Embedded Files
15th July – 21st July 2024
Sanctions
This week’s sanctions news starts in the US, where the Office of Foreign Assets Control has designated and identified ‘as blocked property a dozen persons and vessels, respectively, that have played a critical role in financing the Houthis’ destabilizing regional activities as part of the network of Sa’id al-Jamal. [The]… action includes Indonesia-based Malaysian and Singaporean national Mohammad Roslan Bin Ahmad and People’s Republic of China (PRC)-based Chinese national Zhuang Liang, who have facilitated illicit shipments and engaged in money laundering for the network. Sa’id al-Jamal’s network continues to provide tens of millions of dollars in revenue to the Houthis in Yemen through its shipment of Iranian commodities, including oil, a funding stream underpinning the Houthis’ ongoing attacks against commercial shipping in the Red Sea. This action targets numerous aspects of this illicit network across the spectrum of its operations, from clients and facilitators to insurance providers, vessels, and ship management firms.’
The US Department of State has announced the imposition of ‘sanctions on Hakiman Shargh Research Company for its involvement in Iran’s chemical weapons research and development. These sanctions are being imposed pursuant to Executive Order 13382, which targets proliferators of weapons of mass destruction and their supporters. The United States is designating the company for engaging or attempting to engage in activities or transactions that materially contribute to the proliferation of weapons of mass destruction by Iran. This sanctions action follows the United States’ repeated calls for Iran to remedy its noncompliance with the Chemical Weapons Convention (‘CWC’), including at this week’s meeting of the Executive Council of the Organization for the Prohibition of Chemical Weapons.’
In the European Union, the Council has extended restrictive measures until 27th July 2025 ‘in view of Iran’s military support for Russia’s war of aggression against Ukraine and for armed groups and entities in the Middle East and the Red Sea region. Existing restrictive measures will continue to be reviewed annually. Currently the sanctions regime applies to 12 persons and nine entities. Those targeted are subject to an asset freeze, and the provision of funds or economic resources, directly or indirectly, to them or for their benefit is prohibited. Additionally, a travel ban to the EU applies to the natural persons listed.’ The EU has also announced sanctions against five Israeli individuals and three entities who it contends are responsible for serious and systematic human rights abuses.
In the UK, the Office of Financial Sanctions Implementation (‘OFSI’) has added Seven Frequently Asked Questions to its UK Financial Sanctions FAQs. FAQs 92-97 can be found under the Russia section, and FAQ 98 can be found under the General Licensing section.
Now for a little light reading. In the UK, a Research Briefing has been published on the subject of Sanctions against countries supporting Russia’s invasion of Ukraine. The other bit of light reading is a blog post by the Royal United Services Institute (‘RUSI’) on the broader international financial impact, and the financial system, of financial sanctions.
Bribery and Corruption
This week’s bribery and corruption news, we’ll start in Russia with the news that Lt Gen Vadim Shamarin has been dismissed after arrest on bribery charges earlier this year. He is accused of taking bribes over a seven-year period starting in 2016. This is part of a wider effort to root out corruption in Russia. These efforts have intensified following a series of stories relating to the fact that Russia’s battlefield efforts have been compromised by widespread corruption in military maintenance and procurement processes.
In the UK, the UK Anti-Corruption Coalition has published an anti-corruption agenda for the new Labour government. In its first 100 days, it should:
Immediately reappoint an Anti-Corruption Champion to oversee and coordinate the Anti-Corruption Strategy and make sure departments deliver it.
Begin work on a new, ambitious five-year Anti-Corruption and Illicit Finance Strategy, developed with civil society and business, to be published by January 2025.
Swiftly agree a timeline for the UK-hosted summit of allies and international financial centres, “to launch a sustained initiative to tackle dirty money” –as announced in Labour’s six-point plan in May 2024.
Outline how the Covid Corruption Commissioner will investigate poor procurement during the pandemic and how lessons will be learned for future procurement.
It also makes further recommendations designed to ensure, first, that the UK becomes a leader in the tackling of illicit finance and economic crime, that, secondly, raise standards of political integrity in a bid to restore public trust, which its polling indicates is in serious shape, further, thirdly, that public procurement reforms are sufficiently rigorous to ensure that such as the Covid scandals around PPE procurement and VIP lanes are not repeated. Fourthly, it urges that further action be taken against kleptocrats, and that, fifthly, action is taken to address corruption which undermines fair climate transition.
Money Laundering
The money laundering news this week is limited, but comes from the Financial Conduct Authority (‘FCA’) in the UK which has announced findings from a review undertake on the treatment of politically exposed persons by firms. The FCA found that most firms in its review did not subject PEPs to excessive or disproportionate checks and none would deny them an account based on their status. However, all firms could improve. The regulator has told firms that they should:
ensure their definition of a PEP, family member or close associate is tightened to the minimum required by law and not go beyond that
review the status of PEPs and their associates promptly once they leave public office
communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible
effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks
improve the training offered to staff who deal with PEPs
Some firms have already started to make improvements following the change in January 2024, which made the legal starting point that UK PEPs and their associates present a lower level of risk than foreign PEPs. In a small number of cases, the FCA is instigating an independent and more detailed review of firms’ practices. The FCA is proposing updates to its guidance which are open for consultation until 18th October 2024. The proposed changes:
reflect the new legal starting point that UK PEPs should be treated as lower risk
make clear that non-executive board members of civil service departments should not be treated as PEPs solely for that reason
give greater flexibility in who can approve or sign off PEP relationships within firms
Market Abuse
On market abuse news, a couple of stories from the UK, where the Financial Conduct Authority (‘FCA’) has confirmed that the trial dates of the finfluencers charged with promoting unauthorised FX trading schemes have been set as 1st February 2027 and 15th March 2027. The FCA has also announced the trial date of three individuals charged with multiple offences, including fraud by false representation and fraudulent trading, after they targeted victims by persuading them to invest in contracts for difference (CFDs). The date has been set at 1st February 2027. The date was set following a hearing at Southwark Crown Court on Friday 5 July 2024.
Cyber Crime
We end this week’s financial crime news with a round-up of cyber crime news, starting in the US, where the ‘Department of the Treasury and the Financial Services Sector Coordinating Council (‘FSSCC’) published a suite of resources to share with financial services institutions on effective practices for their secure cloud adoption journey. These deliverables are the result of a year-long public-private partnership of the Financial and Banking Information Infrastructure Committee (‘FBIIC’) and the FSSCC…. The documents … are intended to arm financial institutions of all sizes with effective practices for secure cloud adoption and operations, and to establish a continuing effort and partnership to begin to address the gaps identified in Treasury’s report, which include:
Establishing a common lexicon that may be used by financial institutions and regulators in discussions regarding cloud.
Enhancing information sharing and coordination for examination of cloud service providers.
Assessing existing authorities for cloud service provider (CSP) oversight.
Establishing best practices for third-party risk associated with cloud service providers, outsourcing, and due diligence processes to increase transparency.
Providing a roadmap for institutions considering comprehensive or hybrid cloud adoption strategies including an update to the Financial Sector’s Cloud Profile.
Improving transparency and monitoring of cloud services for better “security by design.’
In other news from the US, the Department of Justice has announced that two individuals have pleaded guilty to ‘participating in the LockBit ransomware group—at various times the most prolific ransomware variant in the world—and to deploying LockBit attacks against victims in the United States and worldwide…. According to court documents, Ruslan Magomedovich Astamirov (АСТАМИРОВ, Руслан Магомедовичь), 21, a Russian national of the Chechen Republic, Russia, and Mikhail Vasiliev, 34, a dual Canadian and Russian national of Bradford, Ontario, were members of LockBit. In the period between January 2020 and February 2024, LockBit grew into what was, at times, the most active and destructive ransomware group in the world. LockBit attacked more than 2,500 victims in at least 120 countries, including 1,800 victims in the United States. Those victims included individuals, small businesses, multinational corporations, hospitals, schools, nonprofit organizations, critical infrastructure, and government and law-enforcement agencies. LockBit’s members extorted at least approximately $500 million in ransom payments from their victims and caused billions of dollars in additional losses to victims, including costs like lost revenue and for incident response and recovery. LockBit’s “affiliate” members, including Vasiliev and Astamirov, first identified and unlawfully accessed vulnerable computer systems, and then deployed LockBit ransomware on those systems to both steal and encrypt stored data.’
And, finally, on cyber news this week, the National Cyber Security Centre in the UK has published a blog post for organisation as it looks to develop further its Cyber Essentials ‘Pathways’.
References
Council of the European Union, Extremist Israeli settlers in the occupied West Bank and East Jerusalem, as well as violent activists, blocking humanitarian aid to Gaza: five individuals and three entities sanctioned under the EU Global Human Rights Sanctions Regime.
Council of the European Union, Iran: Council prolongs EU restrictive measures in view of Iran’s military support for Russia’s war of aggression against Ukraine and for armed groups and entities in the Middle East and the Red Sea region.
Financial Conduct Authority, FCA calls on firms to improve treatment of politically exposed persons (PEPs).
Financial Conduct Authority, Review: The treatment of politically exposed persons.
Financial Conduct Authority, GC24/4: Proposed amendments to Guidance on the treatment of politically exposed persons.
Financial Conduct Authority, Court sets dates for ‘finfluencer’ trials.
Financial Conduct Authority, Three charged over CFD trading pension fraud.
National Cyber Security Centre, Cyber Essentials 'Pathways': From experiment to proof of concept.
Office of Financial Sanctions Implementation, Guidance: UK Financial Sanctions FAQs.
Office of Foreign Assets Control, Treasury Maintains Pressure on Houthi Illicit Shipping and Finance Schemes.
Royal United Services Institute, Sanctions and the Next Financial Crisis.
UK Anti-Corruption Coalition, Time to ramp up the fight against corruption.
UK House of Commons Library, Sanctions against countries supporting Russia’s invasion of Ukraine.
US Department of Justice, Two Foreign Nationals Plead Guilty to Participating in LockBit Ransomware Group.
US Department of State, United States Imposes Sanctions Targeting Iran’s Chemical Weapons Research and Development.
US Department of the Treasury, Treasury and the Financial Services Sector Coordinating Council Publish New Resources on Effective Practices for Secure Cloud Adoption.
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