Insights: Week Of March 6, 2023

Courtesy of Pixabay

The United States and its partners have imposed hundreds of sanctions and export controls during the past year not only on Russian individuals and entities involved in supporting Vladimir Putin’s war in Ukraine, but also on networks and entities helping Russia evade sanctions and gain access to critical technologies to support its war machine. Two Canadian companies—Cpunto Inc and Electronic Network Inc—this week were added to the Bureau of Industry and Security (BIS) Entity List for acting against the national security interests of the United States and are now subject to BIS export restrictions. The Canada Border Services Agency said the two sanctioned companies were identified as part of a “global effort” to support Russia, but other entities will almost certainly catch the attention of regulators.

  • The Ukrainian National Committee for War and Sanctions has flagged five Greek shipping firms allegedly cooperating with Russia. The five companies named on the sanctions list were TMS Tankers, Minerva Marine, Dynacom Tankers Management, Thenamaris, and Delta Tankers. S&P Global this week reported that ship-to-ship (STS) transfers are at record highs, and that transfers near the Greek port of Kalamata increased by 60 percent on month, accounting for almost half of all Russian STS crude activity.
  • A couple of days after Chinese tech company Inspur Group was added to the Entity List, Shenzhen-listed Inspur Electronic Information Industry Co changed its location two kilometers away from its parent group. The company did not give any reason for the change, but the timing is certainly auspicious, given the parent company’s recent listing. Inspur Group owns a 36 percent stake in the unit, which was not included on the Entity List and is technically a separate entity.
  • The leaders of the House Foreign Affairs Committee last week triggered a requirement for the Biden administration to determine within four months whether Hikvision should be sanctioned under the Global Magnitsky Act (GLOMAG) for human rights violations against ethnic Uyghurs and other Muslim minorities in the Xinjiang province.
  • The United States and the EU are discussing Russian diamond sanctions with US and European offices of leading diamond retailers, manufacturers, laboratories, and industry trade associations. Five EU members in September proposed a ban on diamond imports from Russia, but Belgium rejected the ban. A US industry trade association—the Jewelers Vigilance Committee—is warning diamond traders to prepare for new sanctions.
  • Australia’s sovereign wealth fund, the Future Fund, is screening its portfolio for Chinese companies at risk of US investment restrictions. The fund is combing through its holdings to find as many companies that could be restricted by the United States as possible and dropping their stocks.

Why are these reports important?

Monitoring adverse media and regulatory developments to determine which clients and business partners may require closer research and enhanced due diligence is a critical part of compliance work, especially in today’s volatile environment. FiveBy’s IntelSentry solution, which supplements automation data with expert human-driven analysis, also includes daily monitoring of developments in the sanctions space, including possible relevant designations and export controls on the horizon. Click below for a free consultation.

FiveBy IntelSentry

Compliance and Due Diligence

OFAC this week sanctioned what it calls an international network of five companies and one individual that support Iran’s unmanned aerial systems (UAS) procurement. The network is China-based and responsible for the sale and shipment of components to the Iran Aircraft Manufacturing Company, which has been involved in the production of the Shahed-136 drones that Iran used to attack oil tankers and Russia used to attack Ukraine.

Treasury also designated a sanctions evasion network that has been moving billions of dollars in support of Iran’s petrochemical trade, facilitating access to the global financial system for sanctioned Iranian entities such as Petrochemical Industry Commercial Co. and Triliance Petrochemical Co. Ltd. The sanctioned companies are part of a network of foreign buyers, exchange houses, and front companies that help sanctioned Iranian companies continue trading.

Marking International Women’s Day this week, the United States imposed sanctions on three Iranian entities and eight individuals. The entities supply Tehran with equipment used for repression. Entebagh Gostar last year was highlighted in a report as providing sniper guns and riot control equipment to Tehran. The other two entities—Naji Pars Amin Institute and Naji Pas Company—are linked to the Law Enforcement Forces of Iran.

The EU this week sanctioned nine people and three entities accused of committing human rights abuses against women. The list of entities includes the Qarchak Prison—a women’s prison in Tehran that holds political prisoners, pro-democracy protesters, pregnant women, and women with children—the Syrian Republican Guard, which is engaged in widespread sexual and gender-based violence against women, and the Office of the Chief of Military Security Affairs in Burma, which manages detention and interrogation centers in the country. The UK sanctioned four individuals as violators of women’s rights and one entity: Office Or Headquarters For The Promotion Of Virtue And Prevention Of Vice in Iran.

The Russian Elites, Proxies, and Oligarchs (REPO) Task Force this week issued a statement on its accomplishments a year after Russia’s invasion of Ukraine, including successfully blocking or freezing more than $58 billion worth of sanctioned Russians’ assets and barring sanctioned Russians from the international financial system. The task force also issued a global advisory, flagging common typologies of Russian sanctions evasion.

Russian billionaires Mikhail Fridman and Petr Aven are selling their shares in Alfa-Bank to their longtime partner Andrey Kosogov in an effort to ease EU sanctions against them. The sale would be worth about $2.3 billion and is subject to regulatory approval, but there’s no guarantee that Fridman and Aven will be delisted by the EU even if they sell their stakes in the bank. The two have challenged sanctions against them in court and have submitted letters of support from Russian opposition figures such as jailed war critic Ilya Yashin and head of Navanly’s Anti-Corruption Fund, Leonid Volkov, who incidentally has resigned over his signature on the letter, calling it a “political mistake.”

The UN Security Council has renewed an arms embargo and other sanctions against Sudan over violence in the Darfur region that began in 2004. The resolution also extends the mandate of the UN panel of experts monitoring the arms embargo and travel ban and asset freeze on certain individuals until March 12, 2024. Thirteen of the 15 Security Council members voted for the resolution. Russia and China abstained, arguing that the Darfur conflict is largely over.

Russian banking group VTB could sell its subsidiary in Angola because of sanctions. VTB owns a 50.1 percent stake in the Angolan unit, called Banco VTB Africa. Antonio Carlos Sumbula, the president of the Angola state-owned Endiama corporation, owns the rest.

New legislation in Congress would sanction foreign governments that conduct “deadly chemical and biological programs,” following admissions by the FBI and the Department of Energy that the COVID-19 virus most likely originated from a lab leak in Wuhan, China. The bill would impose sanctions on foreign nations that have biological and chemical programs operating with “gross negligence.”

A European court this week annulled sanctions imposed the mother of designated Russian warlord, Yevgeny Prigozhin, ruling that Brussels had not proved she was linked to her son’s activities in Ukraine. The EU sanctioned Violetta Prigozhina for having “supported actions and policies which undermine the territorial integrity, sovereignty and independence of Ukraine” through her association with her son and companies linked to him, such as Concord Management and Consulting LLC. Prigozhina disputed the claims, denying “being currently linked” to Concord Management and arguing that a family link alone does not justify her designation.

A new report indicates that Andorra’s weak AML regime threatens the EU financial system. The report identifies several shortcomings that need to be addressed to protect the EU from allowing a “Trojan Horse” into its financial system as the principality works on further integration with the EU through an Association Agreement. Recommendations include ratifying anticorruption instruments, including the United Nations Convention against Corruption (UNCAC) and others; the creation of an anticorruption authority aligned with international standards; the creation of a central bank; and implementation of anticorruption and policies to counter illicit finance.

India will now require cryptocurrency exchanges, NFT marketplaces, and custody service wallet providers to monitor illicit activities, register with India’s Financial Intelligence Unit (FIU) and comply with the Prevention of Money Laundering Act (PMLA). They will also have to report suspicious activities to the FIU voluntarily and must designate a Money Laundering Reporting Officer (MLRO) to ensure compliance with the law.

Ameen Soleimani, one of the early contributors to US-designated Tornado Cash, has developed a mixing service, Privacy Pools, to help AML compliance. Privacy Pools would allow users of mixers to protect their privacy, while voluntarily opting to help regulators identify illicit funds without disclosing their entire transaction history.

The European Gaming and Betting Association (EGBA) has released regulations and guidelines to help the gambling industry combat money laundering in Europe. The EGBA guidelines include industry-specific advice on how online gambling operators should handle customer and business risk assessments, customer diligence procedures, suspicious transaction reporting, record keeping, and other crucial areas requiring strict AML compliance.

New Jersey Congressman Chris Smith this week introduced a bill to impose sanctions on China’s organ-harvesting industry. Experts say that China uses executed prisoners of conscience, Muslim minorities, and others as an organ donor pool. The Foreign Affairs Committee last week voted unanimously to send the bill, which requires reporting on the practice and sanctions against those involved, to the House Floor. Pharmaceutical companies that manufacture anti-rejection drugs could be just some of the firms sanctioned if the legislation passes.

Mexico this week is seeking to avoid potential trade sanctions for failing to stop the near-extinction of the vaquita—the world’s most endangered marine mammal. The government submitted a protection plan this week to the international wildlife body known as CITES, which had rejected an earlier version. It lists establishing “alternative fishing techniques” to gillnet fishing as one its top priorities. There may be as few as eight vaquitas left in the world.

FATF today published “tougher” global beneficial ownership standards to help countries prevent anonymous shell companies from being used to launder money and hide illicit proceeds. FATF’s Recommendation 24 requires countries to ensure that competent authorities have access to “adequate, accurate, and up-to-date” information on beneficial owners, and the implementation guidance for Recommendation 24 has been updated by explaining the types and sources of relevant information mechanisms to obtain this information.

Fraud and Abuse

Courtesy of Flickr

The CEO of defense contractor Multinational Logistics Services (MLS) has been charged with bribery. Frank Rafaraci was arrested in October 2021 when he returned to the United States to face bribery charges after he allegedly bribed a Marine Liaison Officer for the US Navy’s Fifth Fleet in Manama, Bahrain, in exchange the official using his official position for MLS’s benefit.

Former Goldman Sachs banker Roger Ng this week was sentenced to 10 years in prison after being convicted of helping steal billions of dollars from Malaysia’s 1MDB sovereign wealth fund. Ng, Goldman’s former head of investment banking in Malaysia, last year was found guilty of helping his former boss Tim Leissner embezzle money from the fund, launder the proceeds, and bribe government officials to win business.

The US government has obtained a warrant to seize a $25-million Russian aircraft accused of traveling from a foreign country to Russia in violation of US law. The plane—said to be owned by Rosneft—was last in the United States in 2014 but has flown in and out of Russia several times.

JPMorgan Chase is suing Jes Staley in an attempt to make the former executive liable if the bank is found to have facilitated Jeffrey Epstein’s sex crimes. Staley is alleged in the lawsuits to have “personally observed” Epstein abusing women, concealing that information from his employer, and to have “spent time” with young girls at the disgraced financier’s homes.

AI surveillance groups targeted by US sanctions are obtaining restricted technologies by using cloud providers and rental arrangements with third parties, as well as purchasing the chips through subsidiary companies in China. iFlytek, a state-backed voice recognition company blacklisted by Washington in 2019, has been renting access to Nvidia’s A100 chips. Facial recognition group SenseTime has used intermediaries to purchase banned components. AI-Galaxy, a Shanghai-based cloud computing company founded by former employees from Nvidia and AliCloud, charges $10 for one-hour access to eight of its A100 Nvidia chips.

Messages and documents from 2018 to 2020 reviewed by the Wall Street Journal, as well as interviews with former employees, have revealed that Binance, founded in 2017, and Binance.US are more connected than the companies have previously disclosed, mixing staff and finances, and sharing an affiliated entity that bought and sold cryptocurrencies. Binance developers in China maintained the software code that supported Binance.US users’ digital wallets, potentially giving Binance access to US customer data.

The prosecutor’s office in Milan is probing two unnamed suspects connected to Pier Antonio Panzeri, the former chair of the human rights committee in the European parliament at the heart of the “Qatargate” corruption scandal. The new investigation by Italian authorities involves two shareholders in a consultancy set up by Panzeri’s accountant to help hide bribes he received from foreign governments.

As much as $9 billion in gold that the Perth Mint, Australia’s biggest gold refinery, sold to China starting in 2018 could be recalled after some bars were discovered to be diluted with other metals. Although the product met widely accepted standards on the global gold market, up to 100 tons of bullion shipped to China potentially falls short of the more stringent standards of the Shanghai Gold Exchange (SGE). When the issue was discovered, Perth Mint allegedly tried to cover it up, concerned about the mint’s reputation.

Companies behind Tether—the world’s most widely traded cryptocurrency—in 2018 used falsified documents, sketchy intermediaries, and shell companies to maintain their access to the global financial system. One of those intermediaries, a major Tether trader in China, was trying to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal.” Tether, which is pegged to the US dollar, has been under investigation by the Justice Department.

Law firm Jones Day and corporate intelligence group Kroll are facing accusations of an unlawful conspiracy and “campaign of harassment” to protect Wirecard. In a lawsuit filed in the UK High Court, prominent short seller Matt Earl alleges that the companies used hacked and stolen communications as pretext for “overt surveillance” and “specious legal threats” designed to harass, distress, “and ultimately to deter him from reporting on Wirecard’s criminal activities.”

US officials are concerned that giant Chinese-made cranes operating at US ports across the country could be a possible spying tool for Beijing. Some national-security and Pentagon officials have compared ship-to-shore cranes made by the China-based ZPMC to a Trojan horse, because they have sensitive sensors that could capture information about materiel being shipped to US military operations around the world.

Iran-linked hackers manufactured a social media persona that claimed to be a Middle East researcher with a PhD and used “Sara Shokouhi” to target actual Iran-focused researchers. The woman in the persona’s social media photos is a Russia-based psychologist and tarot card reader, and the hackers are believed to be part of COBALT ILLUSION (aka Charming Kitten, APT42, or Phosphorus). One of the Atlantic Council researchers to whom the fake persona reached out thought the attempt was “some kind of phishing effort.”

FiveBy provides a weekly roundup of relevant news and insights to help readers keep abreast of regulatory developments and reputational risks. We hope you find the insights useful. Please feel free to contact us at if you have any questions or suggestions.

Leave a Reply

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