This month’s Red Flag Bulletin includes the following stories:
- Hong Kong-registered crypto exchange designated as money laundering concern by US for exchanging more than USD 700 million with darknet users and receiving more than USD 15 million in proceeds from ransomware attacks;
- Former top FBI official Charles McGonigal charged with violating US sanctions for allegedly aiding sanctioned Russian businessman Oleg Deripaska; and
- Paraguayan vice president Hugo Velázquez Moreno and former president Horácio Cartes Hara sanctioned by US for alleged involvement in systemic corruption.
Singapore: Former CFO of collapsed commodity trader jailed for 20 years for fraud
On 17 January, the Singaporean State Court sentenced Lim Beng Kim, the former CFO of Singapore-based commodity trader Agritrade International, to 20 years in jail for cheating and falsifying accounts. Between 2017 and 2019, Lim and other members of Agritrade’s senior management submitted falsified financial documents to obtain loans totalling over USD 586 million from 16 financial institutions. Following the collapse of commodity prices in 2019-2020, Agritrade defaulted on its loans and eventually collapsed, causing its creditors losses of over USD 460 million. Lim had pleaded guilty to the charges.
Macau: Gambling tycoon jailed for 18 years
On 18 January, Alvin Chau, the former CEO of junket operator Suncity Group and Macau’s top gambling promoter, was sentenced to 18 years in prison after being convicted on 162 charges of fraud, illegal gambling and criminal association. Prosecutors had accused Chau of running an under-the-table betting operation, which resulted in the loss of more than HKD 1 billion in tax revenue for the Macau government. Additionally, Chau was accused of operating a proxy betting scheme that allowed customers in Mainland China, where gambling is illegal, to gamble remotely. Chau’s high-profile arrest is said to signal Beijing’s further crackdown on illicit financial flows and capital flight, which has involved Chinese authorities solving more than 37,000 cross-border gambling cases in 2022. Chau had denied all wrongdoing.
Hong Kong: Crypto exchange designated as money laundering concern by US Treasury for handling proceeds of ransomware attacks
On 18 January, the US Treasury designated Bitzlato Ltd, a Hong Kong-registered cryptocurrency exchange, as a money laundering concern in the context of Russian illicit finance, and charged the exchange’s founder, Russian national Anatoly Legkodymov, with operating an illegal money transmitting business. According to the US authorities, Bitzlato had inadequate know-your-customer (KYC) processes in place, which led it to exchange more than USD 700 million with users of darknet marketplace Hydranet and receive more than USD 15 million in proceeds from ransomware attacks. According to EU law enforcement, the majority of suspicious transactions involving Bitzlato were linked to entities sanctioned by the US. On 23 January, Europol announced that it had arrested five members of Bitzlato’s senior management. The US Treasury designation prohibits US financial institutions from transferring funds to Bitzlato.
RUSSIA AND CIS
Russia: Russia may withdraw from Council of Europe’s anti-corruption convention
On 9 January, Russian president Vladimir Putin introduced a draft law to the State Duma, the lower house of the Russian parliament, to withdraw Russia from the Criminal Law Convention on Corruption, which aims at coordinating the criminalisation of various corrupt practices. The draft law would also renounce Russia’s membership of the Group of States Against Corruption (GRECO), which monitors compliance with anti-corruption standards by members of the Council of Europe. The decision to withdraw is seen as a response to Russia’s expulsion from the Council of Europe in March 2022 and ensuing loss of its GRECO voting privileges following its invasion of Ukraine.
Russia: Former top FBI official charged with violating US sanctions over ties to Russian oligarch
On 21 January, Charles McGonigal, a retired special agent in the FBI's New York Field Office, was arrested on charges of violating US sanctions against Russia. He allegedly broke US law by helping sanctioned Russian aluminium magnate Oleg Deripaska try to remove himself from US sanctions lists and investigate another oligarch in return for payments which were concealed through shell companies and forged signatures. McGonigal has pleaded not guilty. Separately, he was also charged with accepting USD 225,000 in secret from a former Albanian intelligence officer whilst he worked at the FBI.
Paraguay: US sanctions vice president and former president for corruption
On 26 January, the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned vice president Hugo Velázquez Moreno and former president Horácio Cartes Hara for alleged involvement in systemic corruption in Paraguay before, during, and after Cartes’ presidential term (2013-2018). Cartes has been accused of bribing members of the Partido Colorado, the political party with which he is affiliated, to support him in his 2013 presidential bid, as well as regularly bribing lawmakers during his presidential tenure in exchange for loyalty and support. OFAC has also sanctioned four companies controlled by Cartes: Tabacos USA Inc, Bebidas USA Inc, Dominicana Acquisition SA, and Frigorifico Chajha SAE. As a result of these sanctions, both Cartes and Velásquez, who have denied any wrongdoing, are now prohibited from using the US financial system.
Venezuela: Former chief justice indicted in the US for money laundering
On 26 January, Maikel Moreno, Venezuela's former chief justice, was indicted in Miami on money laundering charges related to bribes he allegedly received in exchange for influencing court decisions between 2014 and 2019. Moreno is accused of receiving over USD 10 million in bribes and using the funds to purchase or renovate real estate in several overseas locations, including the US and Italy. Since 2020, Moreno has been subject to sanctions by the US government, which that year offered a USD 5 million reward for information leading to his arrest or conviction for allegedly participating in transnational organised crime. Moreno was replaced as chief justice in 2022, but retains a position as a justice on Venezuela’s supreme court.
MIDDLE EAST AND NORTH AFRICA
Iran: US sanctions executives at Iranian supplier of drones to Russia
On 6 January, OFAC designated six executives and board members at Iranian defence manufacturer Qods Aviation Industries in relation to the company’s supply of unmanned aerial vehicles (UAVs) to Russia. OFAC targeted Qods Aviation Industries for its design, manufacture and ultimate proliferation into Russia of Mohajer-6 UAVs, which have been used widely by the Russian armed forces in its conflict with Ukraine. The US government previously sanctioned Qods Aviation Industries in December 2013 for its support for the Iranian nuclear missile programme. According to OFAC, the company has attempted to evade US sanctions by operating under a new alias – Light Airplanes Design and Manufacturing Industries. The US has added this name to Qods Aviation Industries’ entry in its sanctions list. OFAC additionally designated the director of Iranian state-owned Aerospace Industries Organization, which is responsible for Iran’s ballistic missile program.
Austria: Court clears former vice-chancellor of corruption charges
On 10 January, the Vienna Regional Criminal Court found Heinz-Christian Strache, the former Austrian vice-chancellor, not guilty of bribery and voided his 15-month probation sentence. Strache had originally been found guilty of corruption in 2021 after he gave a private health clinic access to public funds several years after the clinic’s owner donated EUR 12,000 to the Austrian Freedom Party (FPÖ), the populist party Strache formerly headed, and invited Strache to a private event in Corfu, Greece. In 2019, Strache was implicated in the so-called Ibiza-Affäre corruption scandal that brought down the FPÖ’s coalition government. He was shown in undercover footage from Ibiza in 2017 allegedly negotiating positive media coverage in the run-up to an election in exchange for government contracts with an individual whom he believed to be the niece of a Russian oligarch.
Belgium: Former Italian MEP pledges to inform Belgian federal prosecutor about corruption scandal
On 17 January, the Belgian federal prosecutor announced that Pier Antonio Panzeri, a former Italian Member of the European Parliament, had signed a collaboration agreement to provide information about a cash for influence scandal. Panzeri has been accused of accepting bribes from the governments of Qatar and Morocco in exchange for attempting to influence decisions in the European Parliament, a scandal dubbed Qatargate. As part of their investigation, the Belgian police recovered nearly EUR 1.5 million in cash at several locations across Brussels, including Panzeri’s home. In December 2022, the Belgian federal prosecutor charged Panzeri and three other suspects with money laundering, corruption, and participating in a criminal organisation. As part of the collaboration agreement, Panzeri pledged to inform investigators about how the Qatargate operation was conducted, including the identities of other involved parties. In exchange, he will receive a limited sentence which will include imprisonment, a fine, and the confiscation of assets acquired through the fraud.
UK: January deadline to update UK overseas property register passes
On 31 January, the transitional period under the Economic Crime (Transparency and Enforcement) Act 2022, which legislates the creation of a comprehensive register of overseas owners of UK land and property, the Register of Overseas Entities (ROE), came to an end. The law requires all overseas entities that own UK land to register it on the ROE (through Companies House) in return for an overseas entity ID, and overseas entities will be required to obtain an overseas entity ID to purchase or lease property in the UK. Failure to update the register before the 31 January 2023 deadline is a criminal offence punishable with prison time, a fine, or both. Some media reporting indicates that under half of 36,000 overseas entities that own UK property had registered by 23 January. The bill was fast-tracked through UK parliament in August 2022 to increase the policing of the proceeds of crime in the UK property market after the Russian invasion of Ukraine.