KYC360 Weekly Roundup - 23rd Sep 2022

Published on Sep 23, 2022

Top stories this week: 

Spotlight on the Wirecard Scandal | Crypto | Sanctions

The release of a new documentary has thrown fresh light on one of the biggest financial scandals of recent times. Once the golden child of the financial and tech world, Wirecard was eventually exposed for corrupt business practices and subsequently collapsed. The Wirecard debacle was the result of a perfect storm of money laundering, fraud, inaction by regulatory authorities, and auditing failures by one of the big accountancy firms.

News of Russia’s partial mobilisation of reservists and nuclear threats has spurred the EU into action and a fresh wave of sanctions is expected within days. Meanwhile the crypto sector has made a major inroad into ending criticism of blockchain energy usage and efforts to take crypto mainstream.

We also update you with the latest legislation, policies, and reports. And to complete this week’s Roundup, we deliver news on money laundering and terrorist financing, together with global reports on bribery and fraud.


Financial_ServicesSpotlight on the Wirecard scandal

The story behind the Wirecard scandal

The journalist who first revealed this fraud was the Financial Times’ Dan McCrum (96 of his stories on the case are here). This article covers exactly what went down at Wirecard and why it collapsed, leaving hundreds of employees jobless, thousands of investors €4.5 billion poorer, and €1.9 billion sized hole in its accounts.

Podcast: Lessons from the Wirecard scandal with Dan McCrum

In this insightful interview, Dan McCrum reveals how allegations of malpractice dogged the company since its early days, reaching a peak in 2019 when the Financial Times published a series of investigations along with whistleblower complaints and internal documents. It all came to a head in 2020, when Wirecard filed for insolvency following revelations that €1.9 billion was “missing”.

Documentary: Skandal! Bringing Down Wirecard

Dan McCrum’s book, Money Men: A Hot Startup, A Billion Dollar Fraud, A Fight for the Truth, has just been made into a Netflix documentary, Skandal! Bringing Down Wirecard, bringing to the screen exactly what went down at WireCard and how its secrets were eventually exposed.

Documentary: Wirecard The Billion Euro Lie

This documentary released just last year examines the rise and fall of the poster child of the German FinTech sector. It depicts how a firm with a murky past that was set to take over Deutsche Bank in 2019, collapsed following revelations of fraud on an unprecedented scale.

Video: The Big Four Accounting firms under scrutiny

For ten years, auditors at EY (Ernst & Young) certified Wirecard’s annual financial statements. Yet they failed to uncover that a network of fraudsters was using accounting tricks to write billions into Wirecard’s books. This video brings the role of big auditing firms into focus, how their work is supposed to create trust, but appearances can be deceptive. EY, PwC, KPMG and Deloitte: the ‘Big Four’ auditing firms have all been at the centre of major financial scandals.

Following Wirecard, watchdog largely bans employees from private stock exchange trading

As well as possible malpractice by auditor EY, questions were raised about regulatory failure on the part of the Federal Financial Supervisory Authority (BaFin), Germany’s top financial watchdog. After the collapse of Wirecard, Bafin tightened its previously permissive rules for financial transactions by its employees, now the financial regulator has largely banned its employees from private trading in shares, bonds and other securities.



Money Laundering, Fraud & Corruption

Danske Bank fined €1.82 million in Ireland for money-laundering breaches

Denmark’s Danske Bank has been fined by the Central Bank of Ireland for failing to ensure its Dublin branch properly monitored around 350,000 transactions for potential money laundering or terrorist financing for almost a decade. Danske did not update an automated transaction monitoring system when the Criminal Justice (Money Laundering & Terrorist Financing) Act 2010 came into force.

Key Kinahan cartel member arrested in Spain for laundering €200 million

Irishman Johnny Morrissey who was placed under sanctions by US authorities earlier this year as part of an international crackdown on the Dubai-based cartel, is facing charges of laundering €200 million over an 18 month period.

Jumbo CEO remains in custody for money laundering

Jumbo CEO Frits van Eerd is still in custody after he and various people from the motocross world were allegedly involved in a major money laundering case. The suspects are believed to have used real estate transactions, car trading, unexplained cash deposits, and motocross sponsorship contracts to launder large sums of money.

Banker pleads guilty to Bank Secrecy Act charges

Hanan Ofer pleaded guilty to failing to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act. He failed to implement an effective anti-money laundering program at a small, unsophisticated credit union, causing it to process high-risk transactions without appropriate oversight and without ever filing a single Suspicious Activity Report, as required by law.

RAFT22: Reassessing the Financing of Terrorism in 2022

RAFT22 will take place in Brussels on Tuesday, November 15. It will bring together leading voices in tech, finance and security, together with high-profile representatives of the European counter-terrorism effort with the goal of discussing the past and present of counter terrorism financing in Europe, and to chart the way forward.

Convicted jihadist guilty of financing terrorism though female ISIS supporters

A Dutch court has found Samir A. guilty of financing terrorism and sentenced to 30 months in prison. He helped women who supported ISIS to escape from camps in Syria, or sent them money with the help of money brokers and unmonitored banks, also known as hawala banking or “underground banking.”

NCA attempts to seize £54 million held by Barclays

The National Crime Agency (NCA) has launched legal action to recover nearly £54m from two unamed Barclays bank accounts. Barclays is not a defendant and is not being accused of any wrongdoing, and as a result has only been named only as an interested party.

“The overwhelming inference is that, on the balance of probabilities, the property constitutes the proceeds of crime.”
National Crime Agency

Hedge fund trader to be extradited to Denmark over £1.5bn fraud case

A London court has ruled that a British hedge fund trader Anthony Patterson can be extradited to face charges that he helped defraud the country’s tax authorities out of 9 billion kroner ($1. 2 billion). The charges relatd to the so-called “cum-ex” trading schemes, in which the Danish state lost over 12.7 billion kroner.

Bank of East Asia executive facing bribery charge

Chen Zhiren, a Bank of East Asia (China) executive vice president, has been arrested on suspicion of accepting bribes. According to a report from Bloomberg, he is currently being held in Beijing and the investigation is related to the issuing of bank loans.


“Our investment in ESG has everyone much more motivated, as they’re focused on purposeful businesses” 

Adrian Ma boss of PR firm Fanclub wanted to make his company more environmentally and socially responsible. So, he applied for a global certification called “B Corporation” which requires companies to show that they meet certain social and environmental performance thresholds. In addition, they have to make a commitment to change their corporate governance structure to be accountable to not only their shareholders, but to all their stakeholders – staff, customers and suppliers. While it has meant turning down many clients who wanted to work with them, it has increased staff engagement and made it easier to recruit

UK chief: B Corp movement has some ‘tough questions’ to answer 

Any firm achieving B Corporation certification would once have automatically earned respect for meeting the high ESG standards set by the awarding body, B Lab. But faith in this ethical business movement has been shaken over the past year as the credentials of some B Corps have attracted critical scrutiny. Reflecting on the recent unfavourable publicity, Chris Turner, executive director of B Lab UK, responded that the movement is at an “inflection point”, caused largely by its rapid growth and accepts it faces some “profound” questions that require “thoughtful” answers.

UK is leading the way on ESG, but greater transparency is needed 

New market analysis by digital identity specialists, ID Crypt Global, reveals that the UK business and industry is leading by example when it comes to ESG, with the UK’s top five largest companies securing a far higher ESG score compared to those elsewhere around the world. However, ESG scores can vary from one provider to the next and the methodology used to obtain this score is rarely disclosed, resulting in a lack of consistency and transparency that can cause confusion.

FCA outlines where improvements are needed in ESG benchmarks 

In 2022, the FCA sent a portfolio letter to benchmark administrators where we highlighted the risk of poor disclosures for ESG benchmarks. After completing a preliminary review on ESG benchmarks, it found that the overall quality of ESG-related disclosures made by benchmark administrators was poor and as a result the FCA sent a further letter to administrators outlining the issues identified. 

UK opens consultation on future regulatory regime for ESG rating providers 

The UK Treasury is consulting on whether regulation for providers of Environmental, Social and Governance (ESG) ratings should be introduced, and the potential scope of a regulatory regime. The consultation opened on 30 March and will close on 30 June. 

RequirementsLegislation, Reports & Analyses

France passes crypto bill to enable seizure of assets

French authorities have proposed a new crypto bill that will allow the seizure of digital assets belonging to criminals. Through this bill, any investor involved in illicit activities through their accounts is at risk of forfeiting their assets to the authorities.

The new failure to prevent money laundering offence: what are Jersey businesses required to do?  

Following in the footsteps of the failing to prevent tax evasion offence, with effect from 24 June 2022, Jersey has introduced a new offence under Article 35A of the Proceeds of Crime (Jersey) Law 1999 of failing to prevent money laundering. As a result, if a business is connected to persons engaged in money laundering, the business is itself at risk of committing a criminal offence unless it can demonstrate that its AML policies and procedures (both on paper and in practice) were fit for purpose.

US releases comprehensive framework for responsible development of digital assets

President Biden’s March 9 Executive Order on Ensuring Responsible Development of Digital Assets outlined the first whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology. Agencies across the government have worked together to develop frameworks and policy recommendations that advance six key priorities: consumer and investor protection; promoting financial stability; countering illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.

“Innovation is one of the hallmarks of a vibrant financial system and economy. But as we have learned painfully from the past, innovation without appropriately addressing the impact of these developments can result in significant disruptions… These reports and their recommendations provide a strong foundation for policymakers as we work to realize the potential benefits of digital assets and to mitigate and minimize the risks.” 
US Secretary of the Treasury Janet L. Yellen

Report: Experts warn new US company owner database taking way too long to implement

A major reform designed to halt anonymous companies hiding illicit activities and funds remains stalled 2 years after the release of the FinCEN Files; the money laundering probe that called for greater safeguards. Experts say the Treasury Department is badly behind schedule in implementing a law mandating the government to collect ownership data from companies operating in the US.

Money laundering, sanctions, and corruption present ongoing challenges for financial institutions

Recent geopolitical events and changes in legislation have resulted in a range of new challenges for financial institutions. As well as managing their regulatory exposures and strengthening their risk-management processes, they also need to scan the horizon more than ever before to comply with a myriad of new regulations.

EGBA releases first ever pan-European guidelines to strengthen anti-money laundering efforts

For the first time, the European Gaming and Betting Association (EGBA) has published pan-European, self-regulatory guidelines to strengthen the anti-money laundering (AML) efforts of Europe’s online gambling operators. The publication of the guidelines underlines the EGBA’s commitment to promote the highest level of industry responsibility and support the sector’s contribution in the fight against money laundering.


Crypto-1Crypto & Virtual Assets

Six years in the making, the most sophisticated upgrade in crypto’s history is complete

The Ethereum blockchain has merged with a special-purpose decentralised ledger called the Beacon Chain, concluding its transition to near-carbon neutrality. The shift may end criticism of blockchain energy usage and boost the struggling industry, while helping to take crypto mainstream. Ethereum underpins the vast majority of Web3 applications such as decentralised finance protocols and non-fungible tokens (NFTs), as well as ether, the second-largest cryptocurrency with a $195 billion market value. 

Luxury cars seized from ‘Crypto King’ as investors try to recoup millions

Aiden Pleterski, the self-described ‘Crypto King’ is facing allegations that he took at least $35 million from over 140 investors, only for that money to disappear. Creditors are now trying to unravel where the money given to Pleterski and his company AP Private Equity Limited for cryptocurrency and foreign exchange investments ended up.

Dutch police arrest man for laundering millions using crypto

Dutch police recently arrested a 39-year-old man on suspicion of laundering criminal money via cryptocurrencies worth tens of millions of euros. Police say it tracked down the accused after stolen bitcoins (BTC) from a rogue software update of the Electrum wallet, one of the popular bitcoin wallets ended up with him.

Man sentenced to prison for changing people’s cash into bitcoin

A US law originally enacted in 1992 has just been used to sentence Mark Alexander Hopkins, also known as Doctor Bitcoin and the handle Rizzn, to federal prison. While Hopkins didn’t commit any fraud, the US Department of Justice said by not taking steps to verify the source of the cash, his actions enabled a scammer to commit fraud with funds Hopkins transacted on her behalf

Video: Is web3 a scam?

Jan Liphardt provides a framework and tools to assess how web3 provides value and how to separate fact from fiction. “Blockchains can be painful but beautiful, meaning that sustainable opportunities where a web3 solution makes sense are nuanced.”



EU plans new sanctions following partial mobilisation and nuclear threat

Following Russia’s announcement of an immediate partial mobilisation of 300,000 reservists and threats to deploy nuclear weapons, within days the European Commission will start consultations with EU countries’ representatives on an upcoming sanctions package. Diplomats expect a discussion on a plan to cap the price of Russian oil, more listings of individuals, and a ban on the import on Russian diamonds and other luxury goods. 

“Russia, its political leadership, and all those involved in organising these referenda as well as in other violations of international law and international humanitarian law in Ukraine will be held accountable, and additional restrictive measures against Russia will be brought forward as soon as possible in coordination with our partners”
Josep Borrell, EU High Representative for Foreign Affairs and Security Policy

US Treasury targets additional facilitators of Russia’s aggression in Ukraine

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 22 individuals and 2 entities, including multiple individuals who have furthered the Kremlin’s war in Ukraine. Among those being designated is Task Force Rusich, a neo-Nazi paramilitary group that has participated in combat alongside Russia’s military, as well as two of its senior leaders.

The Brookings Sanctions Tracker

The Brookings Sanctions Tracker is a user-friendly tool that analyses the current landscape of specific restrictive measures imposed against Russia. The tracker allows users to view a snapshot of current sanctions that governments have designated within a specified timeframe. The downloadable Excel spreadsheet format allows users to view, sort, and analyse sanctions against Russian individuals and entities issued by the US, EU, UK, Australia, Canada, Japan, the Republic of Korea, and other nations that have taken major actions.



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