

“Lawyers know that reporting is a sure defence to the money laundering charge. No doubt the [conviction] case made clear that lawyers are not untouchable and the Panama Papers will put even more pressure on lawyers,’’ said Young.

An investigation is under way into Mossack Fonseca in Panama, including raids on the offices of the law firm in that country.

However, despite the world’s biggest data leak revealing that almost a third of their business went through the mainland and Hong Kong , it is unclear if the SAR authorities have been approached by the Panamanian authorities for assistance.

Asked if they had been either ben asked for or offered investigative support, a spokesman for the Hong Kong police said: “Police don’t comment’’.

A spokesman for the Joint Financial Intelligence Unit said the rise in suspicious transaction reports reflected an enhanced awareness of the law.

Source: SCMP

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Chow was also sentenced to two years in jail by the District Court in May last year. The SFC said Chow is not a fit and proper person to be licensed after his convictions.

He was found to have forged 60 signatures of customers when he was HSBC business relationship assistant vice president, according to the reasons for sentence by the District Court. HSBC incurred a potential loss of HK$7.9m ($1m).

Chow forged signatures of six customers on investment product application documents during February and August 2013, with investments involving about HK$700m ($90.2m), although the customers all agreed to invest in those products before or after the signatures were forged.

He also forged another nine deals without authorisation from the customers.

The Court also found Chow changed the subscription fee rates on subscription forms without the knowledge and agreement of a client, involving an extra HK$27,550.

He made six unauthorized payments and withdrawals to and from a number of customers’ accounts in order to cover the losses of some of the unauthorised investments. HSBC has made compensation totaling HK$2.7m to two of Chow’s clients.

Source: Intl. Adviser

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