Episode 133

4th November – 10th November 2024

Sanctions

This week’s sanctions news has a significant amount of enforcement action in it. We’ll start in the US, where the Department of Justice (‘DoJ’) has announced enforcement action against a US-Russian dual national. ‘Vadim Yermolenko, ... pleaded guilty to conspiracy to violate the Export Control Reform Act, conspiracy to commit bank fraud, and conspiracy to defraud the United States for his role in a transnational procurement and money laundering network that sought to acquire sensitive dual-use electronics for Russian military and intelligence services.’ The DoJ has also announced the arrest of a Turkish national for alleged conspiracy to violate US sanctions against Venezuela. Further on evasion, the Office of Foreign Assets Control (‘OFAC’) has expanded sanctions on those aiding Republika Srpska evade US sanctions.

Continuing the theme of enforcement, in the UK, HM Revenue and Customs (‘HMRC’) has announced a series of compound settlement offers to UK exporters. The first is an offer of almost £60,000 for exporting goods in breach of The Russia (Sanctions) (EU Exit) Regulations 2019. The second is three settlements worth, collectively just over £1.9m for ‘unlicensed exports of Military listed goods, Dual-Use goods and related activity controlled by The Export Control Order 2008 and Retained Regulation 428/2009.’

In other news from the UK, the Office of Financial Sanctions Implementation (‘OFSI’) has updated 14 Frequently Asked Questions on its FAQs page. These are questions 49-51, 55, 61-66, 72-73, 76 and 84. OFSI has also amended an entry on the Chemical Weapons financial sanctions regime. OFSI has issued a new licence allowing ‘Relevant Institutions to process payments made in the year 2022 from or via a Designated Credit or Financial Institution, provided that the Original Sender and Original Intended Recipient are not Designated Persons’ and extended an existing licence respecting payments to Evraz plc’s North American subsidiaries. It will now expire at 23:59 on 30 September 2025. Additionally, 56 entries have been made to the Consolidated list across a range of regimes: Russia, Central African Republic, Chemical Weapons, Libya, and Mali. And finally from OFSI, it has extended the deadline for receipt of information concerning the Frozen Assets Review 2024. Reasons relating to the extension can be found in FAQ 123 on OFSI’s website.

Money Laundering

On money laundering news, the governments of Australia and the United Kingdom have released a policy paper following the second UK-Australia Illicit Finance Dialogue, which took place in Canberra last September. ‘Australia and the UK discussed the importance of coordinating … efforts to build capacity and support the improvement of frameworks globally to counter illicit finance. [They] discussed the imperative of a continued presence of high-quality providers of banking services, and in particular the corresponding banking relationships that connect the region to the global financial system. [They] shared [their] continuing efforts to enhance corporate transparency in Australia and the UK to prevent the abuse of complex corporate structures by malign actors and criminal networks to disguise and fund illicit activities.’ Australia updated on the Anti-Money Laundering and Counter-Terrorism Financing Act and knowledge on regulation of ‘gatekeeper professions’ was shared. Finally, there were discussions concerning strategic approaches to fraud and scams.

Bribery and anti-corruption

On bribery and corruption news this week, Transparency International (‘TI’) has raised the issue of how corruption might affect the climate negotiations at COP29. ‘[There] is a serious risk that COP29 will be co-opted by Azerbaijani political elites, oil and gas companies, and lobbyists to promote a pro-fossil fuel industry agenda.... The unacceptable lack of guardrails threatens the integrity of climate negotiations, casting doubt on the neutrality of the Presidency as well as the process’s fairness and openness.’ TI has also marked the tenth anniversary of the meeting in 2014 which agreed the High-Level Principles on Beneficial Ownership Transparency, reflecting on their application and whether more work needs to be done.

The United Nations Development Programme (‘UNDP’) has undertaken ‘an in-depth mapping of support for anti-corruption reforms in Ukraine, particularly within the justice sector’ publishing a report which ‘identifies 19 core anti-corruption projects and 38 additional projects with significant contributions to Ukraine's anti-corruption work from 2021 to 2024’.

In a direction to this week’s bribery and anti-corruption reading, the United Nations Office on Drugs and Crime has published an Explainer on how corruption facilitates organised crime, and Spotlight on Corruption, the pressure group, has published a report which considers the recycling of fines and criminal assets for use in the fight against economic crime. The report suggests that more of the £566m generated on average every year by seizure of criminal assets and through both regulatory and criminal fines, should be used in the fight against financial crime, especially since there is, at present, such pressure on the budgets of relevant agencies. It points out that spending on ‘vanity projects’ might not be a good use of the funds.

Fraud

On fraud news this week, in the UK the Home Office has announced the publication of guidance on the new failure to prevent fraud offence which is set out in sections 199 – 206 and Schedule 13, Economic Crime and Corporate Transparency Act 2023. The offence will come into force on 1st September 2025 following statutory instrument. To mark this, I thought I’d share an article by BCL Solicitors reflecting on the ‘failure to prevent’ model of corporate liability. It was published before this announcement, but contains interesting commentary.

The other fraud news this week is a report by Statistics Netherlands, amplified by ABN AMRO which has warned that teenagers (15 – 18 year olds), around 1 in 13 of whom are victims of cybercrime, are less likely to report it. The findings are that 30 per cent report it, which is somewhat lower than the 46 per cent of 35 – 45 year olds who report it. The scale of the problem is understandable given that only 23 per cent are aware of the risks of online fraud and take precautions. Around 26 per cent are unaware of online fraud and aren’t worried about it. Come on, teenagers, focus!

Other Financial Crime News

In other financial crime news this week, the Financial Conduct Authority (‘FCA’) has announced that three individuals and two firms have been charged with carrying on unauthorised business activities. ‘The individuals are alleged to have engaged in regulated credit agreements, hire agreements and contracts of insurance (service packages and callout covers) [for high-end vacuum cleaners], when they were not authorised by the FCA to do so. The firms also collected money from credit and hire customers without FCA authorisation.’

The Intellectual Property Office in the UK has published the findings of its annual survey of Trading Standard Officers’ work on intellectual property crime. The Survey provides ‘insight on the scale and scope of IP crime in the UK from the perspective of Trading Standards Officers…. Clothing and tobacco products remain the most investigated IP crime sectors while vaping products have increased significantly. Perfume, footwear, electricals and watches/jewellery, remain significant focusses for investigation, with an increase in the number of investigations relating to toys and perfume.’

To round up other financial crime news, it is reported that the Serious Fraud Office is to receive a further £9.3m in additional funding. The General Assembly of Interpol, which has been taking place this week, has closed with remarks from the UK Security Minister, Dan Jarvis. And finally on other financial crime news this week, it has been announced in Australia that the confidential chapter of the Robodebt Royal Commission will now be released in the ‘interests of transparency and accountability.’

Cyber Crime

We end this week’s financial crime news with a brief round-up of cyber crime news. First, as I just mentioned, the General Assembly of Interpol has taken place this week, where the Secretary General, Jürgen Stock, and National Crime Agency (‘NCA’) Director General, Graeme Biggar, have drawn attention to the extent to which artificial intelligence (‘AI’) is allowing financial crime to be committed on an ‘industrial scale’. This is something which is well-understood, but it is the case that at least the use of AI is being explored as a defensive mechanism to meet the threat. The only other piece of cybercrime news this week is a joint statement from the Office of the Director of National Intelligence (‘ODNI’), the Federal Bureau of Investigation (‘FBI’), and the Cybersecurity and Infrastructure Security Agency (‘CISA’) in the US concerning malign influence on US elections and disinformation designed to foment divisions among Americans.