As the entire US sanctions regime has integral money laundering offence types, when extra-territorial actions involving foreign firms are investigated by US agencies, it is highly likely that sanctions-related offences – which typically carry the highest penalties – are being scrutinised.
It is irrelevant – and highly unwise – to treat money laundering offences in isolation without considering the wider sanctions implications. As US sanctions breaches need only to constitute “apparent violations” for US authorities (comfortably the most punitive in the world) to take enforcement action – firms and their advisors need to consider carefully the real threat of US censure.
In terms of punitive action, the US sanctions playbook can take aggressive action relating to primary and, more worryingly, secondary, “apparent” sanctions violations. In material terms, the risk of ignoring US measures is huge.
From 2008 to 2018, the total US penalties for Sanctions, AML and KYC offences amounted to 91% of all global fines during that period, or $23.52bn, versus a mere $1.7bn levied by the EU. US Sanctions-related fines amounted to a massive 56% of the global total.
This is just the tip of the iceberg – US counter-measures include cutting jurisdictions, firms, entities and individuals off from US dollar transactions, US firms and those who trade with them, and the US market altogether. This can be far more damaging than a multi-million/billion dollar fine.
The major threat facing entities, individuals, firms and jurisdictions is complacency. Pretending that the US “has no jurisdiction outside US territory” is a false and dangerous assumption, and has been proven invalid on numerous occasions. French bank BNP Paribas claimed it had broken no EU nor French law – yet was still fined a massive $8.9bn by the US in 2014 for US sanctions violations.
With so many jurisdictions and regions playing veritable “catch-up” with the fully integrated US Sanctions/AML playbook, the danger is that money laundering offences are treated in isolation, and wider (US) sanctions issues ignored. This can lead to a major under-estimation of the threat of (US) enforcement.
One current example is the Nordic banking scandal which involves alleged illicit transactions via Baltic branches of Nordic financial institutions. In EU terms, this is treated as an alleged “money laundering” incident.
But with wider US investigations ongoing, this will be treated as a money laundering and sanctions issue by the US, as US sanctions violations are highly likely. This is because of the integrated US Sanctions/AML playbook and proximityof such alleged violations to US-sanctioned (“designated”) geographies, individuals, jurisdictions, firms and entities.