Recently proposed regulatory changes and legislation indicate that the United States is seeking to upgrade its anti-money laundering (AML) regime, and that the real estate sector in particular almost certainly needs to prepare for new requirements and reporting obligations under the Bank Secrecy Act (BSA) by proactively reevaluating risk appetites and updating compliance processes. Possible upcoming changes will require expert research into ownership and control structures by risk and compliance experts with foreign language capabilities and jurisdictional knowledge. FiveBy’s expert certified AML/CFT and global sanctions analysts can help clients craft a bespoke solution to help identify beneficial owners, money laundering, and sanctions evasion methodologies to help professions in the real estate sector more effectively comply with US laws and regulations.
In our recent advisory we explore possible new changes and challenges that the real estate sector will face and how expert analysis can help mitigate regulatory and reputational risk.
Compliance and Due Diligence
Russia has added 61 more US officials, media executives, and others to its sanctions list, including Treasury Secretary Janet Yellen, Trade Representative Katherine Tai, and Head of the Office of Sanctions Coordination James O’Brien. Ukrainian president Zelensky this week signed a largely symbolic decree imposing sanctions on Putin and dozens of his top officials, including Kremlin spokesman Peskov, Prime Minister Mikhail Mishustin, Foreign Minister Lavrov, and Defense Minister Shoigu, that includes asset freezes and travel bans.
Sberbank this week suspended yuan settlements for corporate clients. According to several sources, Sberbank also has had difficulties in processing payments in Indian rupees. Russian media reports that Sber’s correspondent bank has stopped services because of “politics.” The bank says it’s working on the issue with Chinese partners.
Treasury has prohibited US money managers from buying any Russian debt or stocks in secondary markets. Treasury published new FAQs clarifying that the ban extends to all Russian debt, affecting all Russian firms—not just those specifically included on the SDN list.
The United States has ordered the seizure of a Boeing 787-8 Dreamliner and a Gulfstream G650ER aircraft that are likely owned or controlled by Russian oligarch Roman Abramovich for allegedly violating the Export Control Reform Act of 2018 (ECRA). The two US-manufactured planes were reexported to Russia in violation of the ECRA without obtaining necessary export licenses from the Commerce Department. The Justice Department says Abramovich owns the aircraft through a network of shell companies in Cyprus, Jersey, and the British Virgin Islands.
A group UK firms that specialize in tracing assets has identified hundreds of senior Russians with assets abroad who could be added to international sanctions lists. The London firms are targeting senior but low-profile officials and members of the Russian military who have property and other assets worth millions of pounds in Europe, as well as children at overseas boarding schools.
Congressman Greg Murphy is drafting legislation — the Protecting Endowments from Our Adversaries Act — that would would “disincentivize” US university endowments from investments in restricted firms, calling for a 50 percent excise tax on the principal and a 100 percent excise tax on any realized profits from investments in hostile or abusive entities. Murphy this week sent a letter to the 15 private universities with the largest endowments, including the Ivy Leagues, asking them to purge their investment portfolios of entities that support China’s imprisonment and abuse of the Uyghurs or Russia’s invasion of Ukraine. Murphy is also requesting that universities vet their endowment portfolios to ensure they do not include any entities on the SDN list.
Israel is apparently pressuring the Biden administration to remove Pegasus developer NSO from the Entity List. A senior government official denied the claims that the White House was considering the request and said the rejection was made clear to the Israelis. The removal of NSO from the Entity List would almost certainly draw harsh criticism from the Democratic Party, Congress, and the US cyber defense community.
Switzerland’s lower house yesterday backed legal changes that will allow the country to impose sanctions independently of other nations or international groups on people or entities that have violated international humanitarian law. Currently, Switzerland can only adopt sanctions imposed by the UN, the Organization for Security and Co-operation in Europe (OSCE), or big trading partners like the EU.
EU lawmakers are pushing for additional sanctions on China over its human rights violations against the Uyghurs in Xinjiang. The European Parliament adopted a non-binding resolution yesterday condemning systematic repression of the Uyghur community in China and calling for a ban on importing goods made with forced labor. China condemns the largely symbolic passage of the resolution and claims the country’s actions in Xinjiang are related to counterterrorism.
Treasury this week designated two Bosnian senior officials for destabilizing the region and undermining the Dayton Peace accords. Marinko Cavara, the Federation of Bosnia and Herzegovina (FBiH) President, and Alen Seranic, the Republika Srpska Minister of Health and Social Welfare, were designated under EO 14033 for undermining democratic institutions in Bosnia and Herzegovina.
The UK will begin stricter enforcement of the country’s economic sanctions next week, when the Office of Financial Sanctions Implementation (OFSI) will no longer have to prove that companies or individuals who violate sanctions knew or should have known they were violating the rules. Instead, OFSI will only have to prove that a sanctions violation occurred to take appropriate enforcement action.
Italian oil company, Eni SpA, and Spanish Repsol SA could begin shipping Venezuelan oil to Europe as soon as next month, resuming oil-for-debt exchanges that were halted when Washington increased Venezuela sanctions two years ago. The State Department gave the authorization to resume shipments in hopes that the Venezuelan crude can help Europe cut dependence on Russian oil and redirect some of Venezuela’s oil cargoes away from China.
Canadian advertising and public-relations agencies this week were banned from working for Russian oil and gas firms. The new sanctions outlaw 28 types of Canadian consultants, including technical and management consultants and advertising agencies, from working for Russia’s oil, gas, and chemical sectors.
Taiwan’s Ministry of Economic Affairs (MOEA) has announced a new list of technologies that are now banned from sale to Russia and Belarus, including essentially any kind of processor made in the last 30 years. The ban makes sourcing chips for Russia’s war operation and even common items like smartphones, consumer electronics, and vehicles difficult .
The Commerce Department this week suspended the export privileges of three US-based firms—Quicksilver Manufacturing Inc, Rapid Cut LLC, and US Prototype Inc—for receiving technical drawings and blueprints from US customers and forwarding them to manufacturers in China for 3-D print satellite, rocket, and defense-related prototypes. The three companies all received a 180-day suspension.
New Zealand has sanctioned 44 Russian and Belarusian state-owned companies and defense entities, including Gazprom and three weapons and military technology manufacturers. New Zealand’s Minister of Foreign Affairs wants to ensure that Russia and Belarus do not consider New Zealand a safe haven for their activities and that businesses across the country will not unknowingly fund President Vladimir Putin’s war efforts.
WikiIran is exposing 12 Iranian front companies in China and Hong Kong and that are involved in sanctioned Iranian petrochemicals trade. These front companies were used by Iranian petrochemical producers and brokers to receive payments for the sale of their products to the Petrochemical Commercial Company (PCC), manipulating banks into facilitating money transfers in violation of sanctions. Most of these companies hold dollar-denominated accounts in Chinese banks.
Fraud and Abuse
Litecoin will be delisted on South Korean crypto exchanges Bithumb and Upbit over modifications that enabled greater transaction privacy. The two platforms stated they were shutting down market support for Litecoin because its newly activated Mimblewimble Extension Blocks network upgrade conflicts with South Korean AML regulations.
AlphaBay is apparently the #1 darknet marketplace again after being taken down in 2017 during Operation Bayonet, which seized the site’s central server in Lithuania and arrested its creator, Alexandre Cazes, in Bangkok. Last year, AlphaBay’s number-two administrator and security specialist, publicly known only as DeSnake, suddenly reappeared along with the site, and thanks in part to takedowns and the mysterious disappearances of competing dark web markets, AlphaBay once again lists thousands of drugs, malware, and stolen data, such as Social Security numbers and credit card details on its site.
The Securities and Exchange Commission (SEC) is examining whether Binance’s initial coin offering of its Binance coin (BNB) token in 2017 should have been registered with the regulatory agency. The SEC is also investigating whether Binance.US is wholly independent of the global exchange and whether its employees may be involved in insider trading. Binance is currently under investigation in the United States by the Justice Department, the Commodity Futures Trading Commission (CFTC), and the IRS.
Russia is trying to profit by selling wheat it has plundered from Ukraine to drought-stricken countries in Africa. A State Department cable last month identified by name three Russian cargo vessels suspected of transporting the stolen grain. German Chancellor Scholz has rejected a proposal to lift sanctions against Belarus in exchange for Minsk allowing the transit of grain from Ukraine through Belarus. Western countries are looking for ways to safely export agricultural products from Ukraine in order to avoid global food shortages. Zelensky also rejected the idea.
A US court is seeking to compel two top Lebanese politicians to respond to accusations that they orchestrated the kidnap and torture of a Lebanese-American couple. Elie and Lara Samaha are suing the Lebanese politicians and eight others, including family members, judges, and lawyers, in connection with a family dispute over land and money they claim was stolen from them and that resulted in the couple’s alleged detention and torture in Lebanon. The case has the potential to further expose abuses of power in Lebanon.
Appleby is one of many elite firms that provide services to powerful Russians despite their known links to the Kremlin. Russian oligarchs and their close friends and family members lean on gatekeepers, such as Appleby, accounting giant PwC, and US law firm Baker McKenzie, to help them build elaborate networks of shell and front companies to conceal their assets.
The SEC has begun an investigation into Terraform Labs’ cryptocurrency Terra Luna’s recent meteoric crash and ran across possible money laundering by its founder Do Kwon. The SEC says that $80 million of the company’s monthly operating expenses were split between numerous crypto wallets and transferred shortly before Terra crashed.
More than $400 million in tax advances and loans that Democratic Republic of Congo’s state mining company, Gecamines, said it paid to the national treasury has disappeared. Gecamines has long been accused of corruption by NGOs and opposition politicians. Since assuming office in 2019, President Felix Tshisekedi has replaced the Gecamines executives most closely connected to previous corruption allegations.
Colombian authorities have arrested five people for their alleged involvement in last month’s murder of a Paraguayan prosecutor known for fighting organized crime. Marcelo Pecci was assassinated while on his honeymoon, likely because of his prosecutions in Paraguay of cases which often involved money laundering and narcotics. Colombian authorities say that they have captured all of those presumed to be involved in the murder.
Analysis of data about Binance’s transactions showed that from 2017 to 2022, its weak AML compliance processes resulted in $2.35 billion laundered through its platform by illicit actors such as North Korean hacking group Lazarus, illegal drug sales on darknet market Hydra, and investment fraud . Binance’s CEO refuted the report.
US agencies in a new advisory this week provided details about how Chinese state-sponsored hackers use publicly known vulnerabilities to target internet service providers and major telecommunications firms around the world. Taking advantage of common vulnerabilities and exposures allows Beijing-backed malicious actors to break into victim accounts and network infrastructure via a VPN or another public-facing application “without using their own distinctive or identifying malware.”
The FBI this week seized an illicit marketplace that has made millions selling the personal data of roughly 24 million US citizens. US law enforcement worked with authorities in Cyrus and Latvia to seize four domains belonging to SSNDOB administrators. Chainalysis also found financial ties between SSNDOB and Joker’s Stash—a darknet market popular for offering stolen credit card and personal information that was taken down last year. Bitcoin transfers from December 2018 to June 2019 suggest a possible relationship between the two marketplaces.