Russia and Eastern European Clients in the AML/Sanctions Crosshairs...Again!!

Forensic & Litigation Consulting

September 1, 2015

Map of Ukraine borders outlined in red and the land in green with word Ukraine in the middle.

The UK’s apparent willingness to do business with individuals and their companies from Russia and Eastern Europe makes life difficult for Money Laundering Reporting Officers (MLRO). The UK government recently indicated its intention to clamp down on real estate and complex structures, but will those intentions stick? Here, we explore the challenges of doing business with ‘persons’ originally from those jurisdictions.

MLRO under fire

The recent case in Jersey, AG v Jardine, in which a MLRO was prosecuted for failing to report potential money laundering suspicions, has brought into sharp focus some core AML compliance challenges.

The Jersey legislation under which this prosecution was brought is consistent with the UK proceeds of crime Act. The case involved the handling of an application on behalf of a Ukrainian politically Exposed person (pEp) and funds indirectly routed through a company incorporated in Belize via a trust company based in cyprus. The prosecution argued that as the application and funds originated from a pEp the application should have been treated as suspicious – not just high risk and subject to monitoring. Mrs Jardine was the MLRO of the Jersey-based financial institution where the application was made and which received the funds in question. Mrs Jardine and her employer undertook a risk-based assessment of the application but with no clear connection between the applicant and the source of funds, they were returned and the application did not proceed further. It was argued that in the circumstances, there were reasonable grounds for suspicion and the MLRO was therefore obliged to make a report to the authorities, which she failed to do.

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