Treasury this week, in coordination with the State and Justice Departments, took action against a Russian network that procured military and sensitive dual-use technologies from US manufacturers and supplied them to Russian users. Yury Orekhov and his two companies—Nord-Deutsche Industrieanlagenbau GmbH (NDA GmbH) and Opus Energy Trading LLC (Opus Energy Trading)—were sanctioned for helping Russia wage war against Ukraine.
In addition, the Justice Department charged Orekhov and his co-conspirators, Artem Uss, Svetlana Kuzurgasheva (aka Lana Neumann), Timofey Telegin, and Sergey Tulyakov with running a global procurement, smuggling, and money laundering network. Juan Fernando Serrano Ponce (aka Juanfe Serrano) and Juan Carlos Soto, who brokered illicit oil deals for Venezuelan oil company, Petroleos de Venezuela S.A. (PDVSA), were also charged as part of the scheme.
Why is this important?
The Justice Department press release also highlights that Orekhov and Uss used NDA GmbH as a front to smuggle hundreds of millions of barrels of oil from Venezuela to Russian and Chinese purchasers, including a Russian aluminum company controlled by a sanctioned oligarch, which almost certainly is a reference to Oleg Deripaska, who supposedly ceded control of Russian aluminum giant Rusal in 2018 in exchange for the company’s removal from the SDN list.
- In one communication with Serrano Ponce, Orekhov openly admitted that he was acting on behalf of a sanctioned Russian oligarch, saying “He [the oligarch] is under sanctions as well. That’s why we [are] acting from this company [NDA GmbH]. As fronting.”
- The White House is now considering a ban on aluminum imports from Rusal. Other options include a price cap or full blocking sanctions against the company. Major US aluminum producer, Alcoa, supports sanctions on the Russian aluminum giant.
Russian oligarch Vladimir Potanin in July floated the idea of a merger between Norilsk Nickel and Rusal, which was postponed as of last month. US sanctions against Rusal will almost certainly put the idea of creating a “sanctions-proof” Russian conglomerate on ice indefinitely.
Changes—especially in the area of Russian sanctions—are coming quickly, and the volatile environment makes continued monitoring and situational awareness and analysis more critical than ever. FiveBy’s expert analysts can help you keep track of the vital developments and assess your vulnerabilities and risk exposures.
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Compliance and Due Diligence
The UK and the EU this week imposed new sanctions on Iran for supplying Russia with drones that Moscow has been using against civilians in Ukraine. The sanctions target the company that manufactures Shahed-136 drones, as well as three Iranian generals. Iran and Russia still deny that Iranian drones are being used in Ukraine, but there are photos and media reports about the drones, as well as about Iranian trainers traveling to Crimea to train and advise the Russian military on the use of the drones. The EU implied that it will impose “restrictive measures” against two more individuals and two other entities on the same grounds. The bloc this week also imposed sanctions on Iran’s morality police and individuals responsible for violent repression of protesters in the country.
Senator Josh Hawley is introducing legislation accusing Chinese president Xi Jinping and his top associates of being personally complicit in genocide against the Uyghurs in Xinjiang. The bill contends that Xi is complicit in “crimes against humanity,” sanctions Xi and senior CCP officials, and directs Secretary of State Blinken and Director of National Intelligence Avril Haines to provide regular reports on the CCP officials involved in the abuses.
The Biden administration is not deploying sanctions against human rights violators in Africa, including in Ethiopia, where a deadly war has raged for more than two years, despite mounting pressure from US lawmakers and human rights advocates. Experts argue that the Biden administration is undercutting its own foreign-policy agenda by constantly threatening to sanction human rights violators in Africa and not following through.
The UN Security Council this week unanimously adopted a resolution demanding an immediate end to violence and criminal activity in Haiti and imposing sanctions on a powerful gang leader. The sanctions resolution named Jimmy “Barbecue” Cherizier, whose criminal network has blocked a key fuel terminal leading to severe shortages. Cherizier is a former police officer who leads an alliance of gangs known as the G9 Family and Allies.
Switzerland is considering adopting EU sanctions against Iran following Tehran’s crackdown against demonstrators in the aftermath of the death of Mahsa Amini in police custody. No time frame has been set for Switzerland to make a decision, which could be made either by Economic Affairs Minister Guy Parmelin alone or in concert with the Swiss cabinet.
OFAC this week issued a finding of violation (FOV) to Nodus International Bank for violating sanctions against Venezuela and inaccurately reporting the blocked property to OFAC. The finding underscores the critical importance of hiring compliance experts who understand the regulations and can help US firms and financial institutions navigate the sometimes complex requirements. Although there was no fine imposed, the FOV means that the bank could face heavier fines and penalties next time it is found to be in violation of US sanctions.
OFAC this week sanctioned several financial facilitators of the al-Qa‘ida-linked militant group al-Shabaab pursuant to EO 13224. The group officially became an al-Qa‘ida affiliate in 2012 and generates roughly $100 million per year through multiple funding streams, including extortion of local businesses and individuals, collections of fees on goods, and the facilitation of illicit trades.
Japan this week sanctioned five North Korean companies in response to the DPRK’s missile tests. The five entities include North Korea’s Ministry of Rocket Industry and four trading firms—Hapjanggang Trading Corporation, Korea Rousan Trading Corporation, Sungnisan Trading Corporation, and Unchon Trading Corporation.
Despite sanctions imposed against her and her husband by the United States and the EU, Tatiana Navka, the wife of Kremlin spokesman Dmitry Peskov, this week was reportedly vacationing in Tel Aviv. Navka stayed at the Kempinski Hotel in Tel Aviv, as Israel faces criticism from advocates for its leniency toward Russia.
A group of major US businesses wants the US government to make key import data—such as information collected from vessel manifests—confidential, which would make investigating links to forced labor more difficult. The Commercial Customs Operations Advisory Committee is made up of executives from 20 companies, including Walmart, General Motors, and Intel and advises the government on ways to streamline trade regulations.
After four years, FATF this week removed Pakistan from its grey list, with a promise that Islamabad will continue working with the Asia/Pacific Group to improve its AML/CFT regime. Pakistan has been on the group’s grey list since June 2018 because of AML/CFT deficiencies. The inclusion has adversely impacted its imports, exports, and remittances and limited its access to international lending.
Fraud and Abuse
In its inaugural Global Crime Trend report, Interpol says that cyber crimes such as money laundering, ransomware, and phishing pose the biggest threat to society. Money laundering was ranked the number one threat, with 67 percent of respondents claiming it to be a “high” or “very high” risk. Ransomware came second at 66 percent but was the crime that most respondents expected to increase in the next 3–5 years.
Seven Chicago-area residents are facing federal charges of fraudulently obtaining at least $16 million in COVID-19 funds through hundreds of falsified loan applications during the pandemic. The defendants are charged with fraud and money laundering after allegedly paying to have previously dissolved businesses reincorporated in order to use them as shell companies through which they applied for small business loans and grants under the Coronavirus Aid, Relief and Economic Security Act.
An indictment was unsealed yesterday in federal court in Brooklyn charging 11 defendants with various offenses, including money laundering conspiracy, wire fraud conspiracy, bank fraud conspiracy, passport fraud conspiracy, aggravated identity theft, and conspiring to operate an unlicensed money transmitting business. The defendants allegedly laundered proceeds from an investment fraud scheme referred to as “Sha Zu Pan” or the “pig butchering” scam, stealing almost $18 million.
Pakistan’s former Prime Minister Imran Khan this week was barred from holding public office after being found guilty of unlawfully selling gifts from foreign dignitaries and heads of state. Khan was accused of misusing the office of the prime minister to purchase and sell gifts that he received during visits abroad that were worth more than $635,000. Under Pakistani law, a legislator found guilty of corruption or misuse of public office can be barred for up to five years.
India’s Enforcement Directorate (ED) is investigating Surya Pharmaceuticals Ltd for money laundering. The ED has also frozen the company’s assets and properties, including a building, plant, and machinery. An investigation found that Surya Pharmaceuticals was using letters of credit in lieu of fraudulent invoices and siphoning proceeds for the purchase of various assets.
French cement firm Lafarge SA this week pleaded guilty in New York federal court to paying an ISIS and an al-Qa‘ida affiliate to protect its Syrian cement plant—the first time the Justice Department has charged a company with supporting terrorist organizations. Lafarge agreed to pay about $778 million in financial penalties and serve three years probation. Lafarge made a total of nearly $6 million in payments through intermediaries to the terrorist groups to preserve the operations of its cement factory, which made about $70 million in revenue.
Who is Adolfas Kaminskas, and why is the little known Lithuanian so interesting? Why did he suddenly become a millionaire after marrying the mother of Russian Defense Minister Shoigu’s illegitimate children, Yelena Shebunova? The Lithuanian Department of Migration is reportedly looking into Kaminska’s double citizenship, and Shoigu’s daughter may be stripped of Lithuanian citizenship as well. Shebunova lost her Lithuanian residence permit this summer after she and her husband relocated to Russia, and she is now suing to stay in the EU.
Lebanese deputies this week examined a draft law to end Lebanon’s banking secrecy policy. An amendment of the banking secrecy law is a prerequisite for the release of a $3 billion financial assistance package from the IMF. The updated law must meet three objectives: strengthen the fight against tax evasion; bring Lebanon closer to international standards in the fight against money laundering and the financing of terrorism; and end banking secrecy in the fight against corruption. President Aoun refused to sign the first draft of the bill, claiming it was too ambiguous.
Dutch bank Bunq this week hailed a “landmark” verdict in the Dutch courts over the use of AI for AML monitoring that was originally prohibited by the Dutch Central Bank (DNB). Bunq says the suit was based on the potential “long-term detriment” to its users and the stability of the banking system as a whole had it “yielded to DNB’s anti-money laundering strategy.”
New reporting by Reuters that includes interviews with 30 former Binance employees, advisers, and business partners and a review of thousands of company messages, emails, and documents dated between 2017 and early 2022, shows that CEO Changpeng Zhao approved a plan to “insulate” Binance from scrutiny by US authorities by setting up a new US exchange that would draw regulators’ attention away from the main platform by serving as a “regulatory inquiry clearing house.”
How does Russia use small cargo ships to collect stolen grains from Ukraine, which says almost all departing commodities are stolen from its occupied territories by Kremlin troops? Russia apparently comingles the grains, laundering them into a legitimate supply chain and obscuring commodities stolen from Ukraine, to sell abroad without detection. Small ships turn off their tracking devices and engage in multi-ship transfers of cargo in the open seas off the Russian port of Kavkaz with large vessels that then proceed to countries including Libya and Iran.
The largest computer hack in Mexico’s history has revealed new information suggesting that the Mexican government uses spyware to surveil its citizens. A group calling itself Guacamaya last month hacked Mexico’s defense ministry and stole roughly 6 terabytes of data. Revelations so far include significant ties between Mexican politicians and organized crime. The hack also reveals that the military wants a greater role in the economy.
Freelance chip brokers in China are forming a massive grey market that is rife with second-hand or out-of-date chips at exorbitant prices. The situation is most dangerous with chips destined for cars, because substandard or outdated chips can compromise safety.
Stories to Watch
Former chief executive of the controversial Israeli spyware company, NSO Group, Shalev Hulio, has partnered with Sebastian Kurz, Austria’s ex-Chancellor, who was forced to resign following a corruption investigation last year, to launch the cybersecurity startup, Dream Security. The company will build artificial intelligence-based solutions to detect and respond to cyber incidents as they occur in real time and has already raised $20 million in funding.
TikTok may have been planning to use the platform to monitor the physical location of some US users. Parent company ByteDance’s Internal Audit team was planning to use location data to surveil individual American citizens, not to target ads, as a TikTok spokeswoman recently claimed.
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