KYC360 Weekly Roundup

Published on Jan 11, 2022

Spotlight on Sanctions

When policy makers want to respond to foreign challenges or influence a desired outcome, the favourite non-lethal tool in their armoury is economic sanctions. Whether it’s the US embargo on Cuba or international sanctions on Russia for its invasion of Ukraine, the effectiveness of sanctions continues to be widely debated. So, this week we take a closer look at sanctions, how they work, how effective they are, and how you can see who is currently being sanctioned.

The crypto sector was rocked this week when Binance pulled out of its takeover of FTX. The resultant surge in withdrawals ($6bn (£5.2bn) in just three days) has left FTX on the verge of collapse and led to global cryptocurrency markets suffering heavy losses.

We take a look at new attempts to crack down on Terrorism Financing, while also reporting on the causes behind the rise in Wildlife Trafficking.

And to conclude this week’s Roundup we deliver the latest Legislation and Reports, together with global updates covering Money Laundering, Fraud, Corruption, and Tax Evasion.




How do Sanctions work?

The primary aim of sanctions is to deter bad behaviour by imposing economic punishment on the targeted country. They are most effective when coordinated and implemented multilaterally with allies, yet poor design and implementation of sanctions policies all too often leads to a failure to achieve the desired results.

Trade Sanctions: Their meanings, reasons, types, pros and cons

A trade sanction is a formal penalty for stopping or reducing the purchase or sale of goods to a country. This informative website explains the difference between trade sanctions and embargoes, the reasons for imposing trade sanctions, the different types, and their advantages and disadvantages.

European Union sanctions map

This insightful and highly instructive website provides a clear overview of the most current EU sanctions. It enables you to search by country or category, their type or specification, who they have been adopted by, the restrictive measures they enforce. And the legal acts that govern them.

Who in the UK is subject to financial sanctions with regard to Russia?

The UK government has issued a guide to the current consolidated list of asset freeze targets, together with a list of persons named in relation to financial and investment restrictions under the Russia regulations

Consolidated list of sanctioned entities designated by countries and international organisations

This collection from OpenSanctions combines all designated entities from the various sanctions lists and represents the broadest set of sanctioned people, companies and other assets that are designated globally. Virtually all sanctions lists are based on the UN Security Council List, and add further listings based on national policies.

OFSI and OFAC announce enhanced co-operation on sanctions

The OFAC-OFSI announcement is latest sign of United States’ growing multilateral sanctions approach. In a joint salvo, the US and UK civil sanctions offices said they are deepening their collaboration through sharing best practices and possibly implementing joint products or guidance.

The IRS joins law enforcement agencies to enforce Russia sanctions

Earlier this year, the IRS’ Criminal Investigation division was asked to provide expertise and intelligence to assist efforts to enforce sanctions on Russia. Working alongside other law enforcement agencies, the US tax agency has identified 50 people and companies as possible targets for sanctions-related enforcement.

US State Department on the impact of Russia sanctions and export controls

The US State Department has published a factsheet that summarises the impact of sanctions and export controls imposed on Russia since February 2022. These include: Supply shortages for Russian forces in Ukraine; Difficulties importing semiconductors and other key components; The near cessation of Russian hypersonic ballistic missile production due to the lack of semiconductors; Cutting off Russia’s military aviation program from resupply.

How to become a Certified Sanctions Specialist (CSS)

The Association of Certified Sanctions Specialists offers an examination that covers the knowledge and skills common to all sanctions professionals in financial institutions, international corporations, law firms, consulting companies, government, and other trades and businesses. The objective of the certification program is to set the standard for the sanctions profession, and to make Certified Sanctions Specialists (CSS) widely recognized as trained and credentialed specialists in the sanctions field.

Video: Are the sanctions against Russia working?

James Nixey of Chatham House explores whether sanctions have been effective in deterring Russia. He argues that the reality is sanctions have dealt Russia a huge blow. It is cut off from capital markets, foreign businesses have left, Russia cannot borrow because it has a poor credit rating, unemployment and inflation are spiking, and it cannot find new markets for imports.

Sanctions unleash a flood of Russian mergers and acquisitions

While thousands of companies have pulled out or suspended operations in Russia, Western companies have invested hundreds of millions of dollars in building up their presence and, according to a report from Yale, have a turnover equivalent to 40% of Russia’s GDP. As a result, many companies don’t want to abandon their investments entirely, leading to a huge number of mergers and acquisitions as investors attempt to rescue something from the Russian debacle. 



Cryptocurrency giant Binance walks away from FTX bailout

Following due diligence, Binance, the world’s biggest cryptocurrency exchange, has walked away from a bailout deal of its smaller rival FTX. Sources believe that Binance’s decision was swayed by reports that the US Securities and Exchange Commission (SEC) was investigating FTX’s handling of customer funds and its crypto-lending activities. Concerns about FTX’s financial health have triggered a surge in withdrawals of $6bn (£5.2bn) in just three days.

South Korean regulators to toughen crypto fraud punishments

Following the Terra collapse, South Korean legislators intend to ramp up legislation, putting specific emphasis on the protection of investors in virtual assets and harshening penalties. The Financial Services Commission (FSC) and the National Assembly are working to pass a bill that would enable authorities to monitor and punish unfair trade practices such as the use of undisclosed information, price manipulation and fraud while supervising crypto exchanges.  

Binance CEO downplays CBDC threat to crypto

According to Changpeng Zhao, chief executive of Binance, central bank digital currencies (CBDCs) do not pose a threat to cryptocurrencies and would actually help build trust among sceptics by validating the underlying blockchain technology. All the major central banks have explored the idea of establishing their own digital currency, as has the Bank for International Settlements, often described as the central bank of central banks, while recently the European Central Bank suggested that CBDCs could be the holy grail for cross-border payments.

Goldman, MSCI and Coin Metrics launch digital asset classification system

Goldman Sachs has joined forces with MSCI and Coin Metrics to launch a classification system for the digital assets market, called datonomy. To be delivered as a data service, datonomy classifies coins and tokens based on how they are used, providing a standardised way to view and analyse the digital assets ecosystem.

“Given our commitment to providing developer services, and as a trusted data analytics provider to our institutional clients, creating reliable data services for the emerging digital asset community is a strategic focus and natural extension to our existing business.”
Anne Marie Darling, Head of Marquee Client Strategy and Distribution at Goldman Sachs

Santander to block UK transfers to crypto exchanges in 2023

According to Reuters, Santander is to ban customers in the UK from sending instant payments to cryptocurrency exchanges. The banking giant plans to block phone, in-branch, online and mobile payments to cryptocurrency exchanges made using telephone banking, as early as 2023.

Billions being spent in metaverse land grab

Researchers at metaverse analysts DappRadar have revealed that close to $2bn (£1.75bn) has been spent on virtual land in the past 12 months, as people and companies race to get a foothold in the metaverse.

The impact of Web 3.0 technologies on Islamic finance

While the Islamic finance sector has been growing at pace, knowledge and understanding of shariah-compliant banking systems remain limited in mainstream financial sectors, particularly within institutions and customers in western regions. This report examines what the likely impact of Web 3.0 technologies will have on the sector over the coming years. 

FATF says crypto monitoring regime remains unchanged

The Financial Action Task Force has stated that it has not changed the way it monitors digital assets following an Al Jazeera report that the global financial watchdog is preparing to conduct annual checks to ensure countries are enforcing anti-money laundering and terrorist financing rules on crypto providers. 


Financial_ServicesTerrorism Financing

Cement giant Lafarge fined $778m for working with Isis in Syria

French cement giant Lafarge SA has agreed to pay a $778 million fine to resolve a criminal charge over the company’s payments to Isis and another terror group to keep a cement plant operating in Syria. The US Justice Department said the company and its Syrian subsidiary actively sought the terror group’s help to squeeze out competitors when the radical Islamists controlled large parts of Syria and Iraq in 2013-2014, by operating an effective revenue sharing agreement with them. 

The four stages of terrorism financing

As with money laundering, the process of terrorism financing can be explained in different stages. In essence, the financing of terrorism follows a four-stage approach that covers collecting, storing, moving, and using.

Event: RAFT22 – Reassessing the Financing of Terrorism in 2022

RAFT22 will bring together leading voices in tech, finance and security alongside high-profile representatives of the European counter-terrorism effort to discuss the past and present of counter terrorism financing in Europe, and to chart the way forward. The event will be held on Tuesday November 15, 2022, both online and in Brussels. For more information click here. 

Report: Crypto-linked terror attacks have quadrupled in the last few years

Svetlana Martynova, a senior legal officer at the United Nations Counter-Terrorism Committee Executive Directorate has stated that crypto-financed terror attacks have soared in the past few years. Two years ago, only 5% of terrorist attacks were viewed as crypto-financed or linked to digital assets, but this may now be as much as 20%.

Opinion: Choking local funding prevents terrorism

Research by Nicola Limodio, Department of Finance, Bocconi University, has uncovered that terrorist groups are highly reliant on local funding availability, as they struggle to move money around. As a result, the application of financial counterterrorism to limit their ability to access financing is a highly effective method of limiting terrorism attacks. 


Legislation & Reports

Germany’s State Secretary announces ‘big plans’ to fight dirty money

Sven Giegold, the State Secretary for Germany’s Ministry for Economic Affairs, has promised the country has ‘big plans’ to tackle money laundering and organised crime. He added that the new Second Sanctions Enforcement Act (SDG II), passed last week was a “milestone” and a “major step” against financial crime.

Dutch MEP urges Switzerland to do more to combat tax evasion

Paul Tang, the Chairman of the European Parliament’s sub-committee on tax reform, said that although Switzerland has made progress with corporate tax reforms, the country still has a long way to go when it comes to tax avoidance.

UK Companies House is dysfunctional and facilitating fraud 

The anti-fraud leader at the trade body UK Finance has said the government needs to fix the ‘dysfunctional’ Companies House as it is helping to facilitate business fraud. Nick Van Benschoten, the director of international illicit finance at UK Finance, and anti-fraud bosses at the banks NatWest and HSBC took aim at the online register of UK-based companies. 

“Companies House is supposed to be a key part of the information infrastructure underpinning the business environment. At the moment it is a dysfunctional part, and other people cannot compensate for that.” 
Nick Van Benschoten, Director of international illicit finance, UK Finance

UK’s SRA identifies lack of customer due diligence as the main cause of AML breaches

According to the latest AML report from the Solicitors Regulation Authority (SRA), most solicitors and law firms take their anti-money laundering (AML) obligations seriously. But a small minority still aren’t playing their part in the fight against economic crime owing to a lack of due diligence.

UK Labour party calls for national fraud strategy as annual losses hit £1.3bn

The Labour party is to press the UK government for the first national fraud strategy in a decade as figures show fraud and financial scams affecting consumers and businesses hit a record high of £1.3bn last year. It is seeking to force a vote on the financial services and markets bill with an amendment calling for a new fraud strategy, as households and businesses are losing more than ever on scams and fraud at a time when the cost of living was hurting people’s finances.

Australia aims to force corporations to report which countries they pay taxes to

The proposed legislation will require multinational companies to disclose their earnings and tax bills on a country-by-country basis, even if they are headquartered in foreign jurisdictions. This could be a game-changer for authorities looking to crack down on the tax loopholes that large companies exploit and is being heralded as a model for the US and EU to follow. 

Fund services firms lagging in digital journey

Despite the vast majority of trust, corporate and fund services recognising the benefit of adopting digital technology, only a third have actually started the process. This was the main finding from the Future Focus Report produced by tech vendor TrustQuay. The research, which canvassed 120 private banks and trust, corporate and fund services providers, found that 90% expect to be much more digitised and automated within the next five years. However, just 33% have taken the critical first step in that process which is to consolidate their data onto a single platform.


Financial_ServicesMoney Laundering, Fraud, Corruption, & Tax Evasion

Blog: The Credit Suisse scandal 2022: What went wrong this time?

The Swiss banking giant has a long history of making the news and mostly for the wrong reasons. This new blog reviews the many scandals to have hit Credit Suisse over the last four decades, culminating in the latest revelations of tax evasion and money laundering that have resulted in huge fines, the layoff of thousands of employees, and its stock falling by 60%.

Former CEO of Beige Bank charged with money laundering

The founder and Chief Executive Officer of the now defunct Beige Bank, Michael Nyinaku, has been charged with 44 counts of money laundering, fraudulent breach of trust and stealing depositors’ money. The alleged malfeasance was discovered after the Bank of Ghana had revoked Nyinaku’s banking license and placed the Bank in receivership.

Insurance broker Gallagher is latest target of DOJ Ecuador probe 

Insurance broker Arthur J. Gallagher is under investigation by the Department of Justice (DOJ) in relation to its business in Ecuador, the company told the Securities and Exchange Commission. The Foreign Corrupt Practices Act (FCPA) unit of the DOJ delivered a subpoena to Gallagher during the second quarter of 2022 seeking information related to its insurance business with public entities in Ecuador.

Nigerian influencer ‘Hushpuppi’ sentenced to 11 years in US prison for money laundering

A Nigerian social media influencer who called himself Ray Hushpuppi and flaunted a lavish lifestyle fueled by the money laundering of millions of stolen dollars has been sentenced to more than 11 years in federal prison.  

How Qatar hacked the World Cup

The Bureau of Investigative Journalism has revealed that private investigators working for autocratic states, British lawyers and their wealthy clients are employing India-based computer hacking gangs to target British businesses, government officials, and journalists. Critics of Qatar who threatened to expose wrongdoing by the Gulf state in the run-up to the World Cup were among those hacked. 

Police raid French rugby World Cup HQ as corruption probe intensifies

Organisers of the 2023 Rugby World Cup in France said police have raided their offices as part of a legal probe into the management of the competition under former chief executive Claude Atcher. The national financial crimes prosecutor’s office confirmed that it had opened an investigation into possible favouritism, corruption, and influence-peddling at France-2023.

Robert Mazur: More proof that Biden’s additional funding for the IRS will pay big dividends for the middle class

Despite having to fight with one hand tied behind their back due to underfunding, the IRS Criminal Investigation Division announced the seizure of $3.36 billion worth of cryptocurrency, the largest ever in the history of the U.S. Department of Justice. That money was ripped from the grasp of a crook that would never have been tracked down without the talents of IRS Special Agents trained to do the thankless job of targeting and prosecuting our country’s biggest tax cheats.


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