Wednesday, December 13, 2017

Commonwealth Bank admits multiple breaches in money laundering case - Financial Times

13/12/2017
Commonwealth Bank admits multiple breaches in money laundering case
Australia’s biggest bank admits breaking the law but fights some allegations
Australian regulators have alleged that CBA’s deposit machines were used by drug dealers and other criminals to launder cash © Bloomberg
Jamie Smyth in Sydney
Commonwealth Bank of Australia has admitted multiple breaches of money laundering and counter terrorism laws in its response to a court action filed by Australia’s financial crime fighting agency.
But the country’s biggest bank by assets said on Wednesday it would test some of the claims made by the Australian Transaction Reports and Analysis Centre in a case that has plunged CBA into crisis and cost the job of Ian Narev, chief executive.
“We take our anti-money laundering and counter-terrorism financing obligations extremely seriously. We deeply regret any failure to comply with these obligations. CBA is accountable for those deficiencies,” said the bank.
Austrac has accused CBA of more than 50,000 breaches of the law by failing to adequately monitor A$624.7m of transactions on its network of intelligent deposit machines (IDMs) over three years.
The financial crime fighting agency alleges CBA’s IDMs were used by drug dealers and other criminals to launder tens of millions in cash. It alleges the bank failed to adequately assess the risk posed by the rollout of the IDMs, which were introduced in 2012 and facilitated anonymous cash and cheque deposits of up to A$20,000 per transaction. The machines count the cash and instantly credit the designated recipient.
The agency also alleged that CBA failed to adequately report unusual transactions totalling more than A$77m or to monitor suspicious customers after it became aware of possible money laundering.
CBA said Austrac had indicated it was preparing to file additional allegations of legal breaches — a move that would require the bank to amend its legal defence.
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Legal papers filed by CBA on Wednesday show the bank admits failing to file 53,506 transaction reports on time to the authorities, a “move that deprived law enforcement of some additional intelligence”. It blames a single systems-related error for the problem. The bank is calling for these multiple failures to be treated as a single contravention of the law. This could dramatically reduce any penalty imposed on the bank.
CBA also admits that it did not adequately adhere to risk assessment requirements for IDMs. But it says it does not accept Austrac’s claim that this failure amounts to eight separate contraventions of the law. It also denies 83 allegations concerning suspicious transaction reports and 19 allegations regarding customer due diligence.
CBA said Austrac has indicated to the bank that it planned to file additional allegations of legal breaches in relation to its money laundering investigation. CBA said it would amend its legal defence if this happens, and it would highlight to the court the efforts it has taken since 2015 to strengthen its compliance to financial crimes fighting rules.
The Austrac case, when first revealed in August, sent shockwaves through Australia’s banking sector, intensifying political pressure for a public inquiry into banks’ misconduct that was finally agreed last month.
The scandal led CBA to announce the retirement of Mr Narev, slash remuneration for bank executives and board members, and undertake reviews of its culture and procedures. CBA also faces a class-action lawsuit from shareholders.

Democrat’s Alabama Senate win could be a ‘market moving implication,’ says strategist - CNBC News


12/12/2017
Democrat’s Alabama Senate win could be a ‘market moving implication,’ says strategist
Democrat Doug Jones clinched an unexpected victory in Alabama's Senate race, knocking the Republican majority down to 51-49
U.S. futures, Treasury yields and the dollar fell Wednesday morning on the election news
The Republican tax reform bill is in serious jeopardy if a vote takes place after Jones is seated
Natasha Turak | @NatashaTurak
CNBC.com
Alabama Democrat Doug Jones celebrates his victory over Judge Roy Moore at the Sheraton in Birmingham, Ala., on Tuesday, Dec. 12, 2017. Jones faced off against Judge Roy Moore in a special election for Jeff Sessions' seat in the U.S. Senate.
Bill Clark | CQ Roll Call
Alabama Democrat Doug Jones celebrates his victory over Judge Roy Moore at the Sheraton in Birmingham, Ala., on Tuesday, Dec. 12, 2017. Jones faced off against Judge Roy Moore in a special election for Jeff Sessions' seat in the U.S. Senate.
Democrat Doug Jones' stunning upset victory in Alabama's Senate race against Republican Roy Moore has knocked the GOP's Senate majority down to 51-49, a move that could potentially derail the party's pursuit of a landmark tax reform bill.
"If tax reform gets delayed, this will become a market-moving implication," Richard Kelly, head of global strategy at TD Securities, told CNBC on Wednesday. "Otherwise, especially for the next two days, I think everyone's looking at the Fed, ECB (European Central Bank)," he added, referencing upcoming central bank decisions on future interest rate rises.
U.S. stock futures, Treasury yields and the dollar fellWednesday morning, indicating market doubts over whether legislators can indeedpass the bill.
The first Democrat to win a Senate seat in Alabama in 25 years,Jones was announced the winner of the deep-red state's legislative contest after a very tight race, edging over the embattled Moore by just over 1.5 percent late Tuesday night. This could throw the future of the Republican tax reform agenda into a precarious state as the GOP now holds a fragile 51-49 Senate majority.
Moore, meanwhile, has so far refused to concede, telling his supporters,"When the vote is this close... it's not over."
If US tax reform is delayed, Alabama Democrat win will be market moving: Pro If US tax reform is delayed, Alabama Democrat win will be market moving: Pro
Market optimism for potential tax reform has manifested itself in soaring stocks — the S&P 500 and Dow Jones have all hit record highs in recent weeks. Retail shares have been performing especially well in anticipation of proposed corporate tax cuts.
Kelly noted, however, that as things currently stand, a vote on the tax bill is likely to happen before Jones is officially seated in Congress, and thus without his vote. "It doesn't actually look like they'll get the new senator seated somewhere in the latter part of two weeks out, which means that tax reform should be done."
The key determinant, Kelly said, was the timing of the vote itself. "The deadlines get more important. So, given what the Republicans are saying, which is that the conference committee will be done this week, (Donald) Trump will have it to sign next week, that means this election should not impact that," he said. "If that gets delayed, now this has significant implications."
The Republican conference committee is being held to reconcile differences between the U.S. Senate and House of Representatives' differing versions of the bill before it goes to President Trump's desk.
Tax reform has been a mainstay of Trump's agenda, and is considered his only realistic opportunity for legislative victory in 2017 after nearly a year of failed proposals, including healthcare.
The controversial Republican bill, which pledges to cut corporate taxes from the current 35 percent to a proposed 21 percent and cap the individual tax rate at 37 percent, was found by a Reuters poll to be opposed by nearly half of the American public.
The bill's supporters say it will boost economic growth and investment, while its detractors argue it will hurt middle-class families and the poor while exacerbating income inequality. The nonpartisan Congressional Budget Office calculated the Senate's version of the bill would add $1.4 trillion to the national deficit by 2027, but that projection excluded any amount that would be offset by potential economic growth created by tax cuts.

US ready for North Korea talks without preconditions, says Tillerson - BBC News

12/12/2017
US ready for North Korea talks without preconditions, says Tillerson
Rex Tillerson arrives at the Atlantic Council policy forum to discuss North Korea
The US is "ready to talk any time" with North Korea without preconditions, says Secretary of State Rex Tillerson.
His statement appeared to shift the US position away from previous demands that North Korea must disarm before any talks can be held.
But hours later the White House said President Donald Trump's views on North Korea "had not changed".
North Korea's pursuit of nuclear weapons technology has led to heavy US-led sanctions against the regime.
Separately, the UN's political chief Jeffrey Feltman, who recently visited Pyongyang, told reporters that North Korean officials felt it was "important to prevent war".
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Diplomatic relations between the US and North Korea have been strained by recent North Korean nuclear and missile tests, and by a war of words between US President Donald Trump and North Korea's leader Kim Jong-un.
Speaking at the Atlantic Council policy forum on Tuesday, Mr Tillerson said the US "simply cannot accept a nuclear armed North Korea".
Appearing to soften the US stance towards potential future talks, he said: "Let's just meet and let's talk about the weather if you want and talk about whether it's going to be a square table or a round table if that's what you're excited about.
"Then we can begin to lay out a map, a road map, of what we might be willing to work towards."
But he insisted that there needed to be a "period of quiet" first, without any nuclear or missile tests.
He added that economic and diplomatic sanctions would continue until "the first bomb drops", and Mr Trump still wanted China - Pyongyang's main economic ally - to cut off oil supplies to North Korea.
Mr Tillerson also said China had made contingency plans to accommodate North Korean refugees in the event of a conflict, a major concern for China.
How would war with North Korea unfold?
Several hours after his comments, White House press secretary Sarah Sanders released a statement to reporters saying Mr Trump's views "have not changed".
"North Korea is acting in an unsafe way not only toward Japan, China, and South Korea, but the entire world. North Korea's actions are not good for anyone and certainly not good for North Korea."
On Wednesday, North Korean state media said leader Kim Jong-un had vowed his country would become "the strongest nuclear power and military power in the world".
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Speaking at a munitions industry conference, he cited North Korea's recent launch of intercontinental ballistic missile Hwasong-15 as a "great historic victory".
'Left the door ajar'
The UN's Jeffrey Feltman said that while senior North Korean officials did not offer any commitments, they had agreed that discussions should continue.
"They agreed that it was important to prevent war," he said, in his first briefing since his four-day trip last week.
"We've left the door ajar and I fervently hope the door to a negotiated solution will now be opened wide."

Move over, bitcoin. Here comes litecoin - CNN Money

Move over, bitcoin. Here comes litecoin
by Paul R. La Monica @lamonicabuzz
December 12, 2017: 11:31 AM ET
Bitcoin has been on amazing ride for the past few weeks. But there is actually another cryptocurrency that's enjoyed an even bigger spike lately.
It's called litecoin, and it has nearly doubled in just the past 24 hours and has surged more than 250% in the past week according to digital currency brokerage site Coinbase. Bitcoin, by way of comparison, is up "only" about 45% in the past week.
Litecoin is on an even crazier tear over the past month and year, skyrocketing more than 500% in the past 30 days and 10,000% in the past 12 months. (Prices change so fast though that these figures may be woefully out of date by the time you read this!)
Litecoin is one of several alternative cryptocurrencies that have cropped up to rival bitcoin. Ethereum, ripple and dash are some others.
Litecoin is much smaller though. The combined value of all the litecoins in circulation is about $18 billion, compared with nearly $300 billion for bitcoin. It is also created, or mined, by people solving complex mathematical puzzles on computers.
You don't have to mine bitcoin and other cryptocurrencies to buy them though. Coinbase and other brokerage sites let you set up an account to buy and sell virtual currencies. Mobile payments company Square is testing bitcoin purchases on its Cash app too.
Litecoin, founded by former Google engineer and former director of Coinbase Charlie Lee, is said to be faster and cheaper to mine than bitcoin.
Lee, amusingly enough, goes by the name of @SatoshiLite on Twitter -- a reference to Satoshi Nakamoto, the nickname used by the still anonymous inventor of bitcoin.
Related: South Korea is going bitcoin crazy...
There are rampant rumors about who Nakamoto might be. Some think it's a group of people. There was even speculation recently that Tesla and SpaceX founder Elon Musk is actually Satoshi Nakamoto. Musk has denied it.
But no matter who created bitcoin and launched the crypto revolution, it is clear that investors can't get enough of virtual currencies.
Some experts are nervous that this can't end well though, and that bitcoin, litecoin and other cryptocurrencies are a bubble destined to burst in spectacular fashion like tech stocks in 2000 and housing prices just before the Great Recession of 2008.
The problem with bitcoin and litecoin is that they are so volatile. Paper currencies like the dollar, euro and yen don't tend to move in such wild fashion. Neither does gold for that matter.
So it may be hard for cryptos to be used as a substitute for cash until the prices start to settle down. They also are not as available to the mainstream as old-fashioned paper money backed by governments.
SEC chairman Jay Clayton even sounded the alarm bell on bitcoin, other cryptocurrencies and initial coin offerings this week, saying "there is substantially less investor protection" than with stocks and bonds and "correspondingly greater opportunities for fraud and manipulation."
Related: ...and North Korea may be making a fortune from bitcoin too
But others argue that bitcoin and rival cryptocurrencies will continue to gain in popularity for both spending purposes and as investments.
To that end, the Chicago Board Options Exchange launched futures trading for bitcoin on Sunday, a move that makes bitcoin potentially more attractive to large institutional investors in the same way that oil, sugar and other physical commodities are.
The Chicago Mercantile Exchange is set to begin trading bitcoin futures on December 18 as well. And the Nasdaq is said to be considering following in the footsteps of the CBOE and CME too and could start to trade bitcoin futures next year.
CNNMoney (New York)

Tuesday, December 12, 2017

Europe doesn't like Trump administration's tax plans - CNN Money

Europe doesn't like Trump administration's tax plans
by Ivana Kottasová @ivanakottasova
December 11, 2017: 4:48 PM ET
Tax cuts are a big gift to business. But will workers win too?
Europe's five biggest economies have warned the Trump administration that its tax plan may violate international trade rules.
Germany, France, Britain, Spain and Italy have written to Treasury Sec. Steven Mnuchin, arguing that tax bills passed by the House and Senate run afoul of treaties and could distort international trade.
"It is important that the U.S. government's rights over domestic tax policy be exercised in a way that adheres with international obligations to which it has signed-up," the letter states. It was signed by the countries' finance ministers.
The letter argues that proposed changes to the U.S. tax code could give American companies an advantage over foreign rivals.
The ministers objected specifically to a new 20% tax on payments from U.S.-based multinationals to their foreign affiliates, saying the measure in the House bill could "discriminate in a manner that would be at odds with international rules."
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They said the provision could also tax the profits of foreign businesses that do not have a permanent base in the U.S.
A second measure also drew objections. It would subject cross-border transfers within banks and finance companies to a 10% tax.
"These two ... present [World Trade Organization] problems, said Rebecca Kysar, a professor at Fordham University. She said the measures could be considered to be discriminatory.
The finance ministers said they opposed another measure in the Senate bill that could benefit American companies by subsidizing their exports.
Kysar said the more income a U.S. company makes from exports, the greater the share of its income will be taxed at 12.5% instead of the general corporate rate of 20%.
Related: 4 red flags in the GOP tax bills
The letter comes at a crucial stage in the legislative process.
The House and Senate have passed competing versions of the tax bill. Their task now is to reconcile major differences between the two measures.
Congressional Republicans are hoping to get the final agreement to President Trump before Christmas.
Trump is expected to deliver remarks on tax reform at the Treasury Department on Wednesday.

North Korea developing bio-warfare weapons at factory producing 'microbes by the tonne', US officials warn - Washington Post

12/12/2017
North Korea developing bio-warfare weapons at factory producing 'microbes by the tonne', US officials warn
Alarm initially raised in 2006 when Pyongyang's investment in smallpox and anthrax labs dismissed as 'rudimentary'
Joby Warrick
North Korean soldiers attend a mass rally Getty
Five months before North Korea's first nuclear test in 2006, US intelligence officials sent a report to Congress warning that secret work also was underway on a biological weapon. The communist regime, which had long ago acquired the pathogens that cause smallpox and anthrax, had assembled teams of scientists but seemed to be lacking in certain technical skills, the report said.
“Pyongyang's resources presently include a rudimentary biotechnology infrastructure,” the report by the director of national intelligence explained.
A decade later, the technical hurdles appear to be falling away. North Korea is moving steadily to acquire the essential machinery that could potentially be used for an advanced bioweapons programme, from factories that can produce microbes by the tonne, to laboratories specialising in genetic modification, according to US and Asian intelligence officials and weapons experts. Meanwhile, leader Kim Jong-un's government also is dispatching its scientists abroad to seek advanced degrees in microbiology, while offering to sell biotechnology services to the developing world.
Nobel Peace Prize winners urge US and North Korea to negotiate
The gains have alarmed US analysts, who say North Korea - which has doggedly pursued weapons of mass destruction of every other variety - could quickly surge into industrial-scale production of biological pathogens if it chooses to do so. Such a move could give the regime yet another fearsome weapon with which to threaten neighbours or US troops in a future conflict, officials and analysts say.
Current and former US officials with access to classified files say they have seen no hard evidence so far that Kim has ordered production of actual weapons, beyond samples and prototypes. And they can only speculate about the reasons.
“That the North Koreans have [biological] agents is known, by various means,” said one knowledgeable US official who, like several others interviewed, spoke on the condition of anonymity regarding sensitive military assessments. “The lingering question is, why have they acquired the materials and developed the science, but not yet produced weapons?”
But the official, like others interviewed, also acknowledged that spy agencies might not detect a change in North Korea's programme, since the new capabilities are imbedded within civilian factories ostensibly engaged in making agricultural and pharmaceutical products.
“If it started tomorrow we might not know it,” the official said, “unless we're lucky enough to have an informant who happens to be in just the right place.”
In a country that is famously secretive, it is perhaps the most carefully guarded secret of all. North Korea consistently denies having a biological warfare programme of any kind, and it has worked diligently to keep all evidence of weapons research hidden from sight.
Yet, in 2015, the country's leader took it upon himself to partially roll back the curtain. On 6 June of that year, Kim commandeered a crew of North Korean cameramen for a visit to the newly named Pyongyang Biotechnical Institute, a sprawling, two-story facility on the grounds of what used to a vitamin factory.
State-run news media described the institute as a factory for making biological pesticides - mainly, live bacteria that can kill the worms and caterpillars that threaten North Korea's cabbage crop. But to US analysts studying the video, the images provided an unexpected jolt: On display inside the military-run facility were rooms jammed with expensive equipment, including industrial-scale fermenters used for growing bulk quantities of live microbes, and large dryers designed to turn billions of bacterial spores into a fine powder for easy dispersal.
Many of the machines were banned from sale to North Korea under international sanctions because of their possible use in a bioweapons programme. But Kim, wearing a white lab coat and trailed by a phalanx of scientists and military officers, appeared almost gleeful in showing them off, striking the same rapt pose as when he visits the country's installations for nuclear weapons and long-range missiles.
It was the first public confirmation of the existence of such machines in North Korea, and some US and Asian experts saw their presence as deeply ominous.
“It is hard to avoid the conclusion that the institute is intended to produce military-size batches of anthrax,” Melissa Hanham, a North Korea specialist at the James Martin Center for Nonproliferation Studies in Monterey, California, wrote in a blog posting after the video was shown. “Regardless of whether the equipment is being used to produce anthrax today, it could be in the near future.”
US analysts now believe the timing of the visit was deliberate: The previous week, on 28 May, the Pentagon had publicly acknowledged that live samples of US-made anthrax bacteria had been accidentally shipped to a South Korean military base because of a lab mix-up. North Korea lodged a formal complaint with the United Nations on 4 June, calling the incident proof of American “biological warfare schemes” against its citizens.
Kim's trip to the biotechnology institute came just two days later, and was clearly intended to send a message, Hanham said in an interview.
“Responding by showing their own capability could be taken as a threat,” she said.
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Some weapons experts were sceptical, noting the absence of biohazard suits and protective gear typically found in laboratories that work with deadly pathogens. But since the release of the images, subsequent examinations have poked holes in the official story about the factory's purpose. For one thing, some of the machines shown in the video were not visibly connected to any pipes, vents or ductwork. Experts also have questioned why North Korea would buy expensive industrial equipment at black-market rates, just to make a pesticide that can be purchased legally, at vastly cheaper rates, from China.
“The real takeaway is that [North Korea] had the dual-use equipment necessary for bioweapons production,” said Andrew Weber, a former assistant secretary of defence for nuclear, chemical and biological defence programmes. “What the photos show is a modern bio-production capability.”
That North Korea possesses the basic components for biological weapons is all but settled doctrine within US and Asian military and intelligence establishments, and has been for years.
Although overshadowed by Pyongyang's nuclear and chemical weapons, the threat of biological attack from the North is regarded as sufficiently serious that the Pentagon routinely vaccinates all Korea-bound troops for exposure to anthrax and smallpox.
“It's a presumption that they have it and will use it,” said a retired military officer who oversaw troops on the peninsula. “We've had to spend a lot of time figuring out how to deal with some of the WMD.”
But determining North Korea's precise capabilities - and the regime's intentions for using such weapons - have been among the toughest intelligence challenges for US analysts. Official assessments by US and South Korean intelligence agencies have generally concluded that Pyongyang has experimented with a handful of bacterial strains, including the microbes that cause anthrax, cholera and plague. US analysts also have believed since at least the mid-1990s that North Korea possesses the smallpox virus, a conclusion based in part on the discovery of antibodies in the bloodstreams of North Korean soldiers who escaped to the South in the 1980s and 1990s.
That assessment, while controversial, is buttressed by senior North Korean government and military defectors as well as foreign governments with special insight into the regime's military secrets. In 1993, the head of the Russian intelligence agency's foreign branch revealed in a report that North Korea was performing “applied military-biological research” on four pathogens, including microbes that cause anthrax and smallpox.
But more recently, questions about North Korea's capability have taken on a new urgency, as military planners prepare for the possibility that tensions with Pyongyang could lead to war. While U.S. and South Korean aircraft would seek to knock out suspected chemical and biological facilities from the air, the newest plans include a presumption that infantry divisions would have to face an array of chemical and biological hazards on the battlefield - hazards that may be invisible to fast-moving ground troops, current and former US officials say.
But germs as military weapons also have distinct disadvantages, as they are difficult to control and can take hours or days to kill or disable. A consensus view among military planners is that Kim is choosing to hold his bioweapons card in reserve for now, while his scientists build up a capacity to manufacture large quantities of pathogens quickly. Now that the North is equipped with state-of-the-art factories and teams of trained specialists, that shift could conceivably happen in weeks or even days, said the senior official familiar with military preparations for a biological attack.
“The capabilities - the science and technology - all of that now exists,” the official said. “Kim has chosen not to deploy at this time. But ultimately it comes down to a political decision.”
In the waning years of the Cold War, Soviet weapons scientists laboured in secret to build new super-germs more dangerous than those found in nature. With mixed success, using techniques still novel in the 1980s, they spliced together bits of DNA to increase virulence - so that microbes would kill more quickly - or to introduce stealthy features that would make them harder to detect.
There is no known evidence that Pyongyang is working to engineer designer bugs, US analysts say. But there are signs that North Korea is attempting to catapult itself into the 21st century worlds of genetic research and biomedical science.
In 2015, as North Korea's new microbe-producing factory was coming online, North Korean scientists were teaming up with Chinese counterparts on a research project to identify previously unknown bacterial species discovered in the glacial ice in Svalbard, the Norway-owned island chain far north of the Arctic Circle. In a rare instance in which North Koreans took the lead on a peer-reviewed scientific paper, the scientists described using DNA sequencing techniques to isolate the novel strains.
The project was the most dramatic example of what private researchers describe as a surge of interest by North Koreans in genetic engineering and other biotech disciplines. Earlier this year, the Welsh artificial intelligence firm Amplyfi conducted a search of the “deep Web” - the parts of the Internet invisible to the public - for evidence of North Korean interest in bio-defence topics. The company's DataVoyant search tool produced hundreds of thousands of hits and showed a spike in interest in such terms as “gene expression” and “nucleic acid sequence,” beginning two years ago.
A preliminary analysis suggested a pattern of behaviour that US and Asian officials have independently confirmed: a broad North Korean effort to obtain outside expertise from private companies, academic institutions and even non-profits, company officials said. North Korea is believed to have used technical designs from a British agricultural nonprofit in building its microbe-producing Pyongyang Biotechnology Center, and it has sought to enrol promising microbiology students in top research universities across Europe and Asia. In recent years, the North Koreans also have sought to sell medical services to the developing world, in one instance building and staffing an entire hospital in Zambia.
“Every continent is represented,” Amplyfi co-founder Chris Ganje said in a phone interview from the company's headquarters in Cardiff, Wales. He said the search turned up “worrying indicators of unintended support,” adding: “It is obvious that the international community and larger institutions need to be cautious in providing seemingly benign academic scientific education and training to North Korea.”
A harder challenge is separating legitimate efforts to improve North Korea's medical infrastructure with more sinister attempts to a create new varieties of killing machines, officials and experts acknowledge. Joseph DeTrani, a retired CIA veteran who oversaw intelligence collection for North Korea in the 2000s, noted that ambiguity has been a built-in feature of North Korean weapons programmes for decades.
“They talk openly about their 'nuclear deterrent,' but with chemical and biological weapons, it's different,” DeTrani said. “They've always played it close to the vest. For them, it's a real option. But they want to preserve the possibility of deniability.”
The Washington Post