Good morning. Russia's war effort in Ukraine might be faltering, but the Kremlin has a high-tech superweapon to neutralize Western sanctions.

   -- Russia's payment work around: It is called A7. The state-backed payment 
      network moves money in and out of Russia, defying U.S. and European 
      efforts to isolate Moscow from the global banking system. A7 helps Russia 
      pay for everything from military-drone parts to luxury cars to imported 
      fruit, using a mix of cryptocurrency transactions and more-traditional 
      banking methods, researchers say. 
 
   -- Its origins: Behind its rapid rise is a convicted money launderer. A7's 
      founder, Ilan Shor, is best known for his role in one of the biggest bank 
      heists in history: a complex scheme to extract $1 billion from three 
      banks in Moldova, one of Europe's poorest countries, in 2014. A Moldovan 
      court convicted him of fraud and money laundering for helping orchestrate 
      the theft, but he fled the country while under house arrest. Shor has 
      denied the allegations and called them politically motivated. 
 
   -- Growing business: Founded less than two years ago, A7 says it handles 
      nearly 20% of payments in Russian foreign trade, or more than $100 
      billion annually. President Vladimir Putin gave it his blessing last year, 
      taking part by video link in the opening of an A7 branch office. 
 
   -- Moving beyond Russia: Now, A7 is planning to take its services global and 
      fulfill Putin's vision of an alternative financial system outside the 
      control of Washington or Brussels. Having recently opened its first 
      offices abroad, in Nigeria and Zimbabwe, A7 says it is eyeing expansion 
      into Latin America and the Middle East. Executives don't hide their 
      desire to serve countries seen as pariahs in the West. 

In case you missed it: The latest Risk Journal podcast features Amazon's security chief explaining why artificial intelligence is accelerating both attacks and defenses, and a breakdown of new European AI rules. Listen to new episodes every Friday on Apple Podcasts, Spotify and Amazon.

Compliance

Russian, Iranian sanctions legislation headed to U.S. House

U.S. Senators voted 86-11 to pass a measure expanding sanctions on Russia and Iran, Risk Journal's Max Fillion reports, teeing up the legislation for House lawmakers to consider when they return from their August recess (free link).

What's in the bill? The legislation, named after the late Sen. Lindsey Graham, would introduce new sanctions on Russia's leadership and allow President Trump to place tariffs on countries that purchase its oil and abet its sanctions evasion. The bill would allow Trump to enact tariffs of up to 100% on goods imported from the top five purchasers of Russian crude oil and gas, and the top five countries found to aid Russia's energy sanctions evasion.

FTC will stop bringing 'disparate impact' cases

Risk Journal reports: The Federal Trade Commission said it would stop bringing disparate-impact lawsuits against businesses, saying the legal theory, used to bring bias cases regardless of a company's intent, likely runs afoul of the U.S. Constitution (free link).

What is the theory? Under the disparate-impact theory, differences in outcomes between two groups are presumed to emerge from bias. For example, if an auto lender tends to charge Black customers higher interest rates than it charges Asian customers, a disparate-impact case can be brought regardless of the lender's actual intent.

Potential impact: The FTC's move, announced Friday, could change compliance policies for consumer-facing businesses across the economy.

   -- The crypto industry suffered a significant blow after the Senate delayed 
      a vote on the Clarity Act until after its August recess. The industry's 
      No. 1 priority is essentially out of time. 
 
   -- Secretary of State Marco Rubio announced new sanctions designations on 
      Cuba aimed at broadening sanctions pressure on Cuban officials, security 
      forces and their supporters, Risk Journal reports (free link). 
 
   -- A federal appeals court ruled that the full $629 million British American 
      Tobacco paid to settle North Korea sanctions violations must go into a 
      federal fund for victims of state-sponsored terrorism (free link). 
 
   -- The Federal Aviation Administration has ordered the inspections of Boeing 
      737 MAX jets for cracks in the body of the aircraft, among the latest 
      quality issues to affect the plane maker. 
 
   -- Britain's sanctions authority has added the Kurdistan Export Pipeline to 
      a list of energy projects exempted from Russia sanctions, the latest 
      expansion of a license built around Rosneft's stake in the pipeline 
      carrying Iraqi Kurdish oil to Turkey (free link). 
 
   -- The Senate confirmed Todd Blanche as attorney general in a 50-49 vote, 
      placing a trusted ally of President Trump atop the Justice Department. 
 
   -- U.S. regulators have rejected Bunq's request for a U.S. banking license, 
      citing supervisory and compliance concerns, in a setback for the Dutch 
      fintech company's plans to expand in the country. 
 
   -- Revolut said it received a full banking license in France from the local 
      regulator and the European Central Bank, as the digital bank looks to 
      continue to expand across Europe. 

Amount the Trump administration agreed to provide to companies producing batteries and critical minerals, adding to a wave of government cash aimed at weaning the U.S. off Chinese suppliers.

Risk

U.S. intel links Russia to explosive drone at German airport

An explosive-laden drone discovered at an airport in Germany this week likely belongs to the Russian government, according to U.S. officials familiar with intelligence reports about the incident.

The drone was spotted on the tarmac at Leipzig/Halle Airport in eastern Germany on Tuesday night in a secure area near a Ukrainian cargo jet, prompting the airport to shut down for the night. The country's interior minister said the incident represented "a new level of danger," pointing to a sophisticated foreign actor as the potential culprit.

What the attack could mean. Russia's alleged link to the incident comes as U.S. intelligence found Russian President Vladimir Putin poses an increased threat to NATO's eastern flank. New U.S. intelligence reports say Putin could try to test NATO's resolve with a limited assault on an allied country in the next few years, The Wall Street Journal reported. The assessments envision scenarios ranging from a cyberattack to a small-scale land incursion.

Trump's solar tariffs likely to raise costs for manufacturers, consumers

The Trump administration's latest tariffs on imports of solar panels and their component parts will likely raise costs for manufacturers and consumers, reports Risk Journal's Yusuf Khan, despite more panel production moving to the U.S. in recent years (free link).

The administration announced a 15% tariff Thursday on imports of solar-energy raw materials and equipment. Companies that commit to building manufacturing facilities in the U.S. can apply for exemptions from the levies, which take effect on Dec. 4, according to the proclamation.

   -- Iran's new demands to reopen the Strait of Hormuz have complicated 
      President Trump's efforts to find an off-ramp from the conflict. 
 
   -- Israeli Prime Minister Benjamin Netanyahu rejected President Trump's Gaza 
      peace plan, which calls for Hamas to disarm and Israel to withdraw in 
      tandem. 
 
   -- OpenAI is pausing some activities involving an upcoming 
      artificial-intelligence model, Astra, after internal evaluations led the 
      company to conclude it "cannot rule out critical cyber capabilities," the 
      company said in a blog post on Friday. 
 
   -- The leaders of Turkey, Saudi Arabia and Pakistan signed a mutual defense 
      agreement to establish closer military ties. 
 
   -- China is shifting from producing cheap consumer goods to exporting 
      higher-value intermediate and capital goods that underpin global 
      manufacturing. The shift threatens advanced economies, and Germany now 
      imports more advanced capital goods from China than it exports there. 
 
   -- Spain introduced new border checks on arrivals from Italy on Saturday, 
      escalating a bilateral dispute over migration policy. 
 
   -- Ukrainian drone attacks have struck almost two dozen warehouses of the 
      Russian online retailer Wildberries. Retailers have lost as much as $5 
      billion in inventory since the attacks began, Data Insight has estimated. 
 
   -- Apple has been testing memory chips from China's CXMT across product 
      lines including iPhones and MacBooks, according to people familiar with 
      the matter, as the U.S. company addresses a memory crunch during the 
      artificial-intelligence boom. 
 
   -- Puerto Rico has begun rationing water across the island amid an intense 
      drought, leaving some residents without supply for 48 hours at a time. 

Events

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