Day: January 30, 2020

USED GOODS, NEW RISKS: MITIGATING PROLIFERATION IMPACTS OF THE GLOBAL SECONDARY MARKET

In the latest edition of the Strategic Trade Research Journal includes a paper that addresses this issue, saying that export control requirements apply to WMD-related commodities even beyond first sale, but knowledge of these requirements is sometimes lost as commodities are sold and resold—and many “outdated” products can still contribute to a WMD development programme.  The paper concerns a study to assess the secondary market and form recommendations to plug gaps in training and awareness, as well as control programmes.   It is said that the secondary market for listed commodities may pose proliferation risks and export control challenges that may not be well understood, and that while measures may exist to mitigate the risks posed by the secondary market, those measures may not have been systematically integrated into export enforcement and outreach programs and secondary market resellers may not be aware of the requirements associated with exporting these commodities.

https://strategictraderesearch.org/wp-content/uploads/2020/01/Strategic-Trade-Review-Winter-Spring-2020.pdf

TRADE-BASED MONEY LAUNDERING: BANKS HAVE ‘LIMITED VISIBILITY’ INTO 80% OF TRADE TRANSACTIONS

On 29 January, the US Government Accountability Office released a report which says that whilst trade-based money laundering is believed to be on the rise, financial institutions charged with flagging payments linked to it often have little insight into the nature of the deals.  In the report, “open-account” trade is described as “one of the primary vulnerabilities of the US financial and trade systems”.  Most international trading is done using open-account, as opposed to “documentary transactions”, in which banks review related documentation (bills of lading, invoices, packing lists etc) and so can mitigate the risks of providing letters of credit or other financing and potentially detect or prevent money laundering.  The GAO cites a claim by the Wolfsberg Group of leading banks that 80% of world trade is carried out using open-account trading.

https://www.gao.gov/products/GAO-20-314R

GAO

(NOT) UNDERSTANDING FINANCIAL CRIME RISKS IN E-COMMERCE

On 29 January, an Occasional Paper from RUSI in the UK which shows that e-commerce continues to be exploited by criminal actors, and says that regulators and governments can do more to prevent this.  It identifies that E-commerce businesses can be exploited for criminal purposes in 4 major ways:

  • Committing fraud against the customer by failing to deliver goods or services;
  • Buying goods or services using stolen bank card data;
  • Creating e-commerce businesses as a front for illicit transactions (for example, to accept bank card payments for drugs); and
  • Abusing online marketplaces to move criminally obtained funds (for example, through the sale of computer-generated books sold via Amazon).

It also says that the latter two present particular money laundering and terrorist-financing (financial crime) threats because they involve consensual transactions that are intended to remain undetected.  However, the paper argues, these purposes remain poorly understood, including so-called “transaction laundering” using bogus or disguised online payments.  The paper says that there has been no examination of the effectiveness of online marketplaces’ defences against financial crime, and makes a number of recommendations – including that the FCA should consider a thematic review of risks related to transaction laundering and financial institutions’ ability to detect it, with a view to identifying best practices; and that the UK’s next national risk assessment of money laundering and terrorist financing addresses the risks of phantom transactions and mispricing involving online marketplaces/

https://www.rusi.org/sites/default/files/20191312_e_commerce_risks_moiseienko_final.pdf

 

BULGARIA CHARGES GAMBLING CZAR BOZHKOV IN ABSENTIA

On 29 January, Rferl reported that Bulgarian gaming czar Vasil Bozhkov has been charged in absentia with extortion and attempted bribery among other crimes, and placed on an international wanted list.  He is one of Bulgaria’s richest men and has dominated the country’s gaming business since the early 1990s as well as owning the country’s biggest lottery.  He also owns Levski Sofia, one of the two most popular soccer teams in the Balkan country, as well as a stake in Georgia’s national lottery, and a collection of antiques and paintings.

https://www.rferl.org/a/bulgaria-charges-gambling-czar-bozhkov-in-absentia/30405701.html

SLOVENIA: MONEYVAL AML/CFT SECOND FOLLOW-UP REPORT

On 29 January, FATF published the second follow-up report on Slovenia which says that while the country has made progress, some minor deficiencies identified in the mutual evaluation remain and Slovenia remains partially compliant on 10 FATF Recommendations.  Slovenia remains in enhanced follow-up and will report back to the Plenary within 1 year.  The mutual evaluation report of Slovenia was adopted in June 2017 and its first enhanced follow-up report with technical compliance re-ratings was adopted in December 2018.  As with that first follow-up, this new report addresses only technical compliance, and not effectiveness ratings.  The report says that, in light of the progress made by Slovenia, its technical compliance ratings with the FATF Recommendations are maintained.  However, Slovenia remains partially compliant on 10 Recommendations, including Recommendations 5 and 6.  Therefore, the recent FATF Plenary urged Slovenia to address the outstanding deficiencies as soon as possible.  In this respect, the Plenary recalled the expectation that countries will have addressed most, if not all, technical deficiencies by the end of the third year from the adoption of their mutual evaluation report.

slovenia

http://www.fatf-gafi.org/publications/mutualevaluations/documents/fur2-slovenia-2019.html