KYC360 Weekly Roundup - 10th Mar 2023

Published on Mar 10, 2023

ESG and the Deceitful Art of Greenwashing

Welcome to this week’s AML Roundup. 2023 is set to be a crucial year for ESG, with governments across the world implementing new initiatives. Yet many businesses continue to make exaggerated or outright dishonest claims about their environment-friendly credentials in order to gain favour with customers, shareholders, and investors. Which is why this week we lead on the implications of organisations involved in ‘greenwashing’ and what is being done to stamp out this deceitful and damaging practice. 

We also deliver the most recent sector-related legislation and reports, the ongoing effects of sanctions, and new developments in the crypto sector. 

And we complete this week’s Roundup by sharing the latest global news covering money laundering, fraud, bribery, and corruption. 

RequirementsLegislation, Regulation and Sustainability

What is Greenwashing?

As people gain awareness of the importance of their daily choices and purchases, many businesses are becoming more sustainable to gain favour with customers, shareholders, and investors. Yet many businesses simply put up a façade of sustainability while they continue to engage in activities that cause more waste or greenhouse gases. This article explores what exactly ‘greenwashing’ is and how you can avoid businesses that engage in it.

In a world of greenwashing and ‘greenhushing’, has transparency lost its meaning?

This report examines the current sustainability reporting landscape across the world and asks whether some brands’ empty talk of ‘transparency’ obstructing progress in the field.

Thomson Reuters place ESG at the top of the list of global compliance challenges in 2023

Thomson Reuters has recently published a new white paper that explores the ten major regulatory concerns for 2023. At the top of the list of the 10 compliance challenges sits ESG, as governments across the world implement new initiatives designed to step the enforcement of this crucial area.

Environmental auditors approve products linked to deforestation and authoritarian regimes

A new cross-border investigation has found that environmental auditing firms ignore or fail to recognise the damage caused by loggers and other clients whose practices they certify as sustainable, undercutting a global system meant to fight forest destruction and climate change.

Australia competition regulator claims over half of companies potentially greenwashing

The Australian Competition and Consumer Commission (ACCC) is to investigate companies for potential greenwashing after a study found concerning environmental or sustainability-related claims from over half of the businesses reviewed.

Australia’s regulator sues pension fund in first greenwashing case

Australia’s corporate regulator is taking legal action against pension fund Mercer Superannuation, accusing it of misleading members about the sustainability of some of its investment options. According to the Australian Securities & Investments Commission’s (ASIC) it’s the first court action alleging “greenwashing”, or exaggerated claims of environment-friendly investment and products.

Toyota accused of greenwashing in Greenpeace complaint

The greenwashing complaint, filed by the Environmental Defenders Office on behalf of Greenpeace, focuses on claims about the environmental performance of Toyota’s vehicles and its net zero ambitions. It alleges that Toyota’s net zero by 2050 plans are contradicted by its car production plans and the company was not seeking a rapid transition to electric vehicles and had lobbied globally to halt, weaken, or delay vehicle emissions standards.

UK Ministers taking ‘sustainability’ advice from illegal dumping executives

Ministers are taking high-level environmental advice from a business leader whose firm was fined £millions for pumping raw sewage into British waters. The so-called ‘Council for Sustainable Business’, which advises the Department for Environment, Food and Rural Affairs (Defra) on water, waste, and biodiversity, is chaired by Liv Garfield, CEO of Severn Trent Water, which discharged the raw sewage. Its members also include a scrap metal boss whose company was convicted of illegal dumping, and the CEO of Heathrow Airport.

US industry knew of gas stoves’ air pollution problems in 1970s

The American Gas Association is trying to discredit research on the health impacts of gas stoves today. But newly revealed documents show that over 50 years ago it authored a draft report highlighting indoor air pollution concerns similar to those being raised today. This draft would eventually become an official report published by the National Industrial Pollution Control Council (NIPCC). However, an entire section detailing those concerns, entitled “Indoor Air Quality Control,” vanished from the final report.

EU Commission explores regulation for compliance technology used by EU banks and public sector

The European Commission is looking into whether technology solutions used by banks, fintech, and the public sector in the EU should be regulated. Alexandra Jour-Schroder, one of Europe’s top finance officials, said the issue of direct regulation was being explored by the Commission in Brussels.

Netherlands: Whistleblowers Protection Act passed 

The Dutch Senate has adopted the Whistleblower Protection Act (‘Wet bescherming klokkenluiders’) which amends the current whistleblowing legislation and implements EU Directive 2019/1937. The Act aims to provide whistleblowers with better protection against retaliation and particularly affects organisations with 50 or more employees. You can find an overview of the main provisions and changes here.

Bulgaria: Parliament passes Whistleblowing Act

The Bulgarian Parliament has passed an Act on protection of persons who report breaches or publicly disclose information on violations, implementing Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law. The Whistleblowing Act will become effective as of 4 May 2023 and aims to protect persons reporting breaches of Bulgarian law and/or EU law. It has a wider scope than the EU Whistleblowing Directive and extends protection under national law to include reporting on breaches in the areas of labour law and general criminal law.

Belgium: Legitimate interest and access to the UBO-register

Ever since the Court of Justice of the European Union ruled the access to the UBO-registers for the general public invalid, only competent authorities and subject entities could still access the register. In response, Belgium has introduced new legislation about the legitimate interest that natural and legal persons have to demonstrate to gain access to the UBO-register. Three categories of persons are now assumed to have a legitimate interest, all of which relate to the fight against money laundering and terrorist financing.

New guidance issued on tackling modern slavery in UK government supply chains 

In a further step towards businesses addressing modern slavery risks in their supply chains, the UK Cabinet Office has published a Procurement Policy Note (PPN 02/23: Tackling Modern Slavery in Government Supply Chains). It outlines the actions that contracting authorities must take to ensure that modern slavery risks are identified and managed in government supply chains. 

2023 Global Supply Chain Risk Report 

The pandemic, followed by the war in Ukraine, and tensions in the China Sea have added new uncertainty and made building more resilient supply chains far more difficult. To find out how businesses are coping with this changed landscape, risk and supply chain leaders in eight key sectors were surveyed in order to discover: How are they rebuilding? What are the main challenges and risks they face? And what will the supply chains of the future look like? 


Financial_ServicesMoney Laundering, Fraud & Corruption

Reserve Bank of India fines Amazon Pay over KYC non-compliance

India’s central bank has fined Amazon Pay 30.7 million rupee (USD375,000) for non-compliance with pre-paid payment instruments and KYC rules. The RBI says it imposed the penalty “based on deficiencies in regulatory compliance” before deciding that the issue “warranted imposition of monetary penalty”.

Case Study: ENRC in DR Congo shell companies, mining concessions, and corruption

This new case study focuses on the controversial mining operations carried out in the Democratic Republic of the Congo by the London-listed mining company Eurasian Natural Resources Company (ENRC). It explores the potential conflict of interest and corruption issues and the fact that the company has been subject to a corruption-focused investigation by the Serious Fraud Office in London.

Will the architects of the Unaoil bribery scandal get away with their tainted proceeds? 

Saman Ahsani, one of the kingpins of the corrupt Unaoil empire, was recently sentenced to one year in a minimum-security prison and a $1.5 million fine after co-operating with a US investigation into how the company “bribed the world”. His father, Ata Ahsani, had already agreed to pay a $2.25 million penalty in the US exchange for no action being taken against him. The sentencing of Saman’s brother, Cyrus, has yet again been delayed in the US until later this year. With controversial deals cut in the US, and convictions of their employees quashed in the UK, the Unaoil case raises troubling questions about whether the Ahsanis are getting off exceedingly lightly

10 steps the EU Commission must take to stamp out corruption in the EU 

Following recent scandals involving corruption in the EU parliament, in January the European Commission opened a public consultation on its plans to adopt EU-specific anti-corruption rules and establish an EU policy on corruption. Working with leading academics and members of civil society organisations, the Tax Justice Network identified 10 points that should inform future policy and submitted a response to the consultation which is available to read in full here.

Ericsson to pay $206 million for US federal bribery violations

Swedish telecommunications giant Ericsson has pleaded guilty to violating the anti-bribery provisions of the US Foreign Corrupt Practices Act and has agreed to pay a $206 million penalty. Ericsson had already paid a $520.6 million penalty in 2019 and entered into a deferred prosecution agreement, but the Department of Justice said Ericsson violated the agreement by failing to truthfully disclose “all factual information and evidence” involving the company’s schemes in Djibouti China, and Iraq.

Christian health nonprofit saddled thousands with debt as it built a family empire 

Despite a long history of fraud, one family has thrived in the regulatory no man’s land of US health care sharing ministries, where insurance commissioners are unable to investigate, federal agencies turn a blind eye, and prosecutors reach negligible settlements. 


Crypto-1Crypto & Virtual Assets

SEC Chair questions if crypto exchanges are qualified custodians 

Securities and Exchange Commission (SEC) Chair Gary Gensler has questioned the idea that crypto exchanges are safe qualified custodians for investment advisers. Gensler said a recently proposed rule directing investment advisers to look to qualified custodians for storage of assets (including cryptocurrencies) makes “important enhancements” to existing protection rules but stated that crypto exchanges should not be considered safe under those guidelines

“Based upon how crypto trading and lending platforms generally operate, investment advisers cannot rely on them today as qualified custodians. To be clear, just because a crypto trading platform claims to be a qualified custodian doesn’t mean that it is.” 
Gary Gensler, Securities and Exchange Commission (SEC) Chair

Korea: foreign nationals allegedly funded terrorist group using cryptocurrency 

Two foreign nationals residing in Korea have been arrested on charges of breaking the anti-terrorism and anti-terrorist funding acts by funding an al-Qaida-linked terrorist group. According to police, the funds were delivered via a cryptocurrency broker to Katibat al Tawhid wal Jihad, or KTJ, an anti-Syrian government terrorist group affiliated with al-Qaida.

Effective altruism-linked group used millions donated by FTX to buy a Czech castle 

Collapsed crypto exchange FTX’s bankruptcy proceedings could endanger some of founder Sam Bankman-Fried’s philanthropic gifts, such as the one a group aligned to effective altruism used to buy a castle in Czechia. Four months before FTX collapsed, the $4.5 million gift was bestowed by the FTX Foundation, the exchange’s philanthropic arm, and is one of dozens of donations now sitting in the crosshairs of the sprawling FTX bankruptcy proceedings. 

“I wanted to get rich not because I like money, but because I wanted to give that money to charity.” 
Sam Bankman-Fried, former CEO of now bankrupt FTX

Crypto bank Silvergate goes into liquidation 

Silvergate Bank has gone into liquidation, raising further concerns about rising volatility in the crypto sector. Earlier this month, Silvergate warned that it would miss the deadline to file its annual report and raised questions about its ability to survive as a going concern. The bank in January posted a $1 billion loss for the fourth quarter related to the collapse of cryptocurrency exchange FTX. 

Central banks conclude cross-border CBDC experiment 

Project Icebreaker, a joint initiative between the Bank for International Settlements and the central banks of Israel, Norway, and Sweden, has successfully concluded a study on the benefits and challenges of using central bank digital currencies (CBDCs) in international payments. The project tested the technical feasibility of conducting cross-border and cross-currency transactions in a hub-and-spoke model between different retail CBDC systems.

Australian banks and fintechs to test use cases for CBDC 

The Reserve Bank of Australia is launching 14 pilot projects to investigate potential use cases for a central bank digital currency. The projects will operate in a ring-fenced environment and involve a digital currency that has a real claim on the Reserve Bank. 

HSBC and Nationwide restrict customer crypto purchases as consumer risk fears grow 

Several UK banks have restricted their customers from buying crypto assets as concern grows about the risks posed by digital currency to customers. Citing concerns from the Financial Conduct Authority (FCA), Nationwide said it would not allow payments to crypto exchanges using its credit cards and would impose a £5,000 daily limit on current account crypto spending. HSBC also introduced restrictions on the purchase of crypto currencies, with customers prevented from purchasing cryptocurrencies using an HSBC credit card from February.  



Belgium freezes Russian assets worth €58 billion

According to sources, the country has now frozen a total of €191 billion of Russian financial transactions across 1,789 Russian companies and citizens included in the sanctions list, making it the leader in the total volume of frozen assets in the European Union. Belgium has intensified customs checks on Russia and Belarus: a total of 91,020 declarations were checked regarding the two states, and 7,925 containers were physically inspected.

US Treasury sanctions CJNG-run timeshare fraud network

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned eight Mexican companies linked to timeshare fraud on behalf of the Cartel de Jalisco Nueva Generacion (CJNG), a violent Mexico-based organisation that traffics a significant proportion of the illicit fentanyl and other deadly drugs that enter the United States. 

“As CJNG has consolidated territory over the past decade, it has added other crimes to its core activity of drug trafficking. In tourist destinations such as Puerto Vallarta, CJNG has become heavily engaged in timeshare fraud, which often targets US citizens. Today’s action exposes this CJNG scheme and also serves as a warning to potential victims, many of whom are elderly.”
Andrea M. Gacki. OFAC Director

Danish authorities investigate Rockwool over potential EU sanction breaches 

The insulation company Rockwool is under investigation over a potential breach of European Union sanctions. This follows a report by investigative media outlet Danwatch outlining how its products were used in military projects commissioned by the Russian defence ministry between 2015 – 2020. Despite the war in Ukraine, Rockwool continues to operate in Russia, where it has four factories and 1200 employees, accounting for 10% of its global workforce. 

Spotlight and RUSI ask Security Minister to back sanctions amendment 

Two key directors of Spotlight on Corruption and RUSI, have written to Security Minister Tom Tugendhat calling for a new measure to enhance the enforcement of sanctions against Russia. To stop sanctioned persons hiding their assets and evading sanctions, they would have to disclose their UK assets and provide a statement of assets they held, owned or controlled six months before they were sanctioned. Failure to do so would be a criminal offence and undisclosed assets could potentially be confiscated as a form of sanctions evasion. With calls growing for frozen assets to be seized to help fund the reconstruction of Ukraine, amending the ECCT Bill to include this powerful measure would be a quick win for the government. Read the full letter here

OFAC fines tobacco manufacturer $332,500 for violations of North Korea sanctions 

Godfrey Phillips India Limited, a tobacco manufacturer registered in Mumbai, India, has agreed to pay $332,500 to settle five apparent violations of the North Korea Sanctions Regulations. The violations resulted from GPI’s use of the US financial system to receive payments for tobacco it indirectly exported to North Korea, when it relied on several third-country intermediary parties to receive payment, which obscured the nexus to the DPRK and caused US financial institutions to process these transactions. 

Swiss bankers charged with hiding Putin’s millions 

Prosecutors in Switzerland have charged four bankers with helping to hide tens of millions of Swiss francs on behalf of Vladimir Putin. According to the indictment, two accounts were opened at Gazprombank in 2014, with the beneficial owner identified as Sergei Roldugin, a close confidant and friend of the Russian president, whose role as a “wallet” for Putin was revealed in 2016 by the Panama Papers. However, the bankers did not carry out checks to see if Roldugin was the beneficial owner of the assets, and now stand accused of having “failed to exercise due diligence to ascertain the identity of the beneficial owner” of the funds.

Europe’s Public Prosecutor to go after crime gangs behind sanctions evasions 

Europe’s chief prosecutor Laura Codruta Kovesi is already investigating frauds that allegedly cost EU taxpayers €14 billion, now she wants to go after the smugglers undermining sanctions against Russia. Any decision to add sanctions-busters to the European Public Prosecutor’s Office’s targets will be a political one, taken by the leaders of the EU member states.

“This is something that we already have been asked by the Commission — if we can deal with it. And our answer was: ‘Yes, we can do it. We are ready to do it’. We have specialised prosecutors. We have offices in 22 member states… We are the only available tool in this moment at the European level that can fight with this kind of criminality.”
Laura Codruta Kovesi, Chief Prosecutor, European Public Prosecutor’s Office (EPPO)
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