Big fine but no time – CBA receives largest corporate fine in Australian history

What is the cost of breaching AML/CFT regulations 53,750 times? According to AUSTRAC it is AUD$700 million, which was the sum of the fine that it handed to the Commonwealth Bank of Australia (CBA) earlier this week. The fine is larger than some expected, CBA themselves only budgeted AUD$375 million in their annual budget to settle their indiscretions. What was expected however, as has become the norm in these cases, was that no criminal proceedings were brought against senior management for their role in the scandal.

Some may find this disappointing, especially as the investigation into CBA found that the vulnerabilities in the bank’s systems facilitated the laundering of money for international drugs gangs. This is reminiscent of the famous HSBC fine of $1.9 bn in 2012 which caused outrage at the time when the US Justice Department opted for a DPA instead of prosecutions. As murmurs of frustration re-emerge it is important to consider why regulators don’t always push for prosecutions. Bringing criminal charges against individuals tie regulators with limited funds into drawn out legal proceedings, which drain resources and willpower from already under-resourced public institutions. The sole issuing of fines, regardless of size may not inflict as much pain as some would like but at least they leave regulators unburnt to pursue their next case.

Sharing is caring – The Nordics announce a shared KYC utility  

2017 was a bad year for the financial crime reputation of banks in the Nordic region. Nordea and Danske Bank, two of the largest, were both embroiled in a significant money laundering investigation stemming from systemic weaknesses in their AML controls. So serious were the weaknesses that the French as well as the Danish opened investigations, linking corrupt Russian money to their branches in the Baltics. Last week, the five largest banks in the region announced that they are going to try and clean up their image by building a shared KYC utility. It should allow them to perform a higher quality of KYC and share information more efficiently.

A shared KYC utility could help the Nordics answer some of their AML problems but it won’t come without significant challenges. Firstly, the banks will need to define a KYC process with a framework that all the banks are happy to use for all circumstances. Secondly, and more challenging they will have to create a standard data template to ingest new KYC information but also somehow translate all legacy data across the five banks into a uniform format to gain retrospective insights – a tall order indeed. Shared KYC utilities may be becoming more talked about but a lot of work will have to be done before they reach fruition.

Wheel of misfortune – money laundering in Asia’s casinos

$150 billion of gross gambling yield is generated in casinos each year across the globe. Asia is now responsible for a large slice of this with all ten of the world’s largest revenue generating casinos being found in the region. Asia’s casinos may be successful but increasingly their success and associated transaction volumes seem to also be attracting the wrong sort of customers.

Historically relaxed attitudes toward anti-money laundering rules have turned gambling centres, such as Macau into known havens for corrupt politicians and organized crime bosses to launder their money. Macau however, no longer appears to be the only gambling hotspot with a money laundering problem. A casino operating in Laos’ Special Economic Zone provides an unregulated hub for illicit activities such as money laundering, human trafficking and the trade in exotic species. Casinos in the Philippines were integral in the laundering of the money stolen in the Bangladesh Bank Heist. Further afield authorities in British Columbia have been investigating Chinese money laundering related to PEPs and organized crime in their casinos since last year and will likely uncover a significant scheme when their investigation concludes. As the gambling industry grows in Asia regulators need to ensure that criminals don’t cash in on it.