Episode 127

23rd September – 29th September 2024

Sanctions

This week’s sanctions news starts in the US, where Mohammad Bazzi has pleaded guilty to sanctions evasion. ‘The Lebanese national … pleaded guilty … to conspiracy to conduct and to cause U.S. persons to conduct unlawful transactions with a Specially Designated Global Terrorist.’ Bazzi was designated by the US in May 2018 for his role in assisting sponsorship and the provision of a range of financial and technological support to Hizballah. No date has yet been set for sentencing. In other news from the US, the Office of Foreign Assets Control (‘OFAC’) has designated ‘a network of five entities and one individual—based in Russia and in the Russia-occupied Georgian region of South Ossetia—that have enabled and supported ongoing efforts to establish illicit payment mechanisms between Russia and the Democratic People’s Republic of Korea.’

In a pivot to sanctions against the Fentanyl traffickers in south and central America, five Colombian nationals and two Mexico-based businesses have been sanctioned. The individuals are leaders of one of Colombia’s ‘largest drug trafficking organizations and a key contributor to human smuggling through the Darién Gap. The companies sanctioned today are located in Mexico and owned by designated Sinaloa Cartel fentanyl traffickers.’ The action was taken jointly by OFAC and Homeland Security. In news which is not unconnected, Acting Director for the Office of Foreign Assets Control, Lisa Palluconi, travelled to Colombia and Mexico to ‘strengthen Treasury’s ties with the sanctions compliance communities.’

Two more pieces of sanctions news from the US before we move on. First, OFAC has sanctioned ‘a former member of Haiti’s parliament, Prophane Victor, for his role in forming, supporting, and arming gangs and their members that have committed serious human rights abuse in Haiti.’ OFAC has also designated Luckson Elan, ‘the current leader of the Gran Grif gang, for his involvement in serious human rights abuse related to gang activity in Haiti’s Artibonite department.’ Secondly, OFAC has ‘sanctioned more than a dozen entities and vessels for their involvement in the shipment of Iranian crude oil and liquid petroleum gas to Syria and East Asia on behalf of the Islamic Revolutionary Guard Corps-Qods Force and Hizballah.’

In the UK, the Office of Financial Sanctions Implementation (‘OFSI’) has issued a Notice and updated the designations list to account for a change respecting North Korea made at the United Nations. OFSI has also added two new corporations to the Russian financial sanctions regime. Ocean Speedstar Solutions OPC PVT Ltd and White Fox Ship Management FZCO are now subject to an asset freeze and trust services sanctions. The Consolidated List has been updated. The last one from the UK is a bit of enforcement news. OFSI has announced a £15,000 penalty against Integral Concierge Services Limited for ‘dealing with funds owned by a designated person, and making funds available for the benefit of a designated person without a licence.’

And finally on sanctions news this week, the European Union has published G7 Industry Guidance on preventing sanctions evasion. ‘This guidance document contains: a list of items which pose a heightened risk of being diverted to Russia; updated red flag indicators of potential export control and/or sanctions evasion; best practices for industry to address these red flags; and, reference to publicly available Screening tools and resources to assist with due diligence.’

Money Laundering

The money laundering news this week starts with the Financial Action Task Force (‘FATF’) and the publication of its Mutual Evaluation Report on India. The Report noted the progress which India has made across all of the FATF recommendations, but that this needs to continue as the economy grows. Particularly, it should ensure that ‘money laundering and terrorist financing trials are completed and offenders are subject to appropriate sanctions.’ The FATF did issue a warning that the non-profit sector needed to be more robust in its approach since it is at risk of abuse from terrorists. This is especially important given the terrorist threats to which India is exposed from ISIL and Al-Qaeda. The Indian government has identified that there is still work to do around the criminal trial process.

Staying with the FATF, the Counter-Terrorism Committee Executive Directorate (‘CTED’), part of the UN, participated in the FATF’s ‘Working Groups’ and plenary meetings held at FATF headquarters in Paris, contributing to the discussions on relevant FATF thematic projects, following country-specific processes and assessments, and gathering information on recent trends in terrorism financing and States’ responses.’

To the UK now, where the Office for Professional Body Anti-Money Laundering Supervision (‘OPBAS’) has published its fifth report and found that while ‘most Professional Body Supervisors (‘PBS’s) are complying with money laundering regulations, how they supervise is still not consistently effective.’ ‘OPBAS has not seen any material improvement in PBSs’ effectiveness in the core areas of supervision, risk-based approach, enforcement, and information and intelligence sharing…. Problems in applying a risk-based approach reduced the effectiveness of PBSs’ supervision.’ There are also weaknesses in AML supervision, and continued gaps exist in enforcement approaches. ‘PBSs have a range of enforcement powers and tools, but the majority … assessed did not use them effectively in a dissuasive and proportionate manner.’

To an interesting story now respecting the Egmont Group and Colombia. The Egmont Group provides financial intelligence units (‘FIUs’) with a platform securely to ‘exchange expertise and financial intelligence to combat money laundering, terrorist financing, and associated predicate offences.’ Consequently, nations with access to the databases held by it are expected to treat the information obtained with the utmost discretion and not, as it seems the Colombian president has done, disclose the fact that the previous government in Colombia purchased Pegasus spyware from Israel to spy on its enemies. Needless to say, the Egmont Group is less than happy and announced this week the suspension ‘of FIU Colombia’s access to the Egmont Secure Web (ESW), which is the secure network used by [its] 177 members to exchange information related to money laundering, associated predicate offences, and terrorist financing.’ Colombia is on the equivalent of the international naughty step.

Now to the US, where action was coordinated across a range of government departments and agencies against an international money laundering concern allied to Russian cybercrime. The Department of the Treasury’s Financial Crimes Enforcement Network (‘FinCEN’) issued an order identifying PM2BTC which is ‘a Russian virtual currency exchanger associated with Russian individual Sergey Sergeevich Ivanov (‘Ivanov’) — as being of “primary money laundering concern” in connection with Russian illicit finance. Concurrently, the Office of Foreign Assets Control (‘OFAC’) [sanctioned] Ivanov and Cryptex — a virtual currency exchange registered in St. Vincent and the Grenadines and operating in Russia.’

Bribery and Anti-Corruption

The bribery and anti-corruption news starts this week in the European Union, where the European Parliament has published a Briefing Paper on the proposed Directive on Combatting Corruption. ‘The proposal seeks to update the fragmented EU legislative framework, including by incorporating international standards binding on the EU. It addresses corruption in both the public and private sectors.’

The Council of Europe’s Group of States against Corruption (‘GRECO’) has published a compliance report on the Republic of Ireland reflecting on the progress made in respect of GRECO’s 2022 evaluation report. Of the 18 recommendations made in the 2022 report, only one has been satisfactorily implemented, while four have been partially implemented. The remaining 13 recommendations have not been implemented.

And finally on bribery and corruption news this week, in the US, it has been widely-reported that the Mayor of New York City, Eric Adams, has been charged with bribery and campaign finance offences. It is alleged that for ‘nearly a decade, Adams ... used his prominent positions in New York City government to obtain illegal campaign contributions and luxury travel. Adams solicited and accepted these benefits from foreign nationals, businessmen, and others. Adams then pressured the New York City Fire Department to facilitate the opening of a foreign government’s Manhattan skyscraper that had not passed a fire inspection. To conceal this criminal conduct, Adams took steps to hide his receipt of improper benefits from the public and law enforcement.’

Fraud

On fraud news this week, we’ll start with a story which I missed at the time, where the Financial Conduct Authority (‘FCA’) has announced a consultation on proposed Treasury amendments to the ‘Payment Services Regulations to enable Payment Service Providers to delay making a payment transaction where they have reasonable grounds to suspect fraud or dishonesty. The policy aims to increase firms’ ability to tackle APP fraud while minimising the impact on legitimate payments.’ The consultation closes on 4th October 2024. On the subject of APP fraud, the banks have come out this week to say that tech companies should be doing more to help in the response to such fraud. The Guardian reports comments from Head of Fraud at HSBC, David Callington, that the wider ecosystem in which APP fraud occurs should shoulder some of the responsibility since evidence indicates that many frauds originate from tech or across social medial platforms. The final piece of APP fraud news this week is news that will surprise nobody, and it is that the Payment Systems Regulator has announced that the limit on reimbursement for authorised push payment fraud has been set at £85,000. The new rules will come into effect on 7th October.

Now to a quick circuit around this week’s Covid-19 fraud news. In the US, an individual has been convicted of defrauding the state of over $500,000 in Covid-19 recovery funds. No firm date has been set for sentencing. In the UK, an individual who fraudulently claimed £50,000 in Covid-19 relief funding has been imprisoned for 18 months.

Back to the US, where the former executive of the cryptocurrency agency, FTX, Caroline Ellison, has been imprisoned for two years for her role in the fraud which resulted in losses amounting to billions of dollars. The custodial sentence was imposed notwithstanding the scale of assistance Ellison provided to the prosecution.

And finally on fraud news this week, a couple of stories from the UK. First, a father and son have been jailed for their roles in defrauding the National Trust out of more than £1m. The father, who was employed as a building surveyor at the National Trust, authorised work to his son’s construction company which never carried out the work. A third person, the individual’s other son, was given a suspended sentence. Secondly, the Crown Prosecution Service has announced that an individual who ran a multi-million pound betting syndicate scam has been sentenced to six years for his role in it.

Market Abuse

On market abuse news this week, the Securities and Exchange Commission (‘SEC’) in the US has announced the settlement of charges against Philip Markin, who was charged with insider trading. Markin ‘made approximately $16,362 from illegally trading ahead of the February 2021 announcement of a tender offer by Merck & Co., Inc., to acquire Pandion Therapeutics, Inc. The SEC’s complaint alleges that Philip Markin was tipped about the deal by his cousin, Seth Markin, who misappropriated the material non-public information from his then romantic partner, who worked as an associate for a law firm representing Merck.’ Additionally, the SEC has also announced the settlement of charges against an investment adviser who unfairly allocated trades in a manner which favoured his personal accounts and a few select client accounts.

Other Financial Crime News

In other financial crime news this week, two published speeches. The first is from the Principal Deputy Assistant Attorney General, Nicole M. Argentieri, who delivered opening remarks at the Society of Corporate Compliance and Ethics 23rd Annual Compliance & Ethics Institute. There is extensive discussion of the Evaluation of Corporate Compliance Programs, and updates on the Compensation Incentives and Clawbacks Pilot Program and the Corporate Whistleblower Awards Pilot Program. Secondly, in the UK, Therese Chambers, joint executive director of enforcement and market oversight at the Financial Conduct Authority (‘FCA’), has delivered remarks at AFME Annual European Compliance and Legal Conference. As is the case with all these speeches, it was wide-ranging. In terms of the key takeaways, Chambers focused on the FCA’s approach to enforcement to meet evolving threats and maximise the deterrent effect. She also discussed how the FCA is makings its investigations faster and more focused to address financial crime at source and to ensure that timely signals are distributed to markets and consumers. Finally, Chambers emphasised cooperation, assertive supervision and intervention, and being central to responding to financial crime.

And finally on other financial crime news this week, a direction to some light reading from the Royal United Services Institute (‘RUSI’) on the subject of how the UK’s law enforcement agencies need to adapt to meet rapid digital innovation in order to face-down the threat posed by organised crime.

Cyber Crime

Limited cyber-crime news this week, but what we have comes from the UK, where the wi-fi at railway stations across the UK was hacked such that when users accessed it they received a message about a terror attack. No claim of responsibility has yet been made.