KYC360 Weekly Roundup - 25th Nov 2022

Published on Nov 25, 2022

Crypto Crisis

Welcome to this week’s AML Roundup. Cryptocurrencies were once heralded as a new monetary system that would cut out greedy bankers and create greater trust between transacting parties. But as the world sifts through the debris of the collapse of the crypto exchange FTX, it’s difficult for even the most stalwart libertarian to argue against the mounting call for greater regulation of the entire crypto sector.

With legislation in mind, the bombshell judgement by the EU’s Court of Justice on beneficial ownership has rendered ‘invalid’ the requirement for EU member states to ensure open public access to beneficial ownership information. It’s a decision that could have major implications for corporate transparency in the EU and around the world, while once again raising the spectre of the fundamental argument of AML vs GDPR.

We also take a look at the latest sanctions news, delve into the world of money laundering, and wrap up this week’s Roundup with a selection of other newsworthy items from around the world.


Crypto-1Crypto & Virtual Assets

New FTX CEO slams ‘complete failure of corporate controls’ 

John J. Ray III, the lawyer who oversaw the liquidation of Enron, and new CEO of the failed crypto exchange FTX has blasted his predecessor Sam Bankman-Fried. In court filings he declared that he had never seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information.

“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
John J. Ray III, CEO, FTX

FTX held less than $1bn in liquid assets against $9bn in liabilities

According to documents seen by the Financial Times, Sam Bankman-Fried’s main international FTX exchange held just $900mn in easily sellable assets against $9bn of liabilities the day before it collapsed into bankruptcy.

The fall of FTX ‘King of Crypto’ Sam Bankman-Fried

It took less than eight days for Sam Bankman-Fried to go from being nicknamed the “King of Crypto” to his company filing for bankruptcy and him stepping down as chief executive. He now faces federal investigations into how he handled the company’s finances.

Exclusive: These FTX investors stand to lose the most from the crypto exchange’s implosion

Both FTX and FTX U.S. filed for bankruptcy and Bankman-Fried resigned as CEO, raising the likelihood that investors in each entity will end up losing the vast majority, if not all, of their investment.

What happened to FTX and could the crisis spill over to the rest of crypto?

International exchange for crypto assets is in effect unregulated and may observers believe it has been built on sand. This article explores what happened to FTX, why it happened, and what the collapse of the world’s second biggest cryptocurrency exchange means for the wider market.

Opinion: You can forget about crypto now

While the full effects of the collapse of FTX are yet to be realised, some observers are already claiming that it’s worse than the Theranos and Madoff scandals. The downfall of FTX comes just as the public was beginning to trust the industry, but now crypto feels less ready for the mainstream than it has for many years.

SEC Commissioner Hester Peirce: FTX’s collapse could finally be ‘catalyst’ for regulation

The demise of FTX and its subsequent bankruptcy filing has heaped a great deal of negative attention to the crypto sector. However, according to Hester M. Peirce, a commissioner at the Securities and Exchange Commission (SEC), this may be just the wake-up call US lawmakers need to increase regulation of the crypto sector.

Bank of England: Tougher crypto rules needed after collapse of FTX

Bank of England Deputy Governor Jon Cunliffe has stated that the implosion of FTX demonstrates the need to bring the crypto world within the regulatory framework. Sir Jon noted that the Financial Conduct Authority had been warning for several weeks before FTX’s collapse that “this firm may be providing financial services or products in the UK without our authorisation… you are unlikely to get your money back if things go wrong”.

“We should not wait until it (the crypto sector) is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilising impact.”
Jon Cunliffe, Bank of England Deputy Governor

Blog: The net is closing on crypto firms that shun new anti-money-laundering regimes

As the world’s regulatory bodies intensify their scrutiny of the crypto sector, firms will find it increasingly difficult to find a safe place to hide. Since 2020, the UK’s Financial Conduct Authority (FCA) has required crypto firms to register with it before they can operate, but earlier this year it was reported that only one-third of firms had met the necessary criteria. An FCA spokesperson said the rest had failed to meet requirements or decided to operate outside the UK.


Financial_ServicesMoney Laundering, Fraud & Corruption

DFSA hits Bank of Singapore with AED 4M (€1.1M) fine for ‘inadequate’ AML control controls

Dubai’s Financial Services Authority (DFSA) has fined the Dubai branch of the Bank of Singapore AED 4,113,200 (€1.126M) for inadequate anti-money laundering systems and controls. The DFSA said they had identified deficiencies in the bank’s AML business risk assessments, customer risk assessments, customer due diligence (CDD) and enhanced CDD, identification of customer source of wealth and source of funds and suspicious activity reporting.

German police raid UBS in connection with money laundering investigation into Russian Oligarch

Branches of global lender UBS were raided by German police in connection with a money laundering investigation into Russian Oligarch Alisher Usmanov. Authorities searched UBS branches in Frankfurt and Munich on Tuesday morning, reports Der Spiegel. 

UAE fines three separate companies $612,000 for compliance failures

The UAE has fined 3 companies Dh2.25 million ($612,000) for breaching provisions of the Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) law. Imposing sanctions on companies and property found to be in breach of the law supports the UAE’s efforts to strengthen the compliance of designated non-financial businesses and professions (DNFBPs).

Croatia lowers threshold of cash deals to be reported to anti-money laundering authority

In order to comply with the national action plan to improve the prevention of money laundering and financing of terrorism, amid the forthcoming adoption of the euro, Croatia has lowered the threshold for the reporting of cash transactions. As a result, all cash transactions above 10,000 euro ($10,160) will have to be reported to the money laundering prevention office, lowering the threshold which currently stands at 200,000 kuna ($26,600/26,200 euro).

Famous chateau in heart of Burgundy wine country was bought in money laundering conspiracy

A Ukrainian fraudster is accused of using dirty money to buy a magnificent chateau in the heart of Burgundy wine country. Dmitri Malinovsky is accused of buying ‘La Rochepot’ after faking his death and is also charged with his ex-wife, a former girlfriend and three others with laundering up to €12M he allegedly swindled in a Singapore fertiliser deal through his purchase of the Château de Rochepot.

Two Estonian citizens arrested in $575m cryptocurrency fraud & money laundering scheme

Two Estonian citizens have been arrested on an 18-count indictment for their alleged involvement in a $575 million cryptocurrency fraud and money laundering conspiracy. Sergei Potapenko and Ivan Turõgin allegedly defrauded hundreds of thousands of victims through a multi-faceted scheme, by inducing them to enter fraudulent equipment rental contracts with the defendants’ cryptocurrency mining service HashFlare.

Shadow Diplomats: How rogue honorary consuls undermine global diplomacy

Honorary consuls are supposed to foster ties between countries, but this report from the International Consortium of Investigative Journalists (ICIJ) uncovers how criminals and others have infiltrated their ranks. It reveals how hundreds of rogue honorary consuls, including alleged terror financiers and criminals, have undermined a little-known system of global diplomacy. 

DEA’s most corrupt agent: Parties, sex amid ‘unwinnable war’

José Irizarry is regarded as the most corrupt agent in US Drug Enforcement Administration history. While he admits to conspiring with Colombian cartels to build a lavish lifestyle, he used his final hours of freedom to tell his story, accusing some long-trusted DEA colleagues of joining him in skimming millions of dollars from drug money laundering stings.

DOJ seeks to credit almost half of Glencore’s bribery fine to foreign authorities

The DOJ has asked a US court to credit up to $166 million of Anglo-Swiss commodities trader Glencore’s $428.5 million penalty for pleading guilty to bribing public officials in Africa and South America credited against related resolutions by authorities in the UK and Switzerland.

Ex-Goldman Sachs banker arrested for Ghanaian bribery scheme

Asante Berko allegedly participated in a scheme to pay over $700,000 in bribes to Ghanaian officials to secure a contract for a power plant for one of the bank’s clients.


RequirementsLegislation, Regulation and Sustainability

Court of Justice of EU rules public beneficial ownership registers ‘invalid’

In a landmark ruling that could have major implications for corporate transparency across the EU and around the world, the Court of Justice of the European Union has ruled that unfettered public access to beneficial ownership information is not compatible with the bloc’s ‘fundamental rights’. The bloc’s supreme court in matters of EU law concluded that provisions contained in the EU’s Fifth Anti-Money Laundering Directive, requiring EU nations to establish public registers showing the true owners of companies domiciled in their jurisdictions, are not compatible with the rights to respect for private life and the protection of personal data.

Insight: Former FATF Executive Secretary analyses the landmark Court of Justice of EU ruling

David Lewis, former Executive Secretary of FATF, explores whether the decision by the EU Court of Justice is a serious blow for corporate transparency, good governance and efforts to fight crime, terrorism, corruption and stop rogue regimes from evading sanctions, or if it is just a temporary setback.

The Basel Institute on Governance weighs in on the Court of Justice of EU ruling

The last edition of the Basel AML Index stated that an effective beneficial ownership transparency mechanism is essential to a country’s resilience to financial crimes and its ability to effectively implement financial sanctions. Yet in last analysis of Financial Action Task Force (FATF) data the average effectiveness of beneficial ownership transparency mechanisms globally was only at 21%. Anything that further reduces their effectiveness, such as undermining the watchdog and monitoring role of civil society and the media, will make it harder to ensure the integrity of their financial systems and their compliance with sanctions regimes.

EBA final guidelines on the use of remote customer onboarding solutions

The European Banking Authority (EBA) today published its final guidelines which set out the steps credit and financial institutions should take to ensure safe and effective remote customer onboarding practices in line with applicable AML and CFT legislation and the EU’s data protection framework. The guidelines apply to all credit and financial institutions that are within the scope of the Anti-Money Laundering Directive (AMLD).

US Treasury calls for greater regulation of fintech-bank relationships

The US Department of the Treasury has called for closer supervision of fintech-bank partnerships in a move to prevent abuses and protect consumers. A new report states that fintech players are making a play in core consumer finance markets, but while these non-bank entrants are contributing to more choice, better services, and lower prices, they are not subject to the same oversight as traditional banks.

“Regulators should provide a clear and consistently applied supervisory framework for bank-fintech relationships. A bank-fintech relationship that delivers consumer financial services provided by an insured depository institution (IDI) must operate in compliance with the laws, regulations, and risk management standards applicable to the IDI.” 
US Department of the Treasury Report

US SEC fines surged in the past year

In the past year, the US Securities and Exchange Commission (SEC) has collected some of its largest fines ever, levying 13 penalties of over $100 million on publicly traded firms, in total, the SEC collected $2.2 billion in fines in the 2022 fiscal year.  These numbers represent a dramatic increase over the prior year, when the SEC issued just three fines over that amount.

UAE announces new plans to prevent money laundering and terrorism financing

The UAE has proposed a new regulatory approach to curb money laundering and terrorism financing activities. The national Public-Private Partnership Sub-Committee (PPPSC) has suggested allowing formal sharing of strategic information and intelligence between the public and private sectors on such matters, while also recommending the creation of a dedicated secure digital platform for such intelligence sharing.

FINTRAC revokes registrations of 32 money service firms for failing to comply with AML/CFT regulations

Canada’s financial regulator FINTRAC revealed that it has revoked the registrations of 32 money services businesses between April and September 2022.  FINTRAC said the firms did not meet the requirements set out in Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

FINMA sees increased risks for Swiss financial sector

According to the Swiss financial watchdog (FINMA) the Swiss financial sector is facing mounting risks. The FINMA Risk Monitoring 2022 report identified seven principal risks for the financial sector, including interest rates, credit linked to mortgages and other loans, cyberattacks, combating money laundering, and increased impediments to cross-border market access.

Iraq forms supreme commission to investigate major corruption cases

Iraq’s Federal Commission of Integrity (Nazaha) has announced the formation of a supreme commission mandated to investigate major and important corruption cases. Iraq has lost billions to corruption scandals in this year and official figures show no less than US$450 billion has been siphoned from state coffers over the past two decades, according to international media.



US Treasury sanction microelectronics supplier linked to the Kremlin

The US Department of the Treasury’s latest sanctions includes Milandr, a Russian microelectronics company that is linked to the country’s military-industrial complex. As Russia continues to wage its war against Ukraine, the US has taken action against the Kremlin’s defense industry which, according to a joint alert, is heavily reliant on microelectronics.

Blog: How Russian cybercriminals are adapting machine learning methods in Ukrainian conflict

The sanctions imposed on Russia following its invasion of Ukraine, coupled with capital controls imposed by the Russian Central Bank to counter them, have prompted Russian cybercriminals to devise new and innovative ways of overcoming these obstacles to continue to launder illicit money.

US Treasury targets Russian-backed corruption in Guatemala mining sector

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned a Russian national, Dmitry Kudryakov, and a Belarusian national, Iryna Litviniuk, for their role in exploiting the Guatemalan mining sector, in addition to three associated entities connected with their corruption schemes.

Guidance on the UK ban on Russian oil and oil products

The Department for Business, Energy & Industrial Strategy has published guidance on the UK ban on Russian oil and oil products intended for entry into the UK and explains how to determine the origin of oil imports to the UK. It provides an overview of some of the prohibitions and requirements relating to oil and oil products in the UK’s sanctions legislation and, where appropriate, links to further detailed information.

OFAC targets network supporting Iranian petrochemical and petroleum sales

OFAC has also sanctioned 13 companies across multiple jurisdictions for facilitating the sale of hundreds of millions of dollars’ worth of Iranian petrochemicals and petroleum products to buyers in East Asia on behalf of sanctioned Iranian companies. This fifth round of designations targeting Iran’s illicit petroleum and petrochemical trade since June 2022, demonstrates the US’s determination to target sanction evasion efforts.   

From missions to missiles: North Korea’s diplomats and sanctions-busting

The UN sanctions regime on North Korea has targeted weapons of mass destruction programmes and has been used to counter revenue-raising activities that finance these programmes and keep the regime in power. Since the 1970s, involvement in criminal activities and the procurement of commodities and arms has put the country’s diplomatic corps in a good position to evade sanctions.

Canada & US sanction corrupt Haitian political elites

Canada and the United States individually sanctioned two Haitian political elites, whom the two countries accuse of using their positions to protect and enable criminal organisations responsible for the destabilisation of Haiti. Senate President Joseph Lambert, 61, and former Senate President Youri Latortue, 55, were sanctioned by both Global Affairs Canada and the US Department of the Treasury for their alleged direct involvement with armed crime groups that terrorised Haiti’s population.

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