Apparently leaked records have revealed that the Russian cross-border payments group A7 may have moved as much as USD6.9 billion through the international financial system, using false documents and accounts, and corporate entities linked to Hong Kong, the United Arab Emirates, and other trading hubs.

This case provides a timely warning for international companies as to how sanctions, money laundering and asset-concealment risks arise not just from obviously prohibited counterparties. Such threats can also lurk in apparently legitimate arrangements that hide the true parties, source of funds, or commercial purpose of a transaction.

SVA would note that standard compliance systems, and simple database checks, will not guard against such risks, and can even create a false sense of security – especially in instances where counterparties are wilfully blind to, or complicit in, the threats in question.

Companies need to guard against such risks, to investigate suspected fraud, financial crime and sanctions-related concerns, and to reclaim losses. SVA’s specialists can advise companies and institutions on how to respond to these newer and more dangerous threats.

The A7 case

According to the available details, A7 relied on a sophisticated and falsified documentation system, and on networks of intermediary companies in the United Arab Emirates, Hong Kong, Kyrgyzstan and Indonesia, to facilitate the movement of exceptionally large sums through international banks such as Standard Chartered and Citigroup.

These transactions seemingly helped A7 gain access to international banking and settlement channels, thereby circumventing sanctions and other restrictions imposed by US and other states. As such, the case has illustrated how carefully constructed corporate structures and falsified documents can obscure the origins and purpose of funds.

A new challenge

The A7 case is of further note as it sits alongside a broader effort by Russia, China and other states to develop financial arrangements outside the US dollar system. Such initiatives have expanded rapidly in recent years, driven by Moscow’s need to work around sanctions, and by Beijing’s desire to reduce exposure to US pressure; this case may prove to be part of that broader financial infrastructure.

Asia is significantly exposed to such risks. Asian businesses routinely operate across borders, perhaps by manufacturing in China, Vietnam, Indonesia, or elsewhere; by structuring holding, treasury or other services through Hong Kong or Singapore; and by channelling funds across offshore jurisdictions, such as the BVI or Cayman Islands.

Asian businesses also generally conduct business in US dollars. Moreover, the growth of the regional trade, wealth-management and payment and digital asset markets has raised the speed and complexity of cross-border financial activity – just as geopolitical fragmentation and divergent regulatory and enforcement priorities are adding to the risks.

Beneficial ownership: the economic reality

Given these threats, firms need to work hard to distinguish between legal rights, beneficial ownership, and actual operational control.

The investigation of such complex issues is best handled by organisations with SVA’s experience. Businesses cannot rely purely on digital databases to identify risks, not least as a company’s shareholders may reveal little about direction, economic benefit, or the movement of funds.

A clear understanding requires deeper analysis of the wider commercial structure, including consideration of where revenue is generated, how funds move across a network of companies, and whether a transaction is commercially credible.

Relevant inquiries might include a clear-eyed review of directors, authorised signatories, shareholders, corporate service providers, and the comparison of relevant findings against other details, such as addresses, telephone numbers, email domains, litigation records, and financing arrangements.

Inconsistencies between payments and trade

Another core indicator is a mismatch between payment activity and underlying trade or service. Again, identifying such issues requires experienced investigators with transferrable experience.

After all, value can move through inflated, duplicated or circular invoicing, related-party transactions, intercompany loans, and a transfer of goods or inventory that does not make commercial sense.

A meaningful appraisal should thus include examination of payment instructions, invoices, shipping documents, customs details, and the parties’ known commercial activities.

Reliance on third parties

Businesses also need to be mindful of how the use of third-party intermediaries, or structures can serve to distance parties from a transaction, to subvert relevant rules and restrictions, or to hide the person exercising control or receiving benefit.

Trusts, private wealth structures and holding companies, in particular, require contextual analysis. Their existence need not indicate malfeasance, but they do make it harder to identify the assets in question or the key decision makers.

Establishing their relevance can require careful scrutiny of corporate records, litigation filings, financing documents, public disclosures to stock exchanges, and other details.

A diversification of assets

Of additional note is the growing use of non-traditional asset classes in Asia.

SVA’s fraud and asset search investigations now routinely identify the use of cryptocurrencies, stablecoins, exchange accounts and other digital assets and payment systems in efforts to hide, hold and manage wealth – as noted in a prior SVA briefing, “Technology-Enabled Fraud Poses a Growing Risk to Businesses ‒ a Warning for Company Directors”.

In theory, such assets are traceable, with blockchain mechanisms providing a degree of transparency. In reality, though, the identification of the person controlling a digital wallet is far from straightforward.

There are often hard-to-trace “off ramps” used by sophisticated operators. Following funds that move into non-custodial wallets is especially difficult, and generally requires correlation with other evidence, such as exchange and device records, payment trails, communications, and other data.

Gold sales can create comparable challenges – a theme explored in SVA’s earlier “briefing on Hong Kong’s expanding bullion market”. Gold is portable and easy to convert into new assets; once it is refined, aggregated or re-exported into a more complex chain of transactions, establishing provenance can be extremely hard.

The associated risks become especially acute where digital and other payment systems, opaque ownership structures and fragmented regulatory frameworks intersect with commodity or precious metals transactions.

In such instances, companies may need to assess not only the immediate counterparty, but also the broader transaction chain, the source of funds, and, of course, any potential recovery options.

How SVA can assist

SVA supports clients in responding to complex financial crime, fraud and counterparty risk matters across Asia, and internationally. Our work includes investigative due diligence services, fraud and corporate investigations, and international asset tracing and recovery assistance.

SVA’s inquiries start with a focused debriefing and preliminary fact appraisal, enabling clients to establish the issues, preserve key evidence, and prioritise the most urgent lines of inquiry.

SVA then conducts coordinated cross-border investigations, identifies relevant parties and assets, assesses exposure and recovery prospects, before providing clear findings and practical recommendations for next steps.

SVA’s independent inquiries often range across mainland China, Hong Kong, Singapore, Southeast Asia, Australia, Canada, the US and European states, and offshore jurisdictions. We stand ready to be of assistance.

SVA

SVA (www.stevevickersassociates.com) is an independent specialist risk mitigation, corporate intelligence and financial crime investigative company.

The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.

To discuss relevant concerns about financial crime, please contact us at the numbers below.