US: US sanctions human rights offences
On 12 June, the US Treasury Department’s Financial Crimes Enforcement Network (‘FinCEN’) ordered financial authorities to investigate the link between corrupt foreign politicians and human rights abuses. The measure is designed to tighten existing anti-money laundering frameworks and extends to companies operating outside the US or those who do business with third parties abroad. Companies serving corrupt individuals can also face economic sanctions under the 2017 Global Magnitsky Act and the 2001 USA Patriot Act. Most recently, in February, the FinCEN banned Latvian bank ABLV from opening any accounts in the US after flagging up concerns that it was being used to process illicit payments for individuals with ties to North Korea’s ballistic missile programme.
Mexico: Compliance programmes become compulsory for Pemex contractors
On 24 May, Mexico’s state-owned oil company Petróleos Mexicanos (‘Pemex’) made it mandatory for local contractors to implement their own separate compliance programmes to minimize the risk of corruption from third parties. This applies to all companies who do business with Pemex or any of its subsidiaries. Pemex has been under pressure to crack down on corruption after the former CEO Emilio Lozoya was last year alleged to have received US$10m in bribes from a former Odebrecht executive according to documents seen by Brazilian news site O Globo. The bribe money was allegedly funnelled into President Peña Nieto’s 2012 election campaign, a claim he strongly denies.
Malta: EU regulator investigates country’s anti-money laundering controls
On 6 June, it was announced that the European Banking Authority (EBA), an EU regulator, had opened a formal investigation into inadequate enforcement of money laundering controls by the Financial Intelligence Analysis Unit (FIAU), Malta’s anti-money laundering watchdog, against Pilatus Bank, a Maltese lender. In March, Pilatus Bank’s assets were frozen by regulators after its chairman and owner, Seyed Ali Sadr Hasheminejad, was arrested in the US and charged with evading sanctions against Iran, having allegedly funnelled USD 115 million from Venezuela to Iranian-controlled companies through western banks. In a letter to the European Commission, EBA chairman Andrea Enria said that his investigation was prompted by a breach of EU law. A preliminary investigation the FIAU and the Malta Financial Services Authority (MFSA) began after the EU Commission and Parliament raised concerns about Pilatus Bank in February 2018.
EU: New directive to counter money laundering risks around cryptocurrencies
In May, the EU adopted a new directive to strengthen the capacity of member states to prevent money laundering and terrorist financing using cryptocurrencies. Governments and regulators have expressed concern about the anonymity which cryptocurrencies afford their holders. The new directive aims to extend existing regulation to cryptocurrency exchanges and custodian wallet providers, obliging them to implement preventative measures and report suspicious activity in a similar manner to payment institutions and currency exchange platforms. In addition, the new directive seeks to impose stronger checks on transactions originating in high-risk countries, and improve intelligence sharing between member states’ financial intelligence agencies.
MIDDLE EAST AND NORTH AFRICA
Israel: Sara Netanyahu charged with fraud
On 21 June, Sara Netanyahu, wife of Israeli prime minister Benjamin Netanyahu, was charged with fraud and breach of public trust for allegedly spending USD 98,857 of public funds on personal catering between 2010 and 2013. The trial is scheduled to open on 19 July. The indictment is the latest in a series of corruption scandals occurring during Netanyahu’s fourth term as Israeli premier. In February, the Israeli police recommended that Netanyahu be charged with bribery, fraud and breach of public trust. No charges have yet been brought against the prime minister, who resolutely denies the allegations.
Iran: Fallout from US decision to withdraw from JCPOA continues
On 27 June, OFAC, the financial enforcement arm of the US Treasury, published amended regulations which prohibit the importation to the US of Iranian-origin carpets and foodstuff after 6 August and the export of commercial passenger aircraft parts to Iran after 4 November. Certain transactions relating to foreign entities owned or controlled by US companies or individuals must also cease by 4 November. The amendments follow President Trump’s decision in May to withdraw from the Joint Comprehensive Plan of Action (‘JCPOA’), a deal made in 2016 that provided Iran with sanctions relief in return for curtailing its nuclear programme.
Iran’s Minister of Oil announced that Total, the French multinational, will have 60 days to obtain an exemption from US sanctions on Iran’s oil industry to prevent the transfer of its stake in the South Pars gas project to China National Petroleum Corporation, a government of China-owned oil and gas company.
United Arab Emirates: Abraaj Capital enters provisional liquidation
Abraaj Capital, the largest private equity business in the United Arab Emirates, entered into provisional liquidation in the Cayman Islands on 14 June. This will protect Abraaj from its creditors, some of whom have filed to dissolve the business’ investments, and allow it to restructure debts worth USD 1 billion. Abraaj has been struggling since February to prevent a sell-off in its funds after a forensic audit sanctioned by four investors in its healthcare fund (including the Bill and Melinda Gates Foundation and the UK government’s CDC Group) found that money earmarked for hospital development projects in India, Pakistan, and Nigeria had been used for operational expenses. Separately, UAE authorities have issued an arrest warrant for Abraaj’s Pakistani founder Arif Naqvi, who is currently seeking refuge in the UK. The warrant relates to the bouncing of a USD 48 million cheque Naqvi issued to repay a private loan from one of Abraaj’s founding shareholders.
South Africa: Authorities to investigate corruption at state-owned entities
In June, it was announced that the Special Investigating Unit and the Directorate for Priority Crime Investigation, both specialist South African state-run anti-graft bodies, were working together with South Africa’s debt laden state-owned entities to investigate current and historical allegations of corruption at these entities. These efforts, which form part of President Cyril Ramaphosa’s wider anti-corruption drive, will be supplemented by a long-awaited judicial inquiry into systemic corruption associated with former president Jacob Zuma’s administration. The first hearings of the inquiry are expected to begin in August.
Democratic Republic of Congo: US imposes sanctions on Dan Gertler affiliates
On 15 June, the US Department of the Treasury imposed sanctions on 14 entities affiliated with Dan Gertler, an Israeli billionaire, for their facilitation of Gertler’s corrupt activity in the Democratic Republic of Congo. This follows US sanctions imposed on Gertler and several of his companies in December 2017 for Gertler’s abuse of his close ties to President Joseph Kabila to orchestrate corrupt mining deals in the DRC. Gertler has made use of a network of offshore companies to facilitate these deals, which led to the DRC losing an estimated USD 1.36 billion in revenues between 2010 and 2012 from the under-pricing of mining assets sold corruptly to Gertler-affiliated companies. This recent action brings the number of sanctioned entities connected to Gertler to 34. These sanctions will drastically affect Gertler’s ability to operate in the DRC and elsewhere.
Russia: EU sanctions extended until the end of January 2019
On 29 June, EU leaders agreed to extend sanctions on Russia for a further six months, until the end of January 2019. The sanctions, first imposed in 2014 over Russia’s annexation of the Crimean peninsula and material support for Ukrainian rebels, were previously in place until 31 July and must be rolled over every six months. They target Russia’s energy, defence and financial sectors, including limiting access to EU capital markets for certain Russian banks and companies, a ban on trade in arms and dual-use goods, as well as technologies and services for oil production and exploration. The decision should be formally confirmed in the next few days.
On 18 June, the EU announced it would extend sanctions on EU-based companies doing business with, importing from, or investing in Crimea or Sebastopol for a year.