Friday's Final Word | week 15

Good morning! Discover the latest developments in the world of financial crime, from money laundering through video games to the Panama Papers trials commencing this week. Enjoy the read!

🎮 KYC for video games?

🏖️ The new face of the mafia in Sicily

🏗️ Singapore in the wake of a $2.2 billion scandal

🚪  Binance to restrict unverified accounts

⚖️ 27 employees on Panama Papers trial

📜 Italy goes against potential AI risks

Video game currencies caught up in the crossfire of money laundering

Will KYC measures ever conquer the world of video games? In an era marked by increasing regulatory scrutiny and a growing emphasis on transparency, the once-anonymous world of crypto has already seen its main appeal fade as it becomes entangled in the fight against fraud and money laundering. Now, based on a U.S. Consumer Financial Protection Bureau (CFPB) warning, video games might become the next target for regulators looking gaps to fill. The concerns arise from gamers’ ability to exchange in-game money and other virtual assets, such as filters and skins, for fiat currency, and upon withdrawal, have the traces vanish. Since gamers are not currently required to verify their identities, these in-game exchanges serve as potential loopholes for criminal activity, bypassing the stringent anti-money laundering (AML) requirements applied to the financial sphere.

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The mafia is very much alive, as proven by Sicily

The Godfather movies have achieved exactly what historic movies do so spectacularly – romanticizing a past which was rather cruel at the time of its unfolding. But, when it comes to Sicily, organized crime is not merely a cherished relic but a present-day reality. However, the nature of organized crime did change, becoming even more entwined with the legitimate economy, making it harder to detect, yet equally devastating in its consequences. Though open atrocities on the streets have dwindled since the crackdowns of the 1990s, businesses are still paying protection bribes, and mobsters are profiting more from issuing false invoices than from drug trafficking. The result is less taxes coming in and a more strained treasury, further complicating the government’s ability to curb organized crime efficiently. HBO’s The White Lotus might depict a picturesque Sicily with antique villas and turquoise beaches, but underneath the glitz remains the island’s infamous underbelly.

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Singapore tightens money laundering rules after $2.2 billion scandal

Singapore, a global financial hub renowned for its sound regulatory environment and robust economy, has been forced to tighten its laws around financial crime following its involvement in a $2.2 billion money laundering case last year. As a result of the investigation, wealthy foreign individuals will have to undergo stricter scrutiny in the future when looking to set up family offices in the city-state. However, the “light” jail terms received by two of the perpetrators of the money laundering scheme have drawn criticism on social media from crime analysists, raising doubts about the country’s resolve to effectively stand up against money laundering and require its banks to boost their compliance regime.

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Binance to fully restrict sub-accounts without KYC

Binance, the world’s biggest crypto exchange, is progressing further along the compliance journey. In its latest move, the exchange announced mandatory Know Your Customer (KYC) requirements for its Exchange Link account holders under the Binance Link program. The new measures will take effect on April 20, and by May 20, sub-accounts without complete KYC will be “fully restricted” from accessing the Binance Link Program services. The exchange’s gradual embracing of KYC measures is part of an ongoing shift in the broader crypto sphere which has come under increased regulatory scrutiny in recent years for its promise of decentralization and anonymity.

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Trial to begin for 27 defendants in Panama Papers money laundering case

It all began 8 years ago when leaked financial records from the law firm Mossack Fonseca exposed the global scale of tax evasion and money laundering which centred around Panama and the thousands of shell companies registered in the country. In the wake of the Panama Papers scandal, battered by international criticism, Panama had to adopt new legislation in 2019 modernising the country’s legal definition of money laundering. Now, the trial of 27 former employees of the Mossack Fonseca law firm has finally commenced, however, challenges persist over how effectively convictions can be achieved as the alleged crimes were committed at a time when Panama’s laws against money laundering didn’t yet exist. Despite these hurdles, the prosecution is requesting 12 years in prison for Jurgen Mossack and Ramon Fonseca Mora, the firm's founders who played pivotal roles in the case.

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Italy considers tougher penalties for AI-related crimes

Italy is joining the ranks of countries set to regulate AI and penalize dangerous use cases. The 25-article draft bill lays down general principles "on research, experimentation, development, adoption and application" of AI in Italy, to cope with "the impact on fundamental rights" and related economic and social risks. Among the listed crimes potentially using AI tools is market rigging and money laundering. The proposal comes a month after Prime Minister Giorgia Meloni’s announcement of plans to establish a 1-billion-euro investment fund aimed at promoting AI projects in the country. As the current chair of the Group of Seven (G7) major democracies, Italy has been uniquely vocal about boosting AI innovation while maintaining safety and security.

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