Corruption, 5MLD & fake companies take the headlines in January

Julian Dixon

January 30th, 2020

Another month, and another armload of headlines crying corruption, crypto and fake companies.

Africa's richest woman is accused of laundering money

The main story this January was the case of Isobel dos Santos, Africa's richest woman, accused of laundering money.

If we ever needed a reminder of the potential risks of dealing with politically exposed persons (PEPs), then Isobel dos Santos is certainly serving that purpose. Daughter of former Angola president, José Eduardo dos Santos, Isobel dos Santos is one of the world's richest women and the richest woman in Africa (Forbes magazine estimate her fortune to be worth $2.2bn).

Following more than 700,000 leaked documents, she now faces allegations that she’s built her substantial empire, including businesses in oil, banking, telecoms and diamonds, by exploiting her own country and corruption. A court in the Angolan capital, Luanda, has consequently ordered the freezing of her bank accounts and businesses.

Companies caught up in the allegations include Price Waterhouse Coopers (PWC), which has made millions providing consultancy, auditing and tax advice to her companies, and Portuguese bank, EuroBic, where dos Santos had been a primary shareholder. Both companies have terminated their relationships with her and announced they are conducting their own investigations. I suspect we may see more companies following suit.

If the allegations are true, what’s striking (but sadly not surprising) in this case is not just the scale, but the clear absence of due diligence over decades of trading and hundreds of thousands of transactions. It’s taken a whistleblower to expose corruption that has cost the people of Angola dearly.

This is an investigation that’s not going to go away any time soon. Moreover, it reflects how difficult overcoming money laundering is when those at the top abuse their power.

FCA becomes the AML/CTF supervisor of cryptoasset businesses

In a move that is surely welcomed by many, the FCA became the supervisor of cryptoasset businesses on 10 January 2020. Its duty (amongst many other things) is to ensure the businesses it supervises comply with the money laundering regulations.

This new responsibility has been brought about by the Fifth Money Laundering Directive (5MLD).

Cryptoasset businesses (including exchange providers, automated teller machines, wallet providers, peer-to-peer providers and more) are now classified under 5MLD’s definition of ‘obliged entities’ (i.e. those who must operate within the scope of the money laundering regulations).

All cryptoasset businesses need to register with the FCA. There are several important deadlines to be aware of. While this may seem like yet another regulatory burden, it’s a crucial step to keep improving our processes and approaches to fight money laundering and terrorist financing.

You can find out more about the changes 5MLD implements and how to comply with the money laundering regulations, in our new guide, 5MLD: Your guide for compliance.

Money laundering operation worth £215m shut down

It’s been termed as one of the most significant live money laundering investigations in the UK. And it’s also Northern Ireland’s biggest.

This month seven were arrested in a money laundering scam worth £215m. Following an
18-month long complex investigation, over 50 companies and 140 bank accounts were identified. Deposits were made to thousands of bank accounts across the UK, as well as transferred out of the UK through foreign exchange companies since 2011.

Clearly, the amount of money in question here, and scale of this investigation, reflects just how successful the money laundering operation was. How these criminals remained undetected for so long is concerning.

Crucially, setting up and using shell companies has been identified as integral to the operation. As the investigation continues, it’s a reminder of the potential money laundering risks associated with such companies, and how the lack of controls contribute to ongoing crime.

More effective AML systems, controls and procedures should have prevented the laundering of these ill-gotten gains.

Read more from the blog...