AML Experts - No Excuses for Banks MLRO Not monitoring FIFA Transactions
Money laundering reporting officers would find it hard to argue they were unaware of the risks involved in banking FIFA and its officials prior to the scandal that has engulfed the world football body, sources said. Root-and-branch reviews of past FIFA transactions were needed in order to demonstrate counter-money laundering compliance, they said.
Barclays, Standard Chartered and HSBC are reviewing a number of transactions, totalling hundreds of thousands of dollars, after the trio were named in the U.S. Department of Justice indictment against FIFA last week. There is no suggestion the banks have done anything wrong.
ENOUGH WARNING SIGNS
There were sufficient warnings down the years, said one ex-senior MLRO, speaking on condition of anonymity. "If I were an MLRO, I would be all over the accounts of FIFA and FIFA officials like a rash. There have been enough media reports over the past decade on corruption within FIFA, that no bank could ever claim last week's events were a surprise," he said.
Under the UK's money laundering legislation, banks are obliged to conduct enhanced due diligence and continuing monitoring where situations present a higher risk of money laundering or terrorist financing. The former practitioner said this point could catch out banks because of the swirl of FIFA corruption allegations over the years.
Martin Woods, MLRO at Thomson Reuters, agreed: "FIFA for a number of years has been linked with corruption and organised crime allegations so anyone dealing with FIFA accounts and FIFA executives should have been treating them as high risk," he said.
Barry Vitou, a partner at Pinsent Masons, said MLROs would want to explore all transactions with a FIFA imprint. "MLROs will no doubt now want confirmation of what proposed transactions relate to in order to form a judgement as to whether it is something to worry about, or not. The arrests in Zurich last week and the comments of the U.S. DoJ and the new Swiss investigations are a reminder that MLROs would be well advised to be on a heightened state of alert and asking more questions than usual."
Vitou said most banks had sophisticated know your customer (KYC) processes so any unusual transactions might have been expected to have been picked up in the first place. The nature of the allegations against the organisation over the years meant banks should have addressed how to deal with FIFA or its officials, he said.
"If allegations surface in the media about individuals the MLRO will need to consider whether, in the light of those allegations (and any other information the MLRO due diligence reveals), the firm wishes to maintain a commercial relationship with them. Anti-money laundering is risk based, so firms' rules need to be sufficiently agile to cater for a change in circumstances," Vitou said.
He urged firms to highlight transactions involving FIFA or its officials in case law enforcers asked for information on them. This might exclude regular salary payments but not one-off large deposits, for example.
LEGAL OBLIGATIONS
Vitou also said UK banks had an obligation, under the Proceeds of Crime Act 2002, to file suspicious activity reports (SARs) where merited, while banks might also be caught if they held suspected criminal property from the body. The rights flowing from an agreement with a contract which has been obtained through bribery or is otherwise tainted with FIFA could amount to criminal property, he said.
"If a company is suspicious about a transaction, for example a bank transfer, then the company or firm will need to consider what to do to ensure compliance with anti-money laundering laws. This could include filing a SAR," he said.
There has been some suggestion that banks should have treated FIFA officials on their client books as politically exposed persons (PEPs), but in most circumstances, unless other outside public interests dictated, they would not be. Switzerland recently passed a bill that will lead to changes in the country's AML rule that would see FIFA members classed as PEPs.
Bill Majcher, a former inspector with the Royal Canadian Mounted Police now a consultant in Hong Kong, said FIFA executives should have been treated as PEPs. "With all the years of scandals and accusations of fraud and corruption, surely the banks would have identified their accounts as ultra high risk ... did they? This will be the smell test that the banks will have to pass. Did they have sufficient controls and analytics in place to detect FIFA execs and their accounts?" he said.
Dr Bryane Michael, a senior research fellow at the University of Hong Kong, said banks could justifiably take a position either way regarding the PEPs point. Michael said he would treat them as PEPs, but would not put in place specific measures to target them.
Last week seven FIFA officials were arrested in Switzerland and a criminal investigation was launched into the awarding of two future World Cup tournaments; Russia in 2018 and Qatar in 2022. U.S. authorities said nine football officials and five sports media and promotions executives faced corruption charges involving more than $150 million in bribes.
Australia, meanwhile, has requested information from its banks to help trace a $462,200 payment made to Jack Warner, the former FIFA vice-president. The Football Federation Australia (FFA), which lodged a bid for 2022, made the payment to a Caribbean bank account controlled by Warner for the construction of a football stadium in Trinidad and Tobago. The stadium was not built and the funds are alleged to have been mis-used.
"It would be extremely unlikely that any Australian domestic bank would have been implicated in any potential bribery or corruption investigation," said Paddy Oliver, an AML/CTF lawyer and managing director at Lexcel Consulting.
BIG BUCKS
FIFA does not disclose the remuneration of its leading officials but Sepp Blatter, who resigned as president yesterday, was believed to be on a salary of $10 million a year, a source said. Executive members are said to earn $200,000 per year, plus $500 per day when on FIFA business, as well as accommodation and other expenses, with no receipts needed, the source said.
(Additional reporting by Ajay Shamdasani in Hong Kong and Nathan Lynch in Perth)
Barclays, Standard Chartered and HSBC are reviewing a number of transactions, totalling hundreds of thousands of dollars, after the trio were named in the U.S. Department of Justice indictment against FIFA last week. There is no suggestion the banks have done anything wrong.
ENOUGH WARNING SIGNS
There were sufficient warnings down the years, said one ex-senior MLRO, speaking on condition of anonymity. "If I were an MLRO, I would be all over the accounts of FIFA and FIFA officials like a rash. There have been enough media reports over the past decade on corruption within FIFA, that no bank could ever claim last week's events were a surprise," he said.
Under the UK's money laundering legislation, banks are obliged to conduct enhanced due diligence and continuing monitoring where situations present a higher risk of money laundering or terrorist financing. The former practitioner said this point could catch out banks because of the swirl of FIFA corruption allegations over the years.
Martin Woods, MLRO at Thomson Reuters, agreed: "FIFA for a number of years has been linked with corruption and organised crime allegations so anyone dealing with FIFA accounts and FIFA executives should have been treating them as high risk," he said.
Barry Vitou, a partner at Pinsent Masons, said MLROs would want to explore all transactions with a FIFA imprint. "MLROs will no doubt now want confirmation of what proposed transactions relate to in order to form a judgement as to whether it is something to worry about, or not. The arrests in Zurich last week and the comments of the U.S. DoJ and the new Swiss investigations are a reminder that MLROs would be well advised to be on a heightened state of alert and asking more questions than usual."
Vitou said most banks had sophisticated know your customer (KYC) processes so any unusual transactions might have been expected to have been picked up in the first place. The nature of the allegations against the organisation over the years meant banks should have addressed how to deal with FIFA or its officials, he said.
"If allegations surface in the media about individuals the MLRO will need to consider whether, in the light of those allegations (and any other information the MLRO due diligence reveals), the firm wishes to maintain a commercial relationship with them. Anti-money laundering is risk based, so firms' rules need to be sufficiently agile to cater for a change in circumstances," Vitou said.
He urged firms to highlight transactions involving FIFA or its officials in case law enforcers asked for information on them. This might exclude regular salary payments but not one-off large deposits, for example.
LEGAL OBLIGATIONS
Vitou also said UK banks had an obligation, under the Proceeds of Crime Act 2002, to file suspicious activity reports (SARs) where merited, while banks might also be caught if they held suspected criminal property from the body. The rights flowing from an agreement with a contract which has been obtained through bribery or is otherwise tainted with FIFA could amount to criminal property, he said.
"If a company is suspicious about a transaction, for example a bank transfer, then the company or firm will need to consider what to do to ensure compliance with anti-money laundering laws. This could include filing a SAR," he said.
There has been some suggestion that banks should have treated FIFA officials on their client books as politically exposed persons (PEPs), but in most circumstances, unless other outside public interests dictated, they would not be. Switzerland recently passed a bill that will lead to changes in the country's AML rule that would see FIFA members classed as PEPs.
Bill Majcher, a former inspector with the Royal Canadian Mounted Police now a consultant in Hong Kong, said FIFA executives should have been treated as PEPs. "With all the years of scandals and accusations of fraud and corruption, surely the banks would have identified their accounts as ultra high risk ... did they? This will be the smell test that the banks will have to pass. Did they have sufficient controls and analytics in place to detect FIFA execs and their accounts?" he said.
Dr Bryane Michael, a senior research fellow at the University of Hong Kong, said banks could justifiably take a position either way regarding the PEPs point. Michael said he would treat them as PEPs, but would not put in place specific measures to target them.
Last week seven FIFA officials were arrested in Switzerland and a criminal investigation was launched into the awarding of two future World Cup tournaments; Russia in 2018 and Qatar in 2022. U.S. authorities said nine football officials and five sports media and promotions executives faced corruption charges involving more than $150 million in bribes.
Australia, meanwhile, has requested information from its banks to help trace a $462,200 payment made to Jack Warner, the former FIFA vice-president. The Football Federation Australia (FFA), which lodged a bid for 2022, made the payment to a Caribbean bank account controlled by Warner for the construction of a football stadium in Trinidad and Tobago. The stadium was not built and the funds are alleged to have been mis-used.
"It would be extremely unlikely that any Australian domestic bank would have been implicated in any potential bribery or corruption investigation," said Paddy Oliver, an AML/CTF lawyer and managing director at Lexcel Consulting.
BIG BUCKS
FIFA does not disclose the remuneration of its leading officials but Sepp Blatter, who resigned as president yesterday, was believed to be on a salary of $10 million a year, a source said. Executive members are said to earn $200,000 per year, plus $500 per day when on FIFA business, as well as accommodation and other expenses, with no receipts needed, the source said.
(Additional reporting by Ajay Shamdasani in Hong Kong and Nathan Lynch in Perth)
Martin Coyle is senior editor, AML and financial crime, at Thomson Reuters Regulatory Intelligence in London