Dark Web Dealer ‘OxyMonster’ Forfeits $700,000 in Crypto with 20-Year Prison Term

US District Judge Robert Scola has imposed a 20-year prison sentence on 36 year-old Gal Vallerius also known as “Oxymonster” on the dark web drug hub Dream Market.

In June, CCN reported that the French-Israeli citizen was apprehended by police at Atlanta airport in 2017 while attending the World Beard and Moustache Championship in Austin Texas. He will now start his prison term in Southern Florida after being convicted of money laundering and narcotics trafficking.

Huge Crypto Seizure

In his plea agreement, Vallerius admitted to selling drugs like oxycodone, heroin, cocaine, fentanyl and Ritalin in exchange for cryptocurrencies including bitcoin and bitcoin cash on the dark web. More than 100 BTC and 121.95 BCH – equivalent to over $700,000 – seized from him as proceeds of illicit activity will now be forfeited to the government.

For many, the big question following the forfeiture is: “What becomes of this huge amount of crypto in the hands of the U.S. government?”

A development of this nature is not new. In 2015, after Silk Road creator, Ross Ulbricht was given a life sentence, the government took possession of 144,336 BTC found on his laptop. At a time when the price of one bitcoin was just over $300, the government realized a total of over $48 million selling to multiple auctions. Some later criticized the government’s hasty sale which prevented it from earning far more.

With his plea agreement, sources say Vallerius would have to “provide all necessary passwords” to enable the government gain access. It remains uncertain if the government will take similar action to that taken of Silk Road, or delay auctions till prices show upward movement. The rarity of this situation makes it hard for analysts to predict what decision the government will make.

Earlier this week, Irish native Gary Davis pleaded guilty to conspiring to sell drugs on the Silk Road under the alias Libertas. In 2017, the District Court in California also seized over $8 million worth of cryptocurrency from Alexandre Cazes who committed suicide in Thailand after being accused of running a dark web market AlphaBay. With more cases related to crime which might ultimately lead to similar forfeitures, the U.S. government might just be dealing with crypto auctions more regularly.

Some have however suggested that at a time when the U. S. Justice Department is investigating the possible manipulation of cryptocurrency prices, crypto acquired through the legal system is somewhat unlikely to last in the custody of government for long.

https://www.ccn.com/dark-web-dealer-oxymonster-forfeits-700000-in-crypto-with-20-year-prison-term/

£50 notes to stay despite money laundering claim

£50 notes will not be scrapped but instead get a polymer redesign in a bid to make them more durable and harder to forge.

The announcement by the Bank of England follows growing calls to withdraw the note altogether over fears that the UK’s largest denomination was widely used by criminals and rarely for ordinary purchases.

In March, a review by the Treasury found the roughly 330 million £50 notes in circulation, with a combined total of £16.5bn, were “rarely used” for routine transactions.

The Treasury concluded that “there is also a perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion”.

Peter Sands, former chief executive of Standard Chartered bank, said in a 2016 report that high-denomination notes are favoured by terrorists, drug lords and tax evaders.

Illegal money flows exceed $2 trillion (£1.4 trillion) a year, Sands said. But rather than focus on the criminals, he argued G20 countries should now target the cash itself, urging central banks to stop issuing £50, $100 and €500 notes.

Following the study, the European Central Bank announced it was to axe the €500 note, known in some circles as a “Bin Laden”, in a bid to crackdown on money laundering.

However, Robert Jenrick, exchequer secretary to the Treasury, has resisted a similar move

“People should have as much choice as possible when it comes to their money and we’re making sure that cash is here to stay. Our money needs to be secure and this new note will help prevent crime” he said.

The decision to switch to polymer plastic notes will, however, “also raise questions over which famous Briton will feature on the reverse of the note”, says the BBC.

Steam engine pioneers James Watt and Matthew Boulton appear on the current £50, issued in 2011.

http://www.theweek.co.uk/97093/50-notes-to-stay-despite-money-laundering-claim

Report: 64 Percent Of Countries Have Money Laundering Risk

By Pymnts

Amid the headlines detailing the billions of dollars in money laundering done through conduits like Danske Bank and Deutsche Bank, among others, a report shows that the problem is a global one — and that it is getting worse.

Certainly the topic is a timely one, and here we delve into why the current anti-money laundering (AML) system and standards in place are less than optimal. In an interview with Karen Webster of PYMNTS, Akli Adjaoute, founder and CEO of Brighterion, said the rules-based system adopted by banks and others battling criminal activity are “pretty much useless.” The tech and rules in place simply go about generating volumes of false positives and are hardly efficient.

A report issued earlier this week by the Basel Institute on Governance trains a spotlight on just how poorly the status quo is working. The seventh annual edition of the Basel AML Index, the report shows that 83 of 129 countries have a risk score of at least 5.0 on a 10-point scale. This classification, as The Wall Street Journal notes, means that there is a “significant” risk for money laundering and terrorist financing. Even more unsettling is the fact that the risk appears to be growing: over 40 percent of companies have higher scores than they did in the last report issued in 2017.

The Basel report notes that there is no country with a “zero” risk of such illegal activities. The risk is scored using data points from sources that come from the World Bank, the World Economic Forum and the Financial Action Task Force. The Basel report also noted that only countries with data sufficient to be used in scoring were ranked. Thus some countries — such as Iran, which stood at the top of the list across the last four years — were excluded from the risk scoring.

There is no quantification of how much money is actually flowing through money-laundering activities and across different nations.

Going down the ranks of “top spots,” Tajikistan topped the list for countries at risk for money laundering. Tajikistan was followed by, in order, Mozambique, Afghanistan, Laos and Guinea Bissa. At the bottom of the list — the lowest-risk countries, according to the index — are Finland, Estonia, Lithuania, New Zealand and Macedonia. In reference to the U.S., the score most recently was 5.0, the ranking was 82, and was up 50 basis points from last year.

What the Data Show

In terms of general trends, the headline is that 64 percent of countries show significant risk of those illegal activities. That risk comes, the Basel report said, as countries are not using the tools they have at their disposal to battle money laundering and terrorist financing.

But even the lower-risk countries, the study found, have seen upward  momentum in their risk scores, tied in part to greater access to data and of course the flow of recently-disclosed scandals at banks and elsewhere tied to money laundering. In one example, Denmark’s score was up in the most recent reading to 4.1, a significant jump from 2.98 in the previous year. Denmark’s Danske, of course, has been under investigation tied to as much as $234 billion in illicit fund flow.

“A low risk score in the Basel AML Index is not a ticket to taking a leave from [anti-money-laundering and counterterrorist financing] vigilance, either for a country’s administration or for companies and financial institutions doing business in that country,” the report pointed out. Danske is a Danish Bank, and “seems to confirm the observation that there are big issues with the effectiveness of money-laundering supervision in countries generally regarded as low risk,” the report said.

In other observations published on the Basel site and centered on the findings, at a high-level view, “money laundering and terrorist financing continue to cripple economies, distort international finances and harm citizens around the globe. Estimates of the amount of money laundered worldwide range from $500 billion to a staggering $1 trillion.”

Fewer than 4 percent of countries that were ranked — four of the 129 — bettered their scores by at least one point. Those countries were Ghana, Bolivia, Tanzania, Trinidad and Tobago. Progress has been slow, where only 17 percent of firms improved their score by one point over the period stretching from 2012 to 2018.

“The downward trend is more striking,” said the report, which noted that “42 percent of countries have worsened their risk scores between 2017 and 2018. Almost 37 percent of countries now have a worse risk score than they did in 2012.”

What Must Be Done

Against that backdrop of rising risk, said the report, “taking a holistic approach to tackling money laundering issues is therefore essential. Economic development can only contribute to reducing the risk of money laundering if it is sustainable, in other words not based on corrupt practices or illegal trafficking.”

But, cautioned the Basel Governance report, countries that undertake what the report termed indiscriminate de-risking — “avoiding rather than managing [money laundering and terrorist financing] risks” by terminating relationships with entire regions or classes of customers — can have disastrous consequences as it cuts entire jurisdictions off from international financial flows, including legal ones.

In terms of guidance, the Basel Governance report said actions to undertake — both to improve risk scores or maintain already relatively low ones — include strong legislation that includes freezing terrorist funds, and measures set in place for domestic and international cooperation. Financial sectors must be highly regulated, with “competent supervisory authorities, and minimal, if any, cash-based transactions.”

Money Laundering Tactics Adapting to Colombia Cocaine Boom

By Parker Asmann

A new investigation says that record cocaine production in Colombia is causing criminal groups to diversify the ways in which they launder their money, reflecting the fragmented state of the country’s criminal world.

Criminal groups in Colombia are increasingly diversifying their traditional money laundering techniques involving real estate and large public works contracts, as well as new laundering methods involving cryptocurrencies and non-profit organizations, according to a report from the country’s national anti-money laundering body, the Financial Investigations and Analysis Unit (Unidad de Información y Análisis Financiero – UIAF), El Tiempo reported.

Such changes are occurring amid record cocaine production in the Andean nation.

The article reports that 40 trillion Colombian pesos (around $13 billion) of illicit money have been generated in Colombia, without specifying a time frame. Furthermore, every year 16 trillion pesos (around $5 billion) are moved through different money laundering schemes, according to the UIAF.

El Tiempo also received information that traffickers returning to Colombia and to drug-related activities after serving prison time in the United States have been increasing investment in rural properties since 2016.

The real estate boom that major urban centers like Medellín and Colombia’s capital city of Bogotá saw in the past has now moved on to smaller cities near major coca growing areas, such as Pasto in Nariño, southwest Colombia — the department with the most cocaine — and Popayán in the nearby Cauca department. Property records have grown by 300 percent in Pasto and Popayán alone, according to El Tiempo.

In 2017, Nariño department accounted for more than a quarter of the 171,000 total hectares used for coca cultivation last year, according to the United Nations Office on Drugs and Crime (UNODC). The UNODC also found that the number of coca hectares in Cauca department increased by 55 percent between 2016 and 2017.

On average, each hectare of coca produces 6.9 kilograms of cocaine, with one kilogram of cocaine selling for around 5 million pesos (about $1,600) in Colombia, meaning that a single hectare of coca could produce up to 35 million pesos in illicit earnings (about $11,500), according to El Tiempo.

While there are no official reports linking the real estate boom in Nariño and Cauca with the illicit money derived from increased cocaine production, Colombia’s outgoing superintendent of Notary and Registry (Notariado y Registro), Jairo Mesa, says he has no doubt about the links between what he calls the country’s “new urbanism” and illegal drug proceeds.

The shift in money laundering techniques used by criminal groups in Colombia is likely tied to the departure of the now largely demobilized Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC) and the increasingly fragmented criminal landscape that the guerrillas’ exit ushered in.

The more localized makeup of criminal groups in Colombia and the large profits that are coming in amid record cocaine production may help explain the diversification of money laundering techniques and the substantial uptick in property records observed in smaller municipalities in departments that are strategic to the cocaine trade, such as Nariño and Cauca.

“The Mexicans are full of cash and paying quickly for cocaine, so these more regional groups in Colombia are likely looking for places close to their centers of operation to put their money,” Adam Isacson, a senior associate at the Washington Office on Latin America (WOLA) think tank, told InSight Crime.

This is in line with the historic behavior of Colombia’s most notorious drug trafficking organizations, such as the Norte del Valle, Medellín and Cali cartels, according to Douglas Farah, president of the national security consulting firm IBI Consultants.

“Colombian crime groups have traditionally loved to operate in areas where they know the terrain, have family, and know officials and their vulnerabilities,” Farah said. “As you go from large transnational groups to smaller regional groups, there’s not much protection for them in big cities.”

As Colombia’s criminal landscape continues to take shape, it appears that traffickers are adapting their money laundering strategies to best suit the current dynamics of the cocaine trade.

The EU’s 5th Anti-Money Laundering Directive: What Does It Mean?

By Vishal Marria

In the past week alone, cases of money laundering have hit headlines all around Europe. An investigation found that up to $30 billion of ex-Soviet and Russian money had potentially passed through the Estonian branch of Denmark’s largest bank, Danske Bank. It also emerged only last week that Dutch bank ING will have to pay €775m in fines after it allowed ‘structural infringement’ of the Netherlands’ Money Laundering and Terrorist Financing Act. So, what is being done about Europe’s evident money laundering problem?

In July this year, the European Commission brought into force the 5th Anti-Money Laundering Directive. In the preceding 12 months, a string of money laundering cases which involved high-profile and politically exposed individuals had placed increasing pressure on the Commission to update its policy. The same 12 months saw a series of devastating terror attacks across Europe which raised serious questions about terrorist financing and therefore confirmed the need for policy reform.

The primary focus of the latest directive is to establish a centralized and public register of companies and their ultimate beneficial owners. A typical method of money laundering involves the creation of a shell company which exists solely on paper in order to transform the profits of crimes into ostensibly legitimate assets. Making corporate ownership information public is expected to reduce the use of shell companies because this information will be open to much greater public scrutiny. The directive also requires that the data on these registers be subject to comprehensive verification mechanisms to ensure that the registers themselves cannot be manipulated.

International cooperation is another priority of the directive. Historically, criminal networks have been able to capitalize on the lack of interinstitutional communication by choosing to launder money through countries or banks where they know they are less likely to be detected. The directive is explicit about European banks and their respective Financial Intelligence Unit’s working collaboratively. Centralized bank account and corporate ownership registers must be able to interconnect and be accessible to all member states. Cooperation at this level is expected to be particularly impactful in preventing laundering designed to exploit vulnerabilities of specific member states.

The new directive is the first of its kind to take into consideration digital currencies and prepaid cards. Newer financial technology had been largely overlooked by AML policy until it became clear that they had been used to fund several terror attacks across Europe. The vehicles used in the 2016 Nice truck attack were paid for by pre-paid card because of the anonymity that these cards afford the user. The maximum amount that can be placed on these cards has already been drastically reduced but the new directive also dictates that banks must investigate the holder of any pre-paid card with a value over EUR 150. Similarly, cryptocurrencies and wallets will be held to the same standards as other financial institutions under the new directive to ensure that digital currencies cannot be used to obfuscate a trail of money.

Europe’s money laundering problem was born historically out of an apathy manifested by inefficient detection systems which have been routinely capitalized on by criminals. The EU’s 5th Anti-Money Laundering Directive is the latest in a series of policy developments which demonstrate its commitment to remedying the problem itself. The cooperation of banks on an international level should have a profound effect on the efficacy with which fraudsters operate by drastically restricting their means of deception. And, the introduction of public registers and limits on anonymous financing options restrict their opportunity further still. Europe has a long way to go before it is rid of its dirty money problem but its latest directive is another fantastic step in the right direction.

European countries have been ‘oblivious’ in fighting money laundering, says Latvian minister

By Silvia Amaro

European countries have failed to address financial crime and it is time to take action, the Latvian finance minister told CNBC Wednesday.

The Latvian ABLV, the Danish Danske Bank and the Dutch ING have all recently been involved in scandals over money laundering and financial crime. Dana Reizniece-Ozola, finance minister of Latvia said that these cases have “opened a Pandora’s box” and asked banks do to more to prevent such situations.

“Countries in the European Union have been oblivious in fighting financial crime,” the finance minister told CNBC’s “Squawk Box Europe.”

“Something has to be done, not only at the national level but also at the European level, like probably strengthening the EBA (European Banking Authority),” she suggested.

In the case of ABLV, the U.S. Treasury accused the bank earlier this year of “institutionalized money laundering,” including allowing its clients to conduct business with parties connected to North Korea, which would violate sanctions imposed by the United Nations on the country. At the time, ABLV said the accusations were based on assumptions and information that was then unavailable to the bank.

When the scandal emerged earlier this year, European institutions were criticized for not having the means to oversee and prevent money laundering in the financial system.

This issue has been under further scrutiny after the head of the Danish lender, Danske Bank, resigned last week following a money laundering investigation into the bank. Earlier this month, ING agreed to pay 775 million euros ($910.20 million) in penalties for failing to stop several companies to allegedly launder money over a six-year period.

Separately, German regulators on Monday ordered Deutsche Bankto take internal actions to prevent money laundering.

“The game cannot be won only by one side playing, only by the government playing. The private sector, namely banks themselves have to participate and demonstrate a strong dedication,” Reizniece-Ozola said, adding that “this is the right time” to take action.

Global standard for cryptocurrency anti-money laundering to be agreed

The global anti-money laundering task force has said it is closer to establishing a worldwide set of standards to apply to virtual currencies.

The president of the Financial Action Task Force, Marshall Billingslea, said he is optimistic that at its plenary, due in October, the FATF will agree a series of standards that will close the anti-money laundering “gaps” that all nations face.

“It is essential that we establish a global set of standards that are applied in a uniform manner,” he added.

The task force has accelerated its work and made significant progress on reaching a “consensus across nations” after the G20 requested the organisation tackle the issue as a matter of urgency.

In October, the FATF will discuss which of its existing standards need to be updated to address virtual assets, since its current recommendations do not acknowledge them. It will then revise the methodology it uses to assess how countries implement these standards and when this revised assessment methodology will take effect.

Mr Billingslea, who is also assistant secretary to the US secretary, said currently the adoption of anti-money laundering standards and regimes pertaining to digital assets and virtual currencies is “very much a patchwork quilt or spotty process,” which is “creating significant vulnerabilities for both national and international financial systems”.

China and South Korea have clamped down on the sector, while other countries — including France, Switzerland, Malta and Gibraltar — are drawing up regimes for formally policing the space in an attempt to attract fintech business.

UK MPs also highlighted on Wednesday the urgent need to regulate “Wild West” crypto-asset markets. The Commons Treasury select committee warned that a dearth of regulation around crypto-assets had left investors exposed to a “litany of risks” — without any of the protections usually afforded to consumers, such as access to compensation.

Cryptocurrencies are not regulated by central banks but are held digitally via electronic identities that in many cases allow their owners to remain anonymous. As a result, they have been linked to payments for prohibited goods such as guns and drugs and are a target for hackers.

Mr Billingslea said there were concerns of an emerging use of virtual currencies by terrorist organisations including Isis, as well as in extortion schemes, such as the WannaCry attacks.

His comments come after some observers argued that authorities such as Europol, Europe’s law enforcement agency, should devise a centralised system that flags cryptocurrency wallets linked to nefarious activities to major exchanges, so that they can block the owners from exchanging those funds for hard cash.

Despite the risks associated with digital assets, Mr Billingslea said they also presented “a great opportunity”. In terms of regulation, he said, “you can’t tilt too far in one direction or another” since blockchain, the technology that underpins virtual assets, “will continue to evolve”.

https://www.ft.com/content/1a67f6b2-bbf7-11e8-94b2-17176fbf93f5

The EU Has a Problem With Dirty Money

https://www.bloomberg.com/view/articles/2018-09-18/the-european-commission-misses-an-opportunity-on-money-laundering

After a string of scandals, the European Commission has unveiled new plans to crack down on money laundering. It’s right to take this problem seriously — but its proposals are weak. Instead of setting up a new agency and equipping it to do the job, Europe plans to keep relying on national authorities, some of which aren’t up to the task.

Banks in Denmarkthe NetherlandsLatvia and Malta have all been linked to criminal inflows from countries including Russia and North Korea. The EU has moved to centralize banking supervision, but money laundering has remained a national responsibility. It was the U.S. Treasury Departmentthat found out that ABLV, a Latvian lender, was involved in “institutionalized money laundering,” prompting EU authorities to withdraw its banking license. And a report by the European Banking Authority (EBA) concluded that the Maltese regulator had “failed to conduct an effective supervision” of Pilatus Bank, a lender with links to Iran.

In principle, there’s nothing wrong with national regulation of international financial crime. The U.S. Treasury’s Office of Terrorism and Financial Intelligence deals with money laundering. But some EU governments, concerned about the reputation of their respective banks, have taken an unduly lax approach. A common EU agency would be less susceptible to local pressure. Also, EU banks can set up branches across the union on preferential terms thanks to its so-called passporting system — so EU banking is intrinsically cross-border, strengthening the case for more centralized supervision.

Brussels wants to give new powers to the EBA, so that the agency can tell national supervisors to investigate cases and consider possible sanctions. This is a step in the right direction. But the EBA isn’t equipped for the job. The London-based agency is primarily responsible for designing stress tests and overseeing prudential rules. Some aspects of money laundering fall under its review, but it currently has just two officials assigned to the task. The EU wants to add 10 more. That isn’t enough.

Most important, the EU wants domestic regulators to stay in charge. It would have been better to harmonize the rules, create a new agency, and give it lead responsibility for investigating offenders. The EU has missed an opportunity to move to a better system and improve its reputation for sound financial supervision.

Russia-Linked Money-Laundering Probe Looks at $150 Billion in Transactions

By Bradley Hope, Drew Hinshaw, and Patricia Knowsmann

Denmark’s largest bank is investigating whether companies with ties to Russia used it to launder money, examining $150 billion in transactions that flowed through a tiny branch in Estonia, according to people familiar with the matter.

The $150 billion figure, covering a period between 2007 and 2015, has been presented to the bank’s board of directors and would equal to more than a year’s worth of the corporate profits for the entire country of Russia at the time. The flows would have stayed in the branch for only a short time before leaving Estonia, according to a person familiar with the investigation, so they might not show up in deposit statistics, which reflect the balance at the end of month and not from day to day.

“Any conclusions should be drawn on the basis of verified facts and not fragmented pieces of information taken out of context,” Danske Bank Chairman Ole Andersen said in a statement. “As we have previously communicated, it is clear that the issues related to the portfolio were bigger than we had previously anticipated.” The bank says the results of its probe are being finalized.

Shares in the bank fell as much as 7% on Friday after The Wall Street Journal reported on the size of the amounts involved.

The U.S. has paid close attention to the ways Russia’s wealthy have taken money out of the country, according to U.S. officials, especially since sanctions imposed during the invasion of Crimea in 2014. Sanctions were strengthened following determinations of Russian meddling in the 2016 U.S. presidential election and again earlier this year.

Washington has watched illicit money flows channeled through European-regulated banks to the West. In February, the Treasury Department declared Latvia’s ABLV bank an “institutionalized money laundering” operation where weapons dealers and corrupt politicians from former Soviet Union countries sent their money into Europe. ABLV denied knowingly laundering money and later collapsed.

In 2017, Deutsche Bank agreed to pay nearly $630 million to settle investigations by U.K. and New York regulators into Russian equity trades that transferred $10 billion out of that country in violation of anti-money-laundering laws.

Since last year, NATO has positioned troops in three former Soviet Union republics—Estonia and its neighbors Latvia and Lithuania, all bordering Russia. In return, the U.S. has asked those governments to crack down on illicit Russian money flowing into the West through their banks, according to U.S. officials. That understanding was hammered out after Russia’s 2014 annexation of Crimea.

Danske’s Estonian branch is the subject of criminal investigations in Denmark and Estonia, prosecutors in the countries said. The Danish Financial Supervisory Authority reprimanded the bank for weak controls in May and ordered Danske to hold about $800 million more in capital, but didn’t issue a fine.

Shell companies, including many registered in the U.K., controlled most of the accounts in question, and many of the accounts had links to people in Russia and former Soviet Union countries, people familiar with the matter said. The U.K.’s Financial Conduct Authority isn’t probing the bank, according to a person familiar with the matter.

Danske Bank’s Estonian office in Tallinn.
Danske Bank’s Estonian office in Tallinn. PHOTO:INTS KALNINS/REUTERS

Estonia, a former Soviet Republic of 1.3 million people, became a European Union member in 2004 and joined the euro in 2011. Like its Baltic neighbor Latvia, it quickly became a way station for funds from other former Soviet states. The $150 billion figure is a substantial sum considering Estonia’s entire banking system reports total deposits of €17 billion ($19 billion).

At Danske, clients would typically move funds among several companies with accounts at its Estonia branch before transferring the money to accounts in banks in Turkey, Hong Kong, Latvia, the U.K. and other countries, one of the people familiar with the investigation said.

Danske’s management dragged its feet dealing with the issue, according to a report filed by Danish regulators this year, ignoring complaints from internal whistleblowers and correspondent banks, which made international payments and transfers on its behalf.

Estonian regulators complained to Danish counterparts as early as 2012 and compiled a 200-page report in 2014 detailing the local branch’s extensive failures to ask even basic questions about the source of its clients’ income.

“There were many red flags,” said Kilvar Kessler, chairman of the management board of Estonia’s banking supervisor, the Finantsinspektsioon.

It was only after another bank refused to deal with Danske’s Estonian unit that the bank shut down “nonresident” Estonian accounts in 2015.

Danske Chief Executive Thomas Borgen was in charge of international banking—including in Estonia—during part of the period under investigation. He was promoted to run the bank in 2013. He declined to comment.

Denmark’s Berlingske newspaper earlier reported around $8 billion of illicit money went through the Estonian branch. The Financial Times reported this month that some $30 billion flowed through the Estonian branch in the year 2013. In both instances, Danske said it needed time to look into the reports.

Danske’s investigation is overseen by the bank’s legal counsel and assisted by forensic accountants at PricewaterhouseCoopers LLP and consultants at Ernst & Young LLP. Both firms didn’t immediately respond to requests for comment. Promontory Financial Group, a unit of International Business Machines Corp. , and Palantir Technologies Inc. are also helping in the probe and declined to comment.

Such large sums were able to slip by European regulators’ watch for years largely because of a series of design flaws in the Continent’s anti-money-laundering systems, said James Oates, the founder of Cicero Capital, a financial adviser in the Estonian capital of Tallinn.

“Everybody was looking the other way because they thought they were covered, and it turns out they weren’t,” said Mr. Oates.

Danske Bank’s Estonia branch isn’t directly supervised by the European Central Bank, which in any case lacks the authority to investigate money-laundering cases. Estonian authorities, meanwhile, say that because Danske operated as a branch—and not a subsidiary with a legal entity based in Estonia—they had limited authority and incomplete information.

Parent bank Danske said in a September 2017 statement that the Estonia branch “operated very much as an independent unit, with its own systems, procedures and culture regarding anti-money-laundering measures.”

https://www.wsj.com/articles/danske-bank-money-laundering-probe-involves-150-billion-of-transactions-1536317086

Canada a hotbed for money laundering: Report

Canada is being taken advantage by criminal organizations who launder dirty money from drug trafficking, smuggling, corruption and fraud, according to a report by the C.D. Howe Institute.

And the feds have failed to enact the proper legislation to stop it, the Canadian research institute says.

Money laundering in Canada is estimate to be between $5 billion and $100 billion, Denis Meunier writes in the study. Taxes evaded on these illicit funds become a burden for those honest, hardworking individuals who pay their taxes as they have to cover the bulk of government costs, it states. Canada is a hotbed for this illegal activity because of a lack of transparency in beneficial corporate ownership, Meunier explains.

Simply put, a beneficial owner is someone who owns 25% or more of a company or corporation. Other countries, especially in Europe, require corporations to have publicly accessible registries for beneficial ownership. But here, these registries aren’t public and the onus is on the financial service provider, such as a bank, to verify the accuracy of the information of the beneficial owners and directors.

However, the study states, they generally rely on customers for this information. This is a lower bar than is required for buying a car or getting a library card which often require photo identification, proof of address, email and phone number.

Canada is ranked 21st worst in the Tax Justice Network’s 2018 Financial Secrecy Index of 112 jurisdictions, the study notes.

“There is a clear link between money laundering and hidden beneficial ownership,” Meunier writes. “The abuse of corporate vehicles and camouflaged beneficial ownership is a recognized means of laundering money — and a worldwide problem.”

It points to a World Bank study that in 85% of 150 grand corruption cases (more than US$1 million) reviewed, companies were used to launder money.

“In more than half of these cases, corrupt officials used nominees, shell corporations and trusts to disguise their beneficial ownership and the proceeds of their crimes,” it states.

The report recommends the feds create a central, publicly accessible beneficial ownership registry and make corporations and trusts to “truthfully and fully disclose” information for that database.

https://torontosun.com/news/national/canada-a-hotbed-for-money-laundering-report/wcm/bd905754-38f4-4243-b8da-09c0da362c72