Two US Army reservists plead guilty to a catfishing and money laundering scheme, the US imposes new sanctions on Syria, and the UK and EU reach a deal on Brexit.
We share our financial crime regulatory highlights from the week of 28 December 2020.
Guilty Pleas in US Cyber Fraud Scheme
Two US Army reservists pleaded guilty for their role in a $3 million catfishing and money laundering scheme, the US Attorney’s Office of the Southern District of New York announced on Wednesday, December 23.
Prosecutors say the two reservists, Joseph Asan and Charles Ogozy, and their co-conspirators intentionally defrauded unsuspecting individuals for about 18 months — between February 2018 and September 2019 — by both spoofing business email accounts and accessing compromised accounts. They would then impersonate employees and third parties doing business with the company to deceive legitimate employees into transferring money to accounts the conspirators controlled. Asan and Ogozy also engaged in several online romance scams, through which they used fake identities to convince older men and women who believed they were in a romantic relationship to send them money.
A US Marine Corps veteran’s organization was among those defrauded.
The funds that Asan and Ogozy received from these scams, which totaled over $3 million, were routed through bank accounts they had set up in the names of fake businesses — businesses they led bank employees to believe had legitimate interests in real estate, shipping, and public relations. From there, the money was withdrawn and sent to each other and Nigerian-based co-conspirators.
The defendants, whose sentencing is scheduled for April, each face up to 30 years in prison.
Cybercrime and scams like the ones Asan and Ogozy carried out are on the rise. Indeed, in 2019, consumers lost $201 million to romance scams — 40% more than they did in 2018. Moreover, cybersecurity firm Proofpoint reported that the overwhelming majority of companies — almost 90% — were targets of phishing attacks in 2019. Amid a pandemic that is causing drastic shifts in how we interact, both personally and professionally, this trend has likely only accelerated.
When screening new and current customers, financial institutions must remain vigilant. Understanding who their customers are and the kind of transactional behavior they should expect is key to minimizing such instances of fraud.
US Slaps Syrian Government with Sanctions
On December 22, the US government announced new sanctions on Syria, which target 18 individuals and entities connected to Syrian President Bashar al-Assad’s regime. Further, those who engage with the designated individuals and entities may be subject to secondary sanctions.
The designations include Bashar al-Assad’s wife, Asma al-Assad, who the US Treasury says has helped the regime consolidate power through her network of charities and civil society organizations, and members of her immediate family, as well as the Central Bank of Syria. Lina al-Kinayeh, an advisor to Assad, and her husband Mohammed Masouti, a member of parliament — a “regime mafia power couple” according to Joel Rayburn, the Trump administration’s special envoy for Syria — were also designated.
The 18 designations are the latest sanctions action related to the US Caesar Syria Civilian Protection Act of 2019. The act was signed into law with overwhelming bipartisan support a year ago — and four years after the UN Security Council unanimously passed Resolution 2254 calling for a ceasefire and a peaceful resolution to the conflict in Syria. It took effect on June 17.
Since then, the Trump administration has actively brought sanctions against dozens of individuals and entities that it says have been instrumental in perpetuating the conflict in Syria. It’s a strategy that Rayburn believes is unlikely to change with the incoming Biden administration.
It’s unclear whether these measures will have the desired effect of pressuring Assad to pursue a political resolution. Meanwhile, Syria’s economic situation has continued to worsen due to its nearly decade-long civil war and the pandemic. Additional sanctions, while not intentionally targeting humanitarian assistance, may further exacerbate the problem.
As we move into 2021, and the situation becomes increasingly untenable and fluid, financial institutions will need to ensure they understand the sanctions under this program and are responsive to any changes.
Changes and Confusion Abound with Brexit
After months of negotiations that came down to the wire, the UK and the EU reached a wide-ranging trade agreement on Christmas Eve that will govern UK-EU relations from January 1 onwards.
The deal — formally called the EU-UK Trade and Cooperation Agreement — still has to be approved by each of the 27 member states and then ratified by the European Parliament; nevertheless, initial responses have been positive. As such, and given that the transition period expires on December 31, there are plans to move ahead in good faith with the deal and formally ratify it later in 2021. In the meantime, both the UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen touted the deal as fair and a success.
Initially, not much will change for the average UK citizen, according to at least one analyst. However, odd references to defunct software and outdated encryption standards aside, the 1,255-page draft agreement does contain significant changes to day-to-day business operations. Financial institutions must ensure they understand what’s in the legislation and adjust their processes accordingly.
For one, a standalone UK sanctions regime will apply. While currently composed primarily of designations that overlap with the EU and UN, the UK’s sanctions regime may soon deviate from those regimes as Brexit truly takes hold. To give one example, the law firm, Clifford Chance, points to the UK’s willingness to unilaterally impose Magnitsky-style sanctions on Russian, Saudi, and Belarusian nationals. The law firm also mentions that there will be differences in the sanctions regimes are applied: UK sanctions also encompass entities in which sanctioned entities have a 50% or more ownership or controlling interest.
Nevertheless, there is some confusion as to what other changes might apply to financial services. Many articles explicitly do not, while others are ambiguous. For example, text such as that the UK and EU will “make their best endeavors to ensure that internationally agreed standards in the financial services sector for regulation and supervision, for the fight against money laundering and terrorist financing, and for the fight against tax evasion and avoidance, are implemented” hardly clarify matters.
As a result, some are asking for a phase-in period, during which many of these provisions can be clarified. While this may occur, time is running out for any such approach to be implemented, and financial institutions can’t afford to wait and see. Given this, we’ll be exploring the possible impact of this trade deal on AML compliance in our upcoming 2021 report, which you can pre-register to receive by clicking here.