2 May 2024

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US reimposes sanctions on Venezuelan oil sector | Red Flag Bulletin | May 2024

May 2024
Red Flag Bulletin | May 2024

This month’s top stories:

  • US government reimposes sanctions on Venezuelan oil sector for failing to comply with agreement to adhere to democratic principles ahead of elections in July 2024;
  • 22 individuals arrested and assets worth over EUR 600 million seized in investigation into fraudulent Italian Covid-19 recovery fund; and
  • Cryptocurrency exchange Binance and two of its executives arraigned in Nigeria on charges of tax evasion, currency speculation, and money laundering amounting to USD 34.4 million.


Brazil: Elon Musk included in investigation over dissemination of fake news

On April 8, Alexandre de Moraes, a Brazilian Supreme Court judge, included Elon Musk, the CEO of Tesla Inc and X Corp (formerly known as Twitter), in an ongoing Brazilian investigation into the dissemination of fake news. The investigation seeks to determine whether Musk committed an obstruction of justice and incitement for saying he would not comply with a Brazilian court order to remove X accounts accused of spreading misinformation. X could face fines of USD 19,770 per day for each account that remains active in defiance of the court order. Musk responded to the investigation by accusing Moraes of censorship.

Venezuela: Former oil minister arrested in PDVSA corruption probe

On 9 April, the Venezuelan government announced that it had arrested the former oil minister and vice-president of Venezuela, Tareck El Aissami, in relation to a corruption probe into Petróleos de Venezuela SA (PDVSA), the state-owned oil company. Venezuela’s attorney general said that El Aissami and other former officials were charged with treason, money laundering, conspiracy, and misdirection of public funds. El Aissami reportedly used illicit funds to finance work on his private residences and engaged in capital flight. He is also alleged to have directly managed shipments of crude oil that were not paid for through proper channels. Since 2017, El Aissami has been sanctioned by the US and is wanted on charges of international drug trafficking. El Aissami has not commented publicly on the charges against him.

US: Former US ambassador pleads guilty to acting as an agent of the Cuban government for over 40 years

On 12 April, Victor Manuel Rocha, a former US ambassador and former member of the US National Security Council, pleaded guilty and was sentenced to 15 years in prison for acting as an agent of Cuba. During his career with the US Department of State, Rocha supported Cuba’s Communist Party and aided in its intelligence gathering against the US. Rocha admitted that from 1973 to 2024, he provided false or misleading information to US authorities while feeding intelligence to Cuba’s General Directorate of Intelligence. US authorities built a case against Rocha by sending an undercover agent to engage with him between 2022 and 2023. In addition to his prison sentence, Rocha will pay a USD 500,000 fine and cooperate with the US on any damage assessment related to his work on behalf of Cuba.

Venezuela: US government reimposes sanctions on Venezuelan oil sector

On 17 April, the US Office of Foreign Assets Control reimposed sanctions on Venezuela’s oil sector after easing restrictions in October 2023. The US government assessed Venezuela had failed to comply with the agreement to adhere to democratic principles in Venezuela’s July 2024 elections. A spokesperson for the Department of State stated that the current Venezuelan regime had prevented the democratic opposition from registering a candidate and had harassed political opponents. Companies currently engaged in business with Venezuela’s oil sector have a 45-day window to end their operations and comply with the sanctions program.

Asia Pacific

Pakistan: High Court suspends former prime minister’s graft sentence

On 1 April, Pakistan’s Islamabad High Court granted former prime minister Imran Khan and his wife an appeal against their conviction for graft and suspended their 14-year jail sentence. The couple had been accused of illegally selling gifts worth over USD 500,000 – including luxury watches and jewellery – from the state treasury during Khan’s premiership (2018-2022). The Islamabad High Court ruled that the original hearing failed to meet the legal requirements for a fair trial and said that the couple's graft sentence will remain suspended until a final decision has been made. The couple will not be released as they are already serving separate prison sentences for other crimes including corruption, leaking of state secrets, and illegal marriage. Khan has maintained that the charges against them are politically motivated.

Hong Kong: Three individuals arrested in connection with USD 230 million money laundering scheme

On 17 April, the Hong Kong Customs and Excise Department arrested three individuals in connection with an HKD 1.8 billion (USD 230 million) money laundering scheme involving a cryptocurrency platform and bank accounts of shell companies. The three suspects, aged between 42 and 60, allegedly established five companies and opened 18 local bank accounts between 2021 and 2022 that handled over 1,000 suspicious transactions. They also handled funds from a cryptocurrency platform using Tether tokens. The authorities said the operation had dismantled a syndicate of which the trio were allegedly core members – although they did not rule out further arrests. The three suspects were later released on bail.

Malaysia: Former prime minister implicated in corruption probe

On 25 April, Malaysia’s anti-graft agency confirmed that former prime minister Mahathir Mohamad is being investigated in connection with a corruption probe involving his sons. The Malaysian Anti-Corruption Commission (MACC) declined to elaborate on the investigations facing Mahathir or his sons, the latter of whom were ordered in January to declare their wealth as part of inquiries prompted by the Pandora and Panama Papers leaks. The investigation into Mahathir comes as part of a wider crackdown on graft involving prominent political figures in Malaysia. Mahathir, known as a vocal critic of current Prime Minister Anwar Ibrahim, has previously described the probe against his sons as politically motivated. Anwar has denied targeting political rivals with his anti-corruption campaign and has maintained that he does not intervene in legal cases. Mahathir has not commented publicly on the investigation into him.

Sub-saharan Africa

South Africa: New law introduces failure to prevent corrupt activities offence

On 3 April, the Judicial Matters Amendment Act was signed into law, which amongst other amendments, provides for an additional offence of ‘failure to prevent corrupt activities under South Africa’s Prevention and Combatting of Corrupt Activities Act (PRECCA) of 2004. It is now a criminal offence if a person who performs services for or on behalf of a member of a private sector or state-owned entity gives or agrees, or offers to give, gratification prohibited in terms of PRECCA to another person with the intention of obtaining or retaining business for the entity, or an advantage in business. However, a clause in the amendment states that no offence is committed if the member of the entity had adequate procedures in place to prevent such corrupt activity. This amendment is similar to the failure to prevent bribery offence in the UK Bribery Act of 2010.

Nigeria: Binance and executives charged with money laundering and tax evasion

On 8 April at the Federal High Court in Abuja, the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-graft agency, arraigned cryptocurrency exchange Binance and Tigran Gambaryan, the head of financial crime compliance at Binance, on charges of tax evasion, currency speculation, and money laundering amounting to USD 34.4 million. These charges were also brought against Nadeem Anjarwalla, Binance’s regional manager for Africa. Anjarwalla has reportedly since been arrested in Kenya after fleeing from Nigeria in March and is expected to be extradited to Nigeria to face the charges. Gambaryan and Binance have pleaded not guilty to the charges. The trial is expected to commence on 17 May.

Eswatini: Leaked documents suggest links to illegal gold smuggling and money laundering network

On 15 April, the International Consortium of Investigative Journalists, a global network of investigative journalists, published their findings from Swazi Secrets, a leak of thousands of records from the Eswatini Financial Intelligence Unit (EFIU), the country’s public financial watchdog. The leaked documents included confidential exchanges between government agencies within southern Africa, police investigation reports, and bank records. The records indicate that during a few weeks during 2018, over USD 4 million was transferred from a company in South Africa to an Eswatini gold refinery which allegedly had no facilities and was suspected of being a shell company, from where the money was transferred to Dubai. The EFIU and the Central Bank of Eswatini reportedly viewed these transactions as suspicious and possibly part of an illicit operation to launder money and smuggle gold through the country. It is unclear whether these findings will be investigated further by Eswatini’s law enforcement.

Russia and CIS

Georgia: “Foreign agents” bill attracts criticism and threats of sanctions from US and EU

On 18 April, the bill on Transparency of Foreign Influence, introduced by Georgia’s incumbent party Georgian Dream, passed its first reading in the absence of opposition members of parliament. The bill has sparked national and international outcry for its similarity to the Russian “foreign agents law” that is widely considered a tool to suppress civil society and press freedoms. The EU has strongly opposed the Georgian bill, noting its likeness to the Russian law, and the US Department of State issued a statement labelling Georgia’s bill “Kremlin-inspired legislation”. Both the European Parliament and US Senators have publicly called for the urgent withdrawal of the bill, describing its re-introduction following a failed attempt in 2023 as “another example of democratic backsliding that would jeopardise Georgia’s ambition for EU membership. The US and EU further threatened the potential imposition of sanctions on individuals involved should the bill be passed. The third and final reading of the bill is expected to take place on 17 May 2024.

Georgia: Fast-tracked tax code amendments criticised for potential to increase illicit money flows

On 19 April, Georgian Dream legislators expedited amendments to Georgia’s Tax Code which aim to encourage the transfer of assets from offshore jurisdictions to Georgia by providing tax exemptions. The tax amendments have been criticised by political analysts who assess they could lead to an increased flow of illicit money into the country. Commentators also widely believe that the tax amendments have been passed to protect the incumbent party, and in particular to help former Georgian prime minister Bidzina Ivanishvili to avoid future potential Western sanctions arising from the country’s proposed “foreign agents bill”. Members of Georgian Dream defended the tax amendments, stating that the bill aligns with the party’s goal to transform the country into an “investment-attractive financial centre”.


Italy: 22 individuals arrested for alleged fraud linked to Covid-19 recovery fund

On 4 April, the European Public Prosecutor’s Office (EPPO), the Luxembourg-based public prosecutor for the EU, announced that eight individuals had been detained and a further 14 placed under house arrest following coordinated raids in Italy, Austria, Romania, and Slovakia. The suspects are believed to form part of a multinational criminal association that fraudulently obtained grants from an Italian recovery fund established in the wake of the Covid-19 pandemic. As part of the investigation, the Italian financial police reported that it had seized assets including real estate, cryptocurrency, luxury vehicles, watches, and jewellery with a total value of over EUR 600 million. The EPPO emphasised that all suspects are presumed innocent until proven guilty in an Italian court of law.

Poland: Government announces plans to replace anti-corruption office

On 22 April, the Polish government announced plans to abolish the Central Anti-Corruption Bureau (CBA), the country’s primary anti-corruption directorate, and replace it with a new institution to be named the Central Bureau for Combatting Corruption (CBZK). Polish Prime Minister Donald Tusk stated that the change was necessitated by the CBA becoming ineffective at fighting corruption under the previous administration as it had become politicised and focused on pursuing opposition politicians. The government announced that the police would now tackle minor, local corruption cases, while the newly-formed CBZK would assume responsibility for national corruption risks in partnership with the existing military counterintelligence agency. The plans were criticised by opposition figures, who claimed that Tusk’s government only sought to abolish the CBA in order to avoid scrutiny by the body. Plans for the newly proposed CBZK will reportedly be introduced to parliament in the second quarter of 2024.

Spain: Spanish prosecutors find no evidence of wrongdoing in corruption probe into prime minister’s spouse

On 24 April, Pedro Sánchez, Spain’s Prime Minister and leader of the left-wing Spanish Socialist Workers’ Party (PSOE) announced he would suspend his public duties after a Spanish court opened a corruption investigation into his wife, Begoña Gómez. Gómez was accused of influence peddling and of receiving favours from executives at Air Europa, a Spanish airline. The complaint was filed by Manos Limpias, a Spanish anti-corruption organisation which has been linked to far-right politicians. Sánchez denied the allegations against his wife, characterising them as harassment and bullying. On 28 April, public prosecutors asked the investigating judge to dismiss the investigative proceedings against Gómez after they found no evidence of wrongdoing. On 29 April, Sánchez held a press conference at which he announced that he would not resign, and criticised right-wing parties for stoking political tensions while calling for the country’s social majority to stand strong against threats to democracy.

Middle East and North Africa

Iran: US and UK announce fresh sanctions targeting Iran in response to drone attack on Israel

On 18 April, the US and UK announced fresh sanctions against Iranian actors and entities in response to Iran’s drone attack on Israel on 13-14 April. The US sanctioned 16 individuals and two entities linked to the Islamic Revolutionary Guard Corps and that have enabled Iran’s unmanned aerial vehicle (UAV) production. The Treasury’s actions were pursuant to three Executive Orders which respectively relate to counter-proliferation; sanctions targeting Iran’s iron, steel, aluminium, and copper sectors; and terrorist groups. On 24 April, US President Joe Biden signed a foreign aid package into law which included the expansion of sanctions on Iran’s oil sector to include foreign ports, vessels, and refineries that knowingly process or ship Iranian crude oil. The UK government concurrently announced additional sanctions targeting seven individual and six entities which enabled Iran’s drone attack on Israel and were involved in the country’s UAV and ballistic missile industries.

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

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