A Focus on Enforcement

As the US regulatory environment becomes more volatile, the government is focusing on enforcement of existing laws and stopping sanctions evasion and money-laundering facilitators from giving illicit actors access to the US financial system.

• IRS-CI has opened 20 criminal investigations in its crackdown on sanctions evasion by Russians. The cases are a collaboration between Task Force KleptoCapture, but IRS-CI has also identified nearly 50 possible individuals and entities to target for sanctions enforcement.

• When Treasury Undersecretary for Terrorism and Financial Intelligence (TFI), Brian Nelson, spoke at the ACAMS anti-money laundering conference last month, he highlighted the importance of enforcement in stopping illicit financial actors. Referencing last month’s Treasury enforcement action against virtual currency exchange, Bittrex, Nelson signaled that that no matter how big or small a company may be—especially in the digital assets sphere—compliance needs to be ensured immediately, because Treasury will aggressively pursue sanctions violators.

Small and mid-sized firms and financial institutions must balance rising compliance costs with regulatory requirements. That’s why we created FiveBy Risk Assessment Services to help companies perform enhanced due diligence research when needed without breaking the bank. Click below to receive a free consultation and demo.

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Compliance and Due Diligence

OFAC this week sanctioned a total of 34 individuals, vessels, and entities as specially designated global terrorists under EO 13224. These designations target an international oil smuggling network that facilitated oil trades and revenue for Hizballah and IRGC-QF. Four key players—Viktor Artemov, Edman Nafrieh, Rouzbeh Zahedi, and Mohamed El Zein—allegedly used dozens of front companies to conduct the network’s activities. The network also used oil storage at the Port of Sharjah in the UAE and blended Indian petroleum with Iranian oil to hide its origin.

OFAC this week also sanctioned several individuals for trafficking weapons to terrorist groups, such as ISIS and al-Qa‘ida. Individuals that were designated this week have sold weapons to or were active al-Shabaab members, and OFAC says they are critical nodes for a weapons-trafficking network that is closely integrated with ISIS-Somalia.

The UK this week sanctioned four additional Russian oligarchs—Aleksandr Frolov, Aleksandr Abramov, Airat Shaimiev, and Albert Shigabutdinov—for helping president Putin mobilize Russian industry to support the war in Ukraine. Frolov and Abramov are business associates of sanctioned Russian oligarch Roman Abramovich.

The Monetary Authority of Singapore (MAS) this week stressed that compliance with sanctions against Russia is mandatory for all authorized cryptocurrency exchanges. The announcement comes after investigations revealed that pro-Russian organizations have received millions of dollars in cryptocurrency donations to support Russia’s war in Ukraine.

South Korea wants to impose additional unilateral sanctions against North Korea in response to increasing threats, including this week’s ICBM launch—its seventh this year. The United States in response urged all nations to enforce sanctions on North Korea, saying it violated UN Security Council resolutions with its ICBM launch.

Switzerland will mirror EU sanctions against Iran for supplying drones and missiles to Russia, but it will not impose additional sanctions on Tehran for human rights violations during Iran’s demonstrations in the aftermath of the death of Mahsa Amini. The country’s Ministries of Economy and Foreign Affairs unanimously opposed sanctions claiming that these designations would not be in line with “Swiss domestic and foreign political interests.”

Switzerland’s financial regulator (FINMA) is extending money-laundering checks for crypto transactions despite significant opposition from users. Customers will have to prove their identity if they swap more than 1,000 Swiss francs ($1,000) or more in crypto for cash over the course of one month.

Australia’s financial crime watchdog (AUSTRAC) this week ordered an audit of the country’s largest online betting house, Sportsbet, and British gambling firm Bet365 to assess their compliance with illicit finance laws. External auditors must report within six months whether the firms are identifying and countering money laundering and terrorist financing, conducting risk assessments, and have the necessary oversight to prevent financial crimes.

AUSTRAC this week also warned that Australia can expect more global criticism for its AML regime unless laws that guard against illicit finance are expanded to include “gatekeepers” such as lawyers, accountants, and real estate agents. But leading industry associations oppose reforms, claiming that they would create a significant regulatory burden.

The European Commission has raised the threat level for money laundering in online gambling to its highest possible rating and called for lower thresholds for due diligence checks to prevent criminal activity. The commission performs periodic risk assessments to determine the risk of money laundering and terrorist financing across the EU in various sectors.

Human Rights Watch (HRW) is calling on international leaders to impose even harsher sanctions on the Myanmar junta that overthrew the country’s democratically elected civilian government last year. In addition to a UN global arms embargo on Myanmar, HRW suggested that the United States, the UK, and the EU target foreign revenue from natural gas and mining transactions between Myanmar and countries such as Malaysia and Singapore.

An adjustment to the US export control regime last month is forcing affected Chinese entities to respond to end-user checks for firms on the Commerce Department’s “unverified list.” The Bureau of Industry and Security conducts end-use checks to verify the bona fides of companies on the list. An entity on the “unverified list” will be added to the “entity list” if it fails to complete an end-user check within 60 days. The tweak that directly links the two lists has added pressure on Chinese companies and authorities to respond.

Washington’s restrictions on US citizens assisting China’s chip industry will be narrowly enforced, and may have a smaller-than-expected impact on semiconductor companies doing business there. The rules seem to be mostly targeting US persons working in specific functions for semiconductor manufacturing equipment firms, judging from BIS guidelines, requiring a license for US persons conducting or authorizing the delivery of items used to develop advanced chips in China, but not those who perform related clerical or administrative duties.

New Zealand this week announced new sanctions against 14 Russian individuals and seven entities for their involvement in the invasion of Ukraine. The designations now include military personnel and individuals disseminating Russian disinformation, as well as shareholders of companies that develop and manufacture missiles and weapons.

India’s Insurance Regulatory and Development Authority (IRDAI) has asked insurance companies to implement new AML/CFT guidelines by the new year. The new AML/CFL directives allow insurance companies to take strict action against agents/intermediaries who bring clients in violation of the AML/CFT regulations.

Fraud and Abuse

Sanctioned Russian mercenary group Wagner has ingrained itself in Sudan’s gold sector. M Invest, a company owned by US-designated Wagner boss Evgeniy Prigozhin that runs his operations in Sudan, paid security company, Aswar, that is operated by Sudanese military intelligence, millions of dollars for “security services” and “visa processing.” Aswar was also contracted to supply weapons and organize flights for the Russians on Sudanese military aircraft. They appear to have been given the right to use military signal codes and land on military air bases.

The United Nations Office on Drugs and Crime (UNODC) has launched a new toolkit with guidelines about how to effectively investigate and prosecute the trafficking of people for the illegal organ trade. The global shortage of organs available for transplant has resulted in sick patients seeking out organs from the black market, a process facilitated by criminal groups who engage in organ trafficking and illicit transplants.

Twitter has disrupted three China-based operations that were running influence campaigns on the platform. Nearly 2,000 user accounts, some of which claimed to be located in the United States, weighed in on controversial issues, such as election-rigging and criticism of members of the transgender community. Twitter also took down three networks that were based in Iran but often claimed to be based in the United States or Israel.

An FCC commissioner is asking the Committee on Foreign Investment in the United States (CFIUS) to take action to ban TikTok because the app has become part of critical information infrastructure, making its ownership by a Chinese parent company a target of growing national security concern. TikTok is currently in negotiations with CFIUS to determine whether it can be divested by Chinese parent company ByteDance to a US company and remain operational in the United States.

Investigative reports reveal that Belarussian businessman Yury Chyzh, who used to be known as Belarussian president Lukashenko’s “main wallet,” and his Lithuanian partner Vitold Tomaševskij siphoned billions of dollars out of Belarus owing to preferential access to cheap petroleum and other schemes. Chyzh and his partner gained access to cheap Russian oil, fraudulently manipulating customs codes of petroleum products by marking them as “solvents,” and avoiding payments of export tariffs.

A former University of Georgia student who three years ago pleaded guilty to running a Ponzi scheme from his fraternity house, has been accused by the SEC of defrauding brokerage firms before reporting to prison. A separate civil case accuses Syed Arham Arbab and five others of operating a “free-riding” scheme in which the group made more than $2 million in deposits from empty or underfunded bank accounts into trading accounts at two brokerages, which gave them more than $1.5 million in instant credits to use for stock trades. They then “withdrew or attempted to withdraw trading profits before the broker-dealers discovered the insufficient funds and froze the accounts.”

Immigration and Customs Enforcement (ICE) announced this week that a massive operation in Guatemala had led to a number of arrests and rescues of migrants who were being smuggled by transnational criminal organizations. The operation resulted in the arrest of two dozen Guatemalans for human smuggling, as well as the seizure of over $150,000 and other contraband. ICE also announced that it had rescued 70 migrants in the country illegally from Ecuador, Nicaragua, Salvador, and Venezuela from various hotels in Guatemala City.

A UK subsidiary of mining giant Glencore has been ordered to pay more than £275 million for bribing officials in African countries for oil access. The company used agents and employees to pay £23 million in bribes to energy officials in Nigeria, Cameroon, and the Ivory Coast between 2011 and 2016 by flying cash by private jets to pay the bribes.