Canada’s anti-money laundering and counter financing of terrorism (AML/CFT) regulator and financial intelligence unit has published a Special Bulletin on Russia-linked money laundering related to sanctions evasion.
Ottowa has imposed a significant number of new sanctions on Russia in response to its invasion of Ukraine. Many of these are coordinated with Canada’s allies and partners, which makes the bulletin by the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) relevant beyond Canadian borders.
The bulletin warns banks of risks in correspondent banking arrangements and the use of shell and front companies and highlights that trade-based money laundering (TBML) will likely be employed to evade sanctions.
Nested correspondent banking, whereby banks in higher-risk jurisdictions known to cater to Russian-speaking clients hold accounts in lower-risk jurisdictions and make international payments via these accounts represent a risk according to the bulletin.
It says financial institutions should review correspondent banking relationships and should monitor and report correspondent banking transactions that exhibit the characteristics of money laundering.
TBML and shell companies
Russia-linked money laundering is also known to use TBML and other techniques to move, hide and use assets around the world according to the bulletin.
It outlines potential characteristics of suspicious transactions. These include a pattern of shell companies registered in traditional tax havens conducting international wire transfers using financial institutions in jurisdictions distinct from the company’s registration and associated with Russian financial flows.
The bulletin says attention should be paid to jurisdictions with low barriers to set up shell companies as general trading companies, limited liability corporations or free trade zone entities that are commonly used for professional money laundering and sanctions evasion.
No business rationale
Suspicions may be raised by the involvement of legal firms, including company service providers based in offshore financial centres, that have historically specialised in Russian clientele or in transactions associated with Russian elites and their associates.
Accounts with financial institutions or in jurisdictions associated with Russian financial flows that are experiencing a sudden rise in the value being transferred to their respective institutions or areas, without a clear economic or business rationale may also raise suspicions the bulletin concludes.
More information on Fintrac’s Special Bulletin on Russia-linked money laundering related to sanctions evasion can be found here where the bulletin and associated documents can also be downloaded.
Categories: Trade Based Financial crimes News