5 Predictions for Financial Crime Compliance – Infographic

Financial crime is a global problem that may be affecting you and, the environment around you, without you even knowing it. The value of illegal wildlife trade has an estimation of between $5 billion and $20 billion per year… 

Click on the infographic to read our full article on financial crime compliance what we, and industry specialists, predict for 2020.


Financial Crime Compliance

Infographic By Jack Evangelides, Marketing Executive

5 Ways that Financial Crime Compliance will Change in 2020

Financial Crime Compliance

Financial crime is a global problem that may be affecting you and, the environment around you, without you even knowing it. The value of illegal wildlife trade has an estimation of between $5 billion and $20 billion per year, one of the most lucrative illegal businesses, following narcotics, human trafficking and weapons trade. As technology becomes more advanced, financial criminals are becoming more sophisticated and adaptable in their illicit methodologies; therefore, it is important for legislation to stay updated and mirror the flexibility of their illicit counterparts in order to effectively combat financial crime. Anti-Money Laundering (AML) was a strong focal point for 2019, with new directives and legislation becoming adopted by jurisdictions to combat this global rise in financial crime. 2020 is set to follow-on, improve upon and adapt to foundations that financial crime compliance laid in 2019. This article will draw upon 5 key predictions for 2020 in regards to financial crime compliance. We must address the main issues faced today and how companies and countries can overcome them to stamp out or minimise financial crimes.

Financial Crimes & Hefty Fines

The financial system has heavily evolved in the last decade, rapid payments, instant payments, PSD2 and other advancements have acted as vehicles for financial misuse, resulting in money laundering and harmful effects on economies, society and the environment. Since 2015 there has been a steady rise in money laundering fines issued, notably, 2019 saw almost double the amount of fines issued than 2018. In 2019, global money laundering fines exceeded $8 billion, whereas in 2018 the figures were around $4 billion. France, alone, issued fines of over $5 billion and the global average penalty for money laundering was around $145 million.

Money Laundering
Source: https://www.encompasscorporation.com/blog/why-are-aml-fines-increasing-deep-dive-into-encompass-analysis/

 

The above chart symbolises a need for change in regards to fighting financial crime. Governments, regulators and agencies are scrambling to find optimal solutions to reduce this illicit activity and effectively monitor illegal financing. Below is a variety of key areas that 2020 may unveil in an attempt to reduce financial crime and ensure compliance.

  1. Private-to-Private Information Sharing:

    Currently there is a major lack of information sharing across private companies at a global level. Financial crime is a global issue, yet institutions are combatting them at a microscale. 2020 should see an increase in information sharing at a macro-level. Information sharing is currently difficult due to legislative barriers and due to a lack of digitalisation. Only 54% of data and legal documentation, that is needed to carry out effective due diligence, is digitalised. Therefore, before private information can be successfully shared, it must be digitalised for institutions to utilise effectively. However, with an increasing rise in data privacy and security, it is difficult to share data without breaching data protection legislation. Institutions will opt for information digitisation and information and data sharing solutions for the private sector.

  2. Contextualised Financial Crime:

    2020 should see a focus on redefining the context of financial crime. By this, we mean, currently transactions monitored are based upon a fixed set of rules and thresholds. This approach can allow anomalous behaviour that escapes the standard of protection and monitoring, allowing illicit activity to go unnoticed. Monitoring needs to be contextualised and not generalised in order for future success in preventing financial crime. In order to contextualise monitoring, there needs to be more agile and optimised systems in place that can account for anomalous behaviour, systems that can learn, adapt and predict. In order to make more informed decisions you need relevant content that you can analyse. A prediction for the near future of AML is to integrate multiple sources of data into a centralised system; this can ensure a wider scope of information, account for numerous circumstances and allow for an increased contextual monitoring approach. Additionally, enhancing data analysis can aid this approach, by better understanding the context of transactions you can increase your understanding of consumer activity. Taking informed data-driven approaches based off a centralised data system can provide necessary contextualised financial crime compliance.

  3. Real-Time AML Monitoring:

    This approach is perhaps in its early stages, but 2020 will see a trend in focussing on real-time AML monitoring to allow for quicker decision making than the current batch file process. With the increased usage of artificial intelligence (AI), financial institutions are encouraged to take innovative approaches to work in coexistence with current risk-based approaches. This hybrid of AI and current practice can allow for a prioritisation of scenario-based alerts and quickly and automatically adapting to new money laundering schemes. Additionally, 2020 predicts the convergence of AML transaction monitoring and inbound fraud payment monitoring for operation efficient purposes. This implementation may also aid in preventing financial crime by providing more data to be analysed and contextualised to support the above two factors.

  4. Quality over Quantity:

    To only implement technical compliance is not enough, it is important to also provide higher quality of information. 2020 will place a great emphasis on the quality of information provided to the necessary authorities. Quality of information concerning financial crime will also parallel an awareness movement, to make people, companies and institutions aware of the dangers involved with financial crime, the possibilities and the realism of the threat. Illicit wildlife trading, human trafficking, terrorist financing, arms dealing, drug smuggling and more are all activities that bear implications in the reality of financial crime. These very serious social, economic and environmental issues need to be addressed and managed. Therefore, through spreading relevant and informative information and, moreover, being able to provide the quality information to authorities, we can collectively help reduce financial crimes.

Companies have already begun to adopt campaigns to spread financial crime awareness. For example, Barclays campaigned to fight against human trafficking.

“We need to prevent it entering the supply chain, we need to educate other companies, and we need to raise awareness beyond our consumer base.” – Paul Horlick, Director – Head of Barclays’ Financial Intelligence Unit

Barclays, as a bank, understands the importance of preventing money laundering and is part of the process in redefining how big businesses view, and combat, financial crime. The emphasis on a higher quality of information will bring an increase in thorough investigations that can aid relevant authorities in their mission to end illicit financial activities.

5. Conformity – Alignment of Standards:

As previously stated, financial crime has implications at a global level, money laundering doesn’t stop at the border and criminals will take any means and jump through any loophole in the law that presents itself. 2020 calls for an alignment in regulations and standards to combat financial crime, compliance at this level should hold an international standard that companies can abide by. This factor will also aid to the centralisation of information discussed in the first prediction. Importantly, jurisdictions must first issue a consistency of standards for crimes, punishments and all that falls under the umbrella of financial crime compliance. The EU has taken great leaps in bringing about consistency through their 5th AML directive. The EU are working on implementing a 6th AML directive that will include tougher sentencing and additional offences of criminal liability in the form of aiding and abetting. The EU has acknowledged the necessity for an alignment of standards and has worked tirelessly to compile a respectful standard for companies to follow. Yet, what must follow is a global standard for financial crime punishment and regulations that will, hopefully, reduce financial crime and stop individuals from successfully manoeuvring across jurisdictions.

Bright Days Ahead

Financial crime compliance has undergone transformation and 2020 does not see it slowing down. Newer legislation, technology and methodologies will consistently be tested until financial crime is reduced and, hopefully, eradicated. The above predictions each come with their own hurdles and tests, yet they each propose a slightly better future for financial compliance. We shall see across the next decade if the industry takes the necessary routes to successfully combat illegal financial activities.

MENA’s Finest AML

Cedar Rose has understood the issue of financial crime and has embedded, in their culture, a desire to tackle money laundering from the hardest of regions. We have over 23 years’ experience in the Middle East and North Africa, where we have been combatting money laundering through enhanced due diligence investigations using a collection of resources, local networks and expertise to help companies put an end to financial crime. Tackling financial crime throughout the MENA region is especially difficult due to the scarce digitalisation of data, secrecy of free-zone jurisdictions and its particularly volatile political climate. However, our team of expert researchers can help you with your due diligence needs, we have the experience, the resources and the knowledge to help with your AML requirements. It is our duty to help spread the awareness of financial crime and to help companies avoid it at all costs. This is a global problem, which requires a global solution and Cedar Rose are proud to be part of the solution.

Check out our recent article on The China-Pakistan Economic Corridor

Written By Jack Evangelides, Marketing Executive

How will CPEC affect trade relations between China and the Middle East?

CPEC Trade

China-Pakistan Economic Corridor (CPEC), established in 2013, but officially launched in 2015 with an overriding goal to improve China’s infrastructure, potential bilateral investment, trade and logistics with Pakistan, the Middle East and North Africa (MENA) and beyond. The CPEC initiative is a huge component of China’s Belt and Road Initiative (BRI) – a global development strategy to enhance infrastructure developments and global investment. We can clearly examine China’s strategy as a desire to expand and increase trade potentials at a global level, but with a specific focus in neighbouring regions such as MENA. This long-term initiative is set to revitalise and revive infrastructure, telecommunications, transport and more, and is set to extend up until 2030, with numerous development phases staggered along the way. Through CPEC’s projects, we can understand and assess potential implications on trade relations between China and the Middle East.

What is the significance of CPEC?

CPEC is composed of three fundamental components that highlight and outline its significance.

  1. To facilitate industrial and infrastructural development in Pakistan,
  2. To develop modern transportation and a robust telecommunications network that ensures connectivity between western China and coastal Pakistan, specifically the seaports,
  3. To allow China to develop a deep-water port and, moreover, a special economic zone in the region of Gwadar.

These tri-factors all contribute to greater implications for trade relations between China and the Middle East and each factor has its own significance in accomplishing China’s overriding goals. CPEC is a multi-phase initiative that takes the required steps and process that will enable China’s economic interests in the Middle East and North Africa to grow. Primarily, CPEC aims to establish strong routes, connectivity and connections to a seaport in Gwadar. The significance of CPEC will not only transform China’s influence in MENA but also aid the Middle East in their distribution of oil to China. Currently, the Middle East region is the largest supplier of crude oil and natural gas to China, however, it transports these via sea routes to Eastern China, where the bulk of China’s industrial activities are located. CPEC will establish routes that can deliver commodities to less accessible Western China. This will increase industrial activity within China, using new pipelines and railways to deliver through a more economical route, utilising the Gwadar port.

CPEC – Phase 1

The first phase of the China-Pakistan Economic Corridor initiative set to lay foundations for enhanced trading routes, establishing key areas of influence and finding optimal means to accessibility. The Karakoram Highway Renovation project was a key initiative to set out foundations for increased accessibility to Pakistan, and, consequently, to Gwadar. The highway spans a length of 1,300km, connecting Pakistan’s provinces of Punjab, Gilgit-Baltistan and Khyber Pakhtunkhwa to China’s western region of Xinjiang Uyghur. The highway originally opened in 1979, however, is known as a dangerous route, due to it being at an elevation of over 4,700 metres, passing through the Karakoram mountain range and subject to landslides, earthquakes and floods. China’s renovation project aimed to make the route a safe and secure area for transportation. The renovation took place in 2015 and completed in 2016. This Karakoram highway renovation has provided a method of transportation of goods via trucks in its first phase. The project is set to continue into additional developments up until 2030.

What is the Significance of the Gwadar Seaport?

China sets out to establish a major influence in the seaport of Gwadar for numerous reasons. Due to its geolocation, it will become a key factor in bilateral trade between China and the MENA region, creating a major trade hub. The port will establish four focal contributions for China-Middle East economic relations.

  1. It will act as a major transit and transhipment port of trade with the MENA region, a cost effective solution in comparison to current trade that currently directs to Eastern China. Additionally, the Gwadar port will retain products that are currently delivered to the Dubai port, therefore, instead of deliveries from China to the port of Dubai, Gwadar could become the hub for delivery across the MENA region.

  2. Secondly, the port will become a special economic zone. Re-export zones, currently under development, will attract major foreign direct investment (FDI), especially from the Arab countries. As CPEC progresses, there has already been interest in the Gwadar port from many Middle Eastern countries. For example, Qatar, currently under an economic blockade by the UAE, losing access to Dubai’s port, has expressed interest in the Gwadar seaport, with interests in developing food storage facilities. Additionally, the UAE has expressed direct interests in the port, advertising investment opportunities, especially for the second and third phases of CPEC. “UAE and China have common interests,” – Abdul Aziz Al Neyadi, Deputy Head of Mission at the UAE Embassy, Islamabad.

  3. Gwadar will develop major facilities to aid and encourage FDIs, especially from the Middle East. China and Pakistan will facilitate the construction of a major oil and petrochemical investment zone in Gwadar. Some facilities that the Gwadar Oil Terminal City will include are large terminal and storage facilities for crude oil and associated petrochemical industries and produce-refined oil products.

    Middle Eastern investments in the seaport have already begun with Saudi Arabia reportedly contributing $10 billion investment in petrochemical facilities, the UAE finalising on a $5 billion joint venture agreement with Pakistan and many more investments expected to follow.

  4. The strategic location of Gwadar can aid Iran’s economic relations with the Eurasian region. Due to current economic sanctions imposed against Iran, the country is finding difficulties with exporting oil to India, Afghanistan and central Asia. However, the Gwadar seaport has opened up discussions to link Iran’s Chabahar port to Gwadar by highway and natural gas pipeline. Iran’s Foreign Minister, Mohammed Javad Zarif expressed, “We believe that Chabahar — one of Iran’s developing seaports on the Oman Sea — and Gwadar — a port city on the south-western coast of Baluchistan, Pakistan, also on the Oman sea — can complement each other.”

    This development can aid Iran in exporting natural gas to Pakistan and China, while cementing trilateral trade relations. Iran will seek aid from CPEC to help them complete their natural gas pipeline to the Pakistan border.

Financial Significance

CPEC has implemented a long-haul strategy, up until 2030, and ongoing from 2013, which included the involvement of many governing bodies, from Pakistan to the UAE, Saudi Arabia, Iran and more. The sheer financial significance and investments of CPEC indicates that China is not solely relying on China-Pakistan bilateral trade, but much deeper and enhanced trade relations with China and the whole Middle East and North Africa region. The capabilities of CPEC will undoubtedly revitalise trade relations, enhancing their strategic relationship with energy-rich Middle Eastern countries. Considering CPEC is a branch off China’s BRI (Belt and Road Initiative), it will allow Arab countries to benefit from and connect with the Belt and Road network in Central Asia & Eurasia. CPEC is transitioning into its second stage, from 2020-2025 and in hope of the entire operation to finalise by 2030.  

Investment Opportunities and Mitigating Risks

With CPEC set to transform economic trade relationships between them and the whole MENA region and beyond, it is important to take data-driven approaches to best benefit from investments. With a business credit report, or, for a more enhanced investigation, a due diligence report you can assess the risk of your investment and make sure you avoid any unwarranted risks. With all investments comes risk, however, at Cedar Rose, we have a vast network of experts in the MENA region that can aid in your risk management process. We can help keep the transition of investments secure by providing helpful insights into companies, directors and shareholders. With over 23 years’ experience in the MENA region, we are trusted globally for quality and reliable business intelligence.

Written by Jack Evangelides, Marketing Executive

 

*** The sole purpose of the article above is to generate public discussion, it has no intention to constitute legal advice. ***

4 Steps for Effective KYC and KYB Process – Compliance (Infographic)

KYC/KYB

Know Your Customer (KYC) and Know Your Business (KYB) are two fundamental aspects in today’s business. It is important to stay compliant and for your platform to provide a verification service for all customers. Visually see how, in only 4 steps, our identity verification service works for KYC and KYB compliance. 

For a full article on KYC and KYB, check out “4 Step Process for KYC/KYB – Using Electronic Identity Verification

Additionally, contact helen.lambrou@cedar-rose.com directly for more information on identity verification or visit our identity verification page here.

4 Step Process for KYC/KYB – Using Electronic Identity Verification

KYC-KYB

Know Your Customer (KYC) or Know Your Business (KYB) is the concept of identifying an individual, for KYC, or a business, for KYB, before entering a business relationship. The ability to verify the identity of a person or a company prior to any business arrangements or customer on-boarding can help you mitigate risks. KYC is often tied closely with Anti-Money Laundering (AML), you verify and confirm the identity of an individual or business in order to ensure a business relationship is not misused. One of the most efficient and effective tools on today’s market, to verify identity and to ensure compliance, is Electronic Identity Verification (eIDV). It is important to understand the specifications of eIDV and to recognise how it may be used to help with KYC and KYB procedures and protocols.

What is Electronic Identity Verification?

Electronic Identity Verification, or eIDV, is the process of using digital methods for standard and comprehensive KYC and KYB compliance checks. Private companies are increasingly using eIDV services to instantly confirm the identity of an individual or an entity, such as a company. Identity is confirmed via an instant cross-reference with a database, providing match or no match results. So how does eIDV help?

Electronic Identity Verification takes into consideration a person’s name, address, ID and other factors (depending on the country of origin), standard information that users input when creating accounts for forex, online gaming, for fintech companies, e-commerce sites and more. With the aforementioned information, databases are meticulously and, instantly, scanned until a result is found, either a match, and thus, a verification, or a no match, and thus, a non-verification. The user would then be able to proceed to create the account, or not, depending on the result.

The Importance of Identity Verification

Using a quality and trusted eIDV service to confirm identities will enhance your on-boarding procedures whilst staying compliant and mitigating risks. Naturally, consumers are unaware and unconcerned with business policy, data protection and regulatory pressures faced by businesses; they expect a quick and easy service when conducting business online. Using eIDV, your customers get an enhanced service whilst your company adheres to compliance and regulatory rules. Keeping your company compliant with identity verification will bolster trust and transparency for your company.

“Organizations of all types rely on identity for compliance reasons, to help mitigate the risk of fraud, and to build trust and safety of their services. With better identity frameworks, these organizations can lower costs, lower risk, improve their ability to expand into new markets, and better build trust with customers, employees, suppliers, third-parties, and all their connections.” – Trulioo

Moreover, reputational consequences are, arguably, at an all-time high, with the increasing importance of online media and news, it is important to have a strong and trusted reputation. Without indulging in proper compliance protocols your company’s reputation can be majorly affected, which may deter new business potentials. Data is another factor that has massively grown in importance over the last decade, and making sure data is properly handled and verified is an important role that each company must take part in, without it, you can lose all credibility and trust from clients, investors and more. Therefore, we must ask, how does the KYC/KYB process work?

Identity Verification Process for KYC and KYB

1)      Connect to a Database Provider

First and foremost, before you can even begin to verify data, you need to have access to a system, to a database, that has already collated and cleaned the data, ready to be used. However, you also need to know what type of data you are looking for. For example, at Cedar Rose, we specialise in the Middle East, Romania and Russia, we have quality data on individuals and companies for companies to use our database and perform identity verification checks. Connecting to our database can also be done via API, directly from our system to yours. The data has been translated and is available for checking in either native (eg; Arabic, Cyrillic) and Romanised characters.

2)      User-Side Input

Whether you are an e-commerce company, forex, gaming or more, your users will have to input data at some point of your process that will then need to be verified. Such data can be, first name, last name, address, identification data and so on, depending on the country in question.

3)      Identification Data Checked

The inputted data will then be checked across the database that you’ve connected through via API. Depending on the data inputted, the check will be for either KYC or KYB. Cedar Rose holds a database of over 160 million individuals and over 12 million companies; this data is instantly checked through eIDV.

4)      Instant Verification Results

The final step of the identity verification process is the result that is returned. If the inputted data was found in the database, then it is a ‘match’, and therefore you have verified the legitimacy of the individual or company. However, if it is a ‘no match’, then the individual or company has not been verified. The eIDV service returns one of these two results, for accuracy and speed. The user would then be able to proceed or not, depending on the result.

Cedar Rose – Electronic Identity Verification

Cedar Rose has been compiling data for over 23 years, from the hardest of regions, such as the Middle East where, in some cases, data is not even digitalised yet at the official sources. We have collected and cleaned this data and presented it in a standardised, easy to use and easy to access database for our clients. We offer vast data on individuals in the Middle East, Romania and Russia and data on companies across the MENA region. We source our data from a variety of places such as: official records, local records, public records and credit rating agencies.  Our databases are easily accessed via our API and are suited for international clientele, scalability, and for instant results. If you have a large influx of entities to be verified, our scalable database can handle your requests. We offer a service that can provide a smooth, efficient and most importantly compliant on-boarding process. If you’d like to know more about how we can help, contact Hannah.king@cedar-rose.com or check out https://www.cedar-rose.com/solutions/eidv for more information.

 

Written By Jack Evangelides, Marketing Executive

 

Stay up to date with our latest news here.

 

*** The sole purpose of the article above is to generate public discussion, it has no intention to constitute legal advice. ***

5th Anti-Money Laundering Directive – Highlights

Anti Money Laundering

On 10th January 2020, EU Member states will have to implement new AML rules into their national legislation. The European Commission presented its proposal for a 5th Anti-Money Laundering Directive on 5 July 2016 which aims at ensuring a significant tightening of the European regulations for the prevention of money laundering and terrorism financing. The 5th Anti-Money laundering directive has been adopted and entered into force on 9 July 2018.

As per the European Commission’s fact sheet on the 5th Anti-Money Laundering Directive, this directive aims at:

  • Setting up centralised bank account registers or retrieval systems
  • Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation
  • Enhancing cooperation between financial supervisory authorities
  • Lifting the anonymity on electronic money products (prepaid cards) in particular when used online
  • Extending Anti-Money Laundering and Counter Terrorism financing rules to virtual currencies, tax related services, and traders in works of art.
  • Improving transparency on the real owners of companies
  • Improving transparency on the real owners of trusts
  • Interconnection of the beneficial ownership registers at EU level
  • Broadening the criteria for assessing high-risk third countries and improving checks on transactions involving such countries

It is worth highlighting that accessing data related to beneficial owners of trusts is not accessible to the public. This access is understood to be restricted to competent authorities including Financial Intelligence Units, the professional sectors subject to Anti-Money laundering rules (such as banks, lawyers) as well as other persons who can demonstrate a legitimate interest. Additionally, it is important to mention that the national registers on beneficial ownership information will be directly interconnected to facilitate cooperation and exchange of information between Member States.

The above objectives are meant to increase public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes.

Worth noting also that new criteria have been added to assess high-risk third countries, including transparency of beneficial ownership. Member States will have to ensure that the sectors dealing with countries presenting strategic deficiencies in their Anti-Money Laundering and Counter Terrorism financing regimes listed by the European Commission apply systematic enhanced controls on the financial transactions from and to these countries. The list of checks is now harmonised to ensure there are no loopholes in the EU. In addition, the listing of the Commission will include third-countries with low transparency on beneficial ownership information, no appropriate and dissuasive sanctions or which do not cooperate nor exchange information.

Cedar Rose’s investigative due diligence reports, including tracing the source of wealth of persons residing in high risk third countries as well as the UBOs of companies registered in these same countries, tends to directly serve these objectives. Our database, which includes more than 24 million persons’ data and over twelve million companies, provides a solid foundation for tracing UBO’s and for performing link analysis. Fresh investigations to trace the source of wealth of a person through a local reputational report or via understanding his directorship and shareholding structure is also available to facilitate your investigations.

Written By Wassim Antar, Senior Due Diligence Analyst

See our Due Diligence Case Study here.

References

https://ec.europa.eu/info/policies/justice-and-fundamental-rights/criminal-justice/anti-money-laundering-and-counter-terrorist-financing_en

https://paytechlaw.com/en/5-anti-money-laundering-directive-summary/

Lebanon, Economic Situation and Restrictions

Lebanon

Demonstrations and Protests
Friday, 22nd November was Independence Day in Lebanon, usually a day for celebrations, but lately the country has been going through troubled times in an effort to stamp out corruption. For the past five weeks Lebanon has been facing a decentralised revolution movement throughout the country. The revolution started on the night of October 17 after the declaration by the government of additional fees on WhatsApp application voice calls – an international free of charge service very popular among Lebanese both within Lebanon and overseas. The uprising was triggered by this declaration announced by the Lebanese Minister of Telecommunication. The revolution also includes many demands related to the economic, social and political situation. Protesters were furious about the country’s economic recession as well as the lack of basic services and rights such as medical services, electricity availability and the high level of unemployment in the country. The Lebanese population have been demanding the resignation of the government body as well as investigating corruption and fraud activities over the past 30 years. To exercise more pressure, people have been setting fires and blocking roads in most of the cities which has paralysed the country for more than two weeks. Consequently, the Prime Minister Saad Al Hariri declared the resignation of the Lebanese Council of Ministers, promising to constitute a professional council that puts each person in the right place.

Currency Crisis
Additionally, before the revolution, Lebanon’s currency crisis had started causing concerns among citizens. Banks have been hoarding dollars as a result of a shortage and the country had been seeing the unofficial exchange rate in the “black market” (licensed or unlicensed currency traders) going from LBP 1,580 to the US dollar to LBP 1,600 or even LBP 1,800 for the first time since 1997. Residents have been unable to convert their Lebanese Pounds into dollars and they have been also unable to access bank’s ATM’s. The US dollar is used regularly in daily life in Lebanon alongside the Lebanese pound and most establishments have traditionally accepted payments in both currencies since the LB pound was pegged against the US dollar in 1997.

Oil and Gas Rations
Oil and gas companies and fuel stations have also been protesting since the end of September for being unable to purchase fuel at the original official currency rate. So, oil and gas companies stopped distributing fuel to the stations, and so these had to shut down for a period of time not providing services to the citizens. The problem was resolved in a short period of time when the Central Bank of Lebanon opened US accounts for stations and petroleum companies to import fuel. However, the fuel solutions didn’t last long enough and petroleum companies have since rationed fuel availability for their customers. In a country where many people rely on private diesel generators for electricity supply, this could have extensive consequences.

Bank Strikes and Financial Controls
It is worth noting that banks are currently imposing restrictions related to foreign currencies, due to the citizens’ panic during the revolution. It was estimated that, during one week, Lebanese people have withdrawn around USD 2 billion from their bank accounts.  Following the demonstrations and incidents with clients angered by restrictions on withdrawals, banks have been mostly closed since the start of the protests and businesses have been unable to pay their international suppliers.  Banks are set to reopen on November 19, 2019 with tight restrictions on hard currency withdrawals and transfers abroad. Cash withdrawals would be limited to $1,000 a week and transfers abroad would be restricted to urgent personal spending only.

Since Lebanon is a major importer of goods, this decision has directly affected the country’s importers.

The Situation on the Ground for Importers
Cedar Rose has been doing some in depth research and interviews with Lebanese companies from different sectors to assess the challenges they are facing and find out how they are overcoming these challenges:

Cash on Delivery
A company trading in paint accessories, hardware and electrical tools, importing mainly from China and some European countries has confirmed that with the bank’s closure they are unable to pay their suppliers. A 30% down payment was made on an order before the protests, and the remaining 70% should be settled before the shipment’s arrival in December. Once banks open the company will be able to fulfil its obligations, however, will be highly affected by the current exchange rate converting Lebanese Pounds into US Dollars.

Imports Being Affected
An international pharmaceutical distributor based in Lebanon is mainly facing issues with third party manufacturers and companies engaged in the packaging of the medicines, which usually rely on foreign currency funds from the Central Bank of Lebanon. The lack of these foreign funds is affecting the import of pharmaceutical products.

Bank Recommendations
In order to pay their international suppliers, companies in Lebanon are being issued a US Dollar bank draft from the Central Bank of Lebanon by their banks and the draft is directly transferred to the supplier. However, only a small number of importers can benefit from this solution, as in order to have a bank draft, sufficient funds should be available in the account of the importer which means no credit facilities can be granted by the bank. Also, as there are restrictions on transfers outside of the country and in US dollars, the company should provide US dollars to the bank in cash in order to be issued a bank draft.

Throughout all the current situation in Lebanon related to the revolution, corruption, fraud, foreign currency shortage and international payment restrictions, the only solution for the settlement of international payments is for importers to have US dollars in cash. This solution is costly especially because of the depreciation of the “street” value of the Lebanese pound and this can heavily affect the cost of the products and consequently the increase of the prices for the consumer.

The Situation for Exporters
During such a crisis, it is advisable that exporters to Lebanon exercise extreme caution, and maintain a regular dialogue with their customers to keep up to date with the situation. The central bank controls at this point seem sensible, in order to avoid total economic collapse, but as there is currently no end in sight to the revolution and the daily demonstrations, these controls can only help in the short term.

See more articles here.

Written by Mario Maroun, Financial Analyst

 

*** The sole purpose of the article above is to generate public discussion, it has no intention to constitute legal advice. ***

Cedar Rose – Leaders in Know Your Customer & Entity Verification

Cedar Rose Leaders

Cedar Rose Positioned as Leader in Know Your Customer & Entity Verification in One World Identity’s 2019 Identity Industry Landscape

Cedar Rose Recognized for KYC & KYB Deterministic Data

New York City, New YorkNovember 21, 2019 – Cedar Rose today announced that it was recognized as a leader in Know Your Customer (KYC) & Entity Verification (KYB) by One World Identity (OWI). OWI is a market intelligence and strategy firm focused on identity, trust, and the data economy. Each year, OWI designs an Identity Landscape, providing a comprehensive and holistic view of leaders in the identity space. As the identity industry is rapidly developing, OWI’s landscape provides an unparalleled overview of how digital identity applications are evolving and the companies and markets shaping next-generation digital identity.

With over 400 companies and 35 market segments, the 2019 Identity Landscape visually depicts a growing and maturing industry. The new, unique landscape format allows companies to touch multiple market segments, reflecting on the dynamic nature of digital identity applications. The OWI team selected 415 identity companies from a pool of over 2,000 based on several factors.

  • Each company must be an identity company OR have a distinguishable line of business focused on identity.
  • Each company must be at least 3 years old or have raised $3 million.
  • Each company must have a functioning product in the market.

“Since 2017, the number of identity companies has more than quadrupled, from 500 companies to over 2,000,” said Travis Jarae, CEO and Founder of OWI. “With the wave of data breaches and privacy scandals, there is a rapid expansion of identity products and solutions. The OWI team interacts with identity companies every day, from startups to enterprise. We’re proud to share the Identity Landscape each year to distill how new companies, products, and solutions are shaping the future of identity.”

Cedar Rose has been recognized as a leader in Know Your Customer (KYC) & Entity Verification (KYB). The company provides business intelligence solutions which include electronic identity verification for both people and businesses. Cedar Rose has uniquely covered one of the more difficult geographical regions for KYC and KYB including many countries in the Middle East and North Africa as well as Russia, Romania and Turkey. The company has also recently been recognized by the European Business Awards as “Ones to Watch” and awarded the National Winner prize for Digital Technology, with the final judging to take place in December.

Antoun Massaad, Cedar Rose’s founder and CEO said, “The region we have traditionally been covering for business intelligence, Know Your Customer and Entity Verification data has certainly had its share of challenges and we are working hard every day to not only increase our coverage in these difficult regions, but to expand our services to offer global entity verification very soon. To be recognized by organizations like One World Identity and to be included on their 2019 Identity Industry Landscape is testament to the hard work our teams are putting in every day. It makes me very proud for Cedar Rose to be included amongst the top companies in the world for our KYC and KYB identity verification services as well as for the digital technology that enables them. Having traditionally been providing credit reporting and due diligence services for over 20 years, electronic identity verification is a fairly new line of business for us since 2016 and I’m glad that we grasped the opportunity to be at the forefront of this exciting new industry.”

Digital identity is the core of digital transformation. From personal to professional applications, identity is the foundation for how we connect, engage, and interact in the digital economy. As there is increasing consumer demand for privacy and security, digital identity is no longer a nice-to-have; it is a pillar of success. The OWI Identity Landscape is a tool to help companies keep track of market growth and trends and understand the strategic importance of digital identity moving into 2020 and beyond. OWI will be releasing a more detailed research report delving into the details of each market segment and how companies within the industry overlap and intersect in upcoming months.

Download a complimentary copy of OWI’s 2019 Industry Landscape at www.oneworldidentity.com/landscape.

About Cedar Rose: Cedar Rose is an innovative, digital technology focused business intelligence agency providing company profiles, credit reports, due diligence, data subscriptions and electronic identity verification services for companies and individuals. The company has traditionally covered the Middle East and North Africa, though has been expanding to offer global coverage in many services over recent years. Cedar Rose was founded in the UK in 1997, and is now based in Cyprus and Lebanon.  

About OWI: OWI is a market intelligence and strategy firm focused on identity, trust, and the data economy. Through advisory services, events and research, OWI helps a wide range of public and privately held companies, investors and governments stay ahead of market trends, so they can build sustainable, forward-looking products and strategies. OWI was founded in 2015 and is the host of the KNOW Identity Conference that takes place in Vegas April 5-8, 2020.

Keep up-to-date with Cedar Rose’s latest news here.

Citizenship via Investment Schemes: Risks & Solutions

Citizenship

Facts:
A most recent European Commission report to the European parliament, the Council, the European economic and social committee and the committee of the regions tackled the topic of “Investor Citizenship and Residence Schemes in the European Union”. As per the report, recent years have seen a growing trend in investor citizenship (golden passport) and investor residence (“golden visa”) schemes, which aim to attract investment by granting investors citizenship or residence rights of the country concerned. Such schemes have raised concerns about certain risks related to security, money laundering, tax evasion and corruption.  While some investor residence schemes were initiated in the early 2000s, the financial crisis starting in 2007 led more EU Member States to adopt these schemes, or revive previous ones. This trend has continued over the past 10 years and these schemes exist to date in 20 Member States.  For instance, Bulgaria, Cyprus and Malta introduced in 2005, 2007 and 2013 respectively broader schemes aimed at attracting investment from third-country nationals by facilitating access to their citizenship. These schemes are a new form of naturalisation as they systematically grant citizenship of the Member State concerned, provided the required investment is made and certain criteria fulfilled. The report added that investor citizenship schemes aim to attract investment by offering citizenship in return for a defined amount of money. In Bulgaria, an overall investment of EUR 1 million is requested under its fast-track investor citizenship scheme. In Cyprus, a minimum investment of EUR 2 million is necessary, together with ownership of property in Cyprus. In Malta, a contribution of EUR 650,000 must be paid into a national investment fund, together with an investment of EUR 150,000 and a requirement to own or rent property in Malta. In Cyprus and Malta, additional investments for family members are required. Various investment options can be observed among the three Member States operating investor citizenship schemes: capital investment; investment in immovable property; investment in government bonds; and one-off contributions to the State budget. In addition to the investment requirement, applicants must also pay non-refundable administrative fees as part of the application process. Cyprus and Malta have significantly higher fees than Bulgaria.

Areas of Concern and Risks:

Third-country nationals may invest in an EU Member State for legitimate reasons, but may also be pursuing illegitimate ends, such as:

  1. Evading law enforcement investigation and prosecution in their home country;
  2. Protecting their assets from the related freezing and confiscation measures.
  3. Utilizing illicit funds to obtain a passport.

Hence, investor citizenship and residence schemes create a range of risks for Member States and for the Union as a whole in particular:

  1. Risks to security, including the possibility of infiltration of non-EU organised crime groups.
  2. Risks of money laundering and tax evasion.
  3. Risks related to terrorist financing.
  4. Risks related to corruption including previous involvement in fraudulent practices.
  5. Risks of being directly or indirectly politically exposed.
  6. Risks related to lack of Transparency and proper governance:

Controversial case:

A controversial investment for citizenship scheme was reported in Cyprus on October 17 2019 in relation to the acquisition of Cambodia’s long-time prime minister. Investigations revealed that the once prime minister used his wealth to buy foreign citizenship. It was reported that eight family members or allies including the country’s police chief who has been instrumental in clamping down on dissent in Cambodia, and its finance minister, sought and received Cypriot citizenship in 2016 and 2017. The European Commission warned in a January 2019 report that what it called “golden passports” could help organised crime groups infiltrate Europe and raised the risk of money laundering, corruption and tax evasion. While Cyprus authorities say their processes are transparent, and data laws protect he who gets citizenship, it was understood that the Cypriot government did not respond to questions on the Cambodians before publication of the report. After publication, a government spokesman was reported to say that the citizenship program was absolutely credible and transparent while declining to discuss individual cases and that the information on the Cambodians “will be taken into serious consideration”. Further investigations traced that the prime minister was in power for 30 years and has overseen the murder, torture and jailing of his critics. His family members hold key posts in politics, the military, police, media, and charities, and his eldest son is being groomed to succeed him. His family wield significant control across most of Cambodia’s lucrative industries, with links to major global brands. Some of the domestic companies they are affiliated to have been accused of a litany of abuses, including land grabbing, and violence and intimidation against local populations. His daughter was reported to have the largest number of business holdings of any member of the family, with links to or interests in 22 companies, which have registered share capital of more than USD 66 million, according to filings in Cambodia.

The questions remain on how diligent were the authorities or the obliged entities in examining the applications of the Cambodians? Where there any Enhanced due diligence process conducted to trace any red flags issues associated with these applicants? If yes, were these findings factored in when assessing their case? The above case lies at the heart of the need of enhanced due diligence to be put in place. Mitigating risks and adopting risk based approaches throughout the process of the Citizenship via investment schemes is becoming a necessity rather than just an option.

Solutions

Therefore, Cedar Rose has engineered a bouquet of integrity and investigative due diligence products, which aim at:

  1. Identifying, the source of income / wealth as well as any illicit practices associated with the subject under investigation (Fraud, Bribery, Corruption, etc). This type of investigation helps in understanding the reputation of the subject and in establishing a profile, which would trace any possible reasons for this person to transfer funds or benefit from investor citizenship schemes.

  2. Tracing Ultimate Beneficial Owners (UBO’s) as well as the business and political network of an applicant. This type of investigation will help in tracing and identifying possible concealment of the origins of proceeds, which could be, linked to the layering stage a potential Money laundering scheme.

  3. Identifying the directorship and shareholding of the applicant. This type of investigation will also aim to trace possible concealment of the origins of proceeds (Layering stage) as well to identify possible ownership of these shareholders and directors which would possibly be a result of the reintroduction of laundered funds into the system (Integration stage) via the ownership of assets in the country where they applied for the investor citizenship scheme.

  4. Tracing the business relationships and any possible political exposure for the applicant.
  5. Initiating litigation and criminal checks to understand any possible previous illegal practices.

References:

https://www.globalwitness.org/it/blog/we-dont-care-we-are-still-power/

https://ec.europa.eu/info/sites/info/files/com_2019_12_final_report.pdf

https://cyprus-mail.com/2019/10/17/mp-charalambidou-demands-answers-for-passports-to-cambodian-elite/

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Written by Wassim Antar, Senior Due Diligence Analyst

CEDAR ROSE NAMED ‘NATIONAL WINNER’ IN PRESTIGIOUS EUROPEAN COMPETITION

Cedar Rose EBA

Limassol based business intelligence company, Cedar Rose, has been named ‘National Winner’ for Digital Technology for the second year in a row, in the 2019 European Business Awards; one of the world’s largest business competitions.

Cedar Rose was chosen from 2,753 businesses named as ‘Ones to Watch’ in a list of business excellence published in July and selected as a National Winner by a panel of 50 independent judges including business leaders, politicians and academics. Over 120,000 businesses entered the European Business Awards this year. Cedar Rose is the best business in Cyprus in the category of Digital Technology and will now go on to represent Cyprus in the final stage of the competition across the European continent.

Cedar Rose, which provides company credit reports, due diligence and identity verification services, has continually strived for excellence in order to push the boundaries and break down barriers in the data-driven world. With an overriding mission to supply the world with high quality data from the hardest of regions, such as the Middle East and North Africa, Cedar Rose uses the most advanced technologies, from AI to algorithms, machine learning and API (Application Programming Interface), to accomplish this task. The company also recently won the title of “Commercial Credit Information Provider of the Year 2019” at the Credit Strategy Awards in London.

Christina Massaad, Managing Director of Cedar Rose said: “We are absolutely delighted and honoured to achieve the National Winner award for Digital Technology for the second year in a row. All of our employees, whether they are in Cyprus, Lebanon or other countries around the world work so hard and really aim to be the best at what they do. It is great to have the judges of the European Business Awards recognise and reward those efforts. We are very excited and honoured to represent Cyprus at the European finals in December.”

Adrian Tripp, CEO of the European Business Awards said: “This is a significant achievement and Cedar Rose is an outstanding leader in their field. To be chosen as a National Winner means you show great innovation, ethics and success and are one of the best businesses in Europe. We wish Cedar Rose the best of luck in the final round.”

Cedar Rose will head to Warsaw, Poland on the 3rd and 4th of December to complete a final round of judging and attend both a Summit to engage in business issues, and the Gala Ceremony where the overall category winners for the 2019 European Business Awards will be announced. The European Business Awards is now in its 12th year and its primary purpose is to support the development of a stronger and more successful business community throughout Europe. This year it considered over 120,000 businesses from 33 countries. Sponsors and partners include Inflexion, Germany Trade & Invest and Cision PR Newswire.

For further press information or for case studies/interviews, please contact:

info@cedar-rose.com

+357 25 346630

www.cedar-rose.com

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