The National Crime Agency (NCA) and HM Treasury’s Office of Financial Sanctions Implementation (OFSI) have issued a ‘red alert’ about the financial sanctions evasion typologies by Russian elites, and enablers such as barristers and other professionals and private family offices.
The document provides information from law enforcement and the legal and financial services sectors on some of the common techniques designated persons (DPs) and their UK enablers are suspected to be using, to evade financial sanctions set after Russia’s invasion of Ukraine in February. DPs are using associates, such as family members and close contacts, via enablers to transfer assets (such as shareholdings in holding companies, yachts, property or private aircraft) to trusted proxies such as relatives or employees; and selling or transfer assets at a loss to realise their value before sanctions; or divesting investments or controlling stakes.
The document goes into evasion methods, such as laundering to jurisdictions where sanctions are not in place, such as the UAE, Turkey, China, Brazil, India and the former Soviet Union (not including the Baltic States and Ukraine). Russian money launderers have increasingly been observed in UK intelligence and operational activity providing cash to crypto-asset services (blockchain).
As for the ‘enablers’, the NCA and Serious Fraud Office have previously jointly assessed that, as for international bribery and corruption, London-based enablers are almost certain to be in senior positions (director, owner, CEO, senior partner) within their company or business. Enablers’ level of complicity is assessed at three common levels: criminally complicit, wilfully blind (for example in relation to source of funds checks) and unwittingly involved.
The document goes into what businesses ought to do. Such as; firms should assess complex corporate structures carefully as a component of their enhanced due diligence for high-risk clients. Guidance on making suspicious activity reports where money laundering is suspected is available at www.nationalcrimeagency.gov.uk.
The NCA reports that it has surged officers into a Combating Kleptocracy Cell (CKC) since February. Part of the Agency, the National Economic Crime Centre (NECC), brokers a cross-system response from across law enforcement, regulators, government and private industry to combat illicit finance. Under the Russia (Sanctions) (EU Exit) Regulations 2019, businesses such as law firms, tax advisers, estate agencies, accountants, casinos and jewellers are legally obliged to report to OFSI if they know or suspect that a breach of financial sanctions has occurred.
The document lists indicators suspected of being used to evade sanctions; such as, transfers to previously unknown individuals, where that person’s economic consumption, displays of wealth or financial footprint (such as private jets, large addresses and fleets of luxury cars) does not correspond with their newly reported wealth. Or; clients connected with DPs seeking to move all their assets to other financial institutions and closing their accounts in the UK; and using off-the-shelf corporations with no trading record with nominee ownership as throughputs.
You can read the 15-page document on the NCA website.
William Dodsworth, Co-Chair UK Sanctions Facilitators Cell and Managing Director, Compliance, Barclays, said: “When we look at the unprecedented volume of new sanctions implemented this year, public and private sector cooperation has never been more critical. Our long-standing partnership has enabled the creation of this red alert and it will support the UK’s defences against illicit finance as we work together to ensure compliance with sanctions.”
Adrian Searle, Director National Economic Crime Centre, said: “As the UK government designates more entities in response to Russia’s invasion of Ukraine, the risk of sanctions evasion increases. This Alert has been developed jointly between private sector partners and government to share insights on how to detect designated entities attempting to circumvent the sanctions imposed on them. It is through such public private partnership working that we will uproot illicit finance activity from the UK.”
And Giles Thompson, Director HM Treasury’s Office of Financial Sanctions Implementation, said: “Since the start of the Russian invasion of Ukraine, the Government has introduced an unprecedented quantity of sanctions designations. OFSI has worked tirelessly to ensure that these sanctions are understood, implemented and enforced, and this diligence has been matched by colleagues across the private sector. This latest collaboration outlines the significant exposure that many sections of industry have to sanctions evasion, and given the nature of the risks identified, is something we will all need to be increasingly vigilant to.”
