KYC360 Weekly Roundup

Published on May 06, 2022

Russia Sanctions Update – Spotlight on Crypto

Welcome to this week’s AML Roundup.  The contentious issue of sanctioning Russian oil came to the fore this week, but despite objections from some member states the EU is pressing ahead with plans to ban all imports within six months. Meanwhile, existing sanctions are being felt across the widest possible spectrum, from the hallowed turf of Chelsea FC right up to the dizzying heights of the International Space Station. 

This week we shine the spotlight on crypto, a topic that is rarely out of the news these days. Whether it be the latest hack, its role in sanctions evasion, or the ongoing debate between nations and financial authorities who want greater control and the libertarians who want exactly the opposite. 

The NatWest money laundering scandal hit the headlines again, with a belated apology to shareholders set against the backdrop of the trial of eight individuals charged with facilitating the operation. 

To complete this week’s AML Roundup, we have a special podcast featuring Robert Mazur, the former US Customs special agent and author of The Betrayal, who is internationally recognised as one of the world’s leading authorities on money laundering techniques.

Sanctions-1Sanctions

European Commission chief sets timescale for a total ban on Russian oil imports to the EU 

Quote text“Let us be clear, it will not be easy. “Some member states are strongly dependent on Russian oil. But we simply have to work on it.” 
Ursula von der Leyen, president of the European Commission.

In a speech to the European parliament, Ursula von der Leyen wants Russian supply of crude oil to be prohibited within six months and refined products banned by the end of the year, although she acknowledged Slovakia and Hungary’s demands for flexibility.

Hungary and Slovakia to receive Russian oil embargo exemption until the end of 2023 

In a bid to prevent Hungary and Slovakia from vetoing the EU’s proposed ban on oil imports, Brussels is said to be proposing a longer period to implement the embargo. The exception is centred around existing contracts for Russian crude oil that have been signed by both Hungary and Slovakia. 

Why Slovakia and Hungary are reluctant to support EU sanctions on Russian energy 

Slovakia is almost completely dependent on the Russian oil it receives through the Druzhba pipeline, while Hungary is heavily reliant with 85% of its gas and over 60% of its oil coming from Russia. As a result, the neighbouring countries threatened to veto the move unless given more time to make other arrangements. 

China seeks ways to insulate economy from Western sanctions stoking fears of Taiwan invasion 

In the wake of the Russia sanctions, it has been reported that in late April China’s economic regulators held emergency meetings with bank officials. This has led to fears that China is looking at ways to defend itself from similar sanctions and protect $3.2 trillion in foreign currency reserves should it carry out its threat to invade Taiwan. 

Russian shipping firm to sell up to one-third of its vessels due to Western sanctions 

Recent sanctions have demanded that banks must stop all transactions with Sovcomflot after May 15, resulting in the shipping giant having to repay all its loans to the relevant banks and financiers before the cut-off date. According to Lloyd’s list, this has led to Sovcomflot putting up to a third of its vessels on the market. 

Russia to pull out of the ISS due to sanctions

In the face of mounting sanctions, Russia is set to stop work on the International Space Station (ISS). According to the Tass and RIA Novosti media agencies, the Russian Space Agency Roscosmos is set to inform its partners about its intention to end work on the ISS with a year’s notice as stipulated by its international obligations. 

The impact of Russia sanctions could last decades 

A leading U.S. think tank has said that even if sanctions on persons or businesses are lifted as events unfold, the financial, banking, technology and market prohibitions placed on Russia may not be completely unravelled for decades

Australia introduces new sanctions targeting 76 Russian lawmakers and 34 Ukrainian separatists 

Australia has imposed targeted monetary sanctions and travel bans on 76 members of Russia’s State Duma and 34 senior members of Ukraine’s breakaway regions of Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR). 

Future of Chelsea FC in doubt after Abramovich reneges on promise to write off £1.6 billion debt

Chelsea FC has been warned its future is on the line amid fears Roman Abramovich is reneging on his promise to write off a £1.6 billion debt. With the licence deadline of May 31 looming, UK ministers are refusing negotiations that would enable the Russian billionaire to be repaid, however the club is raising the prospect of a restructure on sale terms which may solve the issue. 

Data leak exposes sanctioned Russians, criminals, and corrupt European officials who bought Dubai real estate 

A new property data leak has revealed how just how many foreigners have poured their money into Dubai in recent times. The list includes more than 100 members of Russia’s political elite, public officials, or businesspeople close to the Kremlin, as well as dozens of Europeans implicated in money laundering and corruption. 

More Russian oligarchs are now seeking Israeli passports 

For years Israel has been one of the most common destinations for Russian billionaires, as the ‘Law of Return’ grants automatic entry and passports to anyone who can prove they have at least one Jewish grandparent. Now with the recent crackdown on European ‘golden passport’ programmes, its popularity as a destination for oligarchs looking for a safe haven is set to increase

Why Turkey is fast becoming the next haven for sanctioned Russian oligarchs 

At least eight yachts owned by Russian oligarchs and worth a collective $1.1 billion, are now moored in Turkish ports. Despite being a NATO member, Turkey is a popular destination as it has rejected Western sanctions and maintained close ties with Russia.  

ICIJ’s Pandora Papers uncover more secrets about how Russia’s oligarchs operate 

The ICIJ and its media partners have once again delved into the Pandora Papers, FinCEN Files and Paradise and Panama Papers to reveal numerous secret networks of Russian oligarchs and businesspeople and released them across the world

 

Financial_ServicesMoney Laundering, Fraud & Corruption

NatWest chair apologises for money laundering scandal 

“We deeply regret that we failed adequately to monitor one of our customers between 2012 and 2016 to prevent money laundering. And while the case has now come to an end, we continue to invest significant resources in the ongoing fight against financial crime and fraud.” 
Howard Davies, Chair, NatWest Bank

The chair of NatWest bank has apologised to shareholders for failures that led to the money laundering that occurred at the group between 2012 – 2016. NatWest pled guilty and was subsequently fined £264 million for breaching anti-money laundering regulations. 

Petra Ecclestone’s ex-husband James Stunt ‘part of £266million NatWest money laundering scheme’ 

Jurors heard how the gold dealer, Fowler Oldfield, deposited some £266 million through NatWest between 2014 – 2016. Prosecutors say the laundered money was used to purchase gold for export to Dubai, while £46 million was transferred into an account of socialite James Stunt’s company, Stunt & Co Ltd. The eight defendants deny the charges, claiming the authorities cannot prove the cash came from criminal sources.

“It was ‘blindingly obvious’ that the money, couriered to the dealer in holdalls and sports bags, was criminal in origin."
Prosecutor at Fowler Oldfield money laundering trial 

RequirementsLegislation, Regulation and Sustainability

UN pressure leads to Swiss considering amending banking secrecy laws 

The country’s controversial banking secrecy law is being debated by the Swiss parliament this week. This follows pressure from UN officials to scrap rules under which whistleblowers and journalists can be prosecuted for reporting potential wrongdoings. Known as article 47, it currently makes it a criminal offence to disclose information about a bank’s clients, even if it’s in the public interest. 

Swiss authorities record increase in suspicious activity reports for the eighth consecutive year 

The Swiss Federal Police Money Laundering Reporting Office (MROS) has recorded an increase in the number of suspicious activity reports (SARs) received for the last eight years in a row. The 5,964 new SARs, involving over 10,000 business relationships, represent an increase of 12% compared to the previous year. 

EU funds fraud: 10 locations searched in Romania 

10 locations in Romania have been searched at the request of the European Public Prosecutor’s Office (EPPO). The searches were part of an investigation into alleged fraud of European funds totalling more than €3 million, linked to companies in Cyprus, Portugal, and Spain. 

Study shows OnlyFans.com hosts online child sex trafficking among ongoing criminal activity 

A recent study conducted by the Anti-Human Trafficking Intelligence Initiative (ATII) and the University of New Haven’s Center for Forensic Investigations of Trafficking in Persons (CFITP) indicates that sex crimes involving children and adults are being hosted on the social media site OnlyFans.com. 

Morgan Stanley Frankfurt offices searched in tax fraud investigation 

As part of a multi-billion-euro tax fraud investigation, German authorities searched the Frankfurt branch of the US bank in connection with ‘cum-ex transactions’, which involves quickly buying and selling shares around the dividend payment date, so tax authorities are unable to identify the true owner. 

How Indian tycoon Yogesh Mehta’s petrochemicals empire bypassed Iran sanctions 

An OCCRP investigation has uncovered evidence that Indian tycoon Yogesh Mehta’s Dubai-based petrochemical conglomerate circumvented Iran sanctions by using false paperwork to hide its operations.

 

Crypto-1Crypto & Virtual Assets

MONEYVAL committee joins FATF in calling for a tougher line on virtual assets 

The Council of Europe’s MONEYVAL committee has urged European countries to crack down on crypto-enabled money laundering, warning of the challenges presented by decentralised finance, privacy coins, and market manipulation of crypto assets.  

Press Release: SEC almost doubles the size of Enforcement’s Crypto Assets and Cyber Unit 

The US Securities and Exchange Commission has allocated 20 additional positions to the unit responsible for protecting investors in crypto markets and from cyber-related threats. The renamed Crypto Assets and Cyber Unit (the Cyber Unit) in the enforcement division will grow to 50 dedicated positions. 

Blockchain and Crypto could assist in tracking financial crimes 

The idea that crypto helps money laundering is often proposed by those with a stake in the traditional financial system. Yet the vast majority of crypto transactions are recorded on a public ledger, which acts as a permanent trail

Binance blocks crypto accounts of individuals with links to the Kremlin

In response to the sanctions imposed on Russia, Binance, one of the world’s largest cryptocurrency exchange platforms has blocked the accounts of multiple individuals related to senior Kremlin officials. 

Bank regulator warns EU crypto laundering plans may overwhelm authorities 

The EU’s own banking authority has claimed that recent proposals to monitor crypto transactions with unhosted wallets could run counter to the risk-based approach set out by international money laundering regulators. 

Nigerian nationals accused of using money laundering proceeds to buy bitcoin worth over $43 million  

According to a report by the Kenyan publication the Nation, three Nigerian nationals may have transferred more than $215 million from Nigeria to Kenya between October and November 2020. Allegedly aided by a powerful Kenyan politician, the trio then used the proceeds to buy bitcoins worth over $43 million.  

Hackers steal over $13 million from DeFi platform Deus Finance 

The decentralised finance (DeFi) platform Deus Finance has confirmed that hackers have used an illegal trading method and stolen $13 million. The Deus platform was hit with a ‘flash loan attack’ whereby hackers borrow funds that don’t require collateral, buy crypto to artificially raise the price before offloading it, then paying back the loan and keeping any profits. 

Hackers target Bored Ape Yacht Club NFTs resulting in $3m theft 

Yuga Labs, the collective responsible for the Bored Ape Yacht Club non-fungible tokens, has been targeted by hackers, resulting in the theft of $ millions of one of the best-known collections of NFTs

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