Insights: Week Of August 1, 2022

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The Biden administration soon may impose sanctions on Burma’s (the official US name for Myanmar) energy sector after the military’s brutal torture and execution of pro-democracy activists last week. We have been flagging the possibility of sanctions against Myanma Oil and Gas Enterprise (MOGE) for several months, and the EU sanctioned MOGE in February. Pressure from Congress, foreign policy experts, activists, and others to sanction MOGE will probably spur the White House to impose sanctions against Burma’s energy sector, which generates about half the foreign currency revenue—around $1.5 billion annually—for the military junta.

Monitoring world events that could trigger possible regulatory action is a vital component of a robust compliance program. Compliance professionals should anticipate possible new designations and identify likely triggers for their management that could impact possible clients or business partners. Engaging with expert analysts to help your firm or financial institution track possible new regulations and events that could result in new designations, using foreign language capabilities and jurisdictional knowledge, can be an cost-effective method to enhance your compliance program.

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Compliance and Due Diligence

OFAC this week issued 51 new designations, with 11 individuals, 48 entities, and two vessels included on the SDN list pursuant to EO 14024. The individuals designated are Kremlin-linked elites, including Putin’s rumored girlfriend, Alina Kabayeva—whom the NSC previously did not want to sanction because the action would have been “too personal”—their companies and yachts, as well as a Russian sanctions evasion network.

The United States this week sanctioned several companies and one vessel in the UAE and Hong Kong for facilitating the sales of millions of dollars in Iranian oil. The Biden administration is also  considering sanctions against a UAE businessman and his network of companies suspected of helping Iran ship oil in violation of sanctions by using ship-to-ship transfers and forging documents to hide the origin of the cargo. Iran also uses Iraq to evade sanctions by blending Iranian and Iraqi oil to hide its origin. The individual behind the oil-blending operation is probably Iraqi-born British citizen, Salim Ahmed Said, and a number of companies that share email and corporate addresses with his firms, including Al-Iraqia Shipping Services & Oil Trading FZE, known as AISSOT. 

In an effort to target Chinese chipmakers, the United States may implement new export restrictions on a specific type of software used to design semiconductors with a next-generation technology that is vital for producing the most advanced AI chips. The software is a crucial design tool for engineers working on products that will eventually be sent to chip manufacturers such as Intel, TSMC, or Samsung.

With an increased global focus on transparency, the UK Register of Overseas Entities has launched a new registry that will require anonymous foreign companies that own or want to own land in the UK to reveal their ultimate beneficial owners to prevent malign actors from hiding behind shell companies. Any foreign company that wants to buy UK property will have to identify its beneficial owner and present verified information to Companies House before applying to make the purchase. The overseas entities that already own land in the UK will have a 6-month transitional period to register their beneficial owners or managing officers.

China has sanctioned House Speaker Nancy Pelosi and her immediate family members in retaliation for her recent trip to Taiwan. Pelosi was the highest ranking US official to visit the island in 25 years, and Beijing is calling the visit a “provocation.” China also has suspended cooperation with the United States on illegal immigration, cross-border crimes, and climate change, as well as defense talks.

The EU has sanctioned deposed Ukrainian President Viktor Yanukovych and his son Oleksandr for undermining the sovereignty of Ukraine and for having done business with separatist groups in the eastern Donbas region. The restrictive measures include asset freezes and travel bans. Yanukovych now lives in Russia and still claims to be Ukraine’s “legitimate” president.

London has eased some Russia-related sanctions, allowing companies to provide insurance and reinsurance to entities linked to Russia. The amendment to the “General Trade Licence Russia Sanctions – Vessels,” allows insurance and reinsurance to be provided to sea vessels and aircraft, their component parts, as well as aero gas turbine engines to mitigate the increase in oil prices and help stabilize global energy security.

The Central Bank of the UAE this week issued new guidelines on the risks related to politically exposed persons (PEPs) to more effectively combat money laundering and terrorism financing. Licensed financial institutions that provide financial services to PEPs have one month to comply with new regulations by developing risk-based policies to ensure they identify PEPs or related customers before a business relationship begins and conducting risk ratings and additional due diligence research on these individuals.

The Indian Ministry of Finance is investigating cryptocurrency exchange WazirX for money laundering and violating foreign exchange rules. The Enforcement Directorate is looking into claims that more than $350 million was laundered through WazirX, which was acquired by Binance in 2019.

The Commerce Department’s Bureau of Industry and Security (BIS) has updated its list of aircraft that have flown into Russia or Belarus in apparent violation of the Export Administration Regulations (EAR) by adding the first 25 foreign-produced aircraft for violating the EAR’s threshold for US components. There are now a total of 183 aircraft included on the list for apparent violations of US export controls. BIS also suspended the export privileges of Venezuela-based cargo airline Empresa de Transporte Aéreocargo del Sur, S.A., for 180 days for acquiring custody or control of a US-origin Boeing 747 aircraft from US-sanctioned Mahan Air in violation of US export controls and operating that aircraft on flights between Venezuela, Iran, and Russia.

Fraud and Abuse

Two New Hampshire residents, Shi Rong Zhang and Qiu Fang Zheng, are facing charges for their alleged involvement in a multi-million dollar money laundering ring that cleaned tens of millions of dollars in drug trafficking proceeds via a family-owned restaurant in Boston’s Chinatown neighborhood. Investigators say the duo would charge a fee for accepting drug profits and transfer the equivalent value in Chinese yuan to accounts held by narcotics traffickers, who would sell the proceeds to US individuals at a discounted rate.

A pro-Beijing online propaganda campaign has been using phony websites and social-media posts in an attempt to discredit a prominent German anthropologist who has investigated China’s treatment of its Uyghur population and other Turkic minorities. The activity pushes pro-China narratives via more than 70 suspected inauthentic news websites in 11 languages, all tied to a Chinese public-relations firm that uses the same language as Chinese state media to refer to the dissemination through social media of messages that promote Beijing’s views and policies.

Authorities in Kazakhstan have arrested 23 individuals who are suspected of running a cryptocurrency crime ring that threatened and blackmailed IT specialists into running underground crypto mining farms in Talgar, Kazakhstan. Authorities also seized $7 million worth of crypto mining equipment, black bookkeeping items, fake license plates, as well as firearms and ammunition.

Italian authorities have seized assets worth more than $144 million for alleged tax offenses from an architect who designed a luxury estate on the Black Sea which has been dubbed “Putin’s palace” by opponents of the Russian president. A lawyer for Lanfranco Cirillo says his client is not guilty of tax crimes, adding Cirillo had based himself in Russia for many years and been granted Russian citizenship in 2014.

The former owner of a T-Mobile store in California has been found guilty of running a $25 million scheme to illegally unlock mobile phones. Argishti Khudaverdyan would steal T-Mobile employee credentials and illegally access the company’s internal computer system to unblock phones, allowing the phones to be sold on the black market, enabling T-Mobile customers to stop using the company’s services, and depriving T-Mobile of revenue generated from customers’ service contracts and equipment installment plans.

The New York State Department of Financial Services (NYDFS) this week accused Robinhood’s crypto unit of violating AML and cybersecurity regulations and imposed a fine of $30 million. Robinhood Crypto LLC apparently failed to comply with its commitment to certify cyber security programs and AML regulations. Going forward, Robinhood will have to retain an independent consultant to assess its compliance with the regulations and its remediation plans.

Mexican prosecutors have launched an investigation into former President Enrique Peña Nieto for money laundering and illicit enrichment weeks after the country’s AML agency accused him of handling millions of dollars in possibly illegal funds. The former president is being investigated for potential election-related crimes tied to a Spanish construction company. Peña Nieto was president from 2012-2018 and now lives in Madrid. He has denied any wrongdoing.

The SEC this week charged 11 individuals with creating and promoting a fraudulent platform that operated as a global crypto pyramid and Ponzi scheme. Forsage raised more than $300 million from individual investors worldwide since its launch in January 2020. The platform’s four founders——Vladimir Okhotnikov, Jane Doe (also known as Lola Ferrari), Mikhail Sergeev, and Sergey Maslakov—were among those charged and were last known to be living in Russia, the Republic of Georgia, and Indonesia, according to the SEC complaint.

Suspected North Korean thieves are plagiarizing resumes from legitimate LinkedIn and Indeed profiles in an effort to get hired and raise money for Pyongyang. The fraudsters are incorporating details they find on legitimate profiles into their own resumes—many times copying them verbatim—in order to try getting hired at US cryptocurrency firms.

Criminals are seizing critical airstrips in Brazil and using the small runways to transport equipment to areas where roads don’t exist in order to facilitate illegal mining activities. When a plane bearing legitimate supplies approaches, the illicit actors spread fuel canisters and other debris along the airstrip to make landing impossible. They have also built four other airstrips nearby, all illegally, propelling such a rapid expansion of illegal mining on the supposedly protected land of the Yanomami people that crime has grown out of control and government workers are too scared to return.

Alexander Vinnik, a Russian citizen accused of supervising a cryptocurrency exchange that allegedly helped criminals launder billions of dollars, has been extradited to the United States and faces up to 50 years in prison. Vinnik was sentenced to five years in French prison for money laundering in 2020 but was cleared of an original charge that he had defrauded nearly 200 individuals using ransomware through the cryptocurrency exchange known as BTC-e and returned to Greece, where he was originally arrested in 2017 before being transported to the United States.

FiveBy provides to our clients a weekly news roundup of relevant insights to help avoid issues associated with both regulatory and reputational risk. We hope you find this useful, if you would like to see other things included, let us know at insightsfeedback@fiveby.com

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