OPINION OF THE WEEK: Geopolitics Turmoil Puts AML, KYC Under Spotlight

Tom Burroughes Group Editor October 18, 2023

OPINION OF THE WEEK: Geopolitics Turmoil Puts AML, KYC Under Spotlight

After the 7 October attacks on Israel, and the subsequent events, I try to examine what people working in the financial services industry will need to consider, particularly if or when sanctions and other economic measures come into effect.

A week after Hamas attacked and killed Israelis, causing the greatest loss of Jewish life since the Holocaust, there has been barely time for those who track the wealth management industry to consider how these terrible events indirectly affect it. But, however unseemly it might appear to think about such matters against the unfolding grim news, think about them we must.

There are several oddities about the situation. First, while the price of crude oil rose slightly after 7 October’s atrocities, markets appeared calm, even as the likely shape of Israel’s actions in response became a little clearer. (As I write, commentators are still focusing on exactly when the Israel Defence Forces started full ground operations in Gaza, a task widely considered to be costly to life, as urban warfare usually is.) Second, I haven’t yet been overwhelmed by commentary about the macroeconomic impact of these attacks on Israel and its counter-attacks on Gaza, beyond a general sense that risks are rising, and investors might want more compensation for it. Maybe a period of rising interest rates has already prepared the way. This has cooled certain markets, such as private equity and venture capital, for example. 

And, on a third point, if there are KYC and anti-money laundering experts out there who are trying to work out how all this affects them and money flows, I haven’t yet seen much evidence of what they are doing. Maybe more information will emerge. 

Let’s consider the AML and KYC points. Iran – a country widely believed to be bankrolling Hamas and Hezbollah – is sanctioned by the US and the European Union, among other jurisdictions. Over a decade ago, I recall how sanctions' violations led the US to hit a number of banks with big fines. In one case, the US Department of Justice fined BNP Paribas, to take the largest single example, almost $9 billion for breaches connected to Iran, Cuba and Sudan. (That fine even caused political anger in Paris about the scale of the punishment. A number of other lenders were also hit.)

More recently, in September, the UK, France and Germany, European signatories to the Joint Collective Plan of Action nuclear deal with Iran in 2015, decided to keep certain sanctions previously imposed on Iran. Given current events, such sanctions could be widened. The conflict also raises the question of the use, or possible misuse, of cryptocurrencies. A story in the Wall Street Journal (10 October) raised the troubling fact that cryptocurrencies may have been used to move funds to Hamas and other groups. The paper said three groups received large amounts of money in this way, according to a review of Israeli government seizure orders and blockchain analytics' reports. This story is unlikely to be an isolated case. 

There is, meanwhile, the matter of Qatar, which at times has been at odds with neighbours in the Gulf such as the United Arab Emirates. UK Prime Minister Rishi Sunak has been urged, for example, to impose sanctions on Qatar, an energy-rich state (from which the UK imports natural gas), because certain Hamas leaders are permitted to live there. It is unclear what might happen. The Gulf chessboard of shifting alliances is one that those concerned with financial compliance must track daily. 

Let’s remember that in September 2020, Israel signed the Abraham Accords, as they were called, with the UAE and Bahrain. At the time, this news service spoke to an understandably excited Citi Private Bank about the immense two-way capital and trade opportunities that this would encourage, and there was, until last weekend, the tempting prospect of a Saudi-Israel pact that would have radically opened further opportunities. Hamas’s attacks were almost certainly designed to wreck this. 

Keeping up with compliance and changing rules is going to be difficult, but firms must err on the side of caution in the current environment. And, as I am sure is already the case, banks which have staff and clients in countries such as Israel must take all necessary steps to keep them safe. 

More broadly, the world is clearly entering a very dangerous situation, or perhaps what was always in the background is now evident. The outcome of the Russian invasion of Ukraine remains unclear. Policymakers in Washington DC, London and elsewhere are keeping a wary eye on Taiwan and whether China will take it over by force. The world is still, let’s not forget, trying to recover from the calamity of Covid-19. The euphoria after the Berlin Wall fell in 1989 seems a long time ago to this present writer.

Our TV and computer screens are likely to be filled for many weeks with images of war and destruction. All this will remind wealthier individuals that they need to do what they can to alleviate the suffering, and I certainly expect conversations with those in the philanthropy advisory space to touch on this topic. Sadly, there is likely to be no shortage of calls for aid, from many quarters.

A final point: while good journalism requires me to be careful about how I comment on recent events, what happened on 7 October will rightly live in infamy.  

As with all my editorials, if you want to respond, email me at

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