This week’s Association of Certified Anti-Money Laundering Specialists (ACAMS) conference in Las Vegas featured insights from both government officials and private sector AML/CFT and sanctions compliance experts, who spoke on a variety of topics from policy to compliance strategies.
Keynote speaker and Treasury Undersecretary for Terrorism and Financial Intelligence (TFI), Brian Nelson, discussed continued government strategies to end Russia’s invasion of Ukraine and highlighted that engagement with compliance experts in the private sector helps Treasury address concerns and issue clarifying guidance. Nelson also pointed out how western sanctions have crippled Russia—from degrading its ability to procure parts for its war machine to limiting profits to fund Russia’s continued aggression.
FinCEN Acting Director, Himamauli Das, discussed the substance of FinCEN’s final rule to implement the requirements of the Corporate Transparency Act that obligates US businesses and other legal entities report their beneficial owners to the agency, as well as the importance of working with the private sector to stop malign actors from accessing the US financial system. Das flagged the importance of suspicious activity reports as critical tools to help law enforcement and prosecutors target illicit financial actors.
FiveBy Director of Risk Intelligence, Irene Kenyon, was a panelist discussing “How to Catch an Oligarch,” along with FTI Consulting Managing Director Gabe Hidalgo and Thomson Reuters Senior Director for Product Marketing, Andrew Pellington. The group stressed the value of instincts and personal experience in helping detect oligarchs’ (and not just Russian ones) efforts to evade sanctions and underlined the critical importance smaller US banks, financial institutions, and firms play in detecting and stopping sanctions evasion and money laundering.
Although the size of large US banks and financial institutions helps malign actors and their facilitators obscure their dirty funds in the sheer volume of transactions, those seeking to access the US financial system also know that larger banks have more compliance resources to detect their efforts and will use smaller community banks to hide their illicit transactions. That’s why FiveBy created Risk Assessment Services: to help small and medium-sized banks, financial institutions, and companies analyze the risks presented by potential clients and business partners without breaking the bank.
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Compliance and Due Diligence
The Parliamentary Assembly of the Council of Europe this week overwhelmingly adopted a resolution calling on members to declare Russia a terrorist regime, with one abstention – Turkey. Ukraine this week also called on the Hague to designate Russia a state sponsor of terrorism. Although the White House has voiced its opposition to designating Russia a state sponsor of terrorism—a label reserved for only four countries: Cuba, Iran, Syria and North Korea—pressure appears to be growing not just from Ukraine, but also from global allies and partners, Congress, and thought leaders.
Treasury Deputy Secretary Wally Adeyemo today warned that the United States can and will impose sanctions on individuals, companies, and countries that provide ammunition to Russia or support its military-industrial complex. The Treasury, Commerce, and State departments today also issued an alert outlining actions that have been taken against Russia’s military-industrial complex and noting the risks faced by those providing material support for Russia’s invasion of Ukraine.
Extreme Networks has been providing goods and services to US-designated military firm MMZ Avangard, whose missiles Russia has been raining on Ukraine. Extreme Networks was providing MMZ Avangard with computer networking equipment for its office IT systems, claiming that an intermediary in Russia was “complicit” in supplying its products to “bad actors” via a front company. But Extreme officials are either not being truthful, or they have intentionally turned a blind eye to misconduct. The transactions with MMZ Avangard were flagged as a concern by two Extreme officials, but the sales went forward anyway. Regardless of intent, this case highlights the importance of due diligence research not just into customers, but also intermediaries and resellers, especially when the jurisdictional risk is significant, as it is with Russia.
The Treasury department has reached a settlement with Washington-based crypto exchange Bittrex for sanctions and AML violations it committed several years ago, when the company was new and small—a mitigating factor in the settlement. Bittrex will pay $24 million to settle with OFAC and another $29 million to settle with FinCEN. At the time of the illegal transactions, Bittrex was not screening this customer information for terms associated with sanctioned jurisdictions. The $53 million fine highlights the importance of having a robust compliance program. Bittrex since then has taken remediation steps to ensure compliance.
NGO Coin Center this week sued the Treasury Department alleging that it has exceeded its authority in sanctioning the Ethereum-based privacy app, Tornado Cash. The suit names Treasury Secretary Janet Yellen and was filed in the Northern District of Florida.
The UN Security Council may impose sanctions on Haitian gangs, as requested by several UN members, including the United States and Mexico. The sanctions regime would include an asset freeze, travel ban, and arms embargo on anyone who threatens the peace, security, or stability of Haiti. The first person to be sanctioned would be Jimmy Cherizier (aka Barbecue) who is known as one of Haiti’s most influential gang leaders.
Crypto wallet provider Blockchain.com in two weeks will stop servicing Russian nationals after the latest package of EU sanctions banned all cross-border crypto payments between Russia and the EU. Major blockchain developer Dapper Labs also suspended Russian accounts. Numerous crypto exchanges have not conformed to the new requirements yet, including Binance.
The European Council has extended sanctions against the proliferation and use of chemical weapons until October 16, 2023. The restrictive measures apply to 15 persons and two entities, including Russians involved in the attempted poisoning of opposition leader Alexey Navalny with the nerve agent Novichok. The EU also extended sanctions against 21 persons and three entities that played a role in the unjust expulsion of the head of the EU delegation from Nicaragua.
The UK’s Financial Conduct Authority (FCA) has fined Gatehouse Bank £1,584,100 for failure to conduct sufficient checks on customers based in high-risk jurisdictions between June 2014 and July 2017. Gatehouse also failed to undertake the correct checks when some of the customers were classed as politically exposed persons (PEPs).
The EU is may give the European Public Prosecutor’s Office (EPPO) authority to penalize Russians who evade sanctions. The bloc’s 27 nations would need to back the plan before EPPO could receive the new authorities.
Iran this week sent letters to several EU diplomats, pressuring them to abandon sanctions against Tehran over its lethal crackdown on protesters. EU foreign policy chief Josep Borrell also received a letter this week from Iranian Foreign Minister Hossein Amirabdollahian. The EU is expected to impose sanctions on Iran for its deadly suppression of the protests following the death of Mahsa Amini. Germany’s foreign minister, Annalena Baerbock, has called for action against those responsible for the violent crackdowns. France’s foreign minister this week said that five of its nationals were being held there.
US officials are concerned that Hong Kong will become a haven for Russian businesses sanctioned over the war in Ukraine. Russian companies have been exploring Hong Kong as an alternative to western markets to secure business in a “friendlier jurisdiction” than places such as New York and London.
Belarus could face more sanctions if it gets more involved in supporting Russia’s war in Ukraine. Belarusian President Lukashenko this week ordered troops to deploy with Russian forces near Ukraine in response to what he said was a “clear threat” to his country from Kyiv and its backers in the West.
Egypt will not allow Russian MIR payment cards to be used in its resorts and hotels because of possible US sanctions. Egypt was also worried that using the Russian payment system could undermine its current negotiations with the IMF for a loan to bolster its economy amid a severe shortage of foreign currency.
Fraud and Abuse
Colombian authorities are investigating the disappearance of assets that went missing after being seized by law enforcement after President Gustavo Petro warned that the state-run company that manages seized assets, the Special Assets Society (SAE), could be involved in “one of the worst acts of corruption in history.” CEO, Daniel Rojas, confirmed that thousands of assets registered to his firm “only exist on paper.”
The UK Gambling Commission has imposed a $745,241 fine on gambling operator NSUS Limited (trading as GGPoker and operating as ggpoker.co.uk) for AML failures. According to the commission, NSUS failed to conduct risk assessments, which could have exposed the company to money laundering and terrorist financing risks.
The European Court of Auditors (ECA) says that more than $4.85 billion in EU funds was misspent in 2021. The ECA said the spending errors were most likely caused by national authorities lacking clarity on how to apply rules and criteria for selecting beneficiaries, but the auditors also identified 15 cases of potential fraud, which could prompt investigations.
British businessman, Graham Bonham-Carter, has been arrested on suspicion of helping Russian oligarch, Oleg Deripaska, evade US sanctions. Bonham-Carter allegedly helped Deripaska move his artwork out of the United States and made payments to maintain the oligarch’s US properties.
Anticorruption group Transparency International (TI) has released a report that says Brazil’s fall in ranking in the global corruption index may negatively impact its potential membership in the Organization for Economic Cooperation and Development (OECD). TI says that the Brazilian government’s interference with law enforcement agencies has affected the country’s anti-graft initiatives.
Two NGOs—the French Darwin Climax Coalition and Ukrainian Razom We Stand—this week filed a complaint against French energy giant TotalEnergies for “complicity in war crimes.” The two groups claim that TotalEnergies helped fuel Russian planes that have bombed Ukraine. TotalEnergies rejected the accusations.
A former comptroller of a New York-registered investment adviser and financial planning firm, Executive Compensation Planners (ECP), is facing 80 months in prison for her role in a multimillion-dollar investment fraud. Vania May Bell conspired with her father, the company’s president, Hector May, to defraud investment advisory clients out of more than $11 million. Bell and May advised 15 victims to withdraw their funds from ECP’s broker-dealer partner and send the money to the ECP custodial account by wire transfer or check. They then transferred the money to ECP’s operating account and spent it on business and personal expenses, making payments to victims to perpetuate the scheme and conceal the fraud.
A man from Monmouth County, New Jersey, has been indicted for laundering money for Black Axe, a gang in Cape Town, South Africa. Andrew Suarez and his co-conspirators laundered money for Cape Town entities, including Abravoo Trading Company, an entity controlled by a Black Axe founding member, between August and December 2017.
The Singapore Police and the Monetary Authority of Singapore have taken separate actions against the former deputy CEO and head of private banking of BSI Bank Singapore Branch (BSIS) for his role in the bank’s failure to file suspicious transaction reports related to the 1MDB scandal in which BSIS played a key role. And speaking of IMDB, the authors of “Billion Dollar Whale“—a comprehensive book about the fraud—claim that the fugitive financier responsible for the scandal is operating and running a business consulting firm in Shanghai. In a series of tweets, one of the authors revealed that Jho Low has a Chinese company called Guiyue Business Consulting, which is 100 percent owned by Grace Zenith—a registered British Virgin Islands entity controlled by Low.
The Justice Department’s National Center for Disaster Fraud (NCDF) is warning about potential fraud schemes in the wake of Hurricane Ian. Fraudsters will likely seek to profit from natural disasters through identity theft schemes and solicitations for fake charities that use the names of well-known charities, impersonating government officials and insurance company representatives, and asking victims to invest in nonexistent businesses and ventures.
The FATF plans to put the Democratic Republic of Congo (DRC) on its grey list of countries subject to increased AML monitoring because of its AML/CFT deficiencies. The organization has asked Congolese officials to commit to fully addressing strategic gaps within the agreed time frame from 2023 to 2025.
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