We caught up with founder Ariyo Raji to learn more.

Introducing Treegar

“Treegar is a mobile application working to democratize investments in Africa. Prior to our offering, the investment options available in the African market were limited, and the ones that were available were not diversified. As an investor, your options were generally restricted to the financial sector or fast-moving consumer goods (FMCG) sector. There was no access to the forward-thinking investment opportunities of big tech, the energy industry, or electric vehicle industry. 

“We changed this with Treegar. A lot of US investment mobile apps have blockers in place that make it difficult for Africans to use them. With Treegar, we have made the same investment opportunities that are available in the US available to the African investor market, without the need to provide information specific to US citizens, such as a social security number.” 

Keeping up with the global market

“We started Treegar because we wanted to provide a solution for Africans struggling to manage their finances due to the rising inflation rates. Nigeria is one of the biggest economies in Africa but our inflation rate and Naira to USD exchange rate is extremely volatile. Even shopping on Amazon is near impossible because the exchange rate is so high.

“We saw this as a major problem that needed solving, so I began to look for ways to make more money myself – not in Naira but in a more stable currency that is acceptable across the world. This is when I started to use a lot of investment apps and couldn’t believe that there were only six companies listed on the Nigerian stock exchange, compared to the thousands that are listed in the US. 

“At this time, we were also seeing a lot of Nigerians, and Africans in general, moving to the US for better opportunities. So we built Treegar as a way to make these opportunities more readily available to the African market and move one step closer towards investment democratization.”

Proudest moment so far

“We now have a working product and we’re so proud to launch in Nigeria on April 1, 2022. It is amazing what our early adopters have to say about us and it gives us validation that we are on the right track. See what early users are saying about us on our website.”

What’s next for Treegar?

“The next steps for Treegar fall under two categories – geographical expansion and product expansion. We want to expand across Africa and we want to do it fast. We will be expanding into more West African and East African countries in the next few quarters.

“We will also be expanding our product offering as we expand into new markets. Some value-added features will include cryptocurrency trading and social investing. We will revolutionize the space by pushing innovative features to further democratize access to global investing from Africa.”

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The Commission’s investigation focused on the trading of G10 currencies – the most liquid and traded currencies worldwide – by a group of traders on behalf of UK-based banks Barclays, RBS (now NatWest), and HSBC, and Swiss banks UBS and Credit Suisse.

“The collusive behavior of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers,” Margrethe Vestager, Executive Vice-President in charge of competition policy, said.

The fines were related to the actions of a cartel of traders from the five banks. Between May 2011 and July 2012 they exchanged sensitive information and trading plans in an online chatroom called ‘Sterling Lads’ and occasionally coordinated their trading strategies. 

These exchanges enabled them to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios. It also helped identify opportunities for coordination, for example through a practice called “standing down”, where some would temporarily stop trading to avoid interfering with another trader.

Swiss bank UBS exposed the existence of the cartel, and as a result, avoided a multi-million Euro fine. The three UK banks cooperated with the investigation and received reduced fines – HSBC was fined €174.3m, Barclays €54.3m, and RBS €32.5m.

“Our culture and controls have changed fundamentally during the past 10 years and this kind of behavior has no place at the bank we are today,” a NatWest spokesman said in response to the penalty.

Credit Suisse, which previously denied that its employees engaged in any misconduct in currency markets that violated EU competition rules, was fined €83m.

The ‘Sterling Lads’ investigation is the third in a series of inquiries by the Commission into Forex, two of which concluded in 2019, and the 37th decision since the settlement procedure for cartels was introduced in June 2008. 

An €811.2m  Forex (Three-Way Banana Split) settlement related to communications in three different, consecutive chat rooms (Three-way banana split /Two and a half me / Only Marge) among traders from UBS, Barclays, RBS, Citigroup, and JPMorgan, between 2007 and 2013.

A €257.7m Forex (Essex Express) settlement decision concerned communications in two chatrooms (Essex Express ‘n the Jimmy and Semi Grumpy Old Men) among traders from UBS, Barclays, RBS, and Bank of Tokyo-Mitsubishi (now MUFG Bank), between 2009 and 2012.

The fines were based on the Commission’s 2006 Guidelines on fines. In line with other cases, firms that are transparent have seen their fines reduced or even waived. 

Under the Commission’s 2006 Leniency Notice, UBS received full immunity for revealing the existence of the cartels, avoiding an aggregate fine of around €94m. Barclays, RBS, and HSBC also benefited from reductions ranging from 15% to 50% under the Leniency Notice and a 10% reduction under the 2008 Settlement Notice for cooperating with the investigation. 

These cases highlight the need for trade surveillance teams to assess and understand their firm’s antitrust risks. These risks will differ depending on the size and nature of the activity of the firm and should be reviewed on an ongoing basis. Regular training for relevant staff is critical, alongside comprehensive risk and control policies. An investigation protocol should be in place to document and handle any breaches. 

As more staff continue to work from home, keeping procedures to monitor work devices up-to-date is also important. For example, unusual patterns of trading, particularly out of regular hours, can signal risk. Keyword scanning of communications on work devices is another key tool, so firms should ensure they’re regularly updating the list of words they’re checking for. 

The post Big Banks Fined €344m for ‘Sterling Lads’ Forex Trading appeared first on ComplyAdvantage.

Importance of the non-financial sector 

The perpetrators of these crimes know that they can bypass the banking sector and still effectively launder money. Cash-intensive businesses such as restaurants and betting shops, the purchase and export of luxury goods and the use of informal money mules are all common vehicles.

Money laundering at scale through financial institutions has been the primary focus of German legislators, with a view to preventing criminals from legalizing their illegitimate income, and assuming influential positions in the social and political life of Germany.

However, the importance of the non-financial sector for money laundering activities raises questions about the responsibilities of public authorities in this area and of the administrative structures in place outside the financial sector to combat money laundering. 

Allocation of responsibilities under section 50 of the Money Laundering Act

Section 50 of the Money Laundering Act sets out which firms are covered by the regulation based on whether they belong to a financial or non-financial sector of the German economy. 

However, these two categories are not defined in more detail in the Money Laundering Act. Instead, it is the responsibility of the Financial Intelligence Unit (FIU) set up at the border customs office to evaluate suspicious activity reports (SARs) and divide companies based on whether they belong to the financial or the non-financial sector.

Which firms are in the financial sector?

Accordingly, the entire banking industry, including financial services institutions and e-money companies, are classified as part of the financial sector. On the basis of the provisions set out in Section 50, money laundering supervision for the entire financial sector is in the hands of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). 

Which firms are in the non-financial sector? 

According to the classifications set by the FIU, the following companies subject to money laundering regulations (Section 2 AMLA) are to be assigned to the non-financial sector: 

• Insurance intermediaries
• Lawyers, tax consultants, auditors and notaries public
• Trustees
• Real estate agents
• Gaming operators
• Freight traders

The fact that these companies belong to the non-financial sector initially means that money laundering supervision by BaFin is out of the question. As there are no other assigned federal authorities, money laundering supervision of these companies falls within the administrative competence of the states (Länder).

The supervision of the non-financial sector

Non-financial sector organizations typically belong to a chamber of commerce or other form of professional organization who will supervise their activities alongside local authorities. 

As a general rule, this means the same authority that is responsible for ensuring compliance with hygiene regulations in the restaurant business or with food preservation regulations in  supermarkets is also responsible for monitoring jewellers and car dealers. 

The task of monitoring money laundering in the non-financial sector is therefore spread over hundreds of local authorities. Some of these may struggle with access to relevant expertise, staff and the wider industry awareness necessary to supervise firms effectively. 

One measure of the disparity between financial and non-financial businesses can be seen in SAR filings. In 2020 104,325 SARs were filed by the financial sector. Just 2,854 SARs were filed by non-financial companies in the same period. Of these limited SAR filings, only around 400 were filed by goods traders nationwide (source: Bafin Annual Report 2020, page 17). 

Focus on the banking sector

For years, the federal government has given high priority to the fight against money laundering. This has most recently been demonstrated by the tightening of Section 261 of the Criminal Code, which goes far beyond all European legal requirements in its definition of money laundering, including even petty offenses in the circle of predicate offences, as well as the increasingly far-reaching allocation of control tasks to banks. 

A look at the non-financial sector, however, makes it clear that administrative structures have so far not been able to keep pace with political objectives. It has been known for years that the non-financial sector accounts for a significant proportion of criminal money laundering offenses. In this area, administrative tasks aren’t centralized, and the inadequate staffing and technical resources of local authorities mean that effective monitoring of money laundering may not always be guaranteed. 

Further reading

Redefining money laundering in Germany: The Implications of Section 261

Raids Across Germany Target Network Suspected of 140m EUR Money Laundering

Anti-Money Laundering In Germany

The post Anti-money laundering in Germany: responsibilities in the non-financial sector appeared first on ComplyAdvantage.

Foreign currency exchange (FX) is a popular methodology for money launderers, who seek to exploit a range of vulnerabilities associated with the service. The growing volume of FX businesses across the banking and commercial sectors, on Main Streets and online, has also increased the opportunity for criminals to transform illegal funds, while regulators in jurisdictions around the world have failed to keep pace with the emerging threats from the industry, meaning there is increased AML risk for foreign exchange businesses. 

FX services are offered by a wide range of entities, including hedge funds, investment firms, traders, brokers and money transfer companies. As an FX service provider, or a financial services firm connected to a provider, it is important to understand the money laundering risks that the industry faces and how to comply with the relevant AML regulations in order to detect and prevent criminal activity.

AML Risks for Foreign Exchange Service Providers

The key money laundering risks faced by foreign currency exchange service providers include:

Identity verification: Many foreign currency exchange services do not require the same identity verification measures as other types of financial service firms, meaning that criminals can use their services to launder money anonymously. The cash-intensive focus of foreign exchange services, and the possibility to obtain cash transfers using associated remittance services, allows criminals to transform money quickly or simply use money mules to carry out transactions on their behalf. Similarly, the proliferation of online foreign exchange services makes customer identity verification all the more challenging, and more difficult for the authorities to supervise.  Therefore bringing more AML risks to foreign exchange companies. 

Regulatory disparity: The fact that foreign exchange transactions often involve different jurisdictions, heightens AML risks, as money launderers may seek to exploit differences or deficiencies in regulatory standards across borders. FATF has warned that many countries, especially those considered higher-risk, do not have adequate AML/CFT regulations or supervisory structures in place to deal with the threat that money launderers pose in the FX industry. That regulatory disparity may see firms use different reporting thresholds for suspicious transactions or see international financial authorities struggling to communicate with each other during investigations, 

Structuring potential: Given the disparity in regulations between jurisdictions and the relative anonymity associated with the service, FX may be vulnerable to structuring, which is when money launderers use a series of transactions to disguise the source of their illegal funds before embedding them within the legitimate financial system. Foreign exchange transactions are particularly vulnerable to structuring because criminals may move their illegal funds through multiple FX service providers, using multiple currencies, to disguise their origin and embed them within the legitimate financial system. 

Beneficial ownership: There is an increase of AML risk to foreign exchange companies, as the proliferation of foreign exchange service providers, both in physical premises and online, has made it easier for money launderers to gain ownership of this type of firm and use that ownership to circumvent AML regulations and protections. Criminals may seek to own FX firms outright (or by using a sub-agent) or may seek to have someone own the firm on their behalf through financial incentive or coercion. Financial authorities may struggle to determine the beneficial ownership of an FX firm, allowing money launderers to conceal their activities.

Complying With AML Regulations Regarding AML Risk in Foreign Exchange

Foreign exchange service providers should be familiar with the AML/CFT regulations that apply in their jurisdiction, including any licensing requirements. In Financial Action Task Force (FATF) member states, firms must take a risk-based approach to the money laundering threats that they face and put commensurate measures in place as part of an internal AML/CFT program. 

In practice, that means that Foreign exchange firms should:

• Perform customer due diligence (CDD) checks at onboarding and throughout the customer relationship to verify customer identities accurately. CDD checks should also be used to establish beneficial ownership if dealing with another FX company.
• Implement transaction monitoring measures in order to spot suspicious FX transactions that might be indicative of suspicious activity. This includes transactions over certain reporting thresholds, unusual transaction patterns or transactions involving high-risk countries.
• Screen and monitor customers for politically exposed person (PEP) and sanctions status and for their involvement in adverse media stories. 
• Appoint an AML compliance officer to oversee the compliance program, liaise with financial authorities and manage audits. 

FX red flags: Foreign exchange employees should also receive adequate training in order to implement the appropriate AML/CFT measures when customers use their services. With that in mind, firms should be aware of the characteristics, or “red flags,” of money laundering methodologies that target foreign exchange services and increase AML risks. Those red flags include:

• Transactions above jurisdictional reporting thresholds.
• Suspicious transaction patterns, such as customers making an unusually high frequency, or an unusually high volume, of transactions.
• Customers consistently using non-face-to-face FX services, concealing their identities or sending third parties (money mules) to conduct transactions on their behalf.
• Multiple exchanges in different currencies that appear to be connected.
• Multiple exchanges across different service providers.
• Transactions involving PEPs, sanctioned customers or customers involved in adverse media stories.

Automated AML Compliance

Implementing an AML/CFT program manually may be unfeasible for many foreign exchange service providers, who must collect and analyze large amounts of customer and transaction data in order to spot potential criminal activity. With that in mind, in order to manage their AML risks, foreign exchange service providers should ideally implement suitable AML software, automating their compliance process where possible and avoiding the costly inefficiencies and human errors associated with manual AML/CFT. Software automation not only adds speed and accuracy to the AML process but helps firms meet their compliance  obligations on an ongoing basis.

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