Week of Monday, March 7, 2022 | Issue 5
Jennifer Kelly, Illicit Finance and Economic Threats (IFET) Team
Cryptocurrency tokens[1]
Date: March 11, 2022
Location: Global
Parties involved: The Food and Agriculture Organization (FAO); Egypt; Turkey; Bangladesh; Iran; Lebanon; Tunisia; Yemen; Libya; Pakistan; Russia; Ukraine; US; Argentina
The event: Poorer countries across North Africa, Asia, and the Middle East are facing a significant food crisis due to the Russian invasion of Ukraine. Egypt, Turkey, Bangladesh, and Iran are heavily dependent on Russia and Ukraine for soil fertilizers and grains including wheat, oats, and buckwheat. The FAO also identified Lebanon, Tunisia, Yemen, Libya, and Pakistan as relying on Russia and Ukraine for wheat. Without exports from Russia and Ukraine, together accounting for one-third of global grain exports, global food prices will rise, with the global number of undernourished individuals predicted to increase to 13 million in the 2022-2023 period. Other countries that are capable of producing the affected food supplies, including the US and Argentina, will be unable to meet the global needs as they are expected to limit exports to meet domestic demands.[2] Russia has imposed an export ban on certain sectors including agricultural materials in response to Western sanctions.[3]
Analysis & Implications:
Poorer populations in North Africa, Asia, and the Middle East will almost certainly not be able to pay increased food costs. Malnourishment will almost certainly lead to health complications such as heart disease, and will likely pressure public healthcare systems. Strained healthcare systems will very likely lead to increased deaths due to a lack in proper care.
After the war, Ukraine will almost certainly not be able to resume the pre-war level of food exports due to a lack of workers who very likely left the country among the millions of Ukrainian refugees, and the conflict’s destruction of production resources. It is unlikely international food trade will return to pre-war levels due to Russia's export bans. Global food costs will likely continue to increase after the war, likely causing hunger among poorer communities in developed countries.
Date: March 12, 2022
Location: United Arab Emirates (UAE)
Parties involved: UAE; UAE-based cryptocurrency firms; Russian cryptocurrency investors; Swiss brokers
The event: Cryptocurrency firms in the UAE are receiving a high volume of requests from Russian clients to liquidate billions of dollars worth of cryptocurrency following the economic sanctions placed on Russia. Some Russians are investing in UAE real estate, and some are converting cryptocurrency to physical money to store elsewhere. Many queries the UAE are receiving have come from Swiss brokers on behalf of Russian clients, who are afraid Switzerland will freeze their assets. Many Russians feel the UAE is a safe haven for their money due to the UAE’s refusal to take a side in the Russia-Ukraine war.[4] The UAE was recently added to the Financial Action Task Force’s (FATF) grey-list for ineffective anti-money laundering and counterterrorism financing regimes.[5]
Analysis & Implications:
Russian oligarchs are likely investing in cryptocurrency to prevent financial losses due to the Russian rouble’s volatility. Easy access to cryptocurrency and the considerable amount of daily cryptocurrency transactions very likely enable Russians to conceal their illicit transactions, including money laundering and terrorist financing. Due to the decentralized nature of cryptocurrency, banks and law enforcement are unlikely to identify and report suspicious cryptocurrency transactions linked to Russians who are sanctioned by Western countries.
Some Russians investing in UAE real estate are likely aiming to conduct money laundering through real estate transactions. Investors are almost certainly manipulating the value of property by selling overvalue, likely without detection from law enforcement. The UAE’s addition to FATF’s grey list likely means law enforcement will aim to strengthen controls to combat money laundering throughout the UAE, including in the real estate market.
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[1] “Cryptocurrency” by WorldSpectrum licensed under Pixabay
[2] Poorer nations in Asia, Africa, Middle East face food crisis: UN, Al Jazeera, March 2022, https://www.aljazeera.com/economy/2022/3/11/food-crisis
[3] Russia hits back at Western sanctions with export bans, BBC, March 2022, https://www.bbc.com/news/business-60689279
[4] Russians liquidating crypto in UAE in hunt for safe havens, Al Jazeera, March 2022, https://www.aljazeera.com/news/2022/3/12/russians-liquidating-crypto-in-the-uae-as-they-seek-safe-havens
[5] Financial crime watchdog adds UAE to “grey” money laundering watch list, Reuters, March 2022, https://www.reuters.com/world/middle-east/fatf-adds-uae-grey-money-laundering-watchlist-2022-03-04/