Alexey's Newsletter: No. 2

Alexey’s Newsletter: No. 2

1. FATF Grey List is not the only factor to take into consideration when dealing with jurisdiction-specific risk. The EU maintains its own list of high-risk jurisdictions. Noteworthy, the European Parliament refused to remove the UAE from such list, the decision, allegedly endorsed by Transparency International. In practice, one leverage this as a call for enhanced due diligence, especially when dealing with the EU-based prospects, ceteris paribus. The exact reasoning behind the EU decision is in the link above.

2. On 1 May 2024, the US sanctioned around 300 entities for providing material support to Russia’s military-industrial sector with nearly 60 targets located in China, Turkey, UAE, Singapore, Belgium, Malaysia, Slovakia, among others. There is a stereotype that export control violations often involve shell companies; however, further analysis shows that at least 25 of the sanctioned entities have well-established operations, often with a website and business operations spanning globally, far beyond Russia. In theory, a shell created post February 2022 with little-to-no revenue is a red flag to established financial institutions. Try flagging a well-established mid-tier business. This month we have seen top Treasury officials visiting the UAE, Malaysia and Singapore to discuss sanctions enforcement. Put together, understanding the evolving export-enforcement typologies shall be one of the top priorities for the enforcement agencies globally.

3. In the meantime, we have seen a number of financial institutions getting fined over AML failures. German BaFin fined Commerzbank AG USD 1.55 million for failing to update customer data in a timely manner and inadequate application of enhanced due diligence practices. Notably, the firm’s London office was fined USD 47 million in 2020 and Hong Kong’s branch USD 0.8 million in 2022. This shows the importance of cultivating a uniform risk-based approach from the top of the organization. Among other violations are the Hong Kong based Huan Nan Commercial Bank (HKD 9 million) and Canadian TD Bank (CAD 9.2 million).

4. The Office of Financial Sanctions Implementation (OFSI) revised its FAQs to complement the public’s understanding of the OFSI Primary Guidance. Q4 is insightful when it comes to UBO/evidence of control matters with Q35 touching upon the Oil Price Cap developments. In summary, if you are subject to the UK sanctions regime, it may be wise to stay aware of the regulator’s latest and keep in mind that the enforcement shall extend to strict liability basis.

5. The Swiss Money Laundering Office published its 2023 Annual Report. Insightful statistics on trends across themes (Russia sanctions, Hamas, crypto) and reporting entities that filed SARs (p.22)