KYC360 Weekly Roundup - 5th May 2023

Published on May 05, 2023

Welcome to this week’s AML Roundup. Two new studies have revealed that ESG is fast gaining traction as consumers increasingly focus on sustainability performance when making purchasing and employment decisions. The study by IBM found that the widely held belief that ESG harms profitability is a myth and revealed that over 70% of executives now view it as a revenue enabler, Meanwhile, a joint study by Bain & Company and sustainability EcoVadis, found that ESG activities correlate positively with stronger financial performance, with benefits including faster revenue growth and stronger margins.

The fallout from the collapse of three major US banks in the space of a few months continues with the Federal bank admitting it failed to take forceful action on Silicon Valley Bank. Furthermore, all three failures have cast doubt over the quality and independence of the work carried out by auditor KPMG, which gave the banks’ financial statements a clean bill of health as recently as the end of February. 

Also in this week’s Roundup, we deliver updates on the world of crypto & virtual assets, provide the latest legislation, reports, analyses, & opinions, cover the most recent sanctions news, and finish with a range of selected newsworthy items on money laundering, fraud, and corruption.

RequirementsSustainability and ESG

IBM Study: Over 70% of businesses view ESG as a revenue enabler

A new study, The ESG ultimatum: Profit or perish, IBM’s Institute for Business Value (IBV), analysed results from a survey of over 20,000 consumers about their attitudes toward sustainability and social responsibility, as well as 2,500 executives across 22 industries and 34 countries regarding their ESG strategy, expected benefits, and objectives. The results revealed that over 70% of executives view ESG as a revenue enabler, and that consumers are increasingly focussing on companies’ sustainability performance when making purchasing and employment decisions.

“Consumer commitment to environmental sustainability and social responsibility has intensified with consumers voting with their wallets. As a majority of consumers choose to buy from and work for ESG leaders, businesses must prioritize transparency and break down barriers to ESG data.”
Jonathan Wright, Global Managing Partner Sustainability Services and Global Business Transformation, IBM Consulting

Bain and EcoVadis study: ESG tied to stronger growth and profitability

According to a new study by global management consultancy Bain & Company and sustainability ratings provider EcoVadis, ESG correlates positively with stronger financial performance, delivering benefits such as faster revenue growth and stronger margins. For the study, Do ESG Efforts Create Value? the companies assessed the impact of ESG activities on 100,000 companies and revealed that there were no strong negative correlations between ESG activities and financial outcomes, while finding positive correlations in multiple areas.

“This new data shows that positive ESG outcomes are a trait of successful companies. This should encourage private companies and investors to confidently double down on ESG efforts.”
Axel Seemann, Advisory Partner at Bain & Company

New EU directive set to transform sustainability across the world

The Corporate Sustainability Reporting Directive (CSRD) is the latest EU policy intended to push economic and investment activity towards greater sustainability. The CSRD replaced the Non-Financial Reporting Directive (NFRD), which only covered the disclosure requirements for about 11,000 EU companies and was never mandatory. In contrast, the CSRD will require nearly 50,000 companies to enhance their sustainability reporting, including around 10,000 companies outside the EU, thereby greatly aiding sustainability around the world.

“In essence, the CSRD is becoming the de facto sustainability disclosure regulation for large global companies; as companies with significant business in Europe will have to adhere to the rules Europe sets down.”
Matt Orsagh, Chief Content Officer, ED4S Academy

EU lawmakers approve new carbon tax and a tougher emissions trading system

The European Council has adopted a series of new laws aimed at enabling the EU to hit its climate targets. These include the establishment of a carbon tax on imported goods, and an update to the EU emissions trading system aimed at helping to reduce emissions from several sectors of the economy.

Sustainability in practice: Legal insight and best practices

This first edition of a series of ESG reports covers a range of topics that are crucial for today’s businesses. From sustainable M&A and finance to managing human capital, driving sustainability through public procurement, ESG considerations impacting competition law, combatting unfair commercial practices and sustainable tax strategies. The multidisciplinary approach provides valuable insights and strategies for navigating the complex ESG landscape.

Blog: The financial industry’s pivotal role in achieving sustainable change through industry-wide standards

This blog states that firms regulated by the Financial Conduct Authority (FCA) are expected to take on a stewardship role in delivering sustainable economic growth. Both the UK government’s Transition Plan Taskforce and the FCA are putting together a blueprint to ensure this happens, in order that the UK becomes a more sustainable society and transition to a net zero greenhouse gas emissions economy by 2050. The FCA has also recently published a discussion paper to help the financial industry deliver on its potential, as part of the FCA’s commitment to deliver on its environmental, social and governance (ESG) strategy.

Reuters Event: Accelerate sustainable action in a time of turbulence

Companies are having to juggle the need to drive short-term successes and profits while delivering strategies and investments that will ensure action on sustainability accelerates, while securing the long-term survival of the business. Responsible Business Europe 2023 (6-7th June, London) will help your organisation to overcome near-term pressures and uncover the true potential for business, centred around long-term, profitable and sustainable decisions.

Will transition plans bring transparency to banks’ net-zero goals?

According to Bloomberg, this year a number of major banks, including Citigroup Inc., Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA) and the UK’s NatWest Group Plc, have all published transition plans. Designed to demonstrate how 30-year goals will be achieved, the transition plans will provide hard data for investors assessing whether a company can actually keep its word. Scores of other major lenders are expected to follow suit before the year is out, leading to observers calling 2023 “the year of the transition plan.”

G7 ministers urge implementation of mandatory climate disclosure

The G7 Ministers’ Meeting on Climate, Energy and Environment in Sapporo, Japan, brought together energy and climate officials from Canada, the EU, France, Germany, Italy, Japan, the UK, and the US.  Following discussions, G7 climate and environment ministers are urging the implementation of mandatory climate-related financial disclosures as a necessary step to accelerate sustainable finance and help achieve global climate goals.


Financial_ServicesMoney Laundering, Fraud & Corruption

Hong Kong police arrest 14 over suspected laundering of HK$560 million

Hong Kong police have cracked down on a criminal syndicate behind the alleged money laundering of over HK$560 million (US$71.3 million) in crime proceeds. Police said the syndicate laundered the illegal funds through 46 bank accounts and two key opinion leader management companies the gang had set up.

Trust pays US$1.5m to FinCEN over SAR process failings

US-based Kingdom Trust Company has agreed to a penalty of US$1.5 million after the US Financial Crimes Enforcement Network (FinCEN) found major defects in its management and filing of suspicious activity reports between 15 February 2016 and 15 March 2021.

Weaknesses in bank mobile app security are exposing customers to fraud

Which? has warned that weak banking security measures are leaving customers dangerously vulnerable to fraud on stolen phones. The consumer champion wants banks to stop relying on SMS to send sensitive information and fraud warnings, as criminals can either view messages sent by SMS or simply put the victims’ SIM card into a different phone and continue to receive messages.

“A lack of strong security protections in some banks’ mobile apps is a huge concern and could leave many more consumers at risk of being defrauded. Banks must up their game to protect customers.” 
Jenny Ross, Which? Money editor

UK Blind Trusts: integrity silver bullet or transparency blackhole?

The latest edition of the list of ministers’ interests reveals 10 ministers, including the Prime Minister, have in place (or are in the process of setting up) a ‘blind trust’ to manage their financial interests while serving in government. Touted as an effective tool to ensure their public duties aren’t influenced by their private financial interests, MPs hand over control of their financial interests to a trustee who makes investment decisions on their behalf. However, as this latest briefing, blind trusts are no silver bullet to prevent conflicts of interest, and in the absence of any substantial rules across parliament, can function as a transparency blackhole.

Rapper Pras Michel found guilty of illegal lobbying, corruption, and witness tampering

Ex-Fugees musician Prakazrel “Pras” Michel has been found guilty of 10 counts stemming from allegations he used money to peddle influence in the US. Prosecutors said Michel had received over $100m (£80m) from Malaysian billionaire Jho Low that was used in efforts to influence US politics. The rapper and businessman was also convicted of lobbying on behalf of China’s government and now faces years in prison.

Russian charged with money laundering and illegally transmitting over $150 million

According to US prosecutors, Russian citizen Feliks Medvedev allegedly registered eight companies in Georgia that were used to transmit over $150 million in a series of 1,300 transactions. The money was partly used to purchase over $65 million in overseas gold bullion leading to the charges of operating an unlicensed money transmitting business and money laundering.

Swiss security firm Sicpa convicted of corruption

The Swiss federal prosecutor has ordered security ink company Sicpa to pay CHF81 million ($90.6 million) for corporate criminal liability over the payment of bribes in various countries, while a former sales manager was given a conditional prison sentence of 170 days.

Swiss indict two managers of Saudi oil company in 1MDB scandal

The Office of the Attorney General of Switzerland (OAG) has charged two executives of the energy company PetroSaudi over the affair of the Malaysian sovereign wealth fund 1MDB. The defendants are accused of embezzlement and laundering $1.8 billion (CHF1.6 billion) for their own or third parties’ enrichment.


RequirementsLegislation and Regulation

UK to ban cold calls selling financial products

Fraud is now the most common crime in the UK, costing nearly £7bn per year with one in 15 people falling victim. As part of a crackdown on fraud, the UK is to ban cold calls offering financial products. It forms a key part of a strategy to reduce fraud by 10% on 2019 levels by 2025, as set out in a new policy paper.

 “The fight against fraud has progressed far too slowly in recent years and in particular more action is needed to guarantee that big tech platforms take serious action against fraud,”
Consumer group Which?

RUSI report: Global Approaches to Cyber Policy, Legislation and Regulation

This paper from the Royal United Services Institute (RUSI) aims to serve as a guide to policymakers by examining different approaches to cyber-security policy, regulation and legislation. It provides an overview of the priorities of five countries (the UK, the US, Canada, Japan, and Singapore) and the EU. The focus rests on cyber policy advanced in the period between January 2019 and March 2023.

Report: Overview of corruption in academic research

Corruption in academic research has consequences way beyond the academic community. When it happens in medical research or in research upon which policy decisions will be based, it can have devastating effects for the whole community. This report from Transparency International examines how corruption in academia can undermine core values make favouritism, bribery and fraud more acceptable to obtain results.

MONEYVAL member states commit to strengthening the fight in AML

In a declaration adopted at a high-level meeting in Warsaw organised by the Ministry of Finance of Poland and MONEYVAL, ministers highlighted the major threat that illicit finance poses to economic development and security. As a result, the Council of Europe’s MONEYVAL Committee has committed to improve the effectiveness of their regimes to prevent and combat money laundering, the financing of terrorism and weapons of mass destruction proliferation.

Top 10 ‘Follow the Money’ reports published in April 2023

Stefcho Stanev, Head of Global Risk Inventory at Deutsche Bank, has listed the top 10 ‘Follow the Money’ open-source reports that were published in April 2023 that will assist in better managing financial crime risk.

COLPs: SRA sanctions questionnaire deadline 31 May

The regulator of solicitors in England and Wales has announced a new round of sanctions assessments. Which takes the form of a mandatory SRA sanctions questionnaire. The assessment will be sent by email to the firm’s Compliance Officer for Legal Practice (COLPs) or authorised signatory, with 31 May the deadline for submissions.

UK SARS in Action April 2023

The 19th issue of SARs in Action from the United Kingdom Financial Intelligence Unit (UKFIU) delivers a broad spectrum of analyses. It ranges from the NCA’s National Assessments Centre (NAC) on Modern Slavery and Human Trafficking (MSHT), the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) on the illegal wildlife trade, and looks at SARs related to cryptocurrency, trust or company service providers.



Australia updates its guidance on conducting employee due diligence and AML/CTF training

The Australian Transaction Reports and Analysis Centre (AUSTRAC) requires that all regulated entities have procedures built into their AML/CTF programme that detail when and how they conduct EDD and AML/CTF risk awareness training. The updated guidance explains what EDD and AML/CTF risk awareness training involves, how it may apply to an organisation, and best practices to help mitigate and manage risks.

The Future of Regulation, Risk Management, and Compliance 2023

Financial institutions are on course to find themselves caught in a perfect storm of risk and compliance-based challenges during 2023, as market-led trends, technology advancement, and regulatory shifts continue to dominate the headlines. The Future of Risk Management and Compliance 2023 report has been published in order to provide expert insights that will help firms to weather the storm and on to calmer waters.

The regtech space is facing a major shake-up

With the Financial Conduct Authority’s new Consumer Duty regulations coming into effect in just a few months, it presents an opportunity for financial institutions to adopt a new approach to compliance and regulation. Throughout May, The Fintech Times will be examining the past and present states of regtech and compliance, highlighting the lessons learned and analysing how they can shape the future of the sector.

Barclays recruits new head of compliance

UK banking giant Barclays has appointed Kirsty Everett as its new chief compliance officer (CCO), subject to regulatory approval. Everett joins Barclays from HSBC, where she was its group head of compliance and prior to that role, she worked at UBS for seven years across a range of roles, leaving the firm as the designated chief compliance officer.


Crypto-1Crypto & Virtual Assets

US regulator demands crypto must end anonymity for illicit finance

A leading US regulatory official has said that anonymity is enabling crypto assets to finance illegal activities and that the lack of visibility in cryptomarkets must be addressed. Christy Goldsmith Romero said cryptocurrencies were being used to finance cybercrime, adding that legally compliant crypto companies should not be using “mixers” or software tools that effectively anonymise users and they must demonstrate that they have internal controls to prevent money laundering and terrorist financing.

“It’s essential for governments and particularly the industry to address that which makes crypto so attractive to illicit finance, and that is the allure of anonymity. Congress is already considering new laws on addressing anonymity and digital identity,”
Christy Goldsmith Romero, Commissioner at the US Commodity Futures Trading Commission

Coinbase opens international exchange

Coinbase has opened a derivatives exchange outside of the US to reduce its reliance on its home market in the face of regulatory action. Taking advantage of its recently secured Class F license from the Bermuda Monetary Authority, Coinbase International Exchange will enable institutional users based in eligible jurisdictions outside of the US to trade perpetual futures, which accounted for nearly 75% of global crypto trading volume in 2022.

Crypto exchange Poloniex agrees to $7.6M settlement for sanctions violations

The US Office of Foreign Assets Control (OFAC) announced a settlement with Poloniex, which has agreed to pay $7,591,630 to settle apparent violations of sanctions against Crimea, Cuba, Iran, Sudan, and Syria. Between January 2014 – November 2019, the Poloniex trading platform allowed customers located in sanctioned jurisdictions to engage in online digital asset-related transactions to the value of over $15 million.

Austria’s Raiffeisenlandesbank to offer crypto investments

The Raiffeisenlandesbank is aiming to become the first traditional European bank to incorporate cryptocurrencies and other digital assets into its investment offering for clients. Crypto investment will be featured alongside digital investment services for stocks, exchange-traded funds, precious metals and commodities and the bank plans to make them available to all customers segments, including retail, private banking and corporate customers.

HM Treasury opens consultation for taxing DeFi cryptoassets

HM Treasury has launched a consultation into modifying the tax treatment of decentralised finance (DeFi) lending and staking in the UK. The consultation aims to create a framework that aligns “the taxation of cryptoassets used in DeFi lending and staking transactions with the underlying economic substance, whilst reducing the administrative burden on users.



Sanctions-busting states could be EU’s next targets

As part of the EU’s next sanctions package against Russia, officials are formulating plans to hit third countries with economic penalties if they fail to comply with Western sanctions or can’t explain a sudden rise in trade in banned goods. Such a mechanism would be a first step toward so-called secondary or extraterritorial sanctions, a practice that is already in place in the US. 

Opinion: The sanctions net around Russia is tightening, but there is scope to do more

Too many countries are at best ambivalent and at worst profiting from helping Russia to evade sanctions, according to the head of the Centre for Financial Crime and Security Studies at the Royal United Services Institute (RUSI). In this article Tom Keatinge states that while sanctions designations have increased, and the targets broadened, the number of countries implementing sanctions has not, leaving significant holes in the net.

UK company set up in name of top Putin official in Ukraine

A UK company has been set up in the name of one of Vladimir Putin’s top officials in Russian-occupied eastern Ukraine despite him being under sanctions. In June 2022 the UK government imposed a freeze on any UK assets Saldo owns and banned him from entering the country, yet since November 2022 he has been listed as the owner of Grainholding Ltd, a British company with an address in the Hatton Garden district of central London.

Sanctions set to take an increasingly prominent role in 2023

Russia’s invasion of Ukraine caused a huge surge of sanctions being placed on the country’s individuals and entities in 2022, and as 2023 progresses this trend appears only to be increasing. This article sets out the argument that governments are highly motivated to continue pressuring Russia, and how financial institutions have a large role to play in enforcing these measures.

Cyprus facing more sanctions in response to enforcement failures

Despite the recent imposition of US and UK sanctions on a number of services providers, law firms in Cyprus may still be offering services to sanctioned oligarchs and now fear they will themselves be targeted by sanctions. As a result, the government, has held several meetings in recent weeks to discuss how to contain the damage eventual sanctions might cause.

China’s Renminbi plays a new role in sanctions busting

While the Chinese currency remains far from supplanting the US dollar in global trade, its increasing usage abroad is helping its allies and friends circumvent US-led economic measures, further bolstering its popularity on the world stage.

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