“Paradise Papers, Saudi corruption purge pose new reputation risk dilemmas” |
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Dear clients, colleagues and friends,
We’re pleased to send you this month’s newsletter to keep you up to date on the latest AML & compliance related news.
This month witnessed two major headline-grabbing developments that shook our industry: the Paradise Papers data leak, and an unprecedented "anti-corruption purge" in Saudi Arabia. But just as you wouldn't judge a book by its cover, we shouldn't judge a scandal by its headline -- this month's newsletter will help you navigate the new reputational risks posed bythese breaking news stories. We wish you an easy reading. The Sqope team. |
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Saudi Corruption Purge: New KYC Dilemmas |
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This month, Saudi Arabia’s unprecedented anti-corruption purge dominated international headlines. Government officials and independent analysts alike are casting a shadow on the country’s private wealth sector with some staggering statistics: According to the Guardian, over 800 billion USD is likely sitting in some 1,700 newly frozen bank accounts, which belong to the 201-plus Saudi royals, business elite, and former palace insiders who are now being held in Riyadh’s glitzy Ritz Carlton. A November 9 government press release further stated that an estimated 100 billion USD of state funds was embezzled over the course of 10 years. But from the get-go, the motivations behind the purge have been called into question. The popular assumption is that the country’s new crown prince, Mohammad Bin Sultan (MBS), is shaking up the country’s typically unstable royal ascension by eliminating his rival power-holders. Others speculate that he seeks to replenish the country’s coffers with his rival’s cash after years of stalemated conflict in Yemen, and to better position himself to carry out his flagship “2030” reform package. Others yet have argued that MBS is acting out of genuine concerns over perceptions of corruption in the Kingdom, particularly among the country’s change-hungry younger generation.
One thing is certain. Saudi’s corruption purge, led by MBS, has a tremendous impact on bankers and their Middle East clientele, posing new reputational risks and other onboarding dilemmas. For example, how should account managers react to news that their client, or (a close associate of their client) has been implicated in the corruption purge? What exactly are the accusations? If the purge is politicly motived, how can we prove it? How long should we wait to act? What sources can we trust? |
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- Don’t make snap decisions: Saudi Arabia is hit with major political ‘earthquakes’ like these every decade or so. The current corruption purge should not necessarily trigger knee-jerk onboarding policy shifts, but does demand an in-depth reassessment of each individual client.
- Assess your exposure: Identify which of your clients are exposed, or could be exposed to the recent scandal. Use local media and social forums to identify if your clients are among those being accused of corruption or if their familial connections, commercial links, past political exposure, or other ties could make them a target.
- Track individual legal proceedings: Currently, the corruption purge has resulted in the detaining of individuals. We have yet to see major trial proceedings. This will be a long, drawn out process. The fate of one individual may not be the same as another.
- Conduct high-level monitoring: The UK’s Financial Times and other outlets recently reported on a potential deal in which those detained could be set free in exchange for “70 percent” of their assets. While the motivations and context of such a deal are disputed, developments like these may seriously challenge the overall legitimacy of the corruption purge, with risk-mitigating effects on the reputation risk of those detained.
- And finally, reassess your Middle East risk tolerance: Determining source of wealth has never been more important; and in Saudi Arabia, perceptions the legitimacy of how monarchy stalwarts acquired their fortunes is under major scrutiny. Separating local political influences from real corruption concerns is now a major factor in continuing business in one of the Middle East’s most lucrative markets.
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Why Sqope can help you in your Reputation risk assessment like no other: |
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Our Middle East desk is staffed with seasoned AML/CFT Arabic language analysts that filter out the bias and white noise to identify both the onboarding risksand mitigating factors. We maintain a proprietary source database containing hundreds of local registries, whistleblower profiles, local media sites, and reliable ground sources that start where the internet stops. Our services: - Multilevel Due Diligence on individuals and families
- In-depth intelligence reports on corporate entities
- Bespoke investigative reports
- Real-time reputation monitoring
- Dormant account tracing
- All delivered within seven working days
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THE SQOPE SPOTLIGHT : PARADISE PAPERS FALLOUT |
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On the evening of November 5, 2017, the International Consortium of Investigative Journalists (ICIJ) began to publicize a new, massive offshore data breach that was investigated by 96 media providers, this time exposing over 13.4 million records belonging to both the Bermuda-based law firm Appleby and the corporate services provider Estera. On November 17, the ICIJ released the first of several batches of raw data, with additional dumps to be released as part of an extended PR effort coordinated with news outlets around the world.
Sqope continues to monitor these developments, while providing our clients with 24/7 reputation monitoring and evaluation of their counterparties’ exposure and associated risk. |
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Corruption is the Real Story of the Paradise Papers | | |
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Paradise Papers Increase Pressure for Tax Transparency | | |
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Thousands More Names and Companies Revealed from Paradise Papers | | |
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Swedish Business Chief Quits Over Paradise Papers | | |
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Paradise Papers Was “attack” on the Isle of Man | | |
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Vanuatu: The final Days of a Tax Haven | | |
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Drug Traffickers Taught the Rich How to Hide Money in Tax Havens | | |
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Other regulatory, sanctions, KYC, AML news Finma's Harsh Spotlight (Read More) Switzerland’s Finance Watchdog Wants to Deter Bankers from Behaving Badly by Naming and Shaming Publicly. (Read More) JP Morgan Sanctioned by FINMA for Money Laundering (Read More) HSBC Pays €300m to the French authorities: Another day, Another Thumping fine (Read More) Greece Probes Central Bank Head Over Alleged Leak (Read More) Trump Administration Slaps More Sanctions on North Korea (Read More) Germany Sanctions Iran’s Bank Sepah (Read More) |
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