Source: Centrale Bank van Curacao en Sint Maarten

Selectie van het nieuws met betrekking tot sancties.

Article by Stefano Siggia

In the past decade, a series of leaks from insider sources have shed light on the complex systems of money laundering, tax evasion, and fraud perpetrated by certain countries and wealthy individuals. The profound work carried out by international journalists in publishing the wrongdoings have shaken the foundations of the world of finance, AML, and tax regulation, leading to the disruption of old and corrupt structures.

Data leaks such as Panama Papers, Offshore Leaks, Swiss Leaks, or Paradise Papers have all had an impact on our perception of the world of finance and its seedy side. Their disclosures have exposed numerous financial misbehaviours from persons across the world – from politicians hiding exorbitant gains from their country’s taxation system, to celebrities masking their assets behind shell companies in far off lands, to the intrinsic web of offshore entities linked to individuals of power.

Transparency International estimates that tax evasion, theft, corruption, bribery, and other illicit activities costs developing nations $1.26 trillion each year, or roughly the equivalent of the economies of Switzerland, South Africa and Belgium combined. In the European Union, about $132 billion are lost to corruption on a yearly basis.

The tsunami of scandals and disbelief created by the various reports are helping to reshape the realm of finance, slowly chipping away the secretive systems that have been weakening global economies.

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How were the financial leaks exposed?

The leaks and reports could not have existed without the help of brave whistleblowers. In 2016, a person by the pseudonym of Joe Doe leaked to the German newspaper Süddeutsche Zeitung 11.5 million documents with a total of 2.6 terabytes of data belonging to the law firm Mossack Fonseca, exposing the massive financial injustice that would be known as Panama Papers. In a public statement titled The Revolution Will Be Digitized, Doe explained that they had disclosed the documents to highlight global financial corruption and growing income inequality.

While most whistleblowers had noble intentions, there were some exceptions. In 2008, former HSBC Private Bank software engineer Hervé Falciani stole data that exposed the tax evasion scheme of 100.000 clients and 20.000 offshore companies that had accounts with HSBC. Known as Swiss Leaks, it is considered the biggest leak in Swiss banking history.

Mr. Falciani initially fled to Lebanon with the data, looking to make money by selling it to local banks and start a new life. He was found and arrested, and upon being let go following an interrogation, Mr. Falciani fled to France where he handed the information over to French authorities prompting a worldwide investigation.

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How were the financial leaks published?

The majority of whistleblowers contacted journalists to hand over the data that they had obtained. The massive amount of information was impossible to go through by a handful of journalists and newspaper shared their evidence with the International Consortium of Investigative Journalists (ICIJ).

The ICIJ is a U.S.-based non-profit organization with a network of 267 investigative reporters from over 100 countries and territories. They also partner with over 100 media organizations including major companies such as the New York Times, the Guardian, and BBC, as well as smaller regional non-profit investigative organizations. The ICIJ not only analyses the data leaks but also publishes them on their website, making accessible to anyone the names of the individuals and companies exposed. The information is also available in screening feeds used by financial institutions.

To be able to sift through the gargantuan number of documents, ICIJ journalists employ various encrypted technological tools to aid them. The first of these is a secure forum, similar to a common social media app, which allows the journalists to post their discoveries. The second is Blacklight, a database used to search for names, countries, and sources, followed by the third tool known as Graph, an app that visualises the links between individuals and companies.

Recently, the ICIJ also began to employ an AI machine-learning model that is capable of finding similar documents amongst piles of records, such as tax filings or business forms of the same company.

In 2021, the ICIJ, together with the Global Alliance for Tax Justice, was nominated for the Nobel Peace Prize for exposing illicit flows and fighting against the circulation of dark money.

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The complete list of data leaks

Below you will find a comparative chart on the various leaks that have been disclosed thus far:

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Who was exposed in the data leaks?

Politicians, heads of state, actors, musicians, television celebrities, members of royal families, entrepreneurs, and other individuals of power were exposed in the various leaks. Below is a short list of some of the most curious or well-known names and in which leak they appeared in:

• Formula One pilot Lewis Hamilton shielded millions of dollars in taxes on his luxury jet – Paradise Papers
• Belgian-Israeli diamond tycoon Erez Dayelot who is connected to blood diamonds, bribery, and arms trafficking – Swiss Leaks
• The king of Saudi Arabia Salman of Saudi Arabia – Panama Papers
• Bono, vocalist of famed rock band U2, owned a Lithuanian shopping mall as a tax shelter – Paradise Papers
• The estate of Queen Elisabeth II invested millions in an offshore portfolio which included companies accused of predatory lending – Paradise Papers
• The Walt Disney Company, Skype, and Koch Industries held accounts in Luxembourg to receive massive tax deductions – LuxLeaks

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What was the impact of the financial leaks?

The leaks and reports had beneficial impacts on national and international legislation, prompting state governments and international unions to take action to improve the state of the financial world. Below is a selection of some of the most important changes enacted after the scandals:

• EU Special Committee on Tax Rulings – following LuxLeaks in 2015, the European Parliament set up a special committee on tax rulings. After an inquiry on several Member States and companies, the committee re-introduced the idea of the Common Consolidated Corporate Tax Base in Europe which would create a European common tax scheme. The same year, the European Commission also introduced the notion of a system of automatic exchange of information on tax rulings in the EU known as the Tax Transparency Package. The special committee was reactivated in 2016.
• The EU Whistleblower Directive – the dangers that the many whistleblowers faced when exposing the various financial injustices prompted the EU to issue a whistleblower protection directive in 2019. The directive offers harmonization across EU Member States and brings about greater legal certainties and stronger rights and obligations towards whistleblowers in the private and public sectors.
• Incorporation Transparency and Law Enforcement Assistance Act – Following Panama Papers, members of the U.S Treasury Department, House of Representatives of the state of New York, and others introduced a bill that would “ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies.” The bill is yet to be approved.
• BVI Public Register of Company Owners – The British Virgin Islands’ secrecy rules have played a prominent role in scandals such as Panama Papers, Paradise Papers, and Offshore Leaks. In 2020, the BVI’s premier and minister of finance, Andrew Fahie, announced at the House of Assembly that the government is currently working on “a publicly accessible register of beneficial ownership for companies.” The register will be adopted by 2023.

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By Stefano Siggia,March 2021, published on pideeco.be

Article by Learningpool

Authors: Kirstie Ball, Sally Dibb and Keith Spiller of the Open University Business School and Ana Canhoto of the Oxford Brookes University Business School.

The regulations around anti-money laundering (AML) place private sector organisations at the frontline of crime prevention and, in the case of counter terrorist financing (CTF), national security. Know Your Customer (KYC) and Customer Due Diligence (CDD) raise questions that concern not just regulatory compliance but also the impact of AML on core business processes and competitive advantage.

Financial services organisations monitor customer transactions both to detect suspicious activity and for marketing purposes. Customer relationship management (CRM) involves mining the information to anticipate and service customer needs over the longer term; it has proved highly effective, enabling firms to identify lucrative prospects, target messages and products, and generate revenue. As well as relying on the same data as CRM, AML employs similar statistical techniques to derive its results. CRM focuses on the attractive customers, whereas AML seeks to isolate the risky ones. The close parallels prompt questions: do organizations that know a lot about their customers through CRM prove equally competent at AML? How does AML, as it translates into operational requirements, affect the customer relationship? Recent opinion from Harvard Business School [1] suggests that business organisations have a duty to take their social responsibilities – including combating financial crime – as seriously as they do their commercial imperatives. But questions persist over the degree of responsibility and pressure that AML/CTF imposes on regulated businesses and, by extension, their customers.

10 March 2021, published on Transparency International

Governments must update election laws to ensure online political advertising is legitimate, its financing transparent, and microtargeting is kept to a minimum. And they need to hold platforms accountable.

Online platforms such as Facebook and Google have become prime virtual real estate for political advertising in recent years.

Such advertising has revolutionised the political process, opening up a world of opportunities for political actors to connect to voters. In turn, groups of constituents can use their own voices more effectively for civic participation. Online advertising can also help less conventional politicians with fewer resources, freeing them from reliance on wealthy donors.

Online political advertising – defined as paid digital communications that aim to influence voters’ or political office holders’ decisions on matters of public interest – has the potential to do even more.

Digital ad spending in the last general election in the US – the country with the biggest market – had hit a record US$1 billion by February 2020. By a few weeks before the November 2020 elections, at least US$3 billion may have been spent on online ads.

While online political advertising is more prominent in the US and Europe, it is quickly becoming a force to be reckoned with in other parts of the world too.

However, this potential force for good has rendered traditional political finance regulations obsolete. Six out of 10 countries worldwide do not have any restrictions on online political advertising at all. Without regulation, online political advertising threatens financial transparency and accountability in the political process.

A new report by Transparency International provides an overview of these risks and recommends five measures to help ensure that online political advertising serves the public good.

Just two companies dominate the multi-billion dollar online political advertising market worldwide – Facebook, which holds around 80 per cent of the share in social media platforms, and Alphabet (Google, YouTube, etc.) which has roughly 90 per cent in search engines. Such concentration without regulation leaves these big tech companies with enormous power in their hands.

Too often, such companies allow a high degree of opacity in online political ads. The public do not know who places an ad, who pays for it, or who it is being shown to.

The ill-effects are starting to show. From misinformation and disinformation, to cybersecurity risks and microtargeting – democracies around the world are feeling the effects of political content on digital platforms gone awry.

Disinformation – information that is deliberately false or misleading – can affect all parts of our society. Just last week, a fake YouTube channel created with the name Transparency International began paying to promote defamatory content about other anti-corruption organisations working on a case in the Democratic Republic of Congo. Platforms such as YouTube, which lack proper checks on these ads and who is behind them, not only undermine democracy and accountability but can facilitate attacks that threaten the work done by civil society organisations.

In order to realise the full potential of online potential advertising, we must first address the myriad transparency and accountability risks it poses.

Regulating online political advertising would be an important step towards removing undue influence from politics. We recommend:

• Updating political financing regulations for the digital era, including an updated legal definition of political advertising.
• Ensuring authentic political messaging through identity verification processes, the use of official accounts by political actors and the removal of inauthentic online content.
• Holding online platforms and advertisers accountable for ad transparency.
• Raising the bar for financial reporting by political actors and online platforms.
• Restricting microtargeting and enhancing standards for trading personal data.

Debates about regulating online platforms often end up being about definitions: when is a platform a publisher, what counts as free speech? But when it comes to online political advertising, the important questions are more a matter of choice: Do we want a world where digital technologies serve the public interest, making politics more responsive to communities? Or are governments and tech companies happy to allow powerful and opaque vested interests to dominate the information we receive about issues that affect us all?

Article by Michael Volkov

Article by KYC360

Confused by all the abbreviations and acronyms used in the world of financial crime prevention and AML compliance? Let KYC360 help…