Offshore havens and hidden riches of world leaders and billionaires exposed in unprecedented leak
The Pandora Papers reveal the inner workings of a shadow economy that benefits the wealthy and well-connected at the expense of everyone else.
Millions of leaked documents and the biggest journalism partnership in history have uncovered financial secrets of 35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, and a global lineup of fugitives, con artists and murderers.
The secret documents expose offshore dealings of the King of Jordan, the presidents of Ukraine, Kenya and Ecuador, the prime minister of the Czech Republic and former British Prime Minister Tony Blair. The files also detail financial activities of Russian President Vladimir Putin’s “unofficial minister of propaganda” and more than 130 billionaires from Russia, the United States, Turkey and other nations.
The leaked records reveal that many of the power players who could help bring an end to the offshore system instead benefit from it – stashing assets in covert companies and trusts while their governments do little to slow a global stream of illicit money that enriches criminals and impoverishes nations.
The Parliamentary Intelligence-Security Forum will help make the world a safer place for everyone through international intelligence and security collaboration between global allies.
Mission, Vision, and Value
The Parliamentary Intelligence-Security Forum is the leading international security forum providing expertise and collaboration among Parliamentarians and government officials to increase the United States’ allies understanding of the global threats of radical Islamic terrorism and adversarial nation states, while creating actionable solutions that counter these threats. Parliamentarians, who write the legislation and fund the government, are a critical player in this mission.
VALUE PROPOSITION
Industry experts play a unique role as they offer their perspective and expertise as speakers at each fora throughout the world. They have opportunity to convey their distinct challenges at the fora to build relationships with these global leaders ,as we work together to deter and foil terrorists’ objectives while advancing American business interests.
Please join via LIVE-STREAM the Parliamentary Intelligence-Security Forum in Budapest, 6 September. The forum will begin at 9am until 6pm Hungary time. (Washington, DC 3am-12noon)
Thank you for participating as we build a stronger working knowledge and closer collaboration on these critical security issues.
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The full program is below of very premier experts from a broad range of security/technology issues will present at the forum.
Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream
What do the Iranian government, a fugitive international jeweler, and a disgraced Harvard University fencing coach have in common?
They have all used U.S. real estate to launder their ill-gotten gains. In Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream, Global Financial Integrity GFI dives into the murky world of global money laundering and demonstrates the ease with which kleptocrats, criminals, sanctions evaders, and corrupt government officials choose the U.S. real estate market as their preferred destination to hide and launder proceeds from illicit activities.
To tell the story of why U.S. real estate continues to remain a favored destination for illicit activity, GFI built a database of more than 100 real estate money laundering cases from the U.S., UK, and Canada, reported between 2015 – 2020. The database and accompanying regulatory analysis in this report provide conclusive evidence that the current U.S. regulatory approach, using temporary and location- specific Geographic Targeting Orders (GTOs), has critical shortcomings that will require comprehensive reform before it can adequately address the threats to the U.S. financial system and national security. To provide context to the analysis and recommendations in this report, GFI compares the regulatory developments in the U.S. with ongoing practices, challenges, and developments in the rest of the G7. Analyzing the problem in the U.S. through this prism helps the U.S. see the merits and demerits of possible regulatory approaches in other similarly placed economies and lends weight to GFI’s final recommendations. At the same time, this approach underscores the continued relevance of real estate money laundering as a systemic risk across the G7 and the need therefore for solutions that are more cooperative.
GFI’s key findings on the U.S. include:
At a minimum, from cases reported in the last five years, more than US$2.3 billion has been laundered through U.S real estate, including millions more through other alternate assets like art, jewelry, and yachts;
Gatekeepers including attorneys, real estate agents, investment advisers, and employees of financial institutions have repeatedly facilitated REML by high net-worth individuals through willful blindness or direct complicity, yet the U.S. remains the only G7 country that does not require real estate professionals to comply with anti-money laundering (AML) laws and regulations;
60.71 percent of U.S. cases involved properties in one or more non-GTO counties, demonstrating the limitations of this location-specific regulatory tool;
Well over 50 percent of the reported cases in the U.S. involved politically exposed persons, which is particularly problematic considering the lack of guidance from FinCEN on PEP identification;
While commercial real estate featured in more than 30 percent of the cases and generally had significantly higher values than the residential real estate involved, the U.S. is yet to create any reporting obligations for risks in the sector;
The use of anonymous shell companies and complex corporate structures continues to be the number one money laundering typology. Eighty-two percent of U.S. cases involved the use of a legal entity to mask ownership, highlighting the importance of implementing a robust beneficial ownership registry under the Corporate Transparency Act.
KEY RECOMMENDATIONS
GFI proposes the following key recommendations for the U.S. real estate sector in line with international best practices and regulatory developments seen elsewhere in the G7:
The GTOs, through a new rule-making, should be made permanent, expanded nationwide, and without any dollar threshold;
Real estate agents should be required to identify the beneficial owner of a residential real estate purchase, when title agents are not involved in the transaction;
FinCEN should issue guidance, red flag indicators, and create reporting requirements for real estate money laundering typologies related to commercial real estate transactions;
Legal professionals should be made the lead reporting entity for identifying money laundering risks in commercial real estate transactions;
The U.S. should create robust AML/CFT processes targeted at the real estate sector, including but not limited to a risk-based approach identifying and verifying the source of funds and beneficial owner of the client;
FinCEN should issue guidance on the definition of PEPs and an advisory highlighting the risk of foreign PEPs to real estate money laundering schemes. Reporting entities should be required to report when a foreign PEP purchases property;
Investment advisors should be required to carry out client due diligence, including enhanced client due diligence where required, on all prospective investors in private (real estate) funds;
The U.S. should undertake comprehensive gatekeeper reform for the real estate sector, by lifting the exemption given to real estate professionals under the BSA and include real estate agents and legal professionals who are involved in real estate transactions under the definition of ‘financial institutions’;
The EB-5 visa investor program needs critical reform on the methods used to identify the source of funds and verify investor identity, including processes to record investors that are PEPs.
Dirty money could still haunt the bloc even after the announcement of a new anti-money laundering watchdog.
Brussels has set its sights on dirty money.
The European Commission on Tuesday unveiled a massive package of anti-money laundering initiatives to drive dirty money out of the bloc after repeated failures in supervision.
The crowning feature of the four-pronged package is a plan to introduce a new EU anti-money laundering authority, known as AMLA. The new EU agency should be set up within the next three years and begin direct supervision by 2026, complete with the power to issue fines worth millions of euros.
But some lawmakers and think-tankers warn that the package might not be enough to snuff out illicit financiers and suspicious activity amounting to some €160 billion across the bloc. Here are five reasons why money launders will likely be shrugging their shoulders over Brussels’ initiatives — for now.
1. AMLA won’t be built in a day
Tuesday’s package is ambitious. The new agency is set to hire 250 people to directly supervise the bloc’s riskiest financial institutions with a yearly budget of €45 million. But AMLA won’t be built in a day. The watchdog is set to only begin its direct supervisory duties from early 2026. That’s almost five years of the status quo, which has proved to be ineffective at tackling dirty money.
It would’ve made more sense to beef up the European Banking Authority’s existing powers against dirty money and improve its faulty governance structure, according to the chief executive of Brussels’ think tank the Centre for European Policy Studies, Karel Lannoo. The EBA will instead be stripped of its powers.
“Now there is a discontinuity and a vacuum of about two years,” Lannoo said. “You will demotivate EBA from the work they’ve been doing. Why should they still care” in the meantime?
2. The bloc still has blind spots
A series of dirty-money scandals since 2018 revealed a blind spot in the EU’s supervision of banks. Governments have been interpreting the bloc’s dirty-money safeguards differently for years when writing them into national law. That’s left plenty of loopholes for criminals to exploit in countries that don’t require all businesses, such as crowdfunding platforms and diamond dealers, to report suspicious transactions.
The Commission proposed a single rulebook Tuesday that will harmonize the bloc’s rules, which AMLA will police, to remedy the situation. Legislative negotiations over uniform rules can take years, however, and there are still some capitals that have yet to introduce the EU’s existing rules. Brussels has been cracking down on the bloc’s stragglers in recent years with threats of courts and penalties. All this takes time, too.
3. Other sectors remain vulnerable
AMLA’s direct responsibilities are limited to the financial industry. That means it’ll still be up to governments to tackle dirty money within other sectors, such as gambling, legal services and auditing. The new watchdog will be able to take over the supervision of specific cases when and if national authorities fail to do their jobs properly. But as recent history shows in Denmark and Estonia, it’s difficult to pinpoint where national supervisors are asleep at the wheel.
“No EU authority can supervise all anti-money laundering law enforcers, especially in the nonfinancial sector such as trade in goods, real estate, lawyers and gambling,” German Green EU lawmaker Sven Giegold said. “Therefore, it is still up to the member states.”
4. The darknet can bypass fintech rules
Finance is becoming increasingly digital. So, it’s only natural that part of the Commission’s AML package would include a bill that targets financial technology, too. The bill aims to introduce disclosure requirements for the buying and selling of crypto assets within the EU. That means any company or financial firm in the EU that transfers a digital asset in or out of the bloc will have to provide details on who’s moving the money around.
That said, the internet is global — people in Europe could still evade the disclosure rules through the darknet by finding a Chinese crypto-asset supplier to transfer funds to Russia, for example.
5. Power politics — what else?
Even if EU legislators are quick to agree on common rules and the makeup of AMLA, there’s a risk that location politics could delay the watchdog’s planned introduction for 2024. You can’t put a spade in the ground if capitals can’t agree on where to start building. EU agencies come with influence and power while boosting national economies with their well-paid employees. Capitals have been willing to fight tooth and nail to secure the lucrative prize of an agency, most recently demonstrated in the EBA’s move to Paris. A deadlock could quickly emerge if a similar fight begins over AMLA — Germany’s funds industry, BVI, has already issued its rallying cry to the German government to fight for the watchdog.
“The German government has to fight for Frankfurt as the location of the new European authority,” Thomas Richter, BVI’s CEO, said in a statement. “A failure as occurred with the EBA should not be allowed to happen again.”
This article is part of POLITICO’s premium policy service:Manoj-Kureel-Cartoon
Section 1. Policy. Corruption corrodes public trust; hobbles effective governance; distorts markets and equitable access to services; undercuts development efforts; contributes to national fragility, extremism, and migration; and provides authoritarian leaders a means to undermine democracies worldwide. When leaders steal from their nations’ citizens or oligarchs flout the rule of law, economic growth slows, inequality widens, and trust in government plummets.
In financial terms alone, the costs of corruption are staggering. It has been estimated that acts of corruption sap between 2 and 5 percent from global gross domestic product. While such costs are not evenly shared worldwide, the abuse of power for private gain, the misappropriation of public assets, bribery, and other forms of corruption impact every country and community. The proceeds of these acts cross national borders and can impact economies and political systems far from their origin. Anonymous shell companies, opaque financial systems, and professional service providers enable the movement and laundering of illicit wealth, including in the United States and other rule-of-law-based democracies.
Corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself. But by effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance, we can secure a critical advantage for the United States and other democracies.
In issuing this National Security Study Memorandum, I establish countering corruption as a core United States national security interest. My Administration will lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities….. Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest
Money laundering is the practice of “legitimising” the proceeds of crime by filtering them into the regular economy to disguise their illegal origin. Given the importance of EU anti-money laundering policy and the role of the banking sector, we assessed whether the EU’s actions in this area are well implemented.
We found institutional fragmentation and poor co-ordination at EU level when it came to actions to prevent money laundering and take action where risk was identified. EU bodies have limited tools to ensure sufficient application of AML/CFT frameworks at national level. There is no single EU supervisor, the EU’s powers are split between several bodies and co-ordination with Member States is carried out separately.
A European Court of Auditors report says the EU requires legislation to be implemented coherently at member state level if it is to adequately tackle money laundering and terrorist financing.
A special report from the European Court of Auditors published on Monday has concluded that the EU’s efforts to combat money laundering and terrorist financing is fragmented, poorly coordinated and shows weaknesses. It fails to ensure a coherent approach and a level playing field.
“EU-level weaknesses with regard to money laundering and terrorist financing need to be addressed, and the EU’s supervisory role significantly strengthened”, said Mihails Kozlovs, the member of the European Court of Auditors responsible for the report. “Much more needs to be done to ensure that the EU law is implemented promptly and coherently. For a start, the EU should use regulations in preference to directives wherever possible, given the need for legislation to be implemented coherently at Member State level”….. Special Report: EU efforts to fight money laundering in the banking sector are fragmented and implementation is insufficient.
In biggest ever law enforcement operation against encrypted communication
The US Federal Bureau of Investigation (FBI), the Dutch National Police (Politie), and the Swedish Police Authority (Polisen), in cooperation with the US Drug Enforcement Administration (DEA) and 16 other countries have carried out with the support of Europol one of the largest and most sophisticated law enforcement operations to date in the fight against encrypted criminal activities.
Since 2019, the US Federal Bureau of Investigation, in close coordination with the Australian Federal Police, strategically developed and covertly operated an encrypted device company, called ANOM, which grew to service more than 12 000 encrypted devices to over 300 criminal syndicates operating in more than 100 countries, including Italian organised crime, outlaw motorcycle gangs, and international drug trafficking organisations. Europol.europa.eu/Newsroom
There are three main methods by which criminal organisations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy. The first is through the use of the financial system; the second involves the physical movement of money (e.g. through the use of cash couriers); and the third is through the physical movement of goods through the trade system. In recent years, the Financial Action Task Force has focused considerable attention on the first two of these methods. By comparison, the scope for abuse of the international trade system has received relatively little attention.
The international trade system is clearly subject to a wide range of risks and vulnerabilities that can be exploited by criminal organisations and terrorist financiers. In part, these arise from the enormous volume of trade flows, which obscures individual transactions; the complexities associated with the use of multiple foreign exchange transactions and diverse trade financing arrangements; the commingling of legitimate and illicit funds; and the limited resources that most customs agencies have available to detect suspicious trade transactions.
For the purpose of this study, trade-based money laundering is defined as the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins. In practice, this can be achieved through the misrepresentation of the price, quantity or quality of imports or exports. Moreover, trade-based money laundering techniques vary in complexity and are frequently used in combination with other money laundering techniques to further obscure the money trail. This study provides a number of case studies that illustrate how the international trade system has been exploited by criminal organisations. It also has made use of a detailed questionnaire to gather information on the current practices of more than thirty countries. This information focuses on the ability of various government agencies to identify suspicious activities related to trade transactions, to share this information with domestic and foreign partner agencies, and to act on this information.
The study concludes that trade-based money laundering represents an important channel of criminal activity and, given the growth of world trade, an increasingly important money laundering and terrorist financing vulnerability.
Moreover, as the standards applied to other money laundering techniques become increasingly effective, the use of trade-based money laundering can be expected to become increasingly attractive.
More on: Trade-Based-Money-Laundering-Trends-and-Developments /Egmont Group The goal of the Egmont Group of Financial Intelligence Units (Egmont Group) is to provide a forum for financial intelligence unites (FIUs) around the world to improve co-operation in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field.
Swedish police warn gambling under “highest threat”
from money launderin The Swedish police has warned that gambling is at its “highest threat level” of money laundering in the country’s National Risk Assessment of Money Laundering and Terrorist Financing report. Money Laundering and Terrorist Financing report.
In-game artefacts and currencies often have real-life value and can be used to move or invest criminal proceeds. But there are no clear expectations of what game operators can or should do to identify criminal activity.
Online games – especially massive multiplayer online role-playing games – have long been suspected of offering an avenue for moving or otherwise using criminal proceeds, a process known as money laundering. As early as 2013, cybercrime analyst Jean-Loup Richet wrote, based on his investigation of hacker forums, that ‘using the virtual currency systems in [online] games, criminals in one country can send virtual money to associates in another country’.
A review of cybercriminals’ methods. Jean–Loup RichetTools and Resources for Anti-Corruption Knowledge –June, 01, 2013 -United Nations Office on Drugs and Crime (UNODC).
Money laundering is a critical step in the cyber crime process which is experiencing some changes as hackers and their criminal colleagues continually alter and optimize payment mechanisms. Conducting quantitative research on underground laundering activity poses an inherent challenge: Bad guys and their banks don’t share informationon criminalpursuits. However, by analyzing forums, we have identified twogrowth areasin money laundering:
Online gaming—
Online role playing games provide an easy way for criminals to launder money. This frequently involves the opening of numerous different accounts on various online gamesto move money.
Micro laundering—
Cyber criminals are increasingly looking at micro laundering via sites like PayPal or, interestingly, using job advertising sites, to avoid detection. Moreover, asonline and mobile micro-payment are interconnected with traditional payment services, funds can now be moved to or from a variety of payment methods, increasing the difficultyto apprehend money launderers. Micro laundering makes it possible to launder a large amount of money in small amounts through thousands of electronic transactions. One growing scenario: using virtual credit cards as analternative to prepaid mobile cards; they could be funded with a scammed bank account –with instant transaction –and used as a foundation of a Pay Pal account that would be laundered through a micro–laundering scheme…. Laundering Money Online: A review of Cybercriminals’ Methods
Manoj-Kureel-Cartoon
Swedish police warn gambling under “highest threat”
