3rd December 2020

Counter-Sanctions, Human Rights Sanctions and a Money Laundering Ring in Spain

China issues sanctions against US-affiliated NGOs, the US sanctions Libyan nationals, and Spanish authorities bust a money laundering ring led by an ex-police officer.

We share our financial crime regulatory highlights from the week of 30 November 2020.

China Slaps Tit-For-Tat Sanctions on US NGO Leaders 

In retaliation for the US sanctioning four nationals in early November, Beijing announced sanctions on four US citizens for their involvement in matters relating to Hong Kong on Monday, November 30.

John Knaus, the senior director of the National Endowment for Democracy (NED); Manpreet Anan, the regional director for the Asia-Pacific at the National Democratic Institute (NDI); and two other NDI specialists are banned from entering China. Details are scarce, but all four are high-level members of nonprofits that promote democratic ideals around the world and are active in Hong Kong — work that is seen by China as fomenting unrest and meddling in domestic matters.

Hong Kong is just one of several areas of contention between the US and China, but tensions escalated following Beijing’s passage of a controversial national security law in June. The law, aimed at curbing unrest in the semi-autonomous state, has been used to crack down on protests and restrict free speech and other subversive acts.

In the months since, the US has sanctioned several Chinese officials involved in enforcing the law. This action has kicked off an ongoing tit for tat, with China countering in kind.

Notably, in August, the US sanctioned Hong Kong Chief Executive Carrie Lam, Hong Kong’s police commissioner, and several other political officials from Hong Kong and mainland China. Beijing responded by designating 11 Americans, including Senators Marco Rubio, Ted Cruz, Tom Cotton and Pat Toomey — all of whom have been critical of China’s actions vis-à-vis Hong Kong.

Then, on November 9, the US sanctioned four more individuals: three officials in Hong Kong charged with enforcing the law and the deputy director of the Hong Kong and Macau Affairs Office in Beijing.

The long-term impact of these tit-for-tat sanctions is uncertain, especially with the swearing-in of a new US president in January 2021. But the sanctions have made things difficult for at least one official in the short term: Hong Kong’s Carrie Lam has had to transition to an all-cash lifestyle after US sanctions cut her off from the global financial system.

It’s also likely that there will be more turbulence before the year is out. The Trump administration has indicated additional sanctions may be forthcoming, and it’s safe to assume that US-China relations will still be rocky for some time — just another reminder that companies must take steps to ensure their compliance program can adapt to all changes in sanctions designations as they occur.

The US Invokes Magnitsky Act to Sanction Libya

Citing the Global Magnitsky Act, the US government announced on November 25 that it’s bringing sanctions against Libya’s Kaniyat militia and its leader, Mohamed al-Kani, over alleged human rights violations.

Libya has been entangled in a civil war since its former leader Muammar Gaddafi was ousted and killed in 2011. The two main factions — the Libyan National Army (LNA) and the UN-recognized Government of National Accord (GNA) — announced a ceasefire in October. But US officials have accused the Kaniyat militia, which aligned itself with the LNA, of torturing and killing scores of Libyan citizens during the war.

Adding fuel to the accusations, in October, Libyan authorities discovered 12 bodies that were buried in four mass graves in Tarhuna — a city the Kaniyat militia had controlled for years and that was recaptured by the GNA in June. These 12 are only the most recent of the many who have been found since June.

The US government’s unilateral action to sanction those it deems responsible comes days after Russia blocked a similar proposal before the UN Security Council that would freeze assets and initiate a travel ban on al-Kani and militia members. The Eastern European country, which supports the LNA, cited the need for more evidence of the Kaniyat militia’s involvement in any human rights violations.

Whether these sanctions have a significant impact remains to be seen. But it’s worth noting that the US has shown an increased willingness to use the Global Magnitsy Act — which became law in 2016 and expanded the more Russian-targeted US Magnitsky Act of 2012 — as justification to unilaterally sanction alleged human-rights abusers around the world. Over 200 individuals and entities are currently designated under this particular program. There’s no indication that the incoming Biden administration will deviate from this course.

Further, the UK and the EU have indicated they intend to follow suit. Both have introduced changes to their sanctions regimes that enable them to target human rights abuses — a trend that companies operating in those jurisdictions would do well to keep a close eye on.

Ex-Guardia Civil Officer Busted for Money Laundering Scheme

A Barcelona-based ex-Guardia Civil officer’s money laundering network has been officially dismantled, according to a statement released on November 24 by the Spanish government’s Tax Office and reported on by Euro Weekly News.

A former member of Spain’s Guardia Civil, one of the country’s two national police forces, had allegedly enlisted the help of several workers and transporters stationed at a port in Barcelona to steal big-ticket items stored in the shipping containers. These items included perfume, household appliances and tobacco products.

The ex-Guardia Civil officer, along with a partner, used the money obtained from liquidating these ill-gotten goods to invest in real estate, restaurants and cafés. In 2018, investigators received a tip about the money laundering scheme from a conspirator, and they used the trail of investment and banking activity to uncover three other conspirators and four companies who were also involved in the scheme. These conspirators have since pleaded guilty.

A search of the port in 2019 led to the seizure of more than €3 million in assets. Later, in their announcement on November 24, 2020, the Tax Office confirmed that investigators had also searched the home of the ex-Guardia Civil officer. Officials found over €5 million in cash stashed on the property. They suspect the network laundered approximately €8 million in total.

Incidences of police criminality and job-related corruption aren’t new. But this case serves to underscore that there are bad actors in civil service that can and will try to hide behind their position to skim a little off the top. Increased diligence in customer and transaction screening, however, is critical to exposing irregular activity and instances of fraud.