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Europe’s anti-money laundering chief defends his record in wake of FinCEN Files

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Valdis Dombrovskis, executive vice-president of the European Commission and the former prime minister of Latvia, has defended his record on combating money laundering after the FinCEN Files detailed how, for years, global banks secretly believed his home country was a magnet for tens of billions of dollars in dirty money.

In a statement to the International Consortium of Investigative Journalists, Dombrovskis said, “During my time as prime minister of Latvia between 2008 and 2014, in the midst of an unprecedented economic crisis, my governments oversaw important reforms … to tackle money laundering and close loopholes.”

He added, “Progress made was acknowledged by [European Union] institutions at the time,” noting that Latvia’s financial system had been closely scrutinized before the country was allowed to adopt the euro as its currency in 2014.

But the FinCEN Files make it clear that many of the world’s biggest banks had long known that Latvia offered sophisticated international criminals one of the easiest avenues into the global financial system, through which vast amounts of dirty money could be laundered. This was the case throughout Dombrovskis’ term as prime minister, the documents show.

One bank alone, Bank of New York Mellon, filed suspicious activity reports to the U.S. Treasury Department that flagged $7.1 billion in suspicious transactions that had flowed through Latvia’s Regional Investment Bank between 2006 and 2015.

Bank of New York Mellon separately reported $1 billion in suspect funds running through accounts at Meridian Trade Bank, now known as Industra Bank, between 2000 and 2014. For much of that time, Meridian Trade Bank had been the local offshoot of Russia’s SMP Bank, a group owned by Arkady and Boris Rotenberg, billionaire brothers and lifelong friends of president Vladimir Putin.

In 2014, shares in the Lativan branch were hurriedly offloaded to local investors after the Rotenberg’s wider SMP Bank empire, and the brothers themselves, became the subject of U.S. sanctions targeted at Putin’s inner circle.

Of even greater concern to Bank of New York Mellon was a third Latvian bank called Expobank, formerly LTB Bank, owned by a publicity-shy Russian banking tycoon called Igor Kim. According to Bank of New York Mellon, a staggering $29.2 billion in suspicious funds flowed through Expobank in just under a decade, between 2006 and early 2016.

Two other Latvian banks that featured prominently in FinCEN Files were Trasta Komercbanka and ABLV Bank, both of which collapsed amid money laundering scandals.

ICIJ asked Dombrovskis whether these and other revelations from the FinCEN Files, damaged his reputation in the European Union as a champion of tougher anti-money laundering rules. He said, “As these latest revelations have again shown, this is a global and complex problem that requires substantial resources and coordination both within the EU and with international parties such as the United States.”

Dombrovskis’ record on bank secrecy

With a population of just 1.9 million people and economic output last year of $34 billion, Latvia is one of Europe’s smaller nations. After gaining independence from the Soviet Union in 1991, the country’s first central banker Einars Repše attempted to shape the Latvian economy into a Baltic version of Switzerland, one of the world’s leading hubs for foreign capital and bank secrecy.

Repše left the central bank in 2001 and months later established the New Era political party, which Dombrovskis joined. By the end of 2002, Repše was prime minister and he appointed Dombrovskis as finance minister. The party had received campaign finance contributions from banks and their owners.

Dombrovskis became prime minister in 2009 and, two years later, merged the New Era party with other political groups to form the Unity Party. It, too, received modest campaign donations — capped at a certain level due to local election laws — from the owners of powerful Latvian banks, including ABLV Bank.

Asked by ICIJ about past political donations to his party from Latvian banks and their owners, a spokesperson for Dombrovskis said, “He is not aware of such contributions having been received by the party. Since joining the European Commission, he is no longer closely involved in the party’s work.”

The FinCEN Files include more than 2,100 suspicious activity reports filed by nearly 90 financial institutions to the U.S. Treasury’s Financial Crimes Enforcement Network, known as FinCEN. The documents were shared by BuzzFeed News with ICIJ and 108 media partners in 88 countries and include information on more than $2 trillion in transactions dated from 1999 to 2017 that had been flagged by the banks as suspicious.

Though headquartered in Riga, all three Latvian banks flagged as suspicious by Bank of New York Mellon — Industra, RIB and Expobank — had for years specialized in catering to customers based outside the country, often allowing these non-resident clients to open accounts in the name of anonymous shell companies.

Shown some of BNY Mellon’s concerns about these banks, Sven Giegold, a member of the European parliament for The Greens, said, “Latvia was one of the dark holes for dirty money in Europe during the time Dombrovskis was prime minister.”

However, he added that Dombrovskis had become a strong advocate for tough reforms since he first joined the EU Commission in 2014. “He turned from Saul to Paul,” said Giegold. “During his time as prime minister, the situation [in Latvia] hadn’t profoundly changed, nor did it for some time [afterwards]. But now he is clearly championing strong reforms at the European level.”

Dombrovskis has pushed for tougher anti-money laundering measures, most recently after a multibillion dollar fraud at German payments company Wirecard was exposed earlier this year. In a speech at an anti-money-laundering even on Wednesday, he again made the case for creating a dedicated, pan-European authority responsible for supervising anti-money laundering practices at banks and other financial institutions. However, he said this would not replace the work of authorities already operating at a national level.

“The EU supervisory system is only as strong as its weakest link,” he said. “We know that national supervisors cannot do this completely alone – and this is why our action plan proposed EU-level supervision.”

Dombrovskis said detailed plans for the proposed agency would be published early next year.

As Latvia’s prime minister, he had also introduced some laws to improve the country’s efforts to combat dirty money, though they had limited impact.

In a statement, Expobank said its anti-money-laundering procedures had been substantially improved in recent years. Industra Bank said it could not talk about customer matters or suspicious activity reports, but added that it had a robust process for checking and monitoring for possible money laundering. RIB said it, too, had its own systems for detecting and weeding out likely dirty money. It noted that suspicious activity reports were not unusual, and did not always suggest the presence of a criminal offense.

Bank of New York Mellon also said in an emailed statement that it takes its role in protecting the integrity of the global financial system seriously. “As a trusted member of the international banking community, we fully comply with all applicable laws and regulations, and assist authorities in the important work they do. By law, we cannot comment on any alleged SAR [suspicious activity report] we may have filed or that may have been illegally disclosed by third parties to the media.”

Bank of New York Mellon did not have a direct relationship with Industra Bank, RIB or Expobank. Other U.S. banks were much closer to these Latvian institutions, providing them with so-called “correspondent banking accounts” — an essential requirement for international payments in U.S. dollars.

Earlier this month, the EU Commission announced a reshuffle of responsibilities in which Dombrovskis — already EU commissioner for the economy — immediately took over the trade brief, too. Ireland’s newly appointed Commissioner Mairead McGuinness will be appointed shortly and is due to take on some aspects of Dombrovskis’ expanded portfolio, including responsibility for anti-money laundering policy.

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Election Integrity

Analyzing the Case for Election Fraud

Despite the overwhelming pressure, if you can’t help but feel that tingling sense of knowing that is telling you there’s more to the story, you are not alone. In fact, according to a new Rassmussen poll, nearly 50% of voters believe the election had issues. A quick look at the data blatantly shows that indeed, shenanigans abound (how can a state have 1+ million more mail-in ballots tallied than they sent out?). But was it fraud or masterful gamesmanship?

Adryenn Ashley

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The world, or at least the global media, has spoken: Biden won the 2020 Election.

UPDATED FREQUENTLY WITH NEW INFORMATION – Last update 12/21/2020

A quick Google search reveals pages upon pages of reports of why the Trump team’s assertions of vote fraud and election fraud and vote flipping are flat out fallacies. YouTube has announced a ban on any videos questioning the election results. And now on Monday all 538 electors have voted, formalizing Biden’s 306-232 win. And while there is still Congress to get through, and the inauguration, based on social media and television news and practically every other point of information bombarding society today, Biden is now the President-elect.

But why now, after Government officials confirmed during Senate testimony that a foreign adversary, Russia, attempted to interfere in the 2016 United States Presidential Election via “a multi-faceted approach intended to undermine confidence in our democratic process.” According to U.S. intelligence official reports, Russia targeted voter registration databases in at least 21 states and sought to infiltrate the networks of voting equipment vendors, political parties, and at least one local election board. And if their purpose was not so much to “hack” the election but create chaos and sow seeds of uncertainty around our election process, I would say they have won. But what if this cycle, it was Russia who somehow manipulated extra ballots and placed the blame on the Democrats? What if…?

Russian Experience With Voter Fraud

The 2004 presidential election in Ukraine saw suspiciously high turnout rates that “even Stalinist North Korea would envy,” the State Department declared!

Back then, the U.S. government decried as corrupt an earlier election where special voting boxes were created to help citizens vote from home, election observers were expelled from vote counts, pre-election polls were wildly off, and voter turnout in certain communities exceeded 90%.

But the story of that Ukrainian election as recounted by then-Ambassador John Tefft to a Senate committee in December 2004 raises a tantalizing question for voters distrustful of the Nov. 3 elections results in our own 2020 Presidential Election: If tactics and outcomes in the Ukrainian election back then were enough to cry foul, why can’t Americans debate similar concerns here?

Tefft’s testimony raises an important question: Should America, the greatest democracy in the world, share any of the fraudulent attributes of a Ukrainian election? The answer for most Americans is hopefully resounding “No.”

And despite continued and repeated headlines that there was no fraud, according to the Harvard Kenney School report on Election Integrity this cycle, expert assessments indicate that compared with 2016, the performance of this contest displays several warning flags, namely worsening confidence in the integrity of American elections and falling public trust, challenges to legitimacy arising from threats of campaign violence,legal disputes about the process and results, and public protests about the outcome, as well as growing attempts at voter suppression. 

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Investigations

Advocates celebrate major US anti-money laundering victory

Landmark laws to thwart the use of U.S. shell companies by terrorists, human traffickers, arms dealers and kleptocrats are set to be enacted after more than a decade of lobbying and politicking with rare bipartisan support.

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Advocates celebrate major US anti-money laundering victory

The sweeping anti-money laundering reforms hitched a lift in the annual defense spending bill that passed the Senate 84-13 today, and was approved by the House 355-78 earlier this week.

The Corporate Transparency Act requires U.S. companies to report their true owners to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN — largely ending anonymous shell companies in the country.

The International Consortium of Investigative Journalists has repeatedly documented how the rich, the powerful and the criminal have used anonymous entities to hide their wealth, including in the 2016 Panama Papers and the 2020 FinCEN Files investigations.

Welcoming the clampdown, Transparency International’s U.S. director Gary Kalman said, “It is rare for such a simple measure to promise such an enormous impact.” Kalman added that the long sought anti-corruption reforms would “move us into a new era of enforcement.”

The new legislation will allow law enforcement agencies and financial institutions to request company ownership information from FinCEN. The data will not be publicly available.

FinCEN Files was based on a trove of suspicious activity reports filed by banks and other financial institutions to FinCEN. BuzzFeed News obtained the secret documents and shared them with ICIJ and more than 100 other media organizations.

The global investigation exposed how a broken U.S.-led enforcement system allows banks to continue to profit from moving dirty money tied to drug cartels, trafficking rings fueling the opioid crisis, fraud, organized crime, sanctions evasion, ruinous real estate schemes, and terrorism.

“Too many times, people … think money laundering is a federal, victimless crime. It is certainly not that,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate banking committee, told reporters on a call organized by the advocacy group the FACT Coalition. “Sinaloa cartel actors, fentanyl traffickers have been destroying thousands of families in my state and across the country.”

Earlier this year, Brown credited FinCEN Files for revealing the lack of forceful enforcement against banks that repeatedly violate the law. Advocates said a number of proposed bipartisan bills, including one co-sponsored by Brown, were instrumental in generating the support needed to attach the reforms to the spending bill.

“This is a really big deal to get this passed,” Brown said Thursday. “No more hiding these abuses in anonymous shell companies. It also cracks down on bank officials who look the other way or actively aid money laundering.”

A long time coming

ICIJ has shown how offshore shell companies have been used for dubious financial dealings and tax avoidance through a series of global exposés, including the Secrecy for Sale investigation, Panama Papers and Paradise Papers. U.S. lawmakers have repeatedly cited the investigations in proposing reforms over the years.

Countries like the United Kingdom, Indonesia and members of the European Union also took steps toward ending anonymous shell companies in response to ICIJ reporting.

“When the Panama Papers leaked, there was a huge flurry of interest because there’s all of a sudden this recognition that it was kleptocrats, money launderers, corrupt officials the world over, as well as criminals, were all using a very common structure to help evade law enforcement, which was setting up an anonymous company,” Lakshmi Kumar, policy director of Global Financial Integrity, said.

The phenomenon is not limited to the exotic offshore tax havens of popular imagination. U.S. jurisdictions like Delaware, Wyoming and Nevada are among the world’s top locations to set up anonymous companies. Legislation to require corporations to disclose their true owners was first proposed in the U.S. over a decade ago, co-sponsored by then-senator Barack Obama, and similar bills have been introduced over the years.

Advocates credit years of lobbying a broad coalition of stakeholders, including the U.S. Chamber of Commerce which had previously been a leading opponent, in getting the reforms across the finish line this year.

“What’s changed now is a growing understanding among various constituencies about the harms that anonymous companies pose, and the threats that they pose for our financial system, to our businesses,” Clark Gascoigne, senior policy advisor at FACT Coalition, said.

But it’s not a done deal quite yet.

Although the anti-money laundering proposals have had the support of the administration, President Donald Trump has repeatedly threatened to veto the National Defense Authorization Act over provisions unrelated to financial secrecy.

Both the House and the Senate votes surpassed the two-thirds margin that would be needed to override a veto, although some Republicans have indicated that they would not support what would be the first veto override of the Trump presidency.

But the NDAA has been reliably passed by Congress every year for six decades and advocates are confident that the time has come for the landmark financial transparency measure that’s included in the omnibus bill.

“It’s one of the few areas where the outgoing Trump administration agrees with the incoming Biden administration,” Gascoigne said. “It may be the first bill in the history of Congress that has the support of both Dow Chemical and Friends of the Earth. Heck, the state of Delaware even supports reform.”

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Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says

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One of 30 people in Austria suspected to be members of the Islamic fundamentalist group Muslim Brotherhood was the director of offshore companies linked to a Saudi billionaire, according to an investigation by Austrian media outlets profil and Ö1.

The man, described as a 37-year-old Viennese entrepreneur with Iraqi roots, is suspected of “participating in a terrorist, subversive and criminal organization” and was a target of the police investigation into the group and the Palestinian extremist organization Hamas, the report said

The inquiry, which led 930 officers to raid 60 apartments, shops and clubs in four federal states last month, had no connection to the Vienna terror attack that killed four and injured 23 on November 2, according to officials cited by Deutsche Welle.

The Austrian report ー based on police records ー does not name the suspect, nor the Saudi businessman, for fear of hampering the ongoing probe into possible terror financing.

The pair’s link to shell companies in the British Virgin Islands and other offshore financial centers was revealed for the first time after the reporters’ examination of Paradise Papers, a trove of leaked documents obtained by Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists in 2017.

The 13.4 million files include incorporation documents, emails, contracts and other records from two offshore service providers and the company registries of some of the world’s most secretive countries.

The Austrian man was listed as the director of several companies in the BVI, Malta and the Bahamas, the media report said. His address on the documents referred to an apartment in Vienna that belongs to the wife of one of the main suspects in the police investigation, according to a review of Austria’s land registry records.

By cross-checking the confidential files with property records, the reporters also found that the shell companies owned properties in the U.K., including two office buildings, a commercial property and a retail park, worth about $73 million in total.

The documents show that a Liechtenstein trust owned by the Saudi businessman was behind those companies. The man is also known as a philanthropist who has financed Islamic studies at various European universities in recent years, including in Austria, the report added.

The complex offshore structure identified by the journalists is legal, the report said, but “can be used to disguise the flow of money and the identity of the true economic beneficiaries.”

Profil and Ö1, two ICIJ media partners in Austria, asked the Viennese suspect about the purpose of the offshore company network and his link with the Saudi billionaire. A lawyer representing him declined to comment.

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