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Victims or Perpetrators?!

Banks can often become the easy targets to get blamed for the ongoing financial crimes all over the world. Recently, Buzz Feed’s revealed the leaks of suspicious activities report which confirmed that they are fulfilling their roles in fighting against the international money laundering. It also suggested that the whole system is on the verge of collapse and that is something to re think about. Banks can detect the actual suspicious criminal activities from their clients in many ways. Selecting the clients based on their own risks assessments, supported by public information and their risk appetites. Next is to make sure that the clients and their operations do not belong to the watch lists of the potential crimes groups of the terrorists or even the sanctioned persons, companies and countries. It’s an obligation for the banks to mandatorily check before executing a transaction and, if required, freezing it. Final step is to monitor the transactions of their clients to identify suspicious behavior, especially money-laundering schemes or tax evasion. And if such the case, after blocking the transactions, banks are supposed to report them to the regulator or the specific agency in charge of investigating financial crime {Financial Crimes Enforcement Network (FinCEN) in the United States, Tracfin in France}.

The leaked FinCEN files are based on more than 2,500 documents called SARs (Suspicious Activity Reports) that banks sent to US authorities between 2000 and 2017. The banks, therefore, had fulfilled their obligations to measure and alert for possible financial crime.

SARs are standardized reports completed by financial institutions about suspicious activity and are sent to FinCEN. Financial institutions are required to report suspicious activities that may be connected with criminal activity (i.e., money laundering, corruption, tax evasion). All SARs are compiled in a database, made available to US law enforcement and other global financial-intelligence agencies. International Consortium of Investigative Journalists are doing a fine job as it is shedding light on the complexity of situations within the global market, where the skillful use of international borders becomes a strategy with an immense amount at stake.

Criminals’ creativity in their actions, discrepancies between regulations in various countries, complexities of banks’ information systems that detect these alerts and potential gaps within the banks’ control frameworks all cause a difficulty for the banks to work smoothly. . Regulators are overwhelmed, scattered as the 2,500 files that leaked (via BuzzFeed) represent only 0.02 percent of the total number of SARs. Criminals leverage off inconsistencies between jurisdictions to find loopholes in the system, cruelly highlighting the lack of global coordination.

Terminating all the shell companies in the US and making it a compulsion to always name the company’s owner which will result in more transparency. Increasing the direct accountability of bankers like modifying company policies to increase accountability of front-office employees may suffice, measures such as fines, salary penalties in cases of not complying with the rules. Constantly upgrading the data management systems to identify fraud patterns to help identify the potential frauds and prompt actions to be taken faster.  Leveraging data management and artificial intelligence to build fraud-detection patterns and to share this with the banks and regulators. As the whole system is subjected to be suspicious, and as it is based on the confidentiality, it is high time to be asking for more transparency and visibility from the regulators and governments. These can be few of the measures which can be taken to raise the banks from being in the watch zone. It is an overall political and economic effort to enforce these measures.

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Banking

Goldman banker hired by the Citi bank

Citigroup has hired Luisa Leyenaar-Huntingford from Goldman Sachs. This new hire is to co-head its global infrastructure franchise. Because, it seeks to win more business from cash-rich investment firms focusing on infrastructure deals. Leyenaar-Huntingford will be based in London. Responsibility will be shared with Todd Guenther in New York.

The pair will work closely with industry teams covering healthcare, industrials, natural resources and clean energy transition (NRCET), technology and communications. Leyenaar-Huntingford helped in the establishment of the Goldman’s infrastructure franchise in her time at the Wall Street bank. They will team up with Citi’s Iberia co-head of banking, capital markets and advisory (BCMA) Jorge Ramos will continue to be a senior member of the global infrastructure franchise.

The infrastructure sector is poised for further growth, according to the memo. The memo was released by Citi’s global co-heads of the alternative assets group Anthony Diamandakis and John Eydenberg, and its EMEA head of BCMA Nacho Gutierrez-Orrantia. There was significant private investment demand across the globe to deal with environmental, energy, transportation, waste, communication, digital and other social needs.

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Banking

Banks make slow progress on UK gender pay

Major banks in Britain made a slight dent in their gender pay gaps. Several insurers went backwards. Companies in Britain with more than 250 employees have been required to publish the difference between the pay and bonuses of their male and female employees. They got a reprieve due to the pandemic, last year. The financial services sector has shown one of the largest genders pay gaps in Britain. The lack of women in senior jobs is the main reason.

Pay gap data from 21 major financial institutions showed a narrowing in their average mean gender pay gap. This is just 0.4 percentage points. Banks alone had a pay gap which narrowed by one percentage point. Ann Francke, chief executive of the Chartered Management Institute said that the UK’s financial services industry has often been singled out. It really does have to get its house in order. Goldman Sachs had the widest gender pay gap in the year to April 2020. Goldman posted a gender pay gap of 51.8%. The bank told the staffs that narrowing the gap further was a critical priority. A spokesperson for banking lobby group UK Finance said, that there is clearly more still to be done.

FTSE 100 insurers Prudential, Legal & General and M&G reported a widening in their pay gaps. Prudential’s UK gender pay gap widened to 45.2%. M&G also reported a widening in its pay gap in the most recent year to 30.5%. The M&G spokesperson said that they are determined to narrow their gender pay gap and will do this by achieving better representation of women in all roles at all levels of our organization. Legal & General’s mean gender pay gap widened to 30.8%.

The insurer said that the legal & general is tackling the underlying causes of its pay gap. This is by creating a more diverse workforce and a more inclusive culture through sustained, long-term action. Admiral had a gender pay gap last year of 12.8%. The 21 firms surveyed were Barclays, HSBC, Lloyds, NatWest, Standard Chartered, Bank of America Merrill Lynch, Goldman Sachs International, JPMorgan, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, PGMS (a Phoenix unit), abrdn, Schroder Investment Management, St James’s Place, Legal & General, Prudential, Admiral Group, Aviva and M&G.

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Banking

BOJ to lower inflation target-Japan’s finance minister

Japan’s outgoing finance minister, Taro Aso, said that he had proposed lowering the central bank’s 2% inflation target. This is when the prices took a hit from plunging oil prices. He was the finance minister for nearly nine years. The slump in oil price was among the main reasons the government could not officially declare an end to deflation. In his final news conference as finance minister, Aso said that he proposed to Governor Kuroda that, with oil prices falling this much, it would be hard to achieve 2% inflation. Hence, the target must be lowered at some point. He stated this by referring to Bank of Japan (BOJ) chief Haruhiko Kuroda.

Aso also said that the governor said he would do his best to achieve the target. This is stated by adding that policymakers must scrutinise at some point, why the BOJ’s inflation target of 2% has not been met. The remarks highlight how the government and lawmakers distanced themselves from the BOJ’s target years ago, despite central bank reassurances that achieving the target was possible by maintaining or increasing stimulus.

Aso was deeply involved in negotiations with the BOJ. After Kuroda took over as governor, he deployed a massive asset-buying program. This is for pulling Japan out of deflation. Aso supported the BOJ’s stimulus efforts. He is a member of the cabinet. And also, had raised many doubts that monetary policy alone can reflate the economy out of the doldrums. New Prime Minister Fumio Kishida is set to form a cabinet.

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