13 September 2023

11 min read

Red Flag Bulletin | September 2023

September 2023
Red Flag Bulletin | September 2023 placeholder thumbnail

This month’s top stories:

  • Singapore Police Force freeze SGD 1 billion worth of assets in country's largest anti-money laundering operation;
  • Madagascan president’s chief of staff arrested and charged in the UK on suspicion of seeking bribe payments from UK-headquartered gemstone mining company; and
  • Russian government announces plan to unblock over EUR 950 million in frozen Russian overseas assets through swaps with frozen assets in Russia belonging to foreign investors.


Singapore: Country’s largest foreign money laundering syndicate exposed

On 15 August, the Singapore Police Force arrested 10 foreign nationals and froze around SGD 1 billion worth of their assets in the country’s largest anti-money laundering operation. The group allegedly has links to individuals who have been investigated for illegal gambling activities by authorities in the People’s Republic of China (PRC). While the suspects hold passports from countries including Cyprus, Turkey, and Cambodia, they are all reported to have originated from Fujian, PRC. Fujian has long been a hotspot for telecom and cyber scams in the PRC, despite the government’s effort to crack down on fraud since the 2010s.

Reach out to S-RM’s teams in Singapore or Hong Kong if your organisation has been impacted by this case or you need support in similar, multi-jurisdictional, incidents.


Pakistan: Former prime minister Imran Khan receives three-year sentence for corruption

On 5 August, a Pakistani court sentenced former prime minister Imran Khan to three years in prison after he was found guilty of unlawfully selling state gifts during his tenure as prime minister between 2018 and 2022. Khan denied the criminal charge and said that his political party, Pakistan Tehreek-e-Insaf (PTI), had already appealed to the Supreme Court. The PTI party has claimed that the charges and conviction are politically motivated. Since being ousted in a parliamentary no-confidence vote in April 2022, Khan has led a campaign against the incumbent government, accusing it of collusion with the military to remove him from office. Political commentators have opined that the conviction could end Khan's chances of standing in national elections that are due to be held later this year.


China: Anti-corruption drive in Chinese medical and pharmaceutical sectors ramps up

On 15 August, major Chinese media outlets reported that the Chinese government’s medical sector anti-graft campaign had increased significantly in intensity and scope, with at least 179 hospital chairmen and party secretaries placed under investigation or arrested by anti-graft authorities in 2023. In addition to the arrests, in late July 2023, more than ten government departments – including the National Healthcare Commission and the Public Security Bureau – agreed to launch a coordinated year-long anti-graft campaign targeting the pharmaceutical sector. The National Healthcare Security Administration also announced on 1 August that it would conduct unannounced inspections on medical institutions to suppress the illegal use of state medical insurance funds. To support the anti-graft campaign, as of 15 August 2023, at least 13 provinces in China had set up hotlines to report corruption in medical sector specifically, and at least seven provinces had held anti-corruption conferences for the medical and pharmaceutical fields.



UK: Russian oil tycoon loses legal case to overturn sanctions  

On 18 August, Russian oil tycoon Eugene Shvidler lost his legal claim to overturn the UK sanctions imposed on him in March 2022. Shvidler was sanctioned following Russia’s invasion of Ukraine for his association with Roman Abramovich and his former non-executive directorship at Evraz, a steel and mining company operating in Russia. Shvidler claimed that the sanctions caused disproportionate hardship and discriminated against him as a Russian-born individual. The court dismissed the challenge, noting that the UK government had struck a fair balance between Shvidler’s interests and those of the wider community. Shvidler’s failed attempt to overturn the sanctions had been seen as a wider test of the strength of the UK government’s sanctions regime against Russia.


UK: Serious Fraud Office closes 10-year corruption investigation into Kazakh miner

On 24 August, the UK’s Serious Fraud Office (SFO) announced it had closed a criminal investigation into ENRC, a mining group with operations in Kazakhstan and Central Africa, after finding that it had gathered insufficient admissible evidence to prosecute. The investigation, which began in April 2013, focused on allegations of bribery and fraud regarding ENRC’s acquisition of mining contracts in the Democratic Republic of Congo between 2008 and 2012. ENRC denied the allegations and filed multiple lawsuits challenging both the allegations and conduct of those who have investigated them. In 2021, ENRC filed a GBP 70 million lawsuit against the SFO, alleging it had mishandled the investigation and committed misfeasance in public office. The SFO was largely cleared of wrongdoing in 2022, but other aspects of its conduct were criticised and it now faces civil proceedings relating to ENRC’s claim. The SFO also closed a corruption investigation into British-Australian miner Rio Tinto Group’s activities in the Republic of Guinea after concluding that prosecution in the UK was not in the public interest.



US: SEC investigates possible greenwashing by ESG investment funds

On 15 August, The Financial Times reported that the US Securities and Exchange Commission (SEC) had sent document requests – including subpoenas – to multiple asset managers concerning their marketing of environmental, social, and governance (ESG) investments, suggesting that the SEC may be preparing for a regulatory crackdown on sustainable funds. The SEC is probing possible wrongdoings relating to ESG investment disclosures, primarily to ensure that funds advertising themselves as climate-conscious are not deceiving investors, a practice known as greenwashing. The SEC already settled ESG cases against a number of companies and asset managers in 2022. A former head of the SEC’s San Francisco office stated that ESG is a priority area for the SEC, and they expect to see enforcement cases by October.


Brazil: Former president under investigation for embezzlement

On 18 August, a Brazilian Supreme Court justice authorised the disclosure of former president Jair Bolsonaro's (2019-2022) banking and tax information. The order was part of an investigation by the Brazilian federal police into an alleged illegal scheme to embezzle funds obtained from the sale of jewellery and other high-value items gifted to the Presidency by foreign delegations during Bolsonaro’s tenure. On 17 August, a lawyer representing Mauro Cid – a former aide to Bolsonaro accused of trying to sell the items on Bolsonaro’s behalf – indicated in interviews to newspapers that Cid would confess to participating in the scheme. Bolsonaro denied being aware of the scheme or benefitting from it, stating that Cid acted independently.


Nicaragua: US Department of State sanctions 100 Nicaraguan officials for human rights restrictions

On 19 August, the US Department of State announced that it would cancel the visas of 100 Nicaraguan officials for their alleged participation in the restriction of human rights under the government of Daniel Ortega. The Department of State said that the goal of the sanctions was to promote accountability for repeated attacks on civil liberties perpetrated by the Nicaraguan regime. The sanctioned individuals include municipal officials alleged to have participated in the repression of civil society organisations, the closure of civic spaces, and the unjust detention of civil society leaders, including Bishop Rolando Álvarez.


US: Tornado Cash founders indicted for laundering money for North Korean cybercrime group

On 23 August, federal prosecutors in New York charged two co-founders of Tornado Cash, a cryptocurrency mixing company, with money laundering and sanctions violations. The co-founders – Roman Semenov and Roman Storm – are accused of laundering over USD 1 billion in criminal proceeds through Tornado Cash, including knowingly laundering hundreds of millions of dollars for Lazarus Group, a North Korean state-sponsored cybercrime organisation sanctioned by the US. The revenue obtained by the Lazarus Group through its hacking activities provides North Korea with resources to support its nuclear weapons programme. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) concurrently sanctioned Semenov, a Russian citizen, for his alleged role in the money laundering scheme. Tornado Cash has been sanctioned by OFAC for money laundering since November 2022. Storm has denied having engaged in criminal conduct, while Semenov is reportedly a fugitive.



Madagascar: President’s chief of staff arrested and charged in the UK on suspicion of bribery

On 10-11 August, the UK’s National Crime Agency (NCA) arrested and charged Romy Andrianarisoa, Madagascan president Andry Rajoelina’s chief of staff, on suspicion of seeking bribe payments from Gemfields Group, the UK-headquartered gemstone mining company. Andrianarisoa and a French associate are suspected of seeking GBP 225,000 in upfront charges from Gemfields and 5 percent equity in Gemfields’ Madagascan projects in return for licences in Madagascar. The NCA’s investigation was reportedly launched after Gemfields raised the matter with the agency. Gemfields has reportedly cooperated with the investigation. On 14 August, President Rajoelina’s office announced that Andrianarisoa had been dismissed with immediate effect. Andrianarisoa has not made any public statement following her arrest, and will remain in custody in the UK until the next hearing scheduled for 8 September. If convicted, Andrianarisoa and her French associate could be sentenced for up to 10 years in prison for violating the UK Bribery Act.



Russia: Government announces plan to swap frozen assets with the West

On 22 August, Russian Finance Minister Anton Siluanov announced a draft decree that would allow frozen assets in the West which are owned by Russian citizens to be exchanged for frozen assets in Russia owned by foreign citizens. Western investors would use their own funds that are frozen in Russia to buy assets of Russian companies that are frozen in Europe. In a first instance, the decree will aim to unblock over EUR 950 million in frozen assets belonging to Russian retail investors. Approximately EUR 200 billion of Russian assets frozen under sanctions are held at Euroclear, the world's largest settlement house. Figures regarding western investors' assets frozen in Russia were last disclosed by the Russian Central Bank in November 2022, when the total value of foreign-owned frozen assets was estimated to exceed EUR 2.6 billion. Western officials reported to be unaware of the draft decree and stated that no talks were taking place regarding the potential exchange of frozen assets.


Russia: Prosecutor general files lawsuit against country’s richest person

On 17 August, the Russian prosecutor general’s office filed a lawsuit against Andrey Melnichenko, the richest person in Russia with an estimated net worth around USD 24.5 billion and interests in the energy and fertiliser sectors. Melnichenko is alleged to have bought Siberia’s largest energy company through uncompetitive practices in 2018 from Mikhail Abyzov, a now-jailed former Russian government minister. The authorities’ lawsuit seeks to recover SIBECO, which owns thermal power plants in Siberia, from Melnichenko. Melnichenko has not commented publicly on the lawsuit.


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

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