KYC360 Weekly Roundup - 30th Sep 2022

Published on Sep 30, 2022

Spotlight on Corruption

“Corruption erodes our institutions.” These were the stark words of European Commission President Ursula von der Leyen in her recent State of the Union address. But corruption isn’t just about business bribes and kickbacks, it occurs at the very highest level of government with kleptocrats siphoning off their nations’ wealth, and also when covert foreign influence and shady funding attack our democracies. So this week we take a deeper look at corruption in its many dark and murky forms.

The world’s governments and regulatory authorities continue in their mission to fight corruption, money laundering, and other nefarious financial crimes. The UK and the EU have been the most active in this arena, with the implementation of new legislation designed to tackle illicit financial activity, prohibit the use of forced labour, and bring tax havens into line.

We also report on the latest sanctions, update you on recent developments in the crypto sector, and complete this week’s Roundup with a selection of articles covering money laundering, bribery and other relevant news items.


Financial_ServicesSpotlight on Corruption

US: How the autocrats steal elections

Since 2014, the Russian government may have spent as much as US$300 million on influencing elections and buying political influence abroad. According to reports, some of the countries affected include Albania, Montenegro, Madagascar, possibly Ecuador, and an unnamed country in Asia.

EU: Covert foreign influence and shady funding by authoritarian regimes a threat to democracy

In the annual State of the Union address, the European Commission President Ursula von der Leyen stated that in the coming year the Commission will present measures to update its legislative framework for fighting corruption. In her speech she called “covert foreign influence and shady funding” by authoritarian regimes as a threat to democracy and specifically called out China.

“We should not lose sight of the way foreign autocrats are targeting our own countries. Foreign entities are funding institutes that undermine our values. Corruption erodes trust in our institutions. So we must fight back with the full force of the law. We will raise standards on offences such as illicit enrichment, trafficking in influence and abuse of power, beyond the more classic offences such as bribery.”
Ursula von der Leyen, European Commission President


Podcast: Democracy and the corrosive impact of illicit finance

The war in Ukraine illustrates the dangers that unchecked kleptocracy poses to democracy. Kleptocrats and corrupt actors use their vast resources to advance their interests both at home and abroad. In this podcast from RUSI, experts discuss this growing transnational threat, its repercussions for international security and human rights, and what democratic alliances can do to stop it.

EU proposes suspending €7.5 billion funding for Hungary over allegations of corruption and fraud

The move follows a litany of EU breaches going back to December 2015. The suspension is only permitted under the recently agreed Conditionality Mechanism (also known as the Rule of Law mechanism). This brand-new mechanism allows financial sanctions to be levelled against member states in cases where there is a breach of the rule of law, and where said breaches, “affect or seriously risk affecting the sound financial management of the Budget of the European Union, or the protection of the financial interests of the union in a sufficiently direct way.”

Australia planning new anti-corruption agency

After years of campaigning by transparency and integrity activists, the Australian federal government has finally tabled legislation for a National Anti-corruption Commission. Prime Minister Anthony Albanese and Attorney General Mark Dreyfus said the planned agency would have broad jurisdiction to investigate serious corruption in the public sector and restore trust and integrity to federal politics.

Former Chinese justice minister jailed for corruption

The former Chinese justice minister was sentenced to death with a two-year reprieve (usually commuted to life in prison) on charges of bribery and helping criminals including his brother hide illegal activity. Fu Zhenghua’s conviction is the latest senior official to be punished for corruption in a crackdown that was launched after President Xi Jinping took power in late 2012.

US designates Bosnian anti-corruption prosecutor

The US has designated a state prosecutor in Bosnia and Herzegovina, describing her as a ‘brazenly corrupt’ and having ‘links to criminal organizations.’ The US views her as responsible for or complicit in corruption or the undermining of democratic processes or institutions in the Western Balkans.

“In support of narcotics traffickers and other criminals, Kajmaković helped hide evidence, prevent prosecution, and otherwise assist criminal activity in exchange for personal gain. She also attempted to block an investigation into her apparent criminal affiliates.”
US Treasury Department statement


Congolese Presidential adviser resigns after being caught on tape negotiating corrupt deal

Videos from an apparent sting operation showed high-ranking Congolese presidential adviser Vidiye Tshimanga offering access to the country’s minerals in exchange for a cut. When the tapes became public, Vidiye Tshimanga sent a resignation letter to the President stating, “Following the scandal caused by the OCCRP’s article, I consider it my ethical obligation to file a resignation from my position of Special Adviser to the Chief of State.”

Swiss-based fund AOG poured cash into joint accounts with African politicians

In the 1990s executives at an energy company bribed Nigerian officials to obtain profitable oil mining licenses. The Suisse Secrets project has revealed that its parent firm poured money into Swiss bank accounts held jointly by its employees and African elites, which included a Nigerian spy chief.

Brazilian airline pays $41million to settle corruption charges in the US and Brazil

The US Department of Justice (DOJ) has revealed that Brazil’s second largest airline GOL Linhas Aéreas Inteligentes S.A. (GOL), will pay over $41 million to resolve bribery investigations by criminal and civil authorities in both the United States and Brazil.

Media advisory: International Anti-Corruption Conference 6-10 December 2022

The 20th International Anti-Corruption Conference (IACC) will be held in Washington, D.C. from 6 to 10 December 2022. The IACC is the world’s largest independent forum in the fight against corruption, with representatives from 140 countries. This year it will focus on the theme ‘Uprooting Corruption, Defending Democratic Values’.


Financial_ServicesMoney Laundering, Bribery & Other News

German police raid residence of Russian oligarch over suspicion of tax evasion and money laundering

Officers from the Federal Criminal Police Office, Bavarian state police, and a special unit of tax investigators have combined forces to raid properties belonging to sanctioned Russian oligarch Alisher Usmanov in a search for evidence relating to alleged tax evasion and money laundering.

UK solicitors’ watchdog fines law firm over money laundering failures

The Solicitors Regulation Authority (SRA) fined law firm Buglear Bate & Co over claims it failed to put in place policies to prevent money laundering and terrorist financing. Research by City A.M. revealed the SRA increased the number of fines it handed to law firms six-fold over the five-year period from 2017/18 to 2021/22, after taking a more pro-active stance towards tackling money laundering after introducing new rules in 2017.

India to crack down on Chinese shell companies

India’s Ministry of Corporate Affairs has launched a crackdown on Indian entities that have been providing ‘dummy directors’ to Chinese shell companies. The Serious Fraud Investigation Office has arrested the person allegedly responsible for incorporating these firms through underhand means and his interrogation is expected to throw light on the involvement of China-linked shell companies in serious financial crimes in India.

‘Most-wanted’ arms dealer hid ties to companies with help from Panama’s offshore industry

Carlos Cardoen was indicted by a US federal grand jury in 1993, charged with illegally importing zirconium from the US to make cluster bombs sold to Saddam Hussein’s regime in Iraq and soon after, Interpol issued a “red notice” requesting his arrest by law enforcement authorities worldwide. But leaked documents show this didn’t prevent Arias, Fàbrega & Fàbrega, a prominent Panamanian law firm and offshore service provider, from representing his offshore companies and setting up shell companies and a private interest foundation on Cardoen’s behalf and providing stand-in directors to keep his ties to the entities secret.

Weapons firms install 50 staff inside the UK’s Ministry of Defence

Over 50 paid employees of global arms companies are working inside the UK’s Ministry of Defence,  independent sources have revealed, sparking questions about conflicts of interest and national security. They include nine staffers on long-term secondment from the UK’s biggest weapons manufacturer, BAE Systems, which in 2021 made over £4.1 billion in sales from the M.O.D. and even boasted about its “strong and long-standing relationships” with the UK government. Almost all of this money was spent through contracts that were awarded without competitive tender.


RequirementsLegislation, Regulation and Sustainability

UK government launches crackdown on fraud and money laundering

Measures to drive dirty money out of the UK and bring in stronger powers to tackle illicit activity have been presented to Parliament. The provisions of the Economic Crime and Corporate Transparency Bill include: reforms to Companies House; reforms to prevent the abuse of limited partnerships; additional powers to seize and recover suspected criminal cryptoassets; reforms to give businesses more confidence to share information to tackle money laundering and other economic crime; new intelligence gathering powers for law enforcement and removal of burdens on business.

“This historic Bill will equip Companies House and law enforcement with the tools they need to root out criminals attempting to hide their activities without burdening law-abiding companies with unnecessary bureaucracy. Above all, via strict enforcement measures, we are telling investors that the UK is open for legitimate business only.”
Jacob Rees-Mogg, UK Government Business Secretary


UK Economic Crime Bill includes plans to expand the investigative powers of the SFO

The Economic Crime and Corporate Transparency Bill will also enable the SFO to compel suspected criminals, banks, technology companies and organisations to provide information before a formal investigation is opened. The proposed changes are designed to enable the SFO to gather evidence at an earlier stage, to allow it to open investigations faster and freeze criminals’ illicit assets more quickly to protect that money for victims.

“The UK is no home for dirty money. The government has taken unprecedented action to prevent kleptocrats and organised criminals from abusing our open economy, and this Bill will go even further. Through this Bill we are giving our law enforcement agencies greater powers and intelligence capabilities to stay one step ahead of the criminal’s intent on keeping their corrupt assets out of reach.”
Suella Braverman, UK Government Home Secretary


Data-led reforms will help Companies House clamp down on ‘criminals and kleptocrats’

The Economic Crime and Corporate Transparency Bill also makes provisions to give the powers and capabilities of Companies House their “biggest upgrade in 170 years”. The register of companies will be given “new powers to check, challenge and decline incorrect or fraudulent information”. Furthermore, Companies House will have greater powers to conduct investigations and enforce standards, as part of which will enable it to “check data with public and private partners, as well as reporting suspicious activity to security agencies and law enforcement”.

Bar Council: Economic Crime Bill may confuse the role of lawyers

The Bar Council has warned that provisions in the Economic Crime and Corporate Transparency Bill to add a regulatory objective to the Legal Services Act 2007 (LSA) may be incompatible with barristers’ duties and risk confusing the role of lawyers. The Bill would add a regulatory objective in relation to promoting the prevention and detection of economic crimes to the LSA meaning the Bar Standards Board and Legal Standards Board would have to create a new workstream to their regulatory duties, at additional cost which may have to be passed onto clients. The Bar Council opposes the inclusion of the regulatory objective as it is not the role of legal professionals to prevent or detect crime.

EU Commission moves to ban products made with forced labour

The EU Commission has proposed to prohibit products made with forced labour on the EU market. The proposal covers all products, namely those made in the EU for domestic consumption and exports, and imported goods, without targeting specific companies or industries. This comprehensive approach is important because an estimated 27.6 million people work in forced labour in many industries and in every continent.

EU to include Bahamas in tax haven blacklist, Bermudas and Tunisia no longer on watchlist

Reports reveal that the EU is to add the Bahamas to its blacklist of governments considered uncooperative in tax matters because it says the archipelago continues to facilitate the operation of offshore firms for purposes of tax evasion. The bloc is also expected to include the Caribbean nations of Anguilla and Turks & Caicos next week in its updated list. Meanwhile, Bermudas and Tunisia are being taken off the watchlist because of their progress in dealing with offshore firms and the exchange of information. Meanwhile, Armenia and Eswatini will become part of the EU’s “greylist,” a warning that they will have to amend their preferential tax regimes by the end of 2023 or be included in the group of non-cooperative jurisdictions.

Chile: corporate crime list widens but most tax crimes still not included

New Chilean legislature has increased the list of offenses that may give rise to criminal liability for legal entities in the nation, by including a series of punishable behaviours associated with human and arms trafficking. However, despite its broad scope, anti-corporate tax evasion measures are still regarded as inadequate.


Crypto-1Crypto & Virtual Assets

Japan ramps up regulations to tackle dirty crypto

Japan is strengthening its efforts to tackle money laundering through dirty crypto. The government will introduce remittance rules in Spring of 2023, which will require exchange operators to share customer information.

Pentagon contracts for a security-focused digital asset mapping tool

Digital asset data analytics company Inca Digital has been contracted by the Pentagon to study the implications of digital assets for national security. In addition to looking at money laundering and sanctions evasions, the project will provide far greater understanding of the interactions between traditional and digital financial systems, the money flows into and out of blockchain systems, and other uses of cryptocurrency in areas of concern.

“The Department of Defense and other federal agencies need to have better tools to understand how digital assets operate and how to leverage their jurisdictional authority over digital asset markets globally."
Adam Zarazinsky, CEO, Inca Digital

KKR blockchain access to $4 billion fund opens door to crypto investors

As the U.S. Securities Exchange Commission (SEC) cracks down on noncompliant cryptocurrency firms, a new breed of blockchain application, created from the ground up to be securities, is emerging to meet demand. This month private-equity giant KKR & Co opened up part of its $4 billion Health Care Strategic Growth Fund II to be tokenised on the Avalanche blockchain, granting access to the asset class to investors with a fraction of the wealth normally required.



EU discussing new sanctions after Putin’s partial mobilisation and nuclear escalation threat

The European Union is planning to hit Russia with fresh sanctions following Putin’s mobilisation of 300,000 reservists and threat to use nuclear weapons. Without going into detail, the EU’s foreign policy chief Josep Borrell stated that there was agreement among EU foreign ministers to adopt additional measures, which could include the targetting of sectors and persons, as well as an oil price cap.

OFAC imposes restrictions on Russia quantum computing sector

Alongside the additional Russia designations and export controls imposed by the US last week, OFAC has issued a Determination that identifies the quantum computing sector of the Russian economy. This allows for sanctions to be imposed on any person or entity determined to operate in this sector.

Iran and Russia seek new sanctions evasion corridor

Russia and Iran are advancing the idea of a transportation route called the International North-South Transport Corridor (INSTC), which would connect the Persian Gulf and Indian ports with Russia. Previously, the Kremlin had been ambivalent to the idea, but with the consequences of the war in Ukraine now clear, there is a considerable incentive to revive the scheme, which could help the two Eurasian powers circumvent Western sanctions.

OFSI fines competition organiser for breaching sanctions by accepting Crimea wines

The Office of Financial Sanctions Implementation (OFSI), the UK’s civil sanctions enforcer has issued a £30,000 penalty to the UK company behind a beverage competition in Hong Kong for breaching sanctions imposed on a Russian state company.


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