Insights: Week Of May 29, 2023


As Russia retains its status as the world’s most sanctioned country, deprioritizing other world crises and focusing scarce resources on Russia sanctions can be tempting. However, we encourage US firms and financial institutions to open their apertures and monitor all current and future developments in the regulatory space.

  • Senator Marco Rubio is working to impose even more sanctions on China for its Uyghur genocide by introducing the Uyghur Genocide Accountability and Sanctions Act. The legislation would authorize the State Department and USAID to provide assistance to the victims of genocide, allow them to develop initiatives to counter Chinese propaganda, help preserve the Uyghur cultural and linguistic heritage repressed by Beijing, mandate disclosures to the SEC about entities directly or indirectly engaged in Uyghur genocide in Xinjiang, and provide resources to organizations documenting abuses there.
  • A group of Republican senators is preparing legislation that would impose additional, more severe sanctions against the Taliban for human rights abuses in Afghanistan, including terrorist activity, drug trafficking, and abuses against women. The group is already sanctioned as a Specially Designated Global Terrorist organization.
  • New Lebanon sanctions may be coming down the pike. The United States is considering sanctioning top Lebanese officials for their continued obstruction of presidential elections. The top two US House Foreign Affairs Committee members are urging the Biden administration to sanction Lebanese individuals for corruption. Lawmakers also are calling on the Biden administration to press for full accountability for the Beirut Port explosion in 2020, since Hizballah and its allies have blocked the lead investigative judge from doing his job.

None of these possible new sanctions are related to Russia, but they can and will result in financial penalties and reputational risk should a US firm or financial institution be found violating these sanctions. Just because regulators are focusing on Russia, does not mean that they will ignore violations of other sanctions programs.

US companies should monitor all regulatory developments and possible new regulations. Registering to receive FiveBy’s Weekly Insights in your inbox is one way to keep informed and avoid inadvertent violations. Scheduling a free consultation can help gain an understanding of your firm’s risks and vulnerabilities. Click below to schedule a chat with our specialists.

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Compliance and Due Diligence

The EU this week included seven individuals on its Moldova sanctions list. Designated persons include oligarch Vladimir Plahotniuc, who is charged with embezzlement of Moldova’s state funds and massive bank fraud; Igor Chaika, the Russian businessman and son of ex-Prosecutor Peneral of Russia Yuri Chaika, who is allegedly responsible for funneling money in support of FSB efforts aimed at destabilizing Moldova and bringing the country under the control of the Kremlin; and Ilan Shor, who is involved in financing political parties in Moldova and incitement of violence against political opposition. He is also guilty of fraud and money laundering in the same “bank fraud” case as Plahotniuc. All three are already sanctioned by the United States. Canada also issued new sanctions for the same reasons

OFAC this week sanctioned 10 entities and 12 individuals under the Syria-Caesar authorities and the Illicit Drugs Executive Order 14059. The White House last month released its fact sheet promising to crack down on fentanyl supply chains, and Treasury has sanctioned those involved in the proliferation of equipment used to produce illicit drugs, such is pill presses and die molds, located in China, Hong Kong, and Mexico. Treasury also sanctioned financial facilitators that helped move millions of dollars benefitting the Assad regime to accounts at the US-designated Central Bank of Syria.

Treasury this week used the new Sudan EO 14098 that was issued last month to impose sanctions on persons or entities in Sudan linked to the “military’s seizure of power in October 2021” and outbreak of violence in April. Four entities have been sanctioned under this new EO for fueling the ongoing violence in the country by supporting both sides of the conflict.

Several Iranian individuals and one entity in Turkey were sanctioned this week for links to Iran’s Islamic Revolutionary Guard Corps (IRGC). They were designated for their involvement in assassination plots in the United States and other countries. Included on that list is Shahram Poursafi, who was charged by the Justice Department last year with plotting to assassinate former national security adviser John Bolton.

The UN Security Council this week renewed sanctions against South Sudan, including an arms embargo and targeted sanctions, such as travel bans and asset freezes, until May 2024. Resolution 2683, which was adopted with 10 votes in favor and five abstentions (including, unsurprisingly, China and Russia), also extends the mandate of the Panel of Experts, which assists the work of the South Sudan Sanctions Committee, until July 1, 2024.

Russian telecommunications company MegaFon is suing the EU in hopes of removing sanctions imposed against it this year in response to Russia’s continued aggression in Ukraine. The company accuses the European Commission of failing to communicate the decision in advance and not allowing it to “submit observations,” to which the company claims it has a legal right for its defense. It also claims it was not been given reasons for being sanctioned.

The UAE central bank has issued new AML guidance for cryptocurrencies, which addresses the risks arising from dealing with virtual assets and virtual asset service providers (VASPs), including on due diligence for licensed financial institutions when dealing with customers and counterparties in the crypto space. The guidance will come into effect within a month and also applies to exchange houses, payment service providers, registered hawala providers, and the insurance sector.

Japanese crypto exchange, BitFlyer, this week announced stringent AML measures to comply with the Travel Rule, which mandates information sharing between financial institutions when money is transferred. The newly implemented measures will restrict transfers from BitFlyer to platforms that are not compliant with the Travel Rule Universal Solution Technology (TRUST) that ensures firms adhere to FATF’s recommendations, including the Travel Rule.

The SEC will pursue crypto influencers who promote scam projects and manipulate the prices of certain tokens on social media. Former SEC chief John Reed Stark is warning crypto influencers that they will face prosecution, focusing on individuals who promoted suspicious crypto projects and helped them manipulate market prices. These manipulations and promotions mostly occur on social media platforms like Twitter, Discord, Instagram, or Reddit.

South Africa’s central bank is warning of risks to the country’s financial stability, not only because of capital outflows, but also the possibility of sanctions following an accusation that the country has supplied weapons to Russia to help Moscow’s war in Ukraine. The South African Reserve Bank says that these risks, along with the possibility of a power grid failure, as well as high inflation, are threatening the country’s financial system.

Ukraine’s Parliament this week approved sanctions against Iran for 50 years. The package was approved one day after Ukraine said Russia used Iranian Shahed drones in the largest UAV attack on Kyiv since the beginning of the invasion.

Poland has imposed sanctions on 365 Belarusian individuals and 20 companies in response to the Belarussian Supreme Court upholding an eight-year prison sentence for a leading figure from the country’s ethnic Polish minority. The individuals will be banned from entering the Schengen area and their assets will be frozen. Warsaw has also implemented a ban on Belarusian and Russian trucks entering Polish territory at the border with Belarus.

Uganda’s president Yoweri Museveni this week signed a law criminalizing homosexuality in the country, imposing mandatory life sentences on homosexual relations and other draconian measures. The United States is considering sanctions, and President Biden has instructed the National Security Council to provide assessments about how aid and investment programs could be impacted, including possible visa restrictions.

Hungary and Greece seem to be the sticking points for the 11th EU sanctions package against Russia. Five Greek companies and one Hungarian company are on a Ukrainian list of “war sponsors.” In Greece, five shipping companies are included on the list – TMS Tankers, Minerva Marine, Thenamaris Ships Management, Delta Tankers, and Dynacom Tankers Management. In Hungary, OTP Bank has been an issue since talks about the next tranche of sanctions began. FiveBy advises watching the other entities included on Ukraine’s list and monitoring for additional designations.

India’s top financial regulators are asking entities in the financial sector to tighten their AML/CFT processes and have also added fresh regulations as they prepare for a review by FATF. Any gaps found in India’s readiness to combat money laundering could lead to adverse comments in the evaluation or impact its rating and make doing business in the country costlier for global firms.

The EU this week formally signed its Markets in Crypto Assets (MiCA) regulation into law alongside a separate AML law that requires crypto providers to verify their customers’ identity when transferring funds. One of the provisions that will offer crypto exchanges and wallet providers a license to operate across the bloc will take effect in 12-18 months.

In a Senate hearing yesterday, Elizabeth Warren pushed her anti-crypto legislation as a way to shut down crypto funding for fentanyl, citing the “rampant” use of crypto in the Chinese fentanyl trade. Warren suggested her Digital Asset Anti-Money Laundering Act may help cut off the crypto payments, and she said the bill will be reintroduced in this Congress.

Fraud and Abuse

Photo by Tima Miroshnichenko:

Italian and Spanish authorities this week arrested 22 suspected members of a global money laundering network that moved money for South American cartels, and seized roughly $21 million in assets. The suspects were Italian, Albanian, Colombian, Moroccan, and Syrian nationals, who managed an international network of companies created to launder drug proceeds. The suspects allegedly a Black Market Peso Exchange (BMPE) to launder the money. To learn more about BMPEs, click here.

Czech police on Friday announced that they have detained 10 foreign university students in Prague, suspected of organizing a group involved in money laundering of online fraud proceeds. The scammers targeted Czech women who publicly identified themselves as “single” or “divorced” on social networks, posing as “a surgeon with the UN mission in Yemen, a US soldier in Afghanistan, or a miner on an oil platform” to get them to part with their money.

The SEC has reached a settlement with a former Coinbase product manager and his brother over insider trading allegations of cryptocurrencies listed on the platform. Ishan Wahi and his brother, Nikhil Wahi, were arrested last year and charged with wire fraud conspiracy and “wire fraud in connection with a scheme to commit insider trading.” The SEC filed insider trading charges on the same day. In this week’s announcement, the SEC said the two agreed to give up their gains and pay interest.

British Virgin Islands-based derivatives exchange platform BKEX Global this week announced a temporary suspension of withdrawals, informing users that their funds were found to be used in money-laundering activities. BKEX wrote that the platform is cooperating with the police to collect evidence, suspending withdrawals to aid in the investigation.

Nicaraguan police are investigating several Catholic Church parishes in the country for money laundering. Police say they found “hundreds of thousands of dollars hidden in bags” in various dioceses and froze their bank accounts. For context, Nicaragua’s president Ortega has clashed with the Church, accusing it of supporting anti-government protests in 2018.

Two individuals have been charged with acting as unregistered agents of the People’s Republic of China, bribing public officials, and conspiracy to commit money laundering. John Chen (aka Chen Jun) and Lin Feng allegedly manipulated the IRS’s Whistleblower Program, filing a fraudulent complaint in an effort to strip the tax-exempt status of an entity run and maintained by practitioners of the Falun Gong—a spiritual practice banned in China. The two paid $5,000 to bribe an undercover officer posing as an IRS agent for his assistance in advancing the complaint and promised more.

Cyber criminal groups are selling fraudulent check schemes on Telegram, and the schemes are becoming more popular. Check fraud increased by 84 percent between 2021 and 2022, beginning its rise during the Covid pandemic and the subsequent stimulus programs. Fraudsters are combining identity theft and fake bank accounts to deposit checks and bypass authentication by the bank.

The organizers of a nonprofit bail fund allegedly involved in helping those accused of launching an attack against an Atlanta police training center this week were arrested on charges of money laundering and charity fraud. The Georgia Bureau of Investigation announced that it found evidence linking three directors of the Network for Strong Communities to the alleged financial crimes.

The Detroit Medical Center Inc. (DMC), Vanguard Health Systems, and Tenet Healthcare, have agreed to pay $29.7 million to resolve allegations that they violated the False Claims Act by providing kickbacks to referring physicians. The government alleged that between 2014 and 2017, Sinai Grace Hospital and Harper University Hospital provided the services of DMC-employed mid-level practitioners to 13 physicians at no cost or below fair market value in violation of the Anti-Kickback Statute (AKS).

The Justice Department this week reached a settlement with ESSA Bank & Trust to resolve allegations that it engaged in redlining majority-Black and Hispanic neighborhoods in and around Philadelphia. Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color, or national origin of the residents in those communities. ESSA agreed to pay more than $3 million.

Discord communities focused on cryptocurrencies have been hacked after their administrators were tricked into running malicious Javascript code disguised as a Web browser bookmark. Someone posing as a reporter for a crypto-focused news outlet would request an interview, and admins who took the bait were sent a link to a Discord server that appeared to be the official Discord of the crypto news site. The victim was then asked to complete a verification step to validate their identity, which would enable the attackers to steal the user’s Discord token and post announcements about “exclusive” money making opportunities, prompting members to connect their crypto wallet to the scammer’s site, where their tokens were stolen and their accounts drained.

  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.

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