Page 80 - ACAMS-Today-V20N3

[ ASPECTS OF APAC ]
Unlike AML laws, sanctions requirements change rapidly with the international political situation
Money laundering risk
Because of the similar purposes or means, violations of sanctions terms are usually accom- panied by the occurrence of money laundering. The money laundering risk is not a standard sanctions compliance risk, yet the two often occur at the same time.
In March 2017, BIS fined Access USA Shipping LLC, a Florida-based U.S. shipping company, $27 million for violating the EAR. From April 2011 to 2013, the company allowed their overseas customers to buy goods that were intended for export by forging the delivery address, falsifying export control documents and using straw buyers. For example, rifle scopes were described as “sporting goods” and rifle stocks and grips were listed as “toy accessories” to avoid the export control of the U.S. government.5
In practice, sanctions compliance risks and money laundering risks often occur simultane- ously. Forging receiving addresses, falsifying import and export documents and using straw buyers are all classic money laundering methods. At the same time, the export of weapons to countries on the restricted list is also the focus of dual-use goods in money laundering risk management.
Characteristics of sanctions compliance risk
Closely linked to international political situations
On November 4, 1979, a hostage crisis broke out in Iran. On November 14 of the same year, President Jimmy Carter issued Executive Order No. 12170, marking the beginning of U.S. sanctions imposed on Iran.
After President Barack Obama took office, he adopted a contact policy with Iran, hoping to improve diplomatic relations between the two countries. On July 14, 2015, the U.S., China, Russia, Germany, France, the United Kingdom and Iran agreed on the Joint Comprehensive Plan of Action (JCPOA). But on May 8, 2018, President Donald J. Trump withdrew from the JCPOA and began imposing sanctions on Iran again.6
In 2020, some Chinese banks received inquiries from corresponding banks asking them to explain their involvement in financing Iranian infrastructure on construction projects from three years ago. In 2017, these businesses (handled within the framework of the JCPOA), were not of any concern in the political environment at that time. But after President Trump had a different approach to Iran, these businesses were required to clear their business with the newly sanctioned country.
Unlike AML laws, sanctions requirements change rapidly with the international political situation. In some cases, transac- tions will become noncompliant with very short notice. For example, letters of credit may face different sanctions environ- ments, so banks must repeatedly test sanctions compliance during different procedures of the same business.
Huge economic losses
On April 16, 2018, the U.S. Ministry of Commerce issued a notice that the government would prohibit ZZ Telecom Equipment (a Chinese telecom equipment company) from purchasing sensitive products made by American enterprises in the next seven years. According to the U.S. Commerce Department, between 2010 and 2016, ZZ Telecom Equipment transferred products from the U.S. to Iran and hid these businesses by setting up straw companies.
80 [ JUNE-AUGUST 2021 ]