Episode 120

5th August – 11th August 2024

Sanctions

This week’s sanctions news starts in the US where Paraguay has been in focus, with sanctions against a tobacco company, ‘Tabacalera del Este S.A. (‘Tabesa’) for providing financial support to Paraguay’s former president, Horacio Manuel Cartes Jara (‘Cartes’)’, who is designated by the US…. Cartes [was designated] on January 26, 2023, for his involvement in corruption. On March 31, 2023, OFAC identified Tabesa as an entity in which Cartes owned, directly or indirectly, a 50 percent or greater interest.’

In other news from the US this week, it is being reasonably widely reported that the US government’s designation of certain individuals it was said were involved in settler violence is being challenged by a range of individuals. The challenge is on the basis that the designation infringes constitutional rights of the individuals concerned. Very little concrete information at this time.

In the UK, the Foreign, Commonwealth and Development Office (‘FCDO’) has added information relating to SI 2024/834, reg 57F on ‘specification of ships for any activity, the object of which, is to destabilise Ukraine, or to obtain benefit from or support the Government of Russia.’ Secondly, on licences, a general licence has been updated to permit designated persons to make or receive payment of fees from local authorities for Business Improvement District levies; a new licence has been issued relating to East-West United Bank and Insolvency related payments and activities; and, a General Licence respecting Permitted Payments to UK Insurance Companies. Finally, OFSI made seven additions (individuals and entities) to the Belarus Financial Sanctions regime. The seven additions relate to the enabling or facilitation of the ‘disappearance of Yury Zakharanka, Viktar Hanchar, Anatol Krasouski or Dzmitry Zavadski, or the failure to investigate properly or institute criminal proceedings against the persons responsible for those disappearances.’

And, finally, on sanctions news this week, in the EU, the Council of Europe has designated a further 28 individuals for internal repression in Belarus. ‘Restrictive measures were imposed on two deputy heads of the Main Department for Combating Organised Crime and Corruption (Bel. HUBAZiK / Rus. GUBOPiK) of the Ministry of Internal Affairs. HUBAZiK is one of the main bodies responsible for political persecution in Belarus, including arbitrary and unlawful arrests and ill-treatment, including torture, of activists and members of civil society. Today’s listings also include various members of the judiciary, namely prosecutors and numerous judges who have issued politically motivated sentences, including against citizens who protested the fraudulent presidential elections of 2020, or who simply voiced their opinions against the Lukashenka regime. Furthermore, restrictive measures are also imposed on the heads of various correctional institutions (prisons and a pre-trial detention centre). Lastly, a group of long-time supporters of Lukashenka, who benefitted from the regime are also targeted.’

Bribery and Corruption

This week’s bribery and corruption news starts in Australia, where the government has published the comments of the Attorney-General, The Hon Mark Dreyfus KC MP, at the 9th Australian Dialogue on Bribery and Corruption. The speech covered the reform agenda, the National Anti-Corruption Commission, which has come in for a bit of criticism recently, and he also flagged the ‘new corporate offence of failing to prevent foreign bribery and corruption as part of changes to its Criminal Code following the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 passed Parliament in February…, significantly strengthening Australia’s criminal offences on foreign bribery.’ These reforms, which come into effect on 8 September this year, make corporations directly liable for the foreign bribery activities of their employees, external contractors, agents and subsidiaries, unless the company can demonstrate it had ‘adequate procedures’ in place.

It has been reported by Europol that Spanish police have arrested a lawyer suspected of corrupting high-level officials close to the Equatorial Guinea government. ‘[The] investigation … uncovered that the suspect had transferred around €4.5m via his project development company. Allegedly, the aim was to obtain an agreement to build a factory catering to the African country’s fishing sector.’

And, finally, on bribery news this week, to the US where the former Finance Minister of Mozambique who has been convicted for the role he played in a $2bn fraud, bribery, and money laundering scheme targeting investors globally. This is linked to the ‘tuna bond’ scandal, the civil claim for which has gone through the English courts, and which we reported previously in the podcast. ‘According to court documents and evidence presented at trial, Manuel Chang, 68, of Mozambique, received $7mn in bribes in exchange for signing guarantees on behalf of the Republic of Mozambique to secure funding for three loans for maritime projects. As part of the scheme, Chang and his co-conspirators falsely told banks and investors that the loan proceeds would be used for the projects and not to pay bribes to government officials. In fact, however, Chang and his co-conspirators diverted more than $200 million of the loan proceeds that were used, among other things, to pay bribes and kickbacks to Chang and others.’ You know the story, but there is a good range of context provided by the Department of Justice. ‘The trial evidence showed that, between approximately 2013 and 2015, Chang, together with his co-conspirators—including executives of Privinvest Group, a United Arab Emirates-based shipbuilding company—ensured that a United Kingdom subsidiary of Credit Suisse AG and another foreign investment bank arranged for more than $2 billion to be extended to companies owned and controlled by the Mozambican government: Proindicus S.A. (Proindicus), Empresa Moçambicana de Atum, S.A. (EMATUM), and Mozambique Asset Management (MAM). The proceeds of the loans were intended to fund three maritime projects for which Privinvest was to provide the equipment and services…. Chang and his co-conspirators illegally facilitated Privinvest’s diversion of more than $200 million of the loan proceeds to bribes and kickbacks. These funds included more than $150 million that Privinvest used to bribe Chang and other Mozambican government officials to ensure that companies owned and controlled by the Mozambican government entered into the loan arrangements, and that the government of Mozambique guaranteed those loans.’

Money Laundering

The money laundering news this week is a bit thin on the ground, but we’ll start with something from the Counter ISIS Finance Group. The Counter ISIS Finance Group (‘CIFG’) operating under the auspices of the Global Coalition to Defeat ISIS, met virtually towards the end of July where ‘participants exchanged information on detecting and disrupting ISIS financing sources and methods across the Middle East, Africa, Asia, and elsewhere. The group has highlighted the ongoing ISIS abuse of money services businesses, particularly hawalas, and the increasing use of virtual assets to support terrorist operations. In certain jurisdictions, ISIS facilitators continue to rely on cash smuggling, transfer funds through front companies, use sham charities for fundraising, and solicit donations online using fraudulent charitable appeals. Particularly across Africa, ISIS operatives generate revenue through criminal tactics, such as extortion, kidnapping-for-ransom, and illicit mining of natural resources. During the latest CIFG meeting, government officials and independent experts presented case studies to illustrate these vulnerabilities and best practices to address them.’ The CIFG co-leads Italy, Saudi Arabia, and the United States, and urged ‘partners to implement comprehensive strategies to counter ISIS financing worldwide….’

Now, the holiday reading. First, in the UK, the Financial Intelligence Unit has published its SARs Reporter Booklet for August 2024. Secondly, the Royal United Services Institute (‘RUSI’) asks the provocative question, What’s the Point of the Financial Action Task Force Standards? Thirdly, a Bitcoin blog reflects on the recent FATF assessment of money laundering and cryptocurrencies and, finally, Norton Rose Fulbright turns the spotlight onto money laundering and the art market, and money laundering and the gambling sector in two recent publications.

Fraud

On fraud news, starting in the US, six people have been charged with a bank fraud scheme relating to an insider sharing account. They have been ‘indicted for conspiracy to commit bank fraud, six counts of bank fraud, and six counts of aggravated identify theft for their scheme to steal more than $345,000 from a western Washington credit union,…. One of the defendants,… allegedly used her brief employment with the credit union to steal account information of credit union customers so that conspirators could take over the accounts and steal the funds…. [The case is that] between May and October 2022, [the individual concerned] …helped customers with account issues. In that role, she had access to personally identifying information about customers of the credit union. According to the indictment, [they] passed that information on to [another], who allegedly used it to access and steal from customer accounts. [That individual then] allegedly advertised on social media that he could make false identification materials and sought to recruit co-schemers to access victims’ accounts…. The credit union has fully reimbursed customers who lost money to the co-schemers.’ In another similar scheme, six members of a transnational fraud network have been indicted in a bank fraud scheme. ‘Through various members and associates, the enterprise obtained identifying and banking information for victims, and created shell entities that claimed to offer products or services, such as cloud storage. The enterprise then executed unauthorized debits against victims’ bank accounts, which it falsely represented to banks were authorized by the victims. Some of the unauthorized debits resulted in returned transactions, which generated high return rates. To both conceal and continue conducting unauthorized debits, the enterprise’s shell entities also generated “micro debits” against other bank accounts controlled and funded by or for the enterprise. The micro debits artificially lowered shell entities’ return rates to levels that conspirators believed would reduce bank scrutiny and lessen potential negative impact on the enterprise’s banking relations.’

In the EU, Eurojust, the European Union Agency for Criminal Justice Cooperation has announced that scammers in an organised crime group (‘OCG’) have been detained for encouraging investment in a non-existent scheme which targeted the bank accounts of 150 victims resulting in losses of around €3m. ‘The OCG started their scam by posting false advertisements on the internet that promoted an investment plan that would lead to secure, quick and substantial earnings in virtual currencies. To ensure the credibility of the advertisements, pictures of well-known people, logos of banks and specialised economic publications were added. People clicking on the advertisement were led to a fake investment platform where the victims would fill in their personal information. To obtain even more personal data, the scammers, posing as financial actors, called their victims to gain access to their bank accounts. With access to the bank accounts, the group transferred sums of money and took over the possession of the victim’s virtual currencies.’

To the UK now where, because we have not had one of these for a while, I thought it might be useful to mention this story for old times’ sake, and it is the news that a company director has been banned from being a director until 2037 for making a false claim under the Bounce Back Loan scheme, which was one of the Covid recovery schemes established in the UK as part of its economic pandemic response.

And, finally, on fraud news this week, a couple of education-related stories from the UK, First, the Department for Education has published its counter-fraud strategy overview: 2024 – 2027. The strategy focusses on a structured management of fraud to minimise losses and risks; works alongside the fraud risk assessment; and, targets prevention measures and engagement with advanced digital detection methods. Secondly, the Student Loan Company’s Economic Crime Unit has published a Statement of Intent. The Economic Crime Unit ‘carries out investigations following internal and third-party referrals where fraud and/or error is suspected in connection with … customers in England or Wales…. In addition, [it] conducts analysis and verification of information to ensure eligibility for funding, and to ensure that [its] assessment process continues to operate accurately and efficiently. This includes sampling activities to identify organisational risk, targeted campaigns to proactively identify fraudulent activity, and auditing of applications in areas known to be susceptible to economic crime…. Where an application for student finance is believed to be in any way fraudulent, sanctions may be applied.’

Other Financial Crime News

In other financial crime news this week, in the UK, the National Crime Agency (‘NCA’) has announced that luxury properties are to be forfeited from the wife of the jailed banker, Jahangir Hajiyev. ‘Hajiyev was the Chairman of the Board of the International Bank of Azerbaijan (‘IBA’) until March 2015. The following year, he was convicted by a court in Azerbaijan of various offences, including misappropriation, abuse of office, fraud and embezzlement in connection with his tenure. The seizure comes after a civil recovery investigation into their acquisition after the NCA believed the assets to have been obtained as a direct result of large-scale fraud and embezzlement, false accounting and money laundering…. NCA investigators … identified numerous examples of funds derived from the IBA being transferred through multiple accounts in ways consistent with common money laundering practices. This was done by a close associate of Hajiyev, acting on his behalf. Substantial sums were moved through a network of accounts and companies in a host of different jurisdictions – including the British Virgin Islands, Saint Kitts and Nevis, Panama, Cyprus and Luxembourg – and channelled into luxury assets for the family. No reasonable explanation was provided to the NCA for the source of funds used to purchase either property. A significant proportion could be traced directly to sums generated by promissory notes and loan agreements used to conceal the theft of IBA monies.’

Cyber Crime

We end this week’s financial crime news with a round-up of cyber-attack news, starting in the UK where the Information Commissioner’s Office (‘ICO’) has ‘provisionally decided to fine Advanced Computer Software Group Ltd (‘Advanced’) £6.09m, following an initial finding that the provider failed to implement measures to protect the personal information of 82,946 people, including some sensitive personal information. Advanced provides IT and software services to organisations on a national scale, including the NHS and other healthcare providers, and handles people’s personal information on behalf of these organisations as their data processor. The provisional decision to issue a fine relates to a ransomware incident in August 2022, where we have provisionally found that hackers initially accessed a number of Advanced’s health and care systems via a customer account that did not have multi-factor authentication.’

Sellafield, the nuclear reprocessing plant in the UK, has apologised for the cybersecurity failings which exposed cyber-vulnerabilities in around 75 per cent of its IT and computer systems. Earlier this year, the institution pleaded guilty to charges relating to IT security offences over four years from 2019 to 2023. Those charges were brought by the Office for Nuclear Regulation.

The big cyber news this week is from the US, where it has been suggested that up to three billion people could have been affected by a data breach following a cyber-attack on National Public Data, the organisation which is owned by Jerico Pictures Inc. It is said that personal data of 2.9 billion people was posted on the dark web by cyber group, USDoD. The information has come from court papers filed in Florida from representatives of some of the victims. If the allegations turn out to be true, this will be the large pool of cyber-attack victims from one attack since the Yahoo cyber-attack in the early part of the last decade.

References

Attorney-General’s Department, 2024 Australian Dialogue on Bribery and Corruption.

BitcoinBlog.de, FATF: Cryptocurrencies continue to be used for terrorism financing.

Council of the European Union, Belarus: EU lists further 28 individuals for participation in internal repression.

Department for Education, Policy paper: DfE counter-fraud strategy overview: 2024 to 2027.

Department of Justice, Six people charged in bank fraud scheme involving an insider sharing account information that caused more than $345,000 in theft.

Department of Justice, Six Members of Transnational Fraud Network Indicted for Scheme to Steal Millions from American Consumers’ Bank Accounts.

Department of Justice, Former Finance Minister of Mozambique Convicted of $2B Fraud and Money Laundering Scheme.

Department of State, Reinforcing Sanctions on Former Paraguayan President Horacio Cartes.

Department of the Treasury, Counter ISIS Finance Group Leaders Issue Joint Statement.

Eurojust, Financial scammers detained following actions coordinated by Eurojust.

Europol, Corrupt Spanish lawyer arrested for €4.5 million fishery project bribe in Equatorial Guinea.