Episode 177

4th August– 7th August 2025

Sanctions

Treasury Targets Iranian UAV Procurement Network

The US Treasury Department has sanctioned five companies and one individual across Iran, Hong Kong, Taiwan, and China for supporting Iran’s military UAV programme. These entities supplied advanced manufacturing equipment, notably CNC machines, to the Iran Aircraft Manufacturing Industrial Company, linked to Iran’s Ministry of Defence and the IRGC. The designations fall under Executive Order 13382, aimed at countering proliferation of weapons of mass destruction. Sanctions block US transactions with these entities and expose foreign institutions to secondary penalties.

Minority Staff Report published on Effectiveness of Russian sanctions and export controls

A Minority Staff Report, prepared for Senators Elizabeth Warren and Jeanne Shaheen in August 2025, has been published which critiques the Trump Administration's approach to sanctions and export controls against Russia. The report asserts that the administration has failed to maintain pressure on Russia since early 2025, evident in a halt of new sanctions, undermining Ukraine's negotiating position, and missing opportunities to reduce Russia's oil revenue. Furthermore, it highlights a concerning strain in staffing across key US agencies responsible for implementing these measures. The document concludes by outlining steps the administration could take to reverse course and re-establish a united front with G7 partners to pressure Russia toward peace.

DBT and OTSI produce a range of updates to Trade Sanctions Guidance and Russian Sanctions

The Department for Business and Trade (‘DBT’) and Office of Trade Sanctions Implementation (‘OTSI’) have updated their guidance on trade sanctions breaches. Section Five now clarifies that HMRC can issue compound penalties in criminal cases.

DBT and OTSI have also updated their guidance on Russian sanctions evasion. Updates include a revised list of countries where enhanced due diligence is recommended, an expanded list of high-risk goods sought by Russia via third countries, and changes in terminology and country listings.

Money Laundering

AUSTRAC Sets 2026 Deadline for AML/CTF Compliance Overhaul Across New and Existing Entities

AUSTRAC is implementing significant reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (‘AML/CTF’) regime, targeting both current reporting entities and sectors soon to be regulated under Tranche 2. These reforms are set to take effect from 31st March 2026 for existing entities and 1st July 2026 for newly regulated businesses, including legal, accounting, real estate, and high-value goods sectors.

For current reporting entities, the reform agenda is designed to streamline AML/CTF obligations, reduce complexity, and enhance financial crime oversight. Key changes involve modifications to reporting and registration requirements, stronger customer due diligence measures, and the introduction of the “travel rule,” which aims to improve transparency in financial transactions involving digital assets. AUSTRAC plans to support entities through tailored guidance and educational resources to ease the transition.

Newly regulated entities under Tranche 2 will need to prepare for AML/CTF obligations by enrolling with AUSTRAC by 31st March 2026, appointing a compliance officer, implementing risk-based AML/CTF programmes, training staff appropriately, and ensuring readiness to report suspicious matters. These steps are critical for aligning with AUSTRAC’s expanded regulatory reach and ensuring robust financial system protections.

Bribery and Corruption

GRECO Urges Spain to Accelerate Anti-Corruption Reforms

The Council of Europe’s Group of States against Corruption (‘GRECO’) has found Spain lacking sufficient progress in implementing key reforms since its 2019 evaluation. In its latest report, GRECO highlights that 16 recommendations were only partially implemented and three remain untouched. Criticisms focus on inadequate action regarding executive accountability and policing ethics. While initiatives like the Open Administration Law and Democracy Action Plan show promise, delays persist. GRECO calls for stronger efforts—especially in police transparency and integrity systems—and has invited the Council’s Secretary General formally to urge Spain's Foreign Minister to take decisive steps before June 2026.

Romania Shows Partial Progress in Anti-Corruption Reforms, GRECO Reports

GRECO has released a follow-up report evaluating Romania’s efforts to combat corruption within its central government and law enforcement. Out of 26 recommendations from the 2023 evaluation, only two have been fully implemented, while 22 are partially addressed and two remain untouched. Key developments include the adoption of Law no. 49/2025 introducing ethics norms for government officials, a code of conduct for the Presidential administration, and improved prosecutorial tools. However, gaps persist in conflict-of-interest disclosures, integrity checks, and oversight mechanisms. In law enforcement, progress includes a unified ethics code, integrity training, and whistleblower protections, though further reforms are needed in recruitment, management, and gender representation.

Pacific Mentoring Initiative Strengthens Anti-Corruption Efforts in Solomon Islands

The United Nations Development Programme Pacific Office, backed by UK funding, organised a week-long mentoring mission in Honiara to enhance the capacity of the Solomon Islands Independent Commission Against Corruption. The initiative brought together regional experts from Fiji and the Solomon Islands, including prosecutors and financial intelligence units, to deliver technical guidance across investigation, prosecution, and financial disruption of corruption. Using tailored handbooks and practical sessions, the mission fostered peer learning and inter-agency collaboration. It also emphasised youth engagement and community outreach through the Pacific Youth Anti-Corruption Toolkit. The mission concluded with action plans to boost national resilience against corruption and reinforced a whole-of-society approach across the Pacific region.

Fraud

Fraud Evolves as Identities Become Commodities in the Age of AI

A UK fraud consortium report reveals that while identity fraud has slightly declined, criminals are shifting tactics—using AI-driven tools for account takeovers, especially on mobile devices. First-party fraud is surging, with a 35% rise in cases where legitimate users misuse their own accounts. Economic pressures are pushing individuals to sell personal data or falsify credit applications, often leading to deeper financial and legal consequences. The report underscores how identities are now more valuable than ever, making fraud both more sophisticated and more personal.

Market Abuse

FCA Fines Sigma Broking £1.1m Over Systemic Reporting Failures

Sigma Broking Limited has been fined £1,087,300 by the Financial Conduct Authority (‘FCA’) for submitting nearly 925,000 incorrect transaction reports between December 2018 and December 2023. The errors, which covered virtually all the firm's trades, stemmed from faulty system configuration and weak oversight. This marks Sigma’s second penalty for similar breaches, following a £531,600 fine in 2022. The FCA criticised the firm’s sustained failures, noting their impact on efforts to combat market abuse and financial crime.

FCA Fines Neil Woodford and WIM Nearly £46m Over Mismanagement of Equity Income Fund

The Financial Conduct Authority (‘FCA’) has issued fines totalling nearly £46 million to Neil Woodford and Woodford Investment Management (‘WIM’) for failures in managing the Woodford Equity Income Fund (‘WEIF’). Mr. Woodford faces a £5.9 million fine and a ban from senior roles in retail fund management, while WIM is fined £40 million. The FCA found that between July 2018 and June 2019, they made inappropriate investment decisions, prioritising illiquid assets and failing to manage fund liquidity responsibly. This led to the fund’s suspension in June 2019, leaving retail investors unable to access their money. Both parties have referred the decision to the Upper Tribunal, making the findings provisional. The Woodford Decision Notice is here, and the WIM Decision Notice is here.

FCA Drops £5.95m Fine Against Nailesh Teraiya but Maintains Industry Ban Over Cum-Ex Fraud

The FCA has revised its position in the case against Nailesh Teraiya, withdrawing its proposed £5.95 million fine following a request from the Danish Tax Authority (‘SKAT’). SKAT argued that pursuing the penalty could prejudice its civil proceedings to recover €91.2 million lost through fraudulent tax reclaims. The Upper Tribunal consented to the withdrawal on 30th July 2025. However, the FCA continues to seek a permanent industry ban against Teraiya, citing his dishonest role in orchestrating sham trades and submitting hundreds of false documents through Indigo Global Partners. The findings remain provisional pending the Tribunal’s final decision. The revised Decision Notice is here.

Other Financial Crime News

Breaking the Mafia’s Grip Boosts Lending and Economic Growth in Italy

A recent study using data from the European Central Bank and Italian anti-Mafia operations reveals that dismantling organised crime has profound economic benefits. After police interventions targeting Mafia-linked businesses, legitimate firms in affected municipalities saw a significant increase in bank lending—up to 2.1% in areas with strong prior Mafia influence. This surge in credit access led to improved productivity as resources shifted toward efficient enterprises. Although interest rates rose modestly due to increased transparency and perceived risk, local banks mitigated the impact using deep borrower knowledge. The research underscores that curbing organised crime not only restores law and order but also revitalises financial markets and drives regional economic development.

AI Supercharges Financial Crime: Regulators Warn of Rising Sophistication and Systemic Risk

At the 2025 Regulators Roundtable, global financial authorities raised alarms over the rapid evolution of financial crime driven by artificial intelligence (‘AI’). AI is now enabling complex schemes such as synthetic identity creation, multi-chain laundering, and real-time market manipulation. Regulators emphasised that traditional compliance tools are struggling to keep pace, prompting a shift toward AI-powered surveillance platforms which use behavioural detection and on-chain intelligence. The rise in AI-driven threats coincides with increased reliance on third-party tech providers, creating systemic vulnerabilities. Discussions also highlighted fragmented oversight in crypto markets, where off-chain trading and centralised exchanges pose significant surveillance gaps. The urgency for international coordination and robust governance frameworks was underscored as essential to maintaining market integrity.

Cybercrime

Legal Aid Sector Teeters on Collapse After Devastating Cyber-Attack

In the UK, The Guardian reports that the legal system continues to suffer following a significant cyber-attack on the Legal Aid Agency in May this year. The attack has left critical digital infrastructure offline for over three months, with the consequence that legal professionals have been unable to access records or bill for services—especially in civil cases—forcing some barristers to consider leaving legal aid altogether. Emotional strain is mounting, with practitioners reporting sleepless nights and financial distress, as contingency payments offer little relief—some as low as £9.50 a week.

Firms supporting vulnerable clients, including victims of domestic abuse, warn of dire operational risks and increased workload, with manual systems replacing digital processes. Lawyers are now spending double the time per case, turning away clients, and grappling with cash flow chaos. Trust has been eroded among those whose confidential data was exposed, and legal professionals fear a deepening access-to-justice crisis for the most vulnerable in society.

Cyber Deterrence Must Evolve for a Multipolar World

A new report by the Royal United Services Institute (‘RUSI’) argues for a rethinking of cyber deterrence strategies amid rising global tensions. It finds current deterrence measures largely ineffective in preventing persistent, low-level cyber threats—especially from Russia and China—which target Western critical infrastructure. The authors urge a shift toward integrated, cross-domain deterrence combining prevention and response across cyber and non-cyber domains. They highlight the risks of complacency and recommend a more tailored, iterative approach grounded in real-world scenarios.