Risk Professional: Money laundering laws begin to bite in office services sector

The Financial Action Task Force, the group of about 30 nations which produces "The Forty Recommendations" for countries as a quasi-enforceable list of requirements to be included in the legal and regulatory regime created to combat money laundering, plus nine "special recommendations" to aid in detecting and deterring the financing of terrorism, often adds new business areas to those businesses that must put in place measures to detect and deter money laundering and terrorist financing.

Among the areas added to the Recommendations in the past few years are jewellers, dealers in high-value goods, cheque cashing businesses, cash couriers and lawyers undertaking certain types of work. Auditors "may" be added by countries if they think it appropriate, accountants should be included.

Also added were providers of office and company services. This includes those providing company formation services, company secretarial services and providers of temporary and virtual offices plus mail services e.g. mail boxes.

This latter group has not been pursued with the same force as many other kinds of business. They have no history of being regulated, no history of being registered or licensed and no history of having any form of compliance regime applicable to them. They are, therefore, completely unprepared for the style of licensing, regulation and compliance which applies to them.

The USA has been one of those countries which has been very lax in requiring the office services sector to put in place measures to identify their customers. In the UK, business centres have made some headway but in many cases, their advice has been poor and the processes they have adopted have been inappropriate, says The Anti Money Laundering Network's Nigel Morris-Cotterill, who has examined the procedures recommended by some UK lawyers and, he says, found them wanting.

Notwithstanding the poor performance in the USA, however, the Bureau of Industry and Security, has paid special attention to the office services sector.

But it has not started enforcement proceedings against any office services companies. Instead, under its powers to ban persons from "export privileges" it has made orders against the following:

Anvik Technologies Sdn. Bhd. and

Babak Jafarpour a.k.a Bob Jefferson

The order is expressed to relate to "the use of virtual offices in the U.S., Hong Kong and Malaysia to facilitate illicit Iranian procurement activities."

The addresses for both the company and the person are listed by BIS as

Level 20, Menara Standard Chartered, 30 Jalan Sultan Ismail, Kuala Lumpur 50250 MalaysiaLevel 36, Menara Citibank, 165 Jalan Ampang, Kuala Lumpur 50450 MalaysiaLevel 19, Two IFC, 8 Finance Street, Central, Hong Kong155 North Wacker Drive (42/f), Chicago, Illinois, 60606, USA

Note: although Menara Standard Chartered and Menara Citibank bear the names of major international banks, they are "named tenants" and not the owners or the managers of the building; they do not operate the business centres listed.

The "Temporary Banning Order" against the company and the individual were issued 16 November 2010 and last for 30 days unless renewed. They are issued because BIS is of the opinion that a breach has occurred or is imminent.

BIS alleges that the individual controls the company and that there have been a number of occasions since October 2009 and continuing when they have sought to export products from the USA to one of the virtual offices with the intention of forwarding them to Iran.

The BIS order with full details of the allegations is at http://www.bis.doc.gov/news/2010/TDO20101115.PDF

All US citizens and residents are not permitted to take a wide range of actions relating to the commercial activities of those who are subject to the order. That includes being involved in any financial arrangement.

By a contorted route through a network of law and regulation, that means that no foreign bank may deal with them in relation to the matters in the Order either directly or through the correspondent banking network.

Because banks are prevented from dealing with them (in USD) then that effectively blocks all persons worldwide from dealing with the named persons in USD wherever the dealings are carried out, if those dealings are covered by the Order.

(The Anti Money Laundering Network Ltd is the ultimate holding company of Vortex Centrum Ltd, the publisher of ChiefOfficers.Net).