Posted by Brian Monroe -
The skinny:
- In this monthly wrap-up, we took a look at the surging sanctions against Russia or invading Ukraine and the historic, global response by the U.S., Europe, United Kingdom and other countries.
- We also offer deep and relevant coverage by ACFCS staffers from videos, to multimedia pieces to bringing it home back to the foundational prongs of a sanctions compliance program.
- We also look at some other pieces of critical news and legal and regulatory updates, including fears about crypto being used to evade sanctions and another historic leak putting a Swiss bank back in the crosshairs of regulators and investigators.
Last Month Today is a new series from ACFCS to bring professionals a wrap-up of news, knowledge, industry updates and views important to you.
By Brian Monroe
bmonroe@acfcs.org
March 4, 2022
Here is a wrap-up of ACFCS and outside news coverage and links to government and related sites that happened in February, with a focus on sanctions. Enjoy!
ACFCS Coverage
Can Russia Use Crypto to Evade Sanctions?
An ACFCS Emerging Risks Interview
In the inaugural interview of the ACFCS Emerging Risks series, we sit down with Ari Redbord, Head of Legal and Government Affairs at TRM Labs, to explore a critically important question in the financial crime arena – can Russian entities and oligarchs targeted by sanctions use cryptocurrencies to evade asset freezes and move funds?
As the world tightens the financial net on Russia, will bad actors spill over into the crypto realm?
The ACFCS Emerging Risks series features interviews with thought leaders and change-makers who are tackling the latest challenges and most pressing threats across the financial crime spectrum.
To see the video, click here.
In mad scramble to comply with flurry of new, updated U.S., global Russian designations, don’t forget guidance to implement five core components of sanctions compliance program
As companies try to keep sprinting with the historic degree of sanctions sprawl tied to the Russian-Ukraine crisis – replete with intricate complexities like updated general licenses, overruled specific licenses, tempting exemptions and requirements to uncover hidden, opaque owners and slippery subsidiaries – they should realize they may not be focusing on the biggest risk of them all.
What is it? Not having a defined, empowered and effective sanctions compliance program (SCP) – the core and foundation of any operation’s combined efforts to monitor for blacklisted entities and jurisdictions, prevent them from becoming customers, or seize assets and report on them when found as sanctions expand and contract.
Why is an SCP so important? Because OFAC has a strict liability standard for sanctions failings – just one has the risk of costing potentially hundreds of thousands of dollars – and the strength of your SCP is one of the very few things that can lower, or even negate, your exposure to massive penalties that in recent years have run into the billions of dollars.
To read the full story click here.
As Russia pounds Ukraine on ground, reticence relents for U.S., EU allies to unsheathe sanctions ‘nuclear option’ SWIFT-ly
Russia’s invasion of the Ukraine on Thursday, ostensibly to prevent further NATO expansion on the country’s doorstep, has caused the opposite – with allies across the globe banding together in a way once thought nigh impossible.
The United States, United Kingdom, Canada, the European Union and others, after first showing a reticence, finally unsheathed what many called the “nuclear option” for sanctions against Russia: removing a yet unnamed “select” number of Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication, or SWIFT. Why?
“If one of these de-SWIFTed Russian banks wants to make or receive a payment with a bank outside of Russia, such as a bank in Asia, it will now need to use the telephone or a fax machine,” one U.S. administration official said. “In all likelihood, most banks around the world will simply stop transacting altogether with Russian banks that are removed from SWIFT.”
To read the full story, click here.
As Russia formally invades Ukraine, sanctions, AML, cyber risks soar in cascade of global condemnation, uproar
After weeks of bluster and saber rattling – and ignoring a cacophony of threats, formal sanctions and condemnations from world leaders – Russia invaded Ukraine Thursday, causing shockwaves in geopolitical, energy and finance markets.
In tandem, the United States – in partnership with more than two dozen members of the European Union, including France, Germany and Italy, as well as the United Kingdom, Canada, Japan, Australia, New Zealand, and others – expanded rising sanctions against Russian financial institutions and entities on Thursday.
The widely-watched game of brinkmanship and now actual military invasion has broad implications for financial crime compliance departments, from the perspective of sanctions compliance, anti-money laundering (AML) review and reporting duties, cybersecurity defense and resilience and cyber-enabled fraud threat vectors.
To read the full story, click here.
United States
To read the full list of updated sanctions against Russia and related specific and general licenses and exemptions, click here.
OFAC imposed full blocking sanctions on Bank Otkritie, Sovcombank OJSC, and Novikombank, along with 34 subsidiaries
- OFAC bans on dealing on new debt and equity for 13 institutions –
- Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft,
- Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways.
- OFAC banned transactions with central bank, Russian National Wealth Fund, Ministry of Finance
- OFAC issued eight general licenses related to Russian and Belarusian energy, agriculture and more
- US Treasury reportedly conducting outreach to crypto exchanges on sanctions evasion
European Union
February 23
Targeted sanctions on 351 members of Russian State Duma, restrictions on Russia’s access to capital markets
Banned imports, certain exports from Donetsk and Luhansk regions
February 25
Sanctions on Putin and Lavrov
Broad sanctions on Russian aviation sector, dual-use goods, semiconductors, and other technologies
February 28
Additional package of sanctions targeting 26 individuals, one entity in financial services, energy
Ban on transactions with the Russian Central Bank
March 2
SWIFT ban for seven banks
- Prohibition of investment in Russian Direct Investment Fund
- Prohibition on selling or supplying euro banknotes to Russia, any natural or legal person in Russia
- Expansion of previous sanctions on Belarus targeting multiple industries, accounting for 70% of exports
- Sanctions on 22 members of Belarus military
- Overall – fresh sanctions now cover nearly 700 individuals and more than 50 entities
Russian, Belarusian Banks Out in the Cold
- Banks to be cut off from SWIFT:
- VTB – 2nd largest institution
- Bank Otkritie
- Novikombank
- Promsvyazbank
- Bank Rossiya
- Sovcombank
- VEB
- Includes the many subsidiaries of these institutions
- Doesn’t include Sberbank and Gazprombank – conduits for oil and gas payments
- Sberbank subject to sanctions on correspondent, payablethrough accounts – 30 days to close for US institutions
United Kingdom
Since the start of Russia’s military activity in Ukraine, the United Kingdom has been regularly updating its list of individuals and persons subject to travel bans and asset freezes, according to the legal team at McDermott, Will & Emery in an analysis published in the National Law Review.
To read the full story, click here.
Targeted entities include major Russian banks (such as VTB Bank, Sberbank and SovComBank), companies in key Russian sectors (such as United Aircraft Corporation and Rostec) and key Russian individuals (such as Denis Alexandrovich Bortnikov, Deputy President and Chairman of VTB Bank’s Management Board, and Elena Alexandrovna Georgieva, Chairwoman of Novikombank).
The full list of designated persons is available here.
UK asset freezes apply to funds and economic resources owned, held or controlled by a sanctioned person as well as entities owned or controlled directly or indirectly by sanctioned persons.
A non-sanctioned entity will be considered as being owned or controlled by a sanctioned person if:
(i) the sanctioned person holds more than 50% of the shares or voting rights in the entity or has the right to appoint or remove a majority of the board of directors of the entity; and/or
(ii) it is reasonable to expect that affairs of the entity are conducted in accordance with the sanctioned person’s wishes.
To read the full U.K. government page devoted to Russian sanctions and updates, click here.
Crypto
US Treasury Department Formally Adds Crypto Rules to Russian Sanctions Guidance
The U.S. government is warning crypto exchanges not to facilitate transactions for individuals and entities newly added to its sanctions list.
The Treasury Department published new regulations banning U.S. persons from providing any support to certain Russian oligarchs and entities as part of an ongoing effort to sanction Russia over its invasion of Ukraine, with the rules taking effect on March 1, according to CoinDesk.
To read the full story click here.
“All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in … deceptive or structured transactions or dealings to circumvent any United States sanctions, including through the use of digital currencies or assets or the use of physical assets,” the document said.
The U.S., alongside a coalition of European and other nations has been sanctioning Russian officials and President Vladimir Putin after military forces invaded Ukraine last week.
These sanctions include seizing international assets held by Russia’s central bank as well as the nation’s largest commercial and state-owned banks.
The regulations published Monday apply to U.S.-based entities. U.S. officials are also asking crypto exchanges around the world to prevent Russian entities from evading sanctions using cryptocurrencies, Bloomberg reported Monday.
Switzerland
Historic Leak of Swiss Banking Records Reveals Unsavory Clients
Already under fire for links to massive money laundering and past sanctions scandals, Credit Suisse took another hit with new gushing leak courtesy of the Organized Crime and Corruption Reporting Project (OCCRP), in their Suisse Leaks expose.
To read the full series, click here.
The story sounds like something out of a spy novel or action movie.
A Yemeni spy chief implicated in torture. The sons of an Azerbaijani strongman who rules a mountainous territory as his own private fiefdom. Bureaucrats accused of looting Venezuela’s oil wealth and hastening its descent into humanitarian crisis.
They come from all over the world, each associated with a different corrupt, authoritarian regime and each enriching themselves in their own way. But there is one thing that unites them: Where they kept their money.
After its luxury watches, snow-capped mountains, and superior chocolates, the Alpine nation of Switzerland is perhaps known best for its secretive banking sector. And at the heart of that sector is Credit Suisse, which over its 166-year history has become one of the world’s most important financial institutions.
Some snapshots of the series:
- Accounts identified by journalists as potentially problematic held over $8 billion in assets.
- Compliance experts who reviewed journalists’ findings said many of these customers should not have been allowed to bank at Credit Suisse at all.
- Asked why so many of these accounts existed, current and former employees described a work culture that incentivized taking on risk to maximize profits.
- Journalists and experts say Switzerland’s draconian banking secrecy laws effectively silence insiders or journalists who may want to expose wrongdoing within a Swiss bank. A Swiss media group was unable to participate in the Suisse Secrets investigation due to the risk of criminal prosecution.
Overall, the group concludes, despite two decades of pledges by Credit Suisse to crack down on illegitimate funds, data leaked from the bank reveals that it catered to dozens of criminals, dictators, intelligence officials, sanctioned parties and political actors with outsized wealth.