KYC360 Weekly Roundup - 17th Mar 2023

Published on Mar 17, 2023

Banking Crisis

Welcome to this week’s AML Roundup. Following the disastrous collapse of Silicon Valley Bank and New York’s Signature Bank, investors are scrambling to work out if any others face equally major problems. In the aftermath, shares in Credit Suisse plunged by over 24% as its biggest shareholder refused to put in any more cash, leading to Switzerland’s central bank moving to reassure investors by lending the struggling bank a staggering $54bn. As governments and central banks lead international efforts to try make sure any problems are contained, the spectre of a global banking crisis looms. 

We also report on a range of new compliance-related regulations, reports, and analyses to help keep you up to date with the latest global trends. There are updates on sanctions, the latest news from the crypto sector, and we wrap up this week’s Roundup with a selection of other newsworthy items covering money laundering, bribery, fraud, and corruption.  

Why did the Silicon Valley Bank and Signature banks collapse and is this the start of a banking crisis? 

The value of shares in banks around the world fell sharply after the demise of the two banks and Joe Biden went out of his way to reassure people that their money is safe. Such are the fears of a potential financial crash that could have wider ramifications across the world. This article delves into the reasons behind their collapse and asks five big questions.  

How does a bank collapse in 48 hours? A timeline of the SVB fall 

The collapse of Silicon Valley Bank which left its high-powered customers and investors in limbo, was the largest failure of a US bank since Washington Mutual in 2008. Here is what is known about the bank’s downfall, and what might come next. 

What’s next following the collapse of Silicon Valley Bank 

It’s all too reminiscent of the financial meltdown that began with the bursting of the housing bubble 15 years ago, yet the initial pace this time around seems even faster. How did we get here and will the steps the government unveiled over the weekend be enough? This article examines what happened and why it matters: 

SVB had no Chief Risk Officer for 9 months prior to collapse 

The abrupt collapse of Silicon Valley Bank has exposed several glaring governance and risk management lapses, including parting ways with its chief risk officer in April 2022 and operating without a full-time replacement for nearly the remainder of the year. 

KPMG gave SVB and Signature Bank a clean bill of health just days before collapse 

KPMG audited Silicon Valley Bank and Signature Bank and gave both financial institutions clean bills of health just days before regulators shut down both financial institutions. Silicon Valley Bank failed just 14 days after KPMG LLP gave the lender a clean bill of health, while Signature Bank went down 11 days after the accounting firm signed off on its audit. What KPMG knew about the two banks’ financial situation and what it missed will likely be the subject of regulatory scrutiny and lawsuits.  

HSBC rescues UK arm of Silicon Valley Bank 

HSBC has swooped to buy the UK arm of collapsed Silicon Valley Bank for just £1, bringing relief to UK tech firms who warned they could go under without help. The government and the Bank of England led the talks and put together the deal, which involves no taxpayer money. Customers and businesses who had been unable to withdraw their money will now be able to access it as normal. 

Signature Bank faced criminal probe ahead of firm’s collapse 

New York state regulators shut down Signature Bank, a big lender in the crypto industry, citing systemic risk and in a bid to prevent the spreading banking crisis. According to sources familiar with the matter, US prosecutors were investigating Signature Bank’s work with crypto clients before regulators suddenly seized the lender.

Government races to reassure US that banking system is safe 

The US federal government raced to reassure Americans that the banking system was secure after the second and third largest bank failures in the nation’s history happened in the span of 48 hours feeding fears that more financial institutions could fall. In response to the crisis, President Joe Biden insisted that the system was safe and regulators guaranteed all deposits at the two banks and created a program that effectively threw a lifeline to other banks to shield them from a run on deposits.

Credit Suisse to borrow up to $54bn from Swiss central bank 

Troubled bank Credit Suisse says it will borrow up to 50bn francs ($54bn; £44.5bn) from the Swiss central bank to shore up its finances. Shares in Credit Suisse fell 24% on Wednesday after it said it had found “weakness” in its financial reporting, prompting a general sell-off on European markets, and fears of a wider financial crisis.

Bank of England in emergency talks as crisis deepens at Credit Suisse 

The Bank of England has held emergency talks with international counterparts as they raced to assess the potential impact of the problems at Credit Suisse, a “systemically important” institution that is enmeshed in the global financial system. Its collapse would rock banks and pension funds around the world and fuel a new banking crisis.

BlackRock’s Larry Fink sees the possibility of a broader banking crisis on the horizon

According to Larry Fink, CEO of BlackRock, the banking crisis may not be over and the threat to the broader financial system remains. Fink has stated that the “the regulatory response has so far been swift, and decisive actions have helped stave off contagion risks, but markets remain on edge.” In a much awaited letter to stakeholders, Fink asked “Are the dominoes starting to fall?”

“While the financial system is clearly stronger than it was in 2008, the monetary and fiscal tools available to policymakers and regulators to address the current crisis are limited, especially with a divided government in the United States.”  
Larry Fink, Chairman and CEO of BlackRock


Financial_ServicesMoney Laundering, Fraud & Corruption

Video: The dark side of philanthropy, how charities can be used for money laundering 

This eye-opening video examines the National Heritage Foundation scandal, a shocking case that highlights the potential for criminal misuse of charitable organisations. It investigates the process of how criminals laundered their money through the NHF, the red flags that were raised, and the lessons that we can learn from this scandal, such as the importance of due diligence and oversight in the charity sector and the consequences of criminal exploitation of these organisations.

£777,581 of ‘bribe money’ placed in Jersey trust to be returned to Mozambique 

The sum of £777,581 placed in a Jersey trust is due to be forfeited after the Royal Court found that the money had been obtained through deception and bribery in Mozambique. The court ordered the forfeiture of the money from the Tolvex Trust, after it was found that the funds had been placed there by a former civil servant from Mozambique who had set up the trust in 1996 using the proceeds of corrupt payments. 

SEC charges Rio Tinto with bribery controls failures 

The Securities and Exchange Commission (SEC) has charged global mining and metals company, Rio Tinto plc, for violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bribery scheme involving a consultant in Guinea. The company has agreed to pay a $15 million civil penalty to settle the SEC’s charges. 

How Uzbekistan president’s daughter built a £200m property empire 

A dictator’s daughter who moonlighted as a pop star and diplomat spent $240m (£200m) on properties from London to Hong Kong, according to a study from Freedom for Eurasia. Gulnara Karimova used UK companies to buy homes with funds obtained through bribery and corruption, while accounting firms in London and the British Virgin Islands acted for the companies involved in the deals. 

Ex-honorary consul accused of financing Hezbollah indicted on money laundering, terrorism counts 

A former Lebanese diplomat sanctioned by the US for allegedly funnelling money to the terrorist group Hezbollah has been arrested in Romania, and US officials are seeking his extradition. Mohammad Ibrahim Bazzi is accused by federal prosecutors of attempting to evade sanctions by trying to launder and move more than $800,000 from the US to Lebanon. 


RequirementsLegislation, Regulation and Sustainability

FCA targets payment firms over ‘unacceptable’ risks

The Financial Conduct Authority (FCA) has written to nearly 300 payment companies warning that it will shut them down if they do not take prompt action to address “unacceptable” risks to consumers and financial system integrity. The letter highlights a number of common failings at payment firms regarding the safeguarding of customers’ money in the event of insolvency, a lack of appropriate liquidity risk management and the failure to consider whether firms should hold capital above their regulatory requirement. Furthermore, companies are failing to implement adequate money laundering and sanctions systems and processes, and falling short on tackling fraud.

HMRC, FCA, and the Gambling Commission to collect UK Treasury’s economic crime levy from July

The Government has introduced an economic crime levy (ECL) to fund the fight against economic crime, which will be collected for the Government by HM Revenue and Customs (HMRC), the FCA, and the Gambling Commission. The ECL will apply to AML regulated businesses and impacted firms (those who were subject to the money laundering regulations between 6 April 2022 and 5 April 2023) will see the new levy appear on invoices from July 2023. 

Annual Report of the European Public Prosecutor’s Office 

On March 1, 2023, the European Public Prosecutor’s Office (EPPO), which is competent in the investigation of fraud against the financial interests of the EU, published its Annual Report for the activities carried out in 2022, offering interesting insights on the current activities of this EU body.

FATF Report: Guidance on Beneficial Ownership of Legal Persons 

In March 2022, the FATF agreed on tougher global beneficial ownership standards in its Recommendation 24 by requiring countries to ensure that competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies. The FATF has now updated the guidance that will help countries implement the revised Recommendation 24 to help prevent organised criminal gangs, the corrupt, and sanctions evaders from using anonymous shell companies and other businesses to hide their dirty money and illicit activities.

EGBA publishes new pan-European anti-money laundering guidelines for online gambling 

The European Gaming and Betting Association (EGBA) has published its first pan-European guidelines to support the online gambling sector’s contribution to Europe’s fight against money laundering. Reviewed and revised by Europe’s top anti-money laundering (AML) compliance experts, the guidelines reflect the latest technologies and laws and build upon EGBA’s commitment to promote the highest level of industry responsibility in AML.

Second anti-money laundering unit formed to crack down on ‘high-risk’ Australian gambling industry 

The Australian Transaction Reports and Analysis Centre (Austrac) has launched a second specialist unit in response to the increasing threat of money laundering within the gambling industry, which insiders acknowledge is “a high risk”. Australia’s financial crime watchdog briefed gambling industry officials about the new warning that it had “identified serious non-compliance in a number of businesses”. 

UAE Central Bank helps improve hawala operators’ compliance 

The UAE Central Bank recognises the role of hawala providers is essential to financial inclusion while acknowledging that they pose greater money laundering and terrorist financing vulnerability. As a result, it is regulated by the Registered Hawala Providers (RHP) regulation and all providers undertaking hawala activity must adhere to a comprehensive set of rules.

Podcast: The role of ethics and compliance programs in international business 

In this podcast, Eric Hinton, the founding Director of the Robert B. Rowling Center for Business Law and Leadership at SMU Dedman School of Law, and a former Chief Ethics & Compliance Officer, discusses the importance of ethics and compliance for an international business, requirements and best practices for compliance programs, and international trade risk areas that businesses should monitor. 


Crypto-1Crypto & Virtual Assets

FCA tell UK parliamentary committee crypto regulation is unavoidable 

While the Financial Services and Markets Act, if passed, will grant the FCA new powers to regulate crypto businesses, the regulatory watchdog stressed that it would not be able to stop the risks involved in investing in cryptocurrencies. 

How regulation and compliance can lay the groundwork for crypto’s next boom 

Many companies with a stake in crypto markets’ maturation believe that regulation and compliance will play an important role in leading the sector out of the crypto winter. This article argues that the broader adoption of compliance and safety solutions creates a huge market opportunity.

Swift to develop beta version of experimental CBDC connector

Interbank co-operative Swift has reported strong support from central and commercial banks after sandbox testing of an experimental method for interlinking central bank digital currencies (CBDC) with existing fiat infrastructures. 

India imposes money laundering provisions on the cryptocurrency sector 

In the latest step by the government to tighten oversight of digital assets, the Finance Ministry said in a notice that anti-money laundering legislation has been applied to crypto trading, safekeeping and related financial services. The move aligns India with a global trend of requiring digital-asset platforms “to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stockbrokers. 



UK Russia sanctions regime at risk of ‘falling to pieces’ 

Senior politicians are demanding action to stiffen sanctions rules after an investigation by The Times and Transparency International revealed that the eight-year-old daughter of one of Vladimir Putin’s former regional governors owns a £2.3 million flat in Kensington. The analysis went on to disclose that property worth hundreds of millions of pounds is held by the family members of individuals with links to the Kremlin who have been sanctioned either by London or Kyiv. 

Russian Elites, Proxies and Oligarchs Task Force joint statement 

Following Russia’s invasion of Ukraine, Finance, Justice, Home Affairs, and Trade Ministers, and European Commissioners launched the Russian Elites, Proxies, and Oligarchs (REPO) Task Force. Since its establishment, the REPO Task Force has leveraged extensive multilateral coordination to successfully block or freeze over $58 billion worth of sanctioned Russians’ assets, tracked sanctioned Russian assets across the globe, and heavily restricted sanctioned Russians from the international financial system. This joint statement details the work it has carried out to date.

US agencies issue “tri-seal compliance note” regarding Russia-related sanctions evasion 

The US Department of Commerce’s Bureau of Industry and Security, the US Department of Justice, and the US Department of the Treasury’s Office of Foreign Assets Control, has issued a Tri-Seal Compliance Note, ‘Cracking down on third-party intermediaries used to evade Russia-related sanctions and export controls’, to alert the business community and the public to attempts by individuals and entities attempting to evade sanctions and export controls in support of Russia’s war against Ukraine. 

US Treasury targets sanctions evasion network moving $billions for Iranian regime 

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned 39 entities which constituted a significant ‘shadow banking’ network, one of several multi-jurisdictional illicit finance systems which grant sanctioned Iranian entities access to the international financial system and obfuscate their trade with foreign customers.  

“Iran cultivates complex sanctions evasion networks where foreign buyers, exchange houses, and dozens of front companies cooperatively help sanctioned Iranian companies to continue to trade. Today’s action demonstrates the United States’ commitment to enforcing our sanctions and our ability to disrupt Iran’s foreign financial networks, which it uses to launder funds.” 
Wally Adeyemo, Deputy Secretary of the US Treasury

Sanctions enforcement: lessons learned from 2022 and how to prepare going forward 

This in-depth and informative publication from multinational law firm Dechert LLP delivers the key takeaways from Sanctions Enforcement Activity in 2022 and examines the outlook for 2023. 

UK allowed sanctioned Abramovich associate to sell £16m mansion 

A close associate of Roman Abramovich was given permission by the UK Treasury to sell his Surrey mansion for £16m, a month after the government designated him for UK sanctions and froze all his assets. The Guardian has revealed that Tenenbaum was added to the UK sanctions list on 14 April 2022, yet the government allowed the former Chelsea FC director Eugene Tenenbaum to sell the property under a licence issued by sanctions officials on 12 May 2022.

Russia Federation designates Transparency International as ‘undesirable’ 

The Russian government pressed its crackdown against critical voices on Monday by branding the global anti-corruption group Transparency International as “undesirable,” effectively banning it from operating in the country. 

"Despite these allegations, Transparency International will continue to shine a light on corruption and kleptocracy in Russia and everywhere else to promote transparency, accountability, integrity, and to hold power to account.” 
Daniel Eriksson, CEO of Berlin-based Transparency International
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