Episode 114

24th June – 30th June 2024

Sanctions

This week’s sanctions news starts in the European Union, where confirmation of the 14th round of sanctions against Russia has come. The news was trailed last week with the agreement, but the Commission has confirmed it this week following the Council’s adoption. There’s nothing we didn’t already know, especially if you have been following this podcast. The Court of Justice of the European Union has annulled the designation of Dmitry Pumpyansky, who was designated when chairman global steel pipe manufacturer, TMK, and president and board member of Sinara, the Russian investment bank. However, he divested himself of his investment and returned to life as a private citizen. This is not the first recent annulment from the ECJ, with Mikhail Fridman and Petr Aven having their respective designations annulled earlier this year.

In the US, the Department of the Treasury’s Office of Foreign Assets Control (‘OFAC’) has made designations of individuals in senior positions at AO Kaspersky Lab ‘after an investigation found transactions involving the products and services of Kaspersky Lab, Inc. and its corporate family pose unacceptable risk to U.S. national security or the safety and security of U.S. persons. This is pursuant to Executive Order 13873. OFAC has also sanctioned nearly 50 entities and individuals that constitute multiple branches of a sprawling “shadow banking” network used by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Islamic Revolutionary Guard Corps (IRGC) to gain illicit access to the international financial system and process the equivalent of billions of dollars since 2020. MODAFL and the IRGC engage in several commercial revenue-generating activities, most notably the sale of Iranian oil and petrochemicals.’

In the UK, news from the Office of Financial Sanctions Implementation (‘OFSI’) has announced that Aleksei Nikolaevich Filippovskii has had his designation removed and is no longer subject to either an asset freeze or travel ban. Filippovskii was, as far as I can tell, only designated in February 2024 as part of the wider designations announced then when, as a member of the management board of Alrosa, Russia’s state-owned diamond company, he was designated alongside three others. No reason has been given for the removal of designation, but it may well be related to the report that he stopped working for Alrosa in 2022. OFSI has also amended the Russia financial sanctions designations, though Pavel Sergeevich Barchugov, Konstantin Denisov, and Fractal Marine DMCC, remain subject to an asset freeze and trust services sanctions. Finally, OFSI has also extended the Syrian humanitarian activity licence, which now expires on 14th February 2025 at 11.59 pm, and issued a general licence allowing for payments to Statutory Auditors for a Statutory Audit from a Designated Person, or on behalf of a Designated Person.

Bribery and Corruption

This week’s bribery and corruption news starts in Turkey, where the Organisation for Economic Cooperation and Development (‘OECD’) has reported that Turkey has some way to go on its anti-foreign bribery enforcement. While the country has ‘substantially increased available corporate fines for foreign bribery and made state-owned enterprises liable for this crime,… its failure to pursue foreign bribery cases raises serious concerns. No individual or company has ever been held liable for bribing foreign officials. Most allegations have not been investigated at all. Judicial and prosecutorial independence has deteriorated, which may affect foreign bribery enforcement. These concerns are heightened as Turkish firms expand their activities in countries and sectors at high risk for corruption, including defence and construction….’ The Working Group makes a number of recommendations, among which are that it ‘proactively detects, investigates, and prosecutes foreign bribery allegations; assigns responsibility for pursuing foreign bribery offences to a specific prosecutorial unit; ensures the independence of the judiciary and prosecutors from improper influence in foreign bribery cases; further improves corporate liability legislation and enforcement; adopts whistleblower protection legislation and a national strategy to fight foreign bribery.’

In other news, the Prime Minister of the Solomon Islands Government has launched a revised national anti-corruption strategy. ‘Following international best practices, the SIG launched its first National Anti-Corruption Strategy (NACS) in 2017, endorsed by Parliament. In June 2023, a revised NACS (2024-2027) was presented by Government in Honiara; this revision addresses shortcomings identified in the initial implementation, including limited stakeholder awareness. The updated NACS features a detailed Action Plan (2024-2027) targeting both government and the private sector, with emphasis on community involvement.’ In the Seychelles, the Anti-Corruption Commission Seychelles (‘ACCS’) and the European Public Prosecution Office (‘EPPO’) have agreed to develop partnership in creating anti-corruption awareness, with attention to corruption within the public sector. The agreement will facilitate cooperation between the ACCS and the EPPO on investigations and prosecutions of criminal offences.

And, finally, from the UK, Transparency International has published a scheme for the restoration of trust in the political class, and Spotlight on Corruption has published a blog post on the rumbling news relating to Glencore’s African operations.

Money Laundering

The money laundering news this week starts in the EU, and specifically, Germany, where it has been confirmed that the European Banking Authority (‘EBA’) will retain its responsibility for coordinating and monitoring the EU financial sector’s fight against money laundering and terrorist financing until December 2025 ‘to minimise disruption and provide continuity’, before powers are formally transferred to the new Frankfurt-based Anti-Money Laundering Authority (‘AMLA’). The EBA and AMLA will, however, maintain a working relationship beyond the transfer. In other money laundering news from the EU, Eurojust – the European Union Agency for Criminal Justice Cooperation – hosted the second meeting of high-level experts on money laundering and asset recovery. ‘The meeting was an opportunity for participants to share experiences in relation to matters such as money laundering as a service, the misuse of Hawala (a type of informal money or value transfer service often used by criminals to launder money) and underground banking, and misuse of cryptocurrencies as money laundering schemes, issues related to predicate office. Participants also shared experiences in relation to asset recovery matters such as restitution and compensation of victims, asset sharing and disposal, exceptional costs and non-conviction based confiscation. Eurojust’s support on these cases was highlighted throughout the presentations. Participants highlighted the importance of increasing cooperation in this field.’

In Asia, authorities in Singapore have announced the publication of its National Asset Recovery Strategy. The Strategy aims to provide a ‘comprehensive approach towards the recovery of illicit funds and assets from criminals, and the forfeiture of these assets or their return to victims…[and rests on four pillars].’ First, to detect suspicious and criminal activities by tracing the illicit funds; secondly, to deprive criminals of their ill-gotten proceeds through prompt seizure and confiscation; thirdly, to deliver maximum recovery of assets for forfeiture and restitution to victims; and, fourthly, to deter criminals from using Singapore to hide, move, or enjoy their illicit assets.

Of course, the major money laundering news this week is from the FATF which has had its Plenary in Singapore. More on that in a moment, but for now, it has updated on Mutual Evaluations of Vietnam and Palau. In relation to Vietnam, the 1st Follow-Up Report re-rated Recommendation 14 from partially to largely compliant. In relation to Palau, recommendations 22 and 36 from non-compliant to largely compliant, recommendation 23, partially to largely compliant, and recommendation 28 from non-compliant to partially compliant. In terms of the Singapore Plenary outcomes, the FATF removed Jamaica and Turkey from its list of Jurisdictions Under Increased Monitoring – the so-called ‘grey list’ – and added Monaco and Venezuela. There were no changes to the High-Risk Jurisdictions subject to a Call for Action, despite calls in advance of the Plenary to have Russia added to the list. The three on this list remain as North Korea, Iran, and Myanmar. ‘In line with its focus on risk and context, the FATF achieved a key strategic milestone by revising the criteria for prioritising countries under its International Cooperation Review Group (ICRG) process (the so-called grey or blacking listing process). These changes will apply in the next round of evaluations and will make the process even more risk-based and cognisant of the capacity challenges faced by the least developed countries. In preparation for the next round of mutual evaluations, the Plenary agreed how countries will be assessed for compliance with the recently revised FATF Standards that further enhance asset recovery and international co-operation frameworks and more effectively deprive criminals of the proceeds of crime. The FATF also hosted the second Learning and Development forum, this time focusing on supporting national implementation of the revised FATF standards on beneficial ownership…. Members approved the Priorities of the FATF under the incoming Mexican Presidency. These include a focus on financial inclusion; ensuring a successful start to the new round of assessments; strengthening cohesion of the Global Network; supporting effective implementation of revised FATF Standards with a focus on asset recovery, beneficial ownership and virtual assets; and continued efforts to combat terrorist and proliferation financing, …[and]… members thanked the Singapore Presidency for kick-starting the Women in FATF and the Global Network initiative.’

Fraud

The fraud news this week starts in the UK, where there is a story with similar parallels to the Robo-debt scandal in Australia, though with nothing like the severity of consequence seen in that case. In the UK, figures obtained under a Freedom of Information Act request by the campaign group, Big Brother Watch, indicates that 200,000 housing benefit claimants were wrongfully investigated for benefits fraud after being identified as high risk by a Department for Work and Pensions algorithm which misfired. The government is unable to comment given the pre-election period in the UK.

In other news, Interpol has announced the seizure of $257m in global action against online scams. Targeting phishing, investment fraud, fake online shopping sites, romance and impersonation scams, Operation First Light 2024 led to the arrest of 3,950 suspects and identified 14,643 other possible suspects on all continents. ‘Police collectively intercepted some USD 135 million in fiat currency and USD 2 million in cryptocurrency…. Other assets worth over USD 120 million were seized, including real estate, high-end vehicles, expensive jewelry, and many other high-value items and collections.’

Other Financial Crime News

In other financial crime news this week, in the UK, the Financial Conduct Authority’s Joint executive director of enforcement and market oversight, Steve Smart, delivered a speech at a London conference on the theme of teamwork in combatting financial crime, both internally and externally. The broader themes of the piece are prevention and enforcement.

Cyber Crime

We end this week’s financial crime news with a round-up of cyber-attack news from the European Union, where the Council has announced sanctions against six individuals for malicious cyber activities against EU member states and Ukraine. They have been involved ‘in cyber-attacks affecting information systems relating to critical infrastructure, critical state functions, the storage or processing of classified information and government emergency response teams in EU member states… [in addition to]… restrictive measures are being taken against cybercriminal actors that use ransomware campaigns against essential services, such as health and banking.’

References

Council of Europe, 14th package of sanctions on Russia's war of aggression against Ukraine: EU lists additional 69 individuals and 47 entities.

Council of Europe, Russia’s war of aggression against Ukraine: comprehensive EU’s 14th package of sanctions cracks down on circumvention and adopts energy measures.

Council of Europe, Cyber-attacks: six persons added to EU sanctions list for malicious cyber activities against EU member states and Ukraine.

Eurojust, Eurojust leads efforts to step up judicial response to money laundering and asset recovery.

European Banking Authority, The EBA welcomes the entry into force of the framework establishing the anti-money laundering and countering the financing of terrorism authority.

European Commission, EU adopts 14th package of sanctions against Russia for its continued illegal war against Ukraine, strengthening enforcement and anti-circumvention measures.

Financial Action Task Force, Vietnam's progress in strengthening measures to tackle money laundering and terrorist financing.

Financial Action Task Force, Palau's progress in strengthening measures to tackle money laundering and terrorist financing.

Financial Action Task Force, Outcomes FATF Plenary, 26-28 June 2024.

Financial Action Task Force, Women in FATF and the Global Network.

Financial Conduct Authority, Teamwork: A Smart way to tackle financial crime.