3 July 2024

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US DOJ indicts 24 Sinaloa Cartel associates | Red Flag Bulletin | July 2024

July 2024
US Department of Justice building and the American flag under the sun

This month’s top stories:

  • Following coordination with Chinese and Mexican law enforcement, US Department of Justice (DOJ) indicts 24 Sinaloa Cartel associates on drug trafficking, money laundering, and possession charges;
  • Venezuela and Monaco added to the Financial Action Task Force’s “grey list” of countries under enhanced money laundering scrutiny and monitoring; and
  • Zimbabwe’s national intelligence agency linked to secret corporate network, thereby violating requirement of full financial oversight and transparency.


Switzerland: Swiss financial services regulator finds HSBC’s Swiss private banking arm breached anti-money laundering rules 

On 18 June, the Financial Market Supervisory Authority (Finma), Switzerland’s financial services regulator, announced that it had found that the Swiss private banking arm of HSBC had breached anti-money laundering rules. Finma launched enforcement proceedings against HSBC Switzerland in December 2021 relating to transactions carried out between 2002 and 2015 with a total value of more than USD 300 million. The funds originated from a government institution and were transferred between several accounts in Lebanon via accounts in Switzerland. Finma stated that HSBC Switzerland had failed to carry out adequate checks into the origin, purpose, or background of the funds, and ordered the bank to conduct a review of all its current high-risk client relationships, including with politically exposed persons. Finma also prohibited HSBC Switzerland from onboarding any new politically-exposed persons until the bank submits a report to Finma on the findings of its review. In a statement to the press, HSBC Switzerland acknowledged the matters raised by Finma, but characterised them as “historic” and stated that it would appeal the decision.

Belgium: EU prosecutor launches corruption probe into former European Investment Bank officials

On 24 June, the European Public Prosecutor’s Office (EPPO), the independent public prosecutor’s office mandated with investigating the misuse of EU funds, announced that it had launched an investigation into two former officials of the European Investment Bank (EIB) for alleged corruption, abuse of influence, and misappropriation of funds. Werner Hoyer, the EIB’s former president (2012-2023), released a statement through legal representatives confirming that he is one of the subjects of the investigation, and characterised the allegations as “absurd and unfounded”. On 25 June, lawyers for Henry von Blumenthal, another former EIB employee, confirmed to news outlets that he is also under investigation, but stated that the precise nature of the allegations against him are unclear. The investigation reportedly relates to compensation payments made by the EIB to von Blumenthal upon his departure from the bank. EPPO stated that it would release no further details regarding the investigation to the public while it remains ongoing.

Monaco: Principality added to FATF grey list owing to anti-money laundering deficiencies

On 28 June, the Financial Action Task Force (FATF), an intergovernmental money laundering and terrorist financing watchdog, announced that it had added the Principality of Monaco to its list of jurisdictions placed under increased monitoring – known as its “grey list”. FATF stated that while Monaco has made “significant progress” in several areas of its anti-money laundering (AML) and counter terrorism financing (CTF) regime, multiple aspects required improvements. These include improving the application of sanctions for AML and CFT breaches; demonstrating further commitment to seizing criminal assets abroad; increasing the seizure of property suspected to be financed from criminal activities; and strengthening understanding of risks associated with money laundering and income tax fraud. Monaco has introduced measures with a view to improving its AML regime since December 2022, when Moneyval, a body of the Council of Europe responsible for assessing AML and CTF compliance, published a report highlighting the deficiencies in the principality’s risk analysis and enforcement procedures. Experts have highlighted that countries can experience a decline in foreign investment following a grey list designation.

Sub-Saharan Africa

Zimbabwe: National intelligence agency linked to secret corporate network

On 6 June, The Sentry, a non-profit investigative organisation, released an investigative report linking Zimbabwe’s Central Intelligence Organisation (CIO), the country’s national intelligence agency, to a secret stream of money from Terrestrial Holdings, a Zimbabwean conglomerate involved in various industries including hemp, solar energy, and coal mining. The Sentry identified directors of Terrestrial Holdings who hold or previously held senior positions at the CIO, as well as shared addresses between the CIO and Terrestrial Holdings, suggesting that the company is likely controlled by the CIO. The existence of a secret corporate network providing funds to the CIO violates the requirement of full financial oversight and transparency of the organisation in order to prevent abuse. Terrestrial Holdings was first linked to the CIO in Zimbabwean media reporting in 1999, and has denied the claims that the company is controlled or owned by the CIO.

South Africa: Improved investor sentiment as Ramaphosa sworn in as president for second term

On 19 June, Cyril Ramaphosa was sworn in for a second term as South Africa’s president, after the elections on 29 May saw his party, the African National Congress (ANC), lose its 30-year parliamentary majority, therefore forcing it to form a Government of National Unity (GNU). In addition to the ANC and a number of smaller parties, the GNU includes the pro-business Democratic Alliance (DA), one of the main opposition parties in South Africa, which secured the second highest number of parliamentary seats in the election. International investors have welcomed Ramaphosa’s presidential inauguration, particularly the formation of the GNU and associated power-sharing agreement with the DA. This has sparked confidence among businesses and investors, and could see renewed investment into the country’s economy. This positive investor sentiment has been evidenced by the South African Rand rising sharply against the Dollar, following its losses after the election. Despite ongoing positive business sentiment, the possibility that the ideological differences between the ANC and DA could create instability cannot be ignored.

Middle east and north africa

Iran: Whistleblowers accuse Standard Chartered Bank of facilitating transactions on behalf of Iranian entities that finance terrorist organisations

On 3 and 4 June, investigative and mainstream media reported on whistleblower accusations that between 2008 and 2013, Standard Chartered Bank facilitated transactions worth USD 100 billion on behalf of Iranian entities, including companies that financed designated foreign terrorist organisations Hezbollah, Hamas, Al Qaeda, and the Taliban. The whistleblowers – who include a former Standard Chartered Bank executive – claimed that some of the transactions may have violated US sanctions against Iran. The whistleblowers’ accusations were disclosed in a US court filing submitted on 31 May to reopen protracted whistleblowing and legal proceedings against Standard Chartered Bank that they had launched in 2012 and were dismissed in 2019. In a press release published on 4 June, Standard Chartered dismissed these allegations as “fabricated” and “false” and stated that the Bank was confident the courts would reject the claims.


US: Following coordination with Chinese and Mexican law enforcement, US Department of Justice indicts 24 Sinaloa Cartel associates with ties to underground money exchanges in China

On 18 June, the US Department of Justice (DOJ) indicted 24 Los Angeles-based associates of Mexico’s Sinaloa Cartel on drug trafficking, money laundering, and possession charges. The indictment was the result of a multi-year Drug Enforcement Agency investigation supported by Chinese and Mexican law enforcement, which found that, from 2019 to 2023, Sinaloa Cartel associates laundered over USD 50 million in drug trafficking proceeds through a California-based money-transmitting group with ties to underground money exchanges in China. According to the indictment, the money remitters disposed of the drug proceeds by selling US dollars to Chinese nationals seeking to circumvent Chinese capital flight restrictions, or by acquiring luxury goods and property on their behalf in exchange for Chinese currency. US authorities alleged that the defendants made the laundered funds available to members of the Sinaloa Cartel in Mexico and abroad, which they used to acquire precursor chemicals for illegal drugs, including fentanyl.

Honduras: US court sentences former Honduran president to 45 years in prison for drug trafficking and weapons charges

On 26 June, former president of Honduras Juan Orlando Hernández (2014-2022) was sentenced to 45 years in a US federal prison and fined USD 8 million for drug trafficking and related firearms offences. According to US prosecutors, from at least 2004 to 2022, Hernández used his political power to help drug trafficking organisations import over 400 tons of cocaine into the US. He accepted bribes from these organisations in exchange for directing Honduran security institutions to use armoured vehicles and weaponry to protect their operations in Honduras. Hernández was found guilty of using the bribe money to fund these protective measures and to support his political campaigns in Honduras. Hernández stated at his sentencing hearing that he was innocent.

Venezuela: Venezuela added to FATF grey list

On 28 June, the Financial Action Taskforce (FATF) added Venezuela to its “grey list” of jurisdictions that it assesses require enhanced money laundering scrutiny and monitoring. During its assessment of Venezuela in 2022, the FATF raised concerns regarding the potential for money laundering through the country's extensive informal economy and for potential terrorist financing through its close financial ties with Iran, which is one of three countries on the FATF’s “black list” of highest-risk jurisdictions. The FATF acknowledged improvements in Venezuela’s AML/CTF regime since its 2022 assessment, but noted remaining deficiencies regarding potential terrorist financing and financial sector oversight, including a lack of financial sanctions and prosecution for financial crimes.

Russia and CIS

Russia: US, UK, and EU expand regimes of sanctions against Russia

Between 12 and 24 June, the US, UK, and EU introduced new sanctions against Russia. The US measures, issued on 12 June, targeted over 300 entities in countries including Russia, Belarus, the UAE, China, South Africa, Kazakhstan, Kyrgyzstan, Turkey, Bulgaria, and the British Virgin Islands that have facilitated sanctions evasion and supported Russia’s war effort. The US also broadened the scope of secondary sanctions by explicitly including the foreign branches of five designated Russian financial institutions in its sanctions lists. On 13 June, the UK announced its first set of sanctions on Russia’s “shadow fleet” of tankers used to circumvent trade restrictions on Russian oil, as well as its coordinated sanctions with the US on the Moscow Stock Exchange. The EU adopted its 14th sanctions package on 24 June, which notably introduced a prohibition on reloading Russian LNG in the EU for the purpose of transshipment to third countries and barred certain vessels – including those in the “shadow fleet” – from accessing EU ports. The EU also introduced a ban on new investments and the provision of goods, technology, and services for LNG projects that are already under construction.

The latest news from our regional desks about financial crime, corruption, sanctions, and integrity issues worldwide.

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