Day: October 19, 2022

On 19 October, a news release from US DoJ advised that the scheme involved illicit oil deals for Petroleos de Venezuela S.A. (PDVSA), the Venezuelan state-owned oil company, as well as sourcing parts used in the Russian-made Sukhoi fighter aircraft and the US-made F-22 Raptor stealth fighter aircraft.  Payment for illicit activities were often consummated in US dollars routed through US financial institutions and correspondent bank accounts.  To facilitate these transactions, the group used fictitious companies, falsified KYC documentation and bank accounts in high-risk jurisdictions, causing US banks to process tens of millions of dollars in violation of US sanctions and other criminal laws.  In 2separate cases, charges filed against 2 companies and half a dozen individuals arrested for alleged illegal sale and export of powerful dual-use technologies

https://www.justice.gov/usao-edny/pr/five-russian-nationals-and-two-oil-traders-charged-global-sanctions-evasion-and-money

https://www.theblock.co/post/178421/u-s-authorities-indict-alleged-money-laundering-ring-that-sold-venezuelan-oil-for-usdt

https://www.justice.gov/opa/pr/justice-department-announces-charges-and-arrests-two-cases-involving-export-violation-schemes

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On 14 October, this Joint Alert was issued and it details actions taken in response to Russia’s attack on Ukraine. The strategic intent of our actions is to degrade Russia’s ability to wage its unjust war against Ukraine and prevent Russia from projecting military force beyond its borders.  It warns that, to overcome the impacts on its military supply chain and to illicitly procure foreign technology, Russia is attempting to evade US and partner sanctions and export controls using a range of techniques, including front companies and fraudulent end-user licences.

https://home.treasury.gov/system/files/126/20221014_russia_alert.pdf

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On 19 October, a news release from OFAC announced that, in coordination with the DoJ and FBI, OFAC has designated a Russian network that procured military and sensitive dual-use technologies from US manufacturers and supplied them to Russian end-users. OFAC has designated Russian national and procurement agent Yury Yuryevich Orekhov and 2 of his companies, Nord-Deutsche Industrieanlagenbau GmbH and Opus Energy Trading LLC.  The designations highlight the US Government’s continuing efforts to hinder Russia’s ability to wage its war of aggression in Ukraine, including by holding accountable those who support Russia’s military by disrupting its illicit defence and technology procurement networks around the world.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20221019_33

https://home.treasury.gov/news/press-releases/jy1035

https://home.treasury.gov/system/files/126/20221014_russia_alert.pdf

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On 19 October, the EU Sanctions blog reported that the changes follow the imposition of a transaction ban on the Russian Maritime Registry of Shipping

https://www.europeansanctions.com/2022/10/eu-updates-faqs-on-state-owned-enterprises/

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On 19 October, a report from EU Institute of Strategic Studies notes that, even before the invasion of Ukraine started on 24 February, observers highlighted that most CFSP decisions by the EU concerned the imposition, renewal or updating of sanctions.  It says that mainstream analyses typically portray the sanctions regime as unsuccessful. However, most assessments are based on the observation that Moscow has not altered its foreign policy course or withdrawn from Crimea, and continues its military actions in the rest of Ukraine.  This Brief proposes an alternative assessment framework –

• To identify the purposes pursued by sanctions and the rationales that guide them; and
• The report relies on a broader set of criteria to produce a more accurate picture of their effectiveness.

The Brief starts by outlining the complex organisation of the EU sanctions regime against Russia, which is divided into several sub-regimes. Next, it investigates the rationale behind sanctions design. Finally, it takes stock of their performance in the case of Russia.

https://www.iss.europa.eu/sites/default/files/EUISSFiles/Brief_11_Sanctions_web.pdf

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On 19 October, OFAC announced that it had designated Juan Francisco Valenzuela Valenzuela and the Valenzuela Drug Trafficking Organization, among others.  Originally established as a transportation cell, the Valenzuela DTO evolved into a sophisticated network that became invaluable to Sinaloa Cartel leadership. 

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20221019

https://home.treasury.gov/system/files/126/20221019_sinaloa_valenzuela_chart.pdf

https://home.treasury.gov/news/press-releases/jy1034

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On 18 October, Global Investigations review and others reported that Lafarge and its Syrian subsidiary pleaded guilty to “unprecedented charges” related to payments it made to terrorist groups to protect a cement plant near the Turkish border.  Lafarge is to pay $778 million in a case the DoJ says marks the first time it has charged a company with supporting a terrorist organisation.  Swiss construction-material giant Holcim Ltd. acquired Lafarge in 2015, but failed to conduct due diligence on the company’s Syrian operations or investigate the matter before it was publicly disclosed.

https://globalinvestigationsreview.com/just-sanctions/article/french-cement-producer-pay-778-million-isis-payments

https://www.wsj.com/articles/french-cement-firm-lafarge-pleads-guilty-to-conspiring-to-support-islamic-state-11666110832

https://www.jurist.org/news/2022/10/french-manufacturing-company-must-pay-778m-in-us-plea-deal-for-bribing-terrorist-organizations/

https://thelaundrynews.com/round-up-lafarge-pleads-guilty-to-providing-material-support-to-isis-and-al-nusrah-front-fined-777-million/

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This report from Spotlight on Corruption says that, up to now, the legal profession has largely been allowed to regulate itself when it comes to money laundering – with AML supervision falling to 9 different professional bodies in the sector.  This system is broken, it says.  The report is based on a comprehensive review and analysis of existing supervisory data over the past 3 years.  It says that the legal sector supervisors tasked with holding legal firms to account for breaches of the UK’s AML rules remain fragmented, with enforcement action uneven and inadequate.  The report lists 5 main findings.

https://www.spotlightcorruption.org/wp-content/uploads/2022/10/Privileged_Profession.FINAL_.pdf

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A briefing paper from the EU Parliament Research Service on 19 October says that, if implemented in the EU and globally in 2024, the 2-pillar agreement reached in 2021 by 137 countries as part of the OECD Inclusive Framework will change international corporate tax rules significantly.  In the meantime, the European Commission is preparing to relaunch the idea of an EU common consolidated corporate tax base (BEFIT), which should build on the foundation laid by the OECD agreement.

https://www.europarl.europa.eu/RegData/etudes/ATAG/2022/733699/EPRS_ATA(2022)733699_EN.pdf

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On 7 October, the IMF published this guide for practitioners, policymakers, and other researchers to establish comprehensive frameworks for holding beneficial ownership information.  It proposes questions to guide strategic thinking and discussion about the establishment of an effective system of beneficial ownership information, for AML purposes.  It also sets out how an effective beneficial ownership framework can reduce opportunities for corruption, support efforts against tax evasion, help tackle illicit financial flows, protect national security interests, and benefit procurement transparency.

https://www.elibrary.imf.org/view/book/9798400208041/9798400208041.xml?cid=web-com-TBOIGPEA

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