European Union

Sino-Spanish laundry brought down in Operation Snake

The combined efforts of Europol and the Spanish Guardia Civil dismantled a six year old money laundering operation earlier this week. Investigators estimate the group sluiced more than EUR300m in the proceeds of crime since 2009. snakesmurfChinese citizens living in Spain operated the laundry, collecting and cleaning the proceeds of crimes from across Southern Europe. The majority of the cleaned money was sent across European borders, Europol said in a statement.

Members of the criminal organisation using the laundry generated funds from importing counterfeit goods into the EU, using false documents. The sales generated an estimated EUR14m in untaxed profits which was cleaned using ‘low-level’ associates who ‘smurfed’ the money back to China. Smurfing is the process of breaking down a large sum of money into smaller and less remarkable amounts, using many different people to transfer funds through personal bank accounts – which are also generally thought to be low risk and off the radar.

As they developed a robust system for moving their own dirty cash out of Europe, via smurfs, establishing complex corporate structures and relying on front men and third parties for transactions, the Chinese group offered their services out to other organised crime groups. In exchange for a percentage of the laundered funds the Spanish network cleaned filthy lucre for contacts in Belgium, Italy, the Netherlands, Portugal and the UK. The going rate for laundering someone else’s money used to be a flat ten per cent, but stories from the past few years claim this has decreased to five per cent.

Proving that criminal networks will lend a hand to anything that turns them a profit, no matter how reprehensible, the group also ran clothing factories in Madrid which exploited Chinese workers.

Police officers arrested 32 people in Operation Snake, searching 65 private residences and company premises in Madrid, Barcelona and Valencia and seizing of 20 high-value vehicles and more than EUR1m in cash.

‘The Operation is still on-going and new arrests and seizures are expected to take place over the next hours and days,’ read the Europol statement.

A good result for the Guardia Civil, which has never shied away from getting its hands dirty in organised crime Eurosinvestigations. Although the EUR1m haul represents a fraction of the total figure estimated. It will be interesting to know how much this operation cost Europol and the Guardia Civil. While there is no doubt that criminal enterprises that make fortunes from exploiting people must be stopped, and cost should not deter law enforcement agencies from doing their jobs, it is worth considering where the rest of the money has gone, via which financial channels, and whether it will ever be recovered.

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Sanctions: talking Turkish banks with the US Fed

A Turkish bank is about to hand over the details of dollar transactions made in the second half of 2012 to the US Federal Reserve.

Ziraat Bank signed an agreement with the Fed in June 2014 to allow an independent consultant to review all US dollar clearing activity carried out between July 1 2012 and December 31 2012. This will give the US a clear view of who the bank was doing business with and for during that period.

US Federal Reserve

US Federal Reserve

The agreement published on the Fed’s website also requires the bank to submit a written compliance plan to enhance anti-money laundering (AML) requirements under the Bank Secrecy Act, an enhanced customer due diligence (CDD) program and a revised suspicious activity monitoring and reporting system.

This is an extremely powerful statement from the Fed, showing the extent of its reach beyond US borders and into the transactions made by a bank in Turkey with only a branch office in the US.

Although the scrutiny is limited to US dollar clearance transactions, this information alone could reveal the identities of any dealings the bank may have had with sanctioned individuals or entities. As suggested by one Turkish politician, the Fed could be looking for information on transfers connected to Iranian businessman Reza Zarrab from Turkey to Iran.

Zarrab was named in a report from Reuters in April, connecting him to a criminal organisation that allegedly allowed Turkey to bust US sanctions in Iran.

EU sanctions on Iran and the cost of sanctions to the US

Turkey has a history of supporting Iran. A Turkish bank was used as an intermediary for oil payments from India to Iran up to February 2013, when EU sanctions prevented Euro transactions with Iran. Several nations forged an agreement in November 2013, to ease sanctions on Iran. This gives some leeway to India who is seeking to resume using the payment channel as soon as sanctions are lifted.

Man looks at Iranian Oil Tanker

Man looks at Iranian Oil Tanker – Nat Geo image

Meanwhile, a court in Luxembourg has annulled sanctions placed on the Iranian National Iranian Tanker Company (NITC). The firm contested the EU’s 2012 sanctions, claiming the firm is privately owned by Iranian pension funds. In July, a court in Luxembourg decided there was no evidence that NITC was owned by the Iranian government and that the sanctions on NITC represented a ‘manifest error of assessment‘ by the EU. This is a great boost for NITC, who now has to wait another two months for an appeals to come forward before it can resume trading with Europe.

Sanctions on Iran have cost the US government USD$175bn, according to a study made by the National Iranian-American Council published in Time. The losses since the US started sanctioning Iran in the mid 1990s are apparent in US employment rates, particularly in California and Texas. The report comes at a time when western nations are working on a deal with Iran to scale back nuclear operations in return for reduced sanctions.

Source: Today’s Zaman

The financial services industry is one of Europe’s greatest assets? Brussels, we have a problem

Last week, the European Commission (EC) slapped itself on the back a few times, with a congratulatory speech about all the things it has done since 2008 to repair the FCA - Bolting horseimmense damage done to the economy by the financial services industry. EC President José Manuel Barroso claimed the financial services industry as one of Europe’s greatest assets as well a listing various achievements including the banker bonus cap, increasing reserves, scrutinising hedge funds, rating agencies, and improving consumer protection.

My initial thought was something about horses running amok in meadow and Barroso and his pals carefully closing the gate. But then, credit where it is due, some action on behalf of the EC is better than nothing done to rebalance the inequalities exploited by the  financial services sector which allowed institutions and individuals to pay themselves ridiculous bonuses, make opaque trades and leave consumers exposed to the risks of actions taken by others.

The bonus cap confusion

Back in March, when the EC announced its plans to curb the excessive bonuses paid to certain employees of the banking industry, the UK released its strategy for getting around the rule. The EC rule limits a bonus to no more than the fixed salary, or twice that level if approved by the bank’s shareholders, and will affect 2014 awards to be handed out early next year. In response to the new law HSBC, the world’s local money launderer, announced  that it will give new “allowances” – expected to take the form of monthly or quarterly payments in cash or shares – to senior staff to boost their fixed pay, meaning that higher bonuses could then be awarded.  The same bank has, however, opted to cut its Chairman’s proposed GBP3.25m  bonus to a measly GBP1m. UK institutions Lloyds and Barclays indicated they would also seek a way around the bonus cap. The UK Government opted to fight the EU’s bonus cap in court and started a legal challenge against the EU, which it lost.

While the UK government sent a strongly worded letter to banks in April, warning them to cut bonuses or face tighter controls, banks have retaliated with a complaint that they will lose their competitive edge in the search for talent and fear the best candidates might all take jobs in the US instead. At least the UK managed to show some mettle and stop the 200 per cent bonuses that RBS – now owned by the UK government since its spectacular bail out in 2008 and 2009 – had scheduled to pay some employees.

Other great assets of Europe

Here is a list of some other great European assets, at least in my opinion. Would you agree?

The Eurovision Song Contest 

Conchita Wurst

Conchita Wurst

The annual paean to the much maligned European pop-song which unites the world for one night a year in awe of this astounding show, and the ever more outlandish performers. Congratulations to Conchita Wurst, the Austrian bearded drag act who won 2014’s content. Her ‘Rise Like a Phoenix’ is no ‘Waterloo’ but the public vote for a champion of tolerance was one in the eye for the countries who have decided to outlaw and punish anything that falls out of the boundaries of heterosexual acts for procreation. I am looking at you India, Nigeria, Russia, Tanzania, Sierra Leone, Uganda, for starters.  Iran, Mauritania, Saudi Arabia, Sudan and Yemen have made homosexuality punishable by death.

 

 

The European Southern Observatory, Chile.FCA - Biggest star ever

Since five European countries signed the ESO convention in 1962, researchers have discovered that the universe is expanding and accelerating as it gets bigger, earning Nobel Physics Prizes for the lead discoverers. They have discovered an Earth sized planet in the star system next door, made the first accurate measurements of the planet Pluto and its moon Charon and found the biggest star ever, see image right.

Eurotrash

FCA - Eurotrash logo

The sadly missed late-night satirical magazine show presented by Antoine de Caunes and Jean-Paul Gaultier, hamming up the French accent for ze British viewerz. The show shed light on some less well known aspects of European life, generally making a mockery of the entire system and reminding us not to take it all so seriously. The term Eurotrash has been used to describe those perceived to be ‘arrogant, lower-class, expatriates’ living in New York. NSFW in the slightest.

Caves

Skocjan Caves

Skocjan Caves

The Eisriesenwelt (German for “World of the Ice Giants”) in Austria is largest ice cave in the world, extending more than 42km (26 miles). The Skocjan cave system in Slovenia includes the highest cave hall in Europe. Or what about the cave paintings at Lascaux in France, a humble message to the future sent by human beings more than 17,000 years ago.

CERN – the European Centre for Nuclear Research

The Big Bang?

The Big Bang?

Where to begin? The biggest particle physics lab in the world has worked continuously to solve some of the biggest mysteries of the universe. On the way, its researchers invented the world wide web in 1989, created stable atoms of antimatter in 2010 and brought us closer to understanding our existence by discovering the Higgs boson in 2013 resulting in Nobel Prizes for the lead researchers. CERN is 60 this year, celebrating  science for peace is its anniversary strap line.

Honourable mention for achievements in the European Financial Services Sector

The EC has done one thing that this European Union citizen considers worth an honourable mention in this list. It now allows me to transfer funds free of charge between my bank in the UK and other banks in the Single European Payments Area. Steps like this have a impact on consumers; it saves them money. This took years to devise and implement when it could have changed retail banking a long time ago. Everything else on Barroso’s list will take a long time to touch the consumer population.

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Canada and EU issue Russia/Ukraine sanctions; 25 individuals, 2 entities

The European Union has released the names of 13 people and two companies which are the subject of restrictive sanctions as of May 12th. Only one of the names appears on the US’ Russia sanctions’ lists, Vladimir Volodin, President Putin’s first Deputy Chief of Staff. The Canadian sanctions list six Russia and and six Ukrainian citizens, who are subject to economic sanctions also from May 12th. This excellent and up to date resource contains the names of all entities and individuals sanctioned by US, EU, Norway, UK, Canada, Switzerland, Liechtenstein and  Austria. There is also a list of the known subjects of Russian travel sanctions on Canadian and US officials. It maybe worth bookmarking that as a reference point for who has sanctioned whom.

Canada’s latest  economic sanctions

Russian Individuals

  • Valery Vasilevich Gerasimov, (Вале́рий Васи́льевич Гера́симов), sources note his DOB as September 8th 1955.  Chief of the General Staff of the Armed Forces of the Russian Federation, First Deputy Minister of Defence of the Russian Federation, General of the Army.
  • Igor Girkin (also known as Igor Strelkov) (Игорь Всеволодович Гиркин), DOB December 17th 1970. Member of the Main Intelligence Directorate of the General Staff of the Armed Forces of the Russian Federation.
  • Sergei Ivanovich Menyailo, acting Governor of the Ukrainian annexed city of Sevastopol and former Russian Black Sea Fleet Assistant Commander.
  • Sergei Ivanovich Neverov, Deputy Chairman of State Duma, United Russia.
  • Oleg Genirokhovich Savelyev, Minister for Crimean Affairs.
  • Ludmila Ivanovna Shvetsova, Deputy Chairman of State Duma, United Russia.

Ukrainian Individuals

  • Olga Fedorovna Kovatidi, member of the Russian Federation Council from the annexed Autonomous Republic of Crimea.
  • German Prokopiv, active leader of the ‘Luhansk Guard’ and a leader of the youth wing.
  • Valeriy Bolotov, retired officer, chair of airborne troop veterans of Luhansk oblast.
  • Andriy Purgin, head of the self declared ‘DonetskRepublic’.
  • Denys Pushylin, one of the leaders of the self declared ‘DonetskRepublic’.
  • Sergey Gennadevich Tsyplakov, one of the leaders of the ideologically radical organization ‘People’s Militia of Donbass’.

EU names

Vyacheslav Volodin

Vyacheslav Volodin

Vyacheslav Viktorovich VOLODIN (Вячеслав Викторович Володин) ; born 4 February 1964 in Alekseevka, Saratov region.
First Deputy Chief of Staff of the Presidential Administration of Russia. Responsible for overseeing the political integration of the annexed Ukrainian region of Crimea into the Russian Federation.

Vladimir SHAMANOV; born 15.02.1954 in Barnaul. Commander of the Russian Airborne Troops, Colonel-General. In his senior position holds responsibility for the deployment of Russian airborne forces in Crimea.

Vladimir Nikolaevich PLIGIN; born 19.05.1960 in Ignatovo, Vologodsk Oblast, USSR.
Chair of the Duma Constitutional Law Committee. Responsible for facilitating the adoption of legislation on the annexation of Crimea and Sevastopol into the Russian Federation.

Petr Grigorievich JAROSH
Acting Head of the Federal Migration Service office for Crimea. Responsible for the systematic and expedited issuance of Russian passports for the residents of Crimea.

Oleg Grigorievich KOZYURA; born 19.12.1962 in Zaporozhye
Acting Head of the Federal Migration Service office for Sevastopol. Responsible for the systematic and expedited issuance of Russian passports for the residents of Crimea.

Viacheslav Ponomariov

Viacheslav Ponomariov

Viacheslav PONOMARIOV, or Vyacheslav POMOMARYOV
Self-declared mayor of Slaviansk. Ponomarev called on Vladimir Putin to send in Russian troops to protect the city and later asked him to supply weapons. Ponomarev’s men are involved in kidnappings (they captured Ukrainian reporter Irma Krat and Simon Ostrovsky, a reporter for Vice News, both were later released, they detained military observers under OSCE Vienna Document).

Igor Mykolaiovych BEZLER; born in 1965
One of the leaders of self-proclaimed militia of Horlivka. He took control of the Security Service of Ukraine’s Office in Donetsk region building and afterwards seized the Ministry of Internal Affairs’ district station in the town of Horlivka. He has links to Ihor Strielkov under which command he was involved in the murder of Peoples’ Deputy of the Horlivka’s Municipal Council Volodymyr Rybak according to the SBU.

Igor-Kakidzyanov photo by @MaximEristavi

Igor-Kakidzyanov photo by @MaximEristavi

Igor KAKIDZYANOV (Игорь Какидзянов)
One of the leaders of armed forces of the self-proclaimed ‘Donetsk People’s Republic’. The aim of the forces is to ‘protect the people of Donetsk People’s Republic and territorial integrity of the republic’ according to Pushylin, one of the leaders of the ‘Donetsk People’s Republic’. According to news sources, armed forces in Ukraine arrested Kakidzyanov in Kiev on May 7th.

Oleg TSARIOV or TSARIEV (Олег Царев) possible DOB 2 June 1970
Member of the Rada. Publicly called for the creation of the Federal Republic of Novorossia, composed of South Eastern Ukrainian regions.

Oleg Tsaryev

Oleg Tsaryev

Roman LYAGIN (Роман Лягин)
Head of the ‘Donetsk People’s Republic’ Central Electoral Commission. Actively organised the referendum on 11 May on the self-determination of the ‘Donetsk People’s Republic’.

Aleksandr MALYKHIN (Aлександр Mалыхин)
Head of the ‘Lugansk People’s Republic’ Central Electoral Commission. Actively organised the referendum on 11 May on the self-determination of the ‘Lugansk People’s Republic’.

Prosecutor Natalya Poklonskaya

Prosecutor Natalya Poklonskaya

Natalia Vladimirovna POKLONSKAYA (Ната́лья Влади́мировна Покло́нская) ; born 18.03.1980 in Eupatoria.
Prosecutor of Crimea. Actively implementing Russia’s annexation of Crimea.

Igor Sergeievich SHEVCHENKO (Игорь Сергеевич ШЕВЧЕНКО)
Acting Prosecutor of Sevastopol. Actively implementing Russia’s annexation of Sevastopol.

The two organisations which are the subject of EU sanctions are PJSC CHERNOMORNEFTEGAZ and FEODOSIA. The Russian backed Crimean Parliament claimed the assets of both companies, effectively confiscating them.  

Transliteration from Cyrillic to Latin script

When transliterated into English/Latin script, Russian names can take on a slightly different spelling and this is worth noting for screening purposes. For example the name Viacheslav Ponomariov could also be written as Vyacheslav Ponomayov – the letters Y and I can be interchangeable. The name Oleg Tsariov could be transliterated as Tsariev from the original Царев.

 

 

 

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Iran will go after its money in Turkey

An interesting look at why Iran goes after embezzled state funds but may FCA - Rouhaninot get to the bottom of the bribery network. This story reveals how a the military’s appointed chauffeur to the former head of the Central Bank earned USD20,000 a day as a bagman making illegal foreign currency transfers and went on to make USD14bn in assets. Using his network of international connections, he became a key figure in circumventing sanctions on Iran, facilitating crude oil sales in the 2000s under President Mahmood Ahmedinejad’s regime.

Babak Zanjani, the man at the centre of the case, and a former ally of the regime, is now looking like President Hasan Rouhani’s first scalp in a campaign to clean up Iran’s financial dealings. Transparency brings in foreign investors. Zanjani was named in the European Union’s sanctions on Iran in December 2012

Iranian investigators have travelled to Malaysia, Tajikistan and Turkey to track down Zanjani’s funds. He has been in custody and under interrogation in Iran since January. Corruption is punishable by death in Iran.

Looking too closely at who was involved in a bribery and corruption schemes in any jurisdiction could expose people in the top ranks of government and where their hands have been. Those in power will carefully protecting their position and reputation.

To learn more about this case, read this analysis.

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Anti-corruption activist on trial in China

Zhao Changqing is the third campaigner to appear in court this week as part of government FCA - Zao Chankingcrackdown on activists.
A Chinese anti-corruption campaigner has gone on trial in Beijing, according to his lawyer, joining two others who appeared in court this week as China’s government cracks down on activists.

Zhao Changqing, 45, faces a possible five-year prison sentence for supporting activists who unveiled banners in Beijing calling for government officials to disclose their assets – despite not being present, Zhang Peihong, his lawyer, said on Thursday.

Zhao is associated with the New Citizens Movement, a loose-knit network of campaigners against corruption, among other issues. China jailed a founder of the movement in January, and more than 10 other members have been tried.

Zhao pleaded not guilty to a charge of “gathering a crowd to disrupt public order” for his alleged involvement in three small-scale protests in Beijing, which saw activists unfurl banners, Zhang said.

“[Zhao] didn’t disturb public order in any way, he didn’t even appear on the scene of the protests, because he was worried about his family,” he said, adding that the hearing lasted around three hours.

Fellow anti-corruption activists Ding Jiaxi and Li Wei were also put on trial this week over the protests.

China’s ruling Communist Party is in the midst of a highly-publicised anti-corruption campaign, which President Xi Jinping has pledged will target both high-ranking “tigers” and low-level “flies” in the face of public anger over the issue.

But the party has cracked down harshly on independent activists who have the same goals, viewing independently organised anti-corruption protests as a challenge to its rule.

Zhao was previously jailed for his role as a leader during the 1989 pro-democracy protests at Tiananmen Square, and has served more than eight years in jail for his continued political campaigning.

A court in Beijing sentenced Xu Zhiyong, a legal campaigner and a founder of the New Citizens Movement, to four years in prison in January for his role in the protests.

The verdict was condemned by the US and the European Union. Xu’s lawyers said the trial was subject to political interference, and appealed, with a court set to announce its decision on Friday.

Source: AlJazeera

 

 

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A very sour note: Vietnam doles out death sentences to corrupt bankers

“In Vietnam, executions have historically been gruesome. A firing squad stuffs the convicted’s mouth with lemons. Then, if customs described by Death Penalty Worldwide are true, he’s tied to a pole and shot by five to seven men. “As the prisoner is dying,” the organization reports, “an officer fires a pistol shot through the condemned’s ear.'”
Duong Chi Dung , 56, former chairman of Vinalines, and his accomplices listen to the verdict at a local People's Court in Hanoi on December 16, 2013. Vietnam, on December 16, sentenced two former top executives at scandal-hit national shipping company Vinalines to death for embezzlement as authorities try to allay rising public anger over corruption.  (Vietnam News Agency/AFP/Getty Images)

Source: The Washington Post

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How to use a 500 euro note

While anti-money laundering professionals chuckled when the European Central Bank announced the highest denomination Euro note back in 1999,  organised criminals rubbed their hands together with glee.FCA - Hiding 500euronotes

The EUR500 is one of the world’s highest value single denomination notes in circulation. Notoriously to difficult to spend – shops do not like them – or to find – although there were 594m in circulation in 2011, most European citizens have never seen one – they provide criminals with a fantastic conduit for moving large amounts of dirty cash in a relative small vessel.

High value notes

The EUR500 note is not the highest value note in circulation globally. That honour goes to two tied Asian currencies: Singapore‘s and Brunei’s. The SGD10,000 and BND10,000 (USD7,900) are in circulation in both countries. Their enormous value, compared to their next most valuable note in circulation – CHF1,000 (USD1,128), makes them very appealing to anyone who usually spends this much on a handbag, for example, or a watch. But these notes are used in limited territories.

FCA - SGD10k

Another factor which makes the EUR500 so useful and vulnerable to misuse its geographical reach. It is the national currency of 18 European Union member states and it is traded in neighbouring non-Euro zone countries. As the world’s second largest reserve currency after the US dollar and the second most traded currency, it has a thriving black market for euros reflects this. The currency is accepted under the counter in Argentina, Nicaragua and  Venezuela, that I have read about, so it is probably used all over South America. Photographs taken of a raid on a raid on a drug trafficking operation in Mexico showed Eeuro notes, albeit in a far smaller amount, piled up next to the Benjamins. It is used in Nigeria and Algeria and the rest of Africa. Although euros are not widely used for savings in Russia, the recent round of sanctions has raised interest in the currency.

Bulk cash smuggling

Woman carrying cereal box contained EUR500 notes

Woman carrying cereal box contained EUR500 notes

Bulk cash smuggling is a method of illegally moving large amount of cash across borders. In Europe, criminals used to employ people to walk across frontiers between countries carrying large amounts of undeclared francs, Deutsch marks or pesetas, for example. Travellers and students were often employed to  smuggle cash in bulk.  A backpack can carry quite a bit of cash, and if you replace the GBP50 notes – the largest denomination note in the UK – for the EUR500 and you can shift eight times more much moolah. Incidentally, UK wholesalers stopped buying and selling EUR500 in 2010. The image on the right shows a woman in London caught by a UK law enforcement surveillance operation carrying EUR300,000 in 500 notes stuffed into a cereal box. Read the BBC’s full story here.

This info graphicFCA - how big are 500Euros shows the physical space and weight of GBP1m in EUR500s compared to GBP20s; there is a huge difference.

Unfamiliarity breeds contempt

Despite the large, and at one point disproportionate, amount of EUR500 notes in circulation there is still some difficulty in spending them at retailers. European retailers have been known to refuse EUR500 and EU200 notes. Known incongruously as Bin Ladens – because everyone has heard of them but few have ever seen one and the notes cause suspicion when they do appear. Advice for travellers is to exchange a EUR500 for EUR50s. Visitors to Russia are advised to bring euros for exchange into Russian roubles upon arrival.

Numbered days?

During a speech given in 2013, the ECB chariman made a passing2 mention of phasing out the EUR500 note, but there have been no further announcements. This may be because the idea is not on the table for discussion, or it may have a more strategic purpose. If the ECB announces plans to withdraw the note, mountains of untaxed and illegal EUR500s will slowly start to drift back into circulation and the owners of the funds may never be identified. However, a sudden crack down on EUR500 notes would force the owners of stockpiled 500s to come forward or risk losing their fortunes. Anyone with a legitimate reason for sitting on a cereal box stuffed with 500s for example – such as not trusting the banks to keep their money safe – would surely come forward, provide their legit reason to the bank and exchange their currency for lower denominations.

Organised criminals and major tax dodgers would think twice about doing this as they might struggle to come up with a plausible reason for sitting on cash. They may also reach for the lawyers and accountants to help them devise slightly more obscure and quick methods of reintegrating their ill-gotten gains.

 

 

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Ukraine: Russia sanctions’ fallout and Latvian measures

A few new stories this morning highlight different aspects of the Ukrainian crisis  how the threat of sanctions is being perceived.

Firstly, EU and US sanctions placed on Russia could have wider reaching consequences, one Kremlin aide told the press. If Russia is prohibited by law from using USD, the worlds reserve currency, it would be unable to payback loans made in USD and ultimately may have to use another settlement currency.

The threat of sanctions is being downplayed by Russia and language used even has echoes of the old

English: Vice President Richard M. Nixon and S...

English: Vice President Richard M. Nixon and Soviet Premier Nikita Khrushchev at the Kremlin. NARA. Special Media Archives Services Division (Still Pictures). RG306-RMN-1-21 (Photo credit: Wikipedia)

Cold War. Nikita Khrushchev is often misquoted as telling Western Ambassadors in 1956 “We will bury you“; his words “Мы вас закопаем” (My vas zakopayem) are better translated as we will dig you in, or even we will outlive you.

The Kremlin aide in this comment mentions Russia’s excellent “relations with our partners in the east and south” and is confident about Moscow’s ability to reduce economic dependence on the West to nothing, even profiting from the situation.

The effect of sanction of global financial markets could be further reaching than any previous similar measures, as discussed by the Midnight Breakfast blog. Ukrainian dependence on EU and US funding could be a great drain on both economies. EU dependence on Russian energy (Putin turned the gas off on Ukraine in January 2006, when temperatures in Kiev plummet below zero) would give Russia great bargaining power.

Meanwhile, the Latvian government has taken legal steps towards issuing asset freezes and travel bans against certain Ukrainian citizensLatvia is a Baltic Sea country and former Soviet State which is now pat of the EU and, since January 2014, trades in EUR.

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Sanctions: EU heads meet to discuss Ukrainian sanctions, PEP names discussed

The Crimean crisis gained considerable ground over the weekend, as Russian military troupes seized control of the Black Sea peninsula, the Russian naval fleet’s stronghold on the Black Sea. The EU has responded by calling an emergency meeting of Heads of State in Brussels to discuss the latest developments in Ukraine and how to facilitate the necessary de-escalation of the situation. John Kerry, the US envoy will land in Kiev for talks with leaders today, as announced on Twitter.

International envoys to Kiev

As of Tuesday, the US, backed by some Eastern European nations and Sweden, wants to impose punitive measures on Moscow and Washington is reportedly reviewing its trade packages with Moscow. The US, via the Office of Foreign Assets Control, has mentioned imposing diplomatic – travel,communications, closing embassies – and economic – trade, account and asset freezes, transaction prohibitions – sanctions against Russia if it does not pull out of the Crimea. FCA - KYIV Sanctions banner

The Foreign Ministers of France, Germany, Italy and Spain are downplaying trade sanctions in favour of halting travel visa easing rules with Russia. It is notoriously difficult, still, to get a visa to travel independently and without a planned itinerary in Russia. Reciprocally, the EU makes acquiring a Schengen visa difficult for average Russians. Oligarchs, however, appear to have no difficulty in getting visas to stay in the UK.

UKs embarrassing damage limitation

The UK’s position on Russian sanctions was leaked in a document on Monday this week. Unsurprisingly, but rather disappointingly nonetheless, Number 10 Downing Street is carefully trying to figure out how it can limit the damage EU sanctions may cause to the Russian owned billions floating around the City of London. This must have been quite a snub to the EU, coming only days after HSBC in London revealed its plans to circumvent EU bonus rules.

One of the UK government’s objectives was noted in an exposed secret document as: “Not support, for now, trade sanctions … or close London’s financial centre to Russians.”

Ukrainian cash flows

While the political games are playing out in cabinet rooms, banks and money laundering reporting officers should be on high alert for funds surging out of the Ukraine or transferring between the accounts of Ukrainian politically exposed persons (PEPs).

Yanukovich and Sons,

Yanukovich and Sons,

Switzerland, Liechtenstein and Austria have already frozen accounts linked to ousted President Viktor Yanukovich and his son Aleksandr (also spelled  Oleksander) and 12 other Ukrainians. Prosecutors in Geneva are investigating transactions between firms connected to Aleksandr in Ukraine, Switzerland and the Netherlands.

Austria has frozen the assets of  18 Ukrainian citizens including Viktor Yanukovich, “former chief of staff Andriy Klyuev, but not his brother Serhiy.” In the same Reuters’ article, one veteran Austrian banker estimated that while Austria is of interest, far more Ukrainian money has been placed in Switzerland and the UK.

Names

The EUObserver portal posted a list of potential sanctions targets last week. Importantly, this is not the final list of targets; the identities of the individuals sanctioned by the EU will appear in the EU’s official journal once they had been decided. Economic and financial sanctions from the EU could include export and/or import bans (trade sanctions which may apply to specific products such as oil, timber or diamonds), bans on the provision of specific services (brokering, financial services, technical assistance), flight bans, prohibitions on investment, payments and capital movements, or the withdrawal of tariff preferences.

The list includes 38 names of individuals suspected of using force against the Ukrainian people in the recent revolution and members of the so-called Yanukovich ‘familia’ – a close group of contacts which surrounded the ex-President – suspected of embezzling more than EUR9bn from the national coffers since 2010.

Anyone reading the list for information should bear in mind the following caveat:

“The following names were given to this website by Ukrainian civil society activists and opposition leaders, some of whom advised the EU diplomats who drew up the draft list of eight names. EUobserver does not know who is currently designated in the confidential EU text.”

 

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