Topics at the 13th annual Anti-Money Laundering/Compliance and Financial Crime Conference ranged from how offshore companies facilitate money laundering to Russian interference in Western politics, with most subjects being tied to the theme of staying vigilant in an increasingly dangerous world.
There were 10 speakers over the two-day event, including financial compliance experts who gave advice on spotting money laundering and terrorist financing, and consultants discussing how firms can handle the fallout if financial wrongdoing occurs.
Despite the recent bevy of regulations that Cayman and other offshore jurisdictions have implemented, money laundering and terrorist financing is still “too easy,” according to speaker Kim Manchester, a longtime banking executive who now provides financial crime risk management training programs to firms and public sector agencies.
Mr. Manchester described a number of ways money launderers can escape the notice of regulators, including the “basic cuckoo,” where wrongdoers mask their transactions by using other people’s bank accounts – either by hijacking their accounts by blackmail or other methods, or using the accounts of trusted friends.
He said this method is prevalent in potential terrorism hotbeds, such as war zones.
“If your family comes from conflict somewhere, where you’re getting the living daylights bombed out of you every day, you’ll go through extraordinary lengths to protect that community. And if somebody comes along and says, can we use your bank accounts, what’s your answer? ‘Absolutely,’” he said.
Other more sophisticated methods include the “back-to-back letter of credit” involving an onshore export firm and an offshore trading company – a company that matches wholesale buyers and sellers – that have the same shareholders. In that method, the onshore exporter may send goods to an importer – or it may not, depending on how fraudulent the scheme is – which pays the trading company. Instead of paying the exporter, the offshore trading company holds onto the payment or wires it to other entities, avoiding regulatory detection in the exporter’s home country in the process.
Retired U.S. Internal Revenue Service agent Arthur Vandesande also said that many financial criminals will try to reduce their liability by “tricking” corporate service providers into being complicit with their schemes. Therefore, Mr. Vandesande told attendees to always assume they’re being recorded when speaking to clients.
“Make sure you don’t say stupid things to people. Some of your clients are nefarious characters and will ask you questions to get you documented so they can later say, ‘I didn’t come up with that scheme. My professional adviser in the Caymans came up with it. Here’s the email, here’s the phone call,’” he said.
Along with discussing various money laundering typologies, cybersecurity expert David Cowen also gave a tutorial on how to avoid data theft and other cyber crimes.
Scam artists used to employ simplistic tactics like the “Nigerian prince” scam, but are now aggregating information from Facebook and other social media sites to specifically target individuals in a more sophisticated manner, he said.
For instance, Mr. Cowen said, scammers can often find out the names of executives in a firm and send fraudulent emails to employees requesting sensitive information.
To avoid being victimized, people should closely check email and web addresses, and call people requesting sensitive information to confirm that their email is authentic.
But despite taking stringent anti-money laundering and cyber crime measures, many firms will eventually fall victim to them. That is why firms should always have plans in place to handle the fallout of such incidents, said speaker J.R. Helmig, the chief analytics officer for consulting firm SAS Federal.
Mr. Helmig took attendees through a group exercise, splitting them into teams to discuss strategies on how to deal with various public crises. Some teams stated that they would attempt to “get out in front of the crisis” and issue a statement to the press immediately, while others said they would order their employees not to speak to media at all.
According to Mr. Helmig, the best strategy is usually the one taken by executives of Johnson & Johnson in the Tylenol cyanide deaths of 1982.
In that incident, in which seven people died in Chicago due to ingesting cyanide-laced Tylenol, company executives worked closely with law enforcement and provided daily public updates on the progress of investigations. Despite the fact that no one was charged in relation to the incident, Johnson & Johnson was widely credited for its response, and the firm’s stock recovered from a 35 percent decrease within a year.
The keynote speaker at the event was Yuri Felshtinsky, a Russian author, historian, and investigative journalist. Mr. Felshtinsky did not speak on financial services-related topics, but recounted his nearly 20-year saga of writing about the inner workings of Russia, its state security organization FSB, and the regime of Vladimir Putin.
Mr. Felshtinsky is best known for documenting how officials from the FSB – formerly known as the KGB – took top positions in nearly all of the government’s departments and state-owned enterprises throughout the 1990s and early 2000s.
In 2001, he and co-author Alexander Litvinenko published their book “Blowing Up Russia,” which alleges that the FSB bombed Russian apartments in 2001 in a false-flag terrorist attack meant to justify the second Chechen war and bring Mr. Putin into power.
The Russian government banned the book, and authorities accused Messrs. Felshtinksy and Litvinenko of publishing state secrets.
In October 2006, about 13 days after he received U.K. citizenship, Mr. Litvinenko was poisoned to death in London with radioactive polonium – an act Mr. Felshtinksy alleges was committed by the FSB.
Since then, the Russian author has continued to document the Putin regime and other Russia-related topics.
Mr. Felshtinksy said at the conference that Mr. Putin’s goal is to make Russia a world power, not by elevating it to the level of the U.S. and European Union, but by destroying those political unions.
The scheme is even more nefarious because it’s being pushed by not just Mr. Putin, but by the entire FSB, meaning that removing Mr. Putin would not solve the West’s problems, he said.
“Russia has more FSB agents in the U.S. now than in the height of the Cold War,” he said. “This we know.”