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EU Fight against money laundering and terrorist financing

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The European Commission is today adopting a Communication and four reports that will support European and national authorities in better addressing money laundering and terrorist financing risks. The Juncker Commission put strong EU rules in place with thefourth and the fifth Anti-Money laundering directives and reinforced the supervisory role of the European Banking Authority. The reports stress the need for their full implementation while underlining that a number of structural shortcomings in the implementation of the Union’s anti-money laundering and counter terrorist financing rules still need to be addressed. Today’s package will serve as a basis for future policy choices on how to further strengthen the EU anti-money laundering framework.

Frans Timmermans, First Vice-President said: “We must close off all opportunities for criminals and terrorists to abuse our financial system and threaten the security of Europeans. There are some very concrete improvements which can be made quickly at operational level. The Commission will continue to support Member States in this, whilst also reflecting on how to address the remaining structural challenges.”

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “A credible framework for preventing and fighting money laundering and terrorist financing is essential to maintain the integrity of the European financial system and reduce risks to financial stability. Yet, today’s analysis gives more proof that our strong AML rules have not been equally applied in all banks and all EU countries. So we have a structural problem in the Union’s capacity to prevent that the financial system is used for illegitimate purposes. This problem has to be addressed and solved sooner rather than later.”

Věra Jourová, Commissioner for Justice, Consumers and Gender Equality said: “We have stringent anti-money laundering rules at EU level, but we need all Member States to implement these rules on the ground. We don’t want to see any weak link point in the EU that criminals could exploit. The recent scandals have shown that Member States should treat this as a matter of urgency.”

The Towards a better implementation of the EU’s anti-money laundering and countering the financing of terrorism framework Communication gives an overview of the four reports published today: the supranational risk assessment report provides an update of sectorial risks associated with money laundering and terrorist financing. The assessment of recent high-profile money laundering cases in the financial sector, the Financial Intelligence Units and the interconnection of central bank account registries’ reports analyse the shortcomings in current anti-money laundering supervision and cooperation, and identifies ways to address them.

Assessment of money laundering risks across the internal market

The supranational risk assessment report is a tool to help Member States identify and address money laundering and terrorist financing risks. It is adopted every two years by the Commission since 2017.

The report shows that most recommendations of the first supranational risk assessment have been implemented by the various actors. However, some horizontal vulnerabilities remain, particularly with regard to anonymous products, the identification of beneficial owners and new unregulated products such as virtual assets. Some of these will be addressed by the upcoming transposition of the fifth Anti-Money Laundering Directive. The report also recalls that Member States still have to fully transpose the fourth Anti-money laundering directive. The Commission calls upon Member States to implement the directive fully and follow the recommendations of this report. This would improve cooperation between supervisors, raise awareness among obliged entities and provide further guidance on beneficial ownership identification.

Assessment and lessons from recent money laundering cases

Following a number of exchanges with the European Parliament and a request from the Council in December 2018, the European Commission has analysed ten recent publicly known cases of money laundering in EU banks to provide an analysis of some of the current shortcomings and outline a possible way forward.

While not being exhaustive, the report shows that:

Banks, in a number of the cases analysed, did not respect effectively or sometimes did not comply at all with anti-money laundering requirements. They lacked the right internal mechanisms to prevent money laundering and did not align their anti-money laundering/counter terrorism financing policies when they had risky business models. The findings also highlighted a lack of coordination between such policies, either at the level of individual entities or at group level.

National authorities responded with significant differences in terms of the timeliness and effectiveness of their supervisory actions. There were major divergences in terms of prioritisation, resources, expertise and available tools. More particularly with respect to the supervision of a banking group, the supervisors had a tendency to rely excessively on the anti-money laundering framework of host Member States and this impinged on the effectiveness of supervisory actions in cross-border cases at EU level. In addition, the division of responsibilities led to ineffective cooperation between anti-money laundering authorities, prudential authorities, Financial Intelligence Units and law enforcement authorities.

These deficiencies point to outstanding structural issues in the implementation of EU rules, which have been addressed only in part. The regulatory and supervisory fragmentation, coupled with the diversity of tasks, powers and tools available to public authorities, create weaknesses in the implementation of EU rules. Shortcomings in anti-money laundering policies and supervision are more prominent in cross-border situations, both within the EU but also in relation to non-EU countries. While significant actions have been taken by banks and supervisors, more remains to be done. There is, for instance, a need for further harmonisation across Member States and strengthened supervision.

The need for reinforced cooperation between Financial Intelligence Units (FIU)

Financial Intelligence Units play a key role in identifying money laundering risks in each country. The EU FIU’s Platform, which is an expert group of the Commission, has greatly improved the cooperation over the last years, but the Commission has identified remaining issues:

Access by FIUs to information: due to their different status, powers, and organisation, some FIUs are not able to access and share relevant information (financial, administrative and law enforcement).

Information sharing between FIUs remains insufficient and is often too slow.

IT tools: FIUs also sometimes lack the proper IT tools to efficiently import and export information to/from the FIU.net.

Limited scope of the EU FIUs’ Platform, which cannotproduce legally-binding templates, guidelines and standards.

The report suggests some concrete changes, such as a new support mechanism, that would further improve the cooperation between Financial Intelligence Units (FIU) across the EU.

Interconnection of central bank account registries

The report on the interconnection of central bank account registries sets out a number of elements to be considered for a possible interconnection of bank account registries and data retrieval systems. The Commission suggests that such a system could possibly be a decentralised system with a common platform at EU level. To achieve the interconnection, legislative action would be required, following consultation with Member States’ governments, Financial Intelligence Units, law enforcement authorities and Asset Recovery Offices.

Next steps

Today’s reports will inform the future debate on further action in this area, including with regard to the obligations of financial institutions and the powers and tools necessary for effective supervision. The current degree of integration of the banking market will also require further work on the cross-border aspects of the anti-money laundering/terrorist financing framework. The Commission will continue to monitor closely the implementation of EU anti-money laundering rules by the Member States.

Background

Under the Juncker Commission, the EU has strengthened the anti-money laundering/ counter terrorist financing framework by adopting the fourth Anti-Money Laundering Directive that had to be transposed by Member States by June 2017. The Commission is assessing the transposition of the fourth Anti-Money Laundering Directive, while also working to verify that the rules are correctly implemented by Member States. The Commission has launched infringement procedures against a majority of Member States as it assessed that the communications received from the Member States did not represent a complete transposition of this Directive.

The fifth Anti-Money Laundering Directive will improve the powers of Financial Intelligence Units, increase the transparency around beneficial ownership information, as well as regulate virtual currencies and pre-paid cards to better prevent terrorist financing. Member States are due to transpose the Directive into national law by January 2020.

Following the uncovering of several money laundering cases in 2018, the Commission set up in May 2018 a joint working group together with the European Supervisory Authorities and the European Central Bank. On the basis of the working group’s recommendations, the Commission issued in September 2018 a Communication on strengthening the AML and prudential frameworks and new rules to strengthen the role of the European Banking Authority. This led to the reinforcement of the anti-money laundering and terrorist financing dimension in prudential banking legislation through the adoption of the fifth Capital Requirements Directive in December 2018.

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Cyber-attacks-Frequency a sign of Red Alert for India

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The biggest target is in terms of transportations, nuclear power plants, Power system Operation Corporation Limited, V.O. Chidambaram Port Trust, Telangana State Load Dispatch Centre, logistic industries and research organisations which eventually can lead to destruction of the whole ecosystem. The confidentiality breach in the case of medical data leak as reported by a German cyber security firm –Greenbone Sustainable Resilience wherein Picture Archiving and Communication Servers were linked to public internet without any requisite protection is a point of concern. Then, there are certain individualistic attacks such as hacking email and financial crimes (banking), etc. In the last two years the attacks radar of focus has been defence, government accounts and the vaccine manufacturing companies.

Cyber Security – Individualistic awareness need of the hour

The target of the individual in a peculiar case which led to heinous crimes casted was due to opening of a document which was a bait to install Netwire- a malware. The bait was eventually delivered through a file and what prompted a person to open that link was a Drop box sent to him on his email was actually opening a Pandora Box of malicious command and control server. An emphasis to understand the technicality that Netwire stands for a malware which gives control of the infected system to an attacker. This in turn paves way for data stealing, logging keystrokes and compromise passwords. In the similar vein the Pegasus used the tactic to infiltrate the user’s phones in 2019.

Cyber Security – Attacking Power Distribution Systems

The intrusions by Chinese hacker groups in October, 2020 as brought out by Recorded Future was done through Shadow Pad which opens a secret path from target system to command and control servers. And, the main target is sectors such as transportation, telecommunication and energy .And , there are different tags that are being used by the Chinese Espionage Industry such as APT41, Wicked Spider and Wicked Panda , etc.

The institutions backing legitimisation

The Institutions which are at working under the cyber security surveillance are the National Security Council and National Information Board headed by National Security Adviser helping in framing India’s cyber security policy .Then, in 2014 there is the National Critical Information Infrastructure Protection Centre under the National Technical Research Organisation mandating the protection of critical information infrastructure. And, in 2015 the National Cyber Security Coordinator advises the Prime Minister on strategic cyber security issues. In the case of nodal entity , India’s Computer Emergency Response Team (CERT-in) is playing a crucial role under the Ministry of Electronics and Information Technology(MEITY).But, there is a requirement of clarity in National Cyber Security Policy of 2013 and the needed updates desired in it respectively.

A cohesive approach – Data Protection and Privacy Importance

The Data privacy i.e. the personal data protection bill is an important imperative in which services of private actors can be bridged through a concerned law which is missing link in that sense. The point of Data localisation falls squarely within this dimension of Section 40 and 41 of the draft bill where in the Indian stakeholders have the capacity to build their own data centres .In this contextualisation there also a need to understand certain technicalities involved in terms of edge computing which in a way is enabling the data to be analysed, processed, and transferred at the edge of a network. An elaboration to this is the data is analysed locally, closer to where it is stored, in real-time without delay. The Edge computing distributes processing, storage, and applications across a wide range of devices and data centres which make it difficult for any single disruption to take down the network. Since more data is being processed on local devices rather than transmitting it back to a central data centre, edge computing also reduces the amount of data actually at risk at any one time. Whereas on the other hand, there is insistence on data localisation has paved the way for companies such as Google Pay to adhere to the policy and synchronise their working with the United Payments Interface (UPI).

What do you understand by Data Share?

In the recent case of WhatsApp privacy issue and drawing in parallel other organisation a similar platform such as Facebook and Google shared the data to the third party with a lopsided agreement and with continuance of the data trade business industry. In 1996 the internet was free so was perceived as carte blanche , a safe harbour falling under the Section 230 of the Communication Decency Act in the United States but with the evolution of the circumstances the laws in that specifications are also required to change in that respect. In relations to the Indian law under the Information Technology Act, 2000 under the Section 69 the Indian government has the powers to monitor and decrypt any information that’s store in any computer resource but on certain conditions such as in regards to the sovereignty, defence and security of the country.

Cyber-attacks understanding on the International Forums

In terms of Lieber Code of Conduct of 1863 or be it Hague Convention of 1899 there is a need of updating the definitions and where in the cyber army falling under the categorisation  of civilians , not possessing any of the warfare weapons cause the main weapon that they possess is a malware which is invisible but can have deep repercussions leading to destruction of that particular economy altogether .So, in recent evolving circumstances there is an undue importance to for the target country to respond with equal force and having a right to self-defence in this manner regardless of the attack being from a non-state actor from a third country and masquerading under the civilian garb .Henceforth , there a thorough understanding of the complex environment that one is dealing with , there is undue emphasis to change and respectively update with the current world.

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Incidents of Uranium Theft in India: Depleting Nuclear Safety and International Silence

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Terrorism

In yet another incident of the capture of nuclear-related materials from unauthorized persons in India has made headlines in the Indian media but largely ignored in the international media. On 4th June 2021, as reported in the Indian media, the authorities arrested seven people possessing approximately 6.4 kilograms of Uranium in the Eastern State of Jharkhand. This is the second time in less than a month where Indian authorities have captured such a gang in an attempt to sell uranium illegally. An incident of the same nature was reported just a few days ago in May 2021 where authorities apprehended unauthorized persons, who were trying to sell nearly 7 kilograms of natural uranium on the black market. Notably, Indian authorities themselves believe that these events might be linked to a “national gang involved in illegal uranium trade”. This is a very serious issue because it means two things; first, that Indian local uranium reserves, radioactive nuclear materials, and facilities are not protected and are prone to black marketing. Secondly, this scenario has emerged because India is not adhering to international bindings of nuclear safety and security such as UN resolution 1540 and (Convention on Physical Protection on Nuclear Material) CPPNM under IAEA to secure its materials, reserves, and facilities. But, the most damaging aspect in this scenario is the discriminatory behavior of the international community, which is criminally silent on the violations of norms, practices, and regulations necessary for nuclear safety and security.

Though in both incidents, Uranium was in natural condition, which cannot be used for making bombs; however; it should be of great concern, as even in its natural state the Uranium can spread considerable radioactivity if used with conventional explosives. Moreover, Indian authorities themselves are considering that these activities could be linked with national gangs involved in the illegal supply of uranium. This raises the point that actually how much natural uranium is illegally sold in the black market by India. Since these are only incidents that are being reported in the Indian media, there might be many incidents that have never been reported. Also, this gang was captured from near the area where Indian Uranium mines of Jharkhand are allocated, the likelihood of access of non-state actors to these mines cannot be denied. These incidents are critical for international security and stability because such radioactive material when sold in black markets could be brought by the non-state and states aspiring for nuclearization. Unfortunately, in such a scenario all the efforts currently going on to stop the proliferation of nuclear weapons would be hampered. The recurring of these incidents reflect that India, despite being a member of CPPNM is not ensuring the protection of its nuclear materials from theft and sabotage by proper regulations, stringent mechanisms, and control. Other than CPPNM, India has also signed UN resolution 1540, which makes it mandatory for the states to ensure security regulations, mechanisms, equipment required for the security of Weapons of Mass Destruction (WMD) from the non-state actors. But, surprisingly, so far the UN or any other international organization has not taken notice of these recurring events. Rather, these mishaps by Indian authorities are shoved under the carpet. These incidents have been reportedly re-occurring in India, media reported these events in 2003, 2008, 2009, 2013, 2016, 2019, and now again in 2021. 

Nuclear safety and security is a national matter of any state; however, against the backdrop of the potential damage, which these weapons can bring, they have become an international concern. Specifically, to an extent, where states are sometimes criticized, lauded, and sometimes rewarded for their behavior in this realm. In this regard, India appears as an exceptional case, where the formation of Nuclear Suppliers Group NSG to stop such events in the future has its roots in the Indian so-called peace nuclear explosion (PNE) in 1974. Ironically, a few years down the road, the same NSG gave a waiver to India for conducting nuclear export. Moreover, India was made part of many other regimes such as the Missile Technology Control Regime (MTCR), Australia Group, and Wassenaar Arrangement. Although, these decisions were carried out in lieu of geo-political realities, where the West regards India as a balancer against China but it gave a free hand to India. Even the US-based NTI Report on Nuclear Security Index gives India less score in nuclear safety and security regulations. At a time when many nuclear theft-related incidents have occurred in India in recent years, disgracefully, India still desires to become a member of NSG based on its so-called nuclear record.

To sum up the situation, the occurrence of back-to-back nuclear theft-related incidents has further exposed India’s nuclear credentials and its non-adherence to international practices of nuclear safety and security. If legal bindings such as CPPNM and 1540 would not be implemented in the future by India, the South Asian stability, as well as the international security, would be undermined. Moreover, if the international non-proliferation continues to remain lenient towards states like India, the rest would likely regard the international non-proliferation mechanism not just as discriminatory but even as hoaxing. Many states might prefer to proliferate for their own interests, which would not serve the non-proliferation mechanism and regime. A very candid example is that today even after two years of the last NPT review conference, the next has not been conducted and chances are that it might not be conducted this year.

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Uranium is being traded freely in the open market in India

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Terrorism

The Times of India has reported that a special police team arrested seven persons and recovered 6 Kgs of Uranium from them following raids at different parts of the city on Thursday. Bokaro SP Chandan Kumar Jha said, “We have seized the yellow substance and will send it to experts for tests. Uranium is a highly radioactive substance used at nuclear facilities.”

Police said the accused, suspected of being part of a national gang involved in the illegal uranium trade, searched for customers and fixed its price at Rs 50 lakhs per kg. Notably, a kilogram of Uranium sells for around Rs 18 crores in the global market, sources said. For the first time, Uranium has been seized in this industrial town, but in other parts of India, similar cases were reported several times recently.

Those arrested have been identified as Bapi Da alias Bapi Da alias Bapi Chandra, Anil Singh, Deepak Kumar, Krishna Kant, Hare Ram Sharma, Mahavir Mahto, and Pankaj Mahto. They are residents of different parts of the district. Deepak and Bapi have a criminal history. It is illegal to possess Uranium without a license in India, and violation of the Atomic Energy Act, 1962, can attract stringent punishment.

Jha said police received information that some criminals are preparing to sell Uranium. A nine-member team headed by Chas DSP Mukesh Kumar and City DSP Kuldeep Kumar were involved in the raids. “It is still unclear how they got their hands on the radioactive metal. During interrogation, they mentioned West Bengal, Giridih, and a few other places. Seven mobile phones and a motorcycle were also seized from them,” he said.

Notably, Jharkhand is among a few states in the country that has uranium mines. Uranium Corporation of India Limited (UCIL) also has a uranium processing plant at Jaduguda, about 150km from Bokaro city.

Sources said police are also investigating to ascertain whether the arrested accused have any links with a similar racket busted by Maharashtra Anti- Terror Squad (ATS) on May 5 after it nabbed two persons. A total of 7.1 kg of natural Uranium worth Rs 21.3 crore was seized from the duo identified as Jigar Jayesh Pandya (27) and Choudhary (31).

It is a severe failure of the Government that hazardous materials are accessible by common people. It is the state’s responsibility, and the state must ensure the safety of the ordinary people. However, PM Modi has different priorities and over-engaged in non-issues. His focus to undermine minorities and the illegal occupation of Kashmir has made him over busy and left no time to safeguard the public interest. His extremist policies and brutalities against minorities are strongly condemned.

It is not the first time that Uranium has been traded like a regular commodity in the open market. It can be dangerous for India as well as the whole world. The law and order situation in India has deteriorated adversely, and criminals may avail this opportunity. The worst scenario will be if the RSS Hindu extremists got access to Uranium, then, definitely, the subcontinent is a one case. The fanatic RSS members are so vulnerable that they can go to any extent without considering the consequences.

Therefore it is appealed to the International community, the International Atomic Energy Agency (IAEA), and the UN to take serious notice and place preventive measures on the ground.

Being the next-door neighbor, Pakistan is under threat and has a responsibility to highlight such severe violations and may involve the international community to avoid similar cases in the future.

Pakistan on Friday, describing the reports of yet another incident of attempted illegal sale of Uranium in India as a “matter of deep concern,” reiterated its call for the thorough investigation of such incidents and measures for strengthening the security of nuclear materials to prevent their diversion.

In a statement, FO Spokesman Zahid Hafeez Chaudhri said the similar incident in Maharashtra last month and other such reports in the past “are a matter of deep concern as they point to lax controls, poor regulatory and enforcement mechanisms, as well as the possible existence of a black market for nuclear materials inside India.”

The UN Security Council Resolution 1540 and the IAEA Convention on the Physical Protection of Nuclear Material (CPPNM) make it binding on states to ensure stringent measures to prevent nuclear material from falling into the wrong hands, the statement noted.

“Pakistan reiterates its call for [a] thorough investigation of such incidents and measures for strengthening the security of nuclear materials to prevent their diversion,” it added.

The press release said it was “equally important to ascertain the intent and ultimate use of the attempted uranium sale given its relevance to international peace and security as well as the sanctity of global non-proliferation regime.”

Uranium is used in several areas, including nuclear explosives and medical techniques. The very fact that some people stole or illegally mined Uranium raises concerns about nuclear safety and security in India. It also indicates the possibility of a nuclear market existing in India that could be connected to international players.

Pakistan had voiced serious concern last month, too, after reports of the Maharashtra seizure emerged, pointing to gaps in state control mechanisms there.

“We have noted with serious concern the reports about the seizure of more than 7kg natural uranium from unauthorized persons in India,” Chaudhri had said at the time.“Security of nuclear materials should be the top priority for all countries,” he added.

“There is a need for a thorough investigation of the matter as to how such sizeable quantity of uranium could become available outside any state control and identify the gaps which made this possible.”

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