KYC360 Weekly Roundup - 14th Apr 2023

Published on Apr 14, 2023

Top stories this week: 

Sportswashing | ESG | Legislation, Reports, & Analyses

Sportswashing is the act of sponsoring a team or sporting event in order to redirect attention away from unethical conduct. It’s a tactic that is used by governments with poor human rights records and businesses with bad public images in order to exploit people’s love of sport to wash their image clean. This week we take a closer look at this unethical practice and how it is steadily tarnishing the reputation of a wide range of sports. 

On the other side of the coin, we delve into the subject of Environmental Social and Governance (ESG), which has been shown to improve corporate reputation, reduce waste, attract employees and customers, secure investments, mitigate risks, and even improve profit margins. Yet questions still remain about the effectiveness and transparency of this increasingly important business framework. 

Our coverage of the legislation, reports and analyses spans a range of new and developing initiatives. The latest Sanctions and Crypto & Virtual Assets updates also feature, and we wrap up this week’s Roundup with reports covering money laundering, bribery, fraud and corruption. 

 

Financial_ServicesSportswashing

What is sportswashing and why is it such a problem? 

Sportswashing uses PR tactics to make companies and countries appear environmentally friendly without doing the hard work of reducing their environmental impact. This article examines sportswashing and how polluting companies and dodgy governments try to clean up their image by buying teams and sponsoring tournaments.

Saudi Arabia shelling out on sports, athletes amid accusations of sportswashing 

Saudi Arabia’s investment in global sports sounded three years ago with a heavyweight title fight “The Clash on the Dunes.” After the Qatar World Cup, the kingdom enticed generational star Ronaldo to play for a team in Riyadh for over $200 million a season. A few months later it staged the world’s richest horse race, while also investing heavily in Formula 1 racing and a 10-year deal with the WWE, and then there is the highly controversial LIV golf tour. For many, these mega-events funded by the Saudi government’s Public Investment Fund (PIF) are financial loss leaders being used to launder the image of a country, in order to cloak repression and authoritarian rule. 

FIFA scrap Visit Saudi sponsorship of the 2023 Women’s World Cup after public backlash 

FIFA has ditched its plans for Visit Saudi, the tourism arm of the Saudi Arabian government, to become a major sponsor of this year’s Women’s World Cup. The decision comes after a public backlash from fans, high-profile players and the governing bodies of co-hosting nations Australia and New Zealand. 

From Nike to the NBA: How brands use sportswashing to control their image 

It would be wrong to assume that sportswashing is limited to countries such as Saudi Arabia, Qatar, and China. This article covers some notable examples of brands and sports organisations that have been accused of sportswashing in recent years, such as Nike, the UFC and WWE, the NBA, the NFL, and the English Premier League.

English Premier League tightens ownership rules to stop human rights abusers running clubs and to ban gambling sponsors on front of shirts

Human rights abuses is now a new “disqualifying event” in the English top-flight’s owners’ and directors’ test, while individuals subject to UK government sanctions will also be banned, with the changes to the test being applied immediately. In a separate move, it has also agreed to a voluntary ban on gambling companies’ logos on the front of match day football shirts from the summer of 2026.

How mining and energy companies sponsor your favourite sports to help clean up their image 

This article reveals that mining and energy giants such as Adani, Rio Tinto, Origin, and Woodside all sponsor sports teams and leagues from local to international levels of sport. Research shows that when companies sponsor sport events, their brands become associated with intense experiences of shared emotion. This benefits companies because they’re more likely to become loyal customers, while distracting from companies’ problematic connections to a range of issues including climate change and pollution.

Climate polluters pour money into winter sports as snowless ski resorts struggle

Snow cover is melting as global heating intensifies, yet fossil fuel polluters are pouring money into winter sports. A report from campaign group Badvertising and thinktank New Weather Sweden has identified 107 ‘high carbon’ sponsorship deals with event organisers, teams and individual athletes.

Financial_ServicesMoney Laundering, Fraud & Corruption

A fake bank was shut down in Spain and now a new one has popped up in the UK 

Six years ago, Spanish authorities closed more than two dozen shell companies, masquerading as a bank in Madrid, that were allegedly laundering money for criminal clients. Since then, figures linked to that operation, which used the name “Bandenia,” have gone on to open hundreds of new companies in the UK and other jurisdictions, with one pretending to be a thriving British bank.

Ukrainian oligarch hires lobbyist to negotiate plea deal 

Exiled oligarch Dmitry Firtash will pay Ben Barnes, the former Lieutenant Governor of Texas, $100,000 per month to help him plead not guilty to FCPA conspiracy charges in Illinois and quash the US request for his extradition from Vienna.

Roman Abramovich bankrolled major Dutch club while Chelsea owner 

Leaked documents seen by the Bureau of Investigative Journalism and the Guardian appear to show Roman Abramovich secretly funded the takeover of a major Dutch football club and then bankrolled it for years while he was Chelsea owner. The Russian oligarch appears to have covertly funded the 2010 acquisition of Vitesse Arnhem via a complex network of offshore entities before going on to channel at least €117m to the club.

RequirementsESG

“Our investment in ESG has everyone much more motivated, as they’re focused on purposeful businesses” 

Adrian Ma boss of PR firm Fanclub wanted to make his company more environmentally and socially responsible. So, he applied for a global certification called “B Corporation” which requires companies to show that they meet certain social and environmental performance thresholds. In addition, they have to make a commitment to change their corporate governance structure to be accountable to not only their shareholders, but to all their stakeholders – staff, customers and suppliers. While it has meant turning down many clients who wanted to work with them, it has increased staff engagement and made it easier to recruit

UK chief: B Corp movement has some ‘tough questions’ to answer 

Any firm achieving B Corporation certification would once have automatically earned respect for meeting the high ESG standards set by the awarding body, B Lab. But faith in this ethical business movement has been shaken over the past year as the credentials of some B Corps have attracted critical scrutiny. Reflecting on the recent unfavourable publicity, Chris Turner, executive director of B Lab UK, responded that the movement is at an “inflection point”, caused largely by its rapid growth and accepts it faces some “profound” questions that require “thoughtful” answers.

UK is leading the way on ESG, but greater transparency is needed 

New market analysis by digital identity specialists, ID Crypt Global, reveals that the UK business and industry is leading by example when it comes to ESG, with the UK’s top five largest companies securing a far higher ESG score compared to those elsewhere around the world. However, ESG scores can vary from one provider to the next and the methodology used to obtain this score is rarely disclosed, resulting in a lack of consistency and transparency that can cause confusion.

FCA outlines where improvements are needed in ESG benchmarks 

In 2022, the FCA sent a portfolio letter to benchmark administrators where we highlighted the risk of poor disclosures for ESG benchmarks. After completing a preliminary review on ESG benchmarks, it found that the overall quality of ESG-related disclosures made by benchmark administrators was poor and as a result the FCA sent a further letter to administrators outlining the issues identified. 

UK opens consultation on future regulatory regime for ESG rating providers 

The UK Treasury is consulting on whether regulation for providers of Environmental, Social and Governance (ESG) ratings should be introduced, and the potential scope of a regulatory regime. The consultation opened on 30 March and will close on 30 June. 

RequirementsLegislation, Reports & Analyses

UK government outlines new Failure to Prevent offences 

The UK has confirmed its intention to expand corporate accountability for compliance with financial crime requirements in its the Economic Crime and Transparency Bill. The purpose of the bill is to deliver reforms to “tackle economic crime and improve transparency over corporate entities”. While its primary focus was on reforms to Companies House and on intelligence and information-sharing powers designed to tackle money laundering and economic crime, proposed amendments include the recommendation of the addition of new failure to prevent offences which are intended to be directly applicable to firms. 

UK AML-regulated businesses need to brace for Economic Crime Levy (ECL) implementation 

The Economic Crime Levy (ECL), introduced by the UK government to fund the countering of money laundering, will be collected from 2023-2024, based on the revenues reported in the previous year. The HMRC has published a policy paper entitled ‘Get ready for the Economic Crime Levy’ which provides information about the steps which are necessary to pay the levy. 

Australia to push ahead with Tranche 2 laws amid international pressure 

According to Thomson Reuters, the Australian government is preparing to move ahead with the long-awaited second tranche of the country’s anti-money laundering regime, amid growing concerns about sanctions risk, and also build a stronger alliance with the United Kingdom on combating illicit finance.

FATF consolidated assessment ratings 

The FATF and its nine FATF-Style Regional Bodies (FSRBs) conduct peer reviews on an ongoing basis to assess how effectively their members’ AML/CFT measures work in practice, and how well they have implemented the technical requirements of the FATF Recommendations. This table provides an up-to-date overview of the ratings that assessed countries obtained for effectiveness and technical compliance (last updated on 3 April 2023).

FATF Joint Experts’ Meeting and FATF/UNODC Joint Workshop on Hawala 

More than 140 experts from across the global network gathered at the FATF Joint Experts Meeting 2023 in New Delhi to discuss new or emerging money laundering and terrorist financing risks and ways to address them. Among a range of topics, they exchanged insights on money laundering and terrorist financing risks including cyber-enabled fraud, the misuse of citizenship and residency investment programs and terrorist financing through crowdfunding.

UK FCA portfolio letter to payments firms: compliance with safeguarding is ‘top priority’ 

The UK’s Financial Conduct Authority (FCA) has published a Portfolio letter setting out its priorities for payments and e-money firms. Among the three outcomes that it has set for businesses, the FCA singled out compliance with safeguarding requirements as a ‘top priority’. The three cross-cutting priorities which underpin the outcomes include governance and leadership, with the FCA describing inadequate governance and oversight as a ‘root cause’ of many of the regulatory issues in the payments portfolio.

A plan to inhibit significant money laundering offenses through improved enhanced due diligence 

In this new whitepaper, Robert Mazur lays out his strategy for new enhanced due diligence to combat money laundering. His aim is to find leaders in the law enforcement, regulatory, and banking sector that would be willing to participate on a committee that would assess his proposal, craft it into a regulation, and offer it to legislators for enactment.

New Spotlight on Corruption report: Integrity Deferred? 

Spotlight on Corruption has published an audit of how the UK government has so far failed to implement crucial recommendations on upgrading ethics in government made by two major independent reports over 18 months ago.

 

Crypto-1Crypto & Virtual Assets

Warren Buffett: “Bitcoin is a gambling token, and it doesn’t have any intrinsic value”

Warren Buffett gave yet another anti-cryptocurrency interview with CNBC. “We’ve had an explosion of gambling,” the magnate told CNBC by way of describing the cryptocurrency market, adding , “I like to bet on a football game if I’m sitting and watching — it makes it more interesting. But I don’t think I want to make a living trying to bet against the house.”

US says criminals are using DeFi to launder illicit proceeds

In its first illicit finance risk assessment conducted on decentralised finance, the US Treasury says bad actors are exploiting the fact that many DeFi services that have anti-money laundering and countering the financing of terrorism (AML/CFT) obligations fail to implement them. Furthermore, some DeFi services are out of scope for existing AML/CFT obligations, have weak controls in other countries, and poor cybersecurity controls by providers.

Bank of England begins building Britcoin team

The Bank of England has started recruiting staff to oversee the development of its proposed central bank digital currency. According to reports, the UK central bank is seeking to create a team of up to 30 people in order to oversee the project.

IMF engaging with dozens of countries on CBDCs

The International Monetary Fund is to publish a CBDC handbook to meet growing demand for its assistance that has already seen it engage with nearly 30 countries that are currently investigating digital currencies.

 

Sanctions-1Sanctions

Microsoft reaches $3 million settlement over sanctions violations 

According to the US Treasury, Microsoft has reached a settlement over violations of sanctions and export controls, which it disclosed voluntarily. The tech giant has agreed a $3 million settlement for over 1,300 apparent sanctions violations in relation to restrictions on Cuba, Iran, Syria and Russia involving the export of services or software from the US to sanctioned jurisdictions.

Wells Fargo to pay $98 million fine for historic sanctions violations 

Wells Fargo & Co is finally resolving an old and lengthy case by paying a $97.8 million fine for inadequate oversight of its compliance risks. Due to its poor practices, the company ended up violating US sanctions against Iran, Sudan, and Syria, according to federal authorities.

Woman jailed for 48 Months for conspiring to violate US sanctions against Iran

A California woman has been sentenced to four years in prison followed by three years of supervised release for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by providing services, including financial services, to Iran and the Government of Iran, in violation of US sanctions.

The high cost of ignoring sanctions lists in international trade 

This video examines the world of sanctions screening and its importance in promoting financial stability and security. Most importantly, it explores the consequences of failing to comply with sanctions lists, including hefty fines and reputational damage.

Live webinar: The history and complexities of sanctions compliance 

On Thursday, April 20 at 1 – 2:30pm BST, the Financial Crime Academy is hosting a live webinar. A panel of experts will examine the historical role of sanctions and how to confront the inherent complexity of identifying and adhering to the increasing numbers of global sanctions. Tickets can be booked here.

Sayari graph showcase: Enhancing Xinjiang forced labour risk assessments

This latest Sayari masterclass shows how organisations can more efficiently and effectively detect Xinjiang forced labour risk in their global supply chains with Sayari Graph. Watch a recording of the webinar to learn how the platform which is trusted by the U.S. Customs & Border Protection and other trade regulators, can be used to mitigate UFLPA risk in global supply chains. 

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