Money laundering: a plague that funds criminals

Money laundering continues to be the plague upon which organised criminals depend to fund both their lifestyles and their efforts to extract ever more ill-gotten gains from their victims.  It takes a lot of money to establish call centres, boiler rooms, illegal drug shipments and other labour intensive operations by which to separate you and me from our hard-earned cash.

There are a number of reasons for their continued success: the inadequacy of regulators, the willingness of banks to look the other way and the failure by governments to close the loopholes that enable, for example, people to buy expensive properties without identifying themselves or the sources of their cash.

Within the last few weeks there have been some splendid examples of all the above:

21 December:  The Swiss Financial Market Supervisory Authority (FINMA) reported that the American bank JP Morgan Chase’s Swiss subsidiary “seriously breached” anti-money laundering rules by completing transactions worth “hundreds of millions of dollars” with a Malaysian government investment fund that is under investigation in at least six countries.

3 January:        The Financial Action Task Force (FATF), an inter-governmental organisation, reported that Mexico is failing to stop money laundering, partly because law enforcement agencies are corrupt.  In 2016, for example, the government seized $32.5 million of illicit funds, less than 0.1% of the $58.5 billion estimated to be generated by organised crime.  Acting attorney general Alberto Elias Beltran said Mexico is “strengthening protocols.”

4 January:        The U.S. Office of the Comptroller of Currency (OCC) announced that it had fined U.S. financial institution Citibank $70 million for failing to address shortcomings in its anti-money laundering policies.  The failings had been brought to the attention of the bank in 2012.  The bank’s spokesman Mark Costiglio said it is committed “to remedy the concerns.”

4 January:        The New York Department of Financial Services (DFS) announced that the money transfer business Western Union Co. will pay $60 million to resolve allegations that it failed for more than a decade to deter and report suspicious transactions.  DFS superintendent Maria Vullo said that the business “put profits ahead of the company’s responsibilities.”  Last year the company agreed to pay $586 million to resolve similar claims by the U.S. Justice Department and the Federal Trade Commission.

5 January:        The U.K.’s Gambling Commission reported that five online casino companies could lose their licences in the U.K. because they are not doing enough to stop criminals from money laundering.  In particular, they were not submitting enough information about suspicious activity to law enforcement agencies.  The regulator’s chief executive Sarah Harrison said the industry had a duty to “keep crime out of gambling.”

Even usually unnoticeable Canada has come under the spotlight.  Foreign students with no known sources of income have been buying up homes in Vancouver worth millions of dollars.  They can do so because Canadian law does not require ultimate owners to be identified.  On 4 January The Economist noted that tougher checks are required for a Canadian library card than to form a company.

Efforts to close such loopholes remain half-hearted.  Until all financial centres, onshore and offshore, are required to identify the ultimate owners of accounts, money launderers with an ounce of sense can safely continue to operate.

In the meantime, bankers, lawyers, accountants and other business people who want to be as sure as possible that they are not dealing with money launderers had best consult with a reputable corporate investigations business.