Money laundering is the world's third largest industry b

1
The European Association of Airport and Seaport
Police 35th Annual Conference Gibraltar 21st to
24th April 2008

• Anti Money Laundering
• Presentation by
• Marcus Killick
• Chief Executive Officer
• Financial Services Commission

2
The Commission

• Established in 1989
• Regulator of Financial Services in Gibraltar,
  covering
• Banking
• Insurance
• Investments (including mutual funds)
• Company Management
• Professional Trusteeship
• Pension Trustees
• Staff complement of 32
• Budget of approx Euros 2.7m

3
FSC statutory objectives

• To promote market confidence
• The reduction of systemic risk
• To promote public awareness
• To protect the reputation of Gibraltar
• The protection of consumers and
• The reduction of financial crime,

4
Other Activities

• Patrolling the perimeter
• Combating market abuse
• International cooperation
• Secondments
• Training
• Information exchange
• Depositors Guarantee Scheme - administration
• Investor Compensation Scheme - administration
• Auditors Registration Board administration
• Shortly to take on responsibility for Money
  Services Businesses

5
Commission Structure

• Commission members (with exception of Chief
  Executive) appointed by Government of Gibraltar
• Eight Commission members (including Chief
  Executive) with a mixture of local and
  international experience
• Separate Chairman and Chief Executive
• Chief Executive responsible for day to day work
  including licensing decisions
• Operates in line with Principles of Good
  Governance. (including Audit, Nomination and
  Remuneration Committees)

6
Financial Sector in Gibraltar(as at March 2008)

• 86 Company Managers Groups
• 426 Company Managers Licensees
• 45 Professional Trustees Groups
• 71 Professional Trustees Licensees
• 17 Authorised Banks
• 1 E-money Institutions
• 10 Collective Investment Scheme Administrators
• 10 Collective Investment Scheme Operators,
  Trustees and Advisers
• 4 Collective Investment Schemes Authorised
• 46 Collective Investment Schemes Recognised
• 33 Collective Investment Schemes Experienced
  Investor Funds
• 60 Insurance Companies
• 8 Insurance Managers
• 6 Investment Dealers
• 27 Investment Managers

7
Financial Crime

• International finance centres are exposed to
  financial crime eg money emanating from
• Corruption
• Sanction busting
• Proceeds of drugs
• Tax evasion
• Market abuse
• In respect of cash placement is normally
  onshore.
• Offshore role primarily layering using structures
  designed to disguise ownership

8
Scale Global Estimates of Laundered Money

• IMF estimate between 2-5 of worlds GDP
  (2.1trillion at todays figures)
• UN estimate 1 trillion laundered annually (just
  under 2 million per minute)
• Money laundering is the worlds third largest
  industry by turnover (after oil agriculture)
• FT Fraud Report 1997 - black economy
• - Italy, Greece, Spain 25 of GDP
• - Russia 50 of GDP
• Query how rigorous and realistic are these
  estimates?

9
Scale Costs of AML Compliance for Financial
Services

• National costs to US banks gt 3 billion pa
  (2003)
• Operational costs (source KPMG AML Survey)
• - rose 58 over the period 2004-2007
• - European banks project costs to rise by 27
  over the next three years
• - transaction monitoring training are the main
  cost drivers (also sanctions compliance)
• Fines
• - Riggs Bank 41 million (2005)
• - ABN Amro Bank 80 million (2005)

10
Other types of financial crimeinclude

• Email fraud
• Pyramid schemes
• Boiler room operations
• Insider trading
• Share ramping
• Market manipulation

11
Emails this week (1)
Dear Beloved. Happiness keeps you sweet, trials
keeps you strong, sorrows keeps you human,
failures keeps you humble, success keeps you
glooming, and but only God keeps you going! You
are so special! My name is Mrs.Yolanda Mcdavis a
British Merchant in Caribbean Island. I have been
diagnosed with Esophageal Cancer, which was
discovered very late, due to my laxity in caring
for my health. This sickness has defiled all
forms of medicine, and right now I have only
about a few months to live, according to medical
experts. I have since lost my power of speech
and can only manage to write now as that has
been the only way I am able to communicate. I
have not particularly lived my life so well, as I
never really cared for anyone not even myself but
my business. Though I am very rich, I was never
generous, I was always hostile to people and only
focus on my business as that is the only thing I
cared for. But now I regret all, as I now know
that there is more to life than just wanting to
have or make all the money in the world. I
believe when the Almighty gives me a second
chance to come to this world I would live my life
a different way from how I have lived it. Now
that I know my time is near, I have willed and
given most of my properties and assets to my
immediate and extended family members and as well
as a few close friends. I want nature and the
Almighty God in Heaven to be merciful to me and
accept my soul and so, I have decided to give the
remains of my wealth to charity organizations, as
I want this to be one of the last good deeds I
did on earth. So far, I have distributed money
to some charity organizations in the Caribbean
Island, London and Ireland. Now that my health
has deteriorated so badly, I cannot do this
myself any more. I once asked members of my
family to close one of my accounts in Switzerland
and donate the money in the account to the
motherless/charity homes across Africa, Europe
and America organizations, they refused and kept
the money to themselves. I do not trust them
anymore, as they seem not to be contended with
what I have left for them. The last of my money
which only few of them know of is the (US13.7M)
cash deposit that I have with a financial firm. I
will want you to hel
Dear Beloved. Happiness keeps you sweet, trials
keeps you strong, sorrows keeps you human,
failures keeps you humble, success keeps you
glooming, and but only God keeps you going! You
are so special! My name is Mrs.Yolanda Mcdavis a
British Merchant in Caribbean Island. I have been
diagnosed with Esophageal Cancer, which was
discovered very late, due to my laxity in caring
for my health. This sickness has defiled all
forms of medicine, and right now I have only
about a few months to live, according to medical
experts. I have since lost my power of speech
and can only manage to write now as that has
been the only way I am able to communicate. I
have not particularly lived my life so well, as I
never really cared for anyone not even myself but
my business. Though I am very rich, I was never
generous, I was always hostile to people and only
focus on my business as that is the only thing I
cared for. But now I regret all, as I now know
that there is more to life than just wanting to
have or make all the money in the world. I
believe when the Almighty gives me a second
chance to come to this world I would live my life
a different way from how I have lived it. Now
that I know my time is near, I have willed and
given most of my properties and assets to my
immediate and extended family members and as well
as a few close friends. I want nature and the
Almighty God in Heaven to be merciful to me and
accept my soul and so, I have decided to give the
remains of my wealth to charity organizations, as
I want this to be one of the last good deeds I
did on earth. So far, I have distributed money
to some charity organizations in the Caribbean
Island, London and Ireland. Now that my health
has deteriorated so badly, I cannot do this
myself any more. I once asked members of my
family to close one of my accounts in Switzerland
and donate the money in the account to the
motherless/charity homes across Africa, Europe
and America organizations, they refused and kept
the money to themselves. I do not trust them
anymore, as they seem not to be contended with
what I have left for them. The last of my money
which only few of them know of is the (US13.7M)
cash deposit that I have with a financial firm. I
will want you to hel

• Dear Beloved.
• Happiness keeps you sweet, trials keeps you
  strong, sorrows keeps you human, failures keeps
  you humble, success keeps you glooming, and but
  only God keeps you going! You are so special!
• My name is Mrs.Yolanda Mcdavis a British
  Merchant in Caribbean Island. I have been
  diagnosed with Esophageal Cancer, which was
  discovered very late, due to my laxity in caring
  for my health. This sickness has defiled all
  forms of medicine, and right now I have only
  about a few months to live, according to medical
  experts. I have since lost my power of speech
  and can only manage to write now as that has
  been the only way I am able to communicate.
• I have not particularly lived my life so well,
  as I never really cared for anyone not even
  myself but my business. Though I am very rich, I
  was never generous, I was always hostile to
  people and only focus on my business as that is
  the only thing I cared for. But now I regret all,
  as I now know that there is more to life than
  just wanting to have or make all the money in the
  world. I believe when the Almighty gives me a
  second chance to come to this world I would live
  my life a different way from how I have lived it.
• Now that I know my time is near, I have willed
  and given most of my properties and assets to my
  immediate and extended family members and as well
  as a few close friends. I want nature and the
  Almighty God in Heaven to be merciful to me and
  accept my soul and so, I have decided to give the
  remains of my wealth to charity organizations, as
  I want this to be one of the last good deeds I
  did on earth.
• So far, I have distributed money to some charity
  organizations in the Caribbean Island, London and
  Ireland. Now that my health has deteriorated so
  badly, I cannot do this myself any more. I once
  asked members of my family to close one of my
  accounts in Switzerland and donate the money in
  the account to the motherless/charity homes
  across
• Africa, Europe and America organizations, they
  refused and kept the money to themselves. I do
  not trust them anymore, as they seem not to be
  contended with what I have left for them.
• The last of my money which only few of them know
  of is the (US13.7M) cash deposit that I have
  with a financial firm. I will want you to hel it
  ended there

12
Emails this week (2)

• Kindest Attention
• I have just discovered your email contact on my
  email review this morning please give me an
  opportunity to seek your interest in this
  beneficiary partnership with you.
• My name is Mr. Alexandra Amilcar I am from
  Portugal the owner of (LIQUEFIED NATURAL GAS
  COMPANY) one of the leading Companies here in
  London, I have lived and managed my company here
  in London for nine years.I has been diagnosed
  with esophageal cancer. It has defiled all forms
  of medical treatment, and right now I have only
  about a few months to live, according to medical
  experts. I have not particularly lived my life so
  well, as I never really cared for anyone (not
  even myself) but my business.
• Though I am very rich, I was never generous, I
  was always hostile to people and only focused on
  my business as that was the only thing I cared
  for. But now I regret all this as I now know that
  there is more to life than just wanting to have
  or make all the money in the world. I believe
  when God gives me a second chance to come to this
  world I would live my life a different way from
  how I have lived it.
• Now that God is about to called me, I have
  willed and given most of my property and assets
  to my immediate and extended family members as
  well as few close friends. I want God to be
  merciful to me and accept my soul, so I have
  decided to give alms to charity organizations, as
  I want this to be one of the last good deeds I do
  on earth.
• So far, I have distributed money to some charity
  organizations in theU.A.E, Somalia and Malaysia.
  Now that my health has deteriorated so badly, I
  cannot do this myself any more. I once asked
  members of my family to close one of my accounts
  and distribute the money which I have there to
  charity organization in Bulgaria and Pakistan
  they refused and kept the money to themselves.
• Hence, I do not trust them any more, as they
  seem not to be contended with what I have left
  for them. The last of my money which no one knows
  of is the huge cash deposit of nineteen Million,
  five hundred United States Dollars (19, 500,
  000. 00) that I have with an Asset Management
  Company Abroad.
• Quoted fund belongs to my notable high-net worth
  raw Diamond industry from the kingdom of Saudi
  Arabia, My wishes before this critical condition
  of mine was to invest these funds substantially
  in Real Estate development in the United States
  of America. Now I will want you to help me
  collect this deposit and dispatch it to charity
  organizations.
• N/B Kindly note that 25 of this funds must go
  to the tsunami victims, 55 to other Charity
  Organization and 20 for your effort and time.
  Once I have established a partnership with you,
  Ill feed you with more information on how you
  will go about transferring these funds to your
  account.
• I cannot talk with you on the phone due to my
  health situation, as I am using my Lap Top
  Computer to communicate with you. You should
  respond to this e-mail if you are interested in
  carrying out this assignment on my behalf.

13
Lottery scams

• On 17th April this year Spanish police
  arrested 87 Nigerians suspected of defrauding at
  least 1,500 people in a postal and internet
  lottery scam. The arrests were made in and around
  Madrid in an operation co-ordinated with the FBI.
  
• Police said millions of euros were taken from
  the victims, most of them in the United States
  and European Union. Those targeted were wrongly
  told they had won a lottery and asked to send a
  payment before prize money could sent. Thousands
  of letters and e-mails, most in ungrammatical
  English, were sent out to prospective victims
  every day, police said. The faked documents
  asked them to make an initial payment of 900
  euros (1,400, 720) in taxes or administrative
  costs. The scam is estimated to have netted
  around 20 million euros, but the actual sum could
  be many times that, say police.
• Police said the number of those defrauded could
  run into many thousands, as most of them probably
  failed to report the crime out of embarrassment.
  Police estimate that only one in 1,000 recipients
  of the letters needed to fall for the fraud for
  it to make a profit. An Anglican bishop was among
  those duped, according to Spanish officials.
• The operation to track down the gang began in
  May 2007 when a huge number of identical letters
  destined for addresses in the US was discovered
  at Madrid's Barajas airport. Police confiscated
  hundreds of computers, mobile phones and 60,000
  letters in a raid on more than 30 homes and
  businesses.
• Law enforcement officers also seized a suitcase
  full of fake 100 notes which they say was used
  to convince some victims who came to Spain in
  person to collect their "prize money".
• Source BBC

14
In case I was feeling left out!

• Good day,
• This is to inform you that your winnings dated
  30th of August, 2007 under the NATIONAL LOTTERY
  promotional lottery draw Batch Number
  NLP/4486321425 and pin numbers051011263141 still
  remains unclaimed. The expiration date has drawn
  close. All unclaimed fund after the 180 days
  expiration date will be rolled over into future
  draws.
• Your inability to attend the award presentation,
  has necessitated this reminder. As a matter of
  urgency you are required to contact the payment
  officer with the contact details stated below to
  be better informed on what is required to lay
  claims to your winnings.
• Mr. Claudio Vicente,
• Blue-Sky Consulting U.K
• Tel [phone]
• 44 704 019 7574
• Fax [phone]
• Email claudiovicente_at_excite.com
• Sincerely yours,
• Kimberly White (Ms.)
• Results Coordinator

15
There are victims

• COMPLAINT AGAINST X LIMITED  X LIMITED
  OWES ME MILLIONS OF DOLLARS USD CURRENCY. THEY
  ARE ILLEGALLY HOLDING THE FUNDS. I SHOULD HAVE
  BEEN PAID MANY MONTHS AGO. I BELIEVE THIS
  FINANCIAL INSTITUTION FRAUDED MYSELF STILL
  HAVEN'T PAID ANYTHING LIKE THIS BUSINESS SUPPOSE
  HAVE. THEY RECENTLY AWARDED MONEY STILL HAVEN'T
  PAID ME ANYTHING WHICH THEY OWE MYSELF.  

16
Real or Fake?
17
Fake or real?
18
Structures used for criminal activityand
countermeasures

• All are, but those most vulnerable are
• Companies
• Trusts
• Hawala
• Money transfer/Bureau de Change
• Client accounts of professional firms
• Countermeasures
• Licensing of service providers
• Requirements on Customer due diligence/record
  keeping/training
• On site reviews
• Effective sanctions
• International Cooperation

19
Gibraltar current Threat matrix
20
International standards

• FSC seeks to comply with relevant international
  standards established in
• Insurance
• Banking
• Investments
• Anti Money laundering
• We are members of
• International Association of Insurance
  Supervisors
• Offshore Group of Insurance Supervisors
• International Organisation of Securities
  Commissions
• The FSC is required by statute to advise the
  Minister if, at any time, it considers it to be
  unable to supervise and regulate financial
  services business carried on in or from Gibraltar
  to internationally accepted standards
• Our adherence to these standards is independently
  verified

21
International StandardsEU Requirements

• As an EU jurisdiction we are required to apply
  all Directives and Regulations made under the
  Financial Services Action Plan as well as those
  relating to AML and combating the proceeeds of
  terrorism
• This gives us full passporting rights throughout
  the EU and, via the Gibraltar Order, the UK
• In respect of EU legislation the FSC is required
  by statue to establish and implement standards
  and supervisory practices which match the
  standards and supervisory practices governing the
  provision of financial services within the United
  Kingdom.

22
Independent reviews

• The FSC is one of the most reviewed regulator on
  the planet!
• Reviews undertaken include
• First statutory review 1998
• Second Statutory review 1999
• IMF Assessment 2001
• Assessment against FATF standards 2002
• Third Statutory review 2004
• Second IMF assessment 2006

23
2006 IMF Review

• Covered
• Banking
• Insurance
• AML/CFT
• Designed to assess compliance with international
  standards
• Gibraltar was the first jurisdiction to volunteer
  for the initial review

24
IMF Findings

• In the area of Banking Supervision Gibraltar was
  fully compliant with 27 and largely compliant
  with 3 out of the 30 applicable international
  standards.  This was matched with 24 observed and
  3 largely observed out of 28 applicable standards
  for Insurance Supervision.
• These levels of compliance are amongst the
  highest ever achieved in any IMF review by any
  country.
• Gibraltar has a well-regulated financial sector
• The assessment found a high standard of
  compliance with the Basel Core Principles and the
  Insurance Core Principles.
• The reputation of Gibraltar as a financial centre
  will depend on maintaining the independence of
  the Financial Services Commission (FSC).

25
The End

• Marcus Killick
• mkillick_at_fsc.gi
• 350 40283