Episode 130

14th October – 20th October 2024

Sanctions

This week’s sanctions news starts in the US, which has been active on a number of fronts. First, an expanded range of sanctions has been imposed on Iran following its attack on Israel. ‘OFAC is ... designating 10 entities in multiple jurisdictions and identifying 17 vessels as blocked property, pursuant to E.O. 13846, for their involvement in shipments of Iranian petroleum and petrochemical products in support of the U.S.-designated National Iranian Oil Company (‘NIOC’) and Triliance Petrochemical Co. Limited (‘Triliance’). The U.S. Department of State is also designating six entities and identifying six vessels as blocked property pursuant to E.O. 13846 for knowingly engaging in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran. Collectively, these actions target a significant portion of the shadow fleet of tankers and illicit operators that move the Iranian regime’s petroleum exports. NIOC was designated pursuant to the counterterrorism authority E.O. 13224, as amended, on October 26, 2020, for its financial support to Iran’s Islamic Revolutionary Guard Corps – Qods Force. Triliance was designated pursuant to E.O. 13846 on January 23, 2020 for facilitating the sale of Iranian petroleum products from NIOC.’ Treasury, State Department, and White House made coordinated statements in relation to the action.

OFAC has also designated ‘the Samidoun Palestinian Prisoner Solidarity Network, or “Samidoun,” a sham charity that serves as an international fundraiser for the Popular Front for the Liberation of Palestine (‘PFLP’) terrorist organization. The PFLP, which was designated as a Foreign Terrorist Organization and a Specially Designated Global Terrorist by the U.S. Department of State in October 1997 and October 2001, respectively, uses Samidoun to maintain fundraising operations in both Europe and North America. Also designated today is Khaled Barakat, a member of the PFLP’s leadership.’ This action against Samidoun was coordinated with the Canadian government which listed Samidoun as a terrorist entity under its Criminal Code.

Later in the week, OFAC also designated ‘three individuals and four associated companies involved in a Lebanon-based sanctions evasion network that generates millions of dollars in revenue for Hizballah. Hizballah’s finance team is responsible for the establishment and operation of Hizballah commercial projects throughout Lebanon, some of which are financed and facilitated by Iran. OFAC is also designating three individuals involved in the illegal production and trafficking of Captagon that has benefitted Bashar al-Assad’s regime and its allies, including Hizballah. The illegal trade in Captagon, a dangerous, highly addictive amphetamine, has become a billion-dollar illicit enterprise operated by senior members of the Syrian regime.’ Finally, OFAC also designated three entities and an individual which it said is providing direct help to Russia in manufacture of long-range attack drones which are then used against Ukraine.

In the UK, the government published a Notice, with detailed Annex, announcing the imposition of sanctions on ‘persons who are or have been involved in the commission of a serious human rights violations or abuse in Iran; or hostile activity by the Government of Iran or an armed group backed by the Government of Iran.’ The Financial Sanctions: Iran have been updated, as well as the Consolidated List. OFSI has also taken action in respect of the Global Human Rights financial sanctions regime against three illegal settler outposts and four organisations which ‘have supported and sponsored violence against communities in the West Bank.’ Certain of these were also subject to US sanctions action last week. The Consolidated Global Human Rights Designated Persons List has been updated. The UK government also issued a new licence in respect of persons making and facilitating payments in respect of UK Government Debt, amending the list of General Licences. The government has also published agreed updated guidance from the G7 on the prevention of Russian evasion of export controls and sanctions. Late in the week, OFSI made an additional designation to the Russia Financial Sanctions Regime, which addition was amended later the same day for what seems like a spelling error, and it also made a removal from the list. Finally, OFSI designated 18 more Russian oil tankers and four liquefied natural gas vessels which are part of Russia’s ‘shadow fleet’.

To the European Union now, where the Council has announced restrictive measures ‘against seven individuals and seven entities following Iran’s missile and drone transfers to Russia.’

And finally on sanctions this week, collective action announced by governments across the globe on establishing a Multilateral Sanctions Monitoring Team (‘MSMT’). The statement from the US Department of State provides that the members of the MSMT are aligned in their ‘commitment to uphold international peace and security and to safeguard the global non-proliferation regime and address the threat arising from the Democratic People’s Republic of Korea’s weapons of mass destruction and ballistic missile programs, which are in violation of UN Security Council resolutions.’

Money Laundering

On money laundering this week, some significant news on the status of Russia in the global financial system with reports from Politico that the Financial Action Task Force (‘FATF’) is considering placing Russia on its black-list, alongside Iran, Democratic People’s republic of Korea, and Myanmar. Of course, Ukraine has been lobbying hard for Russia to be added to the black-list for some time, and as we have reported on this podcast. A decision could be made at the FATF Plenary and Working Group Meetings next week in Paris. Allied to this is the announcement this week from the FATF that it has changed its criteria for adding countries to the ‘grey list’. ‘Under the revised criteria, jurisdictions will be prioritised for active review if they meet the referral criteria and are: (1) an FATF Member; (2) a country on the World Bank High-Income Countries list (excluding those with a financial sector of two or fewer banks); or (3) a country that has financial sector assets above USD 10 billion (measured by broad money). If the jurisdiction is a least developed country as defined by the United Nations, they would not be prioritised for active review unless the FATF agrees that they pose a significant money laundering, terrorist financing or proliferation financing risk. In such cases, least developed countries entering the review process could be granted a longer observation period to work on progress against their Key Recommended Action roadmap (i.e., a two-year observation period).’ The FATF believes that the changes will ‘ensure the listing process better targets the countries that pose the greatest risk to the international financial system and contributes to more adequate support to low-capacity countries …[and]… anticipates that these reforms could reduce by half the number of low-capacity countries being listed in the upcoming assessment cycle.’

In other money laundering news this week, the Financial Accountability and Corporate Transparency (‘FACT’) Coalition has published a report which highlights that the US is the preferred destination for the illicit proceeds of environmental crime committed in the Amazon region. Analysing 230 cases, it has found that ‘anonymous shell and front companies are the most common secrecy vehicles used to commit and conceal the proceeds of environmental crimes.’ The report highlights how environmental crimes overlap with other crimes, with corruption being an unsurprising instance of such overlap. In terms of recommendations, the report indicates that investigations should be integrated such that financial investigations and environmental crime investigations and enforcement occur in parallel. Secondly, that there ought to be timely and robust information exchange between countries in order to shed light on transnational connections. Thirdly, that more needs to be done to reduce the abuse of separate legal personality. Further, more needs to be done around beneficial ownership, and that the US should more willingly share such information with ‘trusted foreign partner governments.’ Finally, given the connection highlighted in the report between corruption and environmental crime, more ought to be done to address the link, particularly at next year’s United Nations Convention against Corruption (‘UNCAC’), which is to be chaired by the US. As with the last paper from the FACT Coalition authored by Julia Yansura, this is worth reading. Indeed, this report and the previous one, featured in episode 122 of the podcast, together represent a strong corpus for anyone interested in the links between environmental and financial crime, and I cannot recommend them both highly enough.

Bribery and anti-corruption

On bribery and corruption news this week, the United Nations Development Programme noted the Second Arab Forum for Enhancing Transparency and Good Governance which took place in Baghdad. ‘With over 300 participants, speakers, and moderators from more than 29 countries, the event marked a major step in Iraq's efforts to combat corruption and promote sustainable solutions for the Arab region. The Forum was co-organized by the Arab Organization for Administrative Development, Transparency International, and UNDP, and was hosted by Iraq’s Federal Commission of Integrity, under the patronage of H.E. Prime Minister Mohammed Shia’ Al-Sudani.’

To the US now, where Raytheon has agreed to ‘pay over $950 million to resolve the government’s investigations into a major government fraud scheme involving defective pricing on certain government contracts and violations of the Foreign Corrupt Practices Act (FCPA) and the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations (ITAR)…. The agreements in Boston the District of Massachusetts and the Eastern District of New York require that Raytheon retain an independent compliance monitor for three years, enhance its internal compliance program, report evidence of additional misconduct to the Justice Department, and cooperate in any ongoing or future criminal investigations.’

And finally on bribery and corruption news this week, the White House has published a ‘Fact Sheet’ on US achievements in the global fight against corruption.

Fraud

One piece of fraud news this week, and it is an announcement from the US Treasury which has updated on its technology and data-driven approach to ‘fraud and improper payment prevention [which has] enabled the prevention and recovery of over $4 billion in fraud and improper payments this fiscal year (FY) (October 2023 – September 2024), up from $652.7 million in FY23. This increase reflects dedicated efforts by Treasury’s Office of Payment Integrity (OPI), within the Bureau of the Fiscal Service (Fiscal Service) to enhance its fraud prevention capabilities and expand offerings to new and existing customers.’

Market Abuse

On market abuse news this week, in the European Union, the European Securities and Markets Authority (‘ESMA’) has published its first consolidated report ‘on sanctions and measures imposed by the National Competent Authorities (NCAs) in Member States in 2023. In 2023, more than 970 administrative sanctions and measures were imposed across EU Member States in financial sectors under ESMA’s remit. The aggregated value of administrative fines amounted to more than €71m. The highest amounts of administrative fines were imposed under the Market Abuse Regulation (MAR) and the Markets in Financial Instruments Directive II (MiFID II). Overall, the report highlights that there is still room for more convergence between NCAs in the exercise of their sanctioning powers.’

Other Financial Crime News

In other financial crime news this week, Europol has published a report which explores the ecosystem of intellectual property crime. The report ‘details the criminal processes behind IP crime, examining factors enabling it and its connection to other organised crime. It also highlights the harmful effects on EU businesses and consumers.’

In the UK, Companies House has published a transition plan outlining its indicative timeline for commencing the key provisions of the Economic Crime and Transparency Act (2023).

Cyber Crime

We end this week’s financial crime news with a round-up of cyber-crime news. First, to Russia, where an attack on the university training Russian drone operators has been claimed by the HUR, Ukraine’s Intelligence Directorate of the Defence Ministry.

To Microsoft now which has published its Digital Defense Report 2023. The Report highlights, along with a raft of other things, that ransomware is the most persistent threat and that such attacks have increased over the last year, with business a key target. ‘Ransomware‑as‑a-service and phishing-as-a-service are key threats to businesses and cybercriminals have conducted business email compromise and other cybercrimes, largely undeterred by the increasing commitment of global law enforcement resources.’ On the threat from Nation states, those ‘cyber actors this year pivoted away from high-volume destructive attacks and instead directed the bulk of their activity toward cyber espionage.’ Further, given the increase in the number of attacks on critical infrastructure, as well as the increased notice being paid to that threat, it should come as no surprise that critical infrastructure ’remains a popular target, with threat actors employing stealthier techniques to establish persistence and evade detection.’ As well as the doom-and-gloom, the report does offer some positivity in that large language models have the potential to provide next-gen cybersecurity against attacks. Additionally, the report offers sound practical advice on how to protect against the vast majority of cyber-attacks.

And finally this week, two things. First, the CEO of the National Cyber Security Centre in the UK has warned that the gap between the sophistication of cyber-attacks and defence capabilities is such that more needs to be done to close it. What is needed is ‘coordinated global efforts to strengthen cyber resilience, ensure security is built into technology from the outset, and prepare both the public and private sectors to not only defend but also recover swiftly from destructive cyber-attacks.’ The comments were made at the Singapore International Cyber Week. Secondly, it has been Cybercrime week at Europol with the European Cybercrime Conference and the 10th anniversary of the Joint Cybercrime Action Taskforce (J-CAT). Europol has published a summary of the event.