Instagram stars discover they’re not above money laundering rules, Deutsche is fined for its Epstein relationship and China implements counter-sanctions.

We share our financial regulatory highlights from the week of 13 July 2020.

Nigeria Laundering via Dubai

A Nigerian Instagram star known as ‘Hushpuppi’ aka Ramon Olorunwa Abbas has been arrested in Dubai on allegations of money laundering and cyber fraud.

Abbas’ arrest is a cautionary tale for money laundering and social media. The Instagram star had showcased his illicit wealth across many posts on the photo-sharing platform with designer clothes, private jets, luxury cars and literally throwing cash in the air. The FBI used that information to build a case against him by tracking the evidence against a list of crimes. $41 million and 13 luxury cars have been seized by investigators.

The arrest comes after a report by the Carnegie Endowment for International Peace named Nigeria as a significant country utilizing Dubai as a money laundering hub for the proceeds of crime and corruption.

Dubai has been recognized as especially conducive for money laundering in the report. Afghan warlords, Russian mobsters, Nigerian kleptocrats, European money launderers, Iranian sanctions-busters, and East African gold smugglers were all named as parties interested in taking advantage of Dubai’s financial system. And Dubai itself is seen as making itself attractive to money launderers and foreign investment through its luxury property market.

The UAE city is made more attractive to money launderers through its numerous free trade zones. There are 30 in Dubai and when coupled with UAE’s lax money laundering laws and enforcement it means that even sanctioned entities are able to launder money through the city with ease.

It’s likely that Dubai will face continued recriminations from reports and international watchdogs if this laxity continues. And it will likely be a cause for concern to any compliance officer seeing cash moving from the country into new territories when screening transactions.

Deutsche Bank Fined $150 Million

Deutsche Bank will pay a total of $150 million to New York’s Department of Financial Services (DFS) to settle three investigations into the German bank’s compliance gaps, including one connected to the late Jeffery Epstein.

This is the first fine levied on a bank for business dealings with Epstein, who was arrested in 2019 on child sex trafficking charges and died of a suspected suicide while in custody.

Since onboarding Epstein in 2013, Deutsche Bank facilitated potentially suspicious transactions worth millions of dollars – including payments to alleged co-conspirators and Russian models as well as over $800,000 in cash withdrawals. This is despite a wealth of adverse media and evidence of prior legal proceedings that would typically indicate a higher level of scrutiny should be applied.

The second investigation dealt with Deutsche Bank’s involvement as a correspondent bank for Danske Bank Estonia – the bank branch involved in what may be the largest money-laundering scandal in history. Despite knowing the branch was high-risk, Deutsche Bank facilitated many questionable transactions on its behalf.

Finally, Deutsche Bank identified possible red flags related to transactions it processed for FBME Bank in Cyprus. But it didn’t take action to sever ties until 2014 when the US Treasury identified the bank as a “primary money laundering concern.”

While all three investigations deal with high-profile cases, the fine – the latest of several levied on the beleaguered bank – is on the smaller side. This may be, in part, because Deutsche Bank cooperated with DFS and took significant steps to remediate gaps, which cost the bank $1 billion in additional training and process improvements.

Nevertheless, the reputational hit Deutsche Bank has taken is significant. It also remains to be seen whether the bank has spent its money wisely. Compliance, after all, isn’t a numbers game: financial institutions must choose providers that can properly support their unique needs and risk-based approach.

China Hits US With Counter-Sanctions

Alleged human rights abuses in Xinjiang have sparked another round of sanctions and retaliatory sanctions by the US and Chinese governments. On Monday, just days after the US imposed sanctions on several Chinese officials, Beijing announced it was imposing sanctions against the US.

Citing US overreach into internal affairs, China’s foreign ministry said that several US officials and politicians have “severely damaged US-China relations, and should be condemned.” Among those US officials sanctioned are Senators Marco Rubio and Ted Cruz and US Representative Chris Smith, as well as Sam Brownback, the ambassador at large for international religious freedom, and the Congressional-Executive Commission on China — individuals who have been highly critical of the Chinese government’s actions.

This latest move is a reaction to reports that Uyghur Muslims, ethnic Kazakhs and other Muslim minorities are being imprisoned in high-security camps. Many Western countries suspect that individuals are suffering severe human rights abuses, including mass surveillance, illegal detentions and forced sterilization. But Chinese authorities maintain that these camps have been established to provide  “vocational training” and to fight terrorism, separatism and religious extremism.

China’s national sovereignty – and the perceived encroachment on that by the US – has been front and center this year. The US has shown an increased willingness to use sanctions to intervene in what Beijing considers internal matters. And the Chinese government is responding in kind. Its sanctions on Lockheed Martin for the company’s role in supplying upgraded arms to Taiwan,  announced 14 July 2020, are another example of this.

Nevertheless, while the practical impact of this most recent round of sanctions and counter-sanctions is likely minimal, it’s simply another sign of how much US-China relations have deteriorated in recent months. It’s also not a stretch to imagine that more sanctions and retaliatory measures are on the way. Therefore, companies should make sure they have in place compliance processes that allow for a quick response to changes and escalations as they happen.


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