September 8-14, 2022 | Issue 17 - IFET (Illicit Finance and Economic Threats)
Christine Saddy, IFET Team
Salomon Montaguth, Editor; Hannah Norton, Senior Editor
FATF[1]
Date: September 8, 2022
Location: Myanmar
Parties involved: Myanmar government; military Junta; US; UN; the Financial Action Task Force (FATF)
The event: According to Western and Asian government officials, the FATF will reportedly add Myanmar to its blacklist in October 2022 due to a lack of progress in combating financial crime.[2] The FATF is an intergovernmental entity that sets international standards for countries to regulate illicit finance and is a global watchdog that focuses largely on preventing organized crime, terrorism, and corruption.[3] Two countries are currently on the FATF blacklist, North Korea and Iran, and 21 countries, including Myanmar, are on the gray-list as being under close monitoring.[4]
Analysis & Implications:
Adding Myanmar to the FATF blacklist will likely spur the UN and the US to impose sanctions on Myanmar to prevent illicit finance activities from spilling over to business investors. The sanctions will very likely negatively impact Myanmar’s reputation, likely deterring legitimate commercial firms from conducting business and investments. The loss of business will very likely negatively impact the economy, very likely decreasing its market value. Firms and investors in Myanmar will likely turn to neighboring countries for safer investments due to lower risk and secure returns on their investments.
It is very likely that illicit actors, especially drug and human traffickers, who obtain funds will exploit Myanmar if the government does not regulate the country’s exposure to money laundering risks. Widespread illicit finance will likely reinforce government resistance groups in Myanmar, likely enabling them to procure weapons to conduct attacks on the military Junta. Attacks on the Junta will very likely destabilize the country even further and will likely lead to more chaos. This will very likely result in civilian unrest and violent protests, likely leading to an increase in crime rates.
Date: September 8, 2022
Location: Hawaii, USA
Parties involved: Head of Martin Defense Group Martin Kao; US Congress; US federal government; federal prosecutors; Paycheck Protection Program (PPP)
The event: Kao pleaded guilty to committing fraud and money laundering schemes worth 22.8 million USD. Kao admitted to committing fraud by abusing the COVID-19 pandemic federal loans that were meant to help businesses stay afloat during the pandemic lockdown. Kao’s schemes involved applying for government loans and falsifying the company's employee numbers and monthly salaries in order to receive financial assistance. He will face 30 years in prison and a 1 million USD fine.[5]
Analysis & Implications:
The fraud scheme will very likely lead the US federal government to conduct more investigations for undetected cases to retrieve the lost funds. The federal government is likely to issue stricter eligibility regulations to receive government assistance for current and future programs. This incident will very likely lead bank lenders to implement stricter requirements and due diligence for approving loans and obtaining available services in efforts to decrease the chance of fraud.
As more cases are exposed, American taxpayers will very likely be dissatisfied and oppose the government's decision of loan assistance programs as a waste of resources that almost certainly could have been used elsewhere. The discourse surrounding loan assistance programs and any opposition will likely lead to political debates regarding the US government’s role in administering programs without the risk of illicit finance and fraud. This will likely further divide the two governing parties, thus likely delaying the implementation of the policies for these programs.
The Counterterrorism Group (CTG)
[1] FATF by WikiMedia Commons licensed under Creative Commons Attribution-ShareAlike 3.0 Unported (CC BY-SA 3.0)
[2] Myanmar Set For Blacklisting by Financial Watchdog: Report, The Diplomat, September 2022, https://thediplomat.com/2022/09/myanmar-set-for-blacklisting-by-financial-watchdog-report/
[3] Who we are, FATF, https://www.fatf-gafi.org/about/
[4] Myanmar Set For Blacklisting by Financial Watchdog: Report, The Diplomat, September 2022, https://thediplomat.com/2022/09/myanmar-set-for-blacklisting-by-financial-watchdog-report/
[5] Former Hawaii defense contractor pleads guilty to PPP fraud, Yahoo News, September 2022,
https://www.yahoo.com/news/former-hawaii-defense-contractor-pleads-213300508.html