Financial Regulatory Forum

Despite progress since 9/11, government must do more to combat terror finance, experts say

By Brett Wolf

NEW YORK, Sept. 12 (Thomson Reuters Accelus) - The fight against terrorism financing has advanced in the 10 years since the September 11, 2001 attacks, but vulnerabilities remain in areas such as digital currencies and alternative transfer networks, and bureaucratic turf battles have reemerged, say former law enforcement officials who pioneered U.S. counter-terrorism financing efforts.

“We cannot forget that the technological methodologies for moving funds around the world are changing exponentially everyday. We’ve got to keep up with that,” a former U.S. counter-terrorism official with the departments of Treasury and Justice told Thomson Reuters.  (more…)

Is the medicine for financial services turning out to be worse than the disease?

By Susannah Hammond

LONDON/NEW YORK , Sept. 9 (Thomson Reuters Accelus) – Almost three years on from the fall of Lehman Brothers and the widespread public bail-out of financial services the world is looking grim. In the white heat of the crisis itself jurisdictions, policymakers and governments moved together to resolve the worst of the immediate issues and bought global financial services time to heal. While some recovery and mending of balance sheets has certainly taken place, global financial services continue to suffer at the hands of divergent policymakers, international recessions and sovereign debt crises.

The medium-term aftermath of the financial crisis may well turn out to be more damaging to financial services than the crisis itself. Quite how severe the current state of affairs has become was highlighted by the new head of the International Monetary Fund, Christine Lagarde, who stated that “there remains a road to recovery, yet, we do not have the luxury of time”. The risks to any recovery are increased by “a growing sense that policymakers do not have the conviction, or are simply not willing, to take the decisions that are needed”.  (more…)

Regulatory forbearance looms as next big supervisory risk for financial giants

By Susannah Hammond

LONDON/NEW YORK, Sept. 9 (Thomson Reuters Accelus) – Regulatory forbearance is not a concept that has hit many headlines. It is, however, emerging as an underlying theme in publications by a range of bodies, from the International Monetary Fund (IMF) to the European Union and beyond. Regulatory forbearance is not about supervisory incompetence but, rather, the potential for a fully briefed regulator to decide not to intervene. There may be many legitimate occasions when non-intervention is the right call but, when judged with the benefit of hindsight, more supervisory interventions, made sooner, could have ameliorated some of the worst of the issues arising out of the financial crisis.

As Bank of England governor Sir Mervyn King stated, taking away the punchbowl when the party is in full swing is never an easy decision to make. Regulators, however, must be both capable and willing to take tough interventionist action. Regulators making such difficult decisions need to be assured that they have the backing of the international financial services community, the support of their domestic political masters and, perhaps to a lesser extent, the understanding of the public.

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U.S. Justice Department disputes charges it unfairly targeted community banks

By Emmanuel Olaoye

NEW YORK, Aug. 31 (Thomson Reuters Accelus) - The U.S. Justice Department disputed charges by community bankers that it is unfairly targeting them with fair lending actions, and said the cases have been consistent with the criteria it has used to bring cases in the last 15 years.

Eric Halperin, special counsel for Fair Lending at the Department of Justice’s Civil Rights Division, told Thomson Reuters on Tuesday that the criteria used to bring enforcement actions is consistent with those used in the Bush and Clinton Administrations.

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Yuan internationalization takes off in Hong Kong

By Helen H. Chan (Hong Kong)

HONG KONG, Aug. 31 (Business Law Currents) – Yuan supporters both inside and outside of China are applauding anticipated regulatory changes in Hong Kong aimed at loosening capital controls over the renminbi, China’s national currency.

During his visit to Hong Kong recently, China’s Vice Premier Li Keqiang announced the formation of a spate of regulatory changes to the existing legal framework governing yuan-denominated trade and financial transactions between the special administrative region and mainland China. The 36 regulatory measures include amendments to existing items such as dim sum bond offerings, to the establishment of new mechanisms such as the pilot renminbi foreign direct investment initiative for offshore renminbi investors.

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Banks face myriad difficulties in trying to return corrupt Gaddafi money

By Martin Coyle

LONDON, Aug. 30 (Thomson Reuters Accelus) – Banks face enormous legal and logistical challenges as they try to repatriate the billions of pounds worth of frozen Libyan assets invested in the war-torn North African state, according to industry officials. The process could take years to resolve even though the United Nations has already unfrozen some $1.5 billion in humanitarian aid which will be sent to the country.

The fears follow the overthrowing of Colonel Gaddafi’s dictatorship by rebel fighters and the formation of Libya’s National Transitional Council (NTC) in Tripoli. It is estimated that as much as $120 billion of Libyan assets are sitting in bank accounts worldwide, including up to $17 billion in the UK alone. UK foreign secretary William Hague said yesterday that it might take a while to repatriate frozen Libyan assets. The U.S. and South Africa last week struck a deal that will see $1.5bn of frozen money released for humanitarian aid by the U.N. The South African government initially had concerns about money being sent to the NTC, which it does not recognise. Diplomacy has smoothed over this, however.

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Bankers, broker-dealers should do their homework before saying ‘yes’ to Chinese companies

By Cavas Pavri, Thomson Reuters Accelus contributing author

NEW YORK, Aug. 26 (Thomson Reuters Accelus) – The considerable negative publicity surrounding Chinese companies listed in the United States has made it increasingly difficult for investors to separate the undervalued from the fraudulent. Essential for success: Taking a close look at the firms’ auditors and corporate governance practices going forward.

In April 2011, the Securities and Exchange Commission (SEC) acknowledged that it had established a task force to address what it deemed to be abuses by Chinese companies accessing the U.S. markets through the use of reverse merger transactions. SEC Commissioner Luis Aguilar referred to the proliferation of these companies as a “disturbing trend that seems to have challenging implications for capital formation and investor protection.” In addition to the SEC, the U.S. national stock exchanges have been taking more aggressive actions against Chinese companies. In 2011, almost two dozen Chinese companies have seen trading in their securities halted or have been delisted because of accounting irregularities.

This article discusses areas that investors should focus on in performing their due diligence on investments in Chinese companies.

PERSONAL VIEW: Reflections on the successful prosecution of Tom Wilmot, UK boiler room king

By Alex Davidson – the views expressed are his own.

LONDON, Aug. 26 (Thomson Reuters Accelus) – Earlier this week Tomas Wilmot was sentenced at Southwark Crown Court to nine years in jail for conspiracy to defraud investors out of 27.5 million pounds through boiler rooms. I took a particular interest in the case because I had once worked for a short period as a dealer at Harvard Securities, a licensed dealer in securities run by Wilmot in London in the late 1980s.  One of the most powerful bosses of speculative share dealing operations over some 25 years had finally been caught.

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Basel III: Chinese banks saving for new capital adequacy ratio

By Helen H. Chan

HONG KONG, Aug. 26 (Business Law Currents) – New capital adequacy rules from the China Banking Regulatory Commission (CBRC) are prompting banks to hit up investors in Hong Kong and Shanghai’s capital markets. Part of the Basel III implementation process, the rules will require Chinese lenders to shore up additional capital to protect against credit risks.

Under the new rules, which are currently open to public review, systemically important banks in China will be subject to a minimum capital adequacy ratio (CAR) of 11.5 percent; other banking institutions will be required to adhere to a minimum CAR of 10.5 percent.

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UK tax migration hits reverse under temporary exemption rules

By Christopher Elias

LONDON, Aug. 24 (Business Law Currents) – The UK offshore migration hit reverse recently when London-listed Bermudan reinsurer Lancashire Holdings decided that UK tax changes had made going offshore unnecessary.

Sailing home to Blighty was Lancashire, who recently announced that it intended to move to a UK tax residency from its current offshore Bermuda location, as the UK’s Controlled Foreign Companies (CFCs) rules introduce a temporary period of exemption. (more…)

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