KYC360 Weekly Roundup - 24th Feb 2023

Published on Feb 24, 2023

Russia Sanctions one year on

Today is not only the first anniversary of Russia’s invasion of Ukraine, it also marks an unprecedented international sanctions regime imposed on Russia by a coalition of Western nations. The impact of the resultant sanctions has been mixed, with Russia able to adjust its economy because of huge oil and gas revenues. However, the situation is changing as the ban on most oil and oil product imports combined with the experimental price cap and in conjunction with coordinated technology export controls are slowly strangling Russian industry. This week, we look at the Russia sanctions regime one year on, report on new measures and its ongoing effectiveness. 

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 from the world of crypto and ESG, and we wrap up this week’s Roundup with a selection of other newsworthy items covering money laundering, corruption, and fraud. 

Details of the EU’s proposed 10th package of Russia sanctions announced

On the first anniversary of the Russian invasion of Ukraine, the EU is set to approve its tenth package of sanctions to hit Russia through trade bans and technology export controls worth €11bn. The new EU measures include export bans on critical technology and industrial goods, such as electronics, specialised vehicles, machine parts, spare parts for trucks and jet engines, as well as goods used in the construction sector, such as antennas or cranes. Further restrictions include the export of dual use goods and advanced technology goods, including 47 new electronic components that can be used in weapons systems, such as drones, missiles and helicopters.

Video: EU Commission says Russia Sanctions are working 

EU Commission Executive Vice President Valdis Dombrovskis says Russian sanctions are working. In this video, Dombrovskis also discusses European gas supplies and gives his views on the use of frozen Russian assets to help rebuild Ukraine. 

Opinion: Could the new EU sanctions proposal be a game-changer? 

Is the EU ready to compete with OFAC? This article explores the EU’s proposed sanctions regime, an aspiring “super competitor” to the United States’ OFAC. It examines the key features of the proposal and how it compares to OFAC, as well as the potential impact of the new regime on businesses operating in Europe. 

US Treasury targets global sanctions evasion network 

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed full blocking sanctions against 22 individuals and entities across multiple countries related to a sanctions evasion network said to support Russia’s military-industrial complex. The action is part of the US strategy to methodically and intensively target sanctions evasion efforts around the globe, close key backfilling channels, expose facilitators and enablers, and limit Russia’s access to revenue needed to wage war in Ukraine.  

“Russia’s desperate attempts to utilize proxies to circumvent U.S. sanctions demonstrate that sanctions have made it much harder and costlier for Russia’s military-industrial complex to re-supply Putin’s war machine,”  “Targeting proxies is one of many steps that Treasury and our coalition of partners have taken, and continue to take, to tighten sanctions enforcement against Russia’s defense sector, its benefactors, and its supporters.” 
Wally Adeyemo, Deputy Secretary of the Treasury


Video: Russia creates a ‘shadow fleet’ to circumvent sanctions

The transfusion of oil and oil products from ship to ship, mixing it in the ports of third countries, disabling the identification system on carrier tankers, falsifying export documentation, the use of a shadow fleet. These are the many ways that Russia disguises the origin of its oil in order to sell it abroad and bypass sanctions.

Opinion: It’s time to cut Russia out of the global financial system 

According to Ukraine’s Finance Minister Serhii Marchenko, Russia has made “a total mockery of the rules-based international order.” He went on to say that the EU, G7, and other nations should recognise “the risks Russia poses to the integrity of the global financial system,” and said it’s time to cut Russia out of the global financial system. The call comes as the 37 members of the Financial Action Task Force (FATF) meet this week, which includes Russia, despite evidence of the country failing to meet FATF standards. 

“Russia is doing everything possible to undermine the global system. The international order can only survive if the rules are followed. We have powerful mechanisms available to enforce these rules. The time has come to use them.”
Serhii Marchenko, Ukraine’s Finance Minister


Four lessons for business from Russia’s invasion of Ukraine 

The scale of the withdrawal of international companies from Russia following the country’s invasion of Ukraine has become a powerful case study in crisis preparedness and response. This article identifies the key recommendations for international companies operating in countries with high political risks. 

A global timeline and analysis of Russia sanctions as of February 2023 

Lexology has published an update of the key sanctions imposed as a result of Russia’s military activity in Ukraine, including asset freezes, export controls, and Putin’s ban on Russian oil sales under contracts that comply with the G7 US$60 price cap.

Keep up to date with major sanctions developments with this weekly tracker 

The continuing growth in the number of sanctions being implemented can make it difficult to keep track of new legislation. Not only does the Sanctions Expert website provide you with everything you need to know about sanctions, it also delivers a summary of the major developments in sanctions on a weekly basis. 

Opinion: Failure to expand the allied sanctions coalition must be addressed 

Tom Keatinge, founding director of the Center for Financial Crime and Security Studies, claims the existing sanctions regime faces two major challenges, both related to implementation. In this article for Politico, he calls for the EU to prioritise implementation by individual member states and for the closure of third-country loopholes. 


Financial_ServicesMoney Laundering, Fraud & Corruption

FATF Week February 2023 

The second Financial Action Task Force (FATF) Plenary under the two-year Singapore Presidency of T. Raja Kumar took place on 22-24 February and concludes FATF Week, which ran from 20-24 February 2023. During the week, delegates discussed key issues including changes to the standards to strengthen the beneficial ownership requirements for trusts and legal arrangements. The Plenary also finalised guidance on improving beneficial ownership transparency to prevent shell companies and other opaque structures from being used to launder illicit funds. A summary of the Plenary’s decisions will be published on the FATF website following the conclusion of the meeting. 

EU adds Russia to its Blacklist of uncooperative tax regimes

The European Union has added Russia to its blacklist of non-cooperative jurisdictions on tax matters, concluding that Moscow has failed to address harmful practices on intellectual property and other issues before talks halted following the invasion of Ukraine. Furthermore, during the meeting last week, EU finance ministers also agreed to add the British Virgin Islands, Costa Rica, and the Marshall Islands to the blacklist.

Video: Why we need to know who own EU companies

Corporate transparency suffered a serious blow on 22 November 2022, when the Court of Justice of the European Union (CJEU) invalidated the anti-money laundering provision guaranteeing public access to information on companies’ real – or ‘beneficial’ – owners. Prior to the ruling, 22 out of 27 EU countries had opened up their company beneficial ownership registers, enabling investigations into suspicious assets worldwide. By the end of November, eight countries had suspended public access to their registers. This video explains why public access to this data is so critical, and what needs to happen next. 

What have we learnt from updated guidance on SARS? 

Suspicious Activity Reports (SARs) form a fundamental part of the UK’s anti-money laundering regime by providing vital intelligence to law enforcement agencies that helps combat organised crime. In its latest annual report for 2020/2021 and 2021/2022, the United Kingdom Financial Intelligence Unit (UKFIU) notes the challenges it has faced over the past two years with new and emerging organised crime threats, particularly fraud, against individuals and businesses. This article provides insights into the key findings of the annual report and examines the most recent guidance issued by the UKFIU when submitting SARs. 

Australia: Labor’s anti-tax avoidance beneficial register slammed 

Labor has been warned that wealthy Australians will be targeted for identity theft and cybercrime under plans to make public the names of the beneficial owners of over 3 million private companies, unlisted investment vehicles and trusts. The federal government wants to create a publicly accessible record of who “owns, controls, and receives benefits from” businesses in a bid to limit complex structures that can help avoid tax and fund crime.

Survey: 64% of Compliance Professionals don’t rely on the CPI 

The Corruption Perception Index (CPI) has been used as a tool for measuring corruption across the world for over two decades. However, a recent survey of Compliance Officers has revealed that 64% of respondents feel that they would not rely solely on the CPI to assess corruption risks in their compliance programs and highlights a growing concern among anticorruption professionals about the limitations of the CPI as a measure of corruption.


Crypto-1Crypto & Virtual Assets

Financial criminals love crypto and other takeaways from a US Senate hearing on cryptocurrency

A US Senate panel met recently to hear from expert witnesses about what the federal government can do to create safeguards for digital assets such as cryptocurrency. Among the main takeaways, Senator Elizabeth Warren used the hearing to promote her bipartisan anti-money laundering crypto legislation with Senator Roger Marshall. 

“Big-time financial criminals love crypto. Just last year — just in one year — crypto was the payment method of choice for international drug traffickers, who raked in over a billion dollars through crypto; North Korean hackers, who stole $1.7 billion and funneled that money into their nuclear program; and ransomware attackers, who took in almost $500 million. The crypto market took in $20 billion last year in illicit transactions.”
Elizabeth Ann Warren, Senior United States Senator Massachusetts

FSB ramps up investigation into DeFi risks

The Financial Stability Board (FSB) is stepping up its investigation into the opaque world of decentralised Finance (DeFi), worried about the potential spill over risks to traditional finance. In a report to the G20, the FSB noted that while the processes to provide services are in many cases novel, DeFi does not differ substantially from traditional finance in the functions it performs or the vulnerabilities to which it is exposed. However, the fact that cryptoassets underpinning much of DeFi lack inherent value and are highly volatile magnifies the impact of these vulnerabilities when they materialise, as demonstrated by the recent chaos in the crypto markets. The FSB expects to publish its final crypto-asset regulatory framework in July 2023.

How global crime gangs are using UK shell companies in £multi-million crypto scams 

An investigation by the Guardian has revealed that more than 150 fake firms, many with ties to China, are targeting people online, breaking their hearts, and emptying their bank accounts. The fraud involves scammers grooming their victims before stealing huge sums in cryptocurrency and has led to the loss of hundreds of millions of pounds, prompting warnings from Interpol and the FBI.

SEC charges cryptocurrency firm Terraform and its CEO with fraud 

The Securities and Exchange Commission (SEC) has charged cryptocurrency firm Terraform Labs and its CEO, Do Kwon, with a $multi-billion crypto fraud scheme. The regulatory watchdog alleges that Kwon raised funds from investors by making false offerings of inter-connected digital assets, most of which were not registered. The firm is accused of misleading investors that believed they were investing in digital asset securities including an ‘algorithmic stablecoin’ that was meant to retain the value to the US dollary, and falsely informed investors that the value of their token would go up.




February 2023 ESG Market Alert 

This month’s ESG Market Alert covers: Forestry investments – a top priority for UK pension schemes; The French Duty of Vigilance Law: Proceedings initiated against food sector leaders/Decision regarding an oil major’s alleged breach; FRC tightens scrutiny of ESG in company audits and updates ESG Statement of Intent; and Market Practice Development – Increasing opportunities for IBs and investors in unlisted ESG companies in emerging markets. 

Morgan Stanley expands its ESG-themed funds despite political pushback

The New York-based investment bank is pressing ahead with the expansion of its offering of ESG-themed funds with the introduction of six ESG products. This is despite the increasing pushback against ESG by Republican politicians, including some potential presidential aspirants, and their fossil-fuel industry donors. 

Nigerians take Shell to court over devastating impact of pollution

Almost 14,000 people from two Nigerian communities are seeking justice in the high court in London against the fossil fuel giant Shell, claiming it is responsible for devastating pollution of their water sources and destruction of their way of life.

Insurance giant ‘breached international guidelines’ by backing oil pipeline 

According to a formal complaint lodged with the US government by a group of NGOs, the insurance giant Marsh violated international guidelines for responsible business by arranging cover for a massive oil pipeline in east Africa. 

Phantom Offsets and Carbon Deceit 

Companies around the world rely on credits to offset their CO₂ emissions. Unfortunately, the system that monitors and measures carbon credits is being abused by some users, resulting in overestimated projections on some projects.”

Video: How can the finance sector achieve Net Zero? 

This insightful video explores how the finance sector can positively contribute to the Net Zero transition, by reporting data, coordinating engagement, and investing in sustainable fintech.


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