1. Tim Howarth, Head of Financial Services Consulting and Risk Consulting at KPMG, has left the company following an internal investigation into his conduct. Howarth was previously a senior manager at the FCA’s predecessor, the Financial Services Authority (FSA).

2. Howarth, who had worked for KPMG for 15 years, was investigated over allegations of misconduct relating to messages he sent via Whatsapp, according to the Financial Times.

3. A spokesperson for KPMG told the FT: “We hold all of our people to a very high standard and take swift and appropriate action against any individual whose behaviour contravenes the firm’s values.

4. “As part of this commitment, we can confirm conduct issues have been raised related to a partner, and following an internal investigation and disciplinary panel, that partner has left the firm. Under our process the partner has appealed.”

5. Tim Howarth told the FT: “I am surprised by the KPMG announcement of the outcome of a disciplinary panel, which is bizarre as the decision is under appeal.

6. “I have not been given the reason for that decision. I had already resigned from the KPMG partnership. I did not believe that the process was fair or would lead to a just outcome. There is no complainant and there were no formal allegations pursued by anyone.”

Comsure thoughts

1. It comes as no surprise that the popularity of social media is growing, with an estimated 35.7 million people using it in the UK alone.

2. Social media is used for many different reasons – from making professional connections, to solving work problems, connecting with family and friends, or to pass the time as you take a break.

Top tips to stay compliant when using social media at work:

1. Read your company’s social media policy –

a. Make sure you know what your company’s attitude is to social media – for example, is some personal use allowed during lunch or break times or is there a complete ban?

2. Know what is expected of you –

a. Be clear about what behaviour is and isn’t allowed – for example, updating your Facebook status may be acceptable during lunch or break times, but make sure you don’t say or comment on something that may be considered detrimental to your firm, or reveal commercial secrets, or share offensive images or emails.

3. Avoid airing grievances –

a. It may be safer to stay clear of social media altogether if you’ve had a bad day at work; always avoid airing personal grievances about your boss/colleagues/customers online as this may lead to disciplinary action.

4. Don’t use your work email for personal use –

a. Most companies will prohibit you from using your work email to post comments on chat forums, sign up for social media or shopping sites, or buy goods online, unless it is for work purposes.

5. Don’t claim to represent your firm online or make comments on their behalf –

a. Unless it’s your job to do so!

6. Think before you post –

a. Remember that social media sites are considered ‘public’ by law and once you’ve posted something online, it is impossible to remove it again. So, don’t post anything that may compromise your personal safety or breach confidentiality.

The issue of the ‘no consent’ regime in Jersey has recently been considered in the Jersey courts as part of an application to judicially review and quash the decision of the JFCU to refuse to consent to the normal operation of a bank account.

1. Judgement say

This is an application to judicially review and quash the decision of the Jersey Financial Crimes Unit (“the JFCU”) taken on 8th November, 2018, to maintain its refusal to consent to the normal operation of certain bank accounts.

The application was taken out against the Chief Officer of the States of Jersey Police as required under Article 25 of the States of Jersey Police Force Law 2012.

https://www.jerseylaw.je/judgments/unreported/Pages/%5B2019%5DJRC161.aspx

2. Guernsey

The judgement also refers to

previous criticisms by the Royal Court of the ‘informal freeze’ regime [see below] and

the Guernsey Court of Appeal decision in Chief Officer, Customs & Excise v Garnet Investments Limited, which lies at the centre of this case.

https://www.gov.gg/article/105231/Judicial-Committee-of-the-Privy-Council-refuses-Garnet-Investments-Ltd-application-to-appeal

While this was hotly debated and there were indications that Garnet may not be a wholly satisfactory decision, the application failed, and the informal freeze maintain on the ground that the decision taken at the time was reasonable and proportionate

Royal Court criticism of the Jersey consent regime

The Royal Court has on a number of occasions remarked upon the potential for injustice arising from the application of the Jersey consent regime.

In 2007 in Chief Officer of SOJP v Minwalla [2007] JLR 409, the Court (Sir Michael Birt, then Deputy Bailiff) contrasted the saisie provisions in Article 15, including the provision to discharge the order if proceedings have not been instituted within a reasonable time, with the unrestricted “informal freeze” achieved by the withholding of police consent under Article 32:

However, there is another provision in the 1999 Law which has the effect of achieving an ‘informal’ freezing of assets without the need for a court order.

The problem arises because of the terms of the money laundering offences such as Article 32 of the 1999 Law.

In broad outline, Article 32 provides that a person is guilty of an offence if he is concerned with an arrangement whereby the retention or control by or on behalf of A of A’s proceeds of criminal conduct is facilitated in circumstances where the person knows or suspects that A is or has been engaged in criminal conduct.

There is a defence available where the person concerned has disclosed his suspicions to the police who have consented to his undertaking the transaction in question

Applying this to the ordinary banking relationship, the consequence is that, if a bank forms a suspicion that its customer may be engaged in criminal conduct, it files a Suspicious Transaction Report (STR) with the police.  If the police then consent to the bank thereafter complying with its customer’s instructions to pay out money from the account, all well and good; the bank is protected.  But if the police do not consent, the bank is on the horns of a dilemma.

On the one hand, it has its customer demanding that it make payment in accordance with the mandate.

On the other hand, it has a suspicion that its customer has been engaged in criminal conduct and, if it makes the payment, it will clearly facilitate the retention or control of the money by its customer.

Accordingly, if it were subsequently to transpire that the money in the account was in fact the proceeds of the customer’s criminal conduct, the bank would have committed the criminal offence of money laundering under Article 32.  As the bank does not know at that stage whether the money in the account is in fact the proceeds of criminal conduct, it invariably errs on the side of caution and refuses to make the payment.

The result is that the account is informally frozen for so long as the bank has the relevant suspicion and the police do not consent.

This is clearly capable of causing great hardship and unfairness.

There may never be a prosecution, yet the bank may retain its suspicion.

The result may be that a person, against whom no criminal charges have been brought and where there lies only a suspicion, finds his assets informally frozen without there even having been any court order to achieve this.  Furthermore, the freezing of the account may continue for an indefinite period.

It is hard to reconcile this situation with the carefully structured protections provided in respect of a saisie, which are clearly intended to ensure that funds are not frozen indefinitely or for an unreasonably long period in the absence of criminal charges.

The potential injustice of the situation was recognised in the United Kingdom where the relevant legislation was amended in 2002 so as to provide that the police have seven days from the STR in which to respond.

If no response is given they are deemed to have consented to the bank dealing with funds in question.

If they respond within the seven days and refuse consent, they have a further thirty one days in which to apply for a restraint order (the equivalent of a saisie).

If they have taken no such action at the expiry of thirty one days after their refusal of consent, the bank may safely proceed.

In the recent case of K limited v National Westminster Bank Plc [2006] 4 All ER 907, the English Court of Appeal concluded that this struck a fair balance between the competing interests and that accordingly there was no need for the court to intervene to prevent an informal freeze, given that it could only last for a maximum of thirty eight days.

We would refer also to the recent decision of the English Court of Appeal in R ex p. UMBS Online Ltd v Serious Organised Crime Agency [2007] EWCA Civ 406 concerning the need to strike a fair balance between undue interference with personal liberties and the need to fight crime.

However, no such amendment to the 1999 Law has been made and we must therefore wrestle with the resulting difficulties.”

In paragraph 75 the Court concluded its judgment by commenting that the amended UK legislation, with its moratorium period and deemed consent provisions, struck a fair balance between the competing interests and then said “

… we would urge that immediate consideration be given to introducing amendments similar to those which have been introduced in the UK”.

These concerns were repeated in Gichuru v Walbrook [2008] JRC 068 at paragraphs 36-38 in which the Court repeated its preference for the balance struck in the UK legislation and its recommendation that the statutory scheme be amended:-

“such amendments could include the introduction of time limits coupled with the ability to obtain a saisie at an earlier stage than at present i.e. once a criminal investigation has begun.” (paragraph 38)

The amendment to permit a saisie at the start of a Jersey criminal investigation (Article 15(1A)), was introduced in 2014 (as set out above).  However, no corresponding amendment was made to limit the time during which consent may be withheld, and thus funds, using the words of Advocate Redgrave, were “informally frozen without a saisie.”

Whether anyone soon acts of the court’s criticisms is an open-ended question but I doubt this is going to be the last we hear on Jersey’s ‘no consent’ regime.

What Are The Current Sanctions Against Cuba?

At the moment, the embargo against Cuba is still in full force. Though it is quite clear that some high-ups in the U.S. Government would like to see that change.

In 2010, a bill was re-introduced by Congressman Collin Peterson, which would bar the President from prohibiting travel to Cuba and the transactions related to such. Travel Restriction Reform and Export Enhancement Act – Prohibits the President from:

1. regulating or prohibiting travel to or from Cuba by U.S. citizens or lawful permanent residents or any transactions incident to such travel; and
2. restricting direct transfers from a Cuban financial institution to a U.S. financial institution executed in payment for a product authorized for sale under the Trade Sanctions Reform and Export Enhancement Act of 2000. H.R.4645 – Travel Restriction Reform and Export Enhancement Act has not yet been approved.

Later in 2014, President Obama announced a move towards reestablishment of diplomatic talks and less restrictive travel and economic policies, known as the “Cuban Thaw”. In addition, according to the U.S. State Department on May of 2015, Cuba’s designation as a state that sponsored terrorism was rescinded.

Despite these positive changes, the new Administration has once again tightened its grip on Cuba.

On April 17, 2019 OFAC unveiled amendments to the Cuban Asset Control Regulations (CACR), citing that Cuba continues to play destabilizing role in the Western Hemisphere, providing a communist foothold in the region and helping adversaries of the U.S. such as Nicaragua and Venezuela.  As of June 5th, 2019 authorization for person-to-person educational travel was removed only allowing travel for those who already had completed travel arrangements prior to this date.

Further, OFAC added a new prohibition to restrict certain direct financial transactions with entities and sub-entities identified on the Cuba Restricted List.

Under the Code of Federal Regulation (CFR) §515.209, the restrictions include transactions by wire transfer, credit card, check, or payment of cash.

Conversely, the prohibitions do not apply to any travel-related transactions, including those that involve direct financial transactions with an entity on the CRL that were initiated prior to the date the entity was added to the list, nor does it apply to commercial engagements that involve direct financial transactions so long they were in place prior to the date the entity was added to the list.

What Should Compliance Officers Be Aware Of?

While there are many restrictions to consider, there are also plenty of scenarios where certain transactions are permitted.

From a compliance perspective, it is critical we stay abreast of every change and every aspect of the Cuban sanctions program.  In the last 2 years alone, OFAC has issued multiple enforcement actions to financial and non-financial institutions including, hotels, travel booking websites and more.

In 2018 and 2019, 8 of the 21 total OFAC actions have been cases involving the Cuban Sanctions Regulations. That is almost 40% of all current OFAC actions.

Recent fines

Recently, On June 13, 2019, OFAC announced the settlement with Hotelbeds USA, a Florida-based company that is a subsidiary of Hotelbeds, headquartered in Mallorca, Spain, in which Hotelbeds USA agreed to pay $222,705 for assisting 703 persons with Cuba travel services in violation of the Cuba Sanctions Program.

The same day, OFAC announced the settlement with Cubasphere, and an individual who acted on behalf of Cubasphere agreed to pay $40,320 for violations to and within Cuba.

https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20190613.aspx

To keep the regulators away on this front, it is key to apply the following best practice :

1. Review and understand the restrictions, which include transactions related to travel to/from Cuba.
2. Know Your Customer – review client information for any relationship to entities found in the Cuba Restricted List issued by the State Department.
3. Reduce research time by maintaining an updated list of current prohibitions so you can determine if you can immediately decline a prohibited transaction

If you have a unique scenario, please check out OFAC’s resource center where you can find detailed information and specific guidance on the Cuba Sanctions. https://www.treasury.gov/resource-center/sanctions/Programs/pages/cuba.aspx

Background to Cuban sanctions

The U.S. and Cuba have always seemed to be at odds. Ever since the Cold War era, when the U.S. severed political ties with Cuba, there has been tension between the two governments.

After 5 decades of a complete embargo against Cuba, in 2015, the Obama Administration began what was known as the ‘Cuba Thaw’. The purpose of this effort was to slowly start normalizing relations with Cuba with the intention of eventually removing all sanctions. Travel restrictions were lifted and there seemed to be a light at the end of the tunnel.

On 16 June 2017, however, newly appointed President Trump announced that he was suspending the policy of sanctions relief against Cuba. Business and travel restrictions that had been loosened by the Obama Administration were reinstated in November 2017 and, in June 2019, further restrictions were announced on American travel to Cuba.

With all these ongoing sanctions and restrictions continuing to shape Cuban-American relations, it is important that compliance officers understand these changes as well as the checkered history that motivates this never-ending saga.

Where DoCuban Sanctions Come From?

The Cuba sanctions program represents the implementation of many legal authorities, which include executive orders issued by the President and statutes passed by Congress.

In 1962, President John F. Kennedy proclaimed an embargo on trade between the United States and Cuba.  The embargo was placed in response to certain actions taken by the government of Cuba which started in 1958 when rebels led by Fidel Castro violated a U.S. policy which permitted the sale of weapons to Latin American countries that were a part of the Rio Treaty, as long as the weapons were not used for hostile purposes. Later in 1960, Cuba purchased weapons from the Soviet Union.  The bold and open purchases lead to additional prohibitions by the U.S which severed all diplomatic relations with Cuba in 1961 and on September of 1962, President Kennedy, formally expanded the embargo to include all Cuban trade.

Fast forward to 1977, the restrictions on U.S. citizens traveling to Cuba lapsed and the regulation on spending US dollars in Cuba was lifted afterwards.  Later, the embargo was reinforced in 1992 by the Cuban Democracy Act and in 1996 by the Cuban Liberty and Democracy Solidarity Act also known as the Helms-Burton Act which penalizes foreign companies that do business in Cuba by preventing them from conducting any business in the U.S.

As history shows, prohibitions have changed over the years, however, the embargo remains to date.

How Effective Have Cuban Sanctions Been?

The economic impact of the embargo can be considered long and short term.  Economic studies completed by Cuba’s Institute of Economic Research indicate that Cuba has lost over $26 billion in trade as a result of the embargo. Further, there are aspects of the embargo that affect the average citizen living in a communist regime.  In Cuba, the government controls all aspects of the economy including the provision of food by rations while the average citizen receives $20 per month to survive.  The average citizen has been forced to find alternative ways of earning money, mainly in the tourism industry as Cuba still receives tourist from countries other than the U.S.  Some critics consider the embargo pointless as the U.S. is the only major country with such measures against Cuba.  Conversely, some argue that the government of Cuba has antagonized the U.S. and should continue to be under the embargo until a democracy is achieved.

*Glenda Juliano is the senior AML & Trade Control Analyst at Franklin Templeton Investments in St. Petersburg, Florida. She is member of the ACSS Editorial Task Force.

The Suspicious Transaction Report is a new fortnightly podcast from the Centre for Financial Crime and Security Studies at RUSI.

https://rusi.org/expertise/research/centre-financial-crime-and-security-studies

The podcast offers ‘behind-the-scenes’ insights and practical advice on how to implement the latest financial crime research in the real world.

In this preview episode of the ‘Suspicious Transaction Report’ podcast,

1. Isabella Chase talks to Tom Keatinge and Nick Parfitt about the EU’s second attempt at a money laundering blacklist,
2. the NCA’s increasing use of Unexplained Wealth Orders and
3. the benefits and drawbacks of transparency in ultimate beneficial ownership registries.

Download this preview podcast

The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has launched a new division dedicated to international money laundering investigations and its use of “special measures” under the USA Patriot Act. 

The bureau’s Global Investigations Division (GID), announced Wednesday, will oversee the implementation of “targeted investigation strategies,” including its utilization of powers granted by Sec. 311 of the Patriot Act, FinCEN said. Under the 2001 law, FinCEN has the authority to deem a financial institution or country to be a “primary money laundering concern.”

The Sec. 311 designation, or simply the threat of adopting such the designation, can have a crippling effect on targeted financial institutions, which can consequently lose access to correspondent banking accounts and other financial services. 

The new division, which will be headed by former US Justice Department official Matthew Stiglitz, will also be responsible for the bureau’s data-collection efforts related to geographic targeting orders and foreign financial agency regulation authorities, FinCEN said. 

“FinCEN will greatly benefit from Matthew’s experience, leadership and management skills,” said bureau chief Kenneth Blanco, in a statement. “We are excited to have him on our team as we stand up GID to further focus FinCEN’s investigative efforts to protect our nation and its people from harm.”

In addition to identifying global money laundering networks, the division will also be tasked with detecting and deterring threats “that have a nexus to the proliferation of weapons of mass destruction, rogue state actors, transnational organized crime, international narcotics trafficking and terrorism,” the bureau said. 

Since 2003, FinCEN has published a notice of proposed rulemaking for “primary money laundering concern” designations 26 times, though the bureau has formally imposed the sanction through a final rule in only nine instances. 

To read original article please click here

Ever listened to This American Life, the mother of all storytelling podcasts?

If not, you should. If yes, you know it’s a weekly podcast that runs about an hour per episode. It’s made by a team of about 20 people.

I’ve always been impressed by the frequency and quality of their output. After creating a podcast for TNW, I’m in complete awe. Turns out: podcast making might be the least time-efficient way to tell a story. At the same time, it was completely worth it.

At TNW, we’re proud to present our very first podcast, Forensic Finance, made with the help of  Dutch bank ABN AMRO. Every episode, we look into urgent global problems — such as human rights violations and environmental issues — and ways technology and finance can help fight them. 

“Without tooting the self-congratulatory trumpet too hard, I think this podcast turned out excellent,” said TNW editor in chief Alejandro Tauber. “The subject is both interesting and shocking, the stories and solutions are well told by our gracious guests, and the production – including dramatic music made at our direction, which made me feel like a cool ad executive – is great. I’m a proud person.”

The first episode of Forensic Finance discusses human trafficking, with more than 40 million people believed to be victims around the world. It’s up to governments, organizations, and society as a whole to battle this evil  — and one solution is to analyze bank data. 

What’s it like to be a victim of human trafficking? How can technology and finance help develop a solution? Listen to the first episode of Forensic Finance to find out.

To read original article please click here

SOFIA (Reuters) – Bulgaria’s DSK Bank, a unit of Hungary’s OTP Group, has been fined 1 million levs ($569,930) for a data breach that afffected over 33,000 clients, the country’s Commission for Personal Data Protection said on Wednesday.

The personal data watchdog said the full names, addresses, copies of ID cards as well as bank account numbers and property deed data of 33,492 people who have taken loans from the bank had been improperly disclosed and accessed by third parties.

Personal data of loan guarantors, spouses and contracting parties that were part of over 23,000 loan dossiers had also been breached.

The Commission launched a probe into the leak after DSK said in June it had been approached by a Bulgarian former convict who claimed to have a database with personal details of its clients.

DSK said at the time it had carried out internal checks that showed the bank’s systems had not been hacked, suggesting any leak of data would have occurred through other illegal means.

“DSK Bank was fined by the Commission for Personal Data Protection over a non-digital data theft carried against it,” the bank said in a statement. “DSK Bank accepts the fine and cooperates with the authorities to further improve its personal data protection measures.”

The Commission said it fined the bank for failing to introduce proper technical and organizational measures to guarantee the confidentiality of clients’ personal data at all times.

To read original article please click here

Nato Secretary General Jens Stoltenberg says all 29 member countries would respond to a serious cyber-attack on one of them.

Writing in Prospect Magazine, he said such an incident would trigger a “collective defence commitment”, known as Article 5 of its founding treaty.

Article 5 has not been triggered since the 9/11 terror attacks on the US in 2001.

Nato’s members include the US, Canada and many European countries.

“We have designated cyber-space a domain in which Nato will operate and defend itself as effectively as it does in the air, on land, and at sea,” he wrote in his article.

It’s not the first time Mr Stoltenberg has made this claim.

As an example of a major cyber-incident, he mentioned the 2017 Wannacry ransomware attack which crippled the NHS in the UK and caused havoc around the world, although this did not trigger Article 5 at the time.

US President Donald Trump has previously criticised the 70-year-old military alliance, saying the US contributes more funding to it than any other member country

Analysis by BBC Security Correspondent Gordon Corera

The idea that an attack on one is an attack on all underpins Nato – but adapting it to cyber-space raises complicated issues.

In the Cold War, a missile launch or a tank column advancing would have left little doubt of what constituted an attack.

But in the cyber-world it is not always so easy.

When Estonia saw its infrastructure hit through cyber-space in 2007, it was blamed on Russia. But was it the Russian state or “patriotic hackers” operating within Russia? And at whose direction?

Another issue is the threshold for considering something an attack.

Russia is accused of turning off a power station in (non-Nato member) Ukraine in December 2015. The crippling of infrastructure is one possibility for reaching a threshold for Article 5.

But what of 2017 when Russia is alleged to have launched the Notpetya computer virus against Ukraine but which then spilled over into other countries (including Nato members) damaging businesses at a cost of billions of dollars?

To read original article please click here