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Working with the risk intelligence group in a multinational tech corporation, FiveBy was able to identify red flags and methodologies used by local resellers to circumvent embargos, and provide guidance on how to prevent this in the future.

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Working with the Anti-Piracy Services team in a multinational software company, FiveBy led the analysis of fraudulent product key distribution and activation to reduce the use of non-genuine and fraudulent software.

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Contacted by an online gaming provider with concerns about fraudulent use of their platform, FiveBy delivered an immediate incident response including a full assessment of fraud against the business.

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Are you worried about business risks posed by global sanctions and anti-money laundering regulations? ThreatSTOP has partnered with FiveBy, a leading Risk Intelligence and Fraud consultancy with a team of sanctions experts, to offer an automated, customizable Office of Foreign Assets Control (OFAC) compliance enforcement solution that can be easily integrated into your existing network devices – including DNS servers, firewalls, routers, and even your endpoints. With One-Click Sanctions Compliance, you’ll gain access to comprehensive OFAC sanctions coverage which network enforcement solutions to now include sanctioned entities and their subsidiaries.

Navigating Compliance Challenges in a Changing World

 Businesses today face mounting challenges in safeguarding their firms amid an ever-evolving sanctions landscape. Rapid changes in compliance requirements, driven by geopolitical conflicts, impact internet traffic and business dynamics. Since the invasion of Ukraine, US sanctions on Russia have skyrocketed, with over 2,500 new Russian-related targets added to the Treasury Department’s SDN (Specially Designated Nationals) list. Engaging with these entities or their subsidiaries can lead to penalties, investigations, negative publicity, and business disruptions. However, identifying subsidiaries, scattered globally, requires extensive investigative and digital forensic research, intensifying the complexity of compliance.

To overcome these obstacles, compliance officers and businesses must adapt by identifying sanctioned entities and subsidiaries, and strictly enforcing all compliance requirements. Staying ahead of evolving sanctions and skillfully navigating compliance is critical to protect firm integrity and reputation.

One-Click Sanctions Compliance: Expertise Meets Technology

Introducing One-Click Sanctions Compliance: a powerful solution by ThreatSTOP and FiveBy. Automate compliance with sanctions regulations and protect your network effortlessly. The ThreatSTOP platform blocks machine-to-machine connections with sanctioned countries, entities, subsidiaries, and seized territories, preventing prohibited business engagements. Customize enforcement policies to fit your specific needs, allowing you to selectively block countries and sanctions regimes while enabling traffic on an entity-specific basis.

Save time and resources by automating compliance efforts, freeing you to focus on business growth. One-Click Sanctions Compliance provides data-backed evidence of your commitment to compliance, blocking and logging communication attempts to prevent violations. It offers internal and external network communications tracing for quick decision-making and action, enhancing your risk mitigation efforts.

Interested in instant sanctions compliance? Get One-Click Sanctions Compliance installed today.

Talk to an Expert

 

ThreatSTOP is a cloud-based automated threat intelligence platform that converts the latest threat and sanctions data into enforcement policies, and automatically updates your firewalls, routers, DNS servers and endpoints to stop attacks before they become breaches.

For more information, go to www.threatstop.com or contact sales@threatstop.com.

FiveBy is a leading Risk Intelligence and Fraud consultancy. ​When it comes to risk and fraud management, FiveBy’s industry experts bring strength and clarity to protecting our clients’ profits and managing their reputations. This can be done through one-time risk assessments, or ongoing managed services.

For more information, go to www.FiveBy.com or contact info@fiveby.com

Seattle, WA

Globally, digital commerce fraud is expected to surpass $48 billion in 2023.  According to a recent report, every one dollar in fraud experienced by a company will cost that company $3 in recovery and expenses.

In addition, the speed with which fraud is mutating to evade detection is alarming many companies engaged in global ecommerce. Now with the ability to employ artificial intelligence (AI) tools in fraud, the fraudsters themselves will be able to scale and continue to evolve their methods.

At the same time, the rise of ecommerce is providing small and midmarket businesses with the opportunity to expand to new markets.  Selling products and services in international markets requires accepting payment methods common in those markets.

Although paying with VISA, PayPal, or MasterCard is common in the Americas, there are many other payment methods that customers use in international markets.  Sellers can face the challenge of safeguarding against fraudulent activities in unfamiliar payment methods.

This situation poses a dilemma.  On one hand, merchants want to streamline transactions and accept as many potential purchases as possible, and on the other hand, they must guard against fraudulent transactions.

 

For this reason, the best way for businesses to expand to new markets is to find a way to leverage services that bring together international payment processing, and cutting-edge, AI-enabled fraud detection that is fine-tuned for their business.

Worldline, one of the largest global digital commerce payment processors, and FiveBy are working together to provide payment processing and consultative services to implement the Microsoft Dynamics 365 Fraud Protection (DFP) platform for their clients.  Microsoft’s stand-alone fraud protection platform is rich in AI and machine learning to protect merchants from various schemes.

According to Kelly Harvin, global head of channel partnerships at Worldline, “Merchants seeking best in class fraud prevention can benefit from the trifecta of the consultative expertise provided by FiveBy, the single source solution of Microsoft DFP, and the seamless integration of DFP with Worldline’s payment processing.”

John Solheim, FiveBy Chief Commercial Officer reported, “We have witnessed significant fraud prevention discoveries using DFP, even during a trial engagement.”  Worldline and FiveBy offer a combination of expertise and digital commerce experience, to combine adaptive AI with a global fraud protection platform.

Discover more about how to implement a strong international ecommerce solution to prevent the increasing threats of fraud, at FiveBy.com.

FiveBy Solutions is a leading Risk Intelligence and Fraud consultancy. FiveBy’s industry experts bring strength and clarity to protecting our clients’ profits and managing their reputations. For more information, go to www.FiveBy.com or email johnsol@fiveby.com

Worldline [Euronext: WLN] helps businesses of all shapes and sizes to accelerate their growth journey – quickly, simply, and securely. With advanced payments technology, local expertise and solutions customized for hundreds of markets and industries, Worldline powers the growth of over one million businesses around the world. www.worldline.com

 

 

Fentanyl. 2 mg. A lethal dose in most people. Courtesy: Drug Enforcement Administration in the public domain.

US companies transacting with chemical and pharmaceutical firms in China must conduct thorough due diligence research on their Chinese counterparts to mitigate the risk of unknowingly engaging with an entity involved in the production of fentanyl or its precursor chemicals. The White House has made combatting fentanyl a major priority, citing the dangers of illicit synthetic opioids which are easier to produce and transport and are significantly more lethal. US companies should expect increased governmental oversight and possible changes to US designations and other restrictions against Chinese firms.

  • China is the main—albeit indirect—source of fentanyl entering the United States, and despite Beijing’s ostensible efforts to control fentanyl-type drugs and related chemicals, they continue to make their way into the hands of Mexican drug cartels and subsequently into the United States.
  • As the opioid crisis tragically claims more American lives, US lawmakers are increasingly targeting Chinese entities involved in the production of fentanyl-related chemicals by introducing legislative proposals to sanction Chinese chemical manufacturers and law enforcement officials who neglect to combat the trafficking of these substances.

China now ranks as the fourth largest supplier of medicines to the United States, largely because of Beijing’s efforts to advance its domestic pharmaceutical sector by reducing the cost of drug development and aligning its regulatory framework with global standards. China’s efforts have led to the outsourcing of active pharmaceutical ingredients (APIs) to foreign countries, with China supplying the US market with 13 percent of its total APIs. Interspersed with the legitimate pharmaceutical trade with China is the shipment of fentanyl powder, precursor materials for manufacturing fentanyl, unregistered pill presses, stamps, and dies. Many of these shipments end up in Mexico, where they are used by the Sinaloa Cartel and Cartel Jalisco Nueva Generacion (CJNG)—the primary smugglers of illicit fentanyl to the United States—to manufacture fentanyl and then transported into the country.

  • The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) in May sanctioned Youli Technology Development Co., Ltd. and Yason General Machinery Co., Ltd. for their involvement in shipping pill press machinery to entities known for counterfeit pill manufacturing in the United States and Mexico.
  • The Justice Department recently charged four China-based chemical manufacturing companies with crimes related to fentanyl production and trafficking. One of the companies, Amarvel Biotech, shipped more than 200 kilograms of precursor fentanyl chemicals from China to the United States.

Despite US pressure, China is unlikely to crack down on its exports of fentanyl-related products without receiving concessions from the United States, including sanctions relief. Beijing has recently demanded that the United States remove export restrictions against China’s Ministry of Public Security’s Institute of Forensic Science—which was included on the Bureau of Industry and Security’s Entity List in 2020—in exchange for cooperation on the fentanyl crisis, suggesting that China exploits its international counternarcotics efforts to achieve its economic and foreign policy objectives. The severe punishments the Chinese government metes out for drug crimes internally compared with relatively light penalties imposed for mislabeling of precursor chemicals for overseas shipments further supports this assessment.

China’s emphasis on growth of the biotech sector has created a powerful industry that local officials may be hesitant to disrupt, making the likelihood of prosecutions of drug-related crimes, such as mislabeling of products shipped abroad, less likely. In addition, deteriorating US-China relations, China’s assertion that the US opioid crisis is the result of internal failings, and Beijing’s refusal to acknowledge the role its pharmaceutical companies play in the illicit drug trade puts the onus on US firms to research the activities of potential clients and business partners in the pharmaceutical sphere, which can be challenging since companies that are involved in the illicit fentanyl trade can also be involved in legitimate pharmaceutical business.

US companies in the chemical and pharmaceutical sectors that transact with Chinese entities should employ robust compliance teams to ensure they are not implicated in the illicit fentanyl trade, exacerbating the opioid crisis. Linguistic and jurisdictional expertise, as well as monitoring media coverage of current and potential business partners, are critical to ensuring that Chinese companies with ties to illicit fentanyl production are identified. Monitoring reports from government agencies involved in efforts to combat the fentanyl crisis can also help compliance teams identify red flags that could indicate trouble.

  • Fentanyl originating from China is primarily shipped in small quantities with high purity (above 90 percent) through intermediary transit countries and mislabeled or stated as not being for human consumption to avoid detection.
  • There is evidence of fentanyl operations moving from China to India as certain precursor chemicals become harder to obtain in China. Understanding the means through which these substances are shipped and the ways illicit actors adapt to regulations can help point to illegal operations.
  • To avoid detection Chinese and Mexican criminal networks also engage in trade of wildlife products, timber, and real estate, avoiding formal banking systems through in-kind trades. If a potential business partner in China is also involved in the wildlife trade or real estate, and accepts virtual currencies as payments, their activities may warrant a closer look.
  • Banks and financial institutions should be aware of certain typologies related to the trafficking of fentanyl and other synthetic opioids, including online sales from Chinese companies to risky jurisdictions in Mexico, where transnational criminal organizations purchase fentanyl and its precursors for manufacture and sales to the United States. The use of front companies operating in a chemical manufacturing field or shell companies that do not appear to be related to the pharmaceutical industry to collect payments should also raise red flags.

The Drug Enforcement Administration in May flagged the use of social media applications and encrypted communications platforms in fentanyl trafficking. Research into social media accounts of Chinese pharmaceutical companies and their employees could provide insights into possible illicit activities. Expert analysis can also provide insights into supply chains that could involve money laundering and chemical precursors.

Expert FiveBy analysts can help conduct the necessary due diligence while adapting to constantly changing US sanctions and export controls, as well as financial methodologies that could help your firm or financial institution avoid possible involvement in the fentanyl trade and the consequent financial penalties and reputational risk.

For a free consultation, click below.

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This week’s regulatory compliance note—a tri-seal effort between the Commerce Department’s Bureau of Industry and Security (BIS), the Justice Department, and OFAC—summarized the procedures for voluntary self disclosure of potential violations of sanctions and export controls. The note also highlighted that disclosures can result in significant mitigation of civil or criminal liabilities, while also helping expose threats to US national security and foreign policy objectives.

  • The compliance note highlights that prompt, voluntary self-disclosures could result in a reduction—and, in some cases, a waiver—of the potential criminal liability.
  • If a company voluntarily self-discloses potential criminal violations, fully cooperates, and remediates the causes of violations, the Justice Department generally will not seek a guilty plea, and the company likely will receive a non-prosecution agreement and avoid a fine, although the note stresses that a non-prosecution agreement may not apply if aggravating factors exist.
  • A disclosure only to OFAC or BIS, but not to the Justice Department’s National Security Division will not qualify for the non-prosecution policy.
  • OFAC and BIS both stress that a company will significantly reduce its penalties if it discloses, researches, and mitigates the root causes of their violations in a timely manner.

Aggravating factors could include failure to have a compliance program, willful ignorance of US sanctions and export controls, or attempts to hide violations.

A thorough look at settlements reached between regulators and violators shows that voluntary self-disclosure is a significant mitigating factor in reducing fines and penalties. A settlement between British American Tobacco in April showed the company not only to have engaged in egregious conduct, transacting with North Korean entities and generating revenue for the Kim regime, but also failed to disclose the conduct and attempted to conceal it. The violations resulted in more than $508 million in fines.

In contrast, a settlement with Microsoft that same month showed that the company not only voluntarily disclosed possible violations that occurred between 2012 and 2019, but also implemented significant remedial measures upon discovery of the apparent violations, resulting in a roughly $3 million fine—a fraction of the maximum penalty.

The note highlights the importance of having a robust and comprehensive compliance program, with timely disclosure and remediation being part of the process. A self-initiated lookback at potential violations, an examination of the root causes of the violations that includes data, linguistic, jurisdictional, and legal analysis, and appropriate enhancements to existing compliance efforts can not only mitigate penalties, but also help US firms and financial institutions avoid violations in the first place.

FiveBy has the capabilities, certified sanctions specialists, data and forensic analysts, and cultural and linguistic experts to help your firm or financial institution examine root causes of possible violations, structure a comprehensive self-disclosure to regulators, and enhance compliance efforts to help avoid inadvertent violations in the future. Click below to request a free consultation.

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Photo by Jingming Pan on Unsplash

The US State, Treasury, Commerce, Homeland Security, and Labor Departments, along with the United States Agency for International Development (USAID), today issued an advisory to warn US persons and companies about the involvement of illicit actors in the gold trade in sub-Saharan Africa. Issued in coordination with sanctions against four companies linked to US-designated Russian warlord Yevgeny Prigozhin, the advisory encourages US firms and individuals to strengthen due diligence practices in an effort to prevent malign actors from exploiting the sector, which is essential to the livelihoods and communities in the region.

The US government encourages responsible investments in the sector and highlights the significant potential to further develop the gold sector in the region by improving efforts to incorporate artisanal and small-scale gold mining activities into the formal gold trade in Sub-Saharan Africa, developing refining capabilities in the region, and other related activities that can help develop the industry in the region. The advisory urges responsible investments in all aspects of the gold sector in Africa, including mining, trading, refining, manufacturing, and retail.

But significant risks do exist, and US entities and individuals must be cautious to perform adequate due diligence to identify suspicious behaviors that could indicate sanctions evasion, money laundering, financing of terrorism, forced labor and other human rights abuses, corruption, smuggling, and environmental dangers to mitigate those risks.

Expert risk analysts can help your firm identify risky behaviors and file suspicious activity reports (SARs) when appropriate. Recognizing risk indicators is critical to protecting your business and preventing reputational damage. Red flags associated with money laundering, labor and human rights abuses, environmental damage, and corruption must be identified and examined. The use of cash-intensive businesses and operations, fraudulent declaration of gold as scrap, involvement of high-risk individuals, sanctioned individuals or entities, or government officials flagged for corruption, can all be indicators of illicit activities in the mining sector.

Due diligence should include a comprehensive examination of labor practices to steer clear of links to worker exploitation, including children, which is unethical and can cause significant reputational damage. Thorough research can also help US firms avoid being subject to Withhold Release Orders (WROs), which authorize the US Customs and Border Protection (CBP) to detain questionable goods at all US ports of entry unless the importer can prove the absence of forced labor in its shipment’s supply chain, which can negatively impact profits.

Specific due diligence focused on environmental concerns to avoid commercial and reputational risks associated with contributing to environmental degradation is also critical. Industry participants should identify these risks in their supply chains and work to find alternatives to mercury and cyanide used in gold mining, which damage the environment.

The designation of several entities linked to Wagner chief Yevgeny Prigozhin today targets entities involved in mining operations in the Central African Republic (CAR) and Sudan. Since several Wagner entities were designated in 2020, Prigozhin and the Wagner Group have continued to actively participate in Russia’s war in Ukraine and in various engagements across Africa, which help the Kremlin fund its aggression.

This activity has resulted in extreme violence, civilian casualties, and extensive corruption. Recent reporting indicates that the Wagner Group is working to expand its gold mining and processing operations in N’dassima in CAR, potentially earning the organization significant new income. The Wagner Group has prevented officials from visiting the region where this mine is located, raising further concerns about the extent of its operations and impact on local communities. This also allows the Wagner Group to extract and export gold outside of official channels, thus depriving CAR of royalties and other revenues.

FiveBy assesses that engagement with expert analysts to identify red flags associated with gold mining in Sub-Saharan Africa, mitigate reputational and business risks, and restrict illicit actors access to this lucrative source of funds is critical to protecting your firm from possible financial and even criminal penalties.

For a free consultation, please click below.

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Courtesy of kremlin.ru and licensed under the Creative Commons Attribution 4.0

The Organized Crime and Corruption Reporting Project (OCCRP), along with partners in the United States, the UK, and others, today published its first series of articles on the Rotenberg Brothers – close friends and enablers of Russian president Vladimir Putin. Boris and Arkady Rotenberg have been sanctioned by the United States since 2014, after Russia invaded and illegally annexed Crimea, and despite being sanctioned by the West, the brothers were able to maintain their luxurious lifestyles and move probably billions of dollars in assets all over the world using a complex web of intermediaries, enablers, shell and front companies, and secretive jurisdictions.

OCCRP’s investigative series is based on a new leak of more than 50,000 emails and documents from a Russian management firm that worked for the Rotenberg brothers.

FiveBy Director of Risk Intelligence, Irene Kenyon, is quoted in the first article of the series, “Leaked Emails Reveal How Putin’s Friends Dodged Sanctions With Help of Western Enablers,” highlighting that Cyprus is a jurisdiction that has been a popular destination for Russian elite to hide assets and establish secretive entities to help obscure beneficial ownership.

More reporting on the Rotenberg brothers will be published by OCCRP and its partners in the coming days.

FiveBy experts are often asked to provide insights on risk-related news, industry trends, and other sanctions and money-laundering issues.

To access FiveBy’s expertise on sanctions, money laundering, and other risks that can impact your business, please click below.

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