Money laundering newsletter june 13 by Jürgen

MONEY LAUNDERING NEWSLETTER ISSUE 02 JUNE ‘13

IN T RODUC T ION

COMPLIANCE OFFICER

JURGEN PAVANELLO The previous issue saw leading banks in the spotlight, accused of negligently or willfully breaking anti-money laundering rules or international economic sanctions. In the largest US money-laundering settlement so far, ING paid $619 million in June for violating sanctions against Cuba and Iran through its Netherlands Caribbean Bank subsidiary. Standard Chartered Bank, accused of breaches of US sanctions on Iran by the New York Department of Financial Services, was forced to pay a $340 million settlement. HSBC’s settlement comes a day after rival British bank Standard Chartered Plc. Despite the known risks of doing business in Mexico, HSBC has put the country in its lowest risk category, which excluded $670 billion in transactions from the monitoring systems. $1.92 billion in fines were paid to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico

and other banking lapses. Compliance was “woefully inadequate,” Loretta Lynch, the U.S. Attorney in Brooklyn, said at a press conference. All of the aforementioned settlement cases have sent a powerful wakeup call to all multinational and local banks about the irremediable reputational damage, material financial loss and legal consequences of disregarding their anti-money laundering obligations. The effects of money laundering and terrorist financing can show themselves through a number of risks that financial institutions may suffer or be exposed to. All employees involved directly or indirectly in a money laundering transaction, including executives, may also face personal liability and are subject to overwhelming fines and other penalties, including loss of job, not to mention reputational impacts, if violations occur, and particularly if prosecutors conclude that the Bank aided money laundering by lacking sufficient controls and/or failed to conduct adequate due diligence on its customers. Reputation risk should be regarded as a generic term embracing the risks, from any source, that can impact reputation, and not as a category of risk in its own right. Regulatory non-compliance, loss of customer data, unethical employee behavior, or an unexpected profit warning can all damage reputation and stakeholder confidence. On a broader level, as with the damaged integrity and the corporate brand image, there is also a damping effect on foreign direct investment when a country’s commercial and financial sectors are perceived to be subject to the control and influence of organised crime. Fighting money laundering and terrorist financing is therefore a part of creating a business friendly environment which is a precondition for lasting economic development. ADVICE TO READERS

The selected articles are being reproduced in this newsletter in good faith and for information purposes only. Furthermore, it should be noted that Credorax (Malta) and its affiliates shall not be responsible for any omission or inaccuracy expressed therein.

THIS MONTH’S ISSUE

CURRENT MONEY LAUNDERING NEWS

CYBER CRIME

INSIGHT: THE FOURTH MONEY LAUNDERING DIRECTIVE

COURT ORDERS

INTERNATIONAL SANCTIONS

WARNINGS FROM THE REGULATOR

FATF HIGH RISK & NON-REPUTABLE JURISDICTIONS

CHARITY HAS TO RETURN €130,000 OF FRAUDULENT PAYMENTS A Co Kildare-based charity has had to return more than €130,000 in donations in recent weeks after its website was targeted as part of a credit card scam. The Jack & Jill Children’s Foundation said it had provided rebates on more than 1,000 fraudulent payments put through its website between March 22nd and April 30th. Brian Honan, a Dublin-based cyber-security consultant, said charity websites were regularly targeted by those involved in credit card fraud as making a small donation is a good way to check if the numbers work. “People checking their accounts or balances might not twig

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a small donation to a charity whereas if you see an iPod being bought on your credit card you might say ‘I don’t remember getting an iPod’ and report the card details as being stolen,” he said. “Once they verify the details are still active they can use the credit card for further fraud or sell it on to other criminals. The details have a higher value once it’s confirmed they can be used,” he said. The donation amounts ranged from 2 cents to €3,000 and were made from skimmed cards linked to financial institutions in countries such asLuxembourg, Venezuela, South Korea, Puerto Rico, Italy and Ireland.

“IF AL CAPONE WERE ALIVE TODAY, THIS IS HOW HE WOULD BE HIDING HIS MONEY”

WWW.IRISHTIMES.COM

The operators of a global currency exchange ran a $6 billion money-laundering operation online, a central hub for criminals trafficking in everything from stolen identities to child pornography. The currency exchange, Liberty Reserve, operated beyond the traditional confines of United States and international banking regulations in what prosecutors called a shadowy netherworld of cyberfinance. It traded in virtual currency and provided the kind of anonymous and easily accessible banking infrastructure increasingly sought by criminal networks, law enforcement officials said. Just as PayPal revolutionized how people shop online, making it possible to buy a microwave oven or concert tickets with the click of a button, Liberty Reserve sought to create a similarly convenient way for criminals to make financial transactions.

BARCELONA’S ARGENTINA FORWARD LIONEL MESSI AND HIS FATHER HAVE BEEN ACCUSED BY SPANISH TAX AUTHORITIES OF DEFRAUDING THE STATE OF OVER £3.4 MILLION The player widely regarded as the greatest of his generation and his father, Jorge, face up to six years in jail and a fine of more than £40 million if found guilty of filing fraudulent tax returns during 2007 to 2009. Prosecutors in the eastern region of Catalonia yesterday filed papers in which Barcelona and Argentina icon Messi and his father were accused of using a complex network of companies in Britain and Switzerland, and tax havens such as Uruguay and Belize, to hide from the authorities income relating to image rights. The alleged fraud, which involves three separate offences, was said to have commenced before Messi came of age and while his father was in charge of his financial affairs. Messi, estimated to be the 10th highest-paid athlete on around £13 million a year – which is almost matched by the value of his endorsements – issued a statement on wednesday via his official Facebook page denying any wrongdoing. “We are surprised about this news, because we have never committed any infringement,” said the 25-year-old four-time reigning World Player of the Year.

WWW.FORBES.COM

COBRAPOST EXPOSE: STANCHART, HSBC OFFICIALS OFFERING LOCKERS FOR BLACK MONEY? According to a CNN-IBN report, HSBC and Standard Chartered officers have been caught in a Cobrapost sting operation, offering to launder money. A Cobrapost undercover reporter posing as a politician’s aide was offered lockers for black money and senior bank officials confirmed on camera that money laundering is a service offered by all. Reacting to the latest sting operation, HSBC has suspended employees who were seen soliciting black money on camera. In a statement, the bank said, “HSBC a zero-tolerance policy for breaches of law and regulation and the bank takes seriously any reports or allegations of such breaches. Our employees featured in the (CNN-IBN) news report are on leave pending completion of the investigation. We will take appropriate action, including dismissal, if any employee is found after investigation to have breached the law or our policy.”

WWW.MONEYCONTROL.COM

Meanwhile, Standard Chartered said it is investigating ‘failures’ in banking standards. The bank said that it will take disciplinary action.

GOT SWISS BANK ACCOUNT? TIME TO FESS UP Are you among the suspected tens of thousands of Americans with a secret Swiss bank account that you are still hiding from the Internal Revenue Service? If so, you are about to acquire a Matterhorn-sized headache. The Swiss government is allowing its nation’s banks to reveal some customer information to U.S. authorities that they were previously prohibited from revealing, an important step in settling tax disputes between the nations. U.S. authorities have been pushing for information on Americans who use Swiss bank accounts to avoid taxes. The Swiss Federal Council, which is the executive branch of the Swiss government, says the new rules are important for the country’s banks to put the tax cases behind them. “If banks were not authorized to cooperate with the U.S. authorities, the initiation of further criminal investigations or charges concerning banking institutions could not be ruled out. The uncertainty for the financial center would continue to exist,” said the statement from the Federal Council. It said it issued the new rules, which will go before the Swiss parliament, because U.S. authorities are no longer willing to wait before taking action against Swiss banks. Switzerland has long had a reputation for bank secrecy that made it a favored tax haven for wealthy individuals from around the globe. But the secrecy had already been pierced in some recent settlements between some of its leading banks and U.S. tax authorities.

WALLSTREETJOBREPORT.COM MONEY.CNN.COM

DOLCE AND GABBANA CONVICTED OF TAX EVASION Fashion designers Domenico Dolce and Stefano Gabbana were handed a 20-month suspended prison sentence and a heavy fine on Wednesday for hiding hundreds of millions of euros from the Italian tax authorities. The design duo, who are nearly as famous as the stars they dress, were not present in court in Milan and will lodge an appeal against their conviction on charges that they have always denied. “We will read the reasons for the verdict, and we will appeal,” Massimo Dinoia, one of the pair’s defense lawyers, said after the hearing. Public prosecutor Gaetano Ruta had asked for a two-and-a-half year jail term. However, the two designers will have to pay 500,000 euros as a first instalment of a fine that could reach 10 million euros ($13.4 million). The judge acquitted the pair of charges that they had filed inaccurate tax returns.

WWW.MONEYCONTROL.COM

JAPAN TO CRACK DOWN ON MONEY LAUNDERING Japan’s Bank of Tokyo-Mitsubishi UFJ agreed to pay $250 million to settle New York state charges that it illegally funneled billions of dollars to countries that are under U.S. sanctions, including Iran, Sudan and Burma. The settlement is part of a larger effort by government regulators to clamp down on funding for countries under sanction, drug traffickers and terrorists. International banks, including HSBC and Standard Chartered, have in recent years faced stiff penalties for flouting U.S. laws. Critics, however, question whether fines are enough to deter this behavior. “If Japan keeps receiving a poor review from the Financial Action Task Force, Japanese banks could get excluded from the global markets such as those

in New York and London,” a government official said, referring to a Paris-based global watchdog on money-laundering activities. The FATF gave Japan the lowest grade of “non-compliance” in nine of the 40 key anti-money laundering metrics, including “customer due diligence,” in its latest country review in 2008. Customer due diligence involves conducting background checks on customers and keeping records of their transactions– the most basic step for uncovering antimoney laundering activities.

WWW.WASHINGTONPOST.COM

IT’S GOOD TO BE A BANKSTER, NOT SO GOOD FOR COMPLIANCE

US Attorney General Eric Holder recently joined a chorus of law enforcement, regulatory, media and other concerned professionals by essentially admitting that our financial institutions have become “too big to fail” and “too big to jail”. Recent regulatory actions highlight his worries. The trend of regulators has been to levy jaw-dropping, headline making, mutli-million dollar fines against financial institutions. The sheer enormity of the dollars almost makes you forget that almost no CEO, corporate executive, trader, or banker has been targeted with criminal charges, forced to pay the fines personally or experience any significant impact on their wallet.

WWW.COMPLIANCEX.COM

VATICAN BANK ~ ON THE BRINK? Pope Francis looks set to intervene at the Institute for Works of Religion (IOR) before summer. Action is likely to come before 31 July, when IOR will complete its internal investigation of customers’ accounts. At this stage, the question is not so much “if” as “when”. And as rumours mount of an upcoming court order against the Vatican bank’s executives, the pace could quicken rapidly. Some of the facts are well established. The first is that Californian lawyer Jeff Lena, the man who in the past few years has become a key figure and string-puller for IOR reform, broke off relations a couple of months ago with Ernst Von Freyberg, the IOR chairman and ally of managing director Paolo Cipriani. Rumours say Mr Lena, who in the recent struggle to eject former chair Ettore Gotti Tedeschi worked in harness with the IOR board and Mr Cipriani himself, now misses the clashes he had with the Piacenza-based Gotti Tedeschi, who was unceremoniously turfed out just over a year ago. Proposals to consolidate all the Vatican’s financial

WWW.CORRIERE.IT

assets have been made and rejected more than once. As far as can be understood, the problem is whether it would be expedient to replace IOR’s top management with one of Pope Francis’ most trusted priests or an influential executive from outside without first changing the Vatican’s government, and without knowing whether placing IOR under what is in effect special administration would provoke a new wave of malicious, possibly finance-related, revelations. The feeling is that after barely a hundred days, Von Freyberg’s administration is under close watch, if not actually on the brink. Increasing scepticism also surrounds AIF, the Vatican financial information authority, and its head René Bruelhart. By early June, there were no reports of Pope Francis’ receiving visits from the IOR chair, which inevitably signals an unwillingness to confer legitimacy until a decision has been made about the future of the Vatican bank.

VALUABLE AS ART, BUT PRICELESS AS A TOOL TO LAUNDER MONEY

WWW.NYTIMES.COM

Art is said to be subjective, and in the eye of the beholder. But what is unquestionably true is that criminals have found effective means of using art to engage in illegal activities specially money laundering. According to the air bill slapped on the crate that arrived at Kennedy International Airport from London, an unnamed painting worth $100 was inside. Only later did federal investigators discover that it was by the American artist Jean-Michel Basquiat and worth $8 million. This painting, known as “Hannibal” after a word scribbled on its surface, was brought into the United States in 2007 as part of a Brazilian embezzler’s elaborate effort to launder money, the authorities say. It was later seized at a Manhattan warehouse by federal investigators who are now preparing to return it to Brazil at the behest of law enforcement officials there. The painting’s seizure was a victory in the economy-rattling, billiondollar fraud and money laundering case of Edemar Cid Ferreira, a former Brazilian banker who converted some of his loot into a 12,000-piece art collection.

Global cyber crime in the financial sector has become a more pressing worry, underlined by a series of cases this year. U.S. prosecutors last month laid out details of a crime ring they say stole $45 million from two Middle Eastern banks by hacking into credit card processing firms and withdrawing money from cash machines in 27 countries.

DODGY SITES EXPLOITING .SG DOMAINS SINGAPORE - About 150 .sg domain names are known to have been registered under a fake or stolen identity since 2011, said the Singapore Network Information Centre (SGNIC), which oversees the registration of .sg domain names. Many originate overseas and tend to be doing something illegal while using the Singapore domain name to lend them legitimacy, or avoid being traced, said an SGNIC spokesman. It has become rampant enough that the authorities have, since last month, required additional verification of all new domain-name owners in the Singapore registry.

CYBER-CRIME LEADS TO LOSSES OF MORE THAN $525M IN 2012 Cyber-criminals stole more than a half-billion dollars last year, relying on a variety of scams including fake sales, extortion, and scareware, according to the latest figures from the Internet Crime Complaint Center. The Internet Crime Complaint Center (IC3) received 289,874 complaints, or approximately 24,000 complaints a month, in 2012, according to the 2012 Internet Crime Report released this week. Nearly 40 percent of the complaints reported some kind of financial loss, for a grand total of $525,441,110. The average loss for those who claimed a financial impact was $4,573, according to the report. The report identified several categories of Internet crime, including intimidation crimes (which included scareware), fake sale scams, and FBI impersonation emails.

UK BANKS FEAR CYBER ATTACK MORE THAN EURO CRISIS. Worries over hacking and other cyber attacks has pushed aside the euro zone crisis as the top risk for Britain’s banks and they must do more to protect themselves . Andrew Haldane, the BoE’s director of financial stability, met with five of Britain’s top banks six months ago and four told him that a cyber attack was their biggest threat. It was surprising the fifth bank did not have this risk on their list but it does now, Haldane told parliament’s Treasury Select Committee. “You can see why the financial sector would be a particularly good target for someone wanting to wreak havoc through the cyber route,” he added. “Understanding and management of this risk was still at a somewhat early stage,” Earlier meetings with bank chiefs had pointed to the “usual suspects” of the euro zone crisis or a slump in the economy at the top risk. The focus on credit, market and liquidity risk over the past five years may have distracted attention from operational, and in particular cyber risks, at banks or in infrastructure like payment systems, Haldane said.

THE FOURTH MONEY LAUNDERING DIRECTIVE A “ M O R E TA R G E T E D A N D F O C U S E D R I S K- B A S E D A P P R O A C H ”

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In parallel to the on-going international processes, the European Commission has been undertaking its own review of the European anti-money laundering (AML) and combating terrorist financing (CTF) framework. A revision of the Third Anti-Money Laundering Directive 2005 (Third AMLD) at this time is complementary to the revised Financial Action Task Force (FATF) Recommendations introduced in February 2012, which in themselves represent a substantial strengthening of the AML and CTF framework. The European Commission adopted proposals in February 2013 for a Fourth Money Laundering Directive (4MLD). Following final approval, expected in the autumn of 2013, Member States will have up to two years to implement 4MLD through introduction or updating of appropriate legislation. While the work required will of course vary across different Member States, firms under scope (so-called “subject persons”) should already be considering what actions they will need to take in the light of its introduction. This article therefore outlines the headline issues raised by 4MLD for Member States, some of the practical and operational issues and stringent financial penalties that will be introduced for individuals and subject persons who fall short of its requirements. THE RISK-BASED APPROACH A number of risk indicators should be considered both at the start of a relationship, and on a continuing basis after that, to determine the levels of risk-based due diligence that should be undertaken. Thus, the objectives behind a risk assessment is to identify as early as possible suspicious activity and prioritise high-risk customers and transactions for review and investigation. Financial institutions may opt for a ‘one size fits all’ approach where resources are applied evenly, so that all customers receive equal attention on the basis of factors other than the risk assessed. However, this can inadvertently lead to a ‘tick box’ approach with the focus on meeting regulatory needs rather than combating money laundering or terrorist financing. Alternatively, developing a defensible strategy, while implementing sound operational processes in a dynamic regulatory environment, requires a Risk Based Approach (RBA). The principle of the RBA implies a more targeted and focused approach to assessing risks and applying resources to where they are most needed. The level of due diligence should commensurate with the type of ML and FT risk each applicant may represent; the rule of thumb is that higher risk clients are subject to a higher level of due diligence and that correspondingly where the

risks are lower simplified measures may be permitted. A robust RBA will therefore reduce the costs incurred as regards to on-going monitoring of client transactions and the procurement of paraphernal KYC documentation. The RBA is a key part of 4MLD and the burden is very much on businesses to understand their clients and the risks they present. A primary purpose for the Commission’s revision of the Third AMLD is to “enhance the risk-based approach to AML compliance and supervision”. Therefore, 4MLD adapts the legal framework with a view to achieving, in fact, a “more targeted and focused risk-based approach” which is aimed at being both “more effective and less costly”. In a nutshell, 4MLD aims to reduce the time spent by busy and pressured compliance teams on reasonably low-risk issues, allowing them to focus instead on the other end of the spectrum; to prioritise limited resources by concentrating on areas of more immediate AML / CFT risk. One broad consequence of the emphasis on an enhanced risk-based approach is a Directive which looks relatively light on prescription. Instead, detail within the new regime may emerge out of the national risk assessments which Member States will be required to produce. This requirement is in line with the updated FATF standards, and is said to be in the spirit of “evidence-based decision making”. National risk assessments will require Member States to record the size and importance of sectors in terms of CFT and AML risk, report their findings back and make them available to the Commission. Subject persons will also be required to identify, understand and mitigate their own risks, and to document and update risk assessments that they undertake. Moreover, they must have policies, controls and procedures to manage any risks identified again, 4MLD’s concern with (cost) effectiveness, means that these should be proportionate to the size and nature of the subject person. Particularly for Maltese, UK and other EU firms, the riskbased approach should be nothing new. The key issue is still how well firms implement and manage the approach on an on-going basis via their policies and procedures. While a risk assessment should always be performed at the inception of a customer relationship, for some customers, a comprehensive risk profile may only become evident once the customer has begun transacting through an account, making monitoring of customer transactions and ongoing reviews a fundamental component of a reasonably designed risk-based approach.

DUE DILIGENCE The guidelines for due diligence contained within 4MLD illustrate how the risk-based approach underpins the new framework. Further, 4MLD makes some recommendations around simplified (SDD) and enhanced due diligence (EDD) requirements, which, under the Third AMLD, have been criticised as being inconsistent with FATF’s Recommendations. SDD under the Third AMLD was viewed as being too lenient, and 4MLD tightens the requirements by removing exemptions that existed for certain types of clients or transactions, imposing instead a requirement for decisions on SDD to be based primarily on an assessment of risk. Subject persons will be able to apply SDD measures where lower risk is identified, taking into account the customer risk factors such as; the product/service risk, transaction or delivery channel risk, and geographical risk. Application of such risk categories will provide for a strategy for managing potential risks by enabling subject persons to proportionate controls and oversight in line with the legal obligations vis-a-vis risk apetite. The 4MLD does provide a non-exhaustive list of factors and types of potentially lower risk. Under EDD subject persons are required to examine, as far as reasonably practical, the background and purpose for all complex, unusual large transactions, and all unusual patterns of transactions which have no apparent economic or lawful purpose. Again, a non-exhaustive list of factors and types of potentially high risk is provided which is based on the customer risk factors as previously mentioned. EDD remains under 4MLD and will always be required for politically exposed persons (PEPs). The Directive broadens the definition of PEPs, extending it to cover domestic as well as overseas individuals. The areas of SDD and EDD will be developed further as the Directive has called on the three European Supervisory Authorities to provide detailed guidance to subject persons and Member States on factors which should be considered when applying SDD and EDD. 4MLD also demands that accurate information is kept by companies and trusts on beneficial owners, and made available to both regulatory authorities and subject persons, with a view to improving transparency within both CDD and supervision. Finally, after receiving information from Member States that the current threshold (€15,000) for traders in high value goods dealing with cash payments was being exploited by criminals, it is proposed to lower this to

€7,500. In addition, the new proposal requires traders to undertake CDD when carrying out an occasional transaction of at least €7,500. Both the definition and the threshold show a tightening of measures against the use of these traders for money laundering purposes across the EU. BROADENING OF SCOPE & ACCOUNTABILITY The 4MLD also broadens the scope of the AML regime, and there are two main areas here that are worthy of note. The first is the inclusion of specific reference to tax crimes within the list of serious crimes which can be considered as predicate offences of money laundering and the removal of potential obstacles to international co-operation regarding tax crimes. This reflects the considerable attention being given to tax issues by regulatory authorities. The proposal is also consistent with the Commission’s broader approach for fighting tax fraud and tax evasion at international level. The enhancement of the CDD procedures for AML purposes will also assist the fight against tax fraud and tax evasion. Second, whereas only casinos have been regarded as subject persons under the Third AMLD, the 4MLD extends its scope to include all “providers of gambling services”. “Gambling services” is defined in the proposal as any service which involves wagering a stake with monetary value in games of chance including those with an element of skill such as lotteries, casino games, poker games and betting transactions that are provided at a physical location, or by any means at a distance, by electronic means or any other technology for facilitating communication, and at the individual request of a recipient of services. The developments outlined above would be interesting by themselves, however, add to them the new, hard-hitting penalties introduced by 4MLD and they are doubly so. The Directive promises to herald an environment of increasing accountability in which sanctions may be applied to members of a firm’s management body or to any other individuals who under national law are responsible of the breach. Potential penalties go far beyond those previously in place. Notably, individuals may be fined up to €5m and subject persons up to 10% of total annual turnover. These sanctions are intended to be effective, proportionate and dissuasive. This newsletter outlines fines and articles that have been issued for AML failings – for example the $1.9bn fine received by HSBC – which has almost been regarded as a cost of doing business. The scale of these proposed penalties looks set to change this mentality.

WRAPPING IT UP

“Not only should the compliance program be tailored to a Firm’s unique activities and requirements, but it should also be dynamic in its ability to recognise and respond to changes in its risk apetite and regulatory requirements” JURGEN PAVA N E L L O

Financial misadventures are hardly a new phenomenon and overseas distribution channels are growing in both size and complexity, while the European Union and governments worldwide are expanding their enforcement of laws prohibiting bribery, falsified accounting records, money laundering, wire fraud, and other forms of corruption. This is the new normal in the regulatory environment, and delaying action will not make such risks go away; but will simply increase them and make subject persons an easy target for money launderers. Henceforth, it is imperative that a sound and robust risk assesment is effected on its client base so as to identify, assess and mitigate potential risks accordingly and in a timely manner. A strong compliance program is necessary not only to minimize the risk of an infraction, fines, legal fees and adverse media but also to establish a Risk-Benefit ratio. To address these many risks, subject persons must enforce its compliance programme that coordinates compliance activities such in order to perform CDD and acquire all the relative KYC documentation prior to establish a business relationship. Firms should also undertake a wide array of activities to minimize risk across the organisation, including education and training, incentives and disciplinary measures, strong internal auditing and continuous review and improvement of the compliance program. Not only should the compliance program be tailored to a Firm’s unique activities and requirements, but it should also be dynamic in its ability to recognise and respond to changes in its risk apetite and regulatory requirements.

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www.mfsa.com.mt www.european-compliance.com www.int-comp.org www.europa.eu/rapid/press-release_IP-1387_en.htm?locale+en www.fatf-gafi.org/documents/ documents/effectivenesshasmoved tothetopofthefatfagenda.html www.ec.europa.eu/internal_market/ company/docs/financial-crime/130205_ impact-assessment_en.pdf Commission Communication presenting an Action Plan to strengthen the fight against tax fraud and evasion, adopted by the Commission on 6 December 2012, COM(2012)722 final

COURT ORDERS MAY BE VIEWED AT WWW.DOI.GOV.MT

This article contains the latest notices related to orders issued by the courts of criminal jurisdiction in terms of Article 5 of the Prevention of Money Laundering Act (Cap. 373 of the Laws of Malta) and Article 23A of the Criminal Code (Cap. 9 of the Laws of Malta) as from 3rd July 2012. In accordance with Article 5(2) of the Act, court orders become operative and binding on all third parties immediately when they are made. These names are only being made available for ease of reference and third parties who may be holding moneys and other movable property due or pertaining or belonging to the accused are still required to monitor the Government Gazette on an ongoing basis for the purpose of complying with the court orders. The ultimate responsibility for compliance with court orders shall lie solely and exclusively with the third party who may be holding moneys and other movable property.

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Tancred Tabone Michelle Vella and Marco Belli Martin Cachia Charles Abela John Joseph Evans and Vladimir Omar Fernandez Delgado Mahmed Amber Mahmud Ali Francis sive Frank Sammut Mohammed Kouruma Isaac Chanda Roderick Delia Martin Cachia Joseph Grech Nicholas Sive Nikki Dimech Freddie Delia Francis sive Frank Sammut Giuseppe Cassar Daddy Augustine Okeke George Tabone Francis sive Frank Sammut Tancred Tabone Tarcisju Mifsud Alfred Mallia Francis Portelli and Anthony Cassar Angelo Zahra Clive Butler Ismael Habesh and Faical Mahouachi Tancred Tabone Francis sive Frank Sammut Mubarak Bawa Keith Joseph Mallia Angelo Bilocca and Priscilla Cassar Zia Ul Noor Loraine Silvia Alkounsul Joseph Francis Scerri Johann Calleja Raymond Pace Anthony Scicluna

INTERNATIONAL SANCTIONS MAY BE VIEWED AT WWW.MFSA.GOV.MT

Financial sanctions are relevant primarily to the financial services sector. However, they are also binding on any person, company or entity, including practitioners such as lawyers and accountants and individual citizens, who may hold funds, financial assets and economic resources affected by the sanctions. In most cases financial sanctions impose the duty to freeze the funds, financial assets and economic resources belonging to, owned, held or controlled by designated (listed) individuals and entities, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them; and prohibit the making available of funds, financial assets or economic resources to or for the benefit of designated individuals and entities. Financial sanctions may also prohibit the provision of certain financial

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services and certain financial transactions or the provision of financial assistance to designated individuals and entities. The EU Regulations listed hereunder only cover the international sanctions for the month of June. A useful source in this regard is the ‘Sanctions Implementation’ section on the website of the MFSA which is however neither authoritative nor complete. In fact, the use of such source should not be considered to be a substitute for the Banks’s own independent research for such purposes. Likewise, Court Orders relating to the freezing of funds may be viewed on the website of the FIAU . Such searches can be only effected once the identification information (as better indicated under ECDD procedures) has been obtained due to possible variations in name and date of birth which may result in false positives.

COUNCIL IMPLEMENTING REGULATION (EU) No 522/2013 of 6 June 2013 implementing Regulation (EU) No 267/2012 concerning restrictive measures against Iran COUNCIL DECISION 2013/255/CFSP of 31 May 2013 concerning restrictive measures against Syria COUNCIL IMPLEMENTING REGULATION (EU) No 494/2013 of 29 May 2013 implementing Regulation (EC) No 765/2006 concerning restrictive measures in respect of Belarus COUNCIL IMPLEMENTING REGULATION (EU) No 451/2013 of 16 May 2013 implementing Article 11(1) and (4) of Regulation (EU) No 753/2011 concerning restrictive measures directed against certain individuals, groups, undertakings and entities in view of the situation in Afghanistan COMMISSION IMPLEMENTING REGULATION (EU) No 439/2013 of 13 May 2013 amending for the 192nd time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the Al Qaida network COUNCIL REGULATION (EU) No 401/2013 of 2 May 2013 concerning restrictive measures in respect of Myanmar/Burma and repealing Regulation (EC) No 194/2008

A D M I N I S T R AT I V E M E A S U R E S A N D P E N A LT I E S In terms of article 4(1)(c) of the Malta Financial Services Authority Act, one of the MFSA’s functions is to keep the general public informed of important developments in the sector that it regulates, and to provide the public with relevant information and guidance. Article 16(8) of the Malta Financial Services Authority Act also provides that: Any administrative or disciplinary sanction or measure, of whatever type, including reprimands or warnings, imposed or decided by the Authority under any law for whose administration it is responsible, shall be subject to publication in such medium and in such manner and for such duration as may be deemed warranted by the circumstances

and the nature and seriousness of the breach or wrongdoing The Malta Financial Services Authority has announced that, on 6 June 2013, it has suspended the investment services licence of All Invest Co. Ltd. after identifying a series of regulatory breaches. As a result, All Invest cannot accept new business and must begin an orderly transfer of its clients business. The Authority has investigated the manner in which All Invest had sold complex investment products to retail investors, and that, in a number of instances, All Invest failed to act in the best interest of investors as required of all firms which provide investment services.

L O C A L WA R N I N G S The Malta Financial Services Authority (MFSA) has become aware of the website http://www.mfsaregulation.com. This website uses the Authority’s Logo without authorisation and may erroneously give the impression that it is an MFSA or an MFSA approved website. The website includes information lifted from the MFSA website in breach of copyright. The information provided by the website in question may not be complete or accurate and the MFSA does not accept any responsibility or liability in respect of the said website nor in respect of the contents thereof. The MFSA therefore alerts the public, in Malta and abroad, that the website http://www.mfsaregulation.com/ has no connection whatsoever to the MFSA and any information provided by such website should not be relied upon. The MFSA disassociates itself completely from this website and from its contents.

The MFSA has only one website situated at: http://www.mfsa.com.mt/ The Malta Financial Services Authority has become aware of on-line operations under names which include “The Bank”, “SaneFX Binary”, “New Rich Lazy Trader”, “FXPro2” and “Gold Trade Pro” which have an internet presence at ; www.thebank. co , http://sanefxbinary.com/, http://richlazytrader.com, http://fxpro2.com and www.goldtradepro.com . These interconnected websites purport to offer financial services of various types and claim to be operated out of Malta by John Campbell. The MFSA wishes to alert the public, in Malta and abroad, that John Campbell and the mentioned operations are NOT licenced by the MFSA to provide any type of financial service. Accordingly, the MFSA warns the public against dealing with these entities.

A list of entities licensed by the MFSA is available from the Malta Financial Services Authority, and can be viewed on the MFSA website at http://www.mfsa.com.mt/pages/announcements.aspx?id=3

F O R E I G N WA R N I N G S INTERACTIVE INVESTOR TRADING LIMITED / SHARE PRICE UK (CLONE OF FCA AUTHORISED FIRM) Tel: 020 8144 4287 Email: advisor@sharepriceuk.co.uk Website: www.sharepriceuk.co.uk is not authorised under the Financial Services and Markets Act 2000 (FSMA) to carry on a regulated activity in the UK. Regulated activities include, amongst other things, advising on investments and dealing and arranging deals in investments (‘investments’ include stocks and shares). We believe that the organisation may be targeting UK customers. The following firm has no association whatsoever with the organisation described above that is identifying itself as Interactive Investor Trading Limited / Share Price UK: • Interactive Investor Trading Limited (also using trading name Shareprice) FCA reference number: 190551 Company Registration Number: 3699618 Address: Standon House, 21 Mansell Street, London E1 8AA

EQUINITI REGISTRARS GROUP (CLONE OF FCA AUTHORISED FIRM) Tel: 0208 133 8268 Fax: 0208 196 2246 Email: equiniti@lawyer.com is not authorised under the Financial Services and Markets Act 2000 (FSMA) to carry on a regulated activity in the UK. Regulated activities include, amongst other things, advising on investments and dealing and arranging deals in investments (‘investments’ include stocks and shares). We believe that the organisation may be targeting UK customers. This entity is using the details of an FCA authorised firm and UK incorporated firms. The following firms have no association whatsoever with the organisation referred to above identifying itself as Equiniti Registrars Group: Equiniti Financial Services Limited (FCA authorisation number 468631 – Companies House No. 06208699) Tel: 01903 833 211 Website: www.equiniti.com Equiniti Limited (Companies House No. 06226088) Please be aware that employees of the authorised firm are being cloned, which includes but are not limited Mark Taylor. A full list of unauthorised firms and individuals can be found at: http://www.fca.org.uk/consumers/protect-yourself/ unauthorised-firms/unauthorised-firms-to-avoid

FINANCIAL ACTION TASK FORCE P U B L I C S TAT E M E N T 21S T J U N E 2 013 The Financial Action Task Force (FATF) is the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT). In order to protect the international financial system from money laundering and financing of terrorism (ML/FT) risks and to encourage greater compliance with the AML/CFT standards, the FATF identified jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system.

H I G H - R I S K A N D N O N - C O O P E R AT I V E J U R I S D I C T I O N S Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/TF) risks emanating from the jurisdictions. • Iran • Democratic People’s Republic of Korea (DPRK) Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies. The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction, as described below. • Ecuador * • Ethiopia • Indonesia • Kenya • Myanmar • Pakistan • Sao Tomé and Principe • Syria • Tanzania • Turkey • Vietnam • Yemen * This jurisdiction has not made sufficient progress since being identified in the Public Statement. If this jurisdiction does not take significant actions by October 2013, the FATF will call upon its members to apply counter-measures proportionate to the risks associated with the jurisdiction. Nigeria is now identified in the FATF document, “Improving Global AML/CFT Compliance: On-going Process” due to its progress in largely addressing its action plan agreed upon with the FATF.

WWW.FATF-GAFI.ORG

Corporate Headquarters 106 Southville Road, Southborough, MA, 01772 USA. T. +1.617.778.7807 W. www.credorax.com European Headquarters Palazzo Homedes, 80 Strait Street, Valletta VLT 1436, Malta. T. +356.2778.0948 UK Headquarters 68 Lombard Street, London, EC3V 9LJ, United Kingdom. T. +44.20.358.22443 Israel Headquarters 20 Lincoln Street, Floor 15, Tel Aviv, 67134, Israel. T. +972.3.5652266