The Russian invasion of Ukraine which began on 24 February 2022 has displaced millions and killed tens of thousands of people. The war has also created several overlapping crises, from refugees to food supplies and massive supply chain disruption.
The conflict has also sparked waves of new laws around the world, from sanctions to tougher economic crime compliance. The main victims of the war are of course those directly caught up in it, but businesses all around the world are experiencing the effects of this unprecedented global event which shows no sign of slowing down in the next year.
VinciWorks has created a guide that reviews the key compliance challenges and lessons which have impacted on business one year into this devastating conflict.
Supplier onboarding has become increasingly challenging and complex in recent years. A major factor that has contributed to this situation is the ongoing conflict in Ukraine, which has resulted in heightened security concerns and economic instability, making it more difficult for companies to manage their supply chains.
In addition to the ongoing conflict in Ukraine, new legislation and regulations have been introduced to tighten restrictions on oligarchs and their illicit gains. This has resulted in increased scrutiny of suppliers, making the onboarding process more comprehensive and time-consuming. Furthermore, new jurisdictions like Turkey and the UAE have been grey-listed by the FATF for money laundering, which has led to increased regulatory requirements and a need for more due diligence in the onboarding process. The difficult economic circumstances and supply chain challenges only add to the complexity of supplier onboarding, making it increasingly difficult for companies to manage their suppliers effectively.
Overall, these factors contribute to a more complex supplier onboarding process, requiring more time, resources, and attention. Conducting effective due diligence including sanctions screening and understanding who the supplier is and who their UBOs are is vital to preventing serious compliance failures.
In this webinar, VinciWorks will take you through:
The supplier onboarding process
Undertaking money laundering and sanctions checks
How to ensure AML compliance
How to assess risk levels and create a due diligence audit trail
What tools and resources you need for supplier onboarding
New regulations in the EU, UK and US to take account of when supplier onboarding
From new ESG regulations to a crackdown on bribery, rapid fluctuations in crypto currency, changes to the regulated sector and the ongoing conflict in Europe demanding a laser-like focus on the supply chain, 2023 looks set to demand even more from compliance professionals.
We have created an in-depth guide to everything compliance in 2023. The guide covers the top ten items you can expect to see in your regulatory inbox, with tips on next steps.
The Financial Action Task Force (FATF) held its latest plenary at the end of October 2022 and updated the list of jurisdictions under increased monitoring for money laundering and terrorist financing concerns. Jurisdictions on this list are working with the FATF to address strategic deficiencies in their regimes with regard to countering money laundering, terrorist financing, and proliferation financing. These countries have committed to work to resolve the deficiencies within the agreed timeframes. The FATF does not require enhanced due diligence measures to be applied to these jurisdictions and does not wish to cut off entire classes of customers, but calls for the application of a risk-based approach for businesses working with these jurisdictions.
Iranian and Russian based crypto addresses sanctioned by OFAC
A series of crypto wallet addresses including Bitcoin (BTC), Ethereum (ETH) and Tether (USDT) were added to the US SDN sanctions list by OFAC in September. The addresses belong to Iranian ransomware attackers and a neo-Nazi Russian paramilitary group Task Force Rusich. Task Force Rusich is known to be affiliated with The Wagner Group, which is also sanctioned by OFAC.
Sanctions teams should be wary about the potential for sanctioned entities to leverage the ability to move between crypto assets and blockchains in an attempt to obscure illicit activity.
Wave of new sanctions aims to cut off professional services to Russia
In response to the illegal annexation of several regions of Ukraine by Russia, the UK government have announced a series of new sanctions which will cut off Russia’s access to:
IT consultancy services
transactional legal advisory services
A further 700 goods crucial to Russian industry have been added to the export ban. These moves come alongside actions by Europe and the US. Additionally, the governor of Russia’s Central Bank, Elvira Nabiullina, has also been subjected to a travel ban and an asset freeze.
A guide to understanding and using sanctions lists
Sanctions are a diplomatic tool used to promote international peace and security and to combat violations of international law and terrorism. They do this by applying economic pressure on a country or regime by restricting dealings with the regime, as well as certain individuals and entities. The goal of using sanctions is to pressure a regime to change its behaviour regarding certain political, military, or social issues.
Sanctions are legal limitations put in place by individual countries like the United Kingdom or the United States, or by international institutions, such as the United Nations (UN) and the European Union (EU). They may include various forms of trade barriers, from tariffs and restrictions on financial transactions to broad embargoes.
The Russian invasion of Ukraine, which began in February 2022, crystalised the role of anti-money laundering in the fight against Russian aggression. Sanctions compliance may have been at the forefront of international efforts to constrain the Russian economy, but money laundering is the vital, long-term compliance programme to ensure those sanctions stick.
Efforts by sanctioned entities or individuals to circumvent legal restrictions or find other ways to use frozen assets, shifts from the realm of sanctions to money laundering. Breaching sanctions is an offence, and thus any funds or economic resources which are a result of breached sanctions become money laundering.
New requirements for money laundering regulated entities
A series of amendments to the UK Money Laundering Regulations 2017 came into force 1 September 2022. The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 include an obligation for regulated entities to identify, assess and mitigate the risk of proliferation financing (PF). We have further detailed guidance on these amendments here.
Regulated entities have the flexibility to create a new risk assessment on PF, or to incorporate proliferation financing into their existing money laundering and terrorist financing risk assessments.
The Treasury will conduct a national risk assessment in relation to proliferation financing, and regulated persons will also be required to take appropriate steps to identify and assess the risks to which their business is subject, and to establish and maintain policies, controls and procedures to mitigate and manage these effectively.
The latest updates to the UK’s high-risk jurisdictions for money laundering
The UK periodically updates its list of high-risk countries or jurisdictions for AML, meaning that regulated businesses must apply enhanced customer due diligence measures and enhanced ongoing monitoring in any business relationship with a person in any of these jurisdictions. A high-risk third country is defined for the purposes of the MLRs as a country specified in Schedule 3ZA.