3 August 2023

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Red Flag Bulletin | August 2023

August 2023
Red Flag Bulletin | August 2023 placeholder thumbnail

This month’s top stories:

  • Over 100 Colombian nationals arrested for laundering proceeds of drug trafficking and gang activities through microfinance companies in El Salvador;
  • Former disciplinary agency officials targeted by the People’s Republic of China’s anti-corruption drive; and
  • UK and US sanction individuals and companies in Mali, the Central African Republic, and Sudan for links to Russian Wagner Group.



El Salvador: Over 100 Colombian nationals arrested for money laundering through microfinance companies

On 17 July, over 100 Colombian nationals were arrested by Salvadoran police for their alleged involvement in a money laundering scheme. Authorities alleged that the accused group posed as microfinance companies, making loans to individuals and small businesses with a 20 percent interest rate as a way of laundering money from drug running and gang activities. The Attorney General of El Salvador, Rodolfo Delgado, stated that the criminal group resorted to coercion and intimidation tactics if victims of the scheme did not repay the loans. These arrests are part of broader anti-gang efforts by Nayib Bukele, the president of El Salvador, who has adopted a tough stance against organised crime and gang activity. The policy has led to approximately 70,000 arrests since last year, representing approximately 2 percent of the adult population of El Salvador.


US: SEC files insider trading charges against UK billionaire Joe Lewis

On 26 July, the US Securities and Exchange Commission (SEC) charged Joe Lewis, a British billionaire and former currency trader, with insider trading. The SEC alleged that Lewis obtained non-public information in his role as chairperson of a biotechnology investment group. Between July and October 2019, Lewis allegedly shared this information with his former girlfriend and his private jet pilots, who then made a combined profit of over USD 545,000. Lewis reportedly had access to insider information on companies such as Mirati Therapeutics, Solid Biosciences, Australian Agriculture Company, and BCTG Acquisition Corporation. On the same day, federal prosecutors in the Southern District of New York announced criminal charges against Lewis for allegedly orchestrating a “brazeninsider trading scheme over several years. Lewis pleaded not guilty to securities fraud and paid a USD 300 million bond.




Australia: Anti-corruption watchdog publishes findings of probe into former New South Wales state premier and MP

On 29 June, Australia’s corruption watchdog ICAC published findings of a two-year probe into former New South Wales premier Gladys Berejiklian. ICAC found that she acted corruptly by awarding grants that her ex-boyfriend Darryl Maguire, a former MP, had personally lobbied for and by not disclosing their relationship. Berejiklian is not being charged as the evidence she gave to ICAC is not admissible in criminal prosecution against her. Berejiklian resigned in 2021 when ICAC disclosed that it was investigating her. Maguire was also found to have engaged in corrupt conduct, with the ICAC adding that it was seeking advice on whether any prosecution should be commenced against him.


PRC: Disciplinary agency officials targeted by anti-corruption investigation

On 10 July, the Central Commission for Discipline Inspection (CCDI) and the National Supervisory Commission (NSC), the PRC’s premier anti-graft agencies, began investigating former officials for corruption. The five individuals – Lu Zuoquan, Chen Haiming, Liu Yongwu, Sun Guanghui and Fu Jiacai – under investigation previously held roles in disciplinary agencies for the Chinese Communist Party. Media outlets have noted a new trend whereby Chinese anti-corruption investigators are being targeted in the government’s recent anti-corruption drive. Since the beginning of the year, more than 20 officials from the CCDI and NSC have come under investigation.




Sub-Saharan Africa: US government departments release African gold trade advisory and encourage heightened due diligence

On 27 June, several US government departments, including the Departments of State and the Treasury, published a joint advisory report – the Africa Gold Advisory – highlighting the risks and opportunities inherent in gold trade in sub-Saharan Africa, and encouraging industry participants to apply strengthened due diligence practices to their operations in the region. The Advisory was prepared in response to recent reports of an increased presence of illicit actors in the sector – notably the Wagner Group and groups with ties to terrorist organisations. The Advisory outlines a set of sanctions that may be imposed by the US to address the risks associated with the gold supply chain, including targeted sanctions on certain individuals or companies operating in the sector or involved in the illicit trade of natural resources, corruption, or financing of armed groups, and an import ban on several products, including gold. The Advisory signals heightened attention by US authorities on the due diligence procedures of companies engaged in Africa’s gold sector.


West, Central, and Northern Africa: UK and US sanction Wagner Group-linked individuals and companies across Africa

On 20 July, the UK government sanctioned thirteen individuals and businesses linked to the operations of the Wagner Group, a Russian paramilitary organisation, in Mali, the Central African Republic (CAR), and Sudan. The Wagner Group is associated with widespread allegations of human rights abuses, disinformation campaigns, and threats against peace and security in the African countries where it operates. Among those sanctioned were Ivan Alexandrovich Maslov, the head of Wagner Group in Mali; Alexander Alexandrovich Ivanov, Wagner Group’s unofficial spokesperson in CAR; Konstantin Alexandrovich Pikalov, an alleged close advisor of Wagner Group founder Yevgeniy Prigozhin; and M-Invest, a Sudan-based company allegedly serving as a front for the Wagner Group. On 24 July, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed similar sanctions on three Malian transition government and military officials alleged to have facilitated the Wagner Group’s activities in Mali – Sadio Camara, Mali’s Minister of Defence; Alou Boi Diarra, the Air Force Chief of Staff; and Adama Bagayoko, the Air Force Deputy Chief of Staff.




Germany: US Federal Reserve fines Deutsche Bank USD 186 million for regulatory control failings

On 19 July, the US Federal Reserve Bank (Fed) fined Deutsche Bank and its US affiliates USD 186 million for failing to adequately address regulatory control problems. The Fed found that Deutsche Bank had made insufficient progress since 2018 to tighten its anti-money laundering controls, improve customer due diligence, and ensure compliance with sanctions, among other failures. Deutsche Bank responded to the fine by stating that it related to the bank’s historic “tardiness in adhering to older enforcement actions and agreements”. The bank highlighted that it was working towards the targets set by the Fed, for example by increasing the size of its global Anti-Financial Crime team by more than 25 percent in the past four years.


Romania: European Court of Justice overrules Romanian judicial reforms concerning statute of limitations for fraud cases

On 24 July, the European Court of Justice (ECJ) overruled Romanian judicial reforms over concerns that they would encourage exemptions for crimes including fraud. The ECJ ruling was made in response to a decision made by Romania’s Constitutional Court in 2022, which dictated that cases concerning crimes including fraud and corruption could be closed retroactively after exceptions to the statute of limitations had been removed in 2018 and not replaced. The judgment issued by the ECJ stated that the Constitutional Court’s decision contradicted EU legislation and created a “systemic risk of impunity” for serious fraud cases including the misuse of EU funds, which could harm the EU’s financial interests. According to Romanian media reporting, there is currently disagreement among Romanian magistrates as to whether the ECJ decision applies to corruption cases in addition to the crimes of fraud, tax evasion, and smuggling.




Kyrgyzstan: OFAC sanctions four Kyrgyz companies for violating trade export controls on Russia

On 20 July, the US Department of the Treasury’s Office of Foreign Asset Control (OFAC) sanctioned four companies based in Kyrgyzstan for allegedly violating trade export controls designed to undermine Russia’s war effort. The four companies have allegedly exported to Russia a range of dual-use electronics components and foreign-made aviation equipment subject to Western sanctions. OFAC also targeted entities based in the UAE and Serbia that have exported to Russia, as well as the Serbian entity’s director. Hours prior to the OFAC announcement, the Kyrgyz State Committee for National Security denied the involvement of Kyrgyz state structures in the violation of sanctions imposed in relation to Russia, and acknowledged the possible culpability of private companies. The Kyrgyz authorities stated that investigations into the matter had been launched and assured their commitment to the tackling of sanctions circumvention. Kremlin spokesperson Dmitry Peskov has announced Russia’s ambition to further develop bilateral relations with Kyrgyzstan, including the prospect of greater integration between the two countries.

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

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