FINANCIAL CRIME DIGEST
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Should you like to know more about our services or discuss how we may be able to help you, please do not hesitate to get in touch with our London or Paris offices. IN THIS ISSUE: FINANCIAL CRIME DIGEST TECHNICAL UPDATES 03
JANUARY 2018 SPECIAL FEATURE 09 US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS Welcome to the January edition of the Financial Crime Digest, Aperio Intelligence’s monthly newsletter, an PRESS AND MEDIA 17 informative summary of the most recent developments MONEY LAUNDERING | FRAUD | TERRORIST FINANCING relating to the world of money laundering, fraud and PRESS AND MEDIA 22 terrorist financing, bribery and corruption, and sanctions. BRIBERY | CORRUPTION PRESS AND MEDIA 26 [email protected] SANCTIONS
COUNTRY UPDATES 29
TECHNICAL UPDATES Eight countries removed from EU tax haven blacklist
Barbados, Grenada, South Korea, good governance in global taxation. Critics Macau, Mongolia, Panama, Tunisia, have also been sceptical of the actual and the United Arab Emirates have improvements and commitments made by been removed from eh EU’s list of these jurisdictions given that such information non-cooperative jurisdictions for tax has not been made public. purposes, following commitments made at a high political level to The list has also been criticised for not remedy the EU concerns. including any EU countries and jurisdictions, such as Malta, Cyprus, as well as Britain’s The list was initially created in December overseas territories. Malta was recently 2017 with the intention to promote good scrutinised by Jean-Claude Juncker, the governance in taxation worldwide and President of the European Commission, maximise efforts to prevent tax avoidance, tax for the country’s deficiencies in anti-money fraud, and tax evasion. The list was prepared laundering standards. in parallel with the OECD’s global forum on The eight countries have been moved to a transparency and exchange of information separate category of jurisdictions subject The decision leaves nine jurisdictions on the for tax purposes, called the Base Erosion and to close monitoring - commonly referred list of non-cooperative jurisdictions out of Profit Shifting project (BEPS). as a “grey-list” – which contains 47 other 17 announced initially on 5 December 2017. jurisdictions that are in the process of These are American Samoa, Bahrain, Guam, On 23 January 2018, the Council agreed that a adhering to EU fiscal standards. Marshall Islands, Namibia, Palau, Saint Lucia, delisting was justified in the light of an expert Samoa and Trinidad and Tobago. assessment of the commitments made by The delisting has been heavily criticised these jurisdictions to address deficiencies by lawmakers and activists, claiming that identified by the EU. In each case, the granting a green-light to countries such commitments were backed by letters signed as Panama – still considered by many as The decision of the Council of the EU can be at a high political level. an epicentre of aggressive tax-dodging – found HERE. undermines the EU’s efforts to promote
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TECHNICAL UPDATES UK launches new anti-money laundering supervisor
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) came into effect on 18 January 2018. The new supervisor, which will work under the remit of the Financial Conduct Authority, will ensure that professional body anti-money laundering supervisors comply with the UK’s anti- money laundering obligations.
OPBAS was created following concerns raised in the UK’s 2017 National Risk Assessment of money laundering and terrorist financing. The assessment found that professional services (particularly legal services, property and estate agency services, and trusts or company service providers) are a significant gateway for money laundering and terrorist financing because of a number of inconsistencies found in the UK’s professional body supervisory regime.
OPBAS will act as a “supervisor of supervisors”, directly overseeing the 22 accountancy and legal professional AML supervisors in the UK. It will ensure these 22 self-regulatory organisations (SROs) meet • The adequacy of any functions performed However, firms have shown concern regarding the high standards set out in the Money by professional body supervisors unrelated regulatory overlap. While OPBAS will have Laundering Regulations 2017, and has powers to AML supervision - this includes any the capacity to authorise SROs, the statutory to investigate and penalise those that do not. oversight of their members’ controls power to designate a new SRO, or remove an over other types of financial crime, such existing one for non-compliance, remains with OPBAS will not directly supervise: as those related to the prevention of HM Treasury. Indeed, certain sectors may • Members of professional bodies, such fraud, improving data security and the face dual supervision if they are regulated by as firms, accountants and solicitors, or implementation of financial sanctions and both OPBAS and HM Treasury. any other type of business subject to the asset freezes. OPBAS has published a sourcebook for requirements of the Money Laundering A significant advantage of OPBAS rests in its professional body AML supervisors about Regulations 2017; information gathering powers. Unlike other how they can meet their obligations in relation • Statutory anti-money laundering supervisors, OPBAS will not collect data to AML supervision. supervisors such as the Gambling from regulated entities but directly from the Commission and HM Revenue and SROs. OPBAS will also collect and summarise Customs; annual questionnaires from SROs and publish anonymised reports, providing an insightful source of information for regulated firms • Activity carried out by professional body Further information is available HERE. supervisors outside the UK; themselves.
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TECHNICAL UPDATES
New register requiring disclosure of beneficial owners of UK properties under consideration
On 25 January, the UK Sanctions and not be accessible to the public. According Anti-Money Laundering Bill had its third to the Government, the proposed register reading in the House of Lords. would reduce the propensity for criminals to launder their ill-gotten funds through the Members unveiled the details of a new UK real estate sector, regarded as a regular public register that, beginning in 2021, would avenue for high-level money laundering. require overseas companies that own or buy property in the UK to provide details of their In its statement announcing the ultimate owners. establishment of the new timetable for the proposed registry, the government claimed The announcement of the public register that more than 75% of the properties in the came after the House of Lords had UK currently under investigation for possible previously voted down a proposal that links to money laundering were found would have called for six British overseas to have made use of offshore corporate territories with financial services industries secrecy. to implement a publicly-accessible register of beneficial ownership by The draft legislation will be published this 1 January 2020. The six jurisdictions in summer, after which it will be submitted question were Anguilla, Bermuda, the to a committee of MPs and Lords for pre- British Virgin Islands, the Cayman Islands, legislative scrutiny. Montserrat and the Turks and Caicos Islands.Under the amended version, the The current status of the bill, as well as information in question would only be shared draft documents, can be found HERE. with law enforcement authorities and would
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TECHNICAL UPDATES European Supervisory Authorities issue opinion on the use of innovative solutions in the customer due diligence process
The Joint Committee of the three European Supervisory Authorities (European Banking Authority, European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority - ESAs) published an opinion on the use of innovative solutions by credit and financial institutions when complying with their customer due diligence (CDD) obligations.
The opinion is part of the ESAs’ wider work on creating a common understanding of the responsible and effective use of innovation by credit and financial institutions, which can enhance their AML/CFT controls.
EU law is technology-neutral and does not set out in detail how CDD measures should be applied, giving an opportunity to financial and non-financial innovators to explore new ways of meeting institutions’ CDD obligations. While these innovations can improve the effectiveness and efficiency of AML/CFT controls, there is a risk that they could weaken ML/TF safeguards, if applied unthinkingly. The opinion explores how innovative solutions currently used by credit and financial the money laundering/terrorist financing institutions can help them meet their AML/ The ESA opinion risk associated with individual business CFT obligations more effectively. relationships and firms’ business-wide risk explores how innovative For example, solutions that involve non-face- profiles. These include: solutions used by to-face verification of customers may contain • Oversight and control mechanisms credit and financial built-in features that can establish whether the identity document presented belongs to the institutions can help • The quality and adequacy of CDD person presenting it, based on a combination measures; them meet their AML/ of multiple parameters, including biometric CFT obligations more facial recognition, the document’s security • The reliability of CDD measures; features and optical character recognition. effectively • Delivery channel risks; and The opinion also states that Member States’ competent authorities should consider a • Geographical risks. The ESAs’ full opinion can be found number of factors when assessing the extent HERE. to which the use or intended use of innovative CDD solutions is adequate in the light of
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TECHNICAL UPDATES Ethiopia added US banks support the creation of a to list of the EU’s Treasury-run database of beneficial list of high-risk ownership for US companies jurisdictions
The EU has concluded that Ethiopia should be considered a third-country jurisdiction with strategic deficiencies in its anti-money laundering/counter financing of terrorism (AML/CFT) regime, In light of the US’s proposed overhaul companies with 20 employees or fewer, thus posing a significant threat to the of anti-money laundering laws, the and USD 5 million or less in annual revenue. financial system of the EU. president of the Clearing House, a Ultimate beneficial owners would have to be listed in annual filings to the Financial Ethiopia has written high-level political trade group of the largest US banks, Crime and Enforcement Network (FinCEN). commitment to address the identified stated that the financial industry deficiencies and has developed an action supports the idea of creating a The beneficial ownership register for small plan with the Financial Action Task Force national database of corporations companies would help banks save costs (FATF). The country joins the list of other and their true owners. and perform due diligence checks more countries which will be reassessed by the Law enforcement authorities and efficiently, although there are still some EU in light of their respective commitments, anticorruption groups had previously questions regarding the implementation of notably Afghanistan, Bosnia and vouched for such measure to be the database. The bill specifies that funding Herzegovina, Guyana, Iraq, Lao PDR, Syria, proposed, but the backing of some of for the register would be capped at USD Uganda, Vanuatu, and Yemen. the largest banks in the country could 40 million, and there is no clear detail as be a catalyst in the ongoing discussions to how FinCEN will verify the reliability of Iran and North Korea are also considered around a draft bill for the implementation information it receives from the companies. as high-risk jurisdictions for the purposes of of the “Counter Terrorism and Illicit State and local law enforcement authorities AML/CFT. Iran provided a high-level political Finance Act”, which is expected to come will not have access to such information, commitment to address the identified into effect in May 2018. which will only be privy to federal law deficiencies, and has decided to seek technical enforcement agencies. assistance in the implementation of the US beneficial ownership rules currently FATF Action Plan. North Korea represents an only apply to publicly-listed companies. ongoing and substantial risk, having repeatedly Under the proposed bill, smaller failed to address the AML/CFT deficiencies companies will also have to abide by identified by the FATF. Further information on the draft bill the same requirements. Specifically, the can be found HERE. rules would apply to US-incorporated
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TECHNICAL UPDATES
FATF issues mutual evaluation report of Mexico
The Financial Action Task Force (FATF) and the International Monetary Fund (IMF) recently concluded an assessment of Mexico’s AML/CFT regime, based on the 2012 FATF Recommendations.
The report stated that Mexico has a good system to tackle money laundering and terrorist financing, but should step up efforts in pursuing launderers and confiscating their assets to mitigate the significant risks.
Mexico has a well-developed legal and institutional framework to combat money laundering and terrorist financing, but the country still faces significant risks stemming from activities often linked to organised crime, drug trafficking, extortion, corruption, and tax evasion. Some of the main findings included:
• Beneficial owners are being identified only not investigating and prosecuting money Mexico’s financial intelligence unit, Alberto to a limited extent due to the country’s laundering in a proactive and systematic Bazbaz, resigned from his position in order disclosure rules, thus systematically fashion, but rather on a reactive, case- to be appointed as the head of the country’s weighing on entities’ effectiveness by-case basis. These are often guided central intelligence agency. Bazbaz was in assessing and managing money by political interests and motivations. personally appointed by President Enquire laundering and terrorist financing risks. Mexico is lagging behind countries such Peña, who is believed to be close to Bazbaz. as Colombia and Brazil, both of which have The move, which has been heavily criticised • Oversight of designated non-financial made strides in setting up independent due to Bazbaz’s lack of experience in law businesses and professions is not prosecutors. enforcement, is reported to be politically very developed and significantly under- motivated in light of the country’s July resourced and there is a low level • Prosecutors do not systematically presidential election, which is causing a of suspicious transaction reporting. pursue confiscation of proceeds and drastic shift in Mexico’s political landscape. Generally, Mexican authorities have instrumentalities as a policy objective, and not applied regulatory sanctions, in an penalties are not commensurate with the This month, Chihuahua governor Javier Corral effective, proportionate and dissuasive money laundering and terrorist financing also alleged that the government of Peña manner across all sectors. Conversely, risks. According to the government’s own Nieto is denying his state financial resources financial sector supervisors have a good estimates, the country seized just USD 32.5 in order to stop a corruption probe implicating understanding of the risks the sector million in 2016, representing less than 0.1% high-ranking party officials and close aides of faces, and have implemented reasonable of the USD 58.5 billion of illicit revenues the President. risk-based approaches to AML/CFT the government estimates is generated by supervision. organized crime annually.
The report by FATF is a reflection of some • Mexican authorities have conducted some The full version of Mexico’s mutual of the recent developments affecting the high-profile investigations, but they are evaluation can be found HERE. country. Earlier this month, the head of
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SPECIAL FEATURE US Treasury Submits “Russian Oligarch Report” to Congress
BY GEORGE VOLOSHIN Head of Aperio Intelligence France
On 29 January, the US Treasury submitted to Congress its “Russian Oligarch Report”, also dubbed in the press the “Kremlin Report”, as per Section 241 of the new Russia sanctions package, which US President Donald Trump signed into law on 2 August 2017 under the name “Countering America’s Adversaries Through Sanctions Act” or CAATSA (H.R. 3364, Pub.L. 115–44).
In accordance with Section 241, the report was submitted in an unclassified form, including the names of individuals identified by the US Treasury and other agencies. It also contains a classified annex with detailed assessments as required by law. Given the considerable amount of attention towards the Mueller investigation and the bipartisan consensus in the US regarding Russian election. Special Counsel and former FBI sectoral sanctions in Directives 1 to 4), interference in the domestic electoral process, director Robert Mueller has since been CAATSA offers the possibility of enacting the release of that annex (in full or in part) into investigating illicit Russian actions on US soil new restrictive measures against Russian the public domain should not be ruled out in as well as presumed collusion between senior citizens and companies. Section 241 requires the future. Russian officials and their intermediaries, on the US executive branch to identify “the most the one hand, and members of the Trump significant” senior Russian government Background campaign and transition team, on the other. officials and oligarchs and assess their:
CAATSA is the latest sanctions bill, which In addition to the significant toughening of • Net worth and known sources of income Congress imposed last year on the Trump existing US sanctions adopted during the (including those of close family members); Administration in retaliation for Russia’s Obama administration (in particular under interference in the 2016 US presidential Executive Order 13662, which details specific • Non-Russian business affiliations;
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SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
• Closeness to the Russian government and, in key sectors (e.g. extractive industries) The Kremlin Report in particular, President Vladimir Putin and traditionally dominated by state monopolies other members of the ruling elite; or subject to heavy government regulation. was drafted by the Drawing the line between those genuinely US Department of the • Involvement in acts of corruption. close to Vladimir Putin and supporting his policies, and others who have to maintain Treasury. Neither the Section 241 further requires the US “favourable neutrality” towards the Putin report nor its annex or Government to evaluate the exposure of key regime is a highly difficult task. It is also worth appendices should be sectors of the US economy, including on a noting that unlike a “senior foreign political priority basis banking, securities, insurance figure” defined in Title 31 of the Code of interpreted as imposing and real estate, to Russian politically exposed Federal Regulations, the term “oligarch” has sanctions on the persons (PEPs). This category no doubt no official definition. includes not only senior government officials individuals listed and prominent oligarchs but also a multitude It has been suggested that the US authorities in and of itself, imply, give rise to, or create any of lesser-known, low-key wealthy Russians are partly relying on contributions from third other restrictions, prohibitions, or limitations whose business activities depend on a good parties such as think tanks (e.g. the Atlantic on dealings with such persons by either US or relationship with the state or who Council), anti-corruption NGOs, Russian foreign persons. Neither does inclusion on the have engaged in joint projects with state- opposition activists and well-known western unclassified list indicate that the US Government owned companies or have had dealings critics of the Putin regime. It has also been has information about the individual’s with state assets. implied that the availability of detailed public involvement in malign activities […]”. information on key representatives of the Who wrote the Kremlin Report? Russian oligarch class, based on many years Despite initial expectations of a shorter of research and analysis by respectable The responsibility to draft the report was list (the actual list of oligarchs contains 96 institutions, will ensure objectivity. As things placed by CAATSA with the US Department names), it is still likely that both financial stand, the sheer number of individuals cited of the Treasury acting in consultation with the and non-financial organisations, within and in the Kremlin Report largely invalidates such US National Intelligence Community (headed outside the US, will seek to take pre-emptive claims to objectivity. by the Director of National Intelligence) and steps in order to either completely terminate, to the extent possible and warranted by short- the US State Department. It is likely that the What are the consequences for the and medium-term business considerations, main input was provided by the Treasury’s oligarchs identified? Office of Foreign Assets Control (OFAC), or to reduce their relationships with and exposure to the oligarchs mentioned in the which administers the majority of sanctions The mere fact of being cited in the Kremlin report. These measures might encompass in programmes in the US (a limited number Report does not automatically entail primary worst-case scenarios the termination of bank of programmes are managed by the State or secondary sanctions. The unclassified accounts, triggering force majeure clauses to Department and the Bureau of Industry and portion of the report states as follows in force an early repayment of loans, refusals to Security of the US Department of Commerce). this respect: provide new lending, walking out of existing OFAC has extensive research capabilities “It is not a sanctions list, and the inclusion contracts and projects, etc. At a minimum, enabling it to identify relevant sanction targets of individuals or entities in this report, its further enhanced due diligence will have to and mostly relies on open sources as available appendices, or its annex does not and in no way be performed on the relevant oligarchs, their through the media, public databases and should be interpreted to impose sanctions on family members and close associates with a similar avenues. In many situations, adding those individuals or entities. Inclusion in this view to identifying the level of inherent risk. a person or entity to a sanctions list is a report also does not constitute the determination Section 241 asks the US Government to matter of subjective judgement given either by any agency that any of those individuals or assess “the potential impacts of imposing the dearth of publicly available information entities meet the criteria for designation under or the lack of credible, trustworthy sources. any sanctions program. Moreover, the inclusion Many rich Russian individuals depend on the of individuals or entities in this report, its benevolence of the Putin regime to survive appendices, or its classified annexes does not, continues on next page
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SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
secondary sanctions with respect to Russian SEC. 241. REPORT ON OLIGARCHS AND PARASTATAL ENTITIES OF oligarchs”. The wording clearly indicates THE RUSSIAN FEDERATION. that the US authorities could decide, at an unspecified point in time if at all, to add all or any of the oligarchs identified to OFAC’s specially designated nationals (SDN) list. (a) <
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US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
The actual list proves to be much longer The list of individuals named in the Kremlin Report is than what was initially expected and in considerably longer than expected, although it omits many ways contradicts recent estimates family members and close associates made in accordance with more subtle parameters. These include the estimates made by qualified individuals who were publicly identified as potential contributors Administration proceeded with the chaotic According to recent media reporting, many to the Kremlin Report. In November 2017, a privatisation of heavily discounted state wealthy Russians have recently approached, staunchly anti-Russian US-based academic, assets. Under Section 9 of the Sovereignty, through influential lobbying firms, former US Anders Aslund, who is a senior fellow at Integrity, Democracy, and Economic Stability Treasury and State Department officials with the Atlantic Council, co-authored a blog of Ukraine Act of 2014, as amended by experience in sanctions in order to stay off post entitled “How to Identify the Kremlin Section 227 of CAATSA, the US President is the list. Others have started to withdraw from Ruling Elite and its Agents: Criteria for the “authorized and encouraged to impose the their US-based businesses. In anticipation of US Administration’s ‘Kremlin Report’”. One sanctions” (asset freezes and visa bans) on the Kremlin Report, four Russian companies – of the remaining co-authors was Daniel any officials or their close associates and PhosAgro, Polyus, Alfa Bank and Rusal, which Fried, sanctions coordinator of the US State family members responsible for “significant are owned by oligarchs – announced plans to Department during the Obama presidency. corruption” within Russia. The same applies sell bonds, fearing fallout from the potential They collectively cautioned against pursuing to “any individual who has materially assisted, inclusion of their owners in the report. Last a simplistic approach, arguing that “earned sponsored, or provided financial, material, or December, the Putin Administration said the wealth in itself should not be regarded as technological support for, or goods or services government was considering issuing special objectionable” because “many made their in support of” such corruption, which may foreign-currency bonds to allow oligarchs fortunes before Putin and, to survive, are potentially include any successful Russian to repatriate capital from abroad. In the forced to pay large tributes to the Kremlin”. businessperson. As with other assessments, meantime, numerous rich Russians have been They also noted that “it is critical that persons the corruption-related analysis has not been allegedly trying to downplay their association are named in the Kremlin Report only on the made public. with Vladimir Putin, notably by declining basis of reliable information” and suggested invitations to meetings or events attended by targeting “the popularly-acclaimed oligarchs, the president. who are big businessmen profiting greatly How many oligarchs were identified in from direct business with the Kremlin”. the Kremlin Report? Both Aslund and Fried came out publicly On 11 January, the respectable Russian daily against the approach ultimately taken by the Kommersant quoted its D.C.-based sources US Government, which is blatantly at odds as saying that the combined list of senior with their own recommendations. The former officials and oligarchs could comprise more told the media on 30 January that while he than 50 names and as many as 300 names had personally prepared suggestions for with the inclusion of family members. The the Kremlin Report and expected them to unclassified portion of the report, as released be used, an unidentified senior official in the by the US Treasury, comprises the names Trump administration had ordered them to of 114 senior Russian officials, including 43 be replaced with an all-encompassing list of from the Presidential Administration, Prime wealthy Russians. “In doing so, this senior Minister Dmitry Medvedev, the 30 members official ridiculed the government experts who of government, 40 other high-ranking officials had prepared another report”, Aslund said. (including CEOs of state-owned companies) Fried sounded as critical: “What came out as well as 96 oligarchs. The sole criterion was so hasty and sloppy it could only have for the identification of oligarchs is their been done on the fly […] It makes us look non- estimated net worth, which must be at USD 1 billion or more, based on “reliable public sources”. continues on next page
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SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
continues from previous page OUR ANALYSIS credible instead of conveying forbearance. It The list of oligarchs in the Kremlin our individual assessments below, Forbes conveys weakness and sloppiness […] A list report presents several challenges. and Bloomberg, the two key providers of that includes everybody is no list at all.” First, there are serious reasons to billionaires’ wealth data, often have drastically doubt its objectivity, as well as the very diverging estimates. In December 2017, the Russian media quality of the work performed by the start-up The Bell, founded by a former editor US Government under Section 241 Despite the intrinsic flaws of the US at RBC, Forbes Russia and Vedomosti, of CAATSA. Government’s approach to Section 241, suggested, instead, that the US Government the individuals included in the Kremlin could primarily target those oligarchs whose This section clearly refers to the “most report, while not being under the imminent companies had received in excess of USD 300 significant senior foreign political figures threat of primary or secondary sanctions, million worth of state support. Out of the 300+ and oligarchs in the Russian Federation, could face some type of sanctions in companies that received financial assistance as determined by their closeness to the the months to come and are likely to from the Russian state in the wake of the Russian regime and their net worth”. The witness negative consequences for their 2008-2009 financial crisis, some 20 entities inclusion of all oligarchs with an estimated businesses and assets. surpassed the USD 300 million threshold. The net worth exceeding USD 1 billion runs biggest recipient was Oleg Deripaska’s Rusal counter to the explicit requirement set out This is especially true in the context of (USD 4.5 billion) while another Deripaska in the law, namely the fact of being among increasingly strained relations between company, carmaker GAZ, secured USD 630 the “most significant” figures as defined by Russia and the US, just weeks away from the million in state guarantees. Other beneficiaries the extent of wealth AND closeness to the March 2018 presidential election in Russia. included Roman Abramovich’s Evraz and Putin regime. The Russian authorities have already publicly Mikhail Fridman’s Alfa Group (USD 2 billion accused the US Government of meddling in each), as well as Vagit Alekperov’s Lukoil, Some of the businesspeople mentioned their electoral process, as the latter earlier Vladimir Yevtushenkov’s AFK Sistema, Alisher in the report are either low-key individuals did in relation to Russia after Donald Trump’s Usmanov’s Metalloinvest and Igor Zyuzin’s without any known ties to the Kremlin, or victory in the 2016 US presidential election. Mechel (Zyuzin has no longer been a Forbes have been living abroad for many years billionaire since 2013). and have not played a discernible role in The Trump administration’s apparent Russian domestic politics, or for some reluctance to adopt a markedly tough Who was included in the Kremlin Report’s have come under direct pressure from approach vis-à-vis Russia, as many members oligarch list? Vladimir Putin’s inner circle. of Congress and opinion leaders have come to believe, could actually backfire. While Russia’s There has therefore been considerable For instance, Vladimir Yevtushenkov, the borrowing costs dropped on 30 January to speculation in the media about who among majority shareholder of AFK Sistema, their lowest level since the spring of 2014 oligarchs might be included in the Kremlin saw his personal wealth tumble from and the rouble rallied, with many experts in Report. As previously mentioned, the list of USD 9 billion in March 2014 to slightly both Russia and the US calling the Kremlin oligarchs, which was disclosed as part of the above USD 2 billion in January 2018, Report “toothless” and “meaningless”, the unclassified portion of the report, comprises according to Forbes. This followed the situation might change if Congress were to 96 individuals. It does not include any family 2014 nationalisation of his key oil asset, take matters in its own hands. An increasingly members or close associates, though. Further, Bashneft, over fraud allegations and the robust bipartisan support for a tougher the US Department of the Treasury has ongoing dispute with Bashneft’s current sanctions policy towards Russia could explicitly indicated that the classified annex owner, Rosneft. The CEO of Rosneft tie Donald Trump’s hands and coerce his may contain individuals who “hold a position is Putin’s close associate, Igor Sechin, administration into more aggressive actions below those included in the unclassified report sanctioned since early 2014. than have ever been envisaged. or have a net worth below USD 1 billion1”. Furthermore, the estimation of wealth is Please find on the next pages our assessment In what many view as a humiliation for the never a simple exercise: as evidenced in of some of the oligarchs mentioned in the entire US executive, a Treasury spokesperson Kremlin Report:
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US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
2 1 Alisher Usmanov Viktor Vekselberg Net worth: USD 15.2 billion (World’s Richest by Net worth: USD 12.4 billion (World’s Richest by Forbes), USD 15.3 billion (Bloomberg Billionaires Forbes), USD 17.4 billion (Bloomberg Billionaires Index) Index)
Main assets: USM Holdings (mining, Main assets: Renova Group (UC Rusal, Sulzer, technology, telecom) Oerlikon)
Closeness to the Putin regime: High Closeness to the Putin regime: High
Commentary: Commentary: Alisher Usmanov is the beneficial owner of USM Holdings Limited, which Viktor Vekselberg has been involved in high-profile litigation in foreign courts controls assets including OJSC MegaFon, CJSC “Holding Company over expropriation of assets, notably from the Canadian company Norex Metalloinvest” and Mail.Ru Group. He also holds a separate interest in Petroleum, which claimed Vekselberg and his business partner Leonid Kommersant Publishing House and Vkontakte, the Russian social media Blavatnik forcibly seized its stake in Yuagraneft in the early 2000s. Similar site. He is considered to be strongly aligned to the interests of the Kremlin charges were later brought against the two men by the former Russian and President Putin. Usmanov acquired his interest in Vkontakte after its senator Leonid Lebedev over the sale of TNK-BP to Rosneft in 2014. In founder, Pavel Durov, claimed he was forced out of Russia for refusing to 2011, Russian opposition activist Alexey Navalny accused Renova Group suppress comment on the social media site relating to the Euromaiden of corruption after it sold a historic building in Moscow to the government protests in Ukraine. Usmanov was not targeted in the initial round of at a suspiciously high price. Vekselberg has been heavily involved with the sanctions against Russian individuals close to President Putin, although Skolkovo Foundation, an innovation centre founded at the initiative of the he took steps to reduce his holdings below the 50% threshold required to current Prime Minister, Dmitry Medvedev, and played a central role in the establish de-facto evidence of control. organisation of the 2014 Sochi Olympics, which was directly overseen by President Vladimir Putin. In 2015, Renova Group granted a hotel it had built Usmanov has a controversial profile, particularly dating from the 1980s and in Sochi to the Sirius Foundation established by an entity linked to cellist 1990s era. Initially jailed in 1980 for eight years in the Uzbek Soviet Republic Roldugin, a close acquaintance of President Putin. In September 2016, two for financial extortion, Usmanov was released for “good behaviour” in 1986 close associates of Viktor Vekselberg were arrested on suspicions of bribery and his conviction was annulled by the Uzbek Supreme Court in July 2000. in the Komi Republic. Usmanov has consistently claimed the matters which led to his sentencing were politically-motived, and has called the charges “trumped up”, stating the matter was heard by a military court and not a civil tribunal. Separately, Usmanov has been cited for his alleged links to figures such as Gafur 3 Rakhimov, who in turn is alleged to be connected to organised crime groups. Roman Abramovich The US Department of Treasury imposed sanctions on Rakhimov for being Net worth: USD 10.5 billion (World’s Richest by part of the “Brothers Circle” criminal organisation. Other sources claim that Forbes), USD 13.5 billion (Bloomberg Billionaires Usmanov has been linked to Soviet Intelligence agencies, in response to Index) which he has stated on record it “was not a crime” to be associated with the KGB. Main assets: REvraz (steel manufacturer), Channel One Russia (TV), Chelsea FC From November 1998 to October 2014, Usmanov worked at Gazprominvestholding (as general director in 2000-2014), a subsidiary of Closeness to the Putin regime: High Gazprom, the Russian state gas giant directly overseen by Vladimir Putin. There have been allegations of his involvement in corruption on Gazprom’s Commentary: behalf, in particular in Uzbekistan. In March 2017, Russian opposition activist In parallel with his successful business career, Roman Abramovich spent Alexey Navalny publicly accused Usmanov of corruption, alleging that he more than a decade serving in high-ranking positions within the Russian had paid bribes to Russian Prime Minister Dmitry Medvedev (whom he has government. He was an MP in the Duma (1999-2000), the governor of the closely known since the 2000s) and his deputy Igor Shuvalov. The oligarch Chukotka Autonomous District (2001-2008) and the speaker of the Chukotka sued Navalny for libel and won the case in May 2017. Usmanov has also legislative assembly (2008-2013). He became an oil trader in the early 1990s been frequently criticised for enforcing pro-Kremlin censorship at the media and was reportedly briefly under investigation for fraud in 1992, but the companies he owns. enquiry was promptly closed. In the mid-1990s, Abramovich rose to national prominence with the help of the controversial oligarch Boris Berezovsky who introduced him to Russian President Boris Yeltsin and his family. According to media reports, he gifted a yacht called Olympia personally to Vladimir Putin in the early 2000s. Former billionaires Berezovsky and Khodorkovsky as well as other Kremlin insiders have repeatedly said of Abramovich that he has the highest degree of access to Putin among all Russian oligarchs. In 2017, the US media wrote about the “years-long” friendship between the family of Donald Trump’s daughter Ivanka and her husband Jared Kushner, on the one hand, and Roman Abramovich and his now former wife Darya Zhukova, on the other. FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
4 Oleg Deripaska 5 Suleiman Kerimov Net worth: USD 5.1 bn (World’s Richest by Net worth: USD 6.1 billion (World’s Richest by Forbes), USD 8.88 bn (Bloomberg Billionaires Forbes), USD 5.48 billion (Bloomberg Billionaires Index) Index)
Main assets: En+ (UC Rusal, EuroSibEnergo), Main assets: Polyus (gold mining), through his GAZ Group (car manufacturing), Basel Aero son Said (airports) Closeness to the Putin regime: High Closeness to the Putin regime: High Commentary: Commentary: Oleg Deripaska has long been suspected of ties to the Russia mafia, Suleiman Kerimov has the double disadvantage of simultaneously being including working in the 1990s under the patronage of Mikhail Cherney, the one of Russia’s richest businessmen and a high-level member of its political highly controversial “king of aluminium” who subsequently sued Deripaska establishment: he was an MP in the Duma from 2003 to 2007 and has been in London in 2006. His name regularly appeared in the press in connection a senator from Dagestan since 2008. Kerimov’s name is associated with a with corporate raids during the 1990s and 2000s. In 2009, the Spanish long series of corporate raids in Russia during the 1990s and 2000s. Those authorities accused Deripaska and a fellow Russian oligarch, Iskander purportedly helped him to take possession of many lucrative assets, which Makhmudov, of money laundering and ties to the powerful Izmaylovsky formed the backbone of his subsequent wealth. In September 2013, the gang from Moscow Region. The inquiry was handed over to the Russian government of Belarus accused Kerimov, the then owner of more than 40% side in 2011, but Russia definitively closed the case at the beginning of 2017. in potash miner Uralkali, of abuse of power and forced him to sell his stake to According to the Russian-American journalist Paul Khlebnikov (murdered two fellow Russian oligarchs by the close of the year. In 2016, Kerimov was in 2004), Deripaska concluded an informal pact with Vladimir Putin in 2001, mentioned in the Panama Papers in connection with a shady scheme, which securing guarantees for himself and his business empire in exchange for a allowed cellist Sergey Roldugin, a close acquaintance of President Putin, to promise to stay away from politics. He allegedly hosted Putin’s daughters at secure claims to a USD 59 million loan for just USD 1. In November 2017, his villa in Sardinia in 2004. In early 2017, it was revealed that Deripaska had Kerimov was arrested in France on suspicions of tax evasion in excess of previously hired Donald Trump’s former campaign manager, Paul Manafort EUR 400 million. He has since been released on bail, but the investigation (currently under investigation for money laundering and other crimes), is ongoing. reportedly to promote Vladimir Putin’s interests in the US.
publicly admitted on 30 January that the have acquired unfair competitive advantages General Yuri Chaika) in the Kremlin Report. unclassified part of the Kremlin Report was thanks to doing business jointly with the derived from Forbes’ ranking of the 200 richest Putin regime”. The two prominent Republicans claim that businessmen in Russia as of 20172. both Usmanov and Chaika have committed On 18 January, Forbes Russia published significant corruption in Russia and may have The current US sanctions against Russia a list of nine oligarchs whose names had repeatedly violated the 1977 Foreign Corrupt apply to a handful of wealthy individuals been most frequently cited in connection Practices Act (FCPA). close to the Putin regime, such as Gennady with Vladimir Putin or the Russian ruling Timchenko, Boris and Arkady Rotenberg and elites in 2017. They were (from most to Yuri Kovalchuk. Last November-December, the least cited): Oleg Deripaska; Gennady 1 The classified annex to the Kremlin report also contains Free Russia Forum, a loose alliance of Russian Timchenko; Leonid Mikhelson; Viktor a list of parastatal entities determined to be those that are opposition activists, gathered in Lithuania Vekselberg; Roman Abramovich; Pyotr Aven, 25% or more owned by the Russian state and had 2016 to hammer out a list of Russian individuals German Khan and Mikhail Fridman (cited revenues of circa USD 2 billion or more. recommended for inclusion in the sanctions together); and Suleiman Kerimov. Just days 2Furthermore, the Russian media reported that the list of regime. The “oligarch” part of the list had 23 earlier, Republican senators Marco Rubio parastatal entities whose CEOs had been cited among names in it, including the already sanctioned and Lindsey Graham had urged Treasury senior officials was based on last year’s ranking of the largest Russian companies by a leading Russian daily, RBC. Arkady Rotenberg (but not his brother Boris). Secretary Steven Mnuchin, Secretary of It also appears that the US authorities did not run basic No specific methodological information was State Rex Tillerson, and Director of National checks on that list because the Kremlin Report contains the made public. The forum’s participants simply Intelligence Dan Coats to include Alisher name of Oleg Budargin as the CEO of Rosseti. He left the stated that those were “big businessmen who Usmanov (along with Russian Prosecutor company in September 2017.
15 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS SPECIAL FEATURE US TREASURY SUBMITS “RUSSIAN OLIGARCH REPORT” TO CONGRESS
Other Russian oligarchs cited in the Kremlin Report are:
• Kirill Shamalov (Sibur Holding), the purportedly former husband of Vladimir Putin’s alleged daughter Ekaterina Tikhonova and the son of Putin’s old friend Nikolay Shamalov (already sanctioned in the EU, Canada and other countries);
• Leonid Mikhelson (Novatek) whose business partners and associates include Kirill Shamalov and a good friend of Putin, Gennady Timchenko (sanctioned);
• Alexey Mordashov (Severstal) who is linked through business to such sanctioned individuals as Gennady Timchenko and Yuri Kovalchuk and who had his company Silovye Mashiny added to the US SDN list in January 2018 over illicit trade with Crimea;
• Vladimir Potanin (Norilsk Nickel) who is frequently referred to in the press as Vladimir Putin’s friend, has played hockey in the Putin team comprising famous athletes and a handful of sanctioned oligarchs, and has repeatedly praised Putin’s policies in public;
• Mikhail Fridman, German Khan, Pyotr Aven and Alexey Kuzmichev (Alfa Group, LetterOne) who were mentioned in the 2016 Trump dossier in relation to Alfa Group’s presumed kickbacks to Putin in the 1990s and as close advisors to the Russian president, especially on the US. Fridman and his associates are generally considered to be on especially good terms with the Putin regime and have a long history of various allegations against them.
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESS AND MEDIA MONEY LAUNDERING | FRAUD | TERRORIST FINANCING Majority of UK BNP Paribas and HSBC fined over multinationals currency rigging have unresolved compliance issues, says report
A survey conducted by the international The US Department of Justice fined Barclays, was the first person to admit guilt in law firm Baker McKenzie found that 52% the American unit of BNP Paribas with the probe, and is scheduled to be sentenced of the 500 UK multinationals interviewed USD 90 million after the bank agreed to in July 2018, according to court records. (over GBP 1 billion annual revenue) had plead guilty to rigging currency prices. Four other traders have also been criminally unresolved compliance issues yet to be charged, and one of them has pleaded guilty, discovered by a regulator. HSBC has entered a three-year deferred the Justice Department said. prosecution agreement with the US Other interesting findings from the survey Department of Justice after paying USD BNP is the sixth major bank to admit criminal suggest that fewer than one in five companies 101.5 million over criminal charges relating wrongdoing over currency rigging. Barclays, give compliance staff substantive roles in the same issue. Citigroup, JP Morgan Chase &Co, Royal Bank handling major mergers, and that 40% of of Scotland, and UBS Group have collectively companies claimed to have discovered BNP Paribas USA admitted to having been fined more than USD 2.8 billion, compliance issues after a merger or acquisition conspired to suppress competition by fixing according to the US Department of Justice. was completed. While the report provides prices for Central and Eastern European, Another French Bank, Societe Generale, insight into compliance-related concerns Middle Eastern and African currencies from is currently in talks with US authorities among executives, there is no indication to September 2011 to July 2013, violating to resolve an investigation into alleged suggest that companies are willing to improve US antitrust law. Allegedly, the bank had manipulation of benchmark interest rates. and invest in enhanced compliance practices in been involved in manipulating prices on HSBC settled a USD 101.5 million dispute the near future. an electronic platform through fraudulent with the US Department of Justice after trades, coordinated trading, and agreements entering a three-year deferred prosecution In light of increasing regulatory requirements, on what prices to quote to specific agreement for the same reasons as BNP 37% of companies were planning to reduce customers, among other means. Paribas USA. The investigation centred on their internal compliance mechanisms HSBC’s foreign exchange (FX) traders who as a way of cutting costs, despite 66% of BNP Paribas’ plea followed the guilty plea of misused confidential client information in compliance chiefs expecting breaches a former trader, Jason Katz, for conspiring to 2010 and 2011 during multibillion-dollar to increase as regulation becomes more fix currency prices. Katz, who also worked at FX transactions. burdensome.
17 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA MONEY LAUNDERING | FRAUD | TERRORIST FINANCING Former Trump campaign manager faces lawsuit from Cypriot company linked to Russian oligarch
US President Donald Trump’s former is suing Manafort and Gates because in campaign manager Robert Manafort and 2015 they had testified under oath claiming his business partner Richard Gates were that they did not know what happened to sued by a Cyprus-based company over the missing funds despite Surf Horizon allegations that they misappropriated allegedly paying them USD 7.35 million in more than USD 18.9 million that the management fees. company had invested in Ukrainian telecom companies known collectively as The company is suing Manafort and Gates the “Black Sea Cable”. for allegedly having syphoned the remainder of the money themselves, according to The Cyprus-based company, called Surf documents provided by a subsidiary of the Horizon Limited, is reportedly linked to Russian Surf Horizon. President Vladimir Putin via his ally Oleg Deripaska. In August 2015, the company also Manafort and Gates are already under criminal filed a parallel case in the US District Court indictment by Special Counsel Robert Mueller, for the Eastern District of Virginia, seeking who has accused them of failing to register as documents and depositions in connection foreign agents, conspiring to commit money with the alleged missing money. laundering and conspiring to defraud the United States. It is unclear whether the cases The lawsuit relates to USD 26 million that had are related at this stage. gone missing from the acquisition of Black Sea Cable. The Deripaska-linked company Photo: larepublica.ec
Law firm at the centre of Paradise Papers represented bank accused of terrorist financing
New revelations continue to emerge in organisations and designated terrorist groups the bank was used by wealthy Russians the aftermath of the Paradise Papers such as Hezbollah. with political connections accused by the data leak, exposed by the International US government of money laundering. FBME, Consortium of Investigative Journalists. Prior to its banking operations being which was banned from the US financial discontinued and being put under liquidation system last year, denies all allegations According to the Guardian, the offshore law in May 2017, FBME operated primarily against. It said Appleby, acting as a registered firm Appleby had provided services to the in Cyprus, where it spurred a number of agent for the bank, regularly carried out full Federal Bank of the Middle East (FBME), controversies. compliance checks on FBME. which has been accused of financing terrorism. Appleby reportedly represented Notably, prosecutor Robert Mueller, who Appleby reportedly terminated its relationship FBME between 2004 and 2015, during which is currently investigating alleged Russian with FBME shortly after FinCEN’s notice, period the Tanzanian bank was accused interference in the 2016 US Presidential because the bank “did not fit Appleby’s risk by the Financial Crimes Enforcement campaign, has asked the Central Bank of profile”. It is unclear whether Appleby was Network (FinCEN) of facilitating financial Cyprus for financial information about FBME, aware of any of the evidence of wrongdoing transactions for multinational organised crime specifically regarding the information that alleged by FinCEN before the 2014 notice was published.
18 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA MONEY LAUNDERING | FRAUD | TERRORIST FINANCING French-Algerian businessman linked to scandal surrounding Sarkozy’s campaign financing arrested in London
Photo: bfmtv.com
Alexandre Djouhri was arrested at investigations into Djouhri’s affairs, with French is also reported to have attempted to secure Heathrow Airport over his alleged role in financial prosecutors investigating a EUR 10 a power sharing plan to stop the civil war intermediating the financing of Nicolas million gain from a suspect property sale he in Libya. During the presidency of Jacques Sarkozy’s 2007 presidential election bid brokered with the Libyan African sovereign Chirac, he played a pivotal role in brokering an with the government of the former Libyan investment fund controlled by the Qaddafi agreement to free Bulgarian nurses held in leader Muammar Qaddafi. regime. In exchange, Bashir Saleh, who was the Tripoli. More recently, he reportedly attended fund’s general manager at the time, reportedly Emmanuel Macron’s guest dinner during his The French-Algerian businessman, who was arranged for EUR 50 million to be handed over official visit to Algeria in December 2017. under a European arrest warrant, is expected to Sarkozy and his chief of staff, Claude Guéant to be extradited to France, where he will face in 2007. questioning over charges of fraud and money laundering. Djouhri’s lawyer in Paris has not responded Alexandre Djouhri has to requests for comment from the French been at the centre of The 58-year-old businessman, who is a Swiss press and Sarkozy has strongly dismissed resident, has been the centre of focus of an the allegations. Known as a “grand fixer” of an inquiry into claims inquiry which was opened in 2013 by judges the French elite in North Africa, Djouhri is the Libyans provided investigating claims by Qaddafi that the known to have arranged deals involving water financing for Sarkozy’s Libyans provided funds for Sarkozy’s election systems, trash collection and oil with French campaign. The inquiry triggered further multinational Veolia Environnement. Djouhri election campaign
19 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA MONEY LAUNDERING | FRAUD | TERRORIST FINANCING AC Milan suspected of money laundering over sale to Chinese investors
Italian prosecutors have opened an The total amount invested by Chinese investors investigation into whether the deal to represented EUR 520 million (plus interest) of the EUR sell AC Milan to Chinese investors last year was inflated in a suspected money 740 million purchase price, although the exact amount laundering operation. that is suspected of inflation has not been disclosed
According to La Stampa, Milan prosecutors financial support in excess of EUR 300 correctly” throughout the negotiations for want to know if the EUR 740 million paid to million from US investment fund Elliot. The the sale of the club. No formal investigation Silvio Berlusconi to buy out the prestigious total amount invested by Chinese investors has been opened according to Milan’s chief Italian football club was overvalued in a represented EUR 520 million (plus interest) prosecutor, although the finance police deliberate move to bring large sums of money of the EUR 740 million, although the exact delivered a report of around 10 pages to into Italy from abroad, the newspaper said. amount that is suspected of inflation has not the prosecutor’s office before Christmas. been disclosed. Berlusconi, who controlled AC Financial institutions are obliged to notify the The consortium, led by Li Yonghong, took Milan for more than thirty years, denied the Bank of Italy of transactions in which there 99.93% of the club’s shares and also bought press reports from La Stampa. His daughter is “reasonable cause to suspect” financial out its debt, which stood at EUR 220 million Marina Berlusconi, who is the chairperson crimes such as money laundering have been as at June 2016. In order to push the deal of the holding company which controlled AC committed or attempted. The report regarding through, Li was forced to set up the buying Milan, said in a statement that the company the AC Milan sale allegedly contained three company in Luxembourg due to capital had “behaved absolutely transparently and indications of suspicious operations. outflow restrictions in China, and obtained
20 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESS AND MEDIA MONEY LAUNDERING | FRAUD | TERRORIST FINANCING Italy cracks down on mafia groups and organised groups
Italian police arrested almost 170 people, including mayors, businessmen, and local officials, and seized EUR 50 million in assets in a coordinated anti- mafia operation between German and Italian police forces.
The assets seized from the ‘Ndrangheta, believed to be one the largest mafia groups in Italy, reportedly include restaurants, rubbish collection services, and funeral services. Most of the arrests were carried out in the southern Italian region of Calabria although a dozen arrests also took place in Germany.
The so-called ‘agro- mafia’ business in Italy, including harvesting and distribution, is estimated to be worth EUR 21.8 billion a year
A number of city councillors and at least three Italian mayors were arrested, including the mayor of Ciro Marina, one of ‘Ndrangheta’s strongholds. The group controlled by the Farao and Marincola so-called “agro-mafia” business, including running a Chinese criminal group involved in families have forced restaurants to buy meat, harvesting and distribution, is worth about prostitution, gambling, and drugs. The group fish, wine and other produce from complicit EUR 21.8 billion a year. reportedly also controlled the transport retailers or wholesalers associated with the of Chinese goods across Europe, and had mob. In at least one case, investigators found Despite the size and success of the Italian- members across Italy and Europe. Arrests links between the ‘Ndrangheta and managers German operation, dismantling the group warrants were issued in Rome, Milan, of a government-financed migrant shelter on altogether is a burdensome task given Padua, Paris, Madrid and Neuss, Germany. the Calabrian coast. the structure of the ‘Ndrangheta. Unlike The suspected head of the mafia group, the Sicilian Cosa Nostra mafia group, Naizhong Zhang, reportedly used illicit In other cases, the mafia group controlled ‘Ndrangheta is reportedly composed of some funds to build a massive transport company some private rubbish collection and recycling 100 closely-knit families in Calabria, and the that controlled the transport of goods for companies as well as funeral services. group has a horizontal hierarchical structure. thousands of Chinese companies. Coldiretti, the Italian farmers’ association, estimates that at least 5,000 restaurants In a separate case, Italian authorities also in Italy are in criminal hands and that the arrested 33 individuals on suspicion of
21 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESSTECHNICAL AND UPDATESMEDIA BRIBERY | CORRUPTION Saudi Arabia’s corruption crackdown
As part of the large-scale anti-graft purge initiated by Crown Prince Mohammed Bin Salman, Saudi Arabia will seek the extradition of nationals abroad suspected of involvement in corruption.
According to Sheikh Saud Al Mujab, the kingdom’s Attorney General, suspects who have fled the country will be indicted and international arrest warrants sought as soon as evidence supporting corruption allegations is collected. He further stressed that everyone will be given free trial.
The anti-corruption initiative attracted the attention of international media in November 2017, when 201 suspects, including 11 princes and government officials, were arrested and held in five-star hotels around the country. Although most of these cases were settled after the detainees agreed to pay back alleged misappropriated funds, the authorities’ focus now appears to be shifting Photo: AFP - Getty Images towards Saudi nationals living abroad.In some cases, authorities reportedly demand as much as 70% of detainees’ wealth in So far over 1,200 bank accounts have been frozen order to settle corruption accusations. as a result of the purge, and the regime is seeking to Approximately 60 detainees have been transferred to Al-Ha’ir prison, after they obtain at least USD 100 billion in cash and assets refused to make the large financial payments from the suspects required for their release.
So far over 1,200 bank accounts have been in MBC in exchange for his release. His case Ritz-Carlton hotel. The terms of his release frozen as a result of the purge, and the illustrates how the anti-corruption initiative remain unclear. Other detainees are also regime is seeking to obtain at least USD 100 is leading to the nationalisation of private reportedly in discussion with the authorities, billion in cash and assets from the suspects. companies, including in the media sector trying to secure their release from the luxury The state hopes to use the funds to reverse over which the government seeks to take hotel, which, according to its website, should the 2018 annual budget deficit estimated at control. MBC is the largest free-to-air Arab TV be re-open for bookings as of February. USD 52 billion, caused by the fall of crude oil network, with a 50% market share. Waleed prices on the global market. bin Ibrahim al-Ibrahim has been released, but The purge, in the expectation of sending it is unclear whether a settlement a message that corruption will not be Those recently targeted in the purge also was agreed. Some commentators suggest tolerated in the kingdom, has distressed include Waleed bin Ibrahim al-Ibrahim, the that the corruption purge has slowed down foreign investors needed for the founder of the Middle East Broadcasting and it was reported that Prince Alwaleed bin implementation of the planned large-scale Center (MBC), who was ordered by the Talal, the highest-profile detainee, has also economic reforms. authorities to hand over his controlling stake been released from detention at Riyadh’s
22 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESSTECHNICAL AND UPDATESMEDIA BRIBERY | CORRUPTION Brazilian court upholds corruption conviction for ex-president Lula
An appeals court panel unanimously linked to the so-called “Operation Car Wash”, upheld a corruption conviction against a large four-year probe into bribes paid by former Brazilian president Luiz Inácio construction companies to public officials in Lula da Silva in a ruling that complicates order to secure lucrative government contracts, the political comeback of one of Latin many with the state-owned oil company America’s best-known figures and a Petrobras. leftist icon. Lula is also accused of seven other crimes, Lula, as the former president is known, had including other counts of corruption, influence emerged as the early front-runner in Brazil’s peddling and illegal campaign financing. upcoming presidential race against rightist candidates. The ruling might now prevent him Lula can still appeal to the higher court and from running due to Brazil’s “clean record law”, has said that he will continue to fight the which bars politicians with convictions upheld allegations. Higher courts have been generally from running for office. known for upholding convictions related to Car Wash. Lula was convicted for receiving more than Photo: Wikimedia USD 1 million in bribes, mostly in the form of a refurbished beachfront apartment. His case is
Former PetroVietnam official jailed for life in corruption case
Two former senior Vietnamese officials and later as the party leader of were sentenced in Hanoi City Court Ho Chi Minh City. Twenty additional officials in a corruption case. Trinh Xuan related to the oil giant were given prison Thanh, former chairman and general sentences ranging from nine to 22 years. director of PetroVietnam Construction According to an assessment of the judge Corporation, was sentenced to life council, the defendants have caused great imprisonment for embezzlement and damage and losses to State property due economic mismanagement. to their serious violations of economic management regulations. The case is perceived to be part of a widespread corruption crackdown. The sentence of Trinh Xuan Thanh, who might Dinh La Thang, Thanh’s former boss and have faced the capital punishment, was board chairman of the parent company reduced to life imprisonment due to the fact PetroVietnam (PVN), was also sentenced that Thanh and his family voluntarily returned to 13 years in prison for his role in incurring the ill-gotten funds and Thanh himself pleaded million-dollar losses at the company. After guilty. The official state roles of his family serving at PVN from 2006 to 2011, Thang took members were reportedly also taken into Photo: saigonnezumi.com on political positions as the transport minister consideration.
23 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESSTECHNICAL AND UPDATESMEDIA BRIBERY | CORRUPTION
Egyptian officials Total’s Nigerian unit denies bribery and charged with bribery corruption allegations
Total Upstream Nigeria Limited, a subsidiary of French oil major Total, has been accused of bribery and corruption regarding the provision of vessels by indigenous contractors.
The oil firm reportedly attended a meeting with the Senate Committee on Local Content on 9 January 2018, where it provided clarification on an ongoing call for tender for the provision of support vessels. The meeting followed a petition from the Indigenous Vessels Operators Association Egyptian authorities have arrested of Nigeria to the Senate Committee on Local 75 individuals including government Content. Following the Senate committee’s officials and a number of foreigners meeting, some media articles reported over corruption-related charges. allegations of bribery and potential conflict of interest in the contracting process. Administrative Control Authority stated that The subsidiary has denied the allegations, the arrests were a result of a 14-months-long reaffirming its commitment to due process investigation that revealed the individuals’ and zero tolerance for corruption. involvement with several “organised gangs.”
The authorities did not disclose the names of the officials or specify the nationalities of the Ex-Fiat Chrysler executive admits paying foreigners involved. The arrests were carried USD 1.5 million in bribes to UAW officials out during raids across several provinces, including Cairo, Giza, Alexandria, Kafr el- Sheikh, Gharbiya and Daqahliyah. Former vice president of employee relations at Fiat Chrysler, Alphons In addition, Egypt’s State Security prosecutors Iacobelli, admitted to delivering almost have charged Governor of Menufia Hesham USD 1.5 million worth of gifts and Abdul Basset with bribery and wasting public cash bribes to the American United money. He was arrested by the Administrative Automotive Workers (UAW) union Oversight Authority for allegedly accepting officials in exchange for leverage in a bribe from two businessmen in exchange contract negotiations. for state-owned land at a lower price. The authorities reportedly launched an He also pleaded guilty to conspiracy to investigation into Abdul Basset after his violate the Labor Management Relations second wife filed a legal complaint, accusing Act and to subscribing a false tax return Photo: Alphons Iacobelli by Detroit Free Press him of corruption. based on the failure to report hundreds of thousands of dollars in income diverted Monica Morgan, wife of the former UAW Egypt’s chief prosecutor ordered that from Fiat. Iacobelli has agreed to cooperate vice president General Holiefield, who died Abdul Basset’s assets and those of the two in an ongoing investigation. UAW denied the in March 2015, is also expected to plead businessmen be seized. allegations. guilty.
24 aperio-intelligence.com FINANCIAL CRIME DIGEST | JANUARY 2018
PRESSTECHNICAL AND UPDATESMEDIA BRIBERY | CORRUPTION
Senior China general State Capture Commission to investigate on trial for bribery corruption with a focus on Guptas
General Fang Fenghui, one of China’s South African President Jacob Zuma most senior military officers and has indicated he wants the State a member of the central military Capture Commission in South Africa commission overseeing the People’s to investigate all forms of government Liberation Army in China, is to be corruption, including the numerous prosecuted for bribery. allegations against him, cabinet members, and the Gupta’s alleged links Fang Fenghui had earlier been replaced as to state-owned entities. chief of the PLA’s joint staff department. Fang is one of two members of the central military Zuma called on the commission to commission to have been arrested as a current investigate why, who and how any members Photo: Abuzzsouthafrica.com senior official. The detention forms part of the of the national executive and others were general anti-corruption crackdown that has so used for personal gain or other corrupt far resulted in arrests of several retired officers. dealings, and whether any members of are an Indian-born South African business the executive unlawfully or improperly family that owns a business empire spanning These included General Guo Boxiong, a former intervened in the closure of the Gupta computer equipment, media, and mining. The vice-chair of the central military commission bank accounts. family’s strong ties to South African president and General Xu Caihou, former head of the Jacob Zuma, both personally and through its army’s political department. The anti-corruption Jacob Zuma had previously been accused of company Oakbay Investments, have been the crackdown in the armed services began in allowing members of the Indian-born Gupta subject of extensive international scrutiny and 2012 with the detention of deputy head of the family to wield undue influence. The Guptas caused significant political controversy. PLA’s general logistics department, Lieutenant General Gu Junshan.
Maryland SFO launches probe into bribery and businessman corruption at Chemring charged with bribing Russian The UK Serious Fraud Office (SFO) Chemring’s activities include the design and has launched an investigation into production of and decoys, flares, detonators US authorities have charged a Maryland alleged bribery, corruption and money and grenades. The company also said that businessman named Mark Lambert with laundering arising from the business neither of the two contracts were considered bribing a Russian official in order to secure conduct of Chemring, a UK-based to be material in the context of the group. contracts to ship uranium to the US. Lambert defence technology firm. was also accused of money laundering, The SFO will examine the business conduct foreign bribery and wire fraud. He is alleged The investigation concerns two specific by Chemring Group and CTSL, including its to have bribed a Russian energy official contracts and was launched following a officers, employees, agents and persons. through a series of shell companies in Cyprus, report by Chemring’s subsidiary, Chemring Latvia and Switzerland. Lambert, former Technology Solutions Limited (CTSL). One of co-president of a Maryland-based shipping the contracts was reportedly awarded prior company Transport Logistics International to the Group’s ownership of the business (TLI), denies the allegations and plans to concerned. Chemring stated that it is fully defend himself in court. cooperating with the authorities.
25 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA SANCTIONS EU sanctions seven Moscow creates bank to help it avoid Venezuelan officials US sanctions
The European Union has sanctioned In response to US sanctions against seven Venezuelan officials involved in the Russia, the country is planning to non-respect of democratic principles or create a bank that will be used by the rule of law as well as in the violation the Kremlin to finance the country’s of human rights. defence industry.
The measures involve an asset freeze and According to a statement by Russian central a travel ban. The decision was taken in the bank, Promsvyazbank will be used as a special- context of the deteriorating political and purpose bank to serve military-industrial- economic situation in Venezuela. complex businesses. Promsvyazbank, Russia’s ninth largest banks in terms of assets, was The Kremlin has also recently classified the list The European Council underlined that the acquired by the central bank last year to of banks allowed to cooperate with the defence restrictive measures aimed at fostering prevent its collapse. It has been estimated industry and limited disclosure of defence democracy can be reversed depending on that the bank might need as much as USD 3.5 tenders. The Russian finance ministry is also the evolution of the situation in the country. billion in recapitalisation funds. reportedly preparing to issue a government bond for wealthy Russians targeted on the US In November 2017, the EU adopted a Promsvyazbank will be headed by Petr Fradkov, list of oligarchs to return their funds to Russia. ban on arms and equipment for internal head of the Russian Export Center. Fradkov, repression and a framework decision on the former deputy chief executive of the state- Promsvyazbank will likely replace banks targeted restrictive measures without controlled VEB has no previous experience such as Sberbank and VTB in financing listing any individual or entity. running a bank. He is the son of Mikhail the defence sector, in order to shelter Fradkov, Russia’s prime minister from 2004 to them from sanctions. The bank is 2007 head of foreign intelligence services expected to be fully transferred to state until 2016. ownership by the end of March 2018.
France sanctions a Chinese businessman from the export hub of Guangdong. A number of Syrian, businesses and Lebanese, and Canadian citizens will face individuals linked to Syria asset freezes as a result. chemical weapons The companies targeted included Electronic Katrangi Trading, Nktronics and ABC Shipping in Beirut, and Electronic System Group in Damascus. Among the France has announced sanctions on 25 three French companies targeted was individuals and companies with links to Smart Pegasus. Syria’s chemical weapons programme. The French government estimated that The government published a list with there were approximately 130 chemical the names and addresses of traders and attacks between 2012 and 2017. No businesses, which are mostly based in member of the Syrian government Beirut, Damascus and Paris, as well as was targeted.
26 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA SANCTIONS Trump Targets Hezbollah before key Iran sanctions deadlines
President Trump has extended waivers on Iranian sanctions suspended under the nuclear deal, but warned Congress and European allies that the latest measure will be the last waiver he signs if the country fails to agree to radical changes.
The announcement triggered a four-month a new set of sanctions targeting Iran for The move suggests a continuous attempt countdown until the US ceases to comply alleged human rights violation, cybercrime, to put additional pressure on Iran without with its obligations under the agreement. and production of ballistic missiles. The abolishing the nuclear deal with the Trump also ordered the imposition of new Justice Department stated that it will country. Mohammad Javad Zarif, Iran’s sanctions on 14 individuals, including Sadeq establish a team dealing with “financing foreign minister, said Trump’s declaration Larijani, the head of the judiciary and brother and narcoterrorism” to target Hezbollah, and policies represent “desperate of the parliamentary speaker. The Trump which is considered by the US as a terrorist attempts to undermine a solid multilateral administration is also reportedly preparing organisation. agreement.”
US imposes more sanctions on Chinese and North Korea companies
The US has imposed new sanctions on The US has been using sanctions as a tool to North Korean and Chinese companies convince the North Korean dictator Kim Jong to impose pressure on Pyongyang to Un to enter negotiations and to persuade him stop its nuclear weapons and missile to abandon his nuclear weapons programme. programmes. In December las year, President Trump Sixteen North Korean individuals, many accused China of supporting North Korea in of them based in China and Russia, were its attempts to obtain oil. Similarly, he has also sanctioned alongside two Chinese companies accused Russia of cooperation with North in Beijing, Chengxing Trading Co and Dandong Korean companies. Jinxiang Trade. The sanctions come shortly before the Winter The sanctions followed accusations of Olympics hosted by South Korea, during exporting goods to North Korean companies which the two Koreas will march under a sanctioned by the United Nations. unified flag.
27 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
PRESS AND MEDIA SANCTIONS South Korea says it will consider temporary lifting of sanctions against North Korea to facilitate Winter Olympics participation
South Korea has said that, if necessary, it would consider a temporary lifting of North Korean sanctions to enable the visit of North Koreans to the upcoming Winter Olympics in South Korea.
South Korea has unilaterally banned several North Korean officials from entering the country in response to Pyongyang’s nuclear and missile tests. The move to lift the sanctions would be considered together with the United Nations Security Council and other countries, a foreign ministry spokesman said. During earlier talks between the North and South Korea, the authoritarian regime announced that it would send a delegation of officials, athletes and a cheering squad to Pyeongchang during the Olympics.”
Germany’s foreign minister suggests lifting sanctions on Russia Sigmar Gabriel, foreign minister of Germany, has proposed lifting economic sanctions on Russia in exchange for a ceasefire in the conflict- ridden areas of Ukraine.
The US and EU sanctions were imposed on Russia after the annexation of Crimea in 2014. The EU recently extended the economic sanctions in December, for a period of six months. Russia is an important business partner for Germany and a key energy supplier.
28 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
COUNTRY UPDATES
Australia Republic’s second-richest man, also faces MPs vote on whether to remove his parliamentary immunity, which protects him from prosecution. Poland The Australian government has drafted a set of laws aimed against economic offences including foreign Dariusz Zawistowski, the head of Poland’s National bribery. The laws, which are expected to be passed Council of the Judiciary resigned over controversial into law, will simplify the process of prosecuting Germany court reforms introduced by the ruling Law and companies for bribery offences committed either at Justice (PiS) party. The Council is Poland’s top home or abroad. The government plans to introduce judicial watchdog. Zawistowski allegedly resigned a new offense of failure to prevent bribery of foreign German authorities found no evidence of substantial in protest against the reforms after he was warned officials on the same lines as the UK Bribery Act. breaches of money laundering rules by 11 banks that they might undermine body’s independence, The draft law applies both to Australian company named in the Panama Papers data leak in 2016. as the new laws will allow lawmakers to choose its employees and to their agents, contractors and According to the country’s official financial watchdog, members and prematurely terminate its current term. subsidiaries, and covers offenses that took place in although none of the named German banks have The nationalist-conservative government’s court Australia or abroad substantially breached money laundering rules, due lack of a mandate it was not possible to determine changes have been heavily criticised by the European whether any of the institutions was engaged in Union, which has described the reforms as a threat to tax evasion. The banks, including Deutsche Bank, Poland’s rule of law and democratic principles. Bulgaria Commerzbank, Berenberg and BayernLB all stated that they adhered to the rules. Bulgarian MPs voted 146 to 80 to overturn President Singapore Rumen Radev’s veto on anti-corruption bill. Radev Singapore vetoed the bill earlier in January claiming that it would Iran Singapore said it would take more serious impede the prosecution of corruption in the country. measures to tackle white-collar crime. The country’s The overturn of the veto has been described as a Commercial Affairs Department responsible for clear demonstration of the parliaments’ intention to Iran has taken the initial step to join the Convention fighting financial crime has pledged to proactively maintain rule of law. The controversial bill has been against Transnational Organized Crime (UNTOC). target ill-gotten gains. Although Singapore is criticised for issues regarding the appointment of The convention’s treatment of terrorist organisations considered to be one of the least corrupt countries members to the new unit for investigating conflicts and how they are defined triggered a heated debate in the world, it is surrounded by several states with a of interest, a lack of security for whistleblowers, and among the legislators, although Iran’s Deputy higher financial crime risk and is therefore vulnerable the right to the use of wiretapping. Bulgaria Ranked President for Parliamentary Affairs Hossein Ali to attempts to channel illicit funds to its financial 75th on Transparency International’s Corruption Amiri described joining UNTOC as an “inevitable system. But as criminals increasingly transact Perceptions Index. necessity.” The Financial Action Task Force on Money Laundering (FATF) places Iran beside North Korea across borders, the Singaporean authorities have at the top of the list of countries with the highest shared know-how on how to tackle financial crime economic and financial risks. Iran also features with several allies including the UK, Hong Kong and Australia. China on the FATF list of countries accused of violating international financial regulations and being involved in money laundering. China announced a national crackdown on organised crime and officials who shelter criminal Ukraine organisations. The initiative will reportedly focus on political fields and industries that are prone to Pakistan According to the latest survey by the American gang involvement. The scale of the crackdown is Chamber of Commerce in Ukraine, corruption unprecedented, with around 30 related authorities remains the top obstacle in doing business in the having been asked to join, including disciplinary Pakistan’s defence minister, Khurram Dastgir Khan, country. Approximately 89% of respondents said agencies, political and legal bureaus that have been announced that his country is expanding its ties that the fight against corruption should be the tasked with finding and tackling the corruption with Russia and Gina, in the context of the recent main priority for enhancing the country’s business behind gang crime. US decision to suspend USD 2 billion in military aid to Islamabad. Minister Khan stated that that the climate. Nearly all of the respondents stated that they government was engaged in a regional recalibration faced corruption while doing business in Ukraine. of Pakistan’s foreign and security policy. He added When asked about the most corrupt institutions in Ukraine, 71% named the courts, whilst 54% put Czech Republic that Pakistan would look to China, Russia, and Europe for new military supplies, and that the county had tax and customs authorities at the first place. already bought Russian helicopters in the past three Misuse of official position was considered the The Czech Republic’s government has resigned years. The US said that it would suspend security most widespread form of corruption by 68% of the as Prime Minister Andrej Babiš, appointed only a assistance to Pakistan because of Islamabad’s respondents. month ago, faces allegations that he abused an EU reluctance to do enough to fight terrorism. subsidy programme. The government will continue to function until President Miloš Zeman makes a decision regarding further steps. Zeman, a close ally of Babiš, had pledged to re-appoint the prime minister. However, it is unclear whether the president will be able to do this due to his unexpectedly close victory in the presidential election that took place on the last weekend of January. Babiš, the Czech
29 FINANCIAL CRIME DIGEST | JANUARY 2018 aperio-intelligence.com
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The European Union has de-listed Bank Saderat and its UK subsidiary Bank UK Treasury lifts sanctions on Saderat PLC from its sanctions on Iran following a decision that the bank’s listing Bank Saderat should apply only until 22 October 2016.
Previously under the JCPOA, Bank Saderat was not due to be de-listed until transition day, which is 20 October 2023. The UK Treasury has published a notice confirming these entities have been removed from the consolidated list of sanctioned entities and are no longer subject to an asset freeze.
Aperio Intelligence Limited 16 Dufferin Street A copy of the UK Treasury notice can be found HERE Lorem ipsum dolor sit amet, London EC1Y 8PD t: +44 (0)20 3146 8900 e: [email protected] Ten individuals added www.aperio-intelligence.com to EU sanctions list
Aperio Intelligence Limited (France) Aperio Intelligence Romania SRL 91 rue du Faubourg Saint-Honoré,The European Union CouncilBulevardul 21 DecembrieThe 1989,designation nr.67, followsap. an announcement 75008 Paris A03, Cluj-Napoca, Romania has added 10 individuals to its by the EU Council that it would seek t: +33 (0) 6 43 07 80 29 t: +40 (0)371 780 734 sanctions on Syria in relation to their to impose further sanctions against e: [email protected] e: [email protected] involvement in repression against the supporters of the Syrian regime. civilian population and support for the Syrian regime.
The individuals include high-ranking military officials and senior figures linked to the Syrian regime. The decision brings to 217 persons the total number of The EU Council press release can be persons targeted by a travel ban and an found HERE asset freeze for violent repression against the civilian population in Syria.
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