Insights: Week Of June 13, 2022

Courtesy of Pixabay

Regulators are beginning to crack down on greenwashing—misleading investors about the environmental, social, and corporate governance (ESG) credentials of firms to which they seek to entrust their funds. Whether it’s a company publicizing false or misleading ESG claims—especially environmental—or a corporation acting to conceal noncompliance with ESG principles, government authorities will no longer allow corporations to falsely claim compliance with ESG criteria and will actively pursue penalties for companies that do. The Securities and Exchange Commission (SEC) last year launched an ESG task force to investigate sustainability claims by investment managers and companies. 

The SEC is investigating Goldman Sachs’s asset management division over possibly fraudulent ESG claims made by its funds. Las month, BNY Mellon Advisor, Inc. became the first asset manager to settle with the agency for allegedly misleading investors about ESG claims. Environmental groups last month also sued Dutch airline KLM, claiming the company is misleading the public over the sustainability of air travel.

The SEC has been requiring fund managers to detail the standards they use to classify ESG-labeled funds and alerts the agency’s enforcement unit for further investigation if misconduct is suspected.

As investors, stakeholders, and regulators increase their focus on ESG, companies will need to dig deeper to examine not just commitment to environmental principles, but also risks associated with supply chains, shipping via designated vessels, complex ownership structures, and politically exposed persons (PEPs).  FiveBy’s expert analysts can help companies navigate the often murky ESG waters, and our nuanced understanding of these issues make FiveBy uniquely skilled at providing thorough and detailed evaluations of ESG concerns. Ignoring or shortchanging ESG concerns can substantially damage companies’ reputations and overall profits.

Click below to access our expert research and analysis.


Compliance and Due Diligence

The FBI and Commerce Department are investigating how restricted US technologies wound up in Russian military gear. Agents are visiting tech companies to ask about computer chips found in drones, as well as other Russian weaponry recovered in Ukraine.

The United States has sanctioned a network of Iranian petrochemical producers and front companies in China, Hong Kong, and the UAE, alleging that they brokered international sales of Iranian petrochemicals, helping Iran evade sanctions. The White House told the Senate this week in a classified briefing that the United States would ratchet up sanctions pressure on Iran if it does not rejoin the nuclear talks, and this week’s designations may be a shot across Tehran’s bow.

OFAC has designated the state-owned Nicaraguan mining company, Empresa Nicaraguense de Minas (ENIMINAS), and one Nicaraguan government official, Ruy Lopez Delgado, pursuant to EO 13851. The United States and its allies have accused the Ortega regime of rigging last year’s elections, blocking political parties, persecuting opposition, and shutting down independent media, while using gold mining revenues to threaten the security of the western hemisphere. 

Treasury this week sanctioned three individuals—two connected to RIM (Russia’s Royal Imperial Movement), designated as a foreign terrorist organization (FTO) by the Trump Administration in 2020, and the other connected to Russian nationalist groups. OFAC sanctioned the three as specially designated global terrorists pursuant to EO 13224. Stanislav Shevchuk is based in Europe, while Alexander Zhuchovsky is in Russia. Anton Thulin—a Swedish national—has a nasty history of nationalist activity and was designated not just by Treasury, but also by the State Department.

The Justice Department is adding resources to enhance its sanctions enforcement and hopes to enlist the private sector in the efforts. The department has created specialized task forces to increase collaboration with foreign allies and agencies across the US government, as well as offer leniency to companies that disclose potential sanctions or export controls violations and cooperate with prosecutors. OFAC already considers voluntary disclosure of possible violations as a mitigating factor when determining penalties for sanctions violations.

The UK this week sanctioned Russian Children’s Rights Commissioner Maria Lvova-Belova for the “forced transfer and adoption of Ukrainian children,” as part of a new package of sanctions against Russia. The UK’s latest round of sanctions also includes Patriarch Kirill—the head of the Russian Orthodox Church and chief Putin acolyte—whom the EU did not designate in its last sanctions package.

Manhattan law firm Brafman & Associates has agreed to represent Russia’s VTB bank in litigation stemming from the 2014 downing of a Malaysia Airlines flight over eastern Ukraine, but the firm is having trouble finding a US financial institution to facilitate a retainer payment that would allow the new lawyers to join the case. The bank’s previous firm refused to defend state-controlled VTB, which is accused of helping fund a group that allegedly shot down the 2014 flight. Brafman & Associates had agreed to represent VTB as long as it could be paid in compliance with US law.

Latvia’s State Revenue Service (VID) has uncovered more than 400 cases of attempted violations of sanctions imposed on Russian and Belarussian embargoed goods and has begun more than a dozen criminal prosecutions. The VID says that most of the cases involve falsification of contracts—specifically dates—because contracts that were signed before sanctions were imposed are exempt from sanctions.

The United States and the UK are collaborating on a “prize challenge” program to encourage the development of new machine-learning technologies that could be used to combat money laundering, providing financial awards to members of the public who offer AML solutions. The amount of AML/CFT regulations in both countries has created troves of data so vast, that both government investigators and individual financial institutions have trouble analyzing them.

Russian oligarchs manage to evade sanctions and continue flying through European skies by using shell companies and offshore entities that help hide the real owners of the aircraft. According to the European Commission, the application of sanctions against business jets and helicopters registered outside Russia and owned by non-Russian companies is sometimes difficult due to opaque ownership structures. 

President Biden has extended the state of the national emergency regarding Belarus that in 2006 was declared in EO 13405 by President Bush. “The actions and policies of certain members of the Government of Belarus and other persons, and the Belarusian regime’s harmful activities and long-standing abuses, continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States.”

Fraud and Abuse

A House bill introduced this week seeks to impose a lifetime ban on members of Congress, senior military leaders, and senior executive branch officials lobbying for a foreign government or political party. The legislation also seeks to compel tax-exempt groups, including think tanks, to disclose high-dollar donations and gifts from foreign powers and require political campaigns to verify that donors have a valid US address, using the three-digit CVV code on the back of credit cards.

Geneva’s top financial-crime prosecutor, Yves Bertossa, has identified eight suspicious transactions worth more than $60 million that Credit Suisse failed to prevent between 2008 and 2014. Patrice Lescaudron, the fraudster at the heart of the case, faked signatures and created fraudulent portfolio statements to illegally transfer millions, primarily from the accounts of his biggest client, Georgian billionaire Bidzina Ivanishvili, leading to his conviction for fraud and forgery and imprisonment in 2018. The UK’s Financial Conduct Authority (FCA) has put Credit Suisse on a watchlist of institutions that need stricter supervision. The regulator told the Swiss bank last month that it had not made enough improvements to its culture, governance, and risk controls.

Germany is preparing legislation that will prohibit real estate cash transactions to enhance its efforts to fight money laundering and other financial crimes. German financial regulator BaFin has been criticized for failing to spot problems at payments firm Wirecard AG, which collapsed in 2020. The FATF is expected in August to publish an assessment of Germany’s record fighting financial crimes.

Authorities in Tennessee are warning residents not to pick up discarded folded dollar bills because they may contain fentanyl. If fentanyl winds up on the skin, even a small amount could kill someone who comes in contact with it.

Malta this week was removed from the FATF grey list a year after first being included as a jurisdiction with deficient AML efforts. The decision to take Malta off the list comes four months after the FATF publicly announced that initial indications showed that Malta had substantially completed the necessary reforms and appeared to have addressed the identified shortcomings . Pakistan is also hoping to get off the FATF grey list after being included in 2018 for deficiencies in its AML/CFT regime.

The AlphV ransomware gang (aka BlackCat) has created a dedicated website that allows the customers and employees of their victims to check if their data was stolen in an attack. The data is posted on the open Internet, making it available to anyone in an effort to pressure victims into paying the ransom.

OCCRP has traced some of the assets of one of Russia’s most prominent families—the Vorobyevs—who are closely connected to Russian Defense Minister Sergei Shoigu. The owner of a luxury children’s store in London, Svetlana Kalininskaya, bought the store in 2018 and is married to Maxim Vorobyev, who has an estimated worth of about $550 million. Vorobyev’s brother, Andrei, for nearly ten years has been the governor of Moscow region, and their father is a longtime Russian politician. In addition to Kalininskaya’s London children’s store, the couple owns a luxury apartment in a historic building in Paris, a furniture dealership in Singapore, and investments in Europe and the United States. Both are Israeli citizens, and Kalininskaya also holds passports from Singapore and Latvia.

In a two-month operation between March and May, codenamed First Light 2022, law enforcement from 76 countries participated in an international clampdown on the organized crime groups behind telecommunications and social engineering scams. Police in participating countries raided national call centers suspected of telecommunications fraud, including romance scams, e-mail deception, and connected financial crime.

In May 2019, auditors concluded investigations into the high-risk clients of Luminor—created via a merger of the Baltic branches of Finnish bank Nordea and Norwegian bank DNB—and determined that billions of dollars may have been laundered through suspicious legacy accounts at the two original banks. The first audit identified some 3.9 billion euros of problematic transfers through these legacy accounts, including “high-volume transactions with counterparties associated with potential financial crime schemes, unexplained wire activity, shell companies, and adverse media.”

Russia is working to wipe out Ukrainian national identity, not just by kidnapping Ukrainian children but also apparently stealing Ukrainian art and precious artifacts using a criminal gang to smuggle valuable historic artifacts out of Ukraine and into Russia. Brian Daniels, an anthropologist working with archaeologists, historians, and digital imaging specialists in Virginia has detected patterns in the crimes that follow threatening interrogations against museum curators and custodians, as Russian attempts locate and steal hidden artifacts are becoming more determined.

Blockchain is helping Ukraine document Russian war crimes. Starling Labs is collecting digital evidence and is initially focusing on two-week long attacks on Kharkiv in March, examining what appear to have been deliberate attacks on schools, which are considered war crimes. First, they archive a relevant Telegram message or tweet and its metadata, such as the author, the date it was created, and how many times it was viewed, also capturing the surrounding site context and the profile of the user. Then they use cryptography to create unique fingerprints, or “hashes,” which would change if the underlying information was altered. The fingerprint and metadata are subsequently registered on multiple blockchains, serving a function resembling a notary’s confirmation when someone possesses a legal document.

Russian oligarch Roman Abramovich secretly transferred millions of dollars in assets, including superyachts and aircraft, to his children before being sanctioned. Days before Putin’s February 24 invasion of Ukraine triggered sanctions against the Russian president’s cronies, Abramovich made some or all of his seven children the beneficiaries of the Cyprus-based Europa Settlement Trust, which controls the shell companies that, on paper, own Abramovich’s jets, several yachts, a helicopter, and other assets.


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

Leave a Reply

Your email address will not be published. Required fields are marked *