The Morning Risk Report: Keeping Sanctioned Russian Timber Out of the EU Is Tricky. This Nonprofit Has a Solution.

Good morning. Scientists are embarking on an effort to keep sanctioned Russian timber out of Europe by mapping the unique chemical fingerprints of trees, reports Risk & Compliance Journal’s Dylan Tokar, a process that could be used to vet corporate supply chains for other banned commodities.

• The goal: The project aims to bring science to bear in a fight by companies and governments to stop illegal wood from seeping into timber supply chains—complex, difficult-to-police networks of logging companies, sawmills, wood manufacturers and traders.
   
• Focus on Russia, Belarus: To start, a team led by the Washington-based nonprofit World Forest ID set its sights on sanctions the European Union placed on Russian and Belarusian timber following the invasion of Ukraine. The team analyzed thousands of wood samples of trees, then layered in advanced statistical models and artificial intelligence. The result was a database allowing customs officials and corporate auditors to verify the origin of timber with a simple, lab-based test. 
   
• Who is using it: Although work on the database is ongoing, furniture giant IKEA has already used it to vet suppliers for sanctioned timber after the war forced it to revamp its supply chain. Belgian authorities have also employed it to seize more than 260 tons of illegally shipped Russian timber. 
   
• The implications: If scaled up, the project could have broad implications for how companies source a range of other agricultural commodities, such as cotton and cacao, which have been linked to environmental and human rights abuses.

Former Allianz fund manager pleads guilty to defrauding investors.

A former Allianz fund manager who ran the investment group responsible for steep losses the firm suffered during the 2020 market meltdown sparked by the Covid-19 pandemic pleaded guilty to fraud charges. 

Gregoire Tournant, the former chief investment officer at Allianz Global Investors U.S., pleaded guilty Friday before Judge Laura Taylor Swain in the U.S. District Court for the Southern District of New York to two counts of investment adviser fraud. He also agreed to forfeit about $17 million as part of his plea. He faces up to 10 years in prison and will be sentenced on Oct. 16.

• CityMD has agreed to pay more than $12 million to the Justice Department for allegedly submitting false claims for payment for Covid-19 testing to the Health Resources and Services Administration governmental program for uninsured patients.
   
• Companies in the market for cybersecurity professionals could face a new method of attack, made harder to spot because of artificial intelligence: Hackers posing as job applicants.
   
• A woman who claims she was falsely depicted as a stalker in Richard Gadd’s Netflix triangle hit “Baby Reindeer” has sued the streaming service for defamation and other charges.
   
• Samsung Electronics unionized workers staged what they called the first-ever walkout at the South Korean technology giant since it was founded more than five decades ago, taking a day of paid leave en masse.
   
• If Tesla wins shareholder support for reviving Elon Musk’s 2018 pay package at its annual meeting this week, it raises a $25 billion question: Will the company’s profit take a big hit?

Americans really, really hate inflation—and that’s a big problem for the Fed.

Inflation is still higher than the 2% the Federal Reserve is aiming for, and maybe that is OK. That is, if we could just put aside the fact that we hate inflation so much.

Fed policymakers are poised on Wednesday to leave their benchmark federal-funds rate steady at the highest level in more than two decades, and inflation is the biggest reason. Their preferred measure of consumer prices, from the Commerce Department, was up 2.7% from a year earlier in April. That marks an improvement from April 2023, when it was up 4.4%, but still doesn’t show the kind of progress investors were hoping for at the beginning of the year, when they were betting the Fed would be cutting by now.

European Union vote delivers shift to right, in blow to French and German governments.

Right-wing parties put on a show of strength in European Union elections, prompting French President Emmanuel Macron to call national elections and underscoring German Chancellor Olaf Scholz’s position lagging behind two rival parties, according to initial projections.

Sunday’s results still appeared to leave the mainstream pro-EU parties with a lock on power in Brussels. The center-right EU political grouping that now leads the bloc looked set to win the most seats in the European Parliament, boosting European Commission President Ursula von der Leyen’s hopes of keeping her job for a second term. She has forged a close working relationship with the Biden administration.

Still, France’s far-right opposition party National Rally looked set to be among the pan-European election’s biggest winners.

• Halfway through the biggest election year in history, the results are in. The verdict: Expect the unexpected and don’t underestimate that voters are people with bills to pay.
   
• The Biden administration is close to finalizing a treaty with Saudi Arabia that would commit the U.S. to help defend the Gulf nation as part of a long-shot deal to encourage diplomatic ties between Riyadh and Israel, U.S. and Saudi officials said.
   
• Risky startups with a flair for digital marketing are using a regulatory exemption that allows them to hype their moonshot products and raise huge sums of money from individual investors.
   
• Extreme weather is disrupting the production of some of life’s great comforts—wine, olive oil, coffee and cocoa. Some of these crops are concentrated in one or two regions, which means wonky weather in one part of the world can have a dizzying impact on global prices.
   
• China’s exports grew at a faster rate in May, thanks to resilient global demand, while import growth slowed.

• A centrist member of Israel’s war cabinet quit the government on Sunday over Prime Minister Benjamin Netanyahu’s handling of the war in Gaza, after a daring Israeli commando mission rescued four hostages but threatened to trip up efforts to end the conflict and free the remaining captives.
   
• Elliott Investment Management has built a stake of nearly $2 billion in Southwest Airlines and plans to push for changes aimed at reversing the airline’s underperformance.
   
• The Texas Stock Exchange is looking to steal New York’s crown as the center of U.S. capital markets. It has a powerful force behind it: red-state frustration with the perceived liberal agenda of Wall Street. But that might not be enough to win business from the New York Stock Exchange and Nasdaq.
   
• Supreme Court justices take pride in a collegiality that transcends their philosophical differences. As the court’s term heads to its close, with pending cases that could remake the presidential election and ethical questions dogging its members, that politesse might be all the nine have left in common.