Christian Romeo Plan

153363

1. Aside from paying several fines to the US authorities, they also maintained compliance
monitor. In addition to forfeiting $1.3 billion, they also paid additional $665 million to civic
penalties including several government financial establishments. They also admitted their
mistakes and accepted full responsibility of their lapses in maintenance against money
laundering. The bank had spent $290m on improving its systems to prevent money laundering
and increased sanctions to strengthen anti-money laundering controls1.

They also implemented AI to automatically spot money laundering, fraud and terrorist
funding2. They will be implementing screening processes with a software that is capable of
managing and interpreting data of customers and transactions. The data gathered will also
come from all accessible sources and with compliance to the rules and regulations of the bank
itself and the government. This could be beneficial since they will treat each transaction and
each person will be analyzed as mere data. This will lead to unbiased decisions and
interpretations. However, this data could still be manipulated internally by the staff.

There have been anti money laundering acts imposed in countries after several cases.
The Financial Action Task Force (FATF) has been created to promote national and international
policies to combat money laundering3. Based on the cases from HSBC other global banks, I
believe the regulation committees should not only provide penalties and fines but also
limitations with their operations. Limitations in terms of the areas they are allowed to operate in.
According to the US AML systems and requirements, the state should be able to control the
relationships with these banks. AML require due diligence for foreign customers as well as new
correspondent accounts. This requires the history and money laundering risks of foreign banks
and investors. AML also requires cross-checking annual reports, relevant licenses, overall
history of the banks.

1
https://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-9-billion-u-s-fine-in-money-laundering-
case-idUSBRE8BA05M20121211

2
https://theamla.com/news/hsbc-brings-in-ai-to-help-spot-money-laundering/
3
https://www.icaew.com/technical/legal-and-regulatory/anti-money-laundering/international-law-and-guidance
 I believe stricter implementation of these laws is a must through heavier penalties. It will
be difficult for the global banks to grow but it will avoid money laundering. Penalties should
already include suspension of operations but it is never ideal for a bank to stop operating. It
should instead remove the employees concerned with the illegal transactions.
2. The first bank is Deutsche Bank where in 2016, there have been allegations regarding
their connection to the documents from a Panamanian law firm4. They were believed to have
assisted clients to set up offshore companies, evade taxes that would help transfer funds to
Deutsche Bank accounts whilst avoiding anti-money laundering security. Over 311 million Euros
were generated from 900 customers in 2016. Allegations against them stated that their
employees did not follow AML procedures and did not report money laundering suspicions.
Another allegation in 2007 against them concern Danske Bank where it concerned 200 billion
euro. Deutsche Bank helped in processing majority of the payments5. Investigators stated that
Deutsche Bank only used Danske Bank to limit the information regarding the lenders.

Investigators stated the weaknesses of Deutsche Bank’s strength in controlling their anti-
money laundering initiatives. They exposed the weakness of Deutsche Bank and it may cause
business operations problems to Deutsche Bank in terms of regulations and in terms of their
customers. Even the Bank agreed that they needed to improve their processing and ocular in
properly identifying clients. This was stated again in August 2018 since they allowed around
$700 million to be laundered in Moscow, London and New York. They have tried several times
to improve their compliance with anti-money laundering procedures. However, there have been
recent allegations again so their statement of improving their anti-money laundering procedures
were not improved.

In the case of 2018, it is relatively new but throughout the investigation which started in
August, they just complied and provided all the information requested from them. They have
cooperated with the officials and provided all the requested documents from them. This could be
a sign that they have already developed and improved their procedures. However, in terms of
the impact on the government officials trust on them, it could have been affected due to the
allegations in 2007 onwards.

The next global banks that had cases in money laundering and bribery is Citibank. This
case is more specific since it concerns a single employee who pleaded guilty in money
laundering and bribery. A former Citigroup Inc executive was sentenced to at least two years in
prison after being guilty of accepting bribes amounting to at least $500,0006. John Cassisi was a

4
https://www.reuters.com/article/us-deutsche-bank-moneylaundering/deutsche-bank-offices-raided-in-money-
laundering-probe-idUSKCN1NY0ZN
5
IBID.
6
http://fortune.com/2015/12/02/citi-bribery-cassisi/
former director of Citi Realty Services where he accepted bribes in the New York City
construction industry.

His sentence of two-to-four years in prison followed his guilty plea in October to charges
of money laundering in the third degree and commercial bribe receiving in the first degree.
Cassisi must also forfeit $500,000.

 MY OPINION: There could be internal and external impacts on

Citibank itself. Internal in terms of their employees becoming
persuaded by the lumpsum amount of money they may acquire
from this illegal activity. External in terms of possible investors and
partners losing trust on citibank’s services. It could also be
interpreted in a more optimistic manner with the perspective of
Citibank. They could gain more investors but the purpose of these
investors is for them to be expecting some sort of bribery from the
banks and it would illegally benefit both parties.
 WHAT THEY DID:
 http://fortune.com/2015/12/02/citi-bribery-cassisi/

3. What role do you think governments play in this entire thing? Some have criticized them for
being "too lenient" on these banks who have willingly allowed crime to happen - but some
regulators argue it would be more catastrophic to close global banks or disrupt their businesses
significantly, given how systemically important they are to the global economy. What do you
think should be done in future cases (prosecution, fines, fire CEOs, etc), and why do you think
these are better / more approriate steps? (20 points)

 Banks should be heavily regulated.

o Their financial statements should constantly be audited by government-
appointed individuals. They will be cross-checked by other auditing firms and
other assigned individuals which are confidential to the banks.
o Each transaction’s details should be presented.
  Confidential information can be accessed when patterns of
unidentifiable transactions have been noticed.
o Pros:
 Better transparency regarding their cash flows.
 Possibility of transparency of most private corporations.
 Better opportunity on distribution of budgets to various sectors since
their activities and supervisions encompass the activities of these
private corporations.
 The government will be able to state the status and needs of
each industry.
o Cons:
 More expenses for audit.
 Rights of these corporations will be limited.
 Lack of interest in operating in the heavily regulating countries.
 Lack of economic movement since every transaction is regulated.
 Businesses will lack the interest to operate and expand due to
several possible expenses compensated by the banks and
longer time for accomplishing the transactions.

4. After knowing more about what HSBC and other banks have done, and understanding how
they now deal with clients and transactions - think about the Philippines. Since RCBC
happened, what have the BSP / Senate been doing to improve our Anti Money Laundering /
Financial crime laws? Are there any bills pending that may improve mitigating financial risks that
may penetrate the banking system here, and what new bills can you think of that should be
introduced (either by best practice of what you've seen elsewhere, or as a result of what you
have seen global banks adopted). (30 points)

5. As a potential future banker - what should you be doing now to ensure you are equipped to
handle opportunities of criminal activities that may penetrate your banking organization? (10
points)