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Money Laundering

Globe and Mail - B.C. Lottery Corp. seeks direct deposit of foreign wire-transfers

Wednesday, March 02, 2011

Reporter: Julian Sher The B.C. Lottery Corporation is pressing for changes to provincial legislation that currently bars direct money-wire transfers from overseas into casinos. That will help Paragon Gaming reach its target of $100-million a year from international gamblers at an expanded Vancouver casino, said corporation president Michael Graydon. But Mr. Graydon insisted that the change won’t increase the possibility of money laundering at casinos. He said the new system would actually reduce it, since casinos would be dealing with less cash than otherwise and police would have a clear electronic trail of where money is coming from. Mr. Graydon and casino owners say that this kind of wire transfer is available in many other casinos around the world that attract international visitors. Currently, gamblers from outside Canada have two options if they want to bring in money to use in casinos. They can bring in cash, as long as it’s less than $10,000. If they want to play with more than that, they have to set up a Canadian bank account and wire the money there. The casino will then set up an electronic account that withdraws and deposits money to that Canadian bank, a pilot project that was only instituted a little more than a year ago. “What we’d like is the ability to wire the money in from an accredited, registered, recognized banking institution in those markets [that gamblers are coming from] directly to the casinos,” said Mr. Graydon. “We are in discussions now [with the province’s gaming policy and enforcement branch] on how to enhance the electronic transfer of funds and reduce the reliance on cash.” The province’s gaming branch said it “is currently reviewing” BCLC’s suggestion for change. Mr. Graydon said the ability to transfer money directly from overseas to a casino won’t affect the majority of international visitors. But it will be an enticement to a small but affluent group. “We have some high-end players that do buy-ins of half a million dollars in a morning. They’ll play for $45,000 a hand and sit for three of four hours.” The corporation recorded 18,000 transactions at B.C. casinos last year of over $10,000. About 13 per cent of those were over $25,000. Many countries have stepped up their vigilance around money laundering in the past decade in an effort to fight terrorism and curb the circulation of illegal drug profits. Money-wire transfers frequently show up as one of the ways that illegal money is moved around. As a 2006 U.S. Financial Action Task Force report on money laundering noted, “Historically, the most prevalent method of money laundering reported in suspicious activity reports is structured cash deposits followed by immediate and regular international wire transfers that are conducted through correspondent accounts either by individuals or businesses.” A Canadian money-laundering expert also said he had concerns about the kind of change that B.C. is now considering. “It raises huge concerns,” said Chris Mathers, a former RCMP expert on the proceeds of crime who is now a Toronto-based consultant. “It’s a really bad idea.” “You need to know the source of the funds, but here a wire transfer just shows up,” he said. “Who is this guy? What is the source of his money? Have you done a background check on him?” But Mr. Graydon said that only select overseas banks will be permitted to do wire transfers to casinos for their customers. Paragon Gaming president Scott Menke said the change in regulations would definitely encourage more international gamblers to make Vancouver a destination. Singapore, which allows that kind of transfer, has shown enormous increases in its gambling revenue. Howard Blank, the president of the local company Great Canadian Gaming, said his company is in favour of the change as long as FINTRAC, Canada’s monitoring agency for money laundering, supports it. “We don’t want Harry’s Night and Day bank in wherever to be able to do this.” Mr. Blank said it would be helpful for patrons, since they wouldn’t need to carry around large amounts of cash or set up a Canadian bank account just in order to gamble. “All we’re doing is taking one step away.” Like Mr. Graydon, he said the change would help police track any possible money laundering. “The nice thing about wire transfers, there’s a total chain in the trail. I would rather have something transferred in than get a bag with $100,000.”

Globe and Mail - Canada says it is plugging money-laundering loopholes

Thursday, February 24, 2011

Still stinging from an official rebuke that its banks and financial institutions were not meeting several key anti-money laundering standards – in particular failing to diligently check the backgrounds of their sometimes shady customers – Canada hopes to convince international authorities at an important Paris meeting this week that it is getting tough on dirty money. At a closed-door meeting that wraps up Friday, the Financial Action Task Force – a multi-government group responsible for setting anti-money laundering and anti-terrorist financing practices – heard Canada make the case that it “has made significant progress in strengthening its regime,” said Finance Department spokeswoman Stephanie Rubec. Ottawa says there are now tougher requirements to check on “customer due diligence” as well as stricter monitoring of everything from wire transfers to casinos and check-cashing companies – all favourite tools of money launderers. But experts warn that while Canada plugs some of the most glaring loopholes in its laws and regulations, the country is still vulnerable because of a lack of investigation, enforcement and prosecution. “You can change the laws all you want, if you don’t prosecute anyone no one gives a damn,” said Chris Mathers, a 20-year veteran of the RCMP who specialized in undercover proceeds-of-crime investigations and now runs his own consulting firm. “The last thing the bad guys laundering money in Canada are worried about is going to jail.” In 2008, the Financial Action Task Force found that Canada was “non-complaint” with 11 of 49 recommendations in its “basic framework for anti-money laundering efforts” – far behind the United States, Germany, and even Saudi Arabia and India. Canada fully met only seven recommendations and was partially or largely compliant with the rest. Of special worry to the task force was Canada’s failure to meet a core recommendation – the need to verify the identity and trustworthiness of banking clients. “Canada basically got a “D” when it comes to knowing who your client is,” said Tim Leech of Risk Oversight, a consulting firm that focuses on money-laundering. “If you want to stop the proceeds of crime, you are going to have to take a whole lot of efforts to find out who is putting money in your accounts.” Since that failing grade, Ottawa says Canada now requires financial institutions to run “enhanced” background checks, especially for “high-risk clients,” and dig deeper into “beneficial owners” – when someone may front for the real owner. Ms. Rubec said Canada has also addressed the other problems flagged by the task force. There are new rules for tracking wire transfers of $1,000 or more; registering sometimes dubious “money service businesses” such as cheque-cashing and money-order operations; expanding control over businesses not completely covered in the past such as casino operators, precious metal dealers and accountants; and ensuring that foreign subsidiaries of Canadian companies follow the task force’s standards. “Canada’s regime is comprehensive and compares favourably with that of other countries,” Ms. Rubec said. This will be Canada’s second follow-up report to the task force, which has acknowledged the progress made. But Canada may have a tougher time showing any improvement on another key failing: the low number of convictions for money-laundering in this country. The latest data from the Canadian Centre for Justice Statistics show that between 2004 and 2009, only 71 people in Canada were found guilty under the Criminal Code section for “laundering proceeds of crime.” Three times as many cases – 201 in all – were withdrawn, dismissed or stayed. By comparison, according the U.K. Under-Secretary of State, the number of defendants found guilty in all courts in England and Wales of money-laundering offences for each year between 2006 and 2008 was more than 1,200. “Successful prosecutions for money laundering in Canada verge on the pitiful,” said Kim Manchester, who runs a financial-crime risk-management firm in Toronto. Experts cite several reasons for the problem: privacy rules that prevent FINTRAC, the main money-laundering watchdog, from freely sharing information with law enforcement; complex investigations that can take understaffed police agencies years to finish, and overworked Crown prosecutors who often plea bargain away difficult money-laundering cases “We’ve put on a good show with all these rules and regulations,” Mr. Manchester said. “But it’s like the buildings down Main Street in an old Western movie: it looks imposing but it’s just a facade. And that’s embarrassing.” A task force official told The Globe the agency would issue a new report on Canada in about a year and “continue to monitor Canada, as it does other countries, until it has made sufficient progress to be removed from the follow-up process.”

FinCEN and OCC Assess Civil Money Penalties Against Union Bank of California

Sunday, September 23, 2007

The Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC) announced the assessment of concurrent civil money penalties, each $10 million, against Union Bank of California, N.A. (Union Bank ) of San Francisco, California, for violations of the Bank Secrecy Act. Union Bank, without admitting or denying the allegations, consented to payment of the civil money penalties, which will be satisfied by a single payment of $10 million to the U.S. Department of the Treasury. Union Bank also consented to issuance of a Cease and Desist Order by the OCC.

The enforcement actions are part of coordinated actions with the U.S. Department of Justice, which issued a Deferred Prosecution Agreement and accompanying $21,600,000 forfeiture in connection with charges that Union Bank failed to maintain an effective anti-money laundering program.

The OCC concurrently issued a Cease and Desist Order requiring Union Bank to take certain corrective actions. The OCC based its assessment of a $10 million civil money penalty, and issuance of a Cease and Desist Order, on failure of Union Bank to establish and maintain an adequate anti-money laundering program and to file timely suspicious activity reports

The OCC's actions are based on its determination that Union Bank failed to adequately monitor certain Mexican casa de cambio accounts, and failed to identify and file hundreds of suspicious activity reports in a timely manner. Union Bank also failed to comply with the requirements of a Memorandum of Understanding it entered into in 2005, including an article that required the bank improve its processes for identifying and reporting suspicious transactions. Union Bank's failures resulted in the movement of millions of dollars of suspected proceeds of drug sales through certain casa de cambio accounts without detection or reporting of the suspicious transactions. At the most recent examination the OCC found that the bank's financial intelligence unit still was ineffective in detecting and reporting suspicious activity, as required by the MOU.

In assessing a $10 million civil money penalty, FinCEN determined that Union Bank failed to implement an adequate anti-money laundering program reasonably designed to identify and report transactions that exhibited indicia of money laundering or other suspicious activity, considering the types of products and services offered by the Bank, the volume of its business, and the nature of its customers. Union Bank failed to monitor Mexican casa de cambio transactions and report suspicious activity, despite knowledge of the heightened risk of money laundering posed by those Bank customers.