China releases information on overseas fugitives

On June 6, the Central Commission for Discipline Inspection (CCDI) released information on 50 fugitives suspected of duty-related or economic crimes, including their names and photos, as well as gender, ID and passport numbers, former positions, date of fleeing China, suspected crimes and possible current whereabouts (including countries, communities, and even streets). The statement shows that 23 of the fugitives are suspected to have fled to the USA, while Canada and New Zealand are other key countries in which fugitives may be hiding. The majority of the fugitives are suspected of corruption, bribery or embezzlement. Among the 50, 21 have been on the run for more than 10 years. The office also released a website that accepts information on the fugitives.

This is the second time that the office has released this type of information, having released information on 22 fugitives, all listed on an Interpol red notice of 100 suspects, in April last year. A number of reports have since been released on the fugitives from both domestic and overseas informants. Six fugitives have surrendered to the police so far.

Former head of CIRC pleads guilty to taking US$3 million in bribes Xiang Junbo, the former head of the (now defunct) China Insurance Regulatory Commission (CIRC) pleaded guilty on 14 April to charges of taking bribes totalling 19.4 million yuan (US$3 million) in exchange for helping organisations and individuals secure contracts, loans, qualifications and personnel promotions. Xiang is the highest-ranking official to be caught up in President Xi Jinping’s crackdown on graft in the financial industry. Prosecutors at a court in eastern Jiangsu province said Xiang had abused his power not only as head of the insurance watchdog, but also earlier in his career while holding senior positions at the People’s Bank of China and Agricultural Bank of China. The court did not give a date for sentencing.


Cryptocurrency turbulence opens the doorway for tougher regulation

Our last update (which can be found here) noted that, while South Korean regulators were publicly endorsing a more 'soft touch' approach to regulation, they continued to demonstrate a harsher approach in practice.

The spotlight has continued to shine on this emerging industry this month, with South Korea's largest cryptocurrency exchange Bithumb announcing on 27 May that it would ban users from eleven countries (comprising those who at the time were identified as having strategic AML/CTF deficiencies or being subject to countermeasures in the FATF high risk jurisdiction review process) from the platform, including North Korea, Iran and Iraq. Explaining its decision, Bithumb said it was acting as part of “global anti money laundering efforts.”

Later in the month, two South Korean cryptocurrency exchanges were hacked; first Coinrail on June 9, and later Bithumb on June 20, amounting to over US$70 million in losses and creating widespread unrest in the cryptocurrency markets. The Korea Internet and Security Agency (KISA) has confirmed that it is in the process of investigating both matters.

The hacks follow a number of other high-profile security breaches at cryptocurrency exchanges over the past year (e.g. Youbit last December), prompting some to call for regulatory intervention. It remains unclear what (if any) the regulatory response will be. However, one possibility on the table would be implementing a regulated and licensed cryptocurrency exchange sector, similar to that in neighbouring Japan; an option seemingly under consideration by the Korean Financial Intelligence Unit (KFIU) (see below).

South Korea to strengthen anti-money laundering rules

South Korean financial authorities plan to tighten AML regulations ahead of next year's assessment of the country by the Financial Action Task Force (FATF) – an intergovernmental organisation set up to combat illicit movement of funds.

During a Policy Advisory Council meeting held on June 8, Kim Geun-ik, head of the Korean Financial Intelligence Unit led an extensive discussion on existing money laundering and terrorist financing prevention regulations, proposing stricter policies for both commercial banks and independent financial service providers. At the time, the KFIU stated that it will follow the movement of leading economies such as the US to prevent money laundering and terrorism financing with more rigorous verification processes for large transactions and monitoring of users.

Initially, the KFIU planned to impose new policies on large-scale financial institutions, retail investors, and traders in the public stock market and other sectors that currently have lenient AML and Know Your Customer (KYC) regulations. However, the KFIU later decided also to include the cryptocurrency sector in its AML and KYC initiative. The KFIU stated that the agency will coordinate with the Congress to pass a bill that would allow local financial authorities to monitor traditional bank account and cryptocurrency users extensively with transparency.

The KFIU said: "There is the need for us to improve our anti-money laundering system to meet international standards already in force in other countries."

Korean high-level corruption scandal continues

The corruption scandal covered in our last few updates (see here, here and here) has continued this month, as three former heads of Korea's National Intelligence Service (NIS) were jailed on 15 June for bribing disgraced ex-president Park Geun Hye with millions of dollars from the agency. Each was sentenced to between three and three and a half years for funnelling a total of 3.5 billion won (US$4.31 million) to Park between 2013 and 2016.

Prosecutors also demanded a further 12 years' imprisonment for Park (who is already serving a 24-year sentence on other corruption charges) in connection with the bribes. She now faces a second trial in connection with the new allegations. Former finance Minister Choi Kyung-hwan is also facing a possible eight-year sentence on charges of having received 100 million won in bribes from the NIS.


Authorities take action in 1MDB scandal

Since the formation of the new government, rapid action has been taken in relation to the infamous 1MDB scandal. Tun Dr Mahathir, the current prime minister, announced that prosecutors have "an almost perfect case" against the principal suspects, including the former prime minister, Najib Razak. 

Malaysian authorities have issued arrest warrants against individuals related to the 1MDB probe, such as financier Jho Low and former 1MBD official Nik Faisal Ariff Kamil. On top of that, more arrest warrants are also in train against others suspects, including ex-chief of 1MDB, Shahrol Halmi.

The Malaysian Anti-Corruption Commission also summoned Rosmah Mansor, the wife of Najib for investigation and requested Tan Kim Loong, whose name has appeared in several bank records relating to the 1MBD scandal, together with three other individuals to come forward to assist with the investigation.

Tun Mahathir stated that he is hopeful charges will be brought against the principal suspects before the end of the year.

Malaysia proposes special task force to investigate French submarines

Malaysia's cabinet has proposed the establishment of a new special task force to probe alleged corruption relating to the Scorpene-class submarines built by state-controlled warship builder DCN International and purchased in 2002 when the former prime minister, Najib Razak, was defence minister.

French financial prosecutors are also investigating the sale of the two French submarines. Abdul Razak Baginda, who was Najib's adviser, has also been placed under formal investigation in connection with the deal. 


Vietnamese bank executives sentenced to jail for embezzlement

A former chairman of the Bank for Investment and Development of Vietnam (BIDV) was alleged to have violated regulations when he approved a VND4.7 trillion loan to 12 companies owned by Pham Cong Danh, former chair of Vietnam Construction Bank (VNCB). Danh profited by VND9 trillion from the loan and was sentenced to 30 years in prison.

Hua Thi Phan, the former senior board adviser of VNCB was found guilty of violating economic regulations and abusing trust when she abused her position at the bank to obtain embezzled funds of US$278 million to purchase properties and later sold the properties back to the bank at a much higher price. Phan was ordered to return the money with interest, compensation and fines of US$700 million. This order is lenient compared to the death sentence imposed on the former head of Ocean Bank Nguyen Xuan Son for embezzlement. Nevertheless such cases indicate the country's continued efforts to reduce corruption and financial related crimes.


Singapore District Court jails two Japanese men for receiving bribes

Two Japanese men were sentenced to five and a half years in jail by the Singapore District Court for luring a Singaporean businessman to pay them a US$2 million bribe to continue business.

Katsutoshi Ishibe and Takaaki Masui, the former manager of Thefoodstuff department of Nissho Singapore, entered into a profit-sharing arrangement with a Singaporean businessman in exchange for the distributor role for Nishho Singapore.

On top of the jail term, Ishibe and Masui were also ordered to pay a US$1 million fine.


AMLO freeze 88 million baht worth of assets of suspects in embezzlement case

On 12 June 2018, the Anti-Money Laundering Office (AMLO) issued an order to freeze 88 million baht in assets in relation to 12 suspects. Two days after the order, a complaint was lodged by AMLO against the former permanent Secretary of the Social Development and Human Security Ministry of Thailand, Phuttihiphat Loetchaowasit, who is one of the 12 suspects.

The suspects were accused of stealing money from a state welfare fund from the poor, according to an investigation by AMLO which highlighted irregularities in the money trail. The suspects were given 30 days to provide evidence to show their frozen assets were acquired through legal means.