KYC360 Weekly Roundup

Published on Dec 16, 2022

EU Court UBO Ruling

Until recently, anyone wanting to find out the ultimate beneficial owner (UBO) of an EU-based company could consult the databases held by member states. This abruptly ended after the Court of Justice of the European Union in effect closed down the registers after a ruling centred around privacy and data protection. Transparency campaigners have condemned the move as a major step backwards in the fight to tackle money laundering and the abuse of shell companies, while privacy lawyers have hailed the ruling as protection against the abuse of individuals’ rights. 

Still on the subject of legislation, we report on the introduction of a range of new international rules and policies and accompanying opinions. We also deliver the latest news from the crypto sector, update you on new sanctions, and delve into the emerging field of ESG. 

We wrap up this week’s Roundup with the latest news covering money laundering, corruption, & fraud, together with other newsworthy items collected from around the world. 

The Court of Justice of the European Union ruling 

On November 22, 2022, the Court of Justice of the European Union (CJEU) declared invalid the part of the European Union’s Anti Money Laundering Directive that allowed public access to registries about companies’ beneficial owners – the people who actually own or control them. 

“The general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data” 
Statement from the European Court of Justice

European countries begin taking down public company registers after CJEU ruling 

European countries have begun taking down public registers of who owns their companies in the wake of the landmark court ruling from the Court of Justice of the European Union (CJEU), which invalidated public access. Luxembourg and the Netherlands have already closed their public beneficial ownership registers, which show the ultimate owners of their companies, following the ruling. 

A key plaintiff in the landmark case owned companies in notorious tax havens 

In case you missed this last week, Patrick Hansen, a business executive based in Luxembourg, who was one of two plaintiffs who persuaded the highest court in Europe to make the landmark ruling owns companies in several high-profile tax havens.

Opinion: Beneficial ownership data is critical in the fight against corruption 

In the aftermath of a “disastrous” CJEU ruling, this article by the International Consortium of Investigative Journalists (ICIJ) explains why publicly available beneficial ownership registries are a key tool for exposing corruption and financial crimes like money laundering 

“This ruling is a total disaster. The European Court of Justice has just done more to help organized crime and dark money flows than the worst criminal could manage.” 
Drew Sullivan, International Consortium of Investigative Journalists

Opinion: The European Court of Justice was played 

The CJEU has reversed a decade of progress against financial secrecy, a move which is being celebrated by tax evaders and sanctioned oligarchs all over the world. This perverse decision that it claims to be founded in human rights, invalidates the public’s ability to access information on companies’ beneficial owners. EU policymakers must deliver an urgent response to this ruling.  

CJEU ruling on beneficial ownership major blow to fight against environmental crimes 

The ruling will have a direct impact in the fight against environmental crimes, particularly illegal, unreported and unregulated (IUU) fishing which accounts for up to one-fifth of global catches. The financial secrecy surrounding the owners of vessels is a key driver of IUU fishing as secrecy makes it harder to catch the real perpetrators. 

Harnessing company ownership data to reduce corruption 

A new policy brief demonstrates the potential of company ownership data to challenge those seeking to abuse their positions for personal gain. It illustrates three ways in which data on beneficial ownership is being used in jurisdictions around the world to prevent and detect corruption. 

Opinion: EUCJ’s landmark decision presents an opportunity for ‘contextual analysis’ 

According to this blog by Dr. Michelle Frasher, while the ruling halts unencumbered public access, it does not affect access rights and leaves legitimate interest as a possibility for other access rights. Individuals concerned about fraudulent registrations can claim their rights under GDPR Article 15 to request a copy of their personal and related data that may be in the registry.  

“The EUCJ restriction on public access rights does not completely shut the door on compliance and transparency in the fight against financial crime.” 
Dr. Michelle Frasher PhD, CAMS

 

Financial_ServicesMoney Laundering, Corruption, & Fraud

Greek MEP stripped of Vice-Presidency over Qatar corruption and money laundering scandal

European Parliament’s Vice-President Eva Kaili has been arrested on charges of corruption and money-laundering after prosecutors seized €1.5m from various properties. Kaili is accused of accepting money and gifts from Qatar in exchange of influencing European policy in Doha’s favour and as a result, MEPs voted by 625 to one to strip Ms Kaili of her role as one of its 14 vice-presidents. 

Credit Suisse accepted ‘suspicious’ invoices for €132m Greensill loan

Greensill Capital received an emergency $140M (€132M) loan from Credit Suisse based partly on invoices to companies who deny ever conducting the business stated on documents. The Swiss bank reportedly provided the loan in October 2020, just five months prior to the collapse of Greensill, a supply chain finance firm that counted former UK prime minister David Cameron as a senior adviser. 

ASIC goes after 11 Star Entertainment executives over casino’s AML failures

The Australian Securities and Investments Commission (ASIC) has launched legal action against 11 past and current directors and executives of casino giant The Star Entertainment for breaching their duties between 2017 and 2019and not taking steps to protect the company from people with criminal links. 


Amsterdam ramps up efforts against money laundering in souvenir shops
 

Amsterdam is stepping up its fight against shops that act as fronts for money laundering, by sending special control teams to check the city’s many souvenir shops for suspicious activity. 

 

“We see a lot of shops where hardly anyone enters. You cannot pay thousands of euros in rent from one customer a day who buys a lighter.”
Femke Halsema, Mayor of Amsterdam

Malaysia PM told there should be no grace period for unity govt to stem corruption

Following the unity government’s aim to be transparent, practice good governance, eradicate corruption and demonstrate accountability, Transparency International Malaysia (TI-M) has urged Prime Minister Datuk Seri Anwar Ibrahim to set clear key performance indicators for his Cabinet members. The anti-graft group said KPIs help provide clear guidance on the objectives of the government and assess their performance. 


Danske Bank to pay over $2 billion after pleading guilty in US to Estonia AML failings
 

Danske Bank has plead guilty to fraud and will pay $2 billion to end a long-running US probe into money laundering at its Estonia branch. The Danish bank admitted to funnelling $160 billion through US banks, helping draw a line under the worst scandal in the bank’s recent history. 


Lithuanian politician’s son guilty of fraud
 

Algirdas Komskis, the son of the former deputy speaker of the Lithuanian parliament, has been convicted of embezzlement, fraud and intentional bankruptcy. A court ruled that Komskis intentionally ran his father’s business into the ground to avoid paying damages to two small children who lost their father in a car accident caused by Komskis’ employee, who was driving drunk in a company car. 

 

RequirementsLegislation, Policies & Opinions

Australian parliament passes national anti-corruption commission bill 

Australia has established the country’s first national investigative body to tackle corruption. The new National Anti-Corruption Commission (NACC) will operate independently of the government, but will be overseen by a Parliamentary Joint Committee, and be subject to judicial review. If investigators uncover possible criminal conduct, the commission can refer the findings to the Federal Police or the Commonwealth Director of Public Prosecutions. 

UK Guidance: Export control compliance code of practice 

This UK government publication provides the latest guidance for exporters of controlled items on how to develop compliance procedures, pass audits, and meet licence obligations. 

Brokers braced for overhaul of US stock trading rules 

In the most sweeping reforms since 2005, banks, trading firms and brokers are bracing for an overhaul of US stock trading over plans designed primarily to lower costs for small investors. The Securities and Exchange Commission (SEC) is set to vote on four proposals aimed at pushing brokers and market-making firms to execute deals at the best price available. 

CCOs torn over US DOJ certifications 

In response to Compliance Week’s fourth annual “Inside the Mind of the CCO” survey, US compliance professionals have stated that the liability of chief compliance officers is uppermost of mind for US compliance professionals, thanks in part to the action (and inaction) of the Department of Justice (DOJ) and Securities and Exchange Commission (SEC). 

Opinion: data analytics in corporate compliance not about the “shiniest tool”  

Glenn Leon, the head of the US Department of Justice’s fraud section has stated that in-house lawyers should make the most of their resources when introducing data analytics into their company’s compliance programme. He also indicated that more enforcement actions and policy changes are on the horizon.  

The Wolfsberg principles for using AI and ML in financial crime compliance 

The Wolfsberg Group has published its principles for using Artificial Intelligence and Machine Learning in Financial Crime Compliance. The document identifies five elements that support an ethical and responsible use of AI/ML: Legitimate Purpose; Proportionate Use; Design and Technical Expertise; Accountability and Oversight; Openness, and Transparency. 

Opinion: More regulation needed to stop lawyers from being professional enablers 

A UK anti-corruption expert believes that lawyers should be limited from putting client interests over moral concerns through the implementation of stricter rules and harsher penalties for non-compliance. 

 

RequirementsESG

Florida targets BlackRock in anti-ESG assault 

Florida’s Republican’s administration is pulling $2 billion from the world’s largest investment firm and is pushing managers who run the state’s pension funds to withdraw their holdings which amount to some $13 billion. All because of BlackRocks’s loudly professed ties to environmental, social and governance investment principles; the complaint being that ESG investing “sacrifices returns at the altar of the select few, unelected corporate elites and their radical woke agendas.” 

Most large ESG funds trail market benchmark  

Funds linked to environmental, social and governance principles are, by definition, meant to minimise risks tied to those three factors, but in 2022 the approach did little to help protect investors from the brutal slide in financial markets. The 10 largest ESG funds by assets have all posted double-digit losses, with eight of them falling even more than the S&P 500’s 14.8% decline.  

How the US military failed to remove unexploded bombs from a Hawaiian island   

The Waikoloa Maneuver Area is a 185,000-acre site that was used by the US military for live-fire training in the 1940s and to this day many munitions that failed to explode remain hidden beneath years of soil and vegetation buildup. But 8 years after the military promised to remove any unexploded ordnance, the islanders are still waiting.   

How the US broke its promise to protect fish for tribes

Regulators have done so little testing for toxic chemicals in fish that even public health and environmental agencies admit they don’t have enough information to prioritise cleanup efforts or to fully inform the public about human health risks. So, Oregon Public Broadcasting and ProPublica did their own testing and revealed that native tribes in the Columbia River Basin face a disproportionate risk of toxic exposure through their most important food.

 

Crypto-1Crypto & Virtual Assets

US charges FTX’s Sam Bankman-Fried with fraud and other violations 

United States prosecutors have charged Sam Bankman-Fried with fraud and violation of campaign finance laws. Bahamas Chief Magistrate denied the petition for Bankman-Fried to be released on bail, citing a “great” risk of flight and ordered the former CEO of FTX sent to the country’s department of corrections until February 8. 

FTX allowed trading affiliate Alameda to borrow unlimited funds 

John Ray III, the court appointed chief executive has revealed that FTX allowed affiliated trading firm Alamada to borrow funds from the cryptocurrency exchange without “any effective limits”, highlighting the depth of ties between the two companies that failed last month.

UK watchdog calls for improved regulation following FTX crypto collapse 

The UK is finalising plans to implement sweeping regulations for the cryptocurrency industry following the collapse of FTX. Three unnamed sources familiar with the UK Treasury’s thinking, have stated that the Financial Conduct Authority (FCA) will have new powers to oversee the digital-assets industry more broadly, including monitoring how companies operate and advertise. 

How to solve the cryptocurrency sustainability problem? 

Bitcoin uses large amounts of energy, more than any other cryptocurrency. If cryptocurrencies are to be taken seriously in the wider financial world, it is crucial that the energy consumption of Bitcoin is not conflated with all cryptocurrencies. 

CTO of blockchain company charged with scheme to defraud the company of over $1 million 

The US Attorney’s office and the FBI have indicted Rikesh Thapa with operating a scheme to defraud a start-up technology company of over $1 million worth of US currency, cryptocurrency, and utility tokens. 

Bank of England seeks applications for CBDC wallet prototype 

The Bank of England is offering a £200,000 contract to successful bidders for a five-month project to create a sample wallet for a Central Bank Digital Currency. Key deliverables include the development of a mobile wallet app, wallet and merchant website and a back-end server to serve mobile app and website, call the core ledger API and store user data and transaction history. 

 

Sanctions-1Sanctions

The murky pricing maths behind Europe’s new oil sanctions 

Europe has introduced a ban on seaborne Russian oil shipments and capped prices on Russian oil elsewhere. This has some oil traders worried that the result could be another spike in crude prices globally, while others believe a ban could have the opposite effect. 

EU Commission proposes ninth package of Russia sanctions 

The European Commission has proposed a ninth package of sanctions on Russia over its invasion of Ukraine. Commission President Ursula von der Leyen said it favoured new sanctions against three additional Russian banks and new export controls and restrictions, especially for dual-use goods such as key chemicals, nerve agents, electronics and IT components.  

EU agrees to add 200 individuals and entities to Russia sanctions list 

While the ninth package of sanctions has yet to be agreed, European Union foreign ministers have agreed in principle to add around 200 Russian individuals and entities to a sanctions list. The latest additions include military figures, politicians and the judiciary, all of whom are viewed as being complicit in the ongoing invasion of Ukraine. 

“This is approved, it is going to hit hard the Russian defence sector and the Russian military. It is going to hit also the political masters of the Russian government, in the Duma, in the Federation Council and in the judiciary. We are targeting those responsible for looting the Ukrainian grain, and for the deportation of Ukrainian people and in particular children.” 
Josep Borrell, EU foreign policy chief

US sanctions over 40 individuals and entities in nine countries for corruption and human rights abuse 

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC), in recognition of International Anti-Corruption Day and Human Rights Day, has sanctioned over 40 individuals and entities across nine countries who are connected to corruption or human rights abuse. 

Canada cancels sanctions exemption for Russian gas turbine 

Canada has cancelled an exemption from sanctions against Russia that it granted to a company that repairs gas turbines for Russia’s Gazprom. The move is in response to Gazprom’s failure to return the Nord Stream 1 pipeline to normal operating capacity after the Canadian government granted an exemption for the company that repairs its turbine. 

RequirementsOther News

How England’s water has become the world’s piggy bank 

England is one of the few countries where water is fully owned by private companies. As a result, 72% of England’s privatised water system is owned by funds, banks and billionaires across the world, leaving the companies to answer to investors based thousands of miles away from their customers. 

“What we have here is just a crazy system. We are managing our water in the interests of offshore investors.” 
Kate Bayliss, Department of Economics, SOAS University of London

Edinburgh Reforms: UK government announces widespread transformation for financial sector  

The Chancellor of Exchequer Jeremy Hunt has announced The Edinburgh Reforms, a set of developments to catalyse competition and growth in the UK’s financial services sector, that includes moves on a CBDC and the move to Net Zero. 

Metro Bank to pay £10m in UK for misleading investors 

The UK’s Financial Conduct Authority (FCA) has fined Metro Bank and its two of its former senior executives more than £10m for breaching rules by knowingly publishing incorrect information to its investors. Metro Bank is set to pay £10m, while the former chief executive Craig Donaldson and former chief financial officer David Arden are facing fines of £223,100 and £134,600 respectively.

 

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