Insights: Week Of October 3, 2022

The Illicit EdgeAt a time when the regulatory landscape is changing at a lightning speed, with new financial sanctions programs, enforcement actions, and global policy developments stretching compliance programs, effective monitoring and mitigating risk is more important than ever for global banks, technology firms, cryptocurrency platforms, and governments.

That’s why FiveBy Solutions—a specialized risk intelligence consultancy with unique expertise in financial crime-related risk and fraud management—has teamed up with The Illicit Edge, the foremost source of breaking financial crime news at the intersection of sanctions, money laundering, corruption, terrorist financing, cyber and cryptocrime, and more.

While The Illicit Edge surfaces the latest and most important sanctions and financial crime news and information that compliance and risk professionals need to stay abreast of the everchanging regulatory risk landscape, FiveBy provides US and international firms and financial institutions with customized risk assessments to make sense of the reams of information generated by their compliance tools and rapid regulatory changes to inform their compliance risk management decisions.

To access FiveBy’s Risk Assessment Services, please click below.


Compliance and Due Diligence

OFAC today released new North Korea sanctions, as well as designated some entities linked to wildlife trafficking. In two separate press releases, Treasury explains that Teo Boon Ching claims to have transported multiple metric tons of rhino horn, ivory, and pangolins, some of which were derived from the critically endangered black rhino. The second press release says that the two individuals and three entities designated today are involved in activities related to the exportation of petroleum to North Korea, which directly supports the development of DPRK weapons programs and its military.

Several EU countries have submitted proposals for new sanctions against Iran for its violent crackdown on protests over women’s rights after the death of Mahsa Amini at the hands of Iran’s “morality police.” OFAC this week sanctioned several individuals involved in Iran’s censorship and violence against protesters. The United States also sanctioned a company in Myanmar for supplying weapons to the junta from Russia and Belarus and facilitating arms deals.

The Biden administration may relax some sanctions against Venezuela to allow Chevron to resume pumping oil there, but President Maduro would have to commit to resuming talks with the country’s opposition about holding free and fair presidential elections in 2024. The deal would also unfreeze hundreds of millions of dollars in Venezuelan state funds from US banks to pay for imports of food, medicine, and equipment for the country’s critical infrastructure.

The EU this week approved an eighth round of sanctions against Russia, further restricting items which might contribute to Russia’s military and technological enhancement, such as steel and steel products, wood pulp and paper, machinery and appliances, and chemicals, plastics, and cigarettes. EU exports of goods used in aviation, such as tires and brakes, as well as electric components are also banned. The EU has also confirmed a ban on providing crypto services to Russians.

OFAC this week released three designations pursuant to the Balkans EO 14033 following last week’s sanctions against a corrupt state prosecutor in Bosnia. According to the Treasury press release, Bosnian Federation PM Fadil Novalic misused pensioner data for the benefit of his own political party and in violation of Bosnian law. Slobodan Stankovic is linked to US-designated Milorad Dodik and owns Integral Inzenjering A.D. Laktasi, which was also sanctioned by OFACT this week.

The Biden administration today announced new limits on the sale of semiconductor technology to China to limit Beijing’s access to technologies critical to China’s military development. The DOD also added more than a dozen Chinese companies, including the world’s largest drone manufacturer, to a list of firms with alleged ties to the Chinese military. Shenzhen-based DJI Technology, which controls more than half of the global market for commercial drones, is among the 13 firms added to the blacklist, as well as BGI Genomics Co, a genetic testing company and Zhejiang Dahua Technology, a Hangzhou-based surveillance equipment maker.

Senators Sheldon Whitehouse and Roger Wicker this week introduced bipartisan legislation as an amendment to the NDAA to hold accountants and other financial professions responsible for safeguarding against money laundering. The Establishing New Authorities for Businesses Laundering and Enabling Risks to Security (ENABLERS) Act aims to strengthen federal due diligence and transparency requirements to include professions such as investment advisors, attorneys, and accountants, whose skills are often exploited in financial crimes..

Pro-Russian paramilitary groups are conducting crowdfunding campaigns, raising cryptocurrencies to support operations in Ukraine and evade sanctions. US-designated neo-Nazi group, Task Force Rusich, and the Novorossia Aid Coordinating Center are raising Bitcoin and other cryptocurrencies to buy thermal imaging devices and radios, as well as drones.

Huawei will relaunch its 5G phones despite US restrictions blocking the company from acquiring US technology, but will use less advanced chips made by Chinese companies that will enable 5G. The company is also apparently planning a secret chip startup in Shenzhen.

A new bipartisan bill—the Stop Helping Adversaries Manipulate Everything (SHAME) Act—would bar Americans from getting paid by foreign adversaries of the United States or any of their agents for lobbying, public relations, or representational services. The bill would amend the Lobbying Disclosure Act (LDA) and the Foreign Agents Registration Act (FARA) by prohibiting both lobbyists and individuals registered as foreign agents from accepting compensation for work performed on behalf of US adversaries and impose new reporting requirements.

The Supreme Court will not hear the appeal of Oleg Deripaska in the Russian oligarch’s latest bid to be removed from the SDN list. Deripaska’s lawyer claimed that the sanctions against him were not legitimate because the United States at the time had not declared a national emergency regarding Russia’s global malign activities.

The Supreme Court will, however, hear the case of Halkbank—the Turkish state-run bank that laundered billions of dollars in Iranian oil money. The justices will hear Halkbank’s appeal of a lower court’s decision rejecting the bank’s contention that it is immune from US prosecution under the Foreign Sovereign Immunities Act, which limits the jurisdiction of American courts over lawsuits against foreign countries. The case gained notoriety because of former President Trump’s efforts to shield the bank from prosecution.

Fraud and Abuse

Yandex founder Arkady Volozh may have had his properties in Finland seized a few days ago, but he still owns a mansion in Amsterdam, which he bought in two transactions between 2018 and 2019, through a likely British Virgin Islands shell company, Paraseven Limited. Media outlets found Volozh listed as the owner through notary documents.

A former Industry Ministry of Barbados official has lost his appeal to overturn his conviction in the United States for laundering insurance contract bribes through his friend’s dental practice in New York. The lawyer for Donville Inniss argued that the conduct wasn’t “technically” money laundering because Inniss didn’t launder the funds after receiving them from the dental business.

The Jalisco Nueva Generacion Cartel (CJNG) has established a large number of businesses to launder drug proceeds, controlling 78 percent of money laundering in Mexico. The entities are mainly located in Jalisco—Guadalajara and Zapopan—where CJNG has established construction, real estate companies, and beauty salons – the usual businesses through which dirty cash is laundered. But since 2018, architecture and graphic design offices, pastry shops, tourist businesses, and others are also being used by the cartel.

Celsius Network founder Alex Mashinsky withdrew $10 million from the crypto lender just weeks before the company froze customer accounts and declared bankruptcy. The company filed for bankruptcy in July.

Criminals have used decentralized exchanges (DEX), cross-chain bridges, and coin swap services to launder more than $4 billion in illicit crypto gains. About $1.2 billion in cryptocurrencies stolen from DeFi or exchanges has been moved using DEXs. FATF in June said it has noticed the issue and is keeping an eye on the risks posed by peer-to-peer transactions.

The trial of Swedbank’s former CEO involving massive money laundering in the bank’s Baltic branches began this week. After the Danske Bank scandal broke, exposing the bank’s failure to prevent money-laundering in the Baltic states, Swedbank’s Birgitte Bonnesen falsely denied her bank was facing the same issues, resulting in charges of aggravated fraud. In 2020, Swedbank received a record $400-million administrative fine from Sweden’s financial supervisory authority because of ”major deficiencies in its work to combat money laundering in its Baltic operations.”

In his first major speech as Prince of Wales, Prince William this week warned that transnational organized criminal networks are threatening to destroy endangered wildlife species. The Prince stressed that wildlife trafficking was linked to money laundering, corruption, and violence.

India’s Enforcement Directorate (ED) is investigating a China-linked mobile app that allegedly defrauded young people after promising them part-time jobs that involved amplifying and uploading videos of celebrities on social media. The ED raided at least 12 Bengaluru businesses linked to the Keepsharer app and subsequently seized more than $70 million.

Mastercard is ready to launch a new tool called Crypto Secure that will enable banks to recognize fraud activities related to crypto exchanges. Crypto Secure was built by CipherTrace, a blockchain-related security startup taken over by Mastercard in 2021, and will use an AI algorithm to examine crypto-fraud and illicit behavior from an open record of crypto transactions.

Incidents of fraud and scams are occurring more often on the popular peer-to-peer payment service Zelle, according to a Senate report issued this week by Elizabeth Warren’s office, which also found that the large banks that partly own Zelle have been reluctant to compensate victims of fraud. Financial associations claim that the Warren report failed to mention that 99.9 percent of the transactions processed via Zelle in the past five years were legitimate transactions.

The Treasury Department this week issued a report warning that cryptocurrency prices are driven largely by market speculation and lack solid financial backing.

The UAE deputy prime minister, Sheikh Mansour bin Zayed Al Nahyan, may be investigated by the UK Foreign Office over allegations that he helped wealthy Russian oligarchs, such as former Chelsea Football Club owner Roman Abramovich and other Russian billionaires, evade sanctions. Two international criminal lawyers have presented evidence to the British Foreign Secretary that Sheikh Mansour has been “central” to the flow of sanctioned money to the UAE.

UK-based nonprofit watchdog group, Environmental Investigation Agency (EIA), has found that most birch products currently being exported from Vietnam to the United States originate in Russia. The group’s investigators spoke to five Chinese companies accounting for 60 percent of China’s birch veneer exports to Vietnam and concluded that more than 90 percent of their birch is sourced from Russia, many times repackaged in China, and re-exported to Vietnam with China listed as the country of origin.

Latvia’s Corruption Prevention and Combating Bureau has received information suggesting that Vladimir Putin may have bribed multiple western politicians, including Latvia’s former Transport Minister, Ainārs Šlesers. According to a newspaper editor, Russian state oil giant Rosneft has paid off multiple other influential western politicians, including Austria’s former Ministry of Foreign Affairs Karin Kneissl, whose wedding Putin attended, Finland’s former PM Esko Tapani Aho, and Austria’s former Chancellor Wolfgang Schüssel.

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

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