Multinational Banks Tied to Russian Mercenary Highlight Global AML Woes

Two multinational financial staples came under fire last week following the release of leaked documents revealing that these major institutions inadvertently processed payments on behalf of companies controlled by heavily sanctioned, late Russian military leader and oligarch Yevgeny Prigozhin. The Center for Advanced Defense Studies (C4ADS) – a non-profit research organization reporting on global conflict and transnational security issues – recently released a report in which it alleged that in 2017 JPMorgan Chase and HSBC, two of the world’s largest financial institutions by total assets, processed multiple transactions on behalf of a Sudanese mining company used as a front under the control of Prigozhin. These transactions were ultimately tied to the purchases of Chinese industrial equipment to back the wartime efforts of the notorious military group founded by Prigozhin. All told, the transactions facilitated by JPMorgan Chase and HSBC effectively allowed this private military company (PMC) to continue their destabilizing activities unimpeded in spite of being heavily sanctioned by both American and international governments bodies.

History will remember Prigozhin, who perished in 2023 while attempting a rebellion against current Russian President Vladimir Putin, as the mastermind behind one of the most notorious and merciless military coalitions of the modern age, PMC Wagner Group. His militant operation is widely viewed as a proxy of the Russian government that had long allowed the Kremlin to maintain plausible deniability with their international counterparts regarding the countless war crimes (including mass executions and other atrocities) that the group committed on the government’s behalf. These unfavorable activities also included utilizing their resources and manpower (in excess of 50,000 total personnel) to back Russia’s invasion of Ukraine in 2022. Wagner’s growth and ability to sustain its longevity however came from contract work performed for oppressive regimes across Africa. It was there that the group began garnering international attention when information spread that they were razing villages to the ground, engaging in human rights violations that included the rape and mass-murder of African citizens, and undermining democratic institutions by backing the hostile government establishments that hired them for the better part of the last decade. In return for their “services” over this period, both Russian and Wagner-linked companies have been provided privileged access to the continent’s natural resources, including gold and diamonds, which have further allowed them to evade international sanctions. The Russian military has also been gifted access to various strategic locations throughout Africa such as airbases and ports they could utilize to continue their calculated international operations.

Given their growing international reputation for wrongdoing, the U.S. government had sanctioned the Wagner Group and multiple associated entities as transnational criminal organizations in 2023 in an effort “to limit the Prigozhin criminal enterprise’s ability to profit from its operations in Africa”² while also limiting the Kremlin’s ability to acquire much-needed arms and additional support to propel their war machine. The United Kingdom also moved to designate Wagner as a terrorist organization in 2023. These efforts did not stop Wagner from working around these restrictions however, with the group capitalizing off of the exploitation of various networks of financial services (of both the licit and illicit variety) and utilize multiple avenues of transportation to move supplies and generate added revenue to fund their operations.

Yet in spite of the growing international attention being paid to Russia’s involvement across the continent, unwary and underprepared western banks ultimately became primary targets utilized to facilitate payments that enabled PMC Wagner’s early operations in Africa to continue. These developments point directly to the ongoing issues facing regulators and financial service providers alike at the global scale. Theoretically the series of financial activities taking place in high-risk jurisdictions across Africa should have served as a red flag in itself. The group – operating behind a front company or not – should have been fairly easy to avoid for any financial institution taking their anti-money laundering and sanctions screening requirements somewhat seriously. While there remains no evidence that either bank was aware that they were handling transactions from PMC Wagner Group, one would assume that banks as large and notable as JPMorgan Chase and HSBC would be among the group of firms with the financial wherewithal to maintain increased precautions when handling suspicious transactions. Apparently not.

In response to these reports, each bank has taken a different approach with respect to their respective PR stance, though somewhat predictably neither firm has chosen to take accountability to this point until more tangible evidence is brought to the table. HSBC chose the route of issuing a cliché statement on the findings in which they stated that they are “deeply committed to combating financial crime and to the integrity of the global financial system,” while adding that their company has “invested significantly in building and maintaining an effective control framework to detect and mitigate this risk.” This investment now seems questionable at best.  JPMorgan took a more bold strategy in vehemently denying these claims – this in spite of invoices that do exist linking the firm to payments sent by Meroe Gold (the Sudanese front company) from a local bank account via JPMorgan Chase as an intermediate bank in New York to a seller in China.¹ “After a review of the limited details shared with us, we have not found any records matching those transactions”, they said.¹

Global RADAR will provide updates on new developments related to these allegations in the weeks to follow.

Citations

1. Johnson, Miles, et al. “Yevgeny Prigozhin Secretly Used JPMorgan and HSBC for Wagner Payments.” The Financial Times, 24 Sept. 2024. 
2. Patta, Debora, and Sarah Carter. “How Russia’s Wagner Group Funds Its Role in Putin’s Ukraine War by Plundering Africa’s Resources.” CBS News, CBS Interactive, 16 May 2023.