FINANCIAL CRIME DIGEST September 2020

Diligent analysis. Powering business.™ aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

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1 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 CONTENTS

ENFORCEMENT 3 CONSULTATIONS 104

SPECIAL FEATURE 19 LITIGATION AND CASE LAW 108

REPORTS AND SPEECHES 21 PRESS AND MEDIA 113

GUIDANCE AND ANNOUNCEMENTS 54 ESG 122

LEGISLATION 82

INTRODUCTION

Welcome to the September issue of the Financial Crime Digest, which provides concise analysis of the most signifcant fnancial crime related developments from around the world. This month also includes a new section on key Environmental, Social and Corporate Governance (ESG) developments. To receive the publication direct to your inbox every month, please sign up here. We are also currently developing an online platform, which provides more comprehensive coverage of fnancial crime developments. If you would like more information on the new platform or our services please email [email protected]

In November, Aperio Intelligence will be hosting a webinar, ‘The shift to renewable energy in the Middle East and North Africa: risks and opportunities for investors and developers’, to discuss the underlying drivers of growth in the solar and wind energy sectors and examine some of the challenges outside investors and developers are likely to face in seeking to capitalise on this opportunity. To register your interest email [email protected]

EDITOR’S PICKS

SPECIAL FEATURE page 19 GUIDANCE AND ANNOUNCEMENTS page 57 30 September 2020 11 September 2020 The FinCEN Files: a renewed push towards UK House of Lords launches inquiry into more effective AML/CFT efforts HMRC’s proposed tax avoidance powers

REPORTS AND SPEECHES page 21 LEGISLATION page 82 18 September 2020 24 September 2020 UK sets out plans to reform Companies House EU Digital Finance Package plans to register to better fght fnancial crime harmonise regulation of cryptoassets to fght fnancial crime

DATES FOR THE DIARY see all events

OCTOBER OCTOBER UK government consultation on the economic Europol webinar series on IOT cybersecurity: 14 crime levy closes 21 supply chain for IoT

OCTOBER OCTOBER UK government call for evidence on payments UK government consultation on cryptoasset 2 20 landscape review closes 26 promotions closes aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

ENFORCEMENT

UK SFO announces criminal charges against three former G4S executives for fraud

The UK’s Serious Fraud Ofce (SFO) representations to the MOJ between prosecution agreement (DPA) with the announced on 8 September that it has 2009 and 2012. They were next due in SFO. The DPA, which was approved by a charged three former executives of court on 6 October. UK magistrate on 17 July, saw G4S C&J G4S Care and Justice Services (UK) take responsibility for three instances Ltd (G4S C&J) with seven counts of According to the SFO's case of fraud and stipulated that the fraud involving a scheme to defraud information, the company sought to company must pay a fne of £38.5 the UK’s Ministry of Justice (MOJ). prevent the MOJ from decreasing the million and pay the SFO £5.9 million in revenue G4S C&J would receive through costs. A 2014 civil settlement between G4S C&J’s former managing director contracts to provide the government the company and the MOJ saw G4S Richard Morris, the company’s with electronic monitoring equipment. C&J pay out £121.3 million. electronic monitoring business’ former The three former executives stand commercial director Mark Preston, and accused of misrepresenting actual SFO press release the business’ former fnance manager company revenue in discussions with and acting commercial director James MOJ ofcials. SFO DPA Jardine have each been charged with seven offences over their alleged On 10 July, the company announced SFO G4S case sheet involvement in making false claims or that it had agreed to a deferred

UK SFO charges four individuals for fraudulent trading on behalf of the Balli Group

The UK’s Serious Fraud Ofce (SFO) fnancial institutions. Louise Worsell Alaghband with one conspiracy count charged four individuals on 29 and Melis Erda have also been charged and two fraudulent trading counts. September with fraudulent trading on with one count of fraudulent trading for Alaghband is due to appear in behalf of Balli Steel Plc and Balli Group Balli Steel, with Erda also charged with Westminster Court on 22 October. Plc, for their alleged involvement in six conspiracy counts and Worsell with attempts to defraud creditors. fve. All four individuals appeared in The charges against all fve traders Westminster Magistrate Court on 29 stem from an investigation into the Balli Nasser Alaghband and David Spriddell September to face charges and will Group initiated by the SFO in May 2017. have been charged with two counts of reappear before Southwark Crown fraudulent trading on behalf of the two Court on 27 October. SFO announcement companies, with Alaghband charged with a further six counts of conspiracy In a related case, the SFO also SFO Balli Group case shee... to commit fraud targeting multiple announced its intent to charge Vahid

3 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK SFO uses listed asset order to forfeit jewelry linked to mortgage fraud case

The UK’s Serious Fraud Ofce (SFO) Nisar Afzal’s former partner, Shabana Nisar Afzal reportedly fed to Pakistan announced in a 23 September press Kausar, the SFO contends that the before he could be arrested, while his release that it has used a listed asset jewelry was purchased by Afzal or his brother Saghir Afzal pleaded guilty in order, introduced by the Criminal money, obtained through criminal January 2011 to two counts of Finances Act 2017, for the frst time to activity. The jewelry was originally conspiracy and four counts of obtaining secure the forfeit of £500,000 in seized by the SFO in September 2015. deceptive money transfers and was assets and jewelry seized from the sentenced to 13 years in prison the safety deposit box of an associate of The mortgage fraud scheme, according following June. After failing to pay back wanted fraudster Nisar Afzal. Afzal and to the SFO’s case information, involved nearly £30 million within six months as his brother Saghir, who is serving a the Afzal brothers producing fake ordered, Afzal was sentenced to prison sentence, are responsible for property valuations using fctitious another ten years in prison. Land orchestrating a mortgage scheme that lease agreements to defraud mortgage surveyor Ian McGarry was sentenced to defrauded lenders out of £50 million in lenders into providing mortgages on seven years in prison and ordered to the mid-2000s. properties that in reality were worth pay £1.5 million, after pleading guilty in only 10 percent or less than the 2010 to the same counts as Afzal. The newly used listed asset order reported value. Using a company under grants UK authorities the ability to the brothers’ control, properties were SFO press release forfeit assets which are likely acquired sold and re-sold several times at through criminal proceeds or used with increasing prices, each time generating Case information criminal intent. In applying the listed an increasing proft. The brothers also asset order to recover the jewelry from bribed a land surveyor.

US DOJ fles forfeiture complaint against four Shanghai-based entities and individuals

The US Department of Justice (DOJ) of ZTE, which exported 478 million Shanghai-based Chinese national Tang announced on 11 September that it has items of telecommunications Xin was allegedly the legal fled a forfeiture complaint to seize equipment to North Korea between representative for Ryer, while his wife, Li $955,880.85 associated with two 2010 and 2016, violating the Xichun, allegedly worked for ZTE Shanghai-based entities, Ryer International Emergency Economic between 2005 and 2009 as the North International Trading Ltd and Rensy Powers Act (IEEPA) as well as Korean account’s manager. ZTE International Trading Co Ltd, and two conspiracy and violation of money previously pleaded guilty to conspiring individuals, Xin Tang and Li Xichun, for laundering statutes. to violate the IEEPA in 2017 and agreed acting as intermediaries on behalf of to a $890 million settlement with the US North Korea's purchase of equipment According to the complaint, Ryer and government for sanctions violations. from ZTE Corporation. Rensy also acted as conduits for money laundering through sanctioned North DOJ press release The DOJ alleges that the two entities Korean fnancial institutions. received US dollar payments on behalf DOJ complaint

4 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Westpac agrees historic $1.3bn settlement with AUSTRAC over AML/CFT breaches

In a separate media release published by the bank on 24 September, King apologised for Westpac’s failings and noted that the bank is committed to avoiding similar mistakes in the future. King stated that the agreement “provides more certainty to all our stakeholders as we continue to implement the measures in our Response Plan and complete the implementation of recommendations from the reviews that have been conducted”.

Westpac has taken responsibility for

The Australian Transaction Reports and Analysis Centre Failing to report or failing to properly report more than (AUSTRAC) announced on 24 September that it has agreed 19.5 million International Funds Transfer Instructions to a proposed settlement agreement with Westpac Banking (IFTIs) to AUSTRAC, which totaled over $11 billion Corporation according to which the bank has agreed to pay a $1.3 billion penalty for violating Australia’s Anti-Money Failing to keep records of the origin of international funds Laundering and Counter Terrorism Financing Act 2006 transfers (AML/CFT Act) on 23 million occasions. Failing to report the origins of the transfers or other funding sources of other banks in the transfer chain, as Westpac admitted to additional mandated by the AML/CFT Act contraventions, including Failing to carry out risk assessments and risk monitoring failures to reasonably monitor for money movement, particularly in regard to funds customers for transactions being transferred to or from high-risk jurisdictions related to possible child Failing to perform customer due diligence on suspicious transactions exploitation Westpac also admitted to 76,000 additional According to AUSTRAC’s press release, if the proposed contraventions that expand the original statement of settlement is approved by the Federal Court of Australia, it claim, which relate to additional IFTI reporting failures, will mark the highest civil penalty in the country’s history. In a failures to reasonably monitor customers for transactions statement, AUSTRAC CEO Nicole Rose said that Westpac has related to possible child exploitation, and two further since improved its AML/CTF controls and is making efforts failures to assess the money laundering and terrorism to improve policies and close loopholes, adding that fnancing risks associated with correspondent banking AUSTRAC will work closely with the bank in overseeing and relationships supporting such efforts. AUSTRAC press release Rose also thanked Peter King, who became CEO of Westpac in December 2019, and expressed enthusiasm for working AUSTRAC CEO statement with his new team to ensure Westpac services are not used to facilitate criminal activity again. Westpac press release

5 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US Commerce Department imposes $55k penalty on Zeiss subsidiary for export violations

The US Department of Commerce’s The alleged violations, which occurred because the company had previously Bureau of Industry and Security (BIS) between December 2014 and July applied for and been granted a licence issued an order on 3 September 2015, involved the export of rife from the Commerce Department to against a New York based subsidiary of telescopes, with an estimated value of export the same or similar items. German optical systems manufacturer, $889,170, to Canada without the Carl Zeiss SBE LLC, to pay $55,000 to required licence. According to the order BIS order Carl Zeiss SBE ... settle allegations that it committed 10 and settlement agreement, Zeiss knew violations of the US Export or had reason to know that a licence BIS export violations Administration Regulations. was required for exporting such items

Sargeant Marine Inc to settle FCPA charges over scheme in Brazil, Venezuela and Ecuador

The US Department of Justice (DOJ) bribe two Petrobras ofcials, two the US and money laundering in announced on 22 September that it has Brazilian politicians, four PDVSA December 2019 and is awaiting reached an agreement with asphalt ofcials, and one ofcial at Empresa sentencing. The DOJ also announced company Sargeant Marine Inc, which Publica de Hidrocarburos del Ecuador that on 10 September, an additional has agreed to pay $16.6 million to (Petroecuador) to secure asphalt criminal complaint was unsealed settle charges that it conspired to purchasing and contracts, earning the charging another former unnamed violate the anti-bribery provisions of company $38 million. Venezuelan ofcial with conspiracy to the US Foreign Corrupt Practices Act commit money laundering. (FCPA). The scheme allegedly involved In order to conceal the bribes, the the payment of bribes to government defendants allegedly created fake The penalty issued by the DOJ was ofcials in Brazil, Venezuela, and consulting contracts and fake invoices, discounted due to the company's Ecuador to obtain contracts with made payments to offshore bank inability-to-pay. The company also state-owned companies. Among the accounts held in the name of shell received a 25 percent discount off the companies in receipt of bribes were companies controlled by intermediaries, minimum fne for its cooperation. The Petróleo Brasileiro S.A. Petrobras and asked to receive payments in cash plea agreement states that factors (Petrobras) and Petroleos de and through other means. contributing to the determination that Venezuela S.A. (PDVSA). the company could not afford the full Several defendants have pleaded guilty penalty included that the company’s According to the indictment and the in relation to the case, including Daniel fnancial condition had been impacted guilty pleas of fve individuals, between Sargeant and two traders, Roberto by the sale of its interests in a joint 2010 and 2018, Sargeant Marine Inc Finocchi and Jose Tomas Meneses, an venture, and the company’s alternative conspired with a Bahamas-incorporated agent and a consultant who acted as sources of capital were considered. company, two Swiss companies, a joint intermediaries in Brazil and Venezuela, venture with a European energy trading Luiz Eduardo Andrade and David Diaz, DOJ press release company, and with intermediaries and and former Venezuelan government employees, including Daniel Sargeant a ofcial, Hector Nunez Troyan. Sargeant DOJ complaint senior executive at the company, to pleaded guilty to conspiracy to defraud

6 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Vitol Group trader charged with violating FCPA in connection with Ecuador bribery scheme

A federal court in Brooklyn unsealed on Ecuador. According to Reuters, Aguilar, Brazil and Venezuela to secure 22 September an indictment charging who denies the allegations, was an oil contracts for asphalt. Andrade also oil trader Javier Aguilar with two trader and a manager at that time for pleaded guilty to acting as bribe counts of conspiring to violate the commodities trading house Vitol Group. intermediary in the scheme. anti-bribery provisions of the US Foreign Corrupt Practices Act (FCPA) The indictment further alleges that On 15 September, Reuters reported that and to commit money laundering. The Aguilar caused fraudulent consulting Petrobras lifted its ban on trading with scheme purportedly involved paying agreements to take place with Vitol and two other major commodity approximately $870,000 in bribes to intermediaries who posed as traders, Trafgura and Glencore, Ecuadorian government ofcials to consultants located in the US. Citing reinitiating business “after adopting and secure a $300 million contract with persons familiar with the matter, perfecting a series of specifc measures Ecuador’s state-owned oil company, Reuters reported that Vitol said it was meant to bring more security to the Petroecuador. aware of the charges and is commercial relationship”. cooperating with the authorities. According to the indictment, from DOJ press release mid-2015 through 2020, Aguilar and his On the same day, Florida-based asphalt co-conspirators allegedly used bank company Sargeant Marine Inc agreed to Indictment accounts located in the United States pay a $16.6 million fne and pleaded and offshore to pay two intermediaries guilty to working with Brazilian Reuters article $1.4 million, out of which $870,000 was consultant Luiz Eduardo Andrade and directed to government ofcials in others to bribe ofcials in Ecuador,

UK Financial Conduct Authority charges former Redcentric executives in market abuse case

The UK’s Financial Conduct Authority auditor, and one count of fraud by false company because Redcentric agreed to (FCA) announced on 24 September representation. Former fnance director, compensate wronged investors and that it has charged three former Estelle Croft, has been charged with because Redcentric’s current executives of IT service provider seven counts of making false customers, which includes the National Redcentric plc with making false statements to an auditor and four Health Service (NHS), would be statements, false accounting, and counts of false accounting. Former adversely impacted which could be fraud. The charges follow the FCA’s chief executive Fraser Fisher, along with detrimental to the prevention and issuance of a fnal notice on 26 June Coleman and Croft, has been charged treatment of Covid-19 cases. against Redcentric for market abuse with two counts of making false or committed between November 2015 misleading statements. FCA press release and November 2016. According to the FCA, Redcentric’s FCA press release (26 Jun... Former chief fnancial ofcer Timothy market infation cost investors during Coleman has been charged with four the 12 months in question £43 million. FCA fnal notice (26 June... counts of false accounting, one count The FCA stated in June that it did not of making a false statement to an impose fnancial penalties on the

7 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US taxpayer sentenced for tax fraud and money laundering exposed by Panama Papers

criminal scheme exposed in the Fonseca, including Ramses Owens, a Panama Papers leak perpetrated by Panamanian lawyer who previously law frm Mossack Fonseca & Co. worked at Mossack Fonseca, and Richard Gaffey, a partner at a US-based The DOJ previously announced that von accounting frm. der Goltz, a former US taxpayer, pleaded guilty on 18 February to tax fraud, Mossack Fonseca allegedly created a money laundering and other charges in sham foundation and shell companies connection with the scheme. Von der to conceal the ownership of accounts Goltz admitted to having conspired with established at overseas banks. It was others to conceal his assets, claimed that von der Goltz’s mother investments and the income generated was the sole benefcial owner of the The US Department of Justice (DOJ) from the US Internal Revenue Service companies and bank accounts as she announced on 21 September that through fraudulent means since at least was not a US taxpayer. Harald Joachim von der Goltz, 2000 through to 2017. (otherwise known as “H.J von der US DOJ press release Goltz,” “Johan von der Goltz,” “Jochen According to the DOJ, to evade his US von der Goltz,” “Tica,” “Tika,”) has been tax obligations and to conceal his US DOJ press release (Feb... sentenced to four years’ imprisonment, assets and income from the US tax with three years of supervised release, authorities, von der Goltz set up a series US DOJ indictment (Septem... a payment of $3,448,848 in restitution, of shell companies and bank accounts, and a $30,000 fne for his role in a with the assistance of Mossack

US accountant sentenced for tax fraud and money laundering in Panama Papers probe

US accountant Richard 'Dick' Gaffey alleged scheme involving Panamanian Gaffey admitted to helping von der was sentenced on 24 September by the law frm Mossack Fonseca & Co that Goltz conceal his US-taxable assets and US Southern District Court of New York helped hide tens of millions of dollars income from the Internal Revenue to 39 months imprisonment, with three from the US tax authorities between Service by falsely claiming von der years of supervised release, payments 2000 and 2018. Goltz’s Guatemala-based mother was of $3,459,315 in restitution, and a the sole benefcial owner of shell $25,000 fne for a tax evasion scheme Charges were unsealed in December companies and bank accounts. frst revealed by the Panama Papers. 2018 against Gaffey, his former client Harald Joachim von der Goltz, former DOJ press release The US Justice Department (DOJ) Mossack Fonseca lawyer Ramses announced on 28 February that Gaffey Owens and Mossfon Asset DOJ press release (Feb 20... had pleaded guilty to conspiring to Management’s ex-investment manager create shell companies and fake bank Dirk Brauer in connection with their Press release on indictme... accounts for clients as part of an roles in the alleged scheme.

8 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Switzerland’s FINMA reprimands Bank SYZ over AML failings relating to Angolan client

The Swiss Financial Market FINMA described the bank’s money the bank’s voluntary reporting and the Supervisory Authority (FINMA) laundering processes as “inadequate”, steps taken by the bank to address the announced on 24 September that it has after the proceedings revealed compliance failings. The reprimanded Bank SYZ over alleged insufcient due diligence efforts to implementation of these new measures anti-money laundering (AML) investigate a substantial increase in the will be assessed by an independent violations. The bank’s failings client’s assets and certain high-risk auditor appointed by FINMA. concerned an unnamed client from transactions made by the client. Angola that had links with politically FINMA notice exposed persons (PEP). When assessing the enforcement options, FINMA took into consideration

OFAC settles with Deutsche Bank Trust Company Americas over sanctions violations

The US Treasury Department’s Ofce Additionally, DBTCA has also agreed to breach of sanctions regulations. of Foreign Assets Control (OFAC) pay $425,600 for processing 61 other Mitigating factors included that DBTCA announced on 9 September that it has payments which ended up in accounts has not been penalised within the fve reached two settlement agreements held by another fnancial institution also years preceding the latest offence, totaling $583,100 with Deutsche Bank designated by OFAC. The fnancial processes large volumes of Trust Company Americas (DBTCA), a institution on OFAC’s SDN List is Open transactions regularly, cooperated with wholly-owned subsidiary of Deutsche Joint Stock Company Krasnodar the investigation, and has taken Bank Trust Corporation, for apparent Regional Investment Bank (a.k.a., OAO remedial steps to address the failings. violations of the Ukraine-related Krayinvestbank; a.k.a. OJSC sanctions regulations and Executive Krayinvestbank). According to OFAC, The second instance of the 61 Order 13685. DBTCA did not stop the payments from payments was found to be more going through because it failed to malign, given a 2013 OFAC and DBTCA DBTCA will pay a $157,500 fne to OFAC include the designated bank’s SWIFT settlement involving near identical for its failure to conduct due diligence codes. Although DBTCA purportedly did misconduct. Furthermore, DBTCA’s in relation to signifcant payments not voluntarily disclose these lapses to willful processing of the payments totaling over $28 million that the bank OFAC, the Treasury statement did state caused actual harm to the sanctions processed in August 2015 in relation to that DBTCA has since implemented regime by allowing such large amounts fuel purchases linked to a Cyprus-based stricter sanctions screening measures to go forward to designated entities. oil company designated by the US and to catch transactions en route to Nevertheless, OFAC determined that no which the bank had reason to suspect designated institutions. Deutsche Bank supervisors were aware was connected with the transaction. of the misconduct, nor did any DBTCA OFAC’s enforcement release states that OFAC identifed aggravating factors in personnel act with willful intent to DBTCA appeared to have violated US the frst case including DBTCA staff’s violate sanctions law. sanctions when it dealt in the property failure to exercise minimal degrees of or interests in property of IPP Oil caution in processing suspicious Treasury Department annou... Products (Cyprus) Limited, which is payments, and DBTCA personnel’s identifed on OFAC’s SDN List. knowledge that the conduct was in OFAC bulletin

9 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC reaches settlement with Comtech over Sudan sanctions violations

The US Department of the Treasury’s this case highlights the importance not software indicating that the sale of Ofce of Foreign Assets Control only of investing in adequate internal the satellite equipment could lead (OFAC) announced on 17 September controls, but also of developing internal to sanctions violations that it has reached a settlement with checks and balances to make sure that Comtech Telecommunications Corp employees are not able to override EF Data managers, including according to which the US-based those controls. The case also compliance personnel, proceeded satellite communications company has demonstrates the risks of proceeding with the indirect export of goods agreed to pay $894,111 to settle its with transactions while a licence and the facilitation of services civil liability for four apparent application is pending. despite having actual knowledge violations of the Sudan Sanctions that the ultimate destination of the Regulations. Comtech voluntarily disclosed the equipment was Sudan apparent violations and OFAC According to the settlement, between considered that the apparent violations EF Data provided shifting June 2014 and October 2015 Comtech constituted an egregious case. explanations in response to OFAC and its subsidiaries Comtech EF Data subpoenas and a request for Corp and Memotec Inc were involved in Aggravating factors included information, and its subpoena the indirect export of warrantied response included an internal email satellite equipment and facilitated EF Data demonstrated “reckless that was manipulated by EF Data’s telephone support and training to the disregard for US sanctions former director of logistics and Sudan Civil Aviation Authority. EF Data requirements” and failed to exercise export compliance ofcials and Montreal based subsidiary a degree of caution by approving Memotec allegedly concluded the warranty services for equipment OFAC press release agreement with an unnamed Canadian provided to Sudan while an OFAC company, despite being aware that the licence application was pending OFAC settlement agreement equipment was destined for Sudan. EF Data failed to respond an alert OFAC enforcement release OFAC’s enforcement notice states that from its compliance screening

HP settles with SEC over misleading investors

The US Securities and Exchange practices between 2015 and mid-2016 only partial information in relation to Commission (SEC) announced on 30 to increase quarterly operating profts HP’s internal channel inventory September that HP Inc has agreed to by selling printing supplies at management. pay a civil penalty of $6 million to substantial discounts to resellers settle charges that it misled investors known to sell HP outside of their The company did not admit or deny the by failing to disclose its efforts to designated territories, in violation of HP SEC’s fndings. increase the sales of printing supplies policy and distributor agreements. In with a view to meet quarterly targets. addition, the company failed to disclose SEC press release known trends and uncertainties The order fnds that regional managers associated with these practices to SEC order at HP undertook undisclosed sales investors and executives and provided

10 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC announces settlement with Keysight Technologies over Iran sanctions violations

The US Department of the Treasury’s knowledge that they were destined for Iran “to preserve their credibility in the Ofce of Foreign Assets Control end-users in Iran. The end-user was a [Middle East] local market”, and (OFAC) announced on 24 September joint venture between a South African concealed their dealings by omitting in that US-based producer of electronic company and the Iranian government, correspondence references to Iran or test and measurement equipment, MTN Irancell. locations in Iran, which OFAC Keysight Technologies Inc, has agreed considered to be an aggravating factor. to pay $473,157 to settle potential civil At the time of the violations, the liability of its former Finnish subsidiary engagement of authorised foreign When determining the settlement Anite Finland OY for apparent entities owned and controlled by US amount, OFAC took into account violations of US sanctions on Iran. persons in certain transactions with mitigating factors including that Iran was authorised by General License Keysight cooperated with the Keysight acquired Anite plc, a UK H, however the licence did not authorise investigation, conducted a thorough company, in August 2015, which had re-exportation of Section 560.205 internal investigation, terminated the been trading in Iran through its Finnish prohibited goods, technology, and employment of the individuals involved, subsidiary, Anite Finland Oy. According services from a third country. and enhanced its compliance to the agreement, between January programme, including by implementing 2016 and June 2016, Anite allegedly The settlement further notes that, further training for Anite personnel. violated the Iranian Transactions and post-acquisition, Keysight demanded Sanctions Regulations (ITSR), by Anite cease all sales to Iran. However, OFAC notice completing six orders of sanctioned senior management at Anite agreed to goods amounting to $331,089, with the continue conducting sales involving Settlement agreement

UK SRA fnes Taylor Vinters LLP for AML failings

The UK’s Solicitors Regulation received without undertaking any CDD, Taylor Vinters has since put in place Authority (SRA) announced on 8 while in 26 other matters the frm processes to mitigate the failings September that law frm Taylor Vinters conducted insufcient CDD. identifed, which includes retrospective LLP has agreed to pay £19,200 for four CDD. The SRA confrmed that there was breaches of the Money Laundering The frm assessed the money no reason to suspect that money Regulations, including customer due laundering risks in these matters as laundering had actually taken place. diligence (CDD) failings. high, and was expected to conduct enhanced CDD and monitoring. Instead, The SRA considered that the fne According to the regulatory settlement the frm had what it described as a should amount to 0.2 percent of Taylor agreement, Taylor Vinters acted from ‘quadruple lock’ process, which required Vinters’ £16 million turnover, equating October 2014 in 161 matters involving a form of photo ID, confrmation of to £32,000. The amount was then 88 clients buying off-plan property plots address, a copy of the client’s bank reduced by the maximum allowable 40 in London amounting to £1.25 million, statement and an online AML check. percent discount, to refect the and, by August 2018, the frm had However, in 43 instances, the frm failed mitigating factors. Taylor Vinters also received £16.8 million in deposits. The to conduct adequate controls before agreed to pay the SRA's costs. frm said that in 17 matters, which funds were deposited and failed to involved nine clients, the deposits were carry out ongoing monitoring. SRA settlement agreement

11 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Seadrill and Sapura targeted in the latest phase of Brazil's Operation Car Wash

Brazilian Federal Police in Rio de Brazilian prosecutors issued a contracts. Sapura’s statement points Janeiro carried out 25 search warrants statement on the alleged bribery out that the company was cleared of on 23 September as part of a scheme in which Sapura Brasil paid similar allegations of bribery and corruption investigation into oil drilling bribes worth 1.5 percent in return for corruption by the Brazilian authorities in company Seadrill Ltd and Malaysian oil favourable treatment during the 2016 and 2017. and gas company Sapura Energy Bhd. procurement process. The Brazilian As part of the latest phase of Operation authorities have linked the transactions Meanwhile, Seadrill confrmed in a Car Wash (Lava Jato), the Brazilian to several bank accounts controlled by statement that its Brazilian subsidiary authorities are investigating three offshore corporations in at least six was served on 23 September with a contracts worth $2.7 million signed in different countries. This led to a request search seizure warrant from the Federal 2011 by Sapura Brasil, a joint venture to their Dutch counterparts who Police. Seadrill stated that it is between Seadrill and Sapura Energy, launched a parallel investigation in the cooperating with the investigation. and state-run oil frm Petrobras. Netherlands, the Brazilian Prosecutor’s According to prosecutors, the Ofce added. In addition, some of the Brazil Prosecutor’s Ofc... contracts between Sapura Brasil and bribes were linked to two of Sapura’s Petrobras for the construction and high-ranking ofcials in Malaysia. Sapura statement charter of three pipelaying support vessels (PLSV), ultimately benefted Sapura Energy has denied any Seadrill statement the interests of both Sapura Energy involvement in any form of bribery or and Seadrill. corruption relating to the Petrobras

Two former Deutsche Bank traders convicted in the US over spoofng practices

A federal jury in Chicago concluded on worked for the bank in London and The illegal practices were carried out on 25 September that two former Singapore between 2008 and 2013. Commodity Exchange Inc, an exchange Deutsche Bank traders were guilty of run by the CME Group. Vorley and placing fraudulent and manipulative The two former traders allegedly placed Chanu were found guilty of three counts trade orders between 2008 and 2013 in buy or sell orders for precious metals of wire fraud and seven counts of wire order to infuence precious metals and then canceled the orders before fraud, respectively. Sentencing is prices. The two former traders are they were executed, misleading other scheduled for 21 January 2021. James Vorley, a UK national who traders about the supply and demand in worked for Deutsche Bank in London precious metals trading. This illegal DOJ press release between 2007 and 2015, and Cedric practice called “spoofng” is prohibited Chanu, a French and UAE national, who by the US Dodd-Frank Act.

12 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 JPMorgan Chase & Co to pay $920m to US prosecutors in connection with unlawful trading

The US Department of Justice (DOJ) According to prosecutors, between in the same period in a scheme to announced on 29 September that 2008 and 2016, numerous traders and deceive market participants into buying JPMorgan Chase & Co has agreed to sales personnel on JPMorgan’s futures contracts that traded on the enter a deferred prosecution precious metals desk in New York, Chicago Board of Trade and of US agreement (DPA) and pay US London, and Singapore engaged in a Treasury notes and bonds traded in the prosecutors, including the CFTC and scheme to defraud in connection with secondary cash market. The scheme the SEC, $920 million to settle charges the purchase of precious metals future involved traders placing spoof orders to in relation to tens of thousands of contracts traded on the New York buy and sell US Treasury products with instances of unlawful trading in the Mercantile Exchange Inc and the intent to cancel those orders before precious metals futures contracts Commodity Exchange Inc by placing execution in order to deceive other markets, in the US Treasury futures spoof orders to buy and sell them with market participants about the existence contracts markets, and in the the intent to cancel before execution. of supply and demand for these secondary market for the US Treasury Additionally, traders engaged in activity products. In May 2015, JPMorgan notes and bonds. that was intended to deliberately trigger entered another into another DPA for or defend barrier options held by similar misconduct involving As part of the agreement, JPMorgan, JPMorgan and avoid losses. Several manipulative and deceptive trading and its subsidiaries JPMorgan Chase traders, namely John Edmonds, practices in the foreign currency Bank, N.A. (JPMC) and J.P. Morgan Christian Trunz, Gregg Smith, Michael exchange spot market. Securities LLC (JPMS) have agreed to Nowak, and Christopher Jordan, and cooperate with the Fraud Section and to one former salesperson, Jeffrey Ruffo, DOJ press release enhance their compliance programme were indicted in 2018 and 2019. and issue follow-up compliance DOJ DPA reports. The DPA remains subject to According to the indictment, traders on court approval by a US federal court in JPMorgan’s US Treasuries desk located DOJ indictment Connecticut. in New York and London were engaged

AUSTRAC issues infringement notice to State Street Bank over reporting breaches

The Australian Transaction Reports AUSTRAC has imposed a total penalty AUSTRAC is said to be working with and Analysis Centre (AUSTRAC) of A$1,247,400 on the bank for the State Street to address the compliance announced on 16 September that it has alleged violations that occurred prior to issues that led to the reporting systems issued an infringement notice to State 1 July 2020. and controls failings. Street Bank and Trust Company for failing to report 99 international funds Financial institutions are required to AUSTRAC press release transfers, in violation of the report international funds transfers to Anti-Money Laundering and AUSTRAC within 10 business days of Infringement notice Counter-Terrorism Financing Act 2006. sending or receiving an instruction.

13 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK FCA issues fnal notice against fnancial adviser for promoting fraudulent investments

The UK Financial Conduct Authority misleading, false or deceptive high degree of recklessness in the frst (FCA) banned on 21 September a statements contrary to the Financial scheme and made irresponsible fnancial adviser from performing any Services and Markets Act. statements without foundation, while in function in relation to any regulated the second scheme he intentionally activity carried out by an authorised According to the notice, between misled investors even though he knew person, exempt person or exempt September 2010 and October 2012, the frst scheme had failed. Additionally, professional frm after establishing Oakley was allegedly involved in Oakley personally sold the schemes that the individual is no longer “ft and promoting two fraudulent investment while ignoring all the red fags and proper”. The FCA’s fnal notice follows schemes which resulted in £2,300,000 reassured investors that the Simon Charles Oakley’s conviction and worth of losses to 21 investors. The investments were successful. sentencing to 30 months in prison on FCA also cited the 2017 ruling, 15 November 2017 for making according to which Oakley exhibited a FCA fnal notice

UK FCA issues fnal notice against former WorldSpreads CEO for market abuse

The UK’s Financial Conduct Authority provided misleading information and In April 2017, the FCA also fned and (FCA) published on 9 September a fnal omitted key details in the drafting of banned WSL’s CFO, Niall O’Kelly, and notice against former WorldSpreads admission documentation ahead of fnancial controller Lukhvir Thind for Limited (WSL) CEO Conor Martin Foley WSG’s fotation on the Alternative falsifying critical fnancial information for market abuse, banning him from Investment Market of the London Stock amounting to £15.9 million, with performing any roles involving Exchange in 2007. regards to the company’s client regulated activity. Foley has withdrawn liabilities and its cash position. a reference to the Upper Tribunal Additionally, between January 2010 and seeking to review the FCA’s 3 July March 2012, Foley used two clients’ FCA press release decision notice fning him £658,900. trading accounts to carry out large spread bets on the shares of WSG, FCA fnal notice on Foley According to the FCA's fnal notice, without their consent. The scheme was Foley and WSL’s holding company aimed at creating the false appearance FCA fnal notice on O’Kel... WorldSpreads Group plc (WSG) of greater demand for WSG shares.

14 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK FCA issues fnal notice against former Moore Capital executive

The UK’s Financial Conduct Authority insider dealing in 2009. In each of those person”, adding that his guilty plea and (FCA) issued a fnal notice on 1 instances, Rifat was made privy to subsequent conviction “demonstrates a September against former Moore price-sensitive information through his clear and serious lack of honesty and Capital Management LP trader Julian position as head of European equity integrity”. The notice repeatedly cites Rifat, banning him from engaging in sales with the fnancial management the fact that in the eight instances of any regulated activities over his group, and soon after gaining the insider trading, Rifat was made aware conviction for insider trading. information, used an intermediary to that he was “wall-crossing”, and read or make fnancial trades to beneft him given a script notifying him that the Rifat, who worked in the London branch and his associates. information was price-sensitive, and of US-based Moore Capital, was still illicitly earned £285,000 in insider sentenced in March 2015 to 19 months The notice, which is effective bets for his associates, of which Rifat in prison, fned £100,000, and ordered immediately, states that “Rifat is not a obtained a portion. to pay over £150,000 in costs after ft and proper person to perform any pleading guilty the previous year to function in relation to any regulated FCA fnal notice engaging in at least eight instances of activity carried on by an authorised

Deloitte fned £15m for Autonomy audit failings

were each culpable of “serious and serial failures” and misconduct in relation to the audit of Autonomy, failing to act with integrity or objectivity. Deloitte has agreed to provide a root cause analysis of the misconduct, which will include details about why the company’s processes did not prevent the misconduct.

Autonomy, which was founded by Mike Lynch and acquired by Hewlett-Packard in 2011 for £8.4 billion, is the subject of a civil fraud trial in the UK brought by HP over allegations that Lynch The UK’s Financial Reporting Council between 2009 and 2011. Deloitte has fraudulently infated the value of (FRC) announced on 17 September been fned £15 million and must pay Autonomy ahead of its acquisition. sanctions against Deloitte and two the FRC’s costs as well as the costs of Lynch is also facing extradition former partners, Richard Knights and the independent tribunal. attempts by the US to face charges. Nigel Mercer, over alleged misconduct when auditing software company The independent disciplinary tribunal FRC press release Autonomy Corporation plc’s accounts found that Deloitte, Knights and Mercer

15 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US seeks to recover 1MDB funds held in the UK

The US Department of Justice (DOJ) (Venezuela) Ltd in connection with a real estate acquired in Beverly Hills, a announced on 16 September that it has line of credit for the use of two drill luxury condominium in New York City, a fled civil complaints seeking the ships, which allegedly were purchased London property, an investment made forfeiture and recovery of more than with 1MDB funds. In addition, the DOJ in a Kentucky maintenance company, $300 million in additional assets is seeking the forfeiture of four dozen and a promotional movie poster. allegedly misappropriated from the promotional movie posters and other Malaysian sovereign wealth fund memorabilia that Riza Shahriz Bin The DOJ estimates that more than $60 1Malaysia Development Berhad Abdul Aziz, known as Riza Aziz, the million in assets will be recovered under (1MDB) between 2009 and 2014. stepson of Malaysia’s former prime the settlement, bringing the total minister Najib Razak, acquired with amount seized in the case to nearly According to the complaints, the assets more than $4 million traceable to the $1.1 billion. include $300 million held in an UK 1MDB conspiracy. escrow account by law frm Clyde & Co US DOJ press release as damages or restitution in a 2017 On 2 September, the DOJ announced international arbitration case between that it had reached a settlement in its US DOJ complaint Petroleos de Venezuela S.A. (PDVSA) civil forfeiture case against Riza Aziz and PetroSaudi Oil Services regarding the sale proceeds of high-end US DOJ press release (2 S...

US reaches settlement to recover $60 million in 1MDB funds from Riza Aziz

The US Department of Justice (DOJ) billion in funds belonging to 1MDB were other 1MDB scheme co-conspirators announced on 2 September that it has allegedly misappropriated and remain pending. reached a settlement in its civil laundered between 2009 and 2015 by forfeiture case against Riza Shahriz high-level ofcials and their associates, Riza Aziz was arrested on 4 July 2019 Abdul Aziz, known as Riza Aziz, the including Riza Aziz. in Malaysia on suspicion of having stepson of Malaysia’s former prime siphoned $248 million from 1MDB minister Najib Razak, who allegedly Under the terms of the consent between April 2011 and November embezzled funds from state-owned judgment, Aziz has agreed to forfeit all 2012 to fnance a series of flms, sovereign wealth fund 1Malaysia properties included in the US complaint, including Oscar-nominated flm “The Development Berhad (1MDB) and which includes the sale proceeds of Wolf of Wall Street”. laundered them through fnancial Beverly Hills high-end real estate, a New institutions in the US, Switzerland, York luxury condominium, investment in On 14 May, the Malaysian Singapore and Luxembourg. a Kentucky maintenance company, a Anti-Corruption Commission London property and a promotional announced that it has dropped the ML The DOJ estimates that more than $60 poster for a 1927 motion picture. In charges against Aziz as part of a million in assets will be recovered under addition, Aziz has agreed to assist law settlement which includes the recovery the settlement, bringing the total enforcement in the transfer, of $107.3 million in overseas assets. amount seized in the 1MDB money management and disposition of the laundering (ML) and bribery case to relevant assets, without any admission DOJ press release nearly $1.1 billion. According to the US of fault, wrongdoing or guilt. Several civil forfeiture complaint, around $4.5 other civil forfeiture complaints against US stipulation and reques...

16 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Daimler AG agrees to $1.5 billion settlement with the US over emissions cheating

The US Department of Justice (DOJ) subsidiary of Daimler AG, violated the two years, which the DOJ states will announced on 14 September, in Clean Air Act and California law. cost the company approximately $436 tandem with the US Environmental According to the complaint, million. A settlement with the state of Protection Agency (EPA) and the Mercedes-Benz vehicles sold between California will see Daimler pay $110 California Air Resources Board (CARB), 2009 and 2016 in the US used million to mitigate excess pollution a proposed settlement totalling $1.5 prohibited software during emissions from non-compliant vehicles in the billion with German car manufacturer tests that concealed the true levels of state. Taken altogether, the settlement Daimler AG over violations of nitrogen oxides emitted. is valued at $1.5 billion. emissions laws. The proposed settlement has been lodged with the Under the settlement, Daimler AG will DOJ press release US District Court for the District of pay approximately $945 million in Columbia for approval. penalties, recall non-compliant vehicles, DOJ complaint and begin a programme to mitigate The settlement has been fled alongside excess nitrogen oxides produced by Consent decree a complaint from the DOJ which alleges their vehicles, with a requirement to fx that Mercedes-Benz USA LLC, a 85 percent of affected vehicles within

FINMA begins enforcement proceedings against Credit Suisse over illegal surveillance allegations

The Swiss Financial Market Peter Goerke, according to the Financial general it “attaches great importance to Supervisory Authority (FINMA) Times. Former Credit Suisse CEO the question of independence when announced on 2 September that it has Tidjane Thiam was ousted in February selecting” investigators. The judge launched enforcement proceedings due to the alleged hiring of private fnding the Swiss bank’s objections against Credit Suisse over alleged detectives to spy on employees. Credit unfounded. violations of supervisory law in Suisse accepted Thiam’s resignation at connection with “the bank’s the time, despite being cleared of Credit Suisse said in a 2 September observation and security activities”. involvement by an internal statement that it took note of FINMA’s investigation. decision and will continue to fully The proceedings reportedly follow an cooperate with the regulator in order to investigation by auditor Thomas On 15 April, Reuters reported that Credit “ensure a complete and expeditious Werlen, appointed by FINMA in Suisse had lost an appeal before the conclusion” of the investigation. December 2019, to review the bank’s Swiss Supreme Court to block Werlen’s corporate governance and its use of appointment by FINMA, on grounds that FINMA press release electronic communications in Werlen and his law frm Quinn Emanuel connection with two purported cases of Urquhart & Sullivan lacked sufcient Credit Suisse statement intrusive surveillance by Credit Suisse independence, arguing that Quinn against the former head of its wealth Emmanuel had “represented the bank’s FINMA press release (20 D... management division Iqbal Khan, and opponents” in some cases. At the time, the former head of human resources FINMA said in a statement that in

17 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US indicts six for bribing Amazon employees to secure unfair competitive advantage

as internal algorithms and procedures; and circumvented Amazon’s internal limits on third-party accounts.

According to the indictment, in return for $100,000, the Amazon employees and contractors reinstated products

The US Attorney’s Ofce in the Western providing consulting services to sellers, and merchant District of Washington released on 18 Nilsen, Leccese, and Nuhanovic also accounts blocked September an indictment against six made their own sales on the Amazon individuals for allegedly bribing at least Marketplace through third-party by Amazon ten Amazon employees and accounts they controlled. contractors to gain an unfair The indictment alleges that the competitive advantage on Amazon According to the indictment, in return arrangement, which has been in place Marketplace, a platform that enables for $100,000, the Amazon employees since at least 2017, has benefted third-party vendors to sell products. and contractors reinstated products select merchant accounts on the and merchant accounts blocked by Amazon Marketplace and resulted in The defendants are Ephraim Rosenberg, Amazon, including items fagged for more than $100 million of competitive Joseph Nilsen, Kristen Leccese, Hadis violating IP laws, products removed benefts to those accounts. Nuhanovic, Rohit Kadimisetty, and after customer complaints and Nishad Kunju. The accused have been accounts suspended after manipulating The sentencing of the six defendants charged with conspiracy to use a product reviews. has been set for 15 October. communication facility to commit commercial bribery, conspiracy to In addition, they purportedly facilitated DOJ press release access a protected computer without attacks against competitors by sharing authorisation, conspiracy to commit competitive intelligence about their Indictment wire fraud and wire fraud, while acting revenue and customers; as consultants to third-party sellers on misappropriated Amazon’s highly the marketplace. In addition to confdential business information such

18 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

SPECIAL FEATURE

The FinCEN Files: a renewed push towards more effective AML/CFT efforts

On 20 September, Buzzfeed News in to the relevant competent authority, in years, most notably the establishment cooperation with the International the US to FinCEN. This reporting regime of the UK’s Joint Money Laundering Consortium of Investigative has long been the subject of criticism Intelligence Task Force in 2015, Journalists (ICIJ) published the for lack of feedback, visibility, fexibility concerns over the SAR/STR regimes fndings from its investigation into and innovation. operating as a “black box” have largely more than 2,100 suspicious activity remained. FinCEN statistics show a reports leaked from the US Treasury Since the current anti-money laundering signifcant increase in SAR flings in the Department’s Financial Crimes and terrorist fnancing regulatory past fve years, the total number of Enforcement Network (FinCEN) in framework (AML/CFT) in the US is reports increasing by almost 30 2018. The FinCEN Files have drawn mainly derived from the Bank Secrecy percent, from 1,659,123 in 2014 to international attention to systematic Act (1970) and the US Patriot Act 2,301,163 in 2019. Although no ofcial failures of both banks and regulators in (2001), criticism has primarily statistics have been released on what combatting fnancial crime. Unlike concentrated around its inability to percentage of these reports were other data leaks, the release of highly adapt to the more interconnected and ultimately used by law enforcement, sensitive data may have far-reaching technologically advanced fnancial employees of fnancial intelligence consequences for public-private systems of the past decade. Regulatory units have repeatedly warned against cooperation and may give fresh efforts have also been criticised for the prevalence of defensive reporting impetus to improving the suspicious incentivising a shift towards technical which overall dilutes the quality of activity reporting regime. compliance as opposed to encouraging intelligence supplied to FinCEN. the development and use of more The SARs regime and its criticism innovative and effective methods by Financial institutions have often cited fnancial institutions in order to detect the lack of regulatory communication The suspicious activity or transactions and report illicit client behaviour. regarding priority enforcement areas reporting (SAR/STR) regime places a and increased pressure on fnancial legal obligation on regulated fnancial Despite the rise of public-private institutions to demonstrate compliance institutions to report suspicions of partnerships between law enforcement with existing policies and procedures money laundering or terrorist fnancing and fnancial institutions in the past fve as the primary propellers of defensive

19 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 suspicious activity reporting. Although regulatory failures by fnancial corporate liability laws, AML/CFT fnancial institutions might expect that institutions, such as carrying out supervisory regime as well as the they have discharged their legal and transactions without any information acceleration of initiatives to wind up regulatory obligations through these about the benefciaries or delayed and anonymous company ownership should practices, the FinCEN Files could incomplete fling of SARs. It has also be expected to receive increased demonstrate how mere technical clearly demonstrated earlier concerns attention in the following months. compliance may ultimately prove over the practice of defensive SAR fling insufcient to achieving actual and its possibly overwhelming effect on The leaking of the FinCEN Files has commitment to AML/CFT efforts. the regulatory system. The time and undeniably put the data security international effort it took to process vulnerabilities of one of the most The data leak and its consequences only 0.02 percent of the SARs that powerful fnancial services regulators in FinCEN received in six years (media the global spotlight. Unless FinCEN The leaking of FInCEN documents reports on the data breach frst demonstrates the improvement of its signifcantly differs from earlier data emerged in late 2018) clearly commitment to secure the highly breach incidents such as the Panama demonstrates the amount of resources sensitive information it receives, this or Paradise Papers or the more recent needed to process the data that has may undermine the guarantee of Luanda Leaks, since it offers a rare view been generated under the SAR/STR confdentiality that the SARs regime has into the (dis)functioning and overall regime. This may rightfully raise been based on and it is expected to (in)effectiveness of the SAR/STR questions about the US government’s have wide-reaching effects on regime in the US as well as the commitment to improving the public-private cooperation in the fght limitations of international efforts to effectiveness of the reporting regime against fnancial crime. combat global money laundering. and its overall willingness or perhaps ability to follow-through on the On the other hand, the FinCEN Files The FinCEN Files comprise disclosures intelligence it receives. follow a pattern of previous leaks from of signifcant transactions by the various sources and clearly world’s largest fnancial institutions, as Although the frst investigative reports demonstrates that no data is secure. would be expected given their size and were only recently released and mainly Therefore, all regulated fnancial systemic importance. Therefore, it is concern the fnancial institutions’ actual institutions need to assume the worst understandable why the media has or perceived shortcomings in the fght and plan for it. They must avoid focused its attention on these against money laundering and terrorist reducing AML resources signifcantly institutions, although in many cases fnancing, the FinCEN Files have already once immediate scandals have been (e.g. HSBC, Deutsche Bank) the signifcantly undermined public trust in resolved, as this has proved to be a high suspicious transactions referenced in the effectiveness of the SAR/STR legal, reputational, regulatory and even the FinCEN Files relate to scandals that regime and may renew pressure for the fnancial risk. In the aftermath of the have already been well-documented overhaul of the global AML/CFT FinCEN Files investigation, fnancial and subject to regulatory action. It is system. As an early response, on 14 institutions will likely be expected to unclear whether, from a regulatory September, FinCEN published a “Gap demonstrate more than just “work to perspective, they would be subject to rule,” requiring minimum standards for the rule” compliance but also the fact further sanctions. Nevertheless, there is banks lacking a federal functional that they have carefully assessed the likely to be a sustained drip-feed of regulator and, on 16 September, risks including, notably, knowing who information from media sources, released a proposal for regulatory they are doing business with and stemming from the documents, in the amendments to existing AML whether that business is legal (and coming months. This may cause further regulations. This will, amongst others, equally, ethical). Financial institutions reputation and possibly legal risks to include, the issuing of a list of national need to recognise that fling a SAR does the named fnancial institutions as third AML priorities every two years. not absolve them of responsibility and parties could seek to bring legal action regardless of what action regulators against them for having processed Similar pressure for a regulatory may take, they will continue to be transactions even where they had overhaul may also be expected in the judged in the court of public opinion. demonstrable suspicions or awareness UK, since the country emerged as a of illegal activity. “higher risk jurisdiction” from the By Zsuzsánna Deák CAMS, Senior FinCEN Files due to the large number of Analyst at Aperio Intelligence The FinCEN Files investigations have UK shell companies in the leaked SARs. [email protected] undeniably uncovered obvious Demands for the reform of the UK's

20 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

REPORTS AND SPEECHES

UK sets out plans to reform Companies House register to better fght fnancial crime

frms, as well as Limited Liability and possibly reject applications Partnerships and Limited Partnerships. before registration, will start an internal review of current processes The paper estimates that the social and and will implement measures to economic cost of organised fraud reduce the risk of fraud against businesses and the UK public sector reaches £5.9 billion. However, Companies House will develop a due to the potential burden on digital identity verifcation service in companies and the difculties in line with the Financial Action Task verifying submissions, the government Force (FATF) guidelines, the frst will not require companies at this stage services of which will be purchased to fle full details of their overseas bank in early 2021 The UK Department for Business, accounts with Companies House. Energy and Industrial Strategy (BEIS) An extension of the January 2020 published on 18 September its In its strategy for 2020-2025 released requirement under the Fifth Money response to the May 2019 consultation on 29 September, Companies House Laundering Directive to allow on corporate transparency and stated that particular attention will be obliged entities to report Companies House register reform, given to strengthening the fght against discrepancies relating to the which outlines new proposals aimed at economic crime and money laundering, benefcial ownership of a company, deterring the abuse of UK registered by effectively delivering the in terms of the information covered entities by international criminals and government’s newly published vision, corrupt elites, and improving translating the legislative changes into The Registrar to receive new compliance with anti-money new systems and processes and powers which will allow Limited laundering (AML) regulations. making active use of analysis and Partnerships to be removed from intelligence. Companies House aims to the register following a court order In an effort to better fght economic be proactive in identifying suspicious crime, the proposed reforms for activity, including by using machine Appropriate measures to safeguard 2020-2025 will focus on improving the learning, and to better share third parties against misleading or information on those who set up, own, information to prevent and tackle crime. false information fled by manage and control corporate entities companies on the register and ensuring greater accuracy and usability of data on the 4.2 million UK The proposals set out in the Additional reforms to ensure more companies currently registered with government’s response include robust privacy protections for Companies House. personal information Mandatory identity verifcation will The government expects the new be required for all directors, People UK government press relea... provisions to apply to any corporate with Signifcant Control and those body subject to disclosure obligations fling information on behalf of a Consultation response under the Companies Act 2006, company (presenters) including private and public limited UK Companies House strate... companies, unlimited companies, Companies House will get new unregistered companies and overseas powers to query company names

21 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 FATF report on virtual assets red fag indicators for money laundering/terrorist fnancing

The red fag indicators include

Structuring VA transactions in small amounts, or in amounts under reporting thresholds, or through irregular, unusual, or uncommon transaction patterns

Transferring VAs immediately to multiple VASPs, especially to those registered or operated in jurisdictions with weak AML/CFT regimes

Conducting large initial deposits to open a relationship The Financial Action Task Force (FATF) published on 14 with a new user, whose profle is inconsistent with the September a report on virtual assets (VAs) red fag amount funded and who trades large amounts or the indicators of money laundering (ML) and terrorist fnancing entire VA balance immediately (TF), which aims to help virtual asset service providers (VASPs), fnancial institutions, and designated non-fnancial Transactions involving the use of multiple VAs, or businesses detect and report suspicious transactions. converting a large amount of fat currency into VAs with no logical business explanation The fndings of the report are based on more than 100 case studies from 2017 to 2020 collected by FATF’s global network Abnormal transactional activity of VAs cashed out at member countries, previous FATF publications and public exchanges from peer to peer platform-associated wallets information on the misuse of VAs. Most of the offences with no logical business explanation analysed involved predicate or ML crimes, fnancial sanctions evasion or TF related fundraising. Other red fag indicators related to anonymity include the use of decentralised/unhosted, hardware or paper wallets The most common type of misuse reported by jurisdictions to transport VAs across borders, using VA ATMs in was illicit trafcking in controlled substances, either with high-risk locations despite the high transaction fees, or sales transacted directly in VAs or the use of VAs as an ML the use of VAs that are linked to possible fraud or Ponzi layering technique. The second most common category of schemes misuse related to fraud, scams, ransomware, and extortion. Transacting with VA addresses or bank cards that are connected to known fraud, extortion, or ransomware The most common type of schemes, sanctioned addresses or darknet marketplaces misuse reported by jurisdictions The sender or recipient lacking knowledge or providing was illicit trafcking in controlled inaccurate KYC information about the transaction or the substances source of funds

FATF press release The FATF report complements its June 2019 guidance on the risk-based approach to VAs and VASPs, which clarifes how FATF report to license and register the sector, how to conduct know-your-customer KYC checks and details on how to store FATF guidance for a risk-based approach to vi... information securely.

22 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU Commission publishes report on member state implementation of certain AML provisions

The European Commission (EC) the Netherlands notifed the EC that remains fragmented. Most member published on 16 September a report trusts are recognised in their territory states that reported not having these evaluating whether member states based on the provisions of the Hague arrangements have passed legislation have complied with the provisions of Convention of 1985. Czechia, France, requiring foreign trusts and other such the Fourth Money Laundering Directive Hungary, Italy, Luxembourg, Romania, arrangements to comply with the (4MLD), as amended by 5AMLD, which and the Netherlands all declared that obligations. require them to identify and make they have similar arrangements under subject to the AML obligations all their national law, while Germany and In view of the report’s fndings, the EC trusts and similar arrangements. Italy’s legal arrangements are not has stated that it will consider the expressly regulated in their national law. possibility of setting up an informal The report fnds that there is no working group with academics, common approach to the identifcation The EC notes that member states which practitioners and Financial Intelligence of arrangements similar to trusts, which notifed that trust or similar legal Units and competent authorities to creates potential loopholes. Cyprus, arrangements are governed under their identify common objective and Ireland, Malta, and the UK notifed the laws have generally adopted legislation consistent criteria for the identifcation EC that trusts are governed under their requiring the provision of benefcial of the relevant legal arrangements. legal systems. Another 16 member ownership information. Additionally, states indicated that no trusts or similar they have introduced the obligation to EU Commission report legal arrangements are governed by disclose such information to reporting their laws, while Italy, Luxembourg, and entities, but the approach across the EU

ESMA report on cum-ex schemes calls for better data sharing to crackdown on tax fraud

The European Securities and Markets empowerment of national competent on the link between dividend arbitrage Authority (ESMA) published its fnal authorities (NCAs) to share information and tax evasion or avoidance needs to report on 24 September on its inquiry with the tax authorities. Another option be held by national tax authorities and into the functioning of cross-border would be to amend the Market Abuse public prosecutors according to dividend arbitrage, including ‘cum-ex’, Regulation (MAR) to remove legal national legislation, given the fact that ‘cum-cum’ and withholding tax (WHT) limitations on NCAs exchanging tax fraud is outside the remit of the reclaim schemes, which proposes a information with tax authorities. ESMA and the NCAs. series of options for limiting the fraud risk in relation to multiple tax reclaims. Through analysing the NCAs’ responses The ESMA’s report has been submitted to the ESMA inquiry, the report to the European Parliament for review. Building on its July 2019 preliminary highlights that some of the WHT report on multiple withholding tax reclaim schemes seem to be aimed at ESMA press release reclaim schemes, the ESMA concludes perpetrating tax fraud, in particular that better detection and prosecution of cum-ex schemes, which involve false ESMA report WHT reclaim schemes is dependent on representations to tax authorities in further changes to the legislative and order to receive reimbursements. The ESMA preliminary report (... supervisory framework and the ESMA recommends that the discussion

23 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 ESMA recommendations for amending the MAR

The European Securities and Markets dealing and market manipulation; the – clarify the responsibility of Authority (ESMA) published the defnition of inside information; the management companies in relation fndings of its review into the Market appropriateness of the trading to the disclosure of inside Abuse Regulation (MAR) on 24 prohibition for persons discharging information September, which fnds that overall the managerial responsibilities; and regulation is ft for purpose. cross-border enforcement of sanctions. Withholding tax reclaim schemes – remove the legal limitations for The ESMA report, which details the Recommendations for member state competent fndings of the frst comprehensive amendments to the MAR authorities to exchange information review of the functioning of the MAR, with tax authorities puts forward recommendations that Market soundings – clarify that the will inform the European Commission’s The ESMA also recommends MAR requirements represent an (EC) review of the MAR. additional guidance relating to: (1) obligation for disclosing market inside information and disclosure; participants that, if complied with, The EC is required to assess certain and (2) pre-hedging will protect them from the allegation provisions of the MAR contained in of having unlawfully disclosed Article 38 and related topics, which ESMA press release inside information includes the appropriateness of introducing common rules on the need ESMA MAR review report Benchmark provisions and the for all member states to provide for interplay between MAR and administrative sanctions for insider collective investment undertakings

EU fnds incrimination of terrorist fnancing incomplete or incorrect in some member states

The European Commission (EC) offences provided by the Directive, formal letters were sent to 16 member published on 30 September its report while in Bulgaria, Latvia, Portugal and states for failing to communicate the assessing the extent to which EU Spain the participation in TF offences is adoption of national measures. In July member states have transposed not included. In addition, the overall 2019, Greece and Luxembourg were Directive 2017/541 of 15 March 2017 approach to TF in Poland, Slovakia, and sent reasoned opinions. on combating terrorism, including their Slovenia is not consistent and the obligation to criminalise terrorist national legislation in Luxembourg By the end of July, 15 member states fnancing (TF) when committed imposes an additional requirement of had declared that transposition was intentionally. funds being “unlawfully collected”. complete. In September 2021, the EC will evaluate the implementation of The report notes that in several The EC notes that its monitoring of Article 29 of Directive 2017/541, with a member states provisions on the member states’ compliance with the focus on the legislation’s impact on the incrimination of TF were incompletely provisions of the Directive might result fundamental rights and freedoms, rule or incorrectly transposed. According to in additional infringement procedures. of law, and the level of protection the EC, in Bulgaria, Germany, Malta, The original deadline for incorporating provided to victims of terrorism. Poland and Portugal, TF does not the rules into national law was 8 appear to cover the fnancing of all September 2018. In November 2018, EU Commission report

24 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU rule of law report fags up extensive anti- corruption failings and democratic backsliding

independent and well equipped to fght crime and corruption, in particular in Poland and Bulgaria

Judicial independence remains an issue of concern in Hungary in relation to the role of the National Judicial Council and the Supreme Court appointment rules; Romania’s controversial reforms of 2017-2019 which affected judicial independence remain in force

There are concerns about the effectiveness of the investigation, The European Commission (EC) covering the effectiveness of the justice prosecution and adjudication of published on 30 September its rule of system, the anti-corruption framework, corruption cases, in countries such law report, part of its new annual rule and media pluralism and freedom. as Bulgaria, Croatia, Slovakia, of law mechanism, which highlights Czechia, Hungary and Malta the need for strong criminal justice Key fndings systems and the key role of Political attacks and media evidence-based anti-corruption Anti-corruption reform projects are campaigns against judges and strategies to fght organised crime. under way in Malta, Austria and prosecutors are reported in some Slovakia, in response to high-profle member states, including Romania Reform projects are corruption cases and public pressure, and in the Netherlands, in The renewed efforts to counter under way in Malta, relation to the prosecution of fraud through the setting up of the corruption in the fnancial sector Austria and European Public Prosecutor’s Ofce, revision of the AML rules and the Measures to boost the capacity of Slovakia, in speeding up fnancial investigations the institutional framework to fght will help improve the fght against response to corruption and reduce obstacles to corruption high-profle effective prosecution have been introduced in Italy, Spain and France corruption cases EU Commission press relea... Irrespective of the set-up of national Rule of law report The report looks at key developments prosecution services, strong safeguards are needed to ensure across the EU and assesses the Report Q&As situation in each member state, that prosecution is sufciently

25 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU states lost €140 billion in VAT revenues in 2018, according to latest VAT gap report

The European Commission (EC) reduction in 2019. However, the EC efforts to counter VAT fraud and released on 10 September its 2020 forecasts that the downward trend will evasion and the effectiveness of value added tax (VAT) gap report, be reversed in 2020, when a potential compliance measures in each member which fnds that EU member states lost loss of €164 billion is expected due to state. The results of the EC’s analysis an estimated €140 billion in revenues the impact of the Covid-19 pandemic. show that the overall VAT gap is in 2018 due to fraud, tax evasion, tax The highest national rates were generally infuenced by the state of the avoidance, bankruptcy, fnancial registered in Romania (33.8 percent), economy, the institutional environment, insolvency and administrative error. Greece (30.1 percent) and Lithuania the economic structure as well as the (25.9 percent), and the smallest gap actions of national tax administrations. In nominal terms, the overall EU VAT was observed in Sweden (0.7 percent). gap decreased by almost €1 billion, EC press release slowing down from a decrease of €2.9 The VAT gap refers to the difference billion in 2017. In relative terms, the between expected revenues in EU VAT gap report 2020 2018 VAT gap dropped to 11 percent member states and the revenues that and is expected to continue its are collected, refecting both the EU’s VAT gap factsheet

EU Customs Action Plan aims to combat fraud

The European Commission published (2) providing data held by payment end of the year, as well as launching on 28 September its new Customs service providers and online platforms comprehensive analysis of the EU’s Union Action Plan, which proposes to customs authorities; (3) reinforcing system of international cooperation measures to make EU customs cooperation between customs and and mutual administrative “smarter”, by improving the use of market surveillance authorities to cooperation in customs matters data, and strengthening obligations to prevent dangerous and combat customs duty and tax fraud. non-EU-compliant goods entering the Extending the Commission’s system EU; and (4) strengthening EU rules on of monitoring how preferential Following multiple instances in which cooperation with member states to origin rules and procedures are the European Parliament and the combat customs fraud. applied to the EU’s 41 Free Trade European Court of Auditors have Agreements, which should help expressed concern about risks to the Other key actions include protect the EU’s fnancial interests EU’s fnancial interests from inadequate or ineffective customs controls Strengthening the obligations on Exploring other avenues of concerning imported goods, the payment service providers and cooperation, including those Commission has decided to adopt an online sales platforms to help between customs and Action Plan to ensure an integrated combat customs duty and tax fraud security/border management approach to customs risk management. in e-commerce agencies to manage safety and security risks, such as implications With regards to customs fraud, the plan Working towards an EU-China of the Covid-19 pandemic proposes several initiatives to address agreement on a new Strategic the issue, including: (1) strengthening Framework for Customs European Commission press... the customs risk management strategy; Cooperation 2021-2024 before the

26 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Finance states government should include fraud in online harms regulatory framework

UK Finance published on 24 September online harms regulatory framework to following the adoption of the voluntary its half year report, noting that in the ensure that online platforms are code on APP fraud in May 2019, £73.1 course of the ongoing Covid-19 involved in fraud prevention efforts million has been returned to victims, up pandemic, impersonation scams have alongside fnancial institutions. 86 percent compared to the same almost doubled, with almost 15,000 period last year. cases reported, while fraudsters According to the report, in the frst half concentrated their efforts on online of 2020, the amount of authorised push UK Finance press release scams. The report also suggests that payment (APP) fraud increased by 15 in order to effectively address online percent, with total losses of £207.8 UK Finance report scams, fraud should be included within million, equivalent to fgures reported in the scope of the government’s new the same period in 2019. However,

Portuguese regulator fnds auditors broke AML regulations in relation to Luanda Leaks

The Portuguese Securities Market The CMVM’s investigation found Following the Luanda Leaks, Angolan Commission (CMVM) issued on 30 situations in which auditors failed to prosecutors accused dos Santos of September its 2019/20 quality verify and report suspicious conspiring to embezzle $1 billion from assurance monitoring report on the transactions to the fnancial intelligence state oil frm Sonangol during her time audit sector, which fags up a series of unit. In other cases, audit frms did not as chairperson between 2016 to 2017. anti-money laundering (AML) perform KYC or source of funds checks In January, a judge at an Angolan court defciencies by the nine audit and failed to maintain adequate records ordered the seizure of dos Santos’ $1.2 companies that did business with the to demonstrate the “economic billion worth of assets, and in February, companies involved in the ‘Luanda substance of underlying transactions” the ICIJ reported that Portugal had Leaks’ scandal. involving related parties. frozen dozens of personal and corporate accounts belonging to dos Following the International Consortium According to Portuguese media outlet Santos and her husband, Sindika of Investigative Journalists’ (ICIJ) Expresso, the regulator does not Dokolo, following a request for revelations, the CMVM investigated exclude the possibility that the international judicial cooperation by the nine auditors of 27 entities and suitability of statutory auditors could be Angolan authorities. In September, reviewed 84 audit fles, which resulted questioned, depending on the Dutch prosecutors reportedly started an in 10 urgent supervisory actions being seriousness of the facts. investigation regarding a controversial launched. Five actions against four loan offered by Sonangol to a company auditors have been completed and the On 19 January, ICIJ revealed that the owned by dos Santos’ husband. remaining fve actions are still former Angolan president’s daughter underway. According to the regulator, Isabel dos Santos established a web of CMVM press release the supervisory actions assess whether companies and subsidiaries and used the auditors have complied with the European and American management CMVM report AML regulations, third-party transaction consultants, accountants and lawyers rules and the relevant professional and to hide the proceeds of corruption and Expresso article (in Port... regulatory standards. embezzlement.

27 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UNCTAD report on Africa estimates $88.6 billion lost to illicit fnancial fows every year

The report makes a series of The ability of governments to recommendations for the African deliver services such as healthcare, governments and for the multilateral education and infrastructure has community to strengthen the policy been signifcantly affected by illegal approaches taken to tackle the capital outfows – the governments incidence and impact of IFFs. These of African countries with high IFFs focus mainly on strengthening African spend 25 percent less than engagement in international tax reform, countries with low IFFs on health intensifying the fght against corruption and 58 percent less on education and money laundering, investing in data infrastructure and transparency, Tax revenue lost to IFFs are redirecting more resources towards the particularly costly for Africa, which A comprehensive report on ‘Tackling recovery of stolen assets, and lost an estimated $9.6 billion to tax illicit fnancial fows for sustainable protecting civil society, whistleblowers havens, equivalent to 2.5 percent of development in Africa’ published by and investigative journalists. total tax revenue the United Nations Conference on Trade and Development (UNCTAD) on According to the report, curbing illicit The report highlights the 28 September warns that 3.7 percent capital fight in Africa could generate importance of collecting more and of Africa’s GDP – which amounts to an enough capital by 2030 to fnance better trade data to detect risks estimated $88.6 billion – is lost due to almost 50 percent of the $2.4 trillion related to IFFs, increase illicit fnancial fows (IFFs), such as tax needed by sub-Saharan African transparency in extractive industries evasion and theft. countries to achieve national priorities and tax collection, particularly and sustainable development goals. considering that only 45 out of 53 The report is aimed at understanding African countries provide data to the breadth of channels and the UN International Trade Statistics mechanisms through which IFFs are Main fndings of the report Database (UN Comtrade) on a conducted and how they affect consistent basis sustainable development in Africa, as From 2000 to 2015, the total illicit well as to equip African governments capital fight from Africa amounted UN press release with the necessary knowledge on how to $836 billion to identify and evaluate risks UNCTAD report associated with IFFs. According to Half of the total amount lost due to UNCTAD Secretary-General Mukhisa IFFs relates to the export of UNCTAD press release Kituyi, IFFs “rob Africa and its people of extractive commodities. Of the their prospects, undermining estimated $40 billion of IFFs transparency and accountability and derived from such commodities in eroding trust in African institutions”. 2015, 77 percent were concentrated in the gold supply chain

Aperio Analysis by Simon Jennings

Botswana, Eswatini, Jordan and Namibia had been placed on the EU’s grey list for countries that fall short on international tax practices. All four had been given until 31 August 2020 to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters or be included on the EU’s blacklist which currently constitutes 12 other jurisdictions and is reviewed twice a year. They must also ratify the Convention by 31 August 2021. The signing by Botswana and Namibia represents some progress in tackling fnancial crime in Africa, particularly in light of last month’s fndings by the United Nations Conference on Trade and Development (UNCTAD) that an estimated $88.6 billion is lost due to illicit fnancial fows on the continent.

28 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OECD report on the use of intermediaries in foreign bribery schemes

The Organisation for Economic anti-bribery reporting mechanism, the audit opinions. OECD enforcement data Co-operation and Development (OECD) high-level authority chosen to oversee also shows that in 75 percent of the published on 23 September two the project needs to be credible, fair cases the company’s senior reports on tackling bribery and and free from political bias. In addition, management was involved in bribery misconduct in government-funded the relevant public ofcials need to and most frequently the illicit behaviour projects and the use of intermediaries possess expertise to assess the reports involved more than one individual. in foreign bribery schemes. and protect potential whistleblowers. Concurrently, the OECD published a The OECD study on preventing bribery Based on the analysis of 115 foreign third study on corporate anti-corruption in public procurement presents best bribery enforcement actions between compliance drivers, mechanisms and practices in using the High-Level 2014 and 2018 in OECD countries, the ideas for change, which aims to identify Reporting Mechanism (HLRMs), a second study covers the role of lawyers which types of resources companies non-legal tool developed in 2012 to give in bribery facilitation either as use to develop effective anti-corruption companies an alternative means to intermediaries or gatekeepers, in compliance programmes. report bribery and corruption issues to consolidating corrupt transactions or an external high-level ofce that is the laundering of illicit gains. In 35 OECD study on tackling br... transparent and objective. percent of the cases, accountants and/or auditors were involved in OECD study on the role of... By analysing case studies in Colombia furthering a foreign bribery scheme by and Argentina, the OECD concludes that giving the appearance of legality to Basel Institute of Govern... for the effective implementation of an accounting books or issuing unqualifed

GRECO publishes report on San Marino

prevent corruption and improve Put in place supervision and transparency and accountability. enforcement policies to oversee parliamentarians’ private interests GRECO has issued 14 new recommendations to San Marino, Implement corruption prevention including the adoption of a training for parliamentarians parliamentary code of conduct in tandem with a new system designed to Ensure transparent processes for require public declaration of assets, in appointing judges addition to private interests that may hold sway over political action. Improve access to judicial decisions

The Council of Europe’s Group of Revise laws on judicial liability States against Corruption (GRECO) GRECO’s recommendations published its report on San Marino on Council of Europe press r... 29 September, which recommends that Introduce guidance and the microstate reforms the mechanisms for confict of interest GRECO report composition of its Judicial Council to resolution

29 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OECD publishes study on drivers of corporate anti-corruption compliance

The OECD published its study on ‘Corporate Anti-corruption “very signifcant” factor. Respondents also noted that Compliance Drivers, Mechanisms and Ideas for Change’ on high-profle anti-corruption probes were also a motivating 23 September, which analyses the extent to which factor in developing compliance measures, with respondents companies are motivated to employ measures to detect and from Europe and Latin America respectively referencing the prevent bribery and corruption, and seeks to identify what well-publicised recent investigations into Odebrecht and resources companies use to develop effective Siemens as having highlighted the importance of effective anti-corruption compliance programmes. anti-corruption programmes.

The OECD based its fndings on information obtained through Respondents noted that a survey of 130 business representatives, predominantly legal and compliance professionals from across the high-profle anti-corruption healthcare, manufacturing, fnancial services, and energy sectors. OECD also conducted interviews with 15 of these probes were also a motivating respondents to provide additional analysis of the fndings. factor in developing compliance

Of the 130 respondents, 124 said that their company had an measures anti-corruption compliance programme in place. The report acknowledges, however, that this is not indicative of the Respondents noted that undertaking due diligence work can percentage of companies worldwide that have implemented require signifcant fnancial resources, suggesting that a such programmes, noting that companies with no system under which companies can share information on compliance programme would be less likely to participate in third-parties amongst contractors might make the process of a survey of this kind. The report posits that smaller conducting compliance research more affordable. companies are less likely to have compliance programmes in place, owing to a belief that they are too small to be targeted Respondents also indicated that companies would beneft by enforcement authorities or to a lack of fnancial resources from opportunities to share best practices amongst one or personnel. The OECD found that this was refected in the another, either in the form of conferences and seminars or results of its survey, which found that 111 of the 112 large partnerships with international organisations, through which companies approached indicated that they had an they could share information confdentially, allowing anti-corruption compliance programme, compared to just 13 companies to explore options without incurring any potential of the 18 SMEs surveyed. reputational risk.

Of those respondents who indicated that their companies OECD press release had an anti-corruption compliance programme in place, more than 88 percent stated that a desire to protect the company’s OECD report reputation was a “signifcant” or “very signifcant” factor in developing the programme, while more than 80 percent OECD recorded version of the webinar identifed the avoidance of prosecution as a “signifcant” or

30 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Review of Istanbul Anti-Corruption Action Plan

The Organisation for Economic still not risk-based, policy development systems, particularly involving effective Co-operation and Development (OECD) processes do not include key corruption verifcation and following up on published on 29 September the results risk areas, and the impact of violations. Furthermore, the report of its fourth round of corruption anti-corruption policies is not being notes signifcant progress made in monitoring reforms during 2016 and properly measured. Additionally, offering access to public registries, 2019 in eastern Europe and central specialised coordination and prevention including on benefcial ownership (BO), Asia, known as the Istanbul bodies’ mechanisms are being while potential tools for business Anti-Corruption Plan, targeting overshadowed by law enforcement and integrity such as whistleblower Armenia, Azerbaijan, Georgia, lacked resources, visibility, and protection and reporting channels are Kazakhstan, Kyrgyzstan, Mongolia, authority, with the OECD recommending seldom used. However, in the case of Tajikistan, Ukraine, and Uzbekistan. empowering them but also subjecting Ukraine, the OECD identifed several The report includes recommendations them to periodic assessment. defciencies, including incomplete and for effective anti-corruption policies unverifed data, companies declaring no and institutions as well as preventing The OECD report identifes several BO without explanation, company and combatting corruption at the challenges in corruption prevention, founders being automatically sectoral level. including ensuring public sector ethics recognised as benefcial owners, and among MPs and other political ofcials, benefcial owners’ identities not being According to the OECD report, the risk of politicisation in relation to requested or verifed. anti-corruption policy planning and senior positions in civil service, monitoring of anti-corruption policies’ conficts of interest in the OECD press release implementation registered some upper-echelons of regulatory improvements. However, in most enforcement, and introducing or OECD report countries anti-corruption policies are reforming asset and interest disclosure

World Bank report on anti-corruption challenges

The World Bank Group published on 22 recommends effective uses of asset political leadership committed to September a report assessing the and interest declarations (AIDs), supporting increased integrity, stronger challenges that governments face in improving benefcial ownership institutions, open and transparent tackling corruption in fve key areas transparency policies, and increasing government policies, and access to including public procurement, public tax information exchange and information. Furthermore, other drivers infrastructure, state-owned collaboration on tax crime include incentives adopted following enterprises, customs administration, investigations. Benefcial ownership the analysis of corruption at and services’ delivery, as well as reforms are recognised as an micro-levels, technology focused on assessing the most effective indispensable tool in the fght against capturing data that helps establish instruments for reform. fnancial crime, however it is noted that accountability, and efforts to foster there are still challenges to be met, collaboration among multiple According to the report, there are such as the need for identifying an stakeholders. several key instruments for fghting effective means of verifying the corruption, including promoting open information. World Bank press release government initiatives, deploying disruptive technologies, and increasing The report includes six anti-corruption World Bank report access to digital data. The report reform cross-cutting drivers, specifcally

31 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OECD reports on nine jurisdictions' transparency and information exchange compliance

The Organisation for Economic inactive companies and ensure the requested information in line with Co-operation and Development’s availability of ownership, international standards (OECD) Global Forum on Transparency accounting, and banking and Exchange of Information for Tax information Greece should improve the Purposes published on 1 September a availability of BO and accounting series of reports on nine jurisdictions’ Chile should expand the scope of its information, especially for shipping progress in implementing the legislation on benefcial ownership companies, and ensure the timely international standard on transparency (BO) to cover all relevant entities exchange of information and the exchange of information on and bring the defnition of benefcial request (EOIR), fnding most states owners for legal entities and Korea should improve the ‘largely compliant’, while Malta was arrangements in line with the availability of BO information, as rated as ‘partially compliant’ and international standard well as ownership and accounting Anguilla was deemed ‘non-compliant’. information on inactive companies China should improve the Key recommendations include availability of BO information, while Papua New Guinea should improve the supervision of fnancial its monitoring and supervision of Anguilla should implement rules on institutions should be enhanced BO availability and accounting the availability of accounting information records and improve its It is recommended that Gibraltar responsiveness to requests improves the availability of BO Uruguay should ensure the timely information, in addition to improving availability of banking information Malta should enhance enforcement, the exercise of enforcement powers supervision, and monitoring in accessing information and OECD press release activities to reduce the number of interpreting the relevance of

US investor visas reportedly open to corruption

A report by Transparency International agencies all purportedly told the attorneys offering advice on how to Russia released on 28 September undercover investigators that the demonstrate the legality of funds using claims that an expansive network of investment’s origins would not be a such dubious means as property fraudulent US granting of EB-5 visas to problem, even offering suggestions on investments or obtaining work Russian investors has taken place how to falsify benefcial ownership contracts through friends. The report based on a sting investigation documentation. Of the US attorneys, notes that compared to EB-5 applicants launched in 2016. one allegedly offered assistance in from China and India, who generally pairing the undercover investigator with wait ten years before their US investor The Russian branch of the German a Russian colleague who could assist in visa is approved, Russian investors investigatory watchdog frst contacted shielding the fctional funds’ origins. typically only wait two years before ten Russian agencies and seven US approval. attorneys posing as Russian investors, Following up in 2019, interviews with suggesting that their investment money ten US attorneys in reference to “grey Transparency Internationa... may have dubious origins. The Russian salaries” yielded nine out of the ten

32 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 French AFA publishes results of anti-corruption review of private sector companies

The French Anti-Corruption Agency complaint. The survey found that 11 the survey, 13.5 percent of these (AFA) published on 21 September its percent of reported corporate companies have reported corruption national analysis of anti-corruption complaints resulted in a conviction. cases in the last fve years, of which 26 measures by private sector companies, percent have engaged in at least one based on the results of a January AFA reports that 70 percent of the disciplinary procedure. Adding to this, survey investigating the level of respondents have implemented a only 50 percent of SMEs have a anti-corruption awareness among prevention system, but more progress prevention mechanism in place, a head private sector entities and following an is needed in relation to anti-corruption of compliance was appointed in 27 inventory of corporate anti-corruption risk mapping, staff training, adopting percent of cases, while more than 25 systems in France. internal alert systems or control percent declared that the risk of mechanisms, third-party assessment corruption was not considered in their According to the review, 22 percent of and strengthening the head of procedures. responding companies have been compliance’s role. confronted with a corruption case AFA press release (in Fre... within the last fve years, of which 51 The report mentions that SMEs have percent undertook disciplinary actions been slow to adopt anti-corruption AFA paper (in French) and 20 percent fled a related criminal prevention mechanisms. According to

US GAO report assesses BSA opportunities for law enforcement, compliance costs

The US Government Accountability most federal and state law enforcement agencies about BSA reports and Ofce (GAO) submitted a report on 22 agencies, and that these law encourages more use of the resource. September on anti-money laundering enforcement agencies utilised the (AML) to the US House of database 31 percent more in 2018 than As part of the report, GAO also Representatives Subcommittee on in 2014 in conjunction with reviewed 11 US banks of varying sizes, Consumer Protection and Financial investigations of fnancial crime, such fnding that they spent between 0.4 Institutions of the House Committee on as money laundering, drug trafcking, or percent and 2.4 percent of their total Financial Institutions, recommending corruption. However, GAO noted that 2018 operating expenses on AML and that the Financial Crimes Enforcement local law enforcement agencies, which BSA compliance. The most costly areas Network (FinCEN) puts policies and must request access for individual included verifying a customer’s identity procedures into effect that will searches, rarely do so, even though and reporting suspicious and other encourage federal, state, and local law investigating fnancial crime is common activity, accounting for 29 and 28 enforcement agencies to make more in local law enforcement. In light of percent of the total compliance costs use of Bank Secrecy Act (BSA) reports fndings that many local law respectively. in their investigations. enforcement are not aware that they can access the BSA database, GAO GAO press release According to the report, GAO found that recommends that FinCEN develops FinCEN, as of December 2018, grants written policies and puts procedures in GAO report direct access to the BSA database to place to educate local law enforcement

33 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Jersey publishes national risk assessment

terrorism fnancing in 2021 in order to legislative framework with regards update the NRA and ensure that it is to private funds, which permit constantly being improved. exemptions which create the concept of supported fund Key fndings operators; (3) the limited availability of independent information sources The trust or company service used for know-your-customer (KYC) provider (TCSP) sector, the banking procedures; and (4) the application sector, the funds and the fund of administrative and criminal services business (FSB) sector, and sanctions for AML breaches, as well lawyers have been identifed as as suspicious activity reporting (SAR) practices and compliance The Bailiwick ofJersey government presenting medium/high ML risk in arrangements in smaller frms published on 30 September its frst Jersey, with variance in risk national risk assessment (NRA) of exposure depending on the activity The most common predicate money laundering (ML), which states conducted and the type of offence for ML is tax evasion, that Jersey has a comprehensive institution. For example, the wealth followed by fraud and corruption infrastructure of institutions, laws and management sector’s exposure to processes in place to combat ML, ML risks is higher than that of Jersey has a benefcial ownership however there are certain areas where independent fnancial advisors register which is available to law additional action is required. particularly because the sector is large, and the majority of clients are enforcement only, which was found to be effective in a recent According to External Relations non-Jersey based assessment by the UK as part of a Minister Ian Gorst, the fndings of the bilateral agreement, referred to as NRA will be addressed in an action plan, The main ML vulnerabilities and the Exchange of Notes which will be published over the next 12 areas that require improvement months and will involve the include: (1) the low level of direct Jersey government press r... government, regulators and the supervision of funds and the fnancial services industry. In addition, complex and multi-jurisdictional Jersey NRA report Jersey has committed to carrying out nature of some of the fund reviews to assess the threat of structures; (2) the complexity of the

FATF publishes follow-up report on Myanmar

The Financial Action Task Force (FATF) Myanmar is now rated as “compliant” obligations under Recommendation 15, regional body, the Asia/Pacifc Group on six Recommendations, “largely Myanmar’s compliance has been on Money Laundering (APG), published compliant” on 14 Recommendations, downgraded from “largely compliant” to its second follow-up report on “partially compliant” on 17 “partially compliant”. Myanmar will Myanmar’s AML/CFT measures on 15 Recommendations, and remain subject to the enhanced September, analysing the progress “non-compliant” on three follow-up process. made in addressing the technical Recommendations. The APG has compliance defciencies identifed in identifed improvements in Myanmar’s FATF press release the country’s mutual evaluation report compliance with Recommendations 10, of October 2018. 12, 13, 14 and 24. In light of new FATF FATF report

34 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 FATF issues follow-up report on the Philippines

The Financial Action Task Force (FATF) recommendation. Concerning of new technologies compliance as published on 15 September the Recommendation 20, regarding covered by Recommendation 15 has Asia/Pacifc Group on Money reporting suspicious transactions, APG been re-rated from “compliant” to Laundering’s (APG) frst follow-up re-assessed the country’s rating from “partially compliant”. report on progress made by the “partially compliant” to “largely Philippines in strengthening its compliant”. Recommendation 29, which Overall, in assessing the scope of anti-money laundering and counter the assesses the strength of national regulation, enforcement, and closing fnancing of terrorism (AML/CFT) fnancial intelligence units has been loopholes, the APG noted a general measures, in response to the re-rated as “partially compliant” to positive trend by the Philippines defciencies identifed in the country’s “compliant”, noting that further towards addressing the defciencies, mutual evaluation report (MER) in progress is still needed. with continued room for improvement. October 2019. The Philippines remains subject to the The APG notes that Recommendation enhanced follow-up process. The follow-up report identifes 15 has been updated since the improvements relating to two country’s MER, mainly concerning the FATF press release recommendations and notes a regulation of virtual assets. As such, downgrade concerning one the rating for the Philippines in the feld FATF report

FATF publishes follow-up report on Mongolia

The Financial Action Task Force (FATF) and sanctioning unlicensed money or fnancing of terrorism (AML/CFT) risks regional body, the Asia/Pacifc Group value transfer services (MVTS) and to associated with NPOs. However, the on Money Laundering (APG), published widen the scope of the provision on APG considered the progress on 15 September the third follow-up preventing criminals from being insufcient to warrant a re-rating. report on Mongolia, which details the professionally accredited, initially country’s signifcant progress towards limited to notaries and lawyers. The follow-up report also recommends overcoming the technical compliance Additionally, Mongolia has designated that Mongolia implements the FATF’s defciencies identifed in its 2017 agencies as supervisors for designated standards on virtual assets (VA) and Mutual Evaluation Report (MER). non-fnancial businesses and virtual assets providers (VASP). professions and expanded the number According to the report, Mongolia has of reporting entities to include real Mongolia remains in the enhanced been re-rated from “partially complaint” estate agents and dealers in precious follow-up process and will continue to to “compliant” on Recommendation 14 metals and stones. report back to the APG on its progress. and was found “largely compliant” with Recommendations 28 and 35. Mongolia requested a re-rating on FATF press release Recommendation 1 on assessing risks Specifcally, the report welcomes and applying a risk-based approach and FATF report Mongolia’s efforts to develop a on Recommendation 8, dealing with the framework with a view to identifying anti-money laundering/counter the

35 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UN high-level panel on fnancial accountability and integrity publishes interim report

The UN High-Level Panel on Covid-19 pandemic, especially for During the launch of the report, priority International Financial Accountability, developing countries. FACTI suggests actions for addressing these challenges Transparency and Integrity for improvements should be made to the were discussed, particularly in light of Achieving the 2030 Agenda for architecture for cooperation, taxation of the impact of the Covid-19 pandemic on Sustainable Development (FACTI) the digital economy, fnancial reporting progress towards the implementation launched on 24 September its interim and information exchange. It also of the 2030 Agenda for Sustainable report identifying the major gaps in suggests addressing impunity, tax Development. Pakistan’s Prime Minister implementation and the systemic abuses and the regulation and Imran Khan suggested that authorities shortcomings of the existing supervision of anti-money laundering, in tax haven jurisdictions should international framework for tax and cross-border access to benefcial sanction fnancial institutions receiving cooperation, anti-corruption, and ownership information. and using the proceeds of crime, that a anti-money laundering (AML), more closely regulated framework for including the lack of coordination and Additionally, a systemic approach is corruption’s enablers should be the existence of gaps around inclusion, needed to address structural adopted, and that the exchange of implementation, and enforcement. defciencies in international frameworks benefcial ownership information for settling tax disputes, resolving should occur more swiftly. According to FACTI, $500-$600 billion is impunity in foreign bribery cases and lost annually due to proft-shifting by offering adequate compensations to The fnal report is due to be published multinational enterprises, $7 trillion of victims, ensuring the transparent return in February 2021. private wealth is hidden in tax haven of assets to countries that are the countries, and 2.7 percent of global victims of corruption, and a FACTI report GDP is lost to money laundering, with strengthened peer review process for higher losses expected during the anti-corruption efforts.

FinCEN Director encourages fnancial institutions to be more specifc in SARs

During a webinar organised by ACAMS suitable investigative team. employing money mules, and using on 29 September, the US Treasury cyber fraud techniques. Additionally, Department’s Financial Crimes According to Blanco, from 1 February Blanco stated that FinCEN continues to Enforcement Network (FinCEN) until 12 September 2020, fnancial meet with fnancial institutions to Director Kenneth A. Blanco encouraged institutions fled over 91,000 SARs discuss cyber threats and risks posed fnancial institutions to fle suspicious related to the Covid-19 pandemic and by virtual currencies, and stressed that activity reports (SARs) containing the subsequent stimulus programme, one of the recurrent topics is mitigating checked boxes and more specifc with most SARs fled by banks. The the risks associated with emerging information in the narrative, in order to most common fnancial crime trends payment systems. make them more useful for law during the Covid-19 pandemic have enforcement, whilst enabling reports to thus far involved fraudsters targeting FinCEN press release be more easily allocated to the most Covid-19 related stimulus programmes,

36 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU monitoring centre’s annual drug report details the impact of the pandemic on trafcking

The European Monitoring Centre for Drugs and Drug forms of public transportation due to the introduction of Addiction (EMCDDA) published on 22 September its border controls. However, the movement of bulk European Drug Report 2020, which details the latest trends quantities of drugs between EU member states has and analyses patterns emerging across Europe in the areas continued, OCGs’ activities have adapted to the continued of drug supply, illicit drug use and associated public health commercial transportation of goods throughout the EU to problems, particularly in light of the Covid-19 pandemic. their advantage, concealing drugs in shipping containers

During the launch of the report, the EU Commissioner for South America, West Asia and North Africa are the most Home Affairs Ylva Johansson, together with the Chair of the important source areas for illicit drugs entering Europe, EMCDDA management board, Laura d’Arrigo, and EMCDDA while China is a signifcant source for new psychoactive Director, Alexis Goosdeel, commended the report’s role in substances, drug precursors and related chemicals. emphasising the dangers posed by the production and Heroin, for example, enters Europe mainly through the trafcking of illicit drugs to the health and security of EU Balkan route, but the emergence of trafcking through the citizens, who face an imminent risk of becoming vulnerable Suez Canal and across the Mediterranean Sea has also to drug problems and drug market involvement, as the been observed. Europe is also a producing region for economic repercussions of the pandemic take effect. synthetic drugs, which are mainly manufactured for the European market and exported to other parts of the world South America, West Asia and The seized quantities of the MDMA precursor piperonyl North Africa are the most methyl ketone (PMK) and non-scheduled chemicals for MDMA manufacture have decreased from 26 tonnes in important source areas for illicit 2017 to under 16 tonnes in 2018, however, there is no drugs entering Europe indication of a decrease in MDMA production, which may suggest that an alternative trafcking route is being used

Based on information provided by member states, Turkey and The initial impact of the Covid-19 crisis on patterns of Norway, as part of the annual reporting process, the report drug use comprised signs of declining interest in highlights a number of developments identifed at the end of substances commonly used in social settings (MDMA, 2019, including (1) regulatory challenges and health risks cocaine), and instances of increased use of other posed by the growing complexity of the drug market; (2) substances in some groups (cannabis, new record cocaine and heroin seizures; (3) concerns around benzodiazepines) high-potency cannabis, new synthetic opioids and ecstasy tablets containing high levels of MDMA; (4) an increase in Consumers and dealers began using online darknet synthetic drug production; and (5) the emergence of new markets, social media platforms and parcel and home psychoactive substances (NPS) and novel synthetic opioids. delivery services, due to restrictions on movements which affected street dealing Key emerging patterns identifed since the beginning of the pandemic EMCDDA press release

Regarding international drug trafcking and the operation European Drug Report 2020 of organised crime groups (OCG), the report notes disruption of couriers on commercial airlines or other European Drug Report – key issues

37 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK FCA annual report highlights signifcant increase in investment fraud cases

The UK’s Financial Conduct Authority as of 31 March, there were 71 fnancial The FCA issued 203 fnal notices, (FCA) published on 10 September its crime cases, 15 pensions scam cases, secured 2017 outcomes using its annual report and accounts for 14 investment fraud cases, 88 insider enforcement powers, of which nine 2019/20, which highlights that the dealing cases and 29 market were criminal, and imposed 15 regulator has focused its efforts on manipulation investigations. fnancial penalties of £224.4 million strengthening anti-money laundering and countering the fnancing of In 2019/20, the FCA’s other areas of £116 million was reimbursed to terrorism (AML/CFT) supervision, focus included developing a clear victims of push payment fraud, an ensuring frms have implemented regulatory framework to reduce harm increase of 40 percent from 2018 appropriate anti-fraud safeguards, with from cryptoassets; ensuring consumer a focus on payments and investments protection during the pandemic; Reported authorised push payment sectors, and that frms have increased infuencing the global response to (APP) fraud increased to £455.8 their resilience to cybercrime. FinTech and RegTech to better prevent million from £354.3 million in 2018 fnancial crime; and developing During the year the FCA analysed approaches to tackling consumer harm The FCA received over 1,000 fnancial crime returns from 2,000 frms, within and around the FCA perimeter. requests for assistance and which will inform the three-year disclosures from international fnancial crime trend report expected to Enforcement highlights counterparts to help tackle fnancial be published in the second half of 2020. services misconduct internationally Opened cases decreased by 46 The number of AML enforcement percent from 343 in 2018 to 184 in FCA press release investigations under way increased to 2019/20, while closed cases 65 and fve enforcement investigations decreased by 2 percent; the highest FCA annual report for fnancial crime systems and increase in the number of opened controls failings were launched in cases concerned investment scams FCA overview of enforceme... 2019/20. Of a total of 646 open cases

Isle of Man progress in tackling fnancial crime

The Isle of Man government published Team (ICART) in December 2016 institution to satisfy a foreign on 21 September a report on the and an increase in resources for confscation order progress made in combatting money ICART and other AML institutions. laundering and terrorist fnancing. The Since 2016, more than £5 million in Updates to the national risk report is a review of the country’s investments has been made to assessment and a review and progress in adopting Moneyval’s these institutions restructuring of the national recommendations made in 2016. AML/CFT oversight framework Recovery of more than £24 million The developments include in illicit funds since January 2019, Government press release on behalf of foreign institutions. Of The creation of the International this amount, £17.9 million was Review report Cooperation and Asset Recovery confscated from a local fnancial

38 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 British Virgin Islands commits to publicly accessible benefcial ownership register

Addressing the British Virgin Islands avoiding the misuse of local information based on the (BVI) House of Assembly on 22 companies, products and offerings for demonstration of probable cause. September, the Premier and Finance the furtherance of illicit activities. Minister of the BVI, Andrew A. Fahie, Eight of the UK's overseas territories – confrmed the territory’s commitment According to Fahie, one of the Anguilla, Bermuda, the Cayman Islands, to implementing a publicly accessible government’s concerns is the wide net the Falkland Islands, Montserrat, the benefcial ownership register for which the current model uses and its Pitcairn Islands and St Helena, companies “in line with international implication on the privacy of Ascension Island and Tristan da Cunha, standards and best practices as they benefciaries who, in some cases, are and the Turks and Caicos Islands – develop globally […] by 2023”. minors. In order to address the risk of have committed to introducing publicly exposing vulnerable individuals to the accessible registers of company Fahie also emphasised BVI’s potential danger of making their benefcial ownership within the next commitment to adhering to global personal information publicly three years as part of their efforts to standards on combatting money accessible to ill-intentioned individuals, improve fnancial transparency. laundering and countering the fnancing Fahie has written to the UK government of terrorism, particularly to the recommending alternative models that BVI Premier statement exchange of benefcial ownership allow access to the various levels of information under the Exchange of data contained in the register, such as UK government statement Notes signed in 2016, as well as to the use of court orders for releasing

UK FCA publishes regulatory perimeter report

The UK’s Financial Conduct Authority fnanciers, and government ofcials on During the FCA’s annual public meeting (FCA) published on 29 September its how to better prevent harm in light of held on 24 September, scam annual regulatory perimeter report, the Covid-19 pandemic. advertisements on online platforms which provides an update on the were discussed in response to a progress made since its previous An area in which the FCA made question from the public. Chairman of report and details other areas where recommendations for where others can the FCA Charles Randell stated that the FCA continues to see harm to play a part is in assessing how large change by online platforms and if consumers and market users. frms operating outside the perimeter necessary, change through legislation is can better assist customer protection required to better protect consumers One action discussed in the report to and harm prevention. Naming Google from scam ads displayed on Google, prevent harm in terms of fraudulent specifcally in the context of major Twitter and Instagram. investments is a January intervention to online platform operators, the FCA halt for 12 months widely marketed report states that such operators ought FCA press release debt securities and preference shares to hold “legal liability for the fnancial which the FCA deemed to be promotions they pass on”. The report FCA report speculative and illiquid. The FCA is now notes that the FCA is considering with consulting on whether to make the ban HM Treasury a potential fnancial FCA annual public meeting permanent. In addition, the regulator is promotions regime that would oversee seeking comments from consumers, such operators.

39 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 House of Commons publishes briefng on economic crime in the UK

The briefng also refers to the Treasury Committee’s December 2019 fndings that numerous legal failings and regulatory shortcomings were to blame for lapses in criminal detection and prosecution, while the Financial Action Task Force (FATF) also identifed gaps in investigatory resources in 2019.

Some of the action points identifed as requiring legislation

Amendments to the Proceeds of Crime Act to improve confscation The House of Commons Library supporting fraud victims, and actions published on 28 September a responding to illicit Russian fnancial government briefng on economic activity in the UK. Establishing liability for corporate crime’s impact on the UK, with the crime and penalties for report noting that only 23 percent of According to the House of Commons company-afliated fnancial crimes the actions detailed in the Library, the briefng follows the leak of government’s July 2019 Economic “FinCEN Files” which revealed the large Abilities to remove partnerships Crime Plan have been completed. scope of fnancial crime in the UK, from Companies House registers spurring a Treasury Committee query The report notes the difculty in as to what increased action the Increasing property ownership determining the exact losses caused by government can take to combat transparency fnancial crime to the UK economy, economic losses from fnancial crime. citing one estimate by the Treasury Preventing certain company stock Select Committee that losses may run The Royal United Services Institute listings based on national security into the hundreds of billions of pounds. (RUSI), in addition to their fgures on the concerns The briefng notes the issues that must plan’s progress, noted that 9 percent of be addressed, which includes the actions detailed in the UK’s Economic House of Commons briefng proposed economic crime levy, the Crime Plan are overdue and 6 percent implications of Brexit, the creation of a paused or indeterminate, with nearly 60 benefcial ownership register, percent of planned actions in progress.

Aperio Analysis by Edoardo Fiora

In the face of the current pandemic, the UK government urgently needs to press ahead with its plans to address economic crime risks, given the scale of suspicious money fows into or via the jurisdiction and their potential harm to society. The recent FinCEN Files have again highlighted concerns that the UK in particular remains a weak point in AML supervision, exacerbated by noted vulnerabilities surrounding company registration measures, the effectiveness of the SARs regime, and a general lack of funding of the UK FIU.

40 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Malta FIAU publishes intelligence factsheets on most frequently reported fnancial crimes

Based on its analysis of suspicious gaming operators (RGOs) in 2019, customers when requested to transaction reports (STRs), Malta’s the most frequently identifed provide supporting documentation Financial Intelligence Analysis Unit predicate offence was fraud, (FIAU) issued between 25 and 30 followed by illegal gambling, In relation to the cash remittance September four factsheets aimed at forgery, tax crime and robbery sector, the FIAU’s analysis of STRs providing obliged persons with insight from 2017 to May 2020 identifed a into tax crime, corruption and bribery, The most reported predicate series of defciencies in AML and AML vulnerabilities in the money offences in STRs related to control frameworks, such as: an remittance industry. The factsheets ATM/over-the-counter cash inability to fag up transactions in include details on the types of STRs deposits were tax crimes; terrorism excess of the required threshold or and requests for information received and/or terrorist fnancing (TF) multiple transfers from the same by the FIAU and they also present activities were the most frequently account; a failure to identify linked aggregate data on the most frequent reported offence in the case of ATM transactions or payments by the suspected predicate offences. cash withdrawals same customer through different agent networks; an inability to Key insights include The most prevalent suspected report transactions that are predicate offences conducted inconsistent with the customer’s Fraud and tax crimes were the most abroad in the STRs submitted profle; a focus of the transaction reported offences in STRs between 2010 and 2019 by RGOs monitoring system on post-factum submitted to the FIAU from 2015 to and credit institutions referred to monitoring 2019, while 3 percent of all SARs fraud, tax crimes, bribery and referred to the suspicion of money corruption FIAU factsheet on cash us... laundering (ML) derived from corruption and bribery The most common red fags in tax FIAU factsheet on remote ... crime related STRs were In relation to the 1,445 STRs that unexplained or inconsistent FIAU factsheet on interna... the FIAU received from remote transactional activities and the identifcation of uncooperative

Malta AML/CFT report on money remittance

Malta’s Financial Intelligence Analysis According to the regulator, the identifed defciencies in transaction monitoring Unit (FIAU) published on 30 September defciencies include business risk systems. The regulator received a total a paper on the fndings of a study assessments not taking all risks into of 98 suspicious transaction reports undertaken in conjunction with the consideration, and the assessment of (STRs) between 2017 and 2019 from Malta Financial Services Authority reputability to identify those money remitters, 87 percent originating (MFSA) on the effectiveness of jurisdictions that pose higher ML/FT from three reporting entities. controls to mitigate money risks not being carried out by the laundering/terrorist fnancing (ML/TF) majority of subject persons. Malta FIAU paper risks by money remittance services, Additionally, customer risk assessment noting that even though controls are methodologies are often lacking or not being applied, weaknesses remain. sufciently transparent, with

41 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 FATF President outlines focus on information sharing to help combat terrorism fnancing

The President of the Financial Action partnerships with the private sector fnancing while maintaining a high level Task Force (FATF), Dr Marcus Pleyer, have consistently proven valuable in the of data protection”, added Pleyer. delivered a speech at the OSCE-wide fght against terrorist fnancing. counter-terrorism conference on 15 FATF’s aim is to identify regulatory September, in which he explained Regarding FATF’s focus on digital obstacles to the adoption of new FATF’s work to combat terrorism transformation, Pleyer illustrated how technologies and identify opportunities fnancing, emphasising the importance technological advancements offer for public authorities in the use of of public-private cooperation and opportunities, which could help digital solutions to facilitate secure FATF’s focus on the digital public-private partnerships more information sharing between public and transformation of AML/CFT. effectively fght terrorism fnance. private sectors. Pleyer confrmed that Financial intelligence units and law the FATF’s work is ongoing to fnalise On improving public-private enforcement agencies need to new guidance on investigating and cooperation, a key part of the FATF’s transform their capability to make prosecuting terrorist fnancing, which operational plan on combatting terrorist better use of data from the private will include practical advice on fnancing is to promote more effective sector. Governments “need to create an supporting investigations through domestic coordination and international enabling environment where private engagement with the private sector. cooperation, and improve information sector partners can also leverage this sharing. Pleyer stressed that information to protect against terrorist FATF president speech

North Korea continues nuclear and sanctions evasion activities, according to UN

The International Atomic Energy In a mid-term report released on 28 channels through its own bank Agency (IAEA) Director General Rafael August, the Panel of Experts appointed representatives, joint ventures and shell Mariano Grossi stated during the IAEA by the UN Security Council’s DPRK companies. annual conference on 21 September Sanctions Committee confrmed that that the ongoing nuclear activities by the country maintains its nuclear The Panel of Experts warned that DPRK the Democratic People's Republic of facilities and continued to produce continues its illicit imports of refned Korea (DPRK) in violation of UN fssile material between February and petroleum products through Security Council (UNSC) resolutions August, including by purchasing ship-to-ship transfers and direct remain “a cause for serious concern”. materiel and technologies from abroad, deliveries far above the 2020 agreed in violation of UN sanctions. ceiling of 500,000 barrels and secured Grossi called on the DPRK to fully income from the illicit transfer of comply with its obligations under the The UN report fnds that North Korea fshing rights and illegal coal exports. UNSC's resolutions and the bypassed the UN sanctions by Non-proliferation Treaty (NPT) unlawfully obtaining fat currency and IAEA director general ope... Safeguards Agreement, while virtual assets, carrying out cyberattacks announcing that the Agency is prepared against critical infrastructure to obtain UN Panel of Experts mid-t... to verify the DPRK’s nuclear dual-use technology and attempting to programme. gain access to international banking

42 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 RUSI report details illicit North Korean trade through Dandong-based companies

The Royal United Services Institute and advertising North Korean items that RUSI’s report should “raise questions (RUSI) published a report on 4 were probably manufactured by North regarding China’s implementation of September mapping North Korean Korean entities designated by the UNSC sanctions it has itself supported at the trade networks that operate through for operating in support of DPRK UNSC” and suggests that foreign trade the Chinese border city of Dandong, nuclear weapons proliferation. The involving the DPRK has likely been where as many as 86 Democratic report also claims to have found underestimated. Closer cooperation Republic of Korea (DPRK) company evidence that many of the Chinese and increased trade may also follow branches were shown to operate, along companies in Dandong advertised Kim Jong Un’s 2019 announcement to with 150 Chinese companies that goods on Chinese platforms that are of further develop the DPRK border town purportedly account for a quarter of North Korean origin and exported of Sinuiju, which sits across the Yalu global North Korean exports, many of prohibited items to North Korea. River from Dandong. The report notes them illicit and in violation of UN that recent data shows that China Security Council (UNSC) sanctions. Surveying the Dandong-based accounts for 96 percent of DPRK companies that engage in cross-border merchandise trade with the outside The RUSI report draws on the trade, RUSI purportedly found that the world, with 2015 fgures demonstrating Chinese-North Korean trading list from main trading partners were government that 60 percent of all Chinese-DPRK 2017, as well as publicly sourced and military entities of the DPRK, trade came through Dandong. documents and cross-border trade furthering the potential for UNSC analysis from September 2014 until the sanctions violations. Such violations Another report on cross-border illicit end of 2017. Illegal activity is alleged to have also involved fnancial institutions business activity between China and have been carried out by Chinese in Dandong, with the report referencing the DPRK will follow. companies in Dandong including the 2017 US Treasury Department brokering, selling, and importing North designation of the Bank of Dandong for RUSI report Korean resources in violation of UN allowing transactions by companies sanctions; owning and operating North procuring missile technology on behalf RUSI report summary Korean-fagged ships that engage in of the DPRK military. prohibited coal exports and oil imports;

UK PSR publishes annual report

The UK’s Payment Systems Regulator implementation of the Contingent mule accounts used by criminals to (PSR) published on 10 September its Reimbursement Model (CRM) Code, receive fraud proceeds. Lastly, the annual report and accounts, presenting which sets out the steps banks should regulator continued to monitor Direct its main achievements in tackling take to help prevent authorised push Debit scheme changes, which aim to payments scams, protecting fraud payment (APP) scams and to reimburse ensure the identifcation of fraudulent victims and in supporting the renewal victims, and the UK’s roll-out of refund claims. of the interbank payment system. Confrmation of Payee (CoP). PSR press release According to the report, to help combat Furthermore, the PSR has engaged with the risk of new scams emerging during the relevant stakeholders on the PSR report the Covid-19 pandemic, the regulator delivery of the Mule Insights Tactical has provided support for the Solution (MITS), which helps identify

43 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK anti-slavery commissioner's annual report

The UK’s Independent Anti-Slavery Commissioner, Dame The annual report outlines the Commissioner’s work to Sara Thornton, published on 17 September the annual report achieve the objective outlined in the Strategic Plan 2020-21, for 2019/20. The report calls on fnancial institutions to help structured around four priority areas of improving victim care put modern slavery on corporate agendas. According to the and support, supporting law enforcement and prosecutions, report, as modern slavery is often intertwined with fnancial focusing on prevention, and gaining value from research and crime, banks can be an essential tool in detecting illegal innovation. The Commissioner supports the research project fnancial fows from criminals who proft from slavery. conducted by Themis and the TRIBE Freedom Foundation which engages with a broad range of fnancial institutions to The report examines the role the investment and banking gauge the level of activity and work collectively on solutions. community can play in halting modern slavery, particularly as supply chains have been weakened by the Covid-19 Independent Anti-slavery Commissioner press r... pandemic, with the report predicting a subsequent rise in modern slavery cases. The report notes that the number of Annual report 2019/20 modern slavery operations has increased by 29 percent in the past year, while prosecutions have not kept pace.

Hong Kong looks to enhance AML/CFT SupTech

The Hong Kong Monetary Authority (HKMA) issued a circular encourages authorised institutions and SVF circular on 29 September informing authorised institutions licensees to assess the implications for their ML/TF risk and stored value facility licensees (SVF licensees) on the management systems, particularly with regards to the implementation of the AML/CFT surveillance capability adoption of RegTech solutions. enhancement project (AMLS project), aimed at strengthening the use of innovative technology (SupTech) in AML/CFT supervision study observations include its risk-based AML/CFT supervision. The HKMA also released a publication on ‘AML/CFT Supervision in the Age AML/CFT supervision could become more proactive and of Digital Innovation’, which provides an update on the targeted through the use of data analytics that leverages progress made since the 2019 RegTech Forum. richer data environments

The AMLS project is one of HKMA’s Digitalisation Programme HKMA can enhance supervision through leveraging initiatives to mitigate the risks and grasp the opportunities advances in data collection, storage and processing to resulting from new and emerging technologies. The become more adept at anticipating and prioritising Digitalisation Programme is aimed at supporting HKMA’s emerging threats digital transformation in terms of banking supervision, AML, fnancial stability surveillance, economic research, and Supervision can be improved through deeper reserves management. collaboration across the AML/CFT ecosystem, in particular through public-private partnerships Based on the fndings of the AML/CFT supervision study, HKMA outlines key priorities over the next three years, HKMA circular for authorised institutions including: enhancing its ability to source, capture, store and process data across the full spectrum of AML/CFT HKMA circular for stored value facility licen... supervision activities; and adopting techniques such as horizon scanning, alongside existing collaboration with public HKMA AML/CFT supervision in the age of digita... and private sector partners on threat mitigation. HKMA’s

44 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 University of California audit report fnds 64 applicants admitted based on unfair procedure

California’s State Auditor published on students based on their family establishing criteria for admitting 22 September a report on the donations history or because they were applicants and profciency standards University of California’s (UC) related or connected to university staff. for reviews. Additionally, the Ofce of admissions process at four campuses, The Auditor found that the University’s the President is advised to oversee UC noting that from the academic years Ofce of the President has allowed Berkley’s admissions process for at 2013-14 through to 2018-19, there weaknesses to persist and has not least three cycles and regularly audit were 64 applicants admitted based on ensured a fair admissions process campuses’ admissions processes and personal and family connections to across its campuses. the ELC programme. donors and university staff. To address the vulnerabilities, the In 2019, US prosecutors charged 50 According to the report, UC campuses report recommends that the Ofce of individuals involved in a nationwide in Berkeley, Los Angeles, San Diego, and the President requires campuses to college admissions scandal in which Santa Barbara unfairly admitted 22 verify athletic talent and review UC was implicated. students through their student-athlete donation records before admitting process, while Berkley admitted 42 prospective students as well as California Auditor of Sta...

US subcommittee report on potential PPP fraud

The US House Select Subcommittee on On 10 September, Acting Assistant having performance or integrity the coronavirus crisis published on 1 Attorney General Brian Rabbitt issues. While guidance did not September a report which indicates announced that since May the DOJ has expressly prohibit loans to that the Paycheck Protection charged 57 individuals over PPP-related companies with performance Programme (PPP) might have resulted fraud worth $175 million. issues, the substantial value of in “billions of dollars being diverted to these loans raised questions about fraud, waste, and abuse”. Key fndings from the report the responsible allocation of taxpayer funds A letter from subcommittee Chairman 613 loans, totalling over $96 million, James E. Clyburn to the Small Business were given to companies 11,365 loans were granted to Administration (SBA) and the Treasury suspended or debarred from companies which had different Department urges the government to contracting with the federal addresses in their application to review the management of PPP. The government. The high number of those on the government’s System subcommittee calls for the loans to suspended companies led for Award Management database development of stronger internal the subcommittee to question controls to detect fraud and whether the list of excluded US House Select Subcommit... improvement of the audit plan to ensure companies had been consulted loans under $2 million are reviewed. before approval Preliminary analysis of P... Under PPP rules, the Treasury and the SBA only committed to auditing loans 353 loans, worth roughly $195 Letter to SBA and Treasur... over $2 million which meant the million, were disbursed to majority of loans had little or no companies which were listed as oversight.

45 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU Commission President promises Magnitsky Act during State of the Union address

During the State of the Union address abuses whenever and wherever they would be published by the end of at the European Parliament (EP) occur. In order to speed up the process, September. This new report is intended plenary on 16 September, European she suggested adopting qualifed to function as “a preventive tool for Commission (EC) President Ursula von majority voting on human rights and early detection of challenges and for der Leyen reafrmed the EC’s sanctions implementation. “This House fnding solutions”. commitment to the rule of law, has called many times for a European including by ensuring that EU funds are Magnitsky Act – and I can announce Von der Leyen also underlined the need protected against fraud, corruption and that we will now come forward with a for a common plan for digital Europe, confict of interest and promising to proposal”, added von der Leyen. guided by the right to privacy and deliver a European e-identity and connectivity, freedom of speech, free European Magnitsky Act proposal. The EC President underlined that fow of data and cybersecurity breaches of the rule of law and attacks principles and promised to propose a On the subject of global affairs, von der against European institutions’ integrity secure European e-identity. Leyen expressed the need for Europe to will not be tolerated. Von der Leyen also take clear and quick actions, which announced that the frst annual rule of EU Commission press relea... includes calling out human rights law report covering all member states

IMPACT report urges Rwanda and Uganda to address gold smuggling routes through DRC

to the gold industry and governments IMPACT suggests that the DRC should of the DRC, Rwanda, and Uganda to enforce its money laundering and tackle the problem. foreign exchange regulations in line with FATF recommendations and According to the report, gold smuggling ensure all licences include benefcial networks in eastern Congo are highly ownership information, while Rwanda iterative and composed of the same and Uganda should foster regional individuals and entities named in UN cooperation between law enforcement reports. Neighbouring countries are agencies to identify the trade reportedly failing to perform customs discrepancies and customs practices controls and apply due diligence on that facilitate smuggling, enhance gold imports and exports, while traders regulatory control, and ensure all supply The Canadian non-governmental and exporters are establishing chain actors comply with the OECD’s organisation IMPACT published a commercial entities along the entire due diligence guidance. report on 17 September exploring the supply chain to maximise profts and illicit gold trade from the Democratic render due diligence ineffective. Finally, IMPACT brief Republic of the Congo (DRC). The the report states that the incentive to report suggests that the illicit trade is work outside the legal economy is IMPACT report potentially linked to money laundering, great, due to high taxes and armed groups, and human rights administrative burdens on exports. abuses and includes recommendations

46 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 LBMA publishes gold sourcing report amid push to increase industry transparency

The London Bullion Market Association strategic expansion to include regulations also rely on the (LBMA) launched its frst annual Environmental, Social and Governance investigative powers of national Responsible Sourcing Report on 17 (ESG) issues in its reporting. LBMA CEO authorities, compliance by fnancial September to identify national origins Ruth Crowell added in the report’s institutions and companies that utilise of precious metals and demonstrate introduction that the LBMA has precious metals, and additional where gold and silver is being mined established a three-year action plan to stakeholders who provide necessary and refned, as part of efforts to improve the transparency and integrity research and feedback to assist all increase transparency. The frst annual of the precious metals industry at large. parties in the gold and silver supply report reviews refnery and auditing Paramount to that strategy is chain. In assessing constant risks, the reports on gold sourcing while also “enhancing controls and due diligence report notes that the three primary establishing the programme’s scope, for recycled material” and “creating real examples of residual risks primarily compliance objectives, and reviewing demand for responsibly sourced involve recycled material, from an the performance of gold refners. precious metals from Artisanal and inability to identify the origin of such Small-Scale Miners” (ASM), which material, to re-refning of ill-gotten LBMA Chairman Paul Fisher said that in accounts for the livelihood of over 40 recycled material, and the fraudulent addition to including the country of million people. trading of precious metals. origin data for all gold and silver refned by the association’s Good Delivery List The LBMA report identifes a LBMA press release (GDL) refners, the new annual report responsible sourcing ecosystem, noting comes on the heels of the LBMA’s 2019 that the industry’s due diligence LBMA report

UN experts on Yemen concerned about human rights abuses and transfers of arms

The UN High Commissioner for Human Transitional Council, as well as indepth criminal probe into the Rights published on 14 September a members of the coalition. perpetrators of the worst abuses in comprehensive report by the Group of the Yemen confict, supported by Experts on Yemen, which has Key takeaways from the report the UN Security Council and investigated several incidents member states, similar to the one occurring from July 2019 to June 2020 Concern was expressed about the created by the UN General and reveals that all parties to the continued transfer of arms by third Assembly in 2016 to investigate confict in Yemen have continued to states to the parties to the confict, abuses in the Syrian confict, known perpetrate numerous violations of which is “only perpetuating the as the International, Impartial and international human rights and confict and prolonging the Independent Mechanism (IIIM) humanitarian laws. suffering of the Yemeni people”, according to the Group of Experts’ UN report on Yemen The report states that violations have Chairperson Kamel Jendoubi been committed by the government of Accompanying statement Yemen, the Houthis, the Southern The experts called for a more

47 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Somali money transfer operators move illicit funds for Yemen arms dealers, claims NGO

Geneva-based Global Initiative against illicit funds. Al-Hayashi was listed by develop a national identifcation Transnational Organised Crime the US Treasury Ofce of Foreign system. Finally, MTOs should consider (GI-TOC) published on 17 September a Assets Control (OFAC) in 2017 for developing and strengthening internal study on the use of four hawala money fnancing Al-Qaeda in the Arabian disciplinary mechanisms, while transfer operators (MTOs) by six Peninsula (AQAP) operations in Yemen international naval missions operating suspected weapons dealers or proxies as an arm dealer and for facilitating off the Somalian coast should better in the Yemen-Somalia arms trade to arms transfers on behalf of the Islamic monitor arms shipments from Yemen. transfer around $3.7 million between State of Iraq and Syria (ISIS) in 2015. 2014 and 2020. According to a Reuters, the Central To address the gaps, GI-TOC Bank of Somalia has stated that it will The paper notes the widespread gaps in recommends that the FATF and other investigate the allegations, while the the anti-money laundering/countering fnancial watchdogs provide training four accused MTOs have stated that the fnancing of terrorism (AML/CFT) and capacity support to hawala MTOs they are in compliance with global KYC controls and makes recommendations located in Somalia and Yemen, while norms and that they use specialist for MTOs to address these the UN Security Council and the US third-party databases of internationally vulnerabilities. In addition, arms dealers Treasury should make major players in sanctioned individuals. exploited gaps in the application of the regional arms trade subject to know-your-customer procedures (KYC) sanctions. Additionally, EU banking GI-TOC press release by using aliases, spelling variations, and institutions and regulators should proxy agents. The lack of oversight encourage Somalia and GI-TOC report allegedly allowed criminals, including Yemen-registered MTOs to move US-designated Yemeni national Sayf towards digital or mobile money Reuters article Abdulrab Salem Al-Hayashi to move transactions, while Somalia should

UK NCA releases frst episode of its new podcast on suspicious activity reporting FAQs

The UK’s National Crime Agency (NCA) Halliday, Chief Compliance Ofcer at on 29 July as “part of the UKFIU’s new released on 5 September the frst Gemini. Providing feedback to digital presence delivering a smarter episode of its new podcast dedicated reporters, especially when reports do approach to fghting crime, in line with to suspicious activity reporting (SARs) not meet the required standard, would UKFIU priorities of reducing harm, frequently asked questions (FAQs) improve the quality of SARs, stressed protecting the integrity of the UK aimed at helping reporters submit Halliday. Hall pointed out during the economy and ensuring that there are no higher quality reports. podcast that the NCA’s current actions, safe spaces for economic crime or including disseminating information on terrorism fnancing”. The frst episode features guests SARs and initiating dialogue with the including David Powers, Head of private sector, should be continued to NCA Twitter post Financial Crime Prevention at Phoenix ensure that reporting improves. Group; Simon Hall, Financial Crime NCA podcast Compliance at Santander UK; and Blair The NCA’s podcast was frst announced

48 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Cambridge symposium on economic crime publishes presentations by UK regulators

The 38th Cambridge International (FCA) and the City of London Graeme Biggar. He highlighted the Symposium on Economic Crime has Corporation to create technological role of resilience, a “single coherent been postponed until September 2021 solutions to combat Covid-19 leadership in governance across the due to the ongoing Covid-19 pandemic, associated fraud and scams, with fraud landscape in the UK”, and according to a 6 September efforts to create a “fagship court effective use of intelligence announcement, but several speakers, for economic and cybercrime” and alongside the need to increase including those from UK fnancial to develop “social global standards investigations and convictions authorities, delivered their by building on international best presentations online. practice” in order to attract The value of cash seizures sustainable investments in the UK increased by 250 percent over the Key takeaways include past fve months and continues to Serious Fraud Ofce (SFO) Director be the main instrument used in Ensuring accountability and Lisa Osofsky underlined the money laundering activities, while transparency in fnancing importance of digital forensics in money service businesses continue programmes that support those analysing fnancial data and the role to be the main vehicle for organised affected by the pandemic are of deferred prosecution agreements crime groups to launder money, crucial, according to John Glen, to incentivise companies to according to Nicolas Stevens, Economic Secretary to HM cooperate with the authorities and Detective Superintendent at the Treasury. He also welcomed some avoid collateral damage Metropolitan Police Service. The positive impacts of the pandemic, threats of child exploitation, modern such as scrutiny of the illegal The threat of fraud increases from 5 slavery, and Chinese underground wildlife trade to 10 percent per year in the UK and banking have also increased represents 35 percent of crime City of London Sheriff Christopher reported in England in Wales, but Conference presentations Hayward presented the frst UK less than 1 percent of police Digital Sandbox project, proposed ofcers are focused on tackling SFO speech transcript by the Financial Conduct Authority fraud, according to National Economic Crime Centre Director

FIFA purged of corruption, states Infantino

FIFA President Gianni Infantino Infantino spoke of the dark place that un-minuted” meetings with Swiss announced at the 70th FIFA Congress football found itself in fve years ago, attorney general Michael Lauber, who on 18 September that the referring to the corruption scandal resigned in July amid allegations that organisation’s strong fnancial position surrounding former FIFA president Sepp he had violated his legal duties. and its ability to help federations Blatter. He emphasised FIFA’s new Infantino dismissed the accusations. through the coronavirus pandemic is transparency rules and declared that down to its purging of "toxic" the organisation now knows the origin FIFA press release corruption within the governing body. of all its income and funds. Infantino FIFA’s annual report for 2019 details also addressed the ongoing FIFA annual report the compensation given to senior investigation into the allegations ofcials within the organisation. against him concerning the “secret,

49 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Bank for International Settlements issues paper on AML/CFT supervision of correspondent banks

The Bank for International Settlements’ shows that the effectiveness of communication of the reasons for (BIS) Financial Stability Institute (FSI) international measures depends on remedial actions could further help published on 3 September a report on how they are applied by national correspondent banks assess the anti-money laundering and counter supervisors. According to the report, AML/CFT frameworks the fnancing of terrorism (AML/CFT) the lack of robust enforcement action in supervision of correspondent banking, some jurisdictions poses a challenge Supervisory authorities should which fnds that despite the legal and for correspondent banks in assessing maintain a two-way dialogue with regulatory frameworks being the effectiveness of the AML/CFT the industry on regulatory consistent with international system in their respondents’ standards, which could signifcantly standards, the implementation across jurisdictions. The report concludes that enhance the effectiveness of jurisdictions remains divergent. all surveyed supervisors applied the AML/CFT/CPF frameworks principles of a risk-based approach The report notes that the number of (RBA) and had similar guidelines to Review barriers to information active correspondent banking integrating onsite and offsite sharing and identify appropriate relationships has decreased by one ffth supervision, but their enforcement legal gateways to facilitate between 2011 and 2019, despite an actions and the implementation of the cross-border AML/CFT/CPF increase in the value and volume of RBA are substantially different. information-sharing international banking transfers. To better assess the decline in Key areas for further work Greater efforts are needed to correspondent banking, the report aims address the underlying money to contribute to the international The application of focused and laundering/terrorism dialogue by focusing on the alignment targeted sanctions by supervisors fnancing/proliferation fnancing of national frameworks with of respondent banks in serious risks, and to strengthen international standards and how cases could help prevent blanket correspondent banking supervision supervisory practices are being de-risking decisions by disseminated. correspondent banks BIS press release

The FSI’s review of supervisory More clarity on the supervisory BIS paper practices of 10 different supervisors expectations and clear and detailed

Denmark eyes blockchain to combat corruption

Denmark’s Ministry of Foreign Affairs Using e-governance to mitigate banks, land registries, and published a report on 4 September on corruption and experiment with accountants the use of technology and blockchain blockchain to enable transparent to help combat corruption. fnancial transactions Using crowdsourcing to enable whistleblowing The report proposes Using blockchain to prevent fraud and secure transparent transactions Danish MFA press release Using open data and contracting for and reduce the need for institutions transparency in public spending that validate transactions, such as Report summary

50 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 FATF's APG publishes annual typologies report

The Financial Action Task Force’s send messages promoting online Pakistan: virtual assets, branchless (FATF) regional body, the Asia/Pacifc gambling is an emerging trend banking, human trafcking, and tax Group on Money Laundering (APG), evasion related STRs are emerging, published on 18 September its annual Indonesia: declined cash while hawala/hundi related STRs typologies report on money laundering transactions, with the most have declined (ML) and terrorist fnancing (TF) common predicate offences being methods and trends. The paper fraud, narcotics-related offences, Singapore: business email includes the Covid-19 pandemic’s and corruption. There is an upward compromise scams continued to impact on ML/TF typologies, trends trend in ML through ATMs, cash increase, while the use of virtual and case studies, and the effects of deposits through tellers, and assets to launder money via mules AML/CFT measures. transfers via mobile banking and virtual assets service provider (VASP) accounts using stolen APG members reported that serious Japan: the main ML method is identities are emerging trends and organised crime groups have transferring proceeds to third-party targeted government pandemic bank accounts and other methods Thailand: continuing ML trends response programmes, with a including hiding stolen goods in include convincing victims to invest signifcant increase in online fraud coin-operated lockers before selling or pay collateral before starting scams. Other emerging typologies the goods under false names work with a promise of large returns include scams related to medical or income, while continuing TF treatment, the impersonation of law Laos: drug-related predicate trends include robbery, drug enforcement ofcials, identity theft, offences are an emerging trend, trafcking, illegal oil trading, fake charity scams and the misuse of while fraud-related ML continues, customs evasion, and religious public funds. with the report noting a decline in schools being used to receive robbery-related ML cases government grants Key trends include Malaysia: mule account use and a APG press release Brunei: the use of SIM cards to ‘rent’ shift from personal to business local mobile phone numbers to accounts to move funds continues to be widespread

EU anti-fraud ofce publishes annual report

The EU’s anti-fraud ofce (OLAF) includes the conclusion of 181 and manipulation of procurement published on 10 September its annual investigations, the opening of 223 processes, complex cross-border fraud report for 2019, which highlights the investigations, and the recommended schemes, continued targeting of growing threat of fraud that harms the recovery of €485 million to the EU research funding and the targeting of environment, recording an increase in budget. OLAF also helped support projects in third countries. the number of cases involving national authorities seize over 251.4 environment-related projects. million cigarettes. OLAF press release

OLAF’s annual report includes statistics OLAF reported signifcant trends across OLAF report on its performance in 2019, which its investigations including collusion

51 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OLAF report on protection of the EU's fnancial interests records decline in detected fraud

The EU's Anti-Fraud Ofce (OLAF) strengthen transparency in the use of while revenue fraud through the published on 3 September several EU funds and monitor the reporting of undervaluation of goods imported documents on fraud relating to the EU’s non-fraudulent irregularities. to the EU remained a threat fnancial interests, including its annual report on the protection of the EU's Key points Investments in health infrastructure fnancial interests, an overview of the are particularly affected by Hercule III Programme, a paper on the In 2019, detected fraud and related violations of public procurement early detection and exclusion system losses continued to decline, with regulations, while the threat of (EDES), a follow-up to the 939 fraudulent irregularities standard medical products with recommendations made by the EU reported, with a value of less than fake EU conformity certifcates Commission, and an assessment of the half that of 2018, while the number entering EU markets has become implementation of Article 325 TFEU. of detected non-fraudulent the main challenge during the An evaluation of reported irregularities irregularities remained stable. OLAF ongoing Covid-19 pandemic in 2019 was also published. notes that, on the expenditure side, the decrease is likely to be linked to OLAF press release OLAF recommends that member states the cycle of spending programmes use emergency procurement based on for EU funds OLAF report a case-by-case assessment and complete the transition to The goods most affected by Annexes to the report e-procurement processes. Additionally, attempted fraud were solar panels, member states are encouraged to

SWIFT report on how cyber criminals cash out

SWIFT published a report on 2 Common victims of money mule Fraudulent accounts that are used September that it commissioned BAE recruitment scams are students or to deposit stolen funds may be set Systems to produce entitled ‘Follow the recently unemployed individuals up months before an attack, and the Money’, which focuses on the use of who are more likely to need quick assignment of fake companies to different money laundering methods cash and may fall victim to such accounts can serve as a cover such as money mules, front companies fraudulent job offers online for large sums being transferred and cryptocurrencies by cyber criminals to ‘cash out’ after a large Front companies that lack The use cryptocurrencies to launder scale cyberattack. legitimate assets and are used to money is appealing because launder stolen funds are often used transactions are conducted in a Key fndings by cyber criminals peer-to-peer manner that circumvents bank KYC checks Money mules are fundamental to More experienced criminals tend to cyber heists, offering obfuscation of engage in less ostentatious SWIFT press release the link between the original fraud purchases, including property or and the transfer of funds, often reinvestments in other illicit Follow the Money report withdrawn from ATMs enterprises

52 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Moneyval issues report on Covid-19 money laundering and terrorism fnancing trends

Despite the overall level of criminality units (FIUs) have been signifcantly remaining relatively stable or affected by the Covid-19 restrictions. decreasing slightly, most countries experienced a surge in certain crimes, Due to temporary closure of national such as fraud and cybercrime. An borders, a decline in crimes such as additional vulnerability to fraud and smuggling and drug trafcking and in corruption was reported in the context the cross-border movements of cash of fnancial aid packages and the has been identifed in Moneyval easing of public procurement rules. jurisdictions. According to the report, criminal organisations now face a “late In addition, supervisors identifed demand” for cross-border potential risks related to the use of transportation of illicit cash, which will The Council of Europe’s Committee of cash for ML purposes, a difculty fully probably target the next phase of the Experts on the Evaluation of applying customer due diligence (CDD) lifting of travel restrictions. Anti-Money Laundering Measures and measures remotely and conducting the Financing of Terrorism (Moneyval) on-site supervisory controls. According Moneyval press release published on 2 September a report on to the report, neither the prosecution of Covid-19 related money laundering and ML/TF cases by law enforcement Moneyval report terrorist fnancing (ML/TF) threats and agencies (LEAs) nor the information best practices, based on information exchange between fnancial intelligence collected from member states.

South African Auditor General reveals weak controls and potential fraud in Covid-19 funding

South Africa's Covid-19 relief package Key fndings include temporary employee/employer “landed in a weak control relief scheme benefts were found environment”, which exposed the Clear signs of overpricing, unfair funds to the risk of misuse or abuse, processes, conficts of interest, There is a high risk social grants according to an audit report published potential fraud and supply chain were offered to unentitled persons, by the South African Auditor General management legislation being which resulted in 30,000 fagged on 2 September. sidestepped were identifed transactions, or claims were rejected incorrectly The report highlights “poor fnancial Health departments and the management controls, a disregard for education sector ordered personal There is a high risk of fraud and supply chain management legislation, protective equipment (PPE) at poor record keeping associated an inability to effectively manage over-infated prices, which was with expanded public works projects and a lack of accountability in insufciently controlled many of the government sectors that South Africa Auditor Gene... now need to lead or support the Overpayments, underpayments, and government’s efforts”. duplicate payments regarding Auditor General report

53 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

GUIDANCE AND ANNOUNCEMENTS

US publishes sanctions advisory on North Korea’s ballistic missile procurement activities

The US Department of State’s Bureau particularly specifc items identifed in specialised materials to instead be of International Security and annexes of the advisory and to avoid general-purpose items that are Nonproliferation, the Department of the violating US or UN sanctions by widely commercially available” Treasury’s Ofce of Foreign Assets assisting – even inadvertently – DPRK’s Control (OFAC), and the Department of ballistic missile procurement. The co-signatories of the advisory Commerce’s Bureau of Industry and urge persons subject to US Security (BIS) issued on 1 September Key takeaways include jurisdiction, US persons and foreign an advisory on North Korea’s ballistic persons conducting transactions missile procurement activities. Illustrative examples of entities and with the US to employ a risk-based individuals (including non-North approach to sanctions compliance, The sanctions Korean individuals) designated by which includes management the UN or US for supporting or commitment, risk assessment, advisory describes providing assistance to the DPRK’s internal controls, testing and some of the ballistic missile programme include: auditing, and training Korea Mining Development Trading deceptive tactics Corporation (KOMID), Munitions Persons violating the North Korea Industry Department (MID), Second Sanctions Regulations may face that intermediaries Academy of Natural Sciences civil monetary penalties of up to the may use (SANS), Second Economic applicable statutory maximum of Committee (SEC), Korea Tangun $307,922 or twice the value of the Trading Corporation (Tangun), underlying transactions, whichever The document identifes key Korea Ryonbong General is greater, and may also be referred procurement entities and deceptive Corporation (Ryonbong) for criminal prosecution, or both techniques adopted by North Korean proliferators and procurement The DPRK uses an extensive The advisory also contains annexes networks, providing an overview of US overseas network of procurement listing key materials and equipment sanctions regulations and authorities agents, including ofcials operating used in the DPRK’s ballistic missile related to the DPRK, as well as a list of from North Korean diplomatic programme, such as carbon, kevlar DPRK individuals and entities currently missions or trade ofces, and and aramid fbres, steels and subject to US sanctions. In addition, the collaborates with foreign aluminum, dimethyl acetamide, advisory provides a list of key materials incorporated companies – such as multi-axle heavy vehicles, and equipment used in the DPRK Chinese and Russian entities – to hydro-pneumatic suspension ballistic missile programme. acquire both sensitive technology cylinders, hot or cold isostatic and basic commercial components press, and gyroscopes Reafrming the US’s commitment to mitigating the threat posed by the The advisory describes some of the Department of Treasury no... DPRK’s missile development activities, deceptive tactics that these a spokesperson for the State intermediaries may use, including Advisory Department called on the private sector concealing the true end-user and to remain vigilant to North Korea’s mislabelling export documentation, Department of State press... efforts to acquire related equipment, such as by “falsely declaring

54 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US guidance on preventing foreign government use of surveillance products or services

The US State Department published on international bodies. When evaluating a or service, and whether the foreign 30 September guidance for businesses potential transaction’s human rights government’s regulations are seeking to prevent their products or impact, several factors should be taken consistent with the Universal services with surveillance capabilities into consideration, including whether Declaration of Human Rights. from being misused by government the product or service’s primary end-users to commit human rights purpose is to collect sensitive data that Additionally, the State Department abuses, encouraging companies to can be linked to an individual or analyse suggests reviewing stakeholders integrate human rights due diligence datasets in order to capture or derive involved in the transaction, tailoring into compliance programmes. sensitive insights about individuals, and each product or service to minimise whether the product or service can be misuse risk, and mitigating human According to the paper, due diligence used without modifcation and is widely rights abuses through contractual and characteristics in line with the UN available from other suppliers or procedural safeguards and strong Guiding Principles on Business and provides a unique or custom capability. grievance mechanisms both prior and Human Rights should include after the sale, as well as publicly assessing and addressing risk, ongoing Additionally, the State Department reporting on sales practices. monitoring and evaluation recommends reviewing each product assessments, stakeholder engagement, and service’s potential for misuse, the US Department of State pr... public communication, a grievance human rights record of the foreign mechanism, and aligning with human government agency end-user of the US Department of State re... rights’ instruments issued by country intended to receive the product

OFAC issues general licence concerning Xinjiang Production and Construction Corps and HK FAQ

The US Department of the Treasury’s transactions involving entities in which transactions with said entities unless Ofce of Foreign Assets Control XPCC owns a 50 percent or greater exempt or authorised by OFAC. (OFAC) issued on 25 September Global interest. The GL does not authorise (1) Magnitsky General License (GL) 2A divestment activities involving the On the same day, OFAC published FAQ authorising certain activities necessary XPCC; (2) the unblocking of any 840, which clarifes that the listing of a to the winding down and divesting of property; (3) any transactions or Hong Kong government ofcial does transactions involving any blocked dealings otherwise prohibited; or (4) not imply that the government itself is entity owned, directly or indirectly, by any debit to the entities’ accounts held blocked, thus the engagement with an the Xinjiang Production and by US fnancial institutions. agency that has a designated ofcial is Construction Corps (XPCC). not prohibited. According to FAQ 835 published on the GL 2A authorises until 30 November same day, GL 2A replaces and OFAC notice 2020 all transactions and activities supersedes GL 2, extending its prohibited by the Global Magnitsky expiration date by two months, after General License 2A Sanctions Regulations required for the which US persons will be prohibited winding down and divesting of from engaging in or facilitating FAQ 835

55 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK government considering imposing sanctions over human rights abuse in Xinjiang

The UK House of Commons held a Minister for Asia Nigel Adams panel would contribute to closely debate on 9 September on the situation underlined that further designations monitoring the situation in Xinjiang. of Uyghur Muslims in Xinjiang, in which under the global human rights regime, the possible actions to be taken introduced in July, are being considered, Refencing recent media reports that against all actors involved in but a thorough evaluation is needed, to Disney Corporation is flming its new perpetrating the human rights abuses avoid speculative designations which flm, ‘Mulan’, in Xinjiang, Nigel Adams against the Uyghur people were may reduce the impact of the regime. stressed that UK businesses operating discussed, including targeting the in the region are expected to conduct Chinese government and companies In addition, Mahmood reiterated the due diligence to ensure that their benefting from forced labour. The need to use and enforce domestic activities do not support human rights possible actions to be taken by the UK avenues of accountability, particularly violations. In regards to reports of government include prospective corporate accountability relating to forced organ donations being carried sanctions under the new global human supply chains, to halt the use of items out on a commercial scale against rights sanctions regime. and materials produced in the Uyghur Muslims, Christians and Falun concentration camps where Uyghurs Gong, Nigel Adams noted that the UK is Shana Mahmood MP, who instigated are being unlawfully detained and taking the allegations seriously and is the debate, called for the forced to work. Building on the “keeping the matter under review”. implementation of Magnitsky-style recommendation made by the Bar sanctions on individuals, “whether state Human Rights Committee, MPs agreed Transcript of House of Co... or non-state” entities, suspected on that legal options, including an impartial reasonable grounds of serious human and independent UN mechanism such Video of House of Commons... rights violations. In response, the as a special rapporteur, or an expert

UK government commits to tackling money laundering and tax evasion in freeports

In response to a parliamentary freeport model, which was in force until participants agreed that more question, UK Chief Secretary to the 2012, was not well used due to very government resources will be needed to Treasury Steve Barclay stated on 7 limited customs benefts and its fxed ensure the security of freeports around September that the government will locations inside ports. A new research the free tariff rules, monitoring of take all necessary safeguards to briefng setting out the background to freeport operators, crime prevention, as reduce the risk of money laundering the UK government’s policy on well as reputational issues around and tax evasion in UK freeports and freeports, the main elements of the potential illicit trade. meet international standards. consultation and areas of criticism was published by the House of Commons UK parliament question Details on mitigating criminal risks in on 3 September. freeports will be included in the House of Commons briefng government’s response to the freeports During an oral evidence session held by consultation, which closed on 13 July. the Parliament’s International Trade UK International Trade Co... According to Barclay, the previous Committee on 9 September,

56 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK House of Lords launches inquiry into HMRC’s proposed tax avoidance powers

Institution Notice (FIN) will be used to right of appeal against the issuance of require tax information from fnancial a FIN and raise questions about the use entities without the need for a tax of the new instrument in domestic tribunal order or the individual’s cases. In addition, the Low Incomes Tax approval. The paper notes that the Reform Group (LITRG) stated on 8 amendments will help establish September that taxpayer and tribunal domestic tax debts, will improve the approval are important safeguards, in cross-border exchange of tax the absence of which HMRC is likely to information and will bring the UK in line issue more third-party information with international standards on tax notices than before. In response to transparency. HMRC’s proposals, UK Finance requested in its 2018 paper a higher The UK House of Lords Finance Bill The UK Finance Bill Sub-Committee’s degree of scrutiny and expressed Sub-Committee launched on 11 inquiry will look into whether the scope concerns over the removal of September an inquiry into the draft of the new powers are clear and “independent oversight and appeal Finance Bill 2020-21 proposals on whether there are appropriate rights from the process”. tackling promoters and enablers of tax safeguards in place following the avoidance schemes, new tax checks on removal of tribunal approval. In The Sub-Committee was accepting licence renewal applications and addition, the inquiry will address the written submissions until 7 October. amendments to HMRC's civil effectiveness of HMRC’s existing and Following the inquiry, a report and a list information powers. proposed powers in tackling promoters of recommendations will be submitted and enablers of tax avoidance to the House of Lords. Under the draft Finance Bill published schemes, and whether proposals for on 21 July, HMRC is set to receive new tax checks on licence renewal Draft Finance Bill 2020-2... civil information powers enabling it to applications are fair and proportionate. obtain third-party information from Finance Bill Sub-Committe... fnancial institutions about taxpayers’ In response to the Finance Bill assets for the purposes of checking proposals, the Chartered Institute of UK Finance Bill 2020/21 (... their tax positions. According to Taxation declared on 10 September that HMRC’s policy paper, the new Financial the forthcoming measures offer no

Swedbank investigated over market abuse

Swedbank AB announced on 18 2018 to 20 February 2019 and pertains in the Swedbank press release is September that it has received a to the “disclosure of insider information accurate. The regulator, however, stated notifcation from the Swedish Financial and the obligation to establish an that it does not usually comment on Supervisory Authority that it is being insider list in connection with the ongoing investigation and offered no investigated for suspected breaches of disclosure of suspected money further information on the probe. the Market Abuse Act. laundering within the company.” Swedbank press release Swedbank stated that the probe Finansinspektionen confrmed on the concerns the period from 20 September same day that the information included Swedish FSA press release

57 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK FCA on listing cannabis-related businesses

The UK’s Financial Conduct Authority The FCA statement clarifes that assess the PoCA. The company will (FCA) published a statement on 18 need to satisfy the FCA that its September setting out its approach to Purely UK-based medicinal activities would be legal if carried the listing of domestic and overseas cannabis companies and cannabis out in the UK. The FCA will also medicinal cannabis-related companies. oil companies can be admitted to need to understand the legal basis the Ofcial List if the company has of the company’s overseas Although medicinal cannabis was the appropriate Home Ofce activities effectively legalised in 2018 through the licences for its activities where they amendment of the cannabis-based are required Recreational cannabis companies: products for medicinal use (CBPM) the proceeds from these classifcation, there have reportedly Overseas-licensed medicinal companies, even when they are been concerns about the risk of cannabis companies and cannabis located in jurisdictions that have committing offences under the oil companies may be admitted to legalised it, are the proceeds of Proceeds of Crime Act 2002 (PoCA) by the Ofcial List, provided the FCA is crime under PoCA, so the FCA will investing in cannabis-related satisfed that PoCA does not apply not approve such a listing companies. The FCA has confrmed and the company otherwise that a consultation on further guidance satisfes the criteria for listing. The FCA statement will follow in due course. FCA will carry out a review to

UK to tackle modern slavery in supply chains

The UK government published a and the extension of reporting Furthermore, public bodies that have a document on 22 September requirements to the public sector. budget of £36 million or more will be summarising the responses received to subject to reporting obligations with the its consultation on transparency in After taking into account the comments possibility to publish ‘group supply chains and setting out its plans received to the consultation, the statements’, and their statements will to strengthen Section 54 of the Modern government will mandate the areas that need to be signed off by the accounting Slavery Act 2015. Under the current modern slavery statements must cover ofcer, chief executive or equivalent and framework, all commercial to include all six areas included in its approved by the senior management organisations that provide goods or 2015 practical guide and deliver body. The UK government has also services in the UK with an annual updated guidance for businesses and pledged to take forward options for civil global turnover of over £36 million are public sector organisations. penalties for non-compliance with the required to publish an annual Additionally, it will mandate that Modern Slavery Act in line with the statement on the steps taken to organisations captured by transparency development of a single enforcement prevent modern slavery within their legislation publish their statement on body for employment rights. operations and supply chains. the government-run reporting service, introduce a single reporting deadline UK government press relea... The 2019 consultation sought views on (30 September) and a shared reporting proposed changes to transparency in period (1 April to 31 March), and require UK government response to... supply chains reporting, including statements to include the date of board potential features for the new (or equivalent) approval and director UK government consultatio... government-run reporting service, a sign off, and group statements to name single reporting deadline, civil penalties, the entities covered.

58 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Consultative Committee of Accountancy Bodies publishes updated AML guidance

The UK’s Consultative Committee of The CCAB guidance sets out the legal guidance is aimed at individuals and Accountancy Bodies (CCAB) published requirement to report to Companies entities providing audit, accountancy, on 8 September draft guidance on the House any discrepancies in the People tax advisory, insolvency, and trust and AML/CFT measures for the with Signifcant Control (PSC) register; company services in the UK and has accountancy sector, refecting the the obligation to train ‘agents’ on client already been approved by the UK changes made to the UK Money due diligence; the inclusion of the accountancy AML supervisory bodies. Laundering and Terrorist Financing indirect provisions of tax services (MLRs) 2017 since the last guidance within the scope of the MLRs; and the The guidance will become fnal once it document was released in 2018. obligation to carry out enhanced due receives HM Treasury’s approval. diligence when dealing with clients in The updated CCAB guidance focuses high-risk jurisdictions. CCAB press release on the measures included in Money Laundering and Terrorist Financing In addition, the CCAB carried out an AML/CFT guidance (Amendment) Regulations 2019, which overall review of its previous guidance implement the EU’s Fifth Money to bring the accountancy sector into Explanatory notes Laundering Directive (5MLD) in the UK. line with other sectors. The CCAB

US CFTC on evaluating corporate compliance programmes during enforcement action

The US Commodity Futures Trading programmes the Division will consider To evaluate a compliance programme's Commission (CFTC) Division of whether it was “reasonably designed ability to detect misconduct, the Enforcement published new guidance and implemented” to (1) prevent the Division will consider whether the on 10 September outlining the factors misconduct; (2) detect the misconduct; misconduct was identifed through the used in the evaluation of corporate and (3) remediate the misconduct. The compliance mechanisms and the compliance programmes when Division will also consider factors such procedures in place designed to detect enforcement matters occur. as the entity involved and the potential misconduct. The Division will also impact of the misconduct. evaluate the company's remediation The CFTC’s guidance sets out a measures. More specifcally it will principles-based approach, which aims To evaluate a compliance programme's consider whether the company to provide transparency on the types of ability to prevent misconduct, the effectively addressed the impact of the issues the Division will consider during following factors will be considered: the misconduct; disciplined the individuals enforcement investigations. This is the company's written policies and responsible; and addressed any frst guidance on the matter issued by procedures; the training of staff; any defciencies identifed in the the Division and will be added to the failure to resolve prior defciencies in compliance programme. CFTC’s enforcement manual. the compliance programme; the resources devoted to compliance; and CFTC press release The guidance explains that when the structure and oversight of the evaluating corporate compliance compliance function.

59 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US to unilaterally restore UN sanctions on Iran

conference on 19 September, US Secretary of State Mike Pompeo said that the US expects all UN member states “to fully comply with their obligations” to restore Iran sanctions.

In response to the US announcement, the UN Secretary-General António Guterres stated on 16 September that it is for the UNSC “to do the interpretation of the Security Council resolutions”. EU High Representative for Foreign Affairs Josep Borrell stated on 20 September that the US “cannot initiate the process of reinstating UN sanctions under the The US Special Representative for “snapback mechanism” within UN UNSC resolution 2231. Consequently, Venezuela and Iran, Elliot Abrams, Security Council (UNSC) resolution sanctions lifting commitments under announced on 16 September that all 2231 of 2015, the US will reportedly the JCPOA continue to apply”. previously suspended UN sanctions on reimpose the Iran arms embargo, the Iran will be restored from 8pm on 19 ban on Iran’s engagement in enrichment US State Department brief... September, in light of the UN’s failure and reprocessing activities, the to extend the Iranian arms embargo, prohibition on ballistic missiles testing EU statement set to expire on 19 October. and development, and sanctions on the transfer of nuclear and missile-related US State Secretary press ... Under the so-called sanctions technologies to Iran. In a press

E3 reject US move to reimpose UN Iran sanctions

The E3 foreign ministers of France, with its obligations under the JCPOA, on the snapback procedure, are Germany and the UK published a joint declares that all UN sanctions against incapable of having legal effect. statement on 20 September reiterating Iran have been restored under the their strong commitment to the Joint snapback mechanism as of 19 Prior to this, on 15 September, the E3 Comprehensive Plan of Action September. Pompeo said that the expressed concern over Iran’s (JCPOA) endorsed by UN Security action was driven by Iran’s failure to continued violation of its nuclear Council resolution 2231 (2015) and adhere to its JCPOA commitments, and commitments under the JCPOA, which rejecting the 19 September statement the UN Security Council’s inaction have irreversible consequences on the by the US Secretary of State Mike regarding the extension of the UN arms non-proliferation benefts of the Pompeo on the reimposition of UN embargo on Iran. agreement. sanctions against Iran pursuant to the snapback process. Emphasising the consequences of the E3 statement US withdrawal from the JCPOA on 8 The US unilateral proclamation, 30 days May 2018, the E3 notes that the E3 statement (15 Septembe... after Pompeo notifed the UN that Iran reimposition of sanctions, as well as was in “signifcant non-performance” any decisions and actions taken based US Department of State st...

60 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 BaFin takes over audit of Grenke AG following fraud and money laundering allegations

Germany’s Federal Financial including the fraudulent buying of Authority (FCA) is currently examining Supervisory Authority (BaFin) underperforming franchisee evidence regarding “the fnance announced on 30 September that it has businesses, “designed to either hide arrangements” offered by Grenke. taken over the examination of fnancial fake cash or siphon off millions of services frm Grenke AG’s statements euros to undisclosed related parties”. In In response to Viceroy Research’s from the Financial Reporting addition, the report claims that more report, Grenke AG stated that the Enforcement Panel (FREP), which was than €100 million in acquisitions made accusations are “unfounded”. The reportedly investigating potential by the company since 2011 were from company has reportedly commissioned market manipulation and insider undisclosed parties controlled by two external audit reports from KPMG trading, following a critical report by Grenke executives and insiders and that and Warth & Klein Grant Thornton to research group Viceroy Research. Grenke’s banking division has received review the market conformity of its money from binary options scams. previous franchise acquisitions. The According to BaFin, the inquiry targets statement adds that the company has the amount of lease receivables Viceroy Research further alleges that sound anti-money laundering and recognised as current and non-current Grenke AG has been “a conduit for the know-your-customer (KYC) processes assets, bank balances recognised as proceeds of crime and money in place and that, with one exception cash and cash equivalents, and laundering for unregulated, BaFin where the account was terminated in third-party transaction disclosures in sanctioned trading platforms” and 2018, none of the suspicious the company’s consolidated fnancial failed to carry out mandatory checks on customers mentioned by Viceroy “were statements. BaFin will also examine the its customers. Additionally, Grenke AG at any time customers of Grenke Bank”. combined group management report allegedly facilitated international fraud and the management report as at 31 and Ponzi schemes by leasing €500 BaFin press release December 2019. worth of television channels to thousands of SMEs, valued at Viceroy Research report The 14 September report by Viceroy €10,000-€50,000 each, which never Research alleges that there are several came to fruition. According to Viceroy Grenke AG press release red fags associated with Grenke AG, Research, the UK Financial Conduct

Brazil extends Operation Car Wash

The Ofce of the Brazilian Prosecutor members of Operation Car Wash: 11 Prosecutor General also requested that General announced on 9 September public prosecutors and two regional the Superior Council of the Federal that Operation Car Wash (Lava Jato) prosecutors supporting Alessandro Public Ministry (CSMPF) expand and anti-corruption and money laundering Oliveira who is the holder of the 15th institutionalise joint action to combat task force will continue its activities Ofce. The task force was created in corruption across the country. until at least 31 January 2021. 2014 to lead the investigation into corruption at state-owned oil company Brazilian Public Prosecut... The extension applies to all 14 Petróleo Brasileiro S.A. (Petrobras). The

61 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EBA responds to European Commission’s call for advice on future AML/CFT framework

The European Banking Authority (EBA) provides technical advice on pillar 2 of where existing provisions are not published its response on 10 the Commission’s Action Plan for a adequately forceful or specifc September to the European comprehensive Union policy on Commission’s call for advice on preventing money laundering and Review the list of obliged entities strengthening the EU’s anti-money terrorist fnancing. within the scope of the EU’s laundering and counter-terrorist AML/CTF regime fnancing (AML/CFT) framework, which The EBA’s recommendations recommends that the Commission Clarify provisions in sectoral establishes a single rulebook to Further harmonisation of the EU’s fnancial services legislation to harmonise the legal framework in a legal framework is necessary where ensure that they are compatible directly applicable regulation. it is clear that divergence of with the EU's AML/CTF objectives national rules and practices across The Commission issued a call for the Union has adversely impacted EBA press release advice to the EBA on 3 March 2020 on efforts to combat money laundering ‘defning the scope of application and and terrorist fnancing EBA opinion the enacting terms of a regulation to be adopted in the feld of preventing Strengthen aspects of the EU’s EBA report money laundering and terrorist Fourth Money Laundering Directive fnancing’. The EBA’s response also

European Commission issues notice on post- Brexit dual-use export controls

The European Commission (EC) Regulation (EC) 428/2009 setting up an intra-EU transfer licences issued by a Directorate General for Trade published EU regime for the control of exports. member state authority for transfers to on 16 September a revised notice on the UK that were issued before the end the EU rules in the feld of dual-use In addition, operators are warned that of the transition period will remain valid export controls that will become UK-obtained licences for shipments until their expiration date. applicable when the UK transition from the EU to a third country and period ends on 31 December if an authorisations issued by EU countries The guidance details applicable rules in agreement on a new partnership does for the export of items located in the UK Northern Ireland after the end of the not take effect. to a third country will no longer be valid transition period, in line with the after the end of the transition period. Ireland/Northern Ireland (IE/NI) To address the consequences of the protocol. The notice replaces previous UK’s EU exit, the EC informs entities Under Regulation 428/2009, exports of guidance issued on 21 March 2019. trading in dual-use items that dual-use items from the EU to third shipments of these items from the EU countries will require a licence issued EU Commission notice to the UK will be subject to an by the competent authority in the authorisation requirement, in line with relevant EU member state. However,

62 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 European Parliament draft resolution calls for effective AML supervision of cryptoassets

The European Parliament’s Economic obliged entities under the EU’s obligations to help law enforcement and Monetary Affairs (ECON) AML/CFT framework, in line with the investigate the ultimate benefciaries of Committee tabled a draft resolution to Financial Action Task Force (FATF) transactions. In addition, the draft the plenary on 18 September, which Recommendations, to ensure that all resolution underlines that the AML/CFT recommends that the European cryptoassets-related activities are risks arising from cross-border Commission adopts a common subject to the same obligations. In activities and foreign providers monitoring and supervision framework addition, improved defnitions of ‘virtual operating in the EU need to be for cryptoassets and ensures that all assets’ and ‘terrorist fnancing’ are adequately addressed. service providers are subject to the needed to ensure cryptoassets are EU’s anti-money laundering and effectively covered. The plenary debate on the draft counter the fnancing of terrorism resolution was scheduled for 5 October. (AML/CFT) rules. The common EU framework on cryptoassets should include clear ECON Committee draft reso... The Committee calls on the European know-your-customer (KYC) rules and Commission to expand the scope of benefcial ownership disclosure

Five European member states call for strict regulation of stablecoins

In a statement sent to the European avoid the misuse of cryptocurrencies market infrastructures for cryptoassets Commission (EC) on 11 September, the for terrorist activities or for money qualifying as fnancial instruments; (3) fnance ministers of Germany, France, laundering,” French Finance Minister protect consumers and investors Italy, Spain and the Netherlands jointly Bruno Le Maire reportedly announced against new risk posed by cryptoassets; called for the effective regulation of during the ECOFIN press conference. and (4) ensure fnancial stability and asset-backed cryptoassets, so-called market integrity. stablecoins, in order to protect the The statement follows the publication bloc’s monetary sovereignty and of a leaked draft proposal on On 12 September, in response to the mitigate fnancial crime risks. cryptoassets prepared by the EC, which joint statement, EC Executive is expected to be published formally by Vice-President Valdis Dombrovskis In the EU ofcials’ view, stablecoins the end of September. The 167-page stated that member state concerns will should not be allowed in the EU until all draft proposal covers cryptoassets be considered “comprehensively”, the legal and regulatory aspects have outside existing EU fnancial services underlining that “we want to regulate been addressed. The statement was legislation, as well as e-money tokens, innovation in, not out”. made during the informal EU Ministers and includes stricter requirements for for Economic and Financial Affairs more challenging digital tokens, Joint statement (ECOFIN) Council meeting, which particularly for stablecoins, such as addressed the need to rethink fnancial Facebook’s Libra. The proposal aims to: Leaked draft proposal markets in the digital age. (1) provide legal certainty, through a sound legal framework; (2) support Informal ECOFIN report “We’re waiting for the Commission to innovation, through a pilot regime for issue very strong and very clear rules to distributed ledger technology (DLT)

63 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU Parliament’s new permanent subcommittee on tax matters details its priorities

The EU Parliament’s new permanent The priorities include and money laundering Economic and Monetary Affairs Subcommittee on Tax Matters (FISC), Discussing corporate taxation and Introducing tax reporting which will focus on combatting tax ensuring tax transparency within requirements for digital currencies fraud, tax evasion and tax avoidance, large corporates as well as on ensuring fnancial Addressing the sale of EU transparency for tax purposes, held its Halting tax dumping via British tax citizenship and residency permits, frst meeting and elected its chair and havens and using bilateral trade and extending tax competition from vice-chairs on 23 September. The agreements as instruments in companies and capital income to Greens/EFA Group, represented by the combatting tax offences rich individuals newly elected Vice-Chair Kira Peter-Hansen and Green Coordinator Addressing the exploitation of Greens/EFA Group press re... of the tax committee Sven Giegold, workers in the internal market, published the new subcommittee’s which impacts trade tax Elected FISC Chair and Vi... priorities on 22 September. Consolidating rules and tightening EU Parliament announcemen... Following recent revelations, Giegold up controls on the real estate stated that the Greens will include the sector, in order to hinder tax evasion FinCEN Files in FISC’s agenda.

Turkey agrees to meeting on drilling dispute

The Greek Ministry of Foreign Affairs ready to impose further restrictive closely monitor subsequent announced on 22 September that it has sectoral and targeted measures to developments and make further reached an agreement with Turkey to avoid adverse impacts on Turkish decisions by its December meeting, hold “the 61st round of explanatory citizens and refugees in the region. including on possible restrictive talks in Istanbul” at a date to be measures against Turkey. determined, with Reuters reporting the During a meeting held by the EU Council next day that the announcement will on 1-2 October, the EU reiterated its full In response to the conclusions adopted likely result in the EU backing down on solidarity with Greece and Cyprus, by the European Council, the Turkish Turkish sanctions. welcoming the bi-lateral announcement Ministry of Foreign Affairs underlined on resuming maritime delimitation that the explanatory talks with Greece During a European Parliament (EP) talks. The Council called on Turkey to are not limited to the maritime plenary session on 15 September, engage in dialogue with Cyprus to settle jurisdiction areas’ delimitation. several MEPs condemned Turkey’s all maritime-related disputes and drilling in the Greek and Cypriot announced that it has agreed to launch Reuters article Exclusive Economic Zone and voiced a positive political EU-Turkey agenda concern over a possible military with an emphasis on a customs union Greek Ministry of Foreign... confict. MEPs also called on Turkey and trade facilitation modernisation, and other member states to support the and continued cooperation on EU Parliament press relea... UN arms embargo in Libya and migration issues. Additionally, the requested that the EU Council stand Council announced that it will be

64 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 European Parliament calls for sanctions against perpetrators of Belarus election fraud

The European Parliament (EP) adopted on 17 September a Additionally, the EP calls on the EU Council to establish resolution rejecting the results of the Belarus presidential “without delay” a Magnitsky-style sanctions list targeting all election and calling on the European Council to implement human rights abusers. “without delay and in close coordination with international partners” broad and effective sanctions against the The EU Council published on 24 September a statement on perpetrators of the election fraud, violence and repression in President Aleksandr Lukashenko’s secret swearing-in, which the country. states that the EU is reviewing its relations with Belarus.

The Council of the European A separate resolution on Belarus was adopted on 18 September by the UN Human Rights Council, which Union imposed sanctions on 40 condemns the alleged acts of torture, cruel treatment and enforced disappearances. The UN body urged the Belarusian Belarusian ofcials on 2 October authorities to cooperate with the Special Rapporteur on the situation of human rights and requested that the UN High According to the EP, Belarusian President Aleksandr Commissioner present an interim oral update on the situation Lukashenko, a substantial number of high and middle-ranking before the end of the year. ofcials, and local entrepreneurs providing support to the regime should become subject to sanctions. The resolution The Council of the European Union imposed sanctions on 40 asks the Council and the EU High Representative to explore Belarusian ofcials on 2 October. whether Russian citizens directly supporting Lukashenko should also be added to the sanctions list. EU Parliament resolution

The resolution also calls for an increase in EU funding to EU Council press release Belarusian civil society, while freezing funds offered to the current government and suspending fnancial assistance by UN resolution the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

Aperio Analysis by Veronika Konečná

The West has imposed sanctions against Belarusian individuals in response to the August presidential election, which is widely considered to have been manipulated, followed by mass public protests and the regime’s brutal response to them. It is unclear whether the sanctions will have a signifcant impact on the regime as its representatives are used to operating under restrictions and sanctions regimes. The sanctions’ impact will be further softened by fnancial and political support from Russia, on which the regime is heavily dependent. A potential consequence of the sanctions is increased criminal activity involving cryptocurrencies and other alternative, unregulated payment methods. If the regime weakens further, this is likely to be accompanied by signifcant capital outfows and Western fnancial institutions, who are likely to be the recipients of the funds, will need to prepare for this possibility especially with regards to sanctions and AML regulations.

65 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU, UN and G7 condemn Navalny poisoning and point to possible sanctions

Following the German government’s On 3 September, the OPCW expressed Warfare Elimination Act, which could announcement that toxicological tests its concern over the “reprehensible” use yield additional sanctions on Russia. have confrmed that Russian of a nerve agent qualifying as a opposition leader Alexei Navalny was chemical weapon, adding that it On 15 September, Borrell stated that poisoned with a Novichok nerve agent, continues to monitor the situation and there are discussions on drafting a several leaders of the main that it stands ready to offer its “Magnitsky-style” act and that the international and inter-governmental assistance. UN High Commissioner for EU-Russia relationship will be organisations, including the EU, UN, the Human Rights Michelle Bachelet urged discussed in the next Foreign Affairs Organisation for the Prohibition of the Russian government to carry out or Council. On 17 September, an EU Chemical Weapons (OPCW), and the fully cooperate with a “thorough, Parliament resolution qualifed the G7 group have issued statements transparent, independent, and impartial attempted assassination of the Russian condemning the action and calling on investigation” into the assassination opposition leader as “part of a systemic the Russian government to investigate attempt. The G7 group called on the effort […] to deter him and those voices and explain the incident. Russian authorities to investigate and from further exposing serious bring the perpetrators to justice. corruption”. It also calls on the EU On 2 September, the EU’s High Council to prioritise the approval of the Representative of Foreign Affairs Josep On 8 September, Representatives Eliot EU Magnitsky-style human rights Borrell condemned the poisoning and L. Engel, Chairman of the House sanctions mechanism. use of a chemical weapon. Borrell Committee on Foreign Affairs, and called on the Russian government to Michael McCaul, a member of the EU press release investigate Navalny’s assassination Committee, sent a letter to President attempt in a transparent manner. On 3 Trump requesting an investigation into EP resolution September, the EU Council issued a whether Russia used chemical statement underlining that it “reserves weapons in violation of international Council of the EU press r... the right to take appropriate actions, law, in accordance with the Chemical including through restrictive measures”. and Biological Weapons Control and

IMF concludes monitoring mission on Albania

The IMF announced on 28 September approve a tax amnesty aimed at of Voluntary Declaration of Assets” was the conclusion of its frst monitoring formalising important parts of the sent to the parliament for approval. mission to Albania, which notes that economy. According to the International Albania’s ongoing efforts to strengthen Labour Organization (ILO), informal In recent weeks, local news outlets its AML/CFT framework need to employment in Albania accounts for 61 have reported that the government has continue. The IMF also reiterated its percent of total employment. In June withdrawn the proposed tax amnesty concerns about a proposed tax 2020, the Albanian Ministry of Finance after critics suggested the bill would amnesty, due to the tax compliance presented a frst draft that guaranteed facilitate money laundering. and money laundering risks. that benefciaries will not be prosecuted for not previously declaring income or IMF press release In March 2020, the Albanian failing to pay taxes. The draft, known as government announced its intention to “Fiscal and Penal Amnesty for Subjects

66 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 ECOWAS lifts sanctions on Mali

Former foreign minister of Mali, assumed during several ECOWAS dissolution of the National Assembly, Moctar Ouane, was named Prime meetings, in which the regional body as well as the broader socio-political Minister of the country on 27 requested that Mali appoint a civil crisis generated by the parliamentary September, according to the Economic president and prime minister elections of March-April. On this Community of West African States responsible for conducting reforms on occasion, the regional body closed all (ECOWAS), which had stipulated that in an “inclusive national dialogue” and for land and air borders and stopped all order for sanctions to be lifted against “preparing for the forthcoming fnancial, economic and trade fows and the country a civil president and prime presidential and legislative elections”. transactions with Mali, except for basic minister must be appointed. The According to ECOWAS, sanctions on essentials to help fght the Covid-19 decision came after Bah Ndaw was Mali will be lifted once a civilian prime pandemic, petroleum products, and sworn in as the civilian President of the minister has been appointed. electricity. Additionally, ECOWAS called Transition on 25 September. ECOWAS for the “immediate imposition” of has since issued a declaration on 5 On 20 August, the ECOWAS heads of sanctions on military putschists and October confrming the decision to lift state and government reviewed the their partners and collaborators. the sanctions on Mali. political instability in Mali after the attempted military coup d’état on 18 ECOWAS press release The appointments have been made in August which resulted in the arrest of order to comply with obligations several government members and the ECOWAS press release (20 ...

Aperio Analysis by Simon Jennings

Moctar Ouane’s appointment marks the formation of a transitional government in Mali which can now open up its ailing economy and move towards holding democratic elections. The lifting of sanctions looked in doubt after Colonel Assimi Goita was appointed vice president within the interim government – Goita was among the military leaders who seized power in August 2020 having overthrown president Ibrahim Boubacar Keita. However, the interim government accepted ECOWAS’ condition that the interim vice president was under no circumstances allowed to replace Bah Ndaw, the interim president. Ndaw has appointed a 25 member civilian-led government although four positions – defence, security, territorial administration and national reconciliation – remain flled by members of the military.

EU Parliament issues draft opinion on preventing post-employment conficts of interest

The European Parliament’s Committee interest into a motion for a resolution. empowering OLAF or the EU on Economic and Monetary Affairs Ombudsman to carry out “oversight of (ECON) issued a draft opinion on 11 The draft opinion calls for the conficts of interest, revolving doors September calling on the Committee strengthening of the regulatory and and lobby transparency for EU on Constitutional Affairs to incorporate enforcement framework for post-public institutions and agencies”. provisions on pre-public and and pre-public employment conficts of post-public employment conficts of interest. It also recommends EP draft opinion

67 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Botswana, Eswatini, Jordan and Namibia join OECD convention on tax evasion and avoidance

The OECD announced on 29 September According to the announcement, with OECD BEPS Project’s implementation. that Botswana, Eswatini, Jordan and the signing of the treaty on mutual The Multilateral Convention to Namibia have signed the Multilateral assistance, the four countries have Implement Tax Treaty Related Convention on Mutual Administrative triggered 554 new exchange Measures to Prevent Base Erosion and Assistance in Tax Matters. relationships and will engage in Proft Shifting offers solutions for information exchange with 140 other governments to close gaps in Jordan has also deposited its jurisdictions, including all major international tax rules. instrument for the ratifcation of the fnancial centres. Multilateral Convention to Implement OECD press release Tax Treaty Related Measures to Prevent The OECD’s Multilateral Convention on Base Erosion and Proft Shifting (BEPS), Mutual Administrative Assistance in OECD press release on Jor... which the OECD stated will enter into Tax Matters is a key instrument in force on 1 January 2021. tackling illicit fnancial fows and for the

Joint EU and UNODC, UNICRI project to combat corruption and money laundering in Libya

The UN Ofce on Drugs and Crime investigations. The three-year project abilities. UNICRI Director Antonia Marie (UNODC) announced on 28 September will be funded with €2.5 million from De Meo added that “Libyans have the launch of a new EU-funded project the EU directed towards ten agencies in suffered from corruption for too long” ‘Building Libya’s National Capacity to Libya, including the country’s central and “should also beneft from the Prevent and Combat Corruption and bank, National Anti-Corruption recovery of stolen assets which – when Money Laundering’ in coordination with Commission, and Ministry of Justice. recovered – can be directed to key the bloc and the UN Interregional public sectors such as health care and Crime and Justice Research Institute Middle East and North Africa Regional education”. (UNICRI), which will train Libyan Representative for UNODC Cristina ofcials and law enforcement agencies Albertin said that the joint project According to the UNODC press release, to more effectively investigate and shows the three international UNICRI has thus far successfully clamp down on corruption and organisations’ commitment to “support assisted Libya’s government in locating fnancial crime. Libya in building long-term sustainable hundreds of millions of dollars worth of national capacities to counter stolen assets. The project also seeks to train corruption and money laundering” authorities in asset tracing and recovery through supplementing and expanding UNODC press release in relation to fnancial crime law enforcement resources and

68 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Vatican Cardinal Angelo Becciu resigns from ofce amid fnancial scandal

The Prefect of the Vatican’s While holding this position, Becciu was theft and fraud. Becciu also reportedly Congregation for the Causes of Saints, allegedly involved in multiple fnancial interfered with an external audit ordered Cardinal Angelo Becciu, resigned from scandals, including the investment of by the Prefecture of the Economy in ofce and renounced the rights hundreds of millions of euros linked to 2016 and was responsible for the extended to members of the College of Italian businessman Rafaelle Mincione dismissal of the Vatican’s frst auditor Cardinals, the Vatican press ofce and the controversial purchase of general, Libero Milone, who attributed announced on 24 September. Becciu luxury real estate in London. his dismissal to his work uncovering has reportedly been implicated in the evidence of fnancial misconduct under ongoing investigation into alleged According to the Catholic News Agency Becciu’s leadership. fnancial malfeasance at the Vatican’s (CNA), in 2015, Becciu attempted to Secretariat of State. conceal the loans made to cover the The Holy See announcement does not purchase, by cancelling them against outline what rights Becciu has resigned, Between 2011 and 2018, Becciu served the value of the London property. In and according to Vatican regulations, as ‘sostituto’, a second-ranking ofcial addition, CNA reported that he was he remains technically a cardinal. at the Secretariat of State, and was involved in the purchase of the Istituto subsequently named cardinal and Dermopatico dell’Immacolata (IDI), an Holy See press statement transferred to the Congregation for the Italian hospital which collapsed in 2013 Causes of the Saints by Pope Francis. due to debts of €800 million caused by Catholic News Agency stor...

Aperio Analysis by Edoardo Fiora

Becciu’s resignation is a de facto defenestration, or the climax thereof. The Pope lost confdence in the Cardinal soon after he was appointed Sostituto, and chose him as Prefect of the Congregation for the Causes of Saints to deprive him of responsibilities. His resignation is evidence that the Pope’s anti-corruption crusade continues, and knows few boundaries. The coming months are to unveil the true extent of Becciu’s misconduct, and further details on the corruption within the Holy See.

Eurasian Economic Commission approves draft AML memorandum with the EAG

The Eurasian Economic Commission particularly in strengthening the region’s need to ensure the protection of the (EEC) announced on 16 September that economic security and resilience when fnancial systems of the Union's its Collegium has approved the draft confronted with fnancial crime threats. member states, as well as the AML memorandum reached in July development of integration processes, with the Eurasian Group on Combating Timur Zhaksylylykov, a member of the make the formats of interaction Money Laundering and Financing of EEC Collegium on Economy and between our organizations, which have Terrorism (EAG). Financial Policy stated that “current been used so far, insufcient”. trends in the world economy, EEC and EAG’s representatives met on challenges and threats arising from the EAG press release 9 July to discuss common goals, development of new technologies, the

69 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Nikola Corporation founder resigns following short-seller’s fraud allegations

US-based electric truck maker Nikola Nikola One model “was not a real truck” produced to manipulate the market and Corporation announced on 20 since it did not move by its own beneft short sellers. Hindenburg September that its founder and propulsion. The document has Research published a response on 15 executive chairman Trevor Milton has reportedly prompted the US Securities September, arguing that Nikola’s stepped down after short-seller and Exchange Commission (SEC) to statement was “a tacit admission of Hindenburg Research issued a report investigate whether Nikola is in securities fraud”. accusing the company and Milton violation of securities laws. The US specifcally of fraud. Department of Justice is also said to be Nikola Corporation press ... investigating the claims. In a report published on 10 September, Hindenburg Research repor... Hindenburg claims that Nikola’s Nikola released a statement on 14 proprietary technology was bought September refuting the claims and Nikola Corporation statem... from another company and that its arguing that the Hindenburg report was

Peruvian Congress dismisses request to remove President for obstructing corruption probe

The Peruvian Congress adopted a proceedings against 16 Ministry “moral incapacity”. The plenary did not motion on 11 September against the employees that were allegedly involved approve his dismissal with 78 against country's President Martín Vizcarra in the scheme. 32 and 15 abstentions, with some MPs Cornejo, over allegations that he tried stating that they had chosen to put the to obstruct a corruption investigation According to some Contigo party country frst and expressed their into the hiring of singer Richard Javier members, Cisneros’ involvement in the confdence that justice would be done Cisneros by the Ministry of Culture 2016 campaign was facilitated by his after Vizcarra’s presidential term. between 2018 and 2020 to deliver relationship with Vizcarra. The Vizcarra was present at the debate and speeches and music projects. On 18 President denied knowing the singer denied any wrongdoing, while his September, the Peruvian Congress and expressed his support for the lawyer Robert Pereira underlined that plenary denied the request. probe, but a leaked conversation from the dismissal request was based on 10 September appears to contain a “uncorroborated facts”, all of them According to the motion, the demand addressed to his aides to currently under investigation. Comptroller General’s Ofce issued a 31 downplay details of his ofce’s August notice on the internal audit involvement in the affair. Peruvian Congress motion ... performed at the Ministry of Culture, which found several irregularities On 18 September, the Peruvian Peruvian Congress press r... regarding Cisneros’ hiring process. The Congress debated Vizcarra’s audit recommended starting criminal impeachment in plenary session for Peruvian Congress press r...

70 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 GRECO publishes plenary meeting decisions

The Council of Europe’s Group of Marin Mrčela and Swedish Countries that were determined to no States Against Corruption (GRECO) Vice-President Monika Olsson. longer need application of Rule 32, held its plenary meeting from 21-25 measures taken in the event of member September, notably concluding Fourth round evaluation reports were non-compliance, include Ireland, France, “globally unsatisfactory” levels of adopted for Belarus, Liechtenstein, and and North Macedonia. Compliance compliance with certain San Marino, with reports from all three procedures for Albania were recommendations in the third and countries due in March 2022 on the satisfactorily terminated following a fourth round compliance reports on implementation of the second fourth round compliance report, Andorra, Austria, Belarus, Bosnia and recommendations. The multinational while Greece and Croatia were Herzegovina, Hungary, and the body “noted with satisfaction” the requested to submit follow-up reports Republic of Moldova. authorisation by San Marino to publish on progress made by September 2021. its evaluation report and urged Belarus The 85th plenary meeting was chaired and Liechtenstein to follow suit. GRECO decisions by current Croatian President of GRECO

US White House lists major drug producing and trafcking nations

US President Donald Trump declared US partner in anti-drug trafcking but can be sourced to Mexico, underlining on 16 September, 22 countries as reafrmed that cocaine production is that Mexico must increase its major illicit drug transit or producing “unacceptably high”. Bolivia remains a investigative pace and the pressure countries pursuant to the Foreign concern as well, with Trump’s placed on cartel activities. Relations Authorization Act 2003 declaration suggesting that Bolivia (FRAA), with particular explanations could fnd itself removed from the list if The countries listed by the US as major offered for listed nations in South the Bolivian government “continues the drug transit or illegal drug producers America, specifcally pinpointing progress made over the past 10 are: Afghanistan, the Bahamas, Belize, Venezuela and Bolivia for failing to months” through next year. Bolivia, Burma, Colombia, Costa Rica, adhere to counter-narcotics the Dominican Republic, Ecuador, El agreements in the past year. The bulk of detailed criticism in the Salvador, Guatemala, Haiti, Honduras, White House declaration was reserved India, Jamaica, Laos, Mexico, The declaration singles out Venezuela for Mexico, despite offering praise for Nicaragua, Pakistan, Panama, Peru, and as “the most complicit kingpin in this Mexico’s recent asset forfeiture Venezuela. Hemisphere”, noting the country’s reforms, the rise in indicted drug unrecognised leader Nicolás Maduro’s trafcking extraditions to the US, and White House declaration indictment by the Department of completion of a comprehensive study Justice (DOJ) for conspiracy to of poppy production. Trump highlighted DOJ press release on Madu... smuggle cocaine into the US. Trump that the majority of all heroin and stated that Colombia remains a close methamphetamine seizures in the US

71 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UN representatives report rise in cross-border movement of drugs in the ‘Golden Triangle’

UN Resident Coordinator in Thailand experienced the continued expansion of methamphetamine’s price drop has Gita Sabharwal and UN Ofce on Drugs drug production, trafcking and use, made it very affordable and increased and Crime (UNODC) Southeast Asia which has transformed the region into its use among young people. In and the Pacifc representative Jeremy “one of the most signifcant drug response to the Covid-19 pandemic, Douglas reported on 5 September that trafcking points in the world”. The trafckers have reportedly redirected the cross-border movement of illicit profts obtained in 2019 are estimated their routes via other provinces or via drugs, especially methamphetamine, at $71 billion, with methamphetamines Laos and back into Thailand. has grown signifcantly in the so-called accounting for $61 million. ‘Golden Triangle’, the region between UN news Thailand, Myanmar and Laos. According to UN ofcials, this industry has become “the fnancial backbone of UN Thailand press release According to the report, the border transnational organised crime and the areas along the Mekong River have ethnic armed groups”. Additionally,

UNODC and FIFA MoU on preventing corruption

The United Nations Ofce on Drugs that FIFA is committed to assisting the forms of match manipulation and Crime (UNODC) and FIFA signed a UN’s Sustainable Development Goals. memorandum of understanding (MoU) Promoting integrity in sporting on 14 September to increase In addition to the MoU goals, the events and organisations and cooperation between the two UNODC has agreed to partake in a FIFA implementing effective control organisations to combat criminal consultation process that aims to systems threats to sport. launch a new international agency that will investigative athlete abuse cases. Putting in place life skills training According to a joint media release This organisation, according to the joint and other measures to promote published by the UNODC, the MoU is press release, will seek to standardise youth development and crime focused on strengthening “youth sanctions and other disciplinary prevention resilience to crime and substance use measures, and put a screening process through the provision of life skills in place to identify repeat offenders. Developing technical tools and training”. UNODC Executive Director The new agency will also lead the publications to prevent crime Ghad Waly said that as the Covid-19 charge in forming a mobile group of recovery period gets underway, sports experts that can offer case Preventing corruption in sport are especially necessary to increase management specialisation and lend through the exchange of health and happiness and create jobs. support to victims, witnesses, and information and expertise by whistleblowers. holding regular meetings and FIFA President Gianni Infantino said conferences in the feld that the MoU “underlines the absolute The MoU goals include commitment of the new FIFA and UNODC-FIFA press release myself to zero tolerance policy on Supporting training programmes corruption in football: never again!” and and building capacity to stop all

72 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Ukrainian government approves national anti- corruption strategy for 2020-2024

The Ukrainian Cabinet of Ministers authorities’ functions; (2) implementing and the High Qualifcation Commission approved on 16 September the national digital transformation and open data; of Judges of Ukraine. anti-corruption strategy for 2020-2024 (3) providing convenient legal services; developed by the National Agency on (4) promoting zero tolerance to Additionally, the Cabinet of Ministers Corruption Prevention (NACP), which corruption among the country's citizens; approved on 16 September the Strategy coordinates all branches of the and (5) imposing adequate sanctions for Combating Organised Crime, as well government to effectively prevent and for corruption. as the main activities of the State combat corruption. Export-Import Bank of Ukraine According to Transparency (Ukreximbank) for 2020-2024. The strategy was frst presented at a International Ukraine, the version of the meeting of the Cabinet of Ministers on strategy which was approved on 16 Ukraine government statem... 8 September, where the Head of the September was amended particularly NACP Oleksandr Novikov explained the with regards to clause 3.1 concerning Presentation of anti-corr... new strategy’s priorities and principles, the verifcation of the integrity of the including (1) optimising public members of the High Council of Justice Transparency Internationa...

Aperio Analysis by George Voloshin

More than fve years since the fall of the corrupt regime of Viktor Yanukovych in the February 2014 Euromaidan revolution, Ukraine is still grappling with widespread corruption. The government's new anti-corruption strategy is a welcome step in the direction of much-needed structural reform, but there is a high chance of it being good only on paper. In 2014, Ukraine amended the criminal code to penalise illegal self-enrichment as a pre-condition for its association agreement with the EU. In fve years, the mechanism has not been acted upon a single time by Ukrainian courts. In February 2019, the Constitutional Court of Ukraine struck it down as illegal. Although President Volodymyr Zelenskiy managed to get his party to adopt a new law in late 2019 to the same effect, corruption continues to plague Ukrainian society and is often weaponised for political reasons.

ECB shares details on new Cyber Information and Intelligence Sharing Initiative framework

The European Central Bank (ECB) includes details on how a central critical service providers, the EU Agency published on 15 September shared intelligence platform is being for Cyber Security (ENISA) and Europol. documentation by the Euro Cyber used for sharing cybersecurity threat The core objective of CIISI-EU is to Resilience Board for pan-European information between public and private protect the fnancial system from Financial Infrastructures (ECRB) on the entities; and the ECRB’s goal to inspire cyberattacks. new Cyber Information and Intelligence other jurisdictions to form their own Sharing Initiative (CIISI-EU). cyber intelligence sharing initiatives. ECB press release

The ECB provides more detailed CIISI-EU is comprised of pan-European ECB details on the initia... information on the CIISI-EU, which fnancial infrastructures, central banks,

73 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 French Anti-Corruption Agency publishes company guide on gifts and invitations

and processes. In order to create an effective policy, each company should frst determine who is subject to the rules and how the rules apply. Additionally, companies should take into consideration how to defne the gift or invitation’s purpose and value.

The regulator also recommends that companies correlate their codes of conduct and other internal procedures with a guide on receiving gifts and invitations. Furthermore, the AFA urges companies to disseminate such provisions to all employees, regularly The French Anti-Corruption Agency internal company registry of gifts and monitor implementation, and offer (AFA) published a company guide on invitations. training to those who are more exposed 11 September on receiving gifts and to corruption risks. invitations, recommending that According to the AFA, a company’s risk companies establish internal rules to mapping should identify and evaluate AFA press release (in Fre... prevent corruption. The guide provides the risk of corruption associated with examples of best practices, including offers, gifts or invitations, bearing in AFA guide (in French) gift mutualisation and establishing an mind its activities, territorial coverage

Pactiv Evergreen announces possible US FCPA violations in SEC fling

Manufacturer and distributor of food The statement explains that the frm attempting to remedy the situation and merchandising products Pactiv has identifed “the occasional giving of has stopped giving gift cards and hiring Evergreen Inc notifed the US gift cards representing relatively minor consultants. Securities and Exchange Commission monetary values to government (SEC) in a Form S-1 registration regulators in the People’s Republic of According to the SEC disclosure, Pactiv statement on 8 September that it has China” in its Evergreen Packaging identifed the possible violations in identifed practices in its China unit Shanghai business (EPS). Pactiv also August and has appointed external that could potentially violate of the US identifed a potential issue with EPS advisers to investigate the practices, as Foreign Corrupt Practices Act (FCPA), engaging external consultants to well as self-reporting the matter to the in a declaration that comes in the communicate with government Department of Justice. run-up to its initial public offering. regulators in the hope of evading “adverse action”. Pactiv stated that it is SEC fling

74 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK HMRC chief states up to £3.5 billion in furlough claims may be fraudulent or erroneous

month. The announcement to the Public Accounts Committee is the frst time that HMRC has spoken publicly about potential fraud affecting the scheme. According to Harra, the government has so far paid out £35.4 billion in furlough payments.

When asked how HMRC intends to recoup the funds that may have been paid out wrongly, Harra explained that the government does not intend to try to fnd employers who have made legitimate mistakes in their claims due to the unique situation which The Chief Executive of HMRC, Jim deliberate fraud or error, to accompanied the Covid-19 pandemic, Harra, told MPs during a Public approximately 27,000 businesses but expects employers to double check Accounts Committee meeting on which the HMRC is treating as their claims and repay any excess tackling the tax gap on 7 September “high-risk” claims. amounts in due course. that between £1.75 billion and £3.5 billion could have been incorrectly paid The Coronavirus Job Retention Scheme In regard to abusive or fraudulent to businesses through fraudulent was designed to provide fnancial claims, Harra confrmed that HMRC will claims or mistaken pay-outs as part of support to businesses during the be focused on tackling fraud. the UK government’s furlough scheme. Covid-19 pandemic, providing 80 Harra estimated that between 5-10 percent of the wages of employees Oral testimony to the Pub... percent of furlough scheme funds were placed on furlough since March, up to a awarded incorrectly, either through maximum of £2,500 per employee per

UK Action Fraud banking protocol stops £19 million of fraud in frst half of 2020

The UK’s Action Fraud announced on scammed, triggering police to visit the scheme is being expanded to telephone 10 September that the banking branch to investigate the suspected and online banking. protocol has prevented £19.3 million of fraud and arrest any suspects still on fraud between January and June 2020. the scene. The scheme is often used to Since it was introduced three years ago, prevent impersonation scams, courier the scheme has prevented a total of The scheme, introduced by UK Finance, scams, and romance fraud with data £116 million in potential fraud and has is UK-wide and enables bank branch provided by police forces showing that led to 744 arrests. staff to alert their local police force customers helped are typically aged when they suspect a customer is being over 65. According to Action Fraud the Action Fraud press releas...

75 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Finance reports sharp increase in impersonation scams in frst half of 2020

UK Finance revealed on 15 September amounted to £58 million, representing a tackle phone number spoofng and is that almost 15,000 impersonation 3 percent increase compared to the sponsoring the UK’s Dedicated Card scam cases were reported between previous year. and Payment Crime Unit (DCPCU). January and June 2020, representing an 84 percent increase compared to UK Finance recalls that the banking and UK Finance urges the public to be the same period last year. fnance industry have put in place aware of potential fraud indicators, measures to combat fraud, such as such as urgent requests to make a Of these reports, 8,220 cases involved delivering the Banking Protocol, payment and disclose personal or criminals impersonating the police or a investing in advanced security systems, fnancial information, demands made bank and in 6,730 cases fraudsters and working with text message under the pressure of imminent risk, attempted to pose as representatives of providers and law enforcement to block and requests to transfer money to utility companies, communications scam text messages. Additionally, the another account for safe-keeping. service providers or government. The industry is working with the UK's total loss caused by these acts communications regulator Ofcom to UK Finance press release

UKFIU and AUSTRAC examined the use of cash for money laundering during Covid-19

In a joint webinar on suspicious activity created online; a shared IP address for unexpectedly large PPE contracts, and reports (SARs) fled during the multiple accounts; the rapid transfer of suspicions that the PPE trade might be Covid-19 pandemic held on 10 funds among accounts; and multiple being used to cover up money September, the UK’s Financial government stimulus payments made laundering. Intelligence Unit (UKFIU) and the to the same account. Brown mentioned Australian Transaction Reports and that the spike in cash withdrawals In addition, UKFIU increased its Analysis Centre (AUSTRAC) stated that between April and July is likely to have monitoring of cash movements and the the areas of increased reporting by been associated with changes in substantial increase in cash deposits obliged entities during the pandemic organised criminal activity in Australia. during the Covid-19 lockdown. Another included fraud, cybercrime, the abuse area of concern was cryptocurrency, of government support schemes, and UKFIU Senior Analyst James Brown where transactions became more illicit cash transfers. provided details on the most frequently visible due to the coronavirus lockdown reported fraud types. In the case of restrictions. According to AUSTRAC National personal protective equipment (PPE) Manager Bradley Brown, the Covid-19 fraud, the three main activities included UKFIU event announcement related list of suspicious activities fraudulent online sales by scammers contains newly established accounts pretending to be legitimate suppliers,

76 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US Senators urge OFAC to issue Russia-related designations under the Magnitsky Act

US Senators Robert Menendez and perpetrators in 2020, only 17 are violations against people seeking to Benjamin L. Cardin sent a letter to the Russia-related, even though there expose illegal activity by Russian US Secretary of the Treasury on 9 continues to be “a host of individuals government ofcials or against September, calling on the Trump whom both the Sergei Magnitsky prong individuals cracking down on those administration to issue new and Gross Violations of Human Rights seeking to promote human rights in the Russia-related Magnitsky Act prong of this Act would apply”. region. Under the Act, the Secretary of designations without delay. The letter State and Secretary of the Treasury are expresses particular concern that the Under the Sergei Magnitsky Rule of Law required to report annually to the annual designations, more specifcally Accountability Act 2012, the President appropriate congressional committee the 2019 round of designations, is required to designate individuals on the number of individuals added or required by the Magnitsky Act have not involved in Russian whistleblower removed to the list of designations and, been issued yet. Sergei Magnitsky’s detention, abuse, or if no such persons have been added, death, or those that have fnancially the reasons why. According to the senators, while the US benefted from the criminal conspiracy Department of the Treasury’s Ofce of Magnitsky uncovered. It also requires Letter to the Treasury Foreign Assets Control (OFAC) has the President to designate individuals designated dozens of human rights responsible for gross human rights US Senate Committee press...

Six US senators urge President Trump to impose sanctions on the entirety of Iran’s fnancial sector

Six US Senators sent a letter to US 19 September. However, the letter Under EO 13902, the US Secretary of President Donald Trump on 18 highlights that at least 14 Iranian banks the Treasury, in consultation with the September, requesting an extension of are still connected to the SWIFT Secretary of State, can impose the country's economic sanctions to network and can perform transactions, sanctions on entire sectors of the cover the entirety of the Iranian providing the Iranian regime with “a Iranian economy in order “to deny Iran fnancial sector, pursuant to Executive crucial economic lifeline”. all paths to a nuclear weapon and Order (EO) 13902. intercontinental ballistic missiles, and To prevent Iranian banks from to counter the totality of Iran's malign Senators Tom Cotton, John Cornyn, Ted accessing the international fnancial infuence in the region”. Cruz, Marco Rubio, Rick Scott and system, the US Senators urge President Thom Tillis praised the Trump’s Trump to impose sanctions on the US Senators letter administration efforts to impose entirety of Iran’s fnancial sector, which pressure on the Iranian economy and would force SWIFT to disconnect the Senator Cotton press rele... trigger the snapback of UN sanctions, remaining banks and force the regime which according to US Secretary of to abandon “its malign activities and State Mike Pompeo were reinstated on return to the negotiating table”.

77 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Chavismo Inc platform launched focusing on the global reach of Venezuelan corruption

Transparency International announced on 22 September the money laundering and bribery cases currently under launch of a collaborative investigation platform, Chavismo investigation in multiple jurisdictions. Those allegedly Inc, focused on the international dimension of corruption in involved include relatives of Venezuelan political fgures such Venezuela. The platform has been created by Transparencia as Samark López Bello and Cilia Flores de Maduro. Venezuela, the Alianza Rebelde Investiga, and the Latin American journalism network Connectas. The platform offers a public database containing 5,000 people and entities connected to Venezuelan funds’ According to several investigations already published on the misappropriation, from which 751 individuals have business platform, Venezuelan businessmen with political ties links with the former Chávez and Maduro governments. invested signifcant amounts in real estate assets in the US According to the launch presentation, Chavismo intends to and Spain, as well as in various businesses in the Dominican develop another interface, Corruptómetro, which will examine Republic, Bolivia, El Salvador, Nicaragua, Argentina, and inquiries by national entities in Venezuela and report Uruguay. Additionally, in 2019, Venezuelans allegedly injected corruption cases. $2.8 billion into Panamanian companies, with Chavismo underlining that 86 corruption cases have been opened TI brief outside Venezuela, 52 of which account for more than $30 billion related to money laundering acts. Chavismo Inc project presentation (in Spanish...

According to Chavismo’s fndings, there are 242 companies in Chavismo Inc database (in Spanish) Panama with 380 connections to Venezuelans involved in

FinCEN statement on unlawfully disclosed SARs

The US Department of the Treasury’s Financial Crimes $100,000 for each violation, and criminal penalties including Enforcement Network (FinCEN) issued on 1 September a fnes of up to $250,000 and/or imprisonment of up to 5 years. statement on certain unnamed media outlets’ intent to publish a series of stories based on “unlawfully disclosed” According to FinCEN, the unauthorised disclosure of SARs suspicious activity reports (SARs) and “other sensitive can impact US national security, compromise law government documents”. FinCEN's statement was issued enforcement investigations, and threaten the safety and prior to the release of the so-called FinCEN Files. security of reporting institutions and individuals. FinCEN has referred the matter to both the Department of Justice and the The unauthorised disclosure of SARs, or any other Department of Treasury’s Ofce of Inspector General for information that may reveal the existence of a SAR is further investigation. prohibited by the Bank Secrecy Act. Unlawful disclosure is also prohibited by the Code for Federal Regulation and the FinCEN statement United States Code, which provide for civil penalties of up to

78 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK NCA latest issue of SARs in Action magazine

The UK’s National Crime Agency (NCA) webinar has taken place to pull together means of outreach and communication, published the seventh edition of its all AML groups in the country to such as the NCA podcast launched in Suspicious Activity Reports (SARs) in exchange best practices and identify July, the formation of new working Action magazine. new trends and emerging patterns. At groups that meet through webcasts and the July Egmont Group working group, plans to produce a series of UKFIU Chief Ian Mynot stated in the which featured over 130 FIUs, the educational videos to better inform magazine’s introduction that a number UKFIU presented a project in tandem stakeholders about the SARs regime. of new SARs and anti-money laundering with the FIUs of Australia and the (AML) working groups have been Philippines on combatting child sexual The next UKFIU informational release formed during the last year to share abuse and exploitation online. will be published before the end of guidance and best practices, including December and will focus on law a challenger bank group, cryptocurrency While the UKFIU conducts regular visits enforcement’s use of the information group, and an e-money and payment with stakeholders to assess SARs gained from SARs. service provider group. regime efcacy and address concerns, despite the restrictions in place due to NCA magazine In terms of broader engagement, the the Covid-19 pandemic, the magazine magazine notes that the frst NCA notes that the UKFIU has initiated new

New issue of FCA Market Watch newsletter

The UK’s Financial Conduct Authority information – should be kept strictly or market observation, given that it (FCA) published on 7 September issue confdential, to avoid the risk of may become disclosable in the 65 of its newsletter on market conduct tipping off or the risk of event of enforcement action and transaction reporting issues, inappropriate destruction of Market Watch, which analyses how evidence. However, in some cases Summing up several data quality inappropriate handling of information information can be shared between issues surrounding the EU Markets requirements issued by the FCA can the compliance department and in Financial Instruments transaction hinder or compromise preliminary other departments, with prior reporting, the newsletter discusses reviews and investigations into consent from the FCA unreported transactions, the suspected market abuse. immediate underlying reporting Confdential communications requirement, errors in the use of Key takeaways include between lawyers and their clients, country of branch felds, and or the lawyer/client and a third party ongoing reconciliation between Essential FCA-requested in connection with actual or pending transaction reports and front ofce information regarding purported litigation, or simply for the purpose records to ensure reporting suspicious trading – including of providing legal advice are subject accuracy insider lists, corporate action to legal professional privilege (LLP). chronologies, copies of Such information should not be FCA Market Watch newslett... communications, know-your-client submitted alongside a suspicious transaction and order report (STOR)

79 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EBA publishes 2021 work programme

The European Banking Authority (EBA) The EBA’s 2021 programme seeks to The work programme also includes published on 30 September its work contribute more broadly to fnancial offering policies that manage risks in programme for 2021, which identifes innovation as well as operational the feld of Environmental, Social, and six primary strategic areas for the resilience across the European fnancial Governance (ESG). coming year and working towards the sector, and further aims to build up horizontal policy priorities of more fnancial and monitoring EBA press release “establishing a culture of sound and infrastructure that will allow the effective governance and good European Union to lead in the feld of EBA 2021 work programme conduct in fnancial institutions” with anti-money laundering and counter the an emphasis on handling the lasting fnancing of terrorism (AML/CFT) EBA six strategic areas impact of the Covid-19 pandemic. monitoring and oversight.

Malta publishes latest edition of its fnancial services oversight newsletter

The government of Malta published on seize suspected criminal proceeds, The MFSA has set the application 4 September its sixth fnancial services without the prior initiation of deadline for virtual fnancial assets oversight newsletter, aimed at criminal proceedings (VFA) service providers to 15 informing all stakeholders about the September 2020. Applicants progress made to strengthen the Malta published the Residual providing incomplete applications country’s fnancial regulations and in Balances Fund Act (Act XLVIII of after the said date will be required meeting international obligations to 2020), which, if determined to be to cease all VFA operations combat money laundering and appropriate, will allow the MFSA to conducted under the transitory terrorism fnancing. issue one or more deposit liability period under Article 62 of the transfer instruments to require a Virtual Financial Assets Act Key takeaways solvent credit institution to transfer all of its deposit liabilities to a An upcoming regulation, which Malta’s parliament has approved residual balances fund, as well as responds to Moneyval’s report of landmark bills to reform the the corresponding deposit assets July 2019, will allow the FIAU to judiciary, and strengthen the rule of and all the property or rights control cash sales in the car law, building on recently pertaining to such deposits industry, real estate and the sale implemented reforms, regarding the and acquisition of precious metals appointment of Malta’s The MFSA launched enforcement – which have been identifed as Commissioner of Police, as well as actions against four entities in high-risk for money laundering the separation of the prosecution August, levying fnes of €15,000 service and the newly established each on two entities – ARQ Malta Financial Services ... state advocate Fiduciaries Ltd and Grand Harbour Trustees Ltd, and withdrawing the Malta FIAU press release Malta’s Justice Minister Edward licences of the other two entities – Zammit Lewis announced an AYN Limited and Corporate & MFSA tweet upcoming bill which will enable the Commercial FX Services Ltd Asset Recovery Bureau (ARB) to

80 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UAE Central Bank introduces mandatory registration framework Hawala providers

The Central Bank of the United Arab laundering and countering the UAE’s fnancial system. Providers must Emirates announced on 2 September fnancing of terrorism (AML/CFT) register within 90 days of the the introduction of a mandatory compliance. announcement. registration framework for Hawala providers as part of a move to The new framework aims to protect UAE Central Bank press re... guarantee transparency in fnancial customers of registered Hawala transactions and improve anti-money providers and the reputation of the Hawala providers regulati...

Switzerland signs memorandum to return $131 million to Uzbekistan

The Swiss Federal Council announced amounts in 2012 from an account held Justice (DOJ) also unsealed on 7 March on 11 September that it has signed a at Lombard Odier in the name of an indictment against her and framework agreement seeking the Takilant Ltd, which was owned by Akhmedov for their alleged return to Uzbekistan of $131 million Karimova’s assistant, Gayane Avakyan. participation in a suspected $865 worth of confscated assets. The However, they were not authorised to million bribery and money laundering amount was confscated from Gulnara withdraw the funds, and, after fnding scheme involving Mobile TeleSystems Karimova, daughter of the former that the man who opened the account, PJSC, VimpelCom Ltd (now VEON) and Uzbek president, following the Swiss Bekhzod Akhmedov, the former CEO of Telia Company AB. Federal Prosecutor’s order in 2018 on Uzdunrobita LLC, was on Interpol’s the forfeiture, which was followed by Wanted List for fraud, the bank notifed The Swiss government’s memorandum two Swiss Federal Criminal Court the authorities. The Swiss authorities is considered a basis for continued decisions in May 2019. then froze several accounts containing cooperation and does not create any $650 million. legally binding rights or obligations Karimova allegedly gained $1 billion by between the parties. using her political infuence to obtain Uzbekistan’s Supreme Court sentenced payments from telecommunications Karimova on 18 March to 13 years and Swiss Federal Council pre... companies. The Swiss authorities four months imprisonment over reportedly launched investigations into charges of extortion, money laundering, Text of the memorandum Karimova after several individuals racketeering, and embezzlement of attempted to withdraw signifcant public funds. The US Department of

Aperio Analysis by George Voloshin

Years after the arrest of the elder daughter of Uzbekistan's former president for corruption, Central Asia's most populous country is fnally seeing the light at the end of the tunnel. In total, Switzerland has frozen over $650 million in misappropriated funds. The inaugural memorandum will defnitely be followed by further successful recovery. Most of all, while the corruption situation in Uzbekistan is not much better than under Islam Karimov who died in 2016, a key condition of the Swiss-Uzbek accord is for the returned funds to be invested in socially important projects under strict external monitoring.

81 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

LEGISLATION

EU Digital Finance Package plans to harmonise regulation of cryptoassets to fght fnancial crime

According to the digital fnance strategy, the EU should implement by 2024 a comprehensive legal framework which will enable the use of interoperable digital identity solutions and straightforward onboarding of new customers, based on more harmonised anti-money laundering and counter-terrorism fnancing (AML/CFT) rules, stronger consumer protection defences against fnancial crime, including tax evasion, and a new framework for electronic identifcation and trust services for electronic transactions.

The proposed regulation on markets in cryptoassets (MICA) covers stablecoins and other cryptoassets not included The European Commission (EC) adopted on 24 September a under existing fnancial services legislation, and will apply to Digital Finance Package and new legislative proposals on issuers, custodian wallets, exchanges, trading platforms and cryptoassets and operational resilience, which aim to boost other associated services. In line with the Financial Action responsible innovation in the EU's fnancial sector and Task Force (FATF) recommendations, the proposals cover reduce the risk of money laundering and cybercrime. more cryptoassets service providers than those subject to the EU’s Fifth Anti-Money Laundering Directive (5MLD) since The proposed regulation on 10 January. To allow authorised EU operators to provide markets in cryptoassets covers services in other member states, the EU plans to introduce safeguards which include capital requirements, custody of stablecoins and other assets, a mandatory complaint holder procedure, and rights of the investor against the issuer. The EC notes that cryptoassets not included under additional AML requirements on cryptoassets are expected existing fnancial services to be issued in 2021.

legislation Under the DORA proposals, all fnancial system participants will be expected to have the necessary safeguards in place to The newly released package includes digital fnance and mitigate cyberattacks, to exchange amongst themselves retail payments strategies and new proposals for a cyber threat information and intelligence, and to report major harmonised EU regulatory framework on digital operational ICT incidents to the European Supervisory Authorities (ESAs) resilience (DORA), cryptoassets and a proposed pilot regime and the European Central Bank (ECB) to help develop a better for Distributed Ledger Technology (DLT) fnancial market understanding of cybercrime in the EU. infrastructures. In the EC’s view, these measures are aimed at tackling fragmentation and promoting innovation in the EC press release digital single market, while addressing the key challenges of the digital transformation by ensuring clear data protection EC Digital Finance Package rules and appropriate prudential supervision. Digital Finance Strategy

82 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK and Canada impose sanctions on Belarus ofcials including President Lukashenko

originating from Belarus and on equipment originating from the UK that ends up in Belarus.

Raab stated that if the Belarusian authorities fail to cooperate, the UK will consider further action along with its

The UK government imposed sanctions elections in Belarus and the violent acts international on eight Belarusian ofcials on 29 against protesters, urging Lukashenko partners September, including President to engage in dialogue with the Alexander Lukashenko and his son and opposition in order to facilitate a advisor Victor Lukashenko, pursuant to peaceful outcome. Raab also stated Canada has made similar designations, the Global Human Rights Sanctions that if the Belarusian authorities fail to except for Sergeenko, and has made Regulations 2020. The action was cooperate, the UK will consider further the following additional designations: coordinated with the Canadian action along with its international Lidia Mikhailovna Yermoshina, Yelena government in response to human partners. Additionally, Raab announced Nikolaevna Dmukhailo, Ivan rights violations against protestors and a doubling of fnancial support for Vladimirovich Kubrakov, and Vadim the arrest and forcible deportation of Belarusian civil society to £1.5 million, Dmitriyevich Ipatov. opposition fgures following what is of which £800,000 will be directed at being deemed the fraudulent journalists, over the next two years. On 17 September, the UK and 16 other presidential election in August. members of the Organisation for In response to Raab’s statement, Lord Security and Cooperation in Europe The UK’s designations, which include a Collins of Highbury questioned the (OSCE) triggered the Moscow travel ban and asset freeze, include Foreign Secretary’s steps to encourage Mechanism, which mandates an Chief of Staff Igor Petrovich Sergeenko, EU countries and its partners to independent investigation into the Deputy Commander Khazalbek sanction Lukashenko’s regime and situation in Belarus. Bakhtibekovich Atabekov, Police asked for an update on whether the Commander Dmitry Balaba, Minister of Magnitsky sanctions will be extended UK government press relea... Internal Affairs Yuri Karayev and Deputy to cover acts of coruption. Baroness Ministers Alexander Petrovich Barsukov Northover also underlined that fraud, UK updated sanctions list and Yuri Gennadyevich Nazarenko. corruption, and money laundering need to be pursued to maintain London as a Canadian government press... UK Foreign Secretary Dominic Raab leading fnancial market after Brexit and issued a statement to Parliament on 24 questioned what checks are being September condemning the fraudulent performed on corrupt resources

83 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Lithuania, Latvia, and Estonia impose sanctions on an additional 98 Belarusian ofcials

The Estonian Ministry of Foreign in Belarus and using violence against Prior to this, on 31 August, the Affairs announced on 25 September peaceful protesters” will be subject to Lithuanian Interior Ministry and the that it has imposed travel bans on an travel bans between 25 September 20 Latvian Foreign Ministry announced the additional 98 Belarusian ofcials, with and 30 August 2025. designation of 30 Belarusian ofcials Latvia and Lithuania also updating their and confrmed that Estonia would lists. Latvia’s government announced The Estonian government called on the prepare a similar list. that it has included 101 additional Belarusian authorities to end the individuals on its list. violence against its people and Estonian government press... encouraged EU leaders to make a joint According to the Estonian political decision on sanctions at the Estonian government list ... announcement, individuals “playing a next European Council meeting. central role in falsifying election results Latvian government press ...

US BIS adds 47 entities in 11 jurisdictions to Entity List, including Iranian scientists

The US Commerce Department’s Iranian scientists were added to the list helicopters on behalf of Iran-based Bureau of Industry and Security (BIS) for playing a “critical role” in Iran’s Farsco Aviation MRO Centre. announced on 21 September that it has nuclear weapons development added 47 individuals and companies to programme and providing support to Following their addition to the Entity its Entity List, determined to be acting the Iranian regime. List, exports, reexports, and in-country “contrary to the national security or transfers of items subject to the Export foreign policy interests of the US”. Six Pakistan-based and two UAE Administration Regulations (EAR) to entities were added to the Entity List listed individuals and entities will be The entities are located in Canada, due to their “contributions to restricted. The BIS fnal rule took effect China, Hong Kong, Iran, Malaysia, unsafeguarded nuclear activities” and on 22 September on publication in the Oman, Pakistan, Thailand, Turkey, the their association with other listed Federal Register. United Arab Emirates (UAE) and the UK. companies. Six Chinese and two Hong Ten Iranian individuals and companies Kong entities were blacklisted for BIS fnal rule were added to the Entity List for diverting US-origin unmanned aerial supporting nuclear-related activities vehicle parts to Iran without the Federal Register notice and engaging in the transfer of necessary licences. Additional entities US-origin items to Iran in violation of the from several other jurisdictions were US Commerce Department pr... Iranian Transactions and Sanctions listed due to their involvement in a Regulations (ITSR). In addition, fve scheme to illicitly procure Bell 412

84 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US designates Iranian entities and ofcials supporting weapons programme

The US Treasury Department’s Ofce sanctions on Iran, previously lifted Iran-based Mammut Industrial of Foreign Assets Control (OFAC) under UN Security Council resolution Group and its subsidiary Mammut announced on 21 September that it has 2231 of 2015. The actions are Diesel, for providing support to an designated three deputy directors of accompanied by the issuance of EO entity in Iran’s ballistic missile the Atomic Energy Organisation of Iran 13949 blocking property of certain programme and Shahid Hemmat (AEOI), three subsidiaries and 13 persons with respect to Iran’s Industrial Group (SHIG), Iran’s senior Iranian ofcials pursuant to conventional arms activities. primary developer of liquid Executive Order (EO) 13382 targeting propelled missiles proliferators of weapons of mass Those designated include destruction (WMD). Mammut Industries CEO Mehrzad AEOI deputy head of nuclear Ferdows and shareholder Behzad The designations planning and strategic supervision Ferdows, as well as Mammut Diesel Mohammad Ghannadi Maragheh managing director Mohammad have been made in and AEOI deputy head and the head Reza Dezfulian support of the US of AEOI’s Nuclear Science and Technology Research Institute Aerospace Industries Organisation administration’s (NSTRI) Javad Karimi Sabet, whose (AIO) ofcial Asghar Esma’ilpur, also listings were removed in January former director of SHIG’s Shahid Haj decision to 2016 under UN Security Council Ali Movahed Research Centre, and reimpose all UN resolution 2231 SHIG ofcial Mohammad Gholami

sanctions on Iran An update to the previous Shahid Haj Ali Movahed Research designation of Advanced Center, designated in 2016 under the name of Shahid Movahed Concurrently, the US State Department Technologies Company of Iran Industries designated AEOI Group Director Hamid (IATC), Mesbah Energy Company, Reza Ghadirian and the head of the Iran and NSTRI, to refect their role as An update to the listing for AIO Centrifuge Technology Company’s key components of Iran’s nuclear director Seid Mir Ahmad Nooshin, Kashan Complex Ahmad Asghari Shiva’i programme and for being owned or also the previous director of SHIG pursuant to EO 13382. According to the controlled by the AEOI State Department, both ofcials were OFAC press release “centrally involved” in Iran’s uranium AEOI spokesman Behrouz enrichment centrifuge activities. Kamalvandi and deputy director Pezhman Rahimian, who heads the OFAC identifying informat... The designations were made in support sanctioned AEOI-afliated Nuclear US State Department press... of the US administration’s decision on Fuel and Raw Materials Production 19 September to reimpose all UN Company

85 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US designates 11 entities and 3 individuals for supporting Iranian petrochemical industry

The US Treasury Department’s Ofce The companies designated by OFAC serve as principal executive ofcers of of Foreign Assets Control (OFAC) are: Iran-based entity Zagros the sanctioned entities: Min Shi, an designated on 3 September six Petrochemical Company, UAE-based employee of New Far; Zuoyou Lin, an entities, based in Iran, the UAE and entities Petrotech FZE and Trio Energy employee of Sino Energy; and Alireza Hong Kong, pursuant to Executive DMCC, and Hong Kong-based entities Amin, an employee of Abadan. Order (EO) 13846, for providing Jingho Technology Co Ltd, and Dynapex support to Triliance Petrochemical Co Energy Ltd. Dinrin Ltd has also been Triliance was designated in January Ltd, a designated entity accused of designated for having supported 2020 for transferring exports from the using the six entities as front Zagros Petrochemical Company. National Iranian Oil Company, which companies to hide its involvement in allegedly helps fnance the Islamic the sale of Iranian petrochemical The entities sanctioned by the State Revolutionary Guard Corps (IRGC). products. The State Department Department are: Iran-based Abadan concurrently imposed sanctions on fve Refning Company, China-based OFAC press release entities and three individuals for Zhihang Ship Management CO Ltd, New knowingly engaging in a signifcant Far International Logistics LLC and Sino OFAC identifying informat... transaction concerning petroleum Energy Shipping Ltd, and UAE-based products from Iran. Chemtrans Petrochemicals Trading Department of State press... LLC. The three individuals designated

US sanctions Iranian judges, prisons, and court over gross human rights abuses

The US Department of State Abelabad, Vakilabad, and Orumiyeh, and his execution on 12 September. Soltani announced on 24 September the Branch 1 of the Revolutionary Court of stands accused of unfairly sentencing designation of two Iranian judges, Shiraz are responsible for human rights religious minorities in violation of their three prisons and a branch of the violations against Iranian citizens. The freedom of expression and beliefs, with Revolutionary Court of Shiraz for being Treasury Department’s Ofce of Foreign Vakilabad and Orumiyeh prisons responsible for gross violations of Assets Control (OFAC) has updated the purportedly sites of abuse, torture, and human rights. All of those designated specially designated nationals and wrongful detainment. will be subject to asset freezing blocked persons (SDN) list. measures, pursuant to the Countering State Department statemen... America’s Adversaries Through Sadati reportedly sentenced athlete Sanctions Act. Navid Afkari to death in Branch 1 of the OFAC notice Revolutionary Court of Shiraz for US Secretary of State Mike Pompeo participating in pro-democracy Updated SDN list stated that Judges Seyyed Mahmoud protests. According to Pompeo, Navid Sadati and Mohammad Soltani, prisons was tortured in Adelabad Prison prior to

86 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US blocks conventional arms sales to Iran

September and is “critical to enforcing the UN arms embargo on Iran”, being aimed at reducing the Iranian regime’s capacity to “export arms to terrorists and dangerous actors throughout the region, as well as its ability to acquire weapons to build up its own forces”.

Under the new powers granted by EO 13949, the US State Department designated on the same day the Iranian Ministry of Defence and Armed Forces Logistics, Iran’s Defence Industries Organization and its director Mehrdada Akhlaghi Ketabachi, and Venezuelan President Nicolás Maduro, for having engaged, or attempted to engage, in the supply, sale, The US President issued on 21 September Executive Order or transfer of arms and related materiel directly or indirectly (EO) 13949 on blocking property of certain persons with to or from Iran. According to US Secretary of State Mike respect to the conventional arms activities of Iran, which Pompeo, “for nearly two years, corrupt ofcials in Tehran authorises the Secretary of the Treasury to impose have worked with the illegitimate regime in Venezuela to fout sanctions on any persons engaged in the supply, sale or the UN arms embargo”. transfer of conventional weapons to or from Iran.

Concurrently, the US Treasury and the US Commerce EO 13949 imposes travel bans and blocks the property and Department administration imposed additional sanctions and interests in property in the US of those who contribute to the export control measures on entities and individuals that are supply, sale, or transfer of conventional arms to or from Iran, alleged to have provided support to Iran’s nuclear, missile and including spare parts, as well as those who provide related conventional arms programmes. technical training, fnancial support or other assistance. In addition, the new EO allows for the imposition of sanctions OFAC press release on any person determined to have engaged in the proliferation of arms or related materiel intended for military Executive Order 13949 end-use by the Iranian government.

State Department factsheet According to the US President, EO 13949 accompanies the US decision to restore all UN sanctions on Iran as of 19

US sanctions former Liberian ofcial

US Secretary of State Mike Pompeo announced on 10 of State, Foreign Operations, and Related Programs September the designation of Andrew Wonplo, the former Appropriations Act, which bans foreign ofcials and director of passport and visas at the Liberian Ministry of immediate family members from entering the US for Foreign Affairs, for his alleged role in a conspiracy to involvement in signifcant corruption. Wonplo’s spouse and defraud Liberia by illegally selling passports to children have been designated. non-Liberians from 2018 to 2019. US State Department press release The designation has been made pursuant to the Department

87 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC sanctions Iran cyber groups, individuals

The US Treasury Department’s Ofce and North African countries, and Concurrently, the US Federal Bureau of of Foreign Assets Control (OFAC) hundreds of other targets in 30 Investigation (FBI) released a public designated on 17 September cyber additional states. In their role as Rana intelligence alert about APT39, which group Advanced Persistent Threat 39 managers, programmers and hacking details eight separate sets of malware (APT39), front company Rana experts, the 45 individuals allegedly used by MOIS through Rana to conduct Intelligence Computing Company and provided support for ongoing MOIS their government-backed malicious 45 associated individuals pursuant to cyberattacks against international activities. In addition, the alert contains Executive Order (EO) 13553, for being businesses, institutions and air carriers. a list of best practices for network owned or controlled by Iran’s Ministry security and defence. of Intelligence and Security (MOIS) and In addition, through Rana, the cyber providing support to the Iranian actors allegedly monitored Iranian OFAC press release government’s malware campaign. citizens, journalists, former ofcials and academics, some of whom have been OFAC identifying informat... According to OFAC, the designated subject to arrest and intimidation by the groups and individuals conducted MOIS. In the US, Rana has used cyber FBI alert on APT39 computer intrusions against foreign intrusion tools to target 15 companies governments of at least 15 Middle East primarily in the travel industry sector.

OFAC designates two former Lebanese ofcials for providing support to Hezbollah

The US Treasury’s Ofce of Foreign carrying out political favours for bribery for their personal beneft and in Assets Control (OFAC) announced on 8 Hezbollah, which included siphoning support of their political allies. September that it has designated funds from government budgets and former Lebanese ministers Yusuf accessing confdential documents. Hezbollah was designated by the US Finyanus and Ali Hassan Khalil, State Department as a Foreign Terrorist pursuant to Executive Order (EO) During his roles as minister of fnance Organization in October 1997 and as a 13224 as amended, for providing (2014-2020) and minister of public Specially Designated Global Terrorist material support to Hezbollah. health (2011-2014), Khalil allegedly pursuant to EO 13224 in October 2001. facilitated the transfer of money from According to OFAC, in his capacity as government accounts to OFAC press release former minister of transportation and Hezbollah-associated organisations public works between 2016 and 2020, and attempted to have the US fnancial OFAC identifying informat... Finyanus received hundreds of restrictions on Hezbollah eased. In thousands of dollars in exchange for addition, the two ofcials engaged in US State Department press...

88 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC designates Hezbollah-linked companies

The US Treasury Department’s Ofce companies and other Hezbollah-related minister of public works and of Foreign Assets Control (OFAC) entities, in his role as a manager of the transportation Yusuf Finyanus, announced on 17 September that it has terrorist group’s central municipal blacklisted on 8 September, to ensure designated Lebanon-based companies activities. Since early 2019, he provided that Arch and Meamar won millions of Arch Consulting and Meamar guidance to these companies and was dollars worth of public contracts and Construction pursuant to Executive involved in their decision making. redirect some of the profts to Order (EO) 13224, as amended by EO Hezbollah’s Executive Council. 13886, for being owned, controlled, or OFAC alleges that the two companies directed by Hezbollah. have been used by Hezbollah to be OFAC press release awarded government contracts, In addition, OFAC designated Hezbollah conceal its economic activity and evade OFAC identifying informat... Executive Council ofcial Sultan US sanctions. Hezbollah reportedly Khalifah As’ad, for overseeing the two collaborated with former Lebanese US State Department press...

US sanctions 11 Syrian entities, 6 individuals

The US Department of the Treasury’s been designated are: Al Ali and Al prohibited by the SySR. OFAC also Ofce of Foreign Assets Control Hamza LLC; Castle Security and published FAQ 841. (OFAC) added on 30 September six Protection LLC; Ella Media Services Syrian nationals and 11 entities to the LLC; Ella Tourism Company; Emma LLC; OFAC has also designated two US Syria sanctions list. Emma Tel Plus LLC; Golden Star individuals – Husam Muhammad Telecommunications provider Emma Trading LLC; Jasmine Contracting Louka, the Head of the Syrian General Tel LLC has been designated pursuant Company; Syrian Company for Metals Intelligence Directorate, and the to Executive Order (EO) 13582, which and Investments LLC; and Syrian Hotel Governor of the Central Bank of Syria, targets those providing support to the Management LLC. Hazem Younes Karfoul – pursuant to Syrian government. Emma Tel has EO 13573 and EO 13572. been designated for being owned or OFAC has also issued General License controlled by Syrian businessman (GL) 20 authorising certain activities Concurrently, the US State Department Khodr Taher Bin Ali, who is a prominent necessary to the winding down and announced the designation of the Fifth intermediary and contractor for the divesting of transactions involving any Corps of the Syrian Arab Army, and its designated Fourth Division of the entity owned, directly or indirectly, by commander Milad Jedid pursuant to EO Syrian Arab Army. Emma Tel LLC. GL 20 authorises until 13894, which targets those obstructing 30 December 2020 all transactions and a ceasefre in the Syrian confict. The Emma Tel was allegedly established at activities prohibited by the Syrian sisters of sanctioned Assad fnancier the order of Bashar al-Assad’s wife, Sanctions Regulations (SySR) required Yasser Ibrahim – Nasreen and Rana Asma al-Assad, with the purpose of for the winding down and divesting of Ibrahim– have also been designated. breaking the dominance of Syriatel transactions involving entities in which Mobile Telecom owned by Bashar Emma Tell owns a 50 percent or greater OFAC press release al-Assad’s cousin, Rami Makhlouf. interest. The GL does not authorise (1) OFAC also designated Taher and 10 winding down and divestment activities General License 20 other entities owned, partially owned or involving Emma Tell itself; (2) the controlled by him. The companies unblocking of any property; (3) any State Department press re... owned or controlled by Taher that have transactions or dealings otherwise

89 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC designates four Venezuelan ofcials

The US Treasury’s Ofce of Foreign in an “election interference scheme” to As a follow-up to the 4 September Assets Control (OFAC) announced on 4 manipulate the National Assembly, action, OFAC announced on 22 September that it has designated four restructure the National Electoral September that José Bernabé Gutiérrez former and current Venezuelan Council and control the state’s wealth Parra, Miguel Antonio José Ponente ofcials pursuant to Executive Order and assets through the Solicitor Parra, Guillermo Antonio Luces Osorio, (EO) 13692, as amended, for General in order to prevent the Chaim José Bucaran Paraguan and facilitating the Nicolás Maduro organisation of free parliamentary Williams José Benavides Rondón have regime’s efforts to undermine the elections on 6 December. been designated pursuant to EO 13692, democratic order of Venezuela. as amended, for their complicity in De Lima Salas was designated for Maduro’s efforts to undermine the The designated individuals are:former leading two vote-buying corruption organisation of free and fair elections. Supreme Court of Justice magistrate schemes of up to $1 million between These individuals, including four Indira Maira Alfonzo Izaguirre, currently November 2019 to January, allegedly Maduro-supporting ad-hoc leaders of the principal rector and president of the with cash supplied by the former Venezuela’s main opposition parties, National Electoral Council;Reinaldo Venezuela’s executive vice president allegedly provided support to the Enrique Muñoz Pedroza, the current Tareck El Aissami, a specially ongoing attempt at manipulating the Solicitor General appointed by the designated narcotics trafcker in the US electoral process and confrmed their Maduro-aligned Supreme Court of since February 2017, and Colombian intention to run in the December Justice in a controversial ruling in April national Alex Nain Saab Moran, parliamentary elections. 2020;Jose Luis Gutierrez Parra, a designated by OFAC on 25 July 2019 for principal rector of the National Electoral orchestrating corruption networks for OFAC press release Council; and former governor and Maduro’s beneft. Saab was charged in former National Assembly member July 2019 for his alleged role in OFAC identifying informat... David Eugenio De Lima Salas. laundering the proceeds of FCPA violations in relation to a scheme to US State Department press... According to OFAC, all of the take advantage of Venezuela’s designated ofcials have been involved government-controlled exchange rate.

US imposes additional visa restrictions on Nigerian nationals for undermining democracy

The US State Department has imposed Morgan Ortagus explained in the press Commission, political parties, and another set of visa restrictions on 14 release that the unnamed individuals security services to “uphold the tenets September targeting as yet unnamed have thus far “operated with impunity at of democracy and facilitate genuinely Nigerian nationals for their roles in the expense of the Nigerian people and free and fair elections”. The multi-state anti-democratic activity, including have undermined democratic elections were due to take place in alleged election rigging concerning the principles”. Ortagus further stated that September and October 2020. November 2019 state elections in the as another round of Edo and Ondo Nigerian states of Kogi and Bayelsa. off-cycle state elections approach, the US State Department press... US urges stakeholders, such as the State Department spokesperson Independent National Electoral US visa restrictions (Jul...

90 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC sanctions Gambian former frst lady and Sudanese company over corruption

The US Department of State issued a husband Yahya Jammeh ruled the businessman Ashraf Seed Ahmed statement 15 September announcing Gambia from 1994 to 2017 and was Al-Cardinal, which has been designated the designation of one individual and sanctioned by the US in 2017 for human for acting on behalf of Al-Cardinal, who an unrelated entity pursuant to the rights abuses and corruption. was himself designated by the US on 11 Global Magnitsky sanctions pertaining According to the US Treasury, Zineb is October 2019 for bribery and to government corruption on the believed to have “been instrumental in procurement fraud involving South African continent and Executive Order aiding and abetting Jammeh’s Sudanese government ofcials. The US 13818 sanctioning ofcials and economic crimes against the country” Treasury claims that Al-Cardinal uses entities involved in signifcant and is purportedly now in control of the Nabah and other front companies to corruption or human rights abuse. The majority of the former president’s evade US sanctions by holding offshore Treasury Department’s Ofce of foreign assets, using a charity funds on behalf of senior South Foreign Assets Control (OFAC) has foundation as a front to illicitly launder Sudanese ofcials. According to the US added the two new designations – funds back to Jammeh. Zineb set up a State Department, Nabah is the sixth former frst lady of the Gambia and a trust fund that was used to purchase a company belonging to Al-Cardinal to be UK registered company owned by a $3.5 million property in Maryland that sanctioned by OFAC. Sudanese businessman with extensive has faced a DOJ forfeiture complaint ties to the South Sudanese government since 15 July. OFAC updated SDN List – to its SDN list. The second designation targets UK Treasury Department press... Zineb Souma Yahya Jammeh is the registered company Nabah Limited, former frst lady of the Gambia, whose purportedly owned by Sudanese State Department press re...

US Customs and Border Protection blocks certain Chinese imports linked to forced labour

US Customs and Border Protection since April, including eight on products The US Agricultural Department, in a 14 (CBP) issued fve new withhold release from China, with the latest WROs May commodity intelligence report, orders (WRO) on 14 September for targeting cotton, apparel, computer estimated that approximately 85 certain goods produced in China to parts, and hair products originating percent of China’s cotton originates combat state-sponsored forced labour from four Xinjiang-based companies, as from Xinjiang. camps holding Uyghur Muslim and well as a “re-education facility” for members of other minority groups in Chinese Muslims. CBP press release China’s Xinjiang province. The State Department declared that the List of WROs enforced by ... The WROs were issued pursuant to four companies and re-education Section 307 of the Tariff Act of 1930, facility are “subjecting individuals to State Department press re... which prohibits the import of all goods forced labor and stripping them of their produced wholly or in part by forced freedom and agency to choose how labour. The CBP have issued 12 WROs and where they work”.

91 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC sanctions Chinese state-owned company for corruption in Cambodia

targets perpetrators of serious human lease on the land, may turn the seized rights abuse and corruption. UDG property into a Chinese military base. allegedly conducted some of the illicit activities through Kun Kim, a senior In a statement by Secretary of State Cambodian general designated by Mike Pompeo the possibility of the OFAC in December 2019 for his land’s usage by Chinese military forces involvement in corruption. will threaten Cambodian sovereignty as well as the security of regional allies. UDG is alleged to have used a Furthermore, Pompeo alleged that in Cambodian director in addition to its the process of clearing the land leased false registration in order to be granted by UDG, which constitutes 20 percent of the land for the Dara Sakor the Cambodian coastline, the The US Treasury Department’s Ofce development project and subsequently Cambodian military used violent of Foreign Assets Control (OFAC) reverted back to its true ownership. methods to expel local residents. In designated on 15 September Chinese return, Royal Cambodian Armed Forces state-owned company Union The Treasury Department claims that Chief of Staff Kun Kim is believed to Development Group Company Limited the land upon which UDG seized and have personally “reaped signifcant (UDG), accused of falsely registering demolished includes protected natural fnancial beneft”. itself as a Cambodian-owned entity in areas intended only for Cambodian use, order to seize and demolish and that UDG “devastated the OFAC press release government-protected natural land environment, hurting the livelihoods of reserves in Cambodia. local communities, all under the guise Updated SDN list of converting Cambodia into a regional UDG has been designated pursuant to logistics hub and tourist destination”. State Department press re... Executive Order (EO)13818, which The Treasury expresses further concern implements the Global Magnitsky that UDG, which now holds a 99-year Human Rights Accountability Act, and

US renews terrorism sanctions for another year

US President Trump announced on 18 EO 13224 declared a national 13224 was amended by EO 13866 on 9 September the continuation for one emergency pursuant to the International September 2019, which consolidated year of the national emergency with Emergency Economic Powers Act in and strengthened the sanctions regime respect to persons who commit, response to the threat to the national to combat international terrorism. threaten to commit, or support security, foreign policy, and economy of terrorism declared through Executive the US constituted by the grave acts of White House notice Order (EO) 13224. terrorism and threats of terrorism committed by foreign terrorists. EO White House letter

92 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 OFAC issues regulations on ICC sanctions and WMD amendments

The US Treasury Department’s Ofce OFAC is due to supplement the new entries of those designated for North of Foreign Assets Control (OFAC) rules with more comprehensive Korea-related activities. announced on 30 September the regulations on licensing, policy, and issuance of the International Criminal other guidance relating to the restrictive Both sets of Regulations have been Court-Related Sanctions Regulations, measures, asset freezing, and travel published in the Federal Register and which implement Executive Order restrictions imposed on ICC members. came into force on 1 October 2020. 13928 targeting members of the International Criminal Court (ICC) who In addition to this, OFAC has also OFAC notice are engaged in extra-judicial amended the Weapons of Mass prosecutorial proceedings against Destruction Proliferators Sanctions Federal Register fnal ru... members of the US military. Regulations, relating to the secondary sanctions risk applied to SDN list EO 13928

US State Department sanctions two ICC ofcials

The US Department of State Mochochoko for having materially The ICC condemned the sanctions as announced on 2 September the assisted Bensouda. unprecedented and a serious attack on designation of two senior members of the Hague-based court, calling the the International Criminal Court (ICC) – US Secretary of State Mike Pompeo move “another attempt to interfere with Chief Prosecutor Fatou Bensouda of called the ICC “reckless” and warned the Court’s judicial and prosecutorial the Gambia and Head of the that other individuals and entities that independence and crucial work to Jurisdiction Complementarity and continue to support Bensouda and address grave crimes of concern to the Cooperation Division, Phakosio Mochochoko’s probe also run the risk of international community”. UN Mochochoko of Lesotho. The US facing travel restrictions pursuant to EO Secretary-General Antonio Guterres Treasury’s Ofce of Foreign Assets 13928. Pompeo claims that the ICC’s issued a statement calling the Control (OFAC) has added both investigation is unjust, illegitimate, and sanctions concerning. On 3 September, individuals to the SDN list. politically-driven, stating that while the the EU’s High Representative for US is “a strong advocate for justice Foreign Affairs and Security Policy The designations are the frst made around the world”, it is “not a party to Josep Borrell expressed unwavering pursuant to Executive Order (EO) 13928, the Rome Statute that created the ICC, support for the ICC and stated that the which authorises sanctions on ICC nor have we ever accepted its US sanctions are “unacceptable”. ofcials or employees who have directly jurisdiction over our personnel”. US engaged in efforts to investigate, arrest, President Donald Trump issued EO State Department press re... detain or prosecute US personnel or 13928 on 11 June 2020, stating that personnel of US’ allies without consent. ICC assertions of jurisdiction over US Updated SDN list Bensouda has been designated for personnel related to Afghanistan were having directly engaged in an effort to illegitimate and constituted a threat to ICC statement investigate US personnel and US sovereignty.

93 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US renews sanctions concerning terrorist attacks

US President Donald Trump announced the terrorist attacks of 11 September “terrorist threat” facing the US. on 10 September the continuation of 2001 in New York, Pennsylvania, and the national emergency with respect to Washington DC and the immediate White House notice certain terrorist attacks. threat of further attacks on the US. White House letter to the... The national emergency was originally The current notice explains that the declared following Proclamation 7463 reason for the continuation of national Federal Register entry of 14 September 2001 with respect to emergency is the persistence of a

US lists two Russians over crypto scheme

The US Treasury Department’s Ofce individuals’ cryptocurrency accounts The two Russians have been charged of Foreign Assets Control (OFAC) and stole their funds or engaged in with computer fraud, conspiracy to designated two Russian nationals on market manipulation. commit computer fraud and abuse, wire 16 September, who have fraud conspiracy, money laundering simultaneously been indicted by the Beginning in June 2017, Potekhin and conspiracy, and aggravated identity Department of Justice (DOJ) for their Karasavidi allegedly gained access to theft. Both remain at large. alleged involvement in a phishing three victims’ credentials and created scheme that purportedly defrauded the fake digital currency accounts at The Treasury’s designation of Potekhin customers of two US based and one platform GAS with their information, and Karasavidi is pursuant to Executive foreign virtual asset services provider then illegally transferred their funds in Order 13694 as amended by EO 13757 out of $16.8 million. October 2017 into GAS, artifcially targeting cybercrime and fnancial manipulating its values. The two then fraud. The digital currency addresses According to the DOJ press release, transferred those funds into other related to the individuals have been Danil Potekhin and Dmitrii Karasavidi digital currencies, causing a loss of included as identifers in the SDN purportedly set up websites that copied around $5 million to the three victims. listing. the appearance of existing virtual currency exchanges, applying phishing In another instance between October US Treasury Department re... and spoofng methods to gain 2017 and March 2018, the two allegedly customer IDs by tricking companies targeted another digital currency US DOJ statement into revealing login details, passwords, exchange, stealing over $11 million, and and other personal details. The two depositing a large portion of the US DOJ indictment then allegedly gained access to those proceeds into Karasavidi’s account.

94 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US designates entities and individuals linked to Yevgeniy Prigozhin and Russia’s FSB

US Secretary of State Mike Pompeo destabilising operations in Ukraine, Freight OY, and Unicum Trade OY, two announced on 23 September that eight Syria, Sudan, Libya, and Mozambique. Russian companies M Finans and NPP individuals and seven entities have PT Okeanos, AO, and Central African been designated for their links with According to the US Treasury Republic company Lobaye Invest. M listed Russian operative Yevgeniy Department’s Ofce of Foreign Assets Finans and Lobaye Invest are said to be Prigozhin, for supporting the activities Control (OFAC) the eight sanctioned owned or controlled by Prigozhin, while of the Federal Security Service (FSB), individuals are: Boris Aleksandrovich Sytii, Khodotov and Kuzin are involved and for helping designated Russian Gaykovich, Elena Nikolaevna Ivanova, in the companies’ operations. actors evade US sanctions. Yevgeny Khodotov, Nikita Gennadievitch Kovalevskij, Nadezhda Leonidovna OFAC press release Prigozhin is the leader of a Russian troll Kuchumova, Aleksandr Yuryevich Kuzin, farm designated in 2018 and is believed Dmitry Sergeevich Sytii, and Vladislav US Department of State pr... to be the manager and fnancier of the Yuryevich Zanin. The designated Russian military company PMC Wagner, entities are four Finish companies: Federal Register notice designated for its involvement in ACEX OY, GCH Finland OY, Optima

OFAC lists individuals for election interference

The designated individuals – Andrii Russian interests. OFAC designated the Derkach, Lifshits, Anton Andreyev, and IRA, as well as its fnancier Yevgeniy Darya Aslanova – have all been placed Prigozhin, in March 2018, for on OFAC’s specially designated interference in the 2016 US elections. nationals and blocked persons (SDN) list. Derkach, a member of the Ukrainian According to the DOJ, Lifshits was Parliament with purported ties to allegedly a manager at Project Lakhta, Russian Intelligence, has been the name given to Russian state efforts designated pursuant to Executive Order to interfere in US political and electoral (EO) 13848 for attempts to interfere in operations. The indictment states that the 2020 US election. From late 2019 to evidence, amongst other things, mid-2020, Derkach was allegedly suggests that Project Lakhta members The US Treasury Department’s Ofce involved in spreading false information “purchased the means of identifcation” of Foreign Assets Control (OFAC) about US ofcials with the intention of of US persons and used these “to open designated four Russia-linked infuencing US voters. bank accounts, PayPal accounts, and individuals on 10 September for their cryptocurrency accounts”. alleged attempted interference in US Lifshits, Andreyev, and Aslanova have elections. One of those designated, been designated pursuant to EO 13694, OFAC press release Artem Lifshits, has concurrently been as amended by EO 13757, and EO indicted by the Department of Justice 13848, over their involvement with Update to SDN List (DOJ) for conspiracy to commit wire Russia’s Internet Research Agency fraud associated with the malign (IRA), which reportedly carries out US DOJ press release activities of Russia's ‘Project Lakhta’. online infuence operations to further

95 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US extends sanctions on election interference

US President Donald Trump announced although there has been no evidence of entities or individuals engaging in, on 10 September the continuation for a foreign power changing the outcome authorising, directing, sponsoring, one year of the national emergency of any US election, in recent years the concealing, or otherwise supporting US with respect to foreign interference in threat of foreign interference has election interference. United States elections, established intensifed due to the proliferation of through Executive Order (EO) 13848. digital devices and internet-based White House notice communications. EO 13848 authorises President Trump’s notice explains that sanctions against foreign governments, US President’s letter

US amends Cuban Assets Control Regulations to impose further restrictions

US Secretary of State Mike Pompeo amendments impose restrictions on including information on the revision of announced on 23 September that the importing Cuba-origin alcohol and the CACR regarding travel authorisation, US Treasury Department’s Ofce of tobacco products, attending, or tourist travel in Cuba and educational Foreign Assets Control (OFAC) has organising certain professional activities, travel-related transactions, amended the Cuban Assets Control meetings or conferences in Cuba, and and Cuban real estate transactions. Regulations (CACR) to restrict certain participating in and organising certain transactions related to lodging at 433 public performances, clinics, OFAC press release properties that are “owned or workshops, competitions, and controlled by the Cuban regime or exhibitions in Cuba. US Department of State pr... certain well-connected insiders”. OFAC has also published updated FAQs OFAC fnal rule Additionally, the new OFAC on the Cuba-related sanctions regime,

US lists Cuban fnancial service provider

The US Department of State Pompeo, AIS regularly conspires with used to fund the Cuban military’s announced on 28 September that its parent company Fincimex, both of inference in Venezuela. Cuba-based fnancial institution which are purportedly controlled by the American International Services (AIS) Cuban military, to artifcially infate the Fincimex was added to the Cuba has been added to the Cuba Restricted foreign currency and remittance market Restricted List on 3 June 2020. List pursuant to the Cuban Assets for the regime’s proft. Pompeo further Control Regulations, for being alleges that the profts State Department press re... controlled by the Cuban military. disproportionately beneft the Cuban military at the expense of Cuban Fincimex designation (Jun... According to Secretary of State Mike civilians and that they are reportedly

96 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US BIS implements Wassenaar Arrangement rules on dual-use goods and technologies

The US Commerce Department’s on emerging technologies were The WA is a voluntary arms export Bureau of Industry and Security (BIS) implemented by the US through the BIS control regime with 42 participating published on 11 September a fnal rule fnal rule of 23 May 2019. states, which exchange information on revising the Export Administration transfers of conventional weapons and Regulations (EAR) to implement The latest amendments align the dual-use goods and advocates the changes made to the Wassenaar Commerce Control List (CCL) with the implementation of effective export Arrangement (WA) List of Dual-Use remaining 2018 decisions by reviewing controls on strategic items. Goods and Technologies and Export Control Classifcation Numbers Munitions List in 2018. (ECCNs) controlled for national security BIS fnal rule reasons and making other adjustments In line with the revisions agreed at the to licence exception eligibility for WA plenary - summary of c... December 2018 WA plenary meeting to national security-controlled items and the list of dual-use goods and to the reporting requirements. BIS fnal rule on the imp... technologies, the frst round of controls

China publishes unreliable entity list regulations

The Chinese Ministry of Commerce apply discriminatory measures to a the risks of conducting transactions (MOFCOM) published on 19 September Chinese company, other organisation, with the entity, as well as a deadline for regulations on the list of unreliable or citizen. Relevant government the foreign entity to attempt to resolve entities pursuant to the Foreign Trade departments will purportedly the concerns. Designated foreign Law, National Security Law and other investigate and list foreign entities entities may become subject to relevant laws. The implementation of based on certain criteria, including but restrictions on imports, exports, the unreliable entity list was frst not limited to the degree of danger investments, and visas. Additionally, announced in a June 2019 press posed to Chinese national sovereignty, fnes and any “other necessary conference. security or development interests, the measures” may also be imposed. degree of damage to legitimate rights, According to the regulations, foreign and whether or not the entity is in MOFCOM press release companies and individuals can be listed compliance with internationally if they (i) engage in actions that could accepted economic and trade rules. MOFCOM Order No 4 endanger China’s national sovereignty, security or development interests or (ii) A foreign entity’s listing will be made MOFCOM press release (1 J... suspend normal transactions with, or public and may include an alert about

97 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU imposes sanctions over human rights abuses in Libya and arms embargo violations

The Council of the EU announced on 21 Jordan/Lebanon registered maritime al-Saiqa Brigade Mahmoud al-Werfalli September the designation of two company Med Wave Shipping has been and Moussa Diab, both of whom are individuals for human rights abuses in designated for operating a vessel called accused of serious human rights Libya and three entities for their Bana, which has been found to have abuses. Those designated are subject involvement in violating the UN arms transported military items to Libya in to travel bans and asset freezes, and EU embargo on Libya. January 2020. persons and entities are prohibited from making funds available to them. Turkish maritime company Avrasya Kazakhstan registered commercial Shipping has been designated, which cargo air company Sigma Airlines (aka EU press release according to the Council operates a Sigma Aviation, Air Sigma) has also vessel called Cirkin that has been found been designated for being involved in EU Ofcial Journal entry to have violated the Libya arms the transfer of military material to Libya. embargo. In particular, Cirkin has been Council Implementing Regu... linked to the transportation of military The individuals designated are Libyan material to Libya in May and June 2020. commander of the Benghazi-based

UNSC extends mandate of UN mission in Libya

The UN Security Council decided on 15 Accord in stabilising post-confict criminalising trafcking in persons and September to extend the mandate of zones, monitoring and reporting human that many migrant smugglers and the United Nations Support Mission in rights and humanitarian law violations, human trafckers are protected by Libya (UNSMIL) by 12 months until 15 providing support to Libya in response well-known militias. The full September 2021 under resolution 2542 to the ongoing Covid-19 pandemic, and implementation of the arms embargo is (2020). The Security Council adopted supporting efforts to achieve and of utmost priority stresses the the resolution with a vote of 13 in subsequently implement a ceasefre. resolution, particularly as there has favour to zero against with just China been a noted increase in direct foreign and Russia electing to abstain. UNSC resolution 2542 (2020) details interference in the confict. the illicit activities and practices that The resolution extends the status of have thrived during Libya’s continued UN Security Council press... UNSMIL as a special political mission, instability, including trafcking in with the task of further implementing persons and smuggling of people. The UN Security Council resol... the Libyan Political Agreement, resolution notes that Libya does not supporting the Government of National have stand-alone legislation

98 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EU renews sanctions over actions concerning Ukraine’s territorial integrity

The Council of the European Union decided on 10 resources available to those listed, as well as travel September to extend the restrictive measures in respect of restrictions. The sanctions currently apply to 175 individuals actions undermining or threatening the territorial integrity, and 44 entities, listed in revised Annex I of Council sovereignty or independence of Ukraine until 15 March Implementing Regulation 2020/1267. 2021. The Ukraine/Russia sanctions regime has been renewed for six months through the adoption of Council EU Council press release Implementing Regulation (EU) 2020/1267 and Council Decision 2020/1269. EU Council Implementing Regulation (EU) 2020/...

The restrictive measures consist of an asset freeze and a EU Council Decision 2020/1269 prohibition against making funds or other economic

Swiss Parliament passes amended anti- terrorism bill, despite criticism from the UN

On 25 September, the Swiss Parliament passed an amended activities of journalists, civil society and political activists. anti-terrorism bill, aimed at imposing stricter measures to According to UN experts, expanding the defnition to cover prevent extremist violence and organised crime, which any non-violent campaign “goes far beyond current Swiss criminalises terrorism fnancing activities and the domestic law and violates international standards”. recruitment, training and support of suspected militants traveling to confict regions. Additionally, the bill allows the premature transmission of information, which implies that information is disclosed to Under the new law, participation in the activities of a terrorist foreign authorities without the suspect concerned being organisation is placed on the same level as involvement in a informed and able to defend themselves against the criminal organisation – with a maximum sentence of 10 accusations. The UN experts warned that the measures set years for both offences. In addition, the legislation enables “a dangerous precedent and risk serving as a model for the authorities to demand that individuals deemed a threat authoritarian governments seeking to suppress political regularly report to the police and allows the imposition of dissent including through torture and other cruel, inhuman or preventative measures on such suspects. degrading treatment or punishment”.

The law has been strongly criticised by United Nations (UN) Swiss Parliament notifcation human rights experts, who highlighted that pursuant to the new law, the defnition of “terrorist activity” is expanded and Swiss Parliament notice could encompass lawful acts aimed at infuencing or modifying the constitutional order, such as legitimate UNHR experts statement

99 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Swiss Federal Council adopts bill to strengthen sanctions for serious wildlife crime

to serious illicit trafcking in protected seize or confscate specimens of fauna and fora. protected species destinated for import, export or in transit provided According to the proposed traders do not have the required amendments, the Federal Council can documentation. The draft legislation temporarily ban the import of mentions that the failure to keep endangered species if it has records on selling or raising specimens, information on the commission of illicit and to register or declare the import or acts under the Convention on export of protected species will be a International Trade in Endangered criminal offence. Species of Wild Fauna and Flora. The bill must now be debated and The Swiss Federal Council adopted on Under the new rules, persons raising or adopted by parliament. 18 September a bill amending the selling specimens of protected species Federal Act on Trade in Protected will be required to keep adequate Swiss Federal Council pre... Species of Animals and Plants records and register their activities, (BGCITES), which aims to strengthen while law enforcement will be able to criminal sanctions for offences relating

Swiss Parliament adopts bill to strengthen DLT and blockchain regulatory framework

The Swiss Parliament’s second provided they have structural that the Swiss legislation is already in chamber passed on 10 September an importance for the fnancial market. compliance with the Financial Action amending act to further improve the Task Force’s enhanced due diligence framework conditions for blockchain In addition, the bill extends the current rules. Federal Councillor Maurer Ueli and distributed ledger technology banking provisions to professionals added that the bill will create (DLT), which includes provisions on accepting Federal Council-designated transparency around the new investor protection, the Swiss Financial cryptocurrencies and introduces a new technologies’ use in the fnancial sector. Market Supervisory Authority’s power for FINMA to establish a (FINMA) remit and anti-money threshold for cryptocurrency deposits. The new legislation is expected to laundering rules. The Money Laundering Act 1997 has come into force in 2021. been amended to include The bill contains provisions on blockchain-based trading systems and Draft bill (in French) introducing a procedure to protect FINMA’s renewed monitoring role. cryptocurrency investors in case of Swiss Council of States c... bankruptcy and on the role of the Swiss In addressing concerns in relation to National Bank in monitoring cryptocurrencies’ money laundering Swiss National Council co... blockchain-based payment systems risk, Christian Levrat MP pointed out

100 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Sanctions (EU Exit) (Miscellaneous Amendments) Regulations 2020

The UK Foreign, Commonwealth and Development Ofce regimes in relation to the Democratic People’s Republic of laid before Parliament the Sanctions (EU Exit) Korea, the Democratic Republic of the Congo, South Sudan, (Miscellaneous Amendments) (No. 3) Regulations 2020 and Iran (nuclear), ISIL (Da’esh) and Al-Qaida, counter terrorism, the Sanctions (EU Exit) (Miscellaneous Amendments) (No. Lebanon, the Central African Republic and Somalia. The 4) Regulations 2020 on 8 September, pursuant to the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 4) Sanctions and Anti-Money Laundering Act 2018. Regulations 2020 amend sanctions regulations on Iran (human rights), Venezuela, Burma, Guinea-Bissau, Belarus, The statutory instruments make corrections and Zimbabwe, chemical weapons, Syria, Russia, Burundi, Guinea, amendments to a number of sanctions regulations, by cyber sanctions, Bosnia and Herzegovina and Nicaragua. introducing a new exception which clarifes that a prohibition is not contravened if the conduct is authorised by a licence or Sanctions (EU Exit) (Miscellaneous Amendments... other authorisation issued under the law as it applies in a British Overseas Territory or Crown Dependency. Statutory instrument No. 3 – adoption timelin...

The Sanctions (EU Exit) (Miscellaneous Amendments) (No. 3) Sanctions (EU Exit) (Miscellaneous Amendments... Regulations 2020 introduce amendments to the sanctions

UK Afghanistan (Sanctions) (EU Exit) Regulations 2020

The UK government laid the Afghanistan (Sanctions) (EU of national security or the prevention of serious crime and Exit) Regulations 2020 before parliament on 8 September, allow the UK’s HM Treasury to issue licences. In addition to made under the Sanctions and Anti-Money Laundering Act this, maritime enforcement ofcers are empowered to search 2018 to ensure that the UK continues to meet its ships in international and foreign waters to check the international obligations under the UN sanctions regime in enforcement of trade sanctions and to seize goods found in the context of the UK’s withdrawal from the EU. violation of the prohibitions.

The UN Security Council sanctions regime has been in place On 15 September, the UK government published a new since 1999, in response to actions by the Taliban that guidance webpage on the Regulations, which are expected to constituted a threat to the peace, stability and security of enter into force on 31 December 2020. Afghanistan, amended by resolution 2255 (2015). The UK Regulations detail the application of prohibitions and Afghanistan (Sanctions) (EU Exit) Regulations... fnancial sanctions, including asset freezes, trade restrictions on military goods and technology, and travel bans. Statutory instrument – adoption timeline

The Regulations include a list of exceptions in relation to UK government guidance page fnancial sanctions and activities carried out for the purpose

101 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020

The UK’s HM Treasury (HMT) laid entity. All such entities must collect banking relationships if they involve before parliament the Money information on benefcial ownership the execution of payments Laundering and Terrorist Financing and register by 10 March 2022. (Amendment) (EU Exit) Regulations Extending by fve months, until 9 2020 on 15 September, which will At the end of the transition period, the June 2021, the time for which art implement certain measures required concepts of “European Economic Area market participants and letting by the EU’s Fifth Money Laundering (EEA) registered trust” and “third agents can operate before applying Directive (5MLD), in particular country entity” will be redefned so that for registration concerning the registration of trusts. all foreign trusts and entities are treated in line with relevant national legislation A clarifcation that the Financial The Regulations amend the Money and not by reason of EEA membership. Conduct Authority (FCA) may Laundering, Terrorist Financing and impose a direction on a cryptoasset Transfer of Funds (Information on the Other changes include business either on its own initiative Payer) Regulations 2017, by expanding or at the business’s request the scope of the UK’s register of Refning the scope of the duty to express trusts to cover all UK express report discrepancies in benefcial Money Laundering and Terr... trusts, including non-UK express trusts ownership registers which acquire UK land, or which have at Statutory instrument time... least one UK trustee and enter into a A provision that frms must apply business relationship with a UK obliged certain measures to correspondent

UK Sanctions (EU Exit) (Consequential Provisions) (Amendment) Regulations 2020

The UK Foreign, Commonwealth and (EU Exit) Regulations 2019. Regulations 2017, by adding Development Ofce laid Sanctions (EU references to offences under the Exit) (Consequential Provisions) The amendments include 2019 Regulations (Amendment) Regulations 2020 before Parliament on 16 September, The removal of references to Amended registration conditions for according to which three persons designated under the ISIL small payment institutions in the sanctions-related statutory (Da’esh) and Al-Qaida Electronic Money Regulations 2011 instruments made in 2019 are to be (Asset-Freezing) Regulations 2011 and the Payment Services revised to bring them in line with other from the Charities Act 2011 Regulations 2017, by adding certain primary and secondary legislation. offences under the An amended defnition for ‘terrorist Counter-Terrorism (Sanctions) (EU The draft Regulations make changes to fnancing’ in the Sanctions and Exit) Regulations 2019 the ISIL (Da’esh) and Al-Qaida (UN Anti-Money Laundering Act 2018 Sanctions) (EU Exit) Regulations 2019, and the Money Laundering, Terrorist Draft Sanctions (EU Exit)... the Counter-Terrorism (International Financing and Transfer of Funds Sanctions) (EU Exit) Regulations 2019 (Information on the Payer) Statutory instrument time... and the Counter-Terrorism (Sanctions)

102 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Pakistan parliament passes bill to strengthen AML/CFT framework

diligence procedures and to implement a compliance programme.

The Islamabad Capital Territory Waqf Properties Bill introduces the obligation for each waqf manager to disclose their status to reporting entities prior to entering a business relationship or carrying out a transaction with a reporting entity. Additionally, each waqf manager must follow steps to tackle ML, including providing a computerised bill to the leaseholder and instructing leaseholders to provide an afdavit that properties will not be used for ML/TF Pakistan’s National Assembly passed obligation for cooperative societies to purposes as well as a verifed bank amendments to the country’s include in their registration application account statement. anti-money laundering (AML) information on benefcial owners and to legislation in a joint session of the update these details annually or when Under the amendments proposed to the parliament on 17 September in order to changes occur. The bill also prohibits Anti-Terrorism Act 1997, the align Pakistan’s current frameworks the issuance, sale, or transfer of bearer investigating ofcer, with prior court with Financial Action Task Force (FATF) shares. The amendments to the permission, can conduct covert guidelines, following parliamentary Cooperative Societies Act were passed operations and track communications discussion of four bills on 14 on 24 September. and computer systems for investigating September to strengthen its countering terrorism fnancing. On 16 September, the fnancing of terrorism (CFT) and The proposed amendments to the the Anti-Terrorism (Third Amendment) AML framework. On 30 September, the Anti-Money Laundering Act introduce Bill was rejected by the Senate. Financial Monitoring Unit (FMU) of provisions on punishment for ML acts Pakistan issued updated regulations in and for establishing an independent Pakistan FMU updated AML/... line with FATF standards and the new fnancial monitoring unit with powers to legislative amendments. receive and analyse suspicious Pakistan National Assembl... transaction reports (SARs). The bill also The amendments to the Cooperative introduces the obligation for reporting Pakistan Senate orders of... Societies Act 1925 introduce the entities to conduct customer due

103 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

CONSULTATIONS

US FinCEN seeks comments on proposed AML programme standard in the Bank Secrecy Act

The US Treasury Department’s Congress to fnd solutions to risk assessment process” and provides Financial Crimes Enforcement Network strengthen FinCEN’s AML efforts. for information reporting that meets a (FinCEN) issued a call for comments Specifcally, the ANPRM is intended to standard that offers a “high degree of on 16 September via an advance notice give fnancial institutions more usefulness to government authorities”. of proposed rulemaking (ANPRM) fexibility to spread resources and align seeking feedback on proposed industry and government priorities Additionally, comments are being amendments to enhance the Bank more effectively in relation to AML sought on proposals that make risk Secrecy Act (BSA), which includes a screening. All interested parties should assessment processes an explicit proposed regulatory provision that submit comments by 16 November. requirement, along with the publication would require fnancial institutions to of a national AML priorities list every have an “effective and reasonably The proposed amendments aim to two years. designed” AML programme. identify an “effective and reasonably designed” AML programme as one FinCEN press release The ANPRM follows recommendations which “assesses and manages risk as by a BSA advisory group established by informed by a fnancial institution’s own Federal Register notice

FinCEN consults on due diligence for foreign correspondent and private banking accounts

The US Treasury ’s Financial Crimes FinCEN’s notice proposes for review the breakdown of the estimated Enforcement Network (FinCEN) issued and comment a methodology to expand number of fnancial institutions by type a request for comments on 29 the scope of future estimates of costs and proposes for comments the September seeking feedback on the and time in order for the Paperwork renewal of the estimate of the renewal of the Bank Secrecy Act’s Reduction Act (PRA) to make more traditional PRA hourly burden and the provision requiring banks, brokers and granular estimates of resources cost of a future estimate of a dealers on securities, futures expended to comply with these supplemental annual PRA burden. commission merchants, introducing regulatory requirements. brokers in commodities, and mutual All interested parties should submit funds to establish risk-based control The frst part of the notice provides a comments by 30 November 2020. procedures and enhanced due clarifcation of required due diligence diligence programmes, particularly for programmes for correspondent Federal Register notice correspondent accounts of foreign accounts for foreign fnancial fnancial institutions and private institutions and for private banking banking accounts. accounts. The second part describes

104 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK government responses to digital identity call for evidence highlight fraud concerns

secure manner ft for the growing transposition of Europe’s Fifth digital economy. Anti-Money Laundering Directive (5MLD) into national law and the use of Key concerns raised included the digital identities to reduce the risks difculty of repairing a digital identity, posed by remote fnancial transactions. the need to create and accelerate a process for stopping the fraudulent use The 100 respondents to the call for of digital identities, and the growing risk evidence included the Association of of identity fraud. Some respondents British Insurers, the Bank of England, suggested that government-provided the British Business Federation digital tokens or digital passports could Authority, Cifas, Deloitte LLP and reduce online fraud and improve access Evernym (UK) Ltd, Finance & Leasing The UK government published on 1 to government services. Respondents Associations, HSBC, Lloyds Banking September the responses received to representing regulated industries raised Group, Mastercard, Revolut, Santander, its call for evidence on digital identity, the issue of establishing liability for the and the Joint Money Laundering which ran from 19 July to 15 fraudulent use of digital identities. Steering Group (JMLSG). September 2019. Noting that identity fraud increased by 8 percent in 2018 Responding to the comments, the Responses to call for evi... and accounted for 58 percent of government stated that poor identity reported fraud in the same year, the practices could be exploited for money Digital identity call for... consultation period yielded views on laundering (ML), terrorism and human how the UK government can support trafcking purposes, referring to the the development of digital identity in a

UK seeks input on consumer investment market

The UK’s Financial Conduct Authority or misleading statements, investing Risk management options for those (FCA) launched on 15 September a call without the required approval or consumers willing to accept higher for input (CFI) on the consumer promoting inappropriate investments. investment risk investment market as it seeks to The average amount lost to pension protect consumers from unsuitable scams was reportedly £82,000 in 2018, The role of the exemptions in the products or advice, and reduce the while in 2019 the FCA registered a fnancial promotions regime number of scams. monthly average of 800 calls about investment scams. How to ensure appropriate Reducing harm in the consumer compensation investments market is an FCA priority. The CFI runs until 15 December. According to the FCA, due to the market How to reduce the amount of being dominated by small fnancial The CFI seeks views on unsuitable advice provided by frms adviser frms and intermediaries, some of which fall outside the regulator’s How to better protect customers FCA press release remit, bad actors have opportunities to from scams, building on the FCA’s make illicit gains through making false ScamSmart campaign FCA call for input

105 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK Law Commission consults on reforming the confscation regime

release would also be on licence, so a future refusal to pay could result in the defendant returning to prison.

The Law Commission's consultation is aimed at tackling the ineffective asset recovery regime which has seen the UK’s confscation debt exceed £2 The Law Commission of England and Wales issued on 17 billion as of March 2019 September a consultation paper setting out its proposals for reforming the confscation regime in order to more The questions set out in the consultation paper concern the accurately and effectively determine a defendant’s criminal objectives of the reform, the early resolution of confscation, proceeds and enforce confscation orders. The consultation incentivising the agreement and payment of orders, defning is aimed at tackling the ineffective asset recovery regime and codifying case law, enforcement of confscation and which has seen the UK’s confscation debt exceed £2 billion contingent orders, and the confscation of cryptoassets. as of March 2019, with the aim being to recover an extra £8 million per annum from convicted criminals. The consultation is open until 18 December and the responses will help inform the Law Commission’s fnal The proposals aim to improve the enforcement of fairer and recommendations to the government, which are expected to more realistic confscation orders, through: (1) allowing be published in 2021. courts to impose fnancial penalties and forfeiture orders prior to resolving confscation proceedings; (2) allowing Law Commission press release contingent orders to be imposed by a court at the same time as a confscation order, so that assets can be taken from Consultation paper defendants who fail to pay; and (3) amending the regulations so that defendants who fail to pay their confscation order Executive summary and are imprisoned, are also no longer subject to unconditional release halfway through their prison term. Early

106 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Hong Kong regulator launches consultation on proposed changes to AML/CFT guidelines

The Hong Kong Securities and Futures frequently upon the occurrence of customer due diligence measures, Commission (SFC) launched on 18 trigger events which materially such as requiring an LC to obtain September a consultation on proposed impact an LC’s business and risk additional information on a amendments to its anti-money exposure” customer’s underlying investor base laundering and counter-fnancing of terrorism (AML/CFT) guidelines. LCs are to apply additional due Incorporating into an appendix diligence measures, using an RBA, ‘red-fag’ indicators, “such as where Through the revised guidelines the SFC when establishing cross-border a customer has no discernible seeks to facilitate the adoption of a correspondent relationships with an reason for using the LC’s service” more effective risk-based approach overseas fnancial institution (RBA) and align legislation with the new LCs must use an RBA when standards set out by the FATF in its Cross-border correspondent deciding who is to be considered a securities sector guidance. The relationship provisions should apply person purporting to act on behalf consultation is open until 18 December. to “transactions in securities, of the customer (PPTA) futures contracts as well as Proposed amendments include leveraged foreign exchange SFC press release contracts” Licensed corporations (LCs) are to SFC consultation conduct a periodic review “at least A list of illustrative examples of once every two years or more potential simplifed or enhanced

Hong Kong regulator makes changes regarding open-ended fund companies

The Hong Kong Securities and Futures licensed or registered securities brokers that the amendments to the Code on Commission (SFC) released on 2 on the list of entities eligible to act as Open-ended Fund Companies (Note 1) September its consultation custodian of private OFCs, and the have taken effect, including a six-month conclusions on the proposed introduction of a statutory mechanism transition period for existing private enhancements to the open-ended fund to re-domicile overseas corporate funds OFC custodians. The SFC also companies (OFCs) regime and to Hong Kong as OFCs. published a circular on the announced it will conduct a further implementation of recent changes to consultation on its proposal that these The new consultation on the AML/CFT the OFC regime. entities are required to appoint a functions and customer due diligence responsible person for anti-money requirements aims to align OFCs with SFC press release laundering and counter-fnancing of the requirements for Limited terrorism (AML/CFT) functions. Partnership Funds (LPFs), which took SFC consultation conclusi... effect on 31 August. The consultation The conclusions have resulted in the closed on 5 October. SFC consultation paper removal of all investment restrictions for private OFCs, the inclusion of The SFC announced on 11 September

107 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

LITIGATION AND CASE LAW

US district courts grant injunctions temporarily blocking TikTok and WeChat prohibitions

conficts with the IEEPA’s stated limitation that presidential authority “does not include the authority to regulate or prohibit” the “importation or exportation of ‘information or informational materials’” or “personal communications, which do not involve a transfer of anything of value”.

The court however denied TikTok’s request for a preliminary injunction to block the implementation of restrictions that will prevent the provision of internet hosting, content delivery network, or internet transit services to TikTok. These restrictions are due to take effect on 12 November 2020.

Two separate US federal district courts granted motions for preliminary injunctions in favour of WeChat and TikTok, on The 18 September prohibitions were as follows 19 September and 27 September respectively, which temporarily prevent the US Department of Commerce from Originally due to come into effect on 20 September, the enforcing restrictions against them. The Commerce following transactions were prohibited: (1) any provision Department announced prohibitions on transactions of service to distribute or maintain the WeChat or TikTok associated with WeChat and TikTok on 18 September mobile apps, constituent code, or app updates through a pursuant to Executive Order (EO) 13942 over the alleged mobile app store in the US; and (2) any provision of national security threat posed by the Chinese government’s services through the WeChat app for the purpose of access to US citizens’ personal data. transferring funds or processing payments within the US

The US District Court for the Northern District of California Originally due to come into effect on 20 September for ruled on 19 September that a lawsuit by a nonproft WeChat and 12 November for TikTok, the following representing WeChat users claiming the prohibitions violate transactions were due to be prohibited: (1) any provision the freedom of speech is valid. The judge wrote in the partial of internet hosting services enabling the functioning or injunction that while Trump’s national security concerns are optimisation of the mobile app in the US; (2) any provision valid, the moderate risk to WeChat users does not justify a of content delivery network services enabling the higher threshold than the lawsuit’s frst amendment claim. functioning or optimisation of the mobile app in the US; (3) any provision directly contracted or arranged internet The injunction was granted one day before the prohibition on transit or peering services enabling the function or US-based mobile app stores from providing services to optimisation of the mobile app within the US; and (4) any WeChat was due to go into effect, with the Commerce utilisation of the mobile app’s constituent code, functions, Department moving the ban’s start date from 20 September or services in the functioning of software or services to 27 September in light of discussions surrounding a developed or accessible in the US potential TikTok takeover by Oracle and Walmart. US court ruling (WeChat) On 27 September, the US District Court for the District of Columbia struck down the download prohibition on TikTok US court ruling (TikTok) ruling that EO 13942 exceeded the lawful bounds of the International Emergency Economic Powers Act (IEEPA). US Commerce Department prohibitions Judge Carl Nichols wrote in his ruling that the download ban

108 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US President Trump sued by niece for fraud and breach of fduciary duty

The New York State Supreme Court the family business and the defendants they generated through fraudulent received on 24 September a complaint committed to watch over her interests appraisals and fnancial statements. It from US President Donald Trump’s as fduciaries, but also controlled the is also alleged that the plaintiff was niece, Mary Trump, directed against activities of her trustee, Irwin Durben. threatened with bankruptcy and the him and Mary Trump’s aunt Maryanne However, they allegedly cancellation of her nephew’s healthcare Trump Barry, accusing them of fraud, misappropriated the funds to entities policy in order to make her agree with negligent representation, and breach of they owned and controlled, while these schemes. fduciary duty. disguising those transfers as legitimate business transactions. Additionally, Complaint According to the complaint, after her they are alleged to have father’s death in 1981, the plaintiff under-evaluated the value of the Case technical details inherited valuable minority interests in plaintiff’s interests and the net income

EU Court of Justice dismisses Rosneft appeal against EU sanctions on the Russian oil sector

The EU Court of Justice (ECJ) OOO, as detailed in Council Regulation adoption of sanctions without stating dismissed on 17 September an appeal 833/2014 and Council Decision “actual or specifc reasons for those by Russian state-owned company 2014/512 of 31 July 2014. measures”. Rosneft Oil Company PAO and four other appellants against their 2014 The court ruling notes that the fve The Court dismissed the companies’ listing in the context of the Ukraine Rosneft Group companies did not appeal in its entirety, by claiming that crisis, by upholding a 2018 General dispute that they meet the European the restrictions on the Russian oil Court judgment that rejected the Council’s criteria for the application of sector and capital markets were in line Rosneft group’s action. targeted sanctions and confrms the with the Council’s stated objective of General Court’s assessment that the “increasing the costs of the Russian The appeal concerns the prohibitions appellants “could not reasonably have Federation’s actions to undermine on the export of sensitive products and been unaware of the reasons why the Ukraine’s territorial integrity, sovereignty technologies in relation to the Russian targeted restrictions at issue were and independence, and of promoting a oil sector and the capital market imposed on them”. peaceful settlement of the crisis”. restrictions against Rosneft Oil Company PAO (formerly NK Rosneft In the ECJ’s view, the previous ruling ECJ press release OAO), RN-Shelf-Arctic OOO, rightly indicated that the Council could RN-Shelf-Far East AO (formerly exercise its broad discretion in adopting General Court ruling (13 ... RN-Shelf-Dalniy Vostok ZAO), certain measures and was allowed to RN-Exploration OOO and Tagulskoe set the overall situation which led to the Rosneft appeal (23 Novemb...

109 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 ECJ dismisses Syrian businessman’s appeal against EU asset freeze

The EU General Court dismissed on 23 freezing list “on the basis of new the applicant’s arguments were September a request by Syrian statements of reasons”. According to “unfounded”. The ruling notes that businessman Khaled Kaddour (also the Council, Kaddour “benefts from and Kaddour has failed to “challenge known as Qaddur) to annul his provides support to the Syrian regime effectively” his links to the Syrian inclusion on the Syria sanctions list and is associated with persons regime and the fact that he was a over links to Maher Al-Assad, benefting from and supporting the founder of Al-Shahba President Bashar al-Assad’s brother. regime”. In response to the applicant’s Telecommunications, a company action seeking annulment of the controlled by Maher Al-Assad. In November 2014, the European Court Council’s decision, the court ruled on 31 of Justice (ECJ) found that Kaddour’s May 2018 that the Council’s argument In the court’s view, keeping Kaddour’s designation by the EU Council in 2011 was “sufciently substantiated and name on the list of restrictive measures “did not contain any evidence capable constituted a sufcient basis” for his is not disproportionate because the of substantiating the claims that the inclusion on the list of restrictive listing “is allegedly potentially unlimited applicant maintained a professional link measures. in time” and reviewed regularly. with Mr Maher Al-Assad or provided fnancial support to the Syrian regime”. In its most recent decision, the Court EU General Court ruling upheld the previous decision, by adding On 26 January 2015, the Council that “all of the evidence produced by Kaddour v. Council action... adopted Implementing Decision the Council to justify retaining the 2015/117 through which the applicant’s applicant’s name on the lists in EU General Court ruling (... name was re-included on the asset question in 2018 is relevant” and that

Deutsche Bank found not liable in German cum- ex case for tax debt

Germany’s Frankfurt Regional Court for its dividend rights, the Hamburg tax obligation that the bank must pay ruled on 23 September that Hamburg ofce demanded that the private bank compensation to Warburg. private bank M.M. Warburg & Co’s cover a tax debt of €167 million in lawsuit against Deutsche Bank AG in relation to its shares. Warburg announced in a press release relating to the cum-ex fraud scandal that it will appeal the verdict, which was should be dismissed. In delivering its judgment, the Frankfurt “unjustifed”. court concluded that Warburg, as the In its complaint, Warburg was seeking original tax debtor, will have to pay the Frankfurt court press rel... €167 million in compensation for the debt in relation to Deutsche Bank, as a unpaid capital gains tax from Deutsche “tax debtor has to fnally bear his tax Frankfurt court press rel... Bank, which served as a custodian bank liability himself”. The court added that in 400 transactions by Warburg Deutsche Bank is obliged to pay capital M.M. Warburg & Co press r... between 2007 and 2011. After gains tax under the 2007 Income Tax compensation was credited to Warburg Act, but this does not justify an

110 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Dutch prosecutors freeze Exem Energy assets linked to Angola billionaire Isabel dos Santos

The Amsterdam Court of Appeal ruled Enterprise Chamber of the Amsterdam Dokolo informed the International on 17 September to freeze the assets Court of Appeal. Esperaza has a 45 Consortium of Investigative Journalists of Exem Energy BV, a company owned percent stake in Dutch company (ICIJ) that the outstanding loan amount by the husband of billionaire Angolan Amorim Energia BV, which in turn has a was repaid in full to Sonangol in 2017, businesswoman Isabel dos Santos, 33 percent stake in Portuguese energy when Isabel dos Santos was Sindika Dokolo, amid accusations of giant Galp Energia SGPS SA. chairwoman of the company and corruption and embezzlement in a therefore signed-off the repayment. shareholding deal under investigation Sonangol’s sale of 40 percent shares in However, this was rejected by dos by Dutch prosecutors. Esperaza to Exem was made for €75 Santos’ successor at Sonangol stating million, which court documents allege the repayment in euros was a breach of The court also ordered the removal of €63 million of which was fnanced by contract and should have been paid in key business associate Mario Silva, Sonangol through a vendor loan Angolan kwanza. pending the investigation. Exem’s 40 provided to Exem. At the time of this percent stake in joint venture holding loan, Dokolo’s father-in-law, José Amsterdam Court of Appeal... company Esperaza, purchased in 2006 Eduardo dos Santos, was president of from Angola’s state-owned energy giant Angola and personally involved in ICIJ article Sonangol, has been frozen by the state-owned Sonangol.

Ukraine Supreme Court blocks ruling requiring Privatbank to pay $350m to Surkis brothers

The Supreme Court of Ukraine claims from the Ukrainian government associated with the Surkis oligarchs,” announced on 9 September that it has that the 2 September ruling was made the NABU confrmed in a statement suspended the execution of a Pechersk “in violation of procedural law”, the published on 8 September. District Court ruling ordering Supreme Court suspended the PrivatBank to pay nearly $347 million enforcement of the payment until the The six British companies named by to six companies owned by Ukrainian merits of the case are heard. NABU are Camerin Investments, Sunnex brothers Ihor and Hryhoriy Surkis, held Investments, Tamplemon Investments, by the bank in relation to a fraud case. The National Anti-Corruption Bureau of Berlini Commercial, Lumil Investments Ukraine (NABU) opened an and Sofnam Investments. The Surkis brothers intended to reclaim investigation on 4 September into the a frst tranche of the $347 million potentially illegal seizure of assets by Ukrainian Supreme Court p... deposit which had been turned into the brothers’ companies. “Among the bank shares following Privatbank’s probable defendants in the case are NABU press release nationalisation in 2016, after the representatives of the judicial branch of Pechersk District Court issued on 2 government, ofcials of the State Pechersk District Court r... September an enforcement decision Criminal Executive Service, and against Privatbank. However, following employees of six British companies

111 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 UK FCA decision notice against executive for market manipulation subject to appeal

The UK’s Financial Conduct Authority The FCA alleges that Abbattista, who In the annex to the decision notice, the (FCA) published a decision notice on was a portfolio manager, partner, and FCA details Abbattista’s trading and 16 September imposing a £100,000 the chief investment ofcer at Fenician, market view tables, as well as fne on Corrado Abbattista of Fenician intentionally falsely represented the Abbattista’s representations and the Capital Management LLP for engaging market between 20 January and 15 FCA’s response to them. in market manipulation in May 2017 by placing misleading contravention of the Market Abuse Contract for Differences (CFDs) orders The illicit actions were discovered by Regulation. The FCA has also banned on equities, which could have created the FCA’s internal surveillance systems Abbattista from performing any role false impressions of supply and designed to identify market relating to a regulated activity. demand. At the same time, Abbattista, manipulation. Abbattista has appealed the decision who allegedly had no intention of notice, as such the FCA’s proposed purchasing the equities, also placed FCA statement penalties will have no effect pending actual smaller orders “that he did intend the Upper Tribunal’s verdict. to execute on the opposite side of the FCA decision notice order book to the misleading orders”.

Ex-CEO Volkswagen CEO to face trial in Germany

Germany’s Braunschweig higher The defendants also allegedly installed Winterkorn for conspiracy to defraud regional court announced on 9 a software update in November 2014 the US government and customers, September that it has launched costing €23 million to disguise the real fraud and Clean Air Act violations, a criminal proceedings against fve reason behind the increased level of case which remains pending. In March former Volkswagen employees, namely pollutants, which saw the defendants 2017, Volkswagen pleaded guilty to former CEO Martin Winterkorn and four receive between €300,000 and €11 criminal charges that it deceived US unnamed managers, over fraud million in bonus payments. agencies by installing defeat devices on charges in connection with the its vehicles and agreed to pay a criminal emissions scandal. The court underlined that the buyer’s fne of $2.8 billion to settle the fnancial loss as a result of the fraud accusations of civil, environmental, According to the indictment, the was €100 million. Additionally, the court customs and fnancial violations. On 13 defendants allegedly committed acts of dismissed charges of indirect false June 2018, the German Public fraud and unfair competition, breach of certifcation, breach of trust and unfair Prosecutor’s Ofce announced that trust, tax evasion and indirect false competition regarding the advertising Volkswagen had been fned €1 billion certifcation between 2006 and 2015. that affected the US market. Finally, the for emissions cheating. Winterkorn has allegedly been aware court considered that the bonus since May 2014 of the manipulation of payments should not be confscated Regional court Braunschwe... diesel engines to comply with the EU from the defendants, as only the vehicle and US environmental regulations but manufactures gained directly from the Braunschweig Public Prose... failed to disclose it to the authorities or car sales. customers and to prohibit the US DOJ press release (3 M... installation of so-called ‘defeat devices’ On 14 March 2018, the US Department in their vehicles. of Justice (DOJ) indicted Martin

112 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

PRESS AND MEDIA

‘FinCEN Files’ reveal $2 trillion in potentially illicit funds processed by top international banks

spokesperson Joerg Eigendorf said that the bank takes anti-money laundering rules very seriously, having invested almost $1 billion in improved controls, training and operational processes.

On 22 September, the Chair of the Council of Europe (CoE) Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) and the President of the Conference of the Parties to the CoE Convention on Laundering, Search, Seizure and Confscation of the Proceeds from Crime and on the Financing of Terrorism (CETS 198) issued a joint statement The International Consortium of Investigative Journalists calling on more jurisdictions to sign, ratify and implement the (ICIJ) together with 109 media outlets around the world Convention and calling on the Financial Action Task Force published 2,657 leaked documents on 20 September (FATF) to include requirements on the suspension of including 2,121 suspicious activity reports (SARs) submitted suspicious transactions in its Recommendations. to the US Financial Crimes Enforcement Network (FinCEN) between 2000 and 2017, which reveal the role of large banks According to a FATF statement released on 23 September, in potential illegal activity, alleged money laundering and suspicious transaction reports are confdential information sanctions evasion. under its global standards. The organisation is calling on the private sector to meet their obligations to help prevent ML. Obtained from an undisclosed US source and shared by BuzzFeed News, the cache of leaked documents, dubbed the In response to ICIJ’s allegations, the Finnish Minister of ‘FinCEN Files’, include about $2 trillion in transactions and Economic Affairs Mika Lintilä told media outlet Yle on 21 cover SARs fled by 90 fnancial institutions, including September that the government is currently looking into the Deutsche Bank, JPMorgan Chase & Co, Standard Chartered, allegations of ML through tax havens by Trafgura, a Barclays, Commerzbank, Danske Bank, HSBC Holdings, and shareholder of the state-owned mining company Terrafame. several US banks. These reports, some of which were submitted several years after the suspicious behaviour was The UK’s Financial Conduct Authority (FCA) announced on 21 identifed, allegedly show that top banks agreed to process September that further enforcement action will be taken by transactions on behalf of organised criminals, terrorists and the end of the year in relation to some of its ongoing AML drug trafckers. investigations, according to Reuters. On 23 September, the UK House of Commons Treasury Committee wrote to several In response to the ICIJ revelations, Standard Chartered government departments asking for details on the UK’s issued a statement explaining that the bank takes its approach to combatting economic crime in light of the responsibility to fght fnancial crime “extremely seriously” FinCEN Files revelations, the UK’s identifcation as a and has invested substantially in its compliance “higher-risk” jurisdiction by the US and plans to further reform programmes. “We acknowledged in the 2014 report that our Companies House. existing AML controls needed improvement and have since devoted considerable resources to comply with the laws and US law frms Labaton Sucharow and Schall Law announced regulations governing anti-money laundering, terrorist on 21 September two class action suits against HSBC fnancing and economic sanctions”, a JPMorgan Holdings plc on behalf of securities purchasers, derivative spokesperson told NBC News. In addition, Deutsche Bank and options holders following the disclosures, for securities

113 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 law violations. The focus of the investigations is reportedly Billionaire Arkady Rotenberg, a close fried of Vladimir on whether HSBC issued false or misleading statements Putin, may have used Barclays Bank in London to launder and/or failed to disclose relevant information to investors. money and evade Russia sanctions

Malta’s Financial Intelligence Analysis Unit (FIAU) released on JPMorgan, Bank of New York Mellon and other banks 29 September a notice advising subject persons on the reportedly moved $150 million for companies related to implications of the FinCEN Files and reminding them of their the North Korean regime, according to NBC News suspicious transaction reporting and ongoing obligations under the AML/CFT legislation. The spouse of Lubov Chernukhin, a UK Conservative party donor, allegedly received $8 million in 2016 from a British Key highlights from the FinCEN Files Virgin Islands company linked to Suleyman Kerimov, a US designated Russian billionaire Among the $4.5 billion in suspicious transactions that HSBC Holdings plc handled, the ICIJ fags up a series of The US Treasury Department is also accused of failing to transactions on behalf of a World Capital Market designate Dubai-based gold trader Kaloti Jewellery Group investment scheme in 2015, two years after the bank as a money laundering threat under the US Patriot Act admitted to allowing dirty drug-related money fow despite evidence of large-scale illicit behaviour through its branches The partnership between Belize-based Choice Bank and JPMorgan allegedly moved more than $1 billion for Jho the US-based international money transfer company Low, the fugitive fnancier charged in Malaysia’s 1MDB Payoneer raised concerns among banks about fnancial scandal, processed payments for Donald Trump’s former technology frms partnering with high-risk offshore banks, advisor Paul Manafort’s companies, later indicted on even before the bank’s collapse in 2018, which resulted in money laundering charges, and allegedly allowed a an overall loss of $100 million to US customers suspicious company to move more than $1 billion through a London account An investigation by CBC News revealed that Canada-based companies Evial Business LP and Oceanic Deutsche Bank AG allegedly handled about $1.3 trillion of Fisheries N.B. doing business with Mauritania were the suspicious transactions, including $11 billion in fagged by banks for receiving $4 million and $31 million, payments for Russian oligarch Oleg Deripaska to evade respectively, in suspicious transfers in relation to an sanctions on Russia, other payments on behalf of Latin alleged $15 million insurance fraud American construction frm Odebrecht SA and companies controlled by Ukrainian oligarch Dmytro Firtash London-based company formation agent ComForm Solutions helped create 380 UK companies, including Standard Chartered Bank reportedly processed 2,000 Intergold LP, fagged up for receiving a $1.6 million transactions for Jordan-based Arab Bank in 2013 and payment from Turkmenistan’s trade ministry through 2014, an institution that has been accused of providing Deutsche Bank in New York and a Belarusian-owned support to terrorists pyramid scheme accused of defrauding 900 people in 2019, according to The Times BNY Mellon reportedly transferred over $137 million in 2016 on behalf of a network of companies that were The Indian Times revealed on 24 September that at least linked to the cryptocurrency Ponzi scheme OneCoin 44 Indian banks, including Punjab National Bank, State Bank of India, Bank of Baroda, Union Bank of India and At least several hundred million US dollars from Russia Canara Bank and a series of private banks, were fagged and Ukraine could have been laundered through the up in SARs fled with FinCEN primarily for their role as Polish ING Bank Śląski SA and wired to tax havens such correspondent banks as Cyprus until at least 2016, according to Dutch media Platform Investico ICIJ FinCEN leaks

The United Arab Emirates (UAE) central bank is accused ICIJ leaked SARs of failing to act on warnings about a local frm which was helping Iran evade sanctions ICIJ report on HSBC, Deutsche Bank, JP Morgan

114 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 EY whistleblower exposed potential Wirecard fraud in 2016, according to the FT

Ernest & Young (EY) was allegedly The report mentions that Wirecard paid Marc Liebscher, a Berlin-based lawyer notifed by an employee in 2016 that €340 million to buy payment companies who has fled several lawsuits against Wirecard senior managers may have Hermes i Tickets, GI Technology and EY, said that “Wirecard investors who committed fraud and tried to bribe an Star Global from Mauritius-based suffered losses now have an even auditor in India, according to an article Emerging Market Investment Fund 1A, better reason to sue EY for damages”. published by the Financial Times on 30 where Wirecard senior management September. held stakes. Additionally, the managers According to a 3 August article are alleged to have artifcially infated published by Handelsblatt, the German According to the news outlet, the the operating proft of the Indian auditor oversight body information was included in an businesses to raise the acquisition (Abschlussprüferaufsichtsstelle) is unpublished 61-page “info addendum” price and offered a bribe to an EY currently investigating the audit to KPMG’s Wirecard special audit employee to sign off the fgures. activities conducted by EY on report, which was released in April. Wirecard’s accounts. The investigation In response to the FT report, German reportedly started in 2019. The unnamed EY whistleblower MP Danyal Bayaz said that the Wirecard reportedly wrote to the company’s parliamentary inquiry will be Financial Times article headquarters in Stuttgart in May 2016 investigating the allegations. about alleged conficts of interest by Additionally, several Wirecard investors, Danyal Bayaz Twitter post Wirecard senior managers in relation to including Union Investment and DWS, a series of acquisitions in India. are reportedly considering fling Handelsblatt article (3 A... lawsuits against the audit frm, while

UK FCA reportedly underperforming in boiler room scam investigations

The Times reported on 5 September a 2013 statement by then Enforcement advised the public that boiler room that the UK’s Financial Conduct Director Tracey McDermott, who said scams can wipe out personal savings Authority (FCA) has not been robustly the FCA has “very experienced teams of and property, urging the public to investigating or prosecuting boiler people able to combat this boiler room consult fnancial advisers before room scams, following the fling of a fraud”. However, the FCA responded engaging in risky investments. The freedom of information (FOI) request. that it does not keep records on how Times reported that consumer many investigators or employees are campaigners have accused the FCA of The FCA reportedly told The Times, in involved in such oversight. not performing its mandated duties by response to its FOI, that it had only not investigating and prosecuting these conducted four prosecutions related to In the past twelve months, the FCA has scams more thoroughly. boiler room scams in the fve years purportedly not shut down any boiler between 2014 and 2019. The FOI rooms in the UK, despite FCA warnings The Times article request also sought to determine how that sophisticated scams are on the many FCA staff were involved in boiler rise that threaten UK consumers and FCA 2017 statement on boi... room investigation work, in response to investors. A 2017 FCA warning notice

115 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Mishcon de Reya LLP under investigation by UK Solicitors Regulation Authority

UK law frm Mishcon de Reya LLP is brought by HMRC, suggested that the fled by another law frm and includes reportedly being investigated by the bulk of a £1.9 million player transfer fee accusations of ML failings and conficts Solicitors Regulation Authority (SRA) in paid by the club to an agent was of interest in connection with one of connection with two separate reports funnelled via Mishcon de Reya to Mishcon de Reya’s previous clients, Luis received between 2017 and 2018 companies linked to the football player Nobre and Paul Sultana. Nobre was detailing allegations of tax evasion, and unlicensed football agents. The imprisoned in 2016 for operating a money laundering (ML) failings and judgment recorded that HMRC said it €100 million investment fraud against conficts of interest, according to a 9 was investigating other player transfers Dutch shipbuilding company Allseas. September article by The Guardian. and “the suspected role of Mishcon” as Sultana, was convicted in 2018 for his part of an investigation known as role in the fraud; in that case Mishcon According to media reports, one of the Operation Loom. de Reya represented Allseas. SRA's investigations started after a 2017 High Court ruling in a case The Guardian claims that the other Guardian article against Newcastle United Football Club investigation stems from a complaint

Thirteen individuals reportedly sued for fraud relating to London Capital & Finance

Thirteen people, including a former UK According to the claim, LCF founder marketed as being Individual Savings energy minister, are reportedly being and former London Oil & Gas Account (ISA) eligible. On 13 December, sued for £178 million in connection co-director Simon Hume-Kendall and FCA ordered LCF to cease all regulated with acts of fraud at the now-bankrupt his wife received at least £24 million, activity and to not dispose of or deal investment company London Capital & chief executive Michael Andrew with its assets, while on 30 January, Finance (LCF), according to a 4 Thomson received £5.3 million, Spencer LCF appointed several joint September article published by the Golding, a signifcant shareholder in administrators from Smith & Williamson Financial Times. LCF-linked companies, obtained £42.8 LLP in order to protect the interests of million, in part as consultancy fees, and the company’s creditors. In March 2019, According to the investigation, Elten Barker, former London Oil & Gas the FCA announced the launch of an individuals linked to LCF are defendants co-director, received £42.8 million. Five independent investigation into the facts, in a lawsuit which claims they individuals, including former UK including the FCA’s supervision of the misappropriated customers’ money. Minister of Energy Charles Hendry, company, while in April 2019, the LCF’s directors allegedly attracted currently director at London Oil & Gas, Serious Fraud Ofce (SFO) announced investors into buying bonds that they are accused of failing to take sufcient its own investigation into LCF’s actions. claimed were invested in a series of steps to discover the alleged fraud. companies and property deals. Financial Times article However, nearly 60 percent of the funds In December 2019, the UK’s Financial were funnelled to the executives Conduct Authority (FCA) directed LCF Companies House informati... directly or via loans to companies they to withdraw its promotional material as controlled or with whom they were it was found to be misleading, unfair, FCA information (15 Augus... directly connected. and unclear, as the bonds were falsely

116 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 JPMorgan Chase investigating customers and employees over PPP loans misuse

JPMorgan Chase is currently document reportedly did not specify in The Small Business Administration investigating instances of its detail the exact instances in which (SBA), which administers the PPP, customers and employees allegedly customers and employees may have stated in July that JPMorgan was the misusing federal funds received in the violated the regulations and which have largest lender to the programme by loan form of loans from one of the US drawn the frm’s scrutiny. value, with 271,809 loans worth nearly government’s coronavirus relief $30 billion. At the time, SBA also programmes, the Paycheck Protection In May, Reuters reported that the US warned of “strong indicators of Program (PPP), according to a 8 Department of Justice (DOJ) had sent widespread potential fraud” concerning September report by Bloomberg, citing grand jury subpoenas to large banks the economic disaster loan programme. a JPMorgan internal memo. with regard to the potential misuse of PPP loans. Reuters also reported at the Bloomberg article The memo reportedly states that the time that US lawmakers were bank found cases of customers concerned that the programme attracts Reuters article (16 May 2... “misusing [PPP] loans, unemployment fraudsters, and that the DOJ also benefts and other government wanted to inspect banks’ records for SBA PPP report (17 July 2... programs”, adding that “some possible wrongdoing by borrowers. employees have fallen short, too”. The

French court sentences former IAAF chief; FinCEN Files reveal SARs on Diack linked funds

Reuters reported that the former head Alongside his sentence, the court has million was transferred into suspicious of the International Association of also ordered Diack to pay a €500,000 bank accounts linked to Lamine Diack Athletics’ Federations (IAAF) Lamine fne and €5 million in damages to World and Papa Massata, which included Diack was sentenced by a French court Athletics. His son, Papa Massata Diack, accounts linked to the Russian doping on 16 September to four years in is to contribute to these damages after scandal. The news outlet claims that prison, two of which are suspended, for also being found guilty of corruption. French prosecutors are investigating accepting bribes to help cover up Papa Massata’s sentence includes a €1 the two men over suspicions that positive Russian doping tests. million fne and a fve year prison millions of dollars worth of bribes were sentence. paid to secure the Tokyo Olympics. It is According to Reuters, Diack accepted claimed that the leaked suspicious bribes totalling €3.45 million from Four other defendants were found guilty activity reports show, amongst other athletes in exchange for covering up of corruption, including Diack’s former things, funds being transferred from a their positive doping tests and paid lawyer at the IAAF, the former head of Tokyo Organising Committee account other IAAF ofcials, currently World Russian athletics Valentin Balakhnichev to an account in Singapore linked to Athletics, to aid the conspiracy. He was and former Russian athletics’ head friends of Massata Diack. additionally found guilty of helping coach Alexei Melnikov. Macky Sall win the Senegalese Reuters article presidency in 2012, fnancing the bid Meanwhile, the Guardian reported on 25 with the illicit funds. September that the FinCEN Files leaks Guardian article have revealed that more than $55

117 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Leaked draft EU sanctions law targets human rights abusers, does not include corruption

A new model for EU-wide sanctions the aforementioned human rights responsibility for communicating with policy dated in August and leaked by violations, the new sanctions regime one another regarding asset freezes. the outlet EU Observer on 14 could purportedly include other types of September proposes an expanded human rights abuse, provided they are Criticism has already come in response sanctions law that targets perpetrators deemed “widespread, systematic, or to the leaked policy proposal’s lack of a of genocide, slavery, forced otherwise serious” while also taking mandate for sanctions that target disappearances and detainment, into account EU-wide foreign and corruption, such as the Global sexual violence, human trafcking, security policy objectives. The Magnitsky Act in the US, named after unlawful killings, and abusers of sanctions will be applied to both state Russian anti-corruption whistleblower freedom of assembly, expression, or and non-state actors. Sergei Magnitsky, who died in a Russian religion, but notably does not address prison in 2009 following his public corruption like sister legislation in the The leaked policy also proposes that revelations of government tax fraud. US, Canada, and the Baltic states. the European Commission will hold Head of the Global Magnitsky sway over the sanctions regime as the Campaign Bill Browder decried the lack According to EU Observer reporting, the “implementing authority”, with of corruption and kleptocracy in the EU Commission dubbed the new European banks required to implement new policy, adding that the EU is “also sanctions regime proposal “restrictive the asset freezes and member states not calling it by its rightful name: The measures against serious human rights obligated to enforce the travel EU Magnitsky Act”. violations” which would impose asset restrictions. The decision to designate freezes on bank accounts within the individuals or entities will be made by EU Observer article bloc and rescind any visa privileges or member states by consensus, and travel access to the EU. In addition to member states will be expected to take Bill Browder Tweet

Ghana to deploy benefcial ownership register

The Registrar General of Ghana requires the identifcation of benefcial need to be disclosed. For foreign Jemima Oware told Ghana’s News owners who are politically exposed companies, shareholders owning at Agency on 8 September that the persons (PEPs). Oware stated that the least 5 percent must be disclosed via deployment of the central benefcial central register will help the fght the BO register. All companies are ownership (BO) register will begin on against corruption and other types of expected to submit full BO details by 21 September and will initially cover fnancial crime, will facilitate the 31 December deadline. the extractive industry and “other information exchange to help track high-risk sectors like banks and other assets across different jurisdictions, Ghana Registrar General i... fnancial institutions”. and will simplify the process of company registration. Ghana Companies Act 2019 The register will implement the requirements of Ghana’s new In addition, Oware said that all Benefcial Ownership decl... Companies Act, adopted in 2019, which shareholders of domestic companies

118 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Belarus to impose retaliatory sanctions

Belarusian Foreign Minister Vladimir Makei announced in a Belarusian ofcials, including President Alexander 2 September press conference in Moscow, fanked by Lukashenko, who has faced over three months of mass street Russian Foreign Minister Sergei Lavrov, that Belarus intends protests, which rose sharply following his disputed to impose travel restrictions on leading government ofcials re-election on 9 August. Makei would provide details in the from the three Baltic nations of Latvia, Lithuania, and press conference on which Baltic ofcials will face travel Estonia, according to Reuters. restrictions.

Makei stated that the sanctions are in retaliation to the three Reuters article nations’ 31 August travel ban announcement targeting 30

Former Spanish PM to be investigated for involvement in Andorra bank closure

An Andorra court agreed on 15 September to open The proceedings follow a complaint fled in May 2017 by the proceedings against former Spanish prime minister Mariano Institute of Human Rights of Andorra and Drets Association Rajoy, ministers Cristóbal Montoro and Jorge Fernández against four Spanish police ofcers who allegedly pressured Díaz, and former interior ministry undersecretary Francisco BPA to obtain bank details on political opponents Artur Mas, Martínez for allegedly threating to close down the Private Oriol Junqueras, and the family of Jordi Pujol. The threats Bank of Andorra (BPA) and its Spanish branch unless they were purportedly made during a state visit by Rajoy and provided politically useful information on their opponents, Montoro to Andorra in January 2015. according to an article published by El National. After BPA refused, the Spanish authorities allegedly reported false El National article (15 September, in Catalan... money laundering acts by BPA to the US Financial Crimes Enforcement Network (FinCEN). Drets Association complaint (16 July 2020, in...

China fnes Luckin Coffee and others for fraud

According to the Wall Street Journal, China’s State The Chinese and US regulators’ probes began after Luckin Administration for Market Regulation fned on 22 September disclosed in July that approximately $300 million worth of two entities of Luckin Coffee Incorporated and another 43 2019 sales were falsifed by employees. Luckin announced companies a total of ¥61 million (£7 million) for infating on 2 April that the company would form a special committee Luckin’s sales and expenses during 2019. to carry out an internal investigation into the fraud accusations that were frst exposed in an anonymous report Luckin is accused of using incorrect data in promotional published by short-seller Muddy Waters. activity, misleading customers, and is further alleged to have violated Chinese regulations governing business competition. Wall Street Journal article The company is also under investigation by the US SEC.

119 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 US Commerce Department imposes licensing requirements on exports to China’s SMIC

The US Commerce Department Reuters frst reported on 4 September SMIC, in a statement released on 5 instructed US-based chip that US President Donald Trump’s September, cited the “numerous” export manufacturers on 25 September that administration was considering adding licenses that it has been granted by BIS, they are now required to obtain an SMIC to its blacklist of Chinese entities. whilst expressing “complete shock and export licence from the Bureau of The article cited an ofcial from the US perplexity to the news”. The company Industry and Security (BIS) before Defense Department who purportedly stated that it is open to “sincere and sending any parts to Semiconductor said that the government was in transparent communication” with the Manufacturing International discussions with multiple agencies to US government to reach a resolution, Corporation (SMIC), China’s largest determine whether to add SMIC to the sentiments echoed again in the maker of chips, according to a 28 trade blacklist. SMIC manufactures company’s 26 September response to September article by the Wall Street chips for use by Huawei Technologies the BIS restrictions. Journal, which reportedly viewed a Company Limited and, if sanctioned, copy of the letter. The licensing would join the over 275 Chinese Wall Street Journal artic... requirements reportedly apply to any companies on the BIS Entity List, many exports destined for SMIC or its of whom are Huawei afliates or Reuters article subsidiaries, while SMIC continued to allegedly afliated with the Chinese insist that its end-users and end-uses military and associated with the SMIC statement are entirely civilian in nature. ongoing genocide in Xinjiang.

Hygo trading suspended after CEO named in Operation Car Wash

Reuters reported on 24 September that investigating three contracts worth $2.7 immediate effect. In the same debut trading in Hygo Energy million signed between Sapura Brasil, a statement, the company pointed out Transition Ltd (Hygo), a joint venture joint venture formed in 2011 between that this decision was not in any way between Golar LNG Ltd and US private Seadrill and Sapura Energy, and linked to any misconduct during his equity frm Stonepeak Infrastructure state-run oil frm Petrobras in 2011. tenure at Hygo. Antonello will focus his Partners, was suspended following Antonello worked for Seadrill in 2011 efforts on the allegations made against revelations that Hygo CEO Eduardo and was responsible for its Brazil him, the company added. Antonello is being investigated as part operations. of the latest phase of Operation Car Reuters article Wash in Brazil. Following the revelations, Golar LNG issued a statement explaining that the Golar statement In a statement, Brazilian prosecutors company has accepted Antonello’s reportedly confrmed that they are request for leave of absence with

120 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 Former Brazilian president corruption case dismissed, money laundering charges fled

A Brazilian court dismissed corruption Da Silva’s defence team reportedly allegations. According to the complaint, charges on 1 September against welcomed the dismissal and stated that between 2013 and 2014, the former president Luis Inácio Lula da it is the ffth complaint fled against the defendants transferred BRL 4 million Silva for “insufcient evidence”, former president that has been (£585,219) worth of bribes through four according to an article published by the dismissed for lack of evidence, while simulated donations made by the Anadolu Agency, but new money eight charges remain pending. Odebrecht Group in favour of the Lula laundering charges were brought Institute. The bribes were allegedly against da Silva two weeks later. Between April and November 2019, the offered to obtain undue advantages for former president was imprisoned over Odebrecht and OAS Group concerning The former president was charged with another corruption case, but was contracts maintained with Petrobras, as corruption, infuence peddling, money released after the Supreme Court demonstrated in two other corruption laundering and illicit association in issued a November 2019 ruling cases before the 13th Federal Court of connection with engineering a bribery establishing that convicted criminals Curitiba and the Federal Regional Court scheme involving Brazilian construction could only be sent to prison after all of the 4th Region. company Odebrecht and procuring appeal options have been exhausted. contracts in Angola. The accusations Anadolu Agency article came in the context of Operation Car On 14 September, the Brazilian Federal Wash (Lava Jato), which has uncovered Public Ministry (MPF) fled a new Brazilian Public Ministry... billions of dollars in bribes and resulted complaint against Da Silva, former in the conviction of dozens of fnance minister Antonio Palocci and 13th Federal Court of Cur... businessmen and politicians. head of the Lula Institute Paulo Okamotto over money laundering

Brazilian President’s son to be charged over corruption scheme, leaked documents reveal

Brazilian prosecutors are to bring According to the leaked documents, coordinated the scheme on Flavio charges against Brazilian President Flavio Bolsonaro designed a corruption Bolsonaro’s behalf. Bolsonaro’s son over a corruption scheme in which 23 advisers appointed scheme, Brazilian news outlet O Globo by him during his tenure in the Rio de In a statement, Rio prosecutors revealed on 28 September. Federal Janeiro assembly would kick back part expressed regret over the disclosure of Senator Flavio Bolsonaro and his of their salaries to him. Bolsonaro news related to the sealed former advisor Fabricio Queiroz are to allegedly acted as the leader of, what investigations. No indictment against be charged with embezzlement, money prosecutors believe, was a criminal Flavio Bolsonaro has been sent to the laundering and running a criminal organisation designed to launder the Justice Tribunal, the statement added. organisation, according to a 300-page kickbacks received from the appointed leaked indictment. According to O public employees. O Globo report Globo , the indictment is due to be sent to the Justice Tribunal of Rio de His former advisor Fabricio Queiroz, Prosecutors statement Janeiro in the coming weeks. who is currently under house arrest over a separate investigation, allegedly

121 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

ESG

Environmental, Social and Governance Update

Levitt concluded further that Boohoo’s Board had failed to grasp that its responsibility to uphold social and human rights standards both within the company and at its suppliers did not derive from a nebulous ‘moral’ duty but, rather, from its obligations as ofcers of the company and duty to act in the best interests of shareholders.

When the original allegations against Boohoo surfaced in July the company’s market value fell by around £1.7 billion overnight. The Boohoo case has therefore highlighted the potential heavy costs of failing to meet societal expectations on sustainability, particularly when it comes to conducting Welcome to the frst edition of the Environmental, Social and effective social or environmental due diligence throughout an Governance (ESG) Update which gives you an overview of organisation’s supply chain. important developments in the sphere of corporate sustainability over the last month. Big Four publish plans for new ESG reporting standards

Boohoo report underlines importance of supply chain due The Big Four accounting frms have come together to publish diligence and effective corporate governance a joint proposal for a new ESG disclosure framework. The plans, which were released on 22 September, are a result of a On 24 September the online fashion retailer Boohoo six-month consultation led by the International Business published an independent review of working conditions in its Council and Brian Moynihan, chief executive of Bank of supply chain carried out by Alison Levitt QC, a former legal America, dating back to the World Economic Forum’s Davos adviser to the Crown Prosecution Service. The review, which summit in January. was commissioned back in July, upheld a number of allegations published in the UK media, including The framework proposed by KPMG, EY, PwC and Deloitte will unacceptable working practices and underpayment of require companies to disclose metrics under four main pillars workers at factories run by Boohoo’s suppliers. – principles of governance, planet, people and prosperity. It seeks to differentiate itself from a number of existing The report concluded that low pay and poor working standards such as Sustainability Accounting Standards conditions were “endemic” in Boohoo’s supply chain and Board, the Global Reporting Initiative and the Task Force on resulted from the company’s weak corporate governance Climate-Related Financial Disclosures by identifying a structures. While Levitt concluded that there was no universal set of ESG metrics and disclosures that will help to intentional exploitation of factory workers at Boohoo, she standardise measurement and enable more comparability reported that its risk management systems were across companies, industries and countries. “signifcantly undeveloped” and the company’s monitoring of its supply chain had been inadequate for many years. The proposed standards have met with a mixed reaction among corporate sustainability experts. Some have Specifc fndings included an under-skilled and under-staffed welcomed the involvement of the Big Four in developing ESG compliance team, an absence of a robust or consistent standards and see it as an opportunity to further increase method of onboarding new suppliers, and infrequent in-house awareness and investment in ESG funds and drive audits of suppliers with no recognisable audit methodology. momentum towards more unifed standards. Others have Among its recommendations the report advised Boohoo to criticised the initiative for setting aside a range of important form a Supply Chain Compliance Committee – chaired by a stakeholders on sustainability matters and bringing Board member – which solely considers supply chain issues. additional complexity given the vast array of existing

122 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020 disclosure frameworks already in the market. Besides these UK confrms plans to match EU on sustainable fnance existing standards, under the European Green Deal the European Commission is currently reviewing the EU’s The economic secretary to the UK Treasury, John Glen, has Non-Financial Reporting Directive in a move towards wider confrmed that the country will match the ambition of the EU mandatory disclosures, particularly of environmental data Sustainable Finance Action Plan after Brexit and that and performance. sustainability and responsible investment is at the top of the agenda as the government seeks to rebuild the economy in Supply chains of EU car makers linked to deforestation the wake of the Covid-19 pandemic.

BMW and Jaguar Landrover have been accused by a climate The UK’s asset management industry is the largest in Europe campaign group of sourcing leather for their vehicle with almost 40,000 people working directly for asset upholstery from protected forests in South America, Reuters management frms in the UK, with a further 76,000 working in reported on 30 September. supporting areas.

Following an 18-month investigation, the campaign group “The investment management sector’s work in this area will Earthsight claims that cattle ranchers in the Chaco region of be especially important as the UK looks to deepen its Paraguay illegally cleared land inhabited by the Ayoreo relationship with international partners and further Totobiegosode indigenous group. Slaughterhouses have then strengthen the UK’s position as a leading global fnancial hub, sold the cow hides to tanneries which supply some of as we build back better and greener,” Glen said as he Europe’s largest car manufacturers. addressed a conference organised by the Investment Association on 7 September. He added that the Treasury Jaguar Land Rover has rejected the allegations. The wants to help asset managers become effective stewards on company said it had tracked the supply chain back to the behalf of clients “by holding the companies they invest in to slaughterhouse but had "not as yet found evidence to verify account”. Earthsight's claim that the individual ranch has been illegally cleared, nor that its hides are in our supply chain". The European Union has recently fnalised its new Sustainable Finance Disclosure Regulation which will apply to BMW also said it had not found any evidence to verify the investment fund managers and their investment funds under claims but that the tanneries used by its supplier in Paraguay management from 10 March 2021. The new legislation aims are certifed as gold-rated by The Leather Working Group or to provide clarity to investors and introduce an element of have been secured by the Paraguayan Ministry of Industry comparability on the actual substance behind companies’ and Trade. The company also said it planned to restructure claims about the sustainability of their activities. its supply chains and was no longer planning to source leather from South America. The new law will require fnancial market participants to integrate sustainability risks into investment decisions and Earthsight said its fndings pointed to the urgency of new EU consider the impact of investments on the environment and laws currently being drawn up to regulate global supply the fght against climate change. They will also need to chains. “Our investigation highlights the urgent need for EU disclose information about their environmental, social and and UK legislation mandating car companies and other governance risks in their annual report and on their website. industries to conduct proper due diligence,” the group said in Crucially, fund managers will be bound by the Sustainable its report. Finance Disclosure Regulation whether specifc investments are held within or outside the EU. Meanwhile the UK government announced its own consultation in August on a new supply chain due diligence In parallel, the EU’s Taxonomy Regulation, which was law that will aim to protect rainforests and other endangered published back in July, provides fnancial markets with a habitats worldwide. common measurement tool to establish whether companies’ sustainability activities meet with the block’s environmental Earthsight’s investigation found that no car frm was able to objectives. trace its leather supplies back to the ranch it came from, something which threatens efforts to prevent human rights By Simon Jennings, Head of Africa and ESG Services at and environmental abuse in supply chains. Aperio Intelligence [email protected]

123 aperio-intelligence.com FINANCIAL CRIME DIGEST | SEPTEMBER 2020

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