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 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. ***

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/

** Check out our newsroom for more business intelligence insights

Written by Wassim Antar, Senior Due Diligence Analyst

Remote Working – Advantages & Disadvantages

Remote Working

Working remotely has always been an attractive prospect for people of all ages and professions. Recently, remote workers are increasing worldwide as technology allows global collaboration and many people find it suitable to work from a home or a coffee shop or a work-space they choose, at the times when they can be most productive

Did You Know?

***** Fact 1 ****

The primary reason employees reported choosing to work from home was for better focus and increased productivity. The second reason was to reduce their commute.

(Source: Owl Labs)

**** Fact 2 ****

90% of remote workers plan on working remotely for the rest of their careers, and 94% encourage others to give remote jobs a shot.

(Source: Buffer)

 **** Fact 3 ****

Loneliness (21%), collaborating and/or communicating (21%), and distractions at home (16%) are the biggest struggles for remote workers.

(Source: Buffer)

**** Fact 4 ****

Companies that allow remote work experience 25% less employee turnover than companies that do not allow remote work.

(Source: Owl Labs)

 

Advantages and Disadvantages of Working Remotely

Advantages:

  • Work anywhere and anytime!

Working remotely gives you the opportunity to choose your work space and control your time. You are not limited this way to any geographic location, nor to strict “working hours”, which will increase your comfort while working, and thus drive your productivity. (This might not sound really interesting if you are from that type of workers who are not really self-motivated to manage their time without some supervision or management!)

  • Well…No commute!

Waking up early in the morning to head to work so you do not get stuck in traffic… this is the main concern for all full time employees! Working remotely helps you avoid a lengthy commute, delays which are beyond your control and/or getting stuck in traffic for hours and arriving late to work. This could be the best way to start your day calmer, with less stress and tension.

  • Yes to Diversity

Remote work offers the opportunity to grow and go international! Working remotely is definitely an added value for both employers and employees. Having remote workers from all over the globe who are all working as a “team” brings cultural, ethical, educational, cognitive and creative additions which will help in enhancing, developing and improving the work environment.

Disadvantages:

Now that we mentioned some benefits for working remotely, let’s talk about the dark side of the moon! Working remotely often brings up some challenges among which we can list the following:

  • Distractions are always there!

Full time employees definitely face distractions in office, however these distractions get worse while working from home. Having kids, receiving unexpected guests, cousins and friends coming over, hearing TV noises, preparing lunches and dinners, all of these are some of the many distractions that a remote worker can face when at home!

  • No “real” work-life balance…

Working remotely might seem to be opening chances for you to enjoy a work-life balance, however it is not really the case, especially that you do not have any separation between workplace and home space. You are now in a too much comfortable and familiar environment, where you also do your daily home tasks, which will therefore minimise your concentration level.

  • Unhealthy Lifestyle

While working in an office, companies are providing ergonomic chairs and suitable desks for your health; however, while working from home it is a little bit harder to set this healthy work space and equip it with the adequate furniture. Some remote workers might like to work lying on the couch, and unless they are informed otherwise, they may be unaware that this may cause them terrible back pain in the future.

Testimonies of some of Cedar Rose Remote Workers:

“Many reasons come to my mind of why I like working remotely with Cedar Rose, mainly:

1-      Time management is pretty important to me specially that I have my own office. Workload tends to be irregular, so this kind of work helps me juggle all my tasks at my ease.

2-      My productivity level increased, noting that I am working in my own comfortable environment.

3-       My financials stabilised and increased radically as I control my own income.

Yet, there are challenges of working remotely, but personally, I face only one challenge, which is the lack of social interaction…  And in order to not feel isolated, I try to take breaks, go for walks and sometimes work from public places like a coffee shop or work with a friend.”

Anna – Maria Hbayter, Arabic/English Remote Worker

“Among the reasons why I enjoy working remotely with Cedar Rose:

  • The team is very friendly and always willing to help.
  • I get to manage my own working hours, without having to miss out on other work opportunities.
  • I found the guidelines and tables provided by the company to be quite helpful, and they are updated regularly.

 

Challenges:

– Losing focus after working too many consecutive hours.

– Thinking I will have time to do things later and ending up working late to get everything done.

  • Solutions:

– Take many breaks.

– Engage in sports and work in a coffee shop to avoid feeling isolated.

– Write a to-do list every morning and setting a maximum number of hours for every task before moving to the next one.

Guitta Njeim,Arabic/English Translator

“Working online has brought about an interesting opportunity that has never been an option for our fathers. You can now work and travel freely as you do not have to show up every morning at a bricks-and-mortar workplace. Besides, you can decide about the working hours and how much money you want to earn. Cedar Rose has provided its remote workers with all these options.

Nevertheless, there are also challenges involved. Not everyone has the willpower and self-discipline minimum prerequisites for working online.

Possible solutions might be working on your willpower by employing a system of positive and negative reinforcement and by dividing the tasks into smaller chunks.

Babak Firouzzadeh, Persian/English Translator

What are your thoughts? Do you work remotely? If so, we’d love to hear your experiences, tips and advice in the comments below.

Written by Maria El Helou

Read more article in our newsroom here.

Image by Freepik

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

GDPR – What have we learnt and what more can we expect?

GDPR

There is no question that when the General Data Protection Regulation (GDPR) was enforced by the European Commission (EC) on the 25th May 2019 it shook up the corporate world. Consumers are becoming more aware of the handling of their private and personal data and more and more businesses are being held accountable for private data misuse. GDPR is, perhaps, the most elaborate and corporate-defining, set of regulations that the business world has experienced in the 21st century. As the world continues its journey within the digital world, a technological age, regulations such as GDPR are starting to parallel basic human rights, akin to rights such as Freedom of Speech. Our data-driven world requires more understanding and precautions over our personal data and GDPR, for just over a year now, has been enforcing just that. It is important to deliberate and acknowledge how far GDPR has already taken us and what lies ahead.

Understandings & Reflections of GDPR
The unsurprising initial ‘noise’ of GDPR is starting to quiet down as we move to a more implicit understanding and a greater acknowledgment of the regulation. But what have the outcomes of GDPR been in this last year?

1. Black & White Understanding
If we have learnt anything from GDPR since its enforcement, it is that it provides clarity over who serves it, who it applies to, what enforces it and penalties for incompliance. Business has undergone a major data-driven transformation in the last decade and now, with the help of GDPR, consumers can now begin to understand their rights over their own private and personal data. Data-privacy is becoming an ingrained concept, a right, into our everyday lives, bolstered by the amount of data that consumers interact with, whether it is on social media, buying insurance or practically anything you do in your day-to-day activities. In the last year there have been over 95,000 complaints issued by consumers in relation to GDPR incompliance which highlights that the everyday consumer is becoming more aware and educated to their individual rights of data-privacy and data-control.

2. GDPR’s Muscle Flex
Although GDPR is something that goes on in the background, its repercussions can be disastrous for both small companies and large. The impacts of incompliance aren’t limited to fines, but you may also receive financial sanctions, and, perhaps the most effective drawback, reputational damages. As consumers become more aware of the rights concerning data-privacy, they are less likely to get into business with companies that carry a poor reputation for looking after client data. The EC have pushed fines to companies amounting to €20 million or 4% of global revenue – whichever figure is higher. Moreover, some of the most notorious financial penalties have recently been handed out to some of the biggest companies in the world, such as Google in January 2019. Google were fined a hefty amount of €50 million by the French National Data Protection Committee, GDPR has proved to the corporate world that no one, no matter how big, is excused from complying with the regulation. The fact that no company can hide from the effects of the General Data Protection Regulation enhances the fact that data-privacy is becoming and has become a norm in society, a core value of human rights and an overall protection of private data.

Where is GDPR heading to next?
GDPR punishes all incompliance and leaves no one to spare. Is it rampaging on to become a tyrant or will the regulation quit while it’s ahead? The good news is that GDPR is out to protect consumers and will hold all accountable for incompliance, naming and shaming as it goes along. The future of the regulation will show it maintaining its current state, providing fines, financial statements and the ever-so disastrous reputational damages that it bears. However, for companies, this means that there will be more of these repercussions until the safety of consumer data can be assured. Our data-driven world will attempt to engrave GDPR into it as natural law, a natural right of each individual and the effects for incompliance are as big as the statement it holds. The European Commission has set a solid precedent in their iron fist approach against incompliant organisations in hope to breed a corporate society of greater legitimacy and trustworthiness. GDPR is trying to create a better future for businesses and consumers to act upon, for consumers to healthily put their trust, their data, into legit and compliant companies.

Pro-GDPR
Cedar Rose is pro-GDPR and since its enforcement in May 2018, we have stayed on top of the necessary policies and regulations to ensure we conduct business legitimately. Companies and consumers have trusted us with their data for over 20 years; we acknowledge them and owe them their privacy in any way possible. We have our Data Protection Officer (DPO) who keeps up with the current affairs of GDPR and makes sure that our company complies with what is necessary. We want to create a friendly and inviting opportunity for our consumers to take part in, a company you can trust with your more sensitive data. We understand the importance of GDPR and wholeheartedly comply with the regulations. We are the go-to data-driven company for the Middle East and North Africa.

But like all companies, we can’t just sit back and say we’ve checked all the boxes, it’s so important to stay abreast of new rules and regulations around business, data and privacy, so do watch out for the proposed EU ePrivacy Regulations possibly coming soon…

See some of our other articles such as ‘Corruption: Steps to Prevention & Avoid Potentially Harmful Risks‘ 

Written By Jack Evangelides, Marketing Assistant

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

Cleaning Dirty Data Daily – The Importance of Data Cleaning

Data Cleaning

Operating since 1997, Cedar Rose is known to have the largest single cleaned database of analytically linked companies’, shareholders’ and directors’ information across the Middle East, Africa and Asia, available to our thousands of clients around the world. Data cleaning has always and will always be a priority to us.

No matter how data is gathered and collected, there will always be some level of error. Data in the real world, certainly in the regions we gather it from is mainly dirty: incomplete, disorganized, unstructured and inconsistent. Incomplete data stems from non-available data values when collected and different criteria between the time collected and the time analyzed. Examples of a lack of attribute values could be an incomplete address or incomplete translated company name. Original data contains errors such as typing, spelling, word transposition (e.g. number of premises or number of employees equal to -3, or even a Shareholder/ Manager who is 230 years old).

Data can also be inconsistent and duplicated; containing incompatibility in codes or names (e.g. Company Name: “XXX Company LTD” or “XXX Company Limited” could be considered one registered entity although in the latter case the legal form is Joint Stock Company which is not reflected correctly in the name). The lack of compatibility is mainly between the different data fields. Inconsistent and duplicate data, as in the example above, comes from different data sources merged together or non-uniform naming conventions.

These types of mistakes can result from human error, poor recording software, or incomplete control over the type of data imported. Before processing the data for analysis or use, error-prevention strategies should be implemented to reduce common errors as much as possible, and to ensure that data is accurate, valid and consistent.

Maintaining an excellent quality database is essential for our company to ensure accuracy in our credit and due diligence reports. In our data warehouse, currently containing more than 12 million companies and more than 23 million individuals, data cleaning is a major part of the extract, transform and load (ETL) process. Data cleansing (also known as data cleaning or scrubbing) is the process of spotting and rectifying inaccurate or corrupt data.  Incomplete, inaccurate or irrelevant data is identified and then either replaced, modified or deleted.

Also worth noting that all our data is date stamped and graded. Our clients can now check the date of each data field in addition to its source grading. In recent years, Cedar Rose has implemented a system for the grading and evaluation of the source reliability, as well as of the information and intelligence credibility of the majority of our data. This grading is invaluable to our subscribers and due diligence clients who can then calculate which data they can rely on 100% and which has less reliability (eg; data from third parties, assumed to be correct but not verified).

No matter what sector you are working in, from public health to extractive industries to education, you can have access to our cleaned and linked database of companies, directors and shareholders via our website at www.cedar-rose.com, via API or by a CRiS subscription.

For further information, please contact Hannah King or Nicole Konstantinou to arrange a demonstration of CRiS, or go to our website to search and download or order a fresh investigation on your client today.

Visit our newsroom for more relevant news!

Written By Elissa Ghosn, Data Analyst

 

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