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Intro

An International Anti-Corruption Day……ever heard of it? What is the point of this day though? What do we expect to accomplish with an International Anti-Corruption Day? Do you as a Compliance Officer know anything about this international day? How important is corruption for you as a Compliance Officer? Let’s take a further look, shall we?

Corruption

Transparency International defines corruption as the abuse of entrusted power for private gain. Corruption erodes trust, weakens democracy, hampers economic development, and further exacerbates inequality, poverty, social division, and the environmental crisis.

The United Nations UNODC defines corruption as a complex social, political, and economic phenomenon that affects all countries. Corruption undermines democratic institutions, slows economic development, and contributes to governmental instability. Corruption attacks the foundation of democratic institutions by distorting electoral processes, perverting the rule of law, and creating bureaucratic quagmires whose only reason for existing is the soliciting of bribes. Economic development is stunted because foreign direct investment is discouraged and small businesses within the country often find it impossible to overcome the “start-up costs” required because of corruption.

Apart from raising awareness against the crime, the aim of the anti-corruption day is also to actively support campaigns that combat and prevent corruption. Through this day, the UN also seeks to support international cooperation to fight against corruption.

Corruption and AML- CFT

Corruption and money laundering are intrinsically linked. Corruption offences, such as bribery or theft of public funds, are generally committed for the purpose of obtaining private gain. Money laundering is the process of concealing illicit gains that were generated from criminal activity.

The FATF Recommendations were designed to combat money laundering and terrorist financing, but when effectively implemented they can also help combat corruption, by:

safeguarding the integrity of the public sector
protecting designated private sector institutions from abuse
increasing transparency of the financial system
facilitating the detection, investigation and prosecution of corruption and money laundering, and the recovery of stolen assets.
availability of beneficial ownership information. Countries need to make sure that up-to-date and accurate information is rapidly available to authorities so we can stop anonymous shell companies laundering funds.
increase oversight of the non-financial sectors. The gatekeepers to the financial system – such as lawyers, accountants, and company service providers – need to be inside the regulatory tent so law enforcement agencies have relevant information to build cases.

Cost of corruption

Political costs, freedom and rule of law.
Social costs, participation and trust in government.
Environmental costs, chance for a healthy environment and a sustainable future.
Economic costs, opportunity to build and grow wealth.

Use the word ‘my’ after every cost and see how it feels to you. Tell me whether you are going to consider corruption only while dealing with your PEP clients at work, or whether you will start considering how important and relevant this topic is for you, your family, and your community….

Further reading:

https://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf

http://www.fatf-gafi.org/publications/corruption/?hf=10&b=0&s=desc(fatf_releasedate)

This article has been written in a personal capacity.

Intro

A Blog about AML-CFT Compliance? Sure! Let’s talk about AML-CFT Compliance together. Let’s discuss the laws, the work, the entities, our colleagues, our regulators, ourselves and AML-CFT Compliance. This blog serves to inform, educate, share, discuss and empower all Compliance Officers, aspiring Compliance Officers, happy Compliance Officer and those struggling with the weight of their work and responsibilities in an ever-growing community of more and more pressure to comply……

Money Laundering from ENVIRONMENTAL CRIME

Have you heard of this one before? Is this even a thing? Is this a ‘ver van mijn bed show’? Why bother if we are not even as far as understanding our own national ML, TF risk to be concerning ourselves with environmental crime! There is too much going on, I don’t have time to read, understand nor inform myself about what’s happening in AML CFT Compliance outside of my jurisdiction!

Which ever one of the above you are, let me draw your attention to this topic:

Environmental crime is one of the most lucrative criminal activities, generating
around USD 110 to 281 billion in criminal gains each year. Environmental crime has far-reaching impacts beyond the financial cost, including for the planet, public health and safety, human security, and social and economic development. It also fuels corruption, while converging with other serious crimes such as drug
trafficking and forced labor.

Specific examples of environmental crime:

Animal poaching, such as illegal capturing or killing for body parts
Animal smuggling, such as the trafficking of ivory or rhino horns
Production of hazardous waste
Pollution of the atmosphere, oceans, rivers or earth
Illegal or unreported fishing
Illegal logging
Illegal mining

Analysis

Criminals often rely on cash intensive sectors (frequently linked
to the export sector) and trade-based fraud to launder proceeds from environmental crimes. In the case of illegal logging and illegal mining, countries identified a heavy reliance on front companies located in offshore centres, third party transactions and complicit intermediaries (lawyers, refiners) to both conceal payments and launder gains.

Environmental Crime Red Flags

Corporate deception, environmental criminals may set up shell companies to handle shipping for illegal goods. Shell companies may have obscure beneficial ownership, overly complex infrastructures or be located in tax havens.
Transaction patterns, environmental criminals may engage in irregular or inconsistent transaction patterns, transact in amounts that don’t match the scale of their stated business or transact with high-risk countries and environmental crime hotspots.
Cash transactions, by dealing with cash, environmental criminals may be able to operate with a greater degree of anonymity. Entities should be on the lookout for a high frequency of cash transactions or requests for high denomination bank notes.
Shipping, criminals may seek to avoid AML checks when transporting the products of environmental crimes by faking, failing to complete or manipulating shipping documents.
Unknown goods, environmental crimes often involve exotic animal species or rare substances. Employees of financial institutions may not be familiar with these species and substances or may not even be aware of laws restricting their trade.
Adverse media categorization, involvement in adverse media is an important indicator of money laundering risk linked to environmental crimes.

Further reading:

https://www.fatf-gafi.org/media/fatf/documents/reports/Money-Laundering-from-Environmental-Crime.pdf