Dirty Money Disguised in Translation: Experts describe the vital steps to stop criminals hiding behind languageon Tuesday 11 November 2014 Written by Ian Miller
Poverty, anarchy, terrorism and organised crime are threats that will come much closer to home if we allow criminals to launder their ill-gotten gains through UK banks, bogus companies and real estate warned David Clarke, the former head of the City Police Fraud Squad. His grim forecast came as he opened a breakfast briefing last week in Whitehall, where experts from BAE Systems, DWF LLP, BNP Paribas Real Estate and Today Advisory explained how to identify and manage serious risks that are hidden in foreign languages.
Enjoying the high life as victims suffer
The ultimate consequences of handling dirty money and the dilemma regulated professionals face was brought home in two one minute videos (Doing the right thing and Why it matters). The vivid description of how criminals enjoy the high life at the expense of victims and honest businesses presented by Clarke was not a dark fiction but an account of life today. The offenders range from overt illegal gaming gangs who con tourists outside the Houses of Parliament through to bogus share-selling Brits who enjoy a luxury lifestyle on the Mediterranean and corrupt officials who steal aid money intended to relieve poverty, using it to purchase high-end property in the UK and USA.
Organised criminals and corrupt officials generate especially large sums of money that they must clean if they are to move it around the world and use it to buy themselves nice things. James Ibori, the petty thief who became one of Nigeria's richest men is believed to have done just that by taking over £175 million from public funds. Britain's serial fraudster Tomas Wilmot and his sons Kevin and Christopher ripped-off investors despite Tomas having previous convictions for fraud. When they were sentenced in 2011, it was said they had ripped off victims to the tune of £27.5 million through their interconnected illegal share trading rooms known as boiler rooms.
Shell Companies and Sham Litigation
Before being caught, the Wilmot fraudsters succeeded in moving huge sums of dirty money through a web of bogus companies with bank accounts in several countries including the UK, Lithuania, UAE and Brazil. In a recent case to hit the news in October 2014, it is alleged that 19 front companies in the UK are at the heart of a $20 billion money laundering conspiracy involving corrupt officials and sham litigation in Moldova.
According to Europol and the UK's National Crime Agency (NCA), the UK is a destination of choice for many organised criminals looking to target victims and launder the proceeds of international crime. The briefing considered why such audacious villains are not spotted sooner or stay hidden for so long and the key role language and the absence of accurate translation play in both facilitating and preventing crime.
Our Identity is Our Behaviour
George Robbins, Senior Director for BAE Systems Applied Intelligence (previously Detica) illustrated the enormity of the problem organisations face when trying to detect the estimated $2-$3 Trillion laundered every year in our highly globalised, interconnected and data-rich world. Looking to the future, he predicted a time when we may have to accept that every citizen will be a victim of identity theft. In that scenario, distinguishing the behaviours that are unique to the true identity holder will be the vital ingredient that prevents crime. "Criminals can steal information about you but only you know who you emailed last night and what you were thinking about. That's a behaviour that is unique to you" said Robbins. BAE Systems provides government agencies and private sector organisations with some of the world's most advanced analytical software capable of crunching vast amounts of data in fast time.
The problems that organisations experience when managing large volumes of information is poor data quality; the lack of a big picture; collusion between parties; and the number of high false positives generated when looking for an activity that is truly suspicious. Advanced algorithms have helped credit card issuers, insurers, HMRC and others to prevent fraud by detecting irregular behaviour such as your account being used in another country and the shift is now moving to multiple modes of detection. Early detection requires a greater depth of knowledge and BAE Systems are working on the next generation of systems to detect money laundering and other crime using advanced analytics to create a single view of entities, be they an individual or company with many identities or links that are not apparent when viewed alone. These will take account of different languages and will trawl deeper and wider than ever before to catch offenders.
Fake Identity Accepted. Now Try Catch Me.
Data analysis is only as good as the information that feeds it and when that information is in a language a person or system cannot read there is a risk that important facts will be missed.
Private schools that receive significant sums for foreign students, like lawyers, accountants, real estate agents and high-value dealers are regulated professions that are required by law to conduct background checks on their customers and the source of their money. This means asking for and checking documents and conducting research about the customer and sometimes their customer's customer or family too. If a customer or their documents are deemed suspicious, the professional is duty-bound to submit a confidential report to the NCA known as a suspicious activity report (SAR).
The number of SARs submitted by lawyers and real estate agents is especially low in the UK and this has been noted by the Financial Action Task Force (FATF) (the European Union body designed to tackle money laundering) which will inspect the UK in 2016 to check the effectiveness of anti-money laundering (AML) measures. One factor is that it can be tricky to spot an irregularity in a foreign document that a professional is unfamiliar with or something said by a customer via an interpreter.
Fraudsters and corrupt officials exploit this loophole by presenting documents in foreign languages to professionals who do not verify their authenticity. The Metropolitan Police alone has identified 80,134 separate documents relating to different identities seized during 89 different operations. These identities are probably just a tiny fraction of the false identities that are being used by criminals to facilitate other crime.
A Duty to Communicate in the Customers Language
Fake documents and misleading translations are worthless to the criminal if they are rejected. To ensure the fake document opens doors, the criminal needs a professional to unwittingly assist or deliberately turn a blind eye to the error. Once the document is accepted, the criminal needs the professional to help them open an account, form a company, buy a house or goods or even commence a sham litigation case. It is for this reason that FATF and the authorities view professionals as gatekeepers and potential enablers of crime. Given this role, it is little surprise that the NCA, Solicitors Regulation Authority (SRA) and HMRC have all turned the spotlight on firms that handle large sums of money for foreign clients.
Given the importance of checking a new customer's identity, I was surprised to learn that in a recent survey of law firms carried out by Riliance, an average of 14% of respondents said their staff would accept a foreign passport in a language they are not familiar with.
Arun Chauhan, a lawyer specialising in fraud and risk at DWF LLP who is regularly instructed to investigate and trace assets arising out of business deals such as misrepresentation in mergers and acquisitions said in his presentation, "Accepting a foreign passport as proof of identity when you don't understand it is a very risky way to commence a business relationship". He considered how a professional regulated by the Financial Conduct Authority (FCA) must comply with the Principles of Business and Principle 7 is very specific insofar as it places a duty on firms to communicate information to customers in a way which is clear, fair and not misleading. He spoke about the risks of misselling financial products to those who did not have a good grasp of English and linked this with other duties under the Money Laundering Regulations. He stressed that in all cases it was essential to identify suspicious behaviour especially that hidden within a translation. Chauhan explained the need to adopt a professional response when false documents are identified. In particular, gathering and preserving evidence of the crime will be central to any future investigation and helps protect the professional from allegations of misconduct.
London's Super-Rich Cash Buyers
The meteoric rise of London's property market, fuelled by foreign investment into exclusive residential and commercial properties has probably been discussed or overheard in a conversation by just about every adult living in the United Kingdom. Parul Thakrar, a chartered accountant and head of compliance at BNP Paribas Real Estate spoke of this and provided an insight into the changing face of risk in the changing world of real estate. She opened with her own short Q&A session: "How many property transactions are there every year in the UK? The answer, a lot. How many real estate professionals have gone to jail for being involved in money laundering? The answer, none that we've heard of." This point may well explain in part why professionals in the property sector submit so few SARs, for where there is a great reward and little risk, there will be abuse.
The practical difficulties of verifying addresses in South East Asia and the use of offshore companies and complex structures are a particular challenge for those conducting checks on customers. That did not mean the issue could be ignored and Thakrar warned of the risks in rushing to set up offices in local markets without fully understanding matters associated with local laws, regulations and customs. To mitigate risk, she advocated adopting robust due diligence with regular reviews and making sure all promotional material is legally compliant and tailored to the local market. To manage multilingual risk, her advice is to understand what you are required to deliver and where appropriate, supply documents to customers in their native language. Good practice also dictates that key discussions with customers should be conducted in their native language to avoid difficulty at a later date.
Mis-sold, Misled or Just Misunderstood
The participants in the briefing covered the Banking, Real Estate, Legal, Accounting, Public and Law Enforcement sectors. In the panel discussion session that followed the briefing, there was common agreement that too many firms in the UK were failing to recognise the extent of the threat from organised crime and the potential impact on their businesses. The group debated threats as diverse as money laundering penalties and civil litigation from PPI style misselling products to people who can claim not to understand the advice provided, or contract documentation, through to being direct victims of fraud themselves. The translation and foreign document verification risk was seen as the biggest controllable factor in risk exposure.
Fair and Ethical Multilingual Communication
No business relationship can ever be risk-free and transactions that involve multilingual communication and international supply chains are no exception. However, adopting good practice such as that shown in the below table shows customers and the regulator that you take compliance seriously.
Managing Multilingual Risk: Good Practice
1. Communication with customers is done in a language in which they are proficient
2. Foreign KYC documents are translated into English and independently verified and certified as true
3. Controls are in place to prevent customers from signing official documents they can't read
4. Customers for whom English is not their first language but are proficient, sign a disclaimer to that effect in their mother tongue
5. Customers provide written consent for a person to act as their interpreter
6. KYC checks are carried out on persons interpreting for a client
7. Accurate records are kept incl: Multilingual KYC checks, level of document verification, identities of those interpreting for customers, what material was translated and certified or not with a rationale
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