According to a Peruvian investigative journalism news source, more than USD 2.2 billion linked to suspected criminal activities has entered Peru’s financial system since 1998 through clients with alleged ties to corruption, drug trafficking, illegal gold mining, and tax evasion. Two of the country’s largest banks reportedly did no respond to questions regarding their client acceptance process, referring to financial secrecy laws. Peru’s Financial Intelligence Unit, La Unidad de Inteligencia Financiera, (UIF) showed a list of banking clients with checkered pasts, and included individuals and companies including on United States sanctions and watchlists.
The investigation revealed inaction by Peru’s oversight entity of insurance and pension funds, La Superintendencia de Banca, Seguros y AFP (SBS) and brought to light instances of noncompliance with regulations intended to prevent money laundering. Recently, Americn and European governments and regulatory entities have filed criminal charges or sanctions, in some cases, for billions of dollars against banks associatied with money laundering or failing to comply with regulations. While the Peruvian government has passed legislation giving the SBS authority to fine institutions for banking irregularities, in order to prevent money laundering, the highest fines pale in comparison to other countries and international regulatory agencies.
Acording to the investigation, the cases revealed major Peruvian banks ran operations which revealed deficiencies in their anti-money laundering systems, particularly, failing to take into account high-risk customer status and address ties to criminal groups. An analysis of client profiles and suspicious acitivities revealed Latin American drug trafficking figures, who purportedly laundered their gaines through real estate, transportation, and currency exchange businesses in Lima.
One other deficiency identified in Peruvian banks was the failure to file suspicious activity reports in required fashion. According to the investigation, there were hundreds of cases in which Peruvian banks notified the UIF of suspicious activitiy well after the required deadline of 30 days, with the average delay lasting four months, and in some cases, lasting as long as five years. In addition, Peruvian banks reportedly demonstrated a tendency to warn their clients and gave them the opportunity to explain themselves after irregularities were detected. Some of these individuals moved significant sums despite no employment or financial history and resided in poor neighborhoods or informal settlements.
Finally, the failure of institutions to conduct appropriate due diligence on not just its customers, but its employees stood out as a significant problem. Analysis revealed employees from high-risk regions were hired, some of them maintaining ties to organized crime. It is important for all financial institutions to scrutinize hires entering sensitive positions, particularly given the capability of some criminal syndicates to penetrate the financial system.
Brock Treworgy
Data, technology and automation have transformed the modern compliance program during a time in which financial institutions are confronted with greater complexity than before. Emerging risk categories, including narrative sanctions, beneficial ownership, and crypto currencies, and fintechs present financial institutions with increasingly difficult challenges to confront.
Narrative Sanctions
Historically, government sanction bodies provided the industry with a set list of individual names and entities to be embargoed from doing business. In the last fifteen years, this has changed, so that sanction bodies now also describe the types of individuals they want screened, putting a huge burden on financial institutions to identity who the individuals and entities covered by these sanctions are, including layers of subsidiaries, and beneficial owners. In this day and age, as companies find it is not sufficient to search by the letter of the sanction, increasingly, they are turning to third party vendors to help them in helping them meet their compliance necessities and protect their businesses from bad actors.
Identifiying what your business is and is not capable of doing should be one of the first steps in establishing a successful compliance program. Staying up to date on industry trends, and the constantly changing political landscape is one strategy that can be effectively used in order to ensure your firm is aware of any new risks and potential partnerships and tools to mitigate them.
Businesses face both regulatory and reputational risk in ensuring they avoid finding themselves as a party to money laundering, organized crime, or terrorist activities. Not only do companies find themselves subject to potential fines and punishment from regulatory authorities, but once an industry reputation for involvement with bad actors is established, it can be difficult to change.
Beneficial Ownership
Governments have recently learned how easily bad actors have been able to set up shell companies and hide ownership, which became evident after the release of the Panama Papers. Unfortunately, in this day and age, this information can change both quickly and significantly, with activities occuring in a complex web of companies scattered across multiple jurisdictions. Furthermore, due to new beneficial ownership requirements, the number of individuals and entities that must be screened increases. As most institutions have restrictions on their time and budget, determining an effective risk mitigation strategy is crucial, and partnering with a third party may be the fastest and most efficient one.
Cryptocurrencies
Over the last year, cryptocurrencies have presented another challenge to many businesses seeking compliance. Due to the rocketing valuations of many of the established cryptocurrencies, their anonymity, their susceptibility to money laundering, and the large influx of customers, there has been increasing scrutiny of the use of cryptocurrencies by regulatory authorities. While certain cryptocurriences obfuscate ownership and transaction activity, increasing their risk, others provide useful insight that demonstrates the lower risk profiles of other users. Banks should, again, stay as informed as possible on breaking trends in the cryptocurrency market in order to protect both themselves and their customer from scams and hacks. A defined plan, and potentially working with a consultancy, could be an effective strategy to grow your business into this new space. Researching the history of the individuals involved with the crypocurrencies, including any previous criminal history or fraud allegations, is also recommened.
Brock Treworgy
VCheck Global, a leading provider of business to business due diligence background checks, has launched its new application to utilize advanced AI to scan social media data. The Company is offering this solution for corporate clients and financial institutions to gather and review an individual’s entire online identity which will generate an easy to read report based upon pre-set criteria chosen by the client.to help determine how well a potential employee or business partner may fit into the organizational framework. Vcheck Global clients will be able to customize the category of “social media red flags” for which they want to screen.
The need for a social media screening product is a long overdue tool and service that will compliment and add value to Vcheck Global’s existing core business of domestic and international corporate due diligence services. When paired with Vcheck Global’s full scope of investigative services, the client will be provided with a more robust view of the individual under consideration. Corporate clients who process high volumes of background check and corporate due diligence services recognize that in today’s online world, a deeper dive into a prospective candidate or business partner must include an overview of social media and web content.
Lyndee Fletcher, COO of Vcheck Global stated, “It is important to note that only publicly available data is considered in the social media review process. Our objective is to deliver maximum value to our clients and to provide highest level of comfort that our methodology is secure and compliant”.
ABOUT VCHECK GLOBAL
Vcheck Global is a business-to-business provider of due diligence, background checks, employment screening, document retrieval, and specialized research of both business entities and individuals. Vcheck Global offers over 275 due diligence and background check services including custom investigations, international services, and rush processing. Vcheck Global protects its clients by providing essential information about the people and companies they do business with.
For more information regarding Vcheck Global, please contact us at [email protected], visit https://vcheckglobal.com or call (888) 740-0747.