The banking and financial services sectors have been “enormous partners” throughout the information sharing effort to combat Russian sanctions evasion according to the US justice department’s director of Task Force KleptoKapture, Andrew Adams.

Now, he says, the department wants to introduce additional means to prevent sanctionable financing of controlled exports and look specifically at new financiers, shell companies, and financial services firms attempting to hide money.

And it seems that the US banking and financial services sectors may face additional calls to assist in Washington’s efforts to enforce sanctions on Russia.

Financial institutions’ failures

Addressing the US senate committee on banking, housing and urban affairs last week, Adams lauded the department’s “robust and successful” efforts in revealing sanction evaders involving “everything from cryptocurrency to trade-based money laundering.”

He then told the hearing entitled Tightening the Screws on Russia: Smart Sanctions, Economic Statecraft and Next Steps that the department has also targeted “wilful failures of anti-money laundering systems in both traditional and novel financial institutions.”

Correspondent accounts

Topmost of the department’s strategic priorities now is to identify illicit proceeds and the actors for whom, and by whom, those funds are transmitted, through the use by criminal networks of shell corporations found in multiple, often offshore and relatively non-cooperative, jurisdictions, Adams told the committee.

The department is therefore directing particular attention to attempts by foreign individuals and entities, including offshore shell corporations, to move funds through correspondent accounts at US banks.

In its simplest form, Adams says this may involve stripping critical information (or inserting affirmatively false information) from international wires, thereby undermining the anti-money laundering, counter financing of terrorism, and sanctions enforcement programmes of US financial institutions.

Complex structures

“In more complex form, we are examining the use of nested bank accounts and the US dollar funding of offshore “nostro” accounts dedicated to use by sanctioned actors,” says Adams.

He concludes that if US banks are unable to accurately determine the originator, beneficiary, purpose, or source of funds with respect to a transaction, through whatever means of obfuscation and omission, their ability to investigate, report, or block a suspicious transaction is compromised in material respects.

The witness statement by Adams to the hearing entitled Tightening the Screws on Russia: Smart Sanctions, Economic Statecraft and Next Steps, along with other statements to the committee, can be downloaded from here.

A YouTube video of the hearing can be found here.

Categories: Trade Based Financial crimes News

Tags: financial services, Russia, Sanctions, USA