27th January 2018
TECH COMPANIES LET RUSSIA PROBE SOFTWARE PROGRAMMES EXTENSIVELY
The Lockport Press and others reports that a Reuters investigation has found that major global technology providers SAP, Symantec and McAfee have allowed Russian authorities to hunt for vulnerabilities in software deeply embedded across the US government. In order to sell in the Russian market, the tech companies let a Russian defence agency scour the inner workings, or source code, of some of their products. Russian authorities say the reviews are necessary to detect flaws that could be exploited by hackers. Tech companies wanting to access Russia‘s large market are often required to seek certification for their products from Russian agencies, including the FSB security service and Russia´s Federal Service for Technical and Export Control (FSTEC), a defence agency tasked with countering cyber espionage.
LETHAL WEAPONS TO UKRAINE: A PRIMER
On 26th January, the Atlantic Council published an article outlining which countries supply what type of weaponry to Ukraine. These include Lithuania and Bulgaria, as well as the US.
THE IMPORTANCE OF TRUSTEE MINUTES: A GUERNSEY VIEW
On 26th January, law firm Ogier published an article which begins by saying that, as a result of today’s climate, in which professional trustees are held to increasingly high standards by regulators, courts and clients alike, the importance of fiduciaries recording their decisions has never been greater. These are divided in the article to fiduciary decisions and regulatory compliance (including for AML/CFT purposes). It concludes that failing to record fiduciary and corporate governance decisions can result in a trust company being criticised and even penalised, but it seems that the degree and extent of record keeping expected is reasonable rather than excessive.
LAUNDERED CASH IN BRITISH COLUMBIA: REPORT DUE IN MARCH
CBC in Canada on 26th January reported that an investigation into the extent of money laundering in British Columbia will also pull back the curtain on whether dirty cash is linked to the province’s booming real estate market. The report, expected early March 2018, was commissioned by the Attorney General following revelations of widespread money laundering in BC casinos. “It’s important that our economy is based on integrity, and that we don’t have an international reputation as a scofflaw,” meaning a jurisdiction where the rules do not apply to white collar crime, fraud, tax evasion, and money laundering, according to the AG. He launched the review after reading a report commissioned by the previous Liberal government about the River Rock Casino in Richmond accepting $13.5 million in $20 bills in July 2015, which police said could be proceeds of crime, where it transpired that the majority of the cash is being presented by people commonly referred to as “high roller Asian VIP clients” and that River Rock was known to have accepted single cash buy-ins in excess of $500,000.
PROMINENT BUSINESSMEN REACH SETTLEMENTS IN SAUDI CORRUPTION PROBE
CNBC reports that several prominent businessmen have reached financial settlements with Saudi Arabian authorities in the kingdom’s sweeping crackdown on corruption, an official source told Reuters. They include Waleed al-Ibrahim, owner of regional television network MBC; Fawaz Alhokair, a major shareholder in fashion retailer Fawaz Abdulaziz Alhokair Co; Khalid al-Tuwaijri, a former chief of the Royal Court; and Turki bin Nasser, a former head of the country’s meteorology and environmental protection agency, the source said.
GANG JAILED FOR FORGING UK IMMIGRATION DOCUMENTS
Sky News on 26th January reported that members of an organised crime gang who conspired to manufacture and supply fake ID documents for illegal immigrants have been jailed for a total of more than 16 years. The Home Office’s immigration enforcement division monitored the gang from late 2015 until June 2017, gathering evidence which ultimately led to the conviction of 7 conspirators from Coventry, Nottingham, Redditch and London responsible for the wide-scale distribution of British passports, British residence permits, degree certificates and Constructions Skills Certification Scheme (CSCS) cards, all of them fake. Prices ranged from £200 for the CSCS card and degree certificates, to £900 for a passport
HOW THE US GOVERNMENT “LAUNDERS DRUG MONEY” FOR ITSELF
An article in the Westender in Australia by a US attorney claims that the US government is profiting handsomely by accepting marijuana cash in the payment of taxes while imposing huge penalties on banks for accepting it as deposits. It points out that 30 states and the District of Columbia currently have laws broadly legalising marijuana in some form. Under federal law, however, marijuana remains a Schedule I Controlled Substance. Under the so-called 2013 Cole Memorandum, the DoJ said it would not prosecute individuals and companies complying with robust and well-enforced state legalisation programs – but on January 4th, the current Attorney General Jeff Sessions rescinded that memo. The article claims that the IRS accepts “tainted” money from the businesses in the payment of taxes, turning it into “clean” money; and it is not an unwitting accomplice to the crime. It says that estimates are that marijuana business owners across the US will owe $2.8 billion in taxes to the federal government in 2018. The government makes a massive profit off the deal, snatching up to 70% of the proceeds of the reporting businesses, the article claims, as opposed to the more typical rate of 30%, by branding marijuana businesses “criminal enterprises” which are not entitled to deduct their costs when reporting their income.
$16 MILLION SOUGHT FROM TEXAN GOLD INVESTOR INDICTED FOR FRAUD, MONEY LAUNDERING
The Austin Business Journal in Texas carried an article about Charles McAllister, the owner of Bullion Direct Inc, an Austin company investing in gold and silver who has been indicted in federal court after the precious metals he was supposed to be protecting on behalf of customers seemingly disappeared in 2015. The indictment aims to recover more than $16 million from McAllister. However, in civil court, Bullion Direct customers claim they have lost $25 million.
BARBADOS AG WARNS OF ESCAPING A BLACKLIST AT A COST
Caribbean Life on 25th January reported that, on the day that the EU released Barbados from its tax avoidance blacklist, the island’s Attorney General has warned of a need to put financial regulatory systems in order because playing ‘catch-up’ can be costly. The article reports that Barbados was dropped from that list on reportedly “following commitments made at a high political level to remedy EU concerns”. Speaking in the island’s parliament, the AG (a former corporate trust lawyer in the BVI) is quoted as saying, “we need to spend the money at this time [to] … strengthen the FSC. Strengthen the regulatory framework, because unless we do it we would continue to be playing catch-up. And when you play catch-up you end up spending hundreds of thousands of dollars flying across to Europe reacting as opposed to having your systems in place”.
ITALIAN MAFIA BOSS PICTURED ON ISLE OF MAN
On 27th January, local media in the Isle of Man reported on a revelation in a BBC documentary that an Italian Mafioso, linked with the theft of 2 Van Gogh masterpieces worth $100 million, has been pictured on the Island. It is said that this is the only known public photo of a Camorra crime boss, Raffaele Impieriale (though no date was given for when the photo was, secretly it seems, taken). The claim featured in ‘Stealing Van Gogh’, a programme which traced the paintings’ journey after they were stolen from a museum in Amsterdam in 2002
The BBC programme is at –
FATF REPORT: FINANCING FOR RECRUITING FOR TERRORIST PURPOSES
In January 2018, FATF released a new report “Financing for Recruiting for Terrorist Purposes”. In its article on the release, law firm Shearman & Sterling say that the Report examines the typical methods of recruitment to terrorist organisations and the costs associated with those methods, that recruitment methods vary from region to region, and that techniques include recruitment via religious groups in some regions and online recruitment via social media in others. The Report also presents case study data on the sources of funds available to terrorist recruiters and the general expenditures involved in the recruitment process. The Report recommends –
- improved inter-agency and international co-operation to share information and analyze suspected recruiters and financial supporters of terrorist organizations;
- that national operational and security agencies engage more with the private sector, non-profit organizations and social media and other Internet providers, by providing better contextual information and guidance to enable those providers to identify the financial flows associated with terrorist recruitment.
The Report says that, while terrorist organisations have different recruitment techniques, depending on whether they are large, small or a dispersed network of individuals, it has identified the most common methods of recruitment used by terrorist organisations and terrorist cells (and their related funding needs) as follows –
- Personal needs of the recruiter and the maintenance of basic infrastructure for the recruitment/facilitation network;
- Production and dissemination of recruitment materials (e.g. online or in print);
- Paying for goods and services to facilitate the new recruits’ early participation in the terrorist organisation (e.g. travel, accommodation costs or payments); and
- Financial incentives provided directly to recruits.
This Report also found that –
- Recruitment activities on the Internet are often very closely linked to appeals for financial assistance to terrorists;
- Recruitment and dissemination of terrorist ideology in prisons and correctional centres is increasing. In one case study, individuals in prison received funding for recruitment activities;
- More information is required on the costs associated with producing high quality recruitment materials such as the online magazines and video games produced by ISIL. The production of these materials, and their continuous availability online, requires a certain level of expertise and equipment which is likely to have some financial implications and could generate a financial footprint; and
- Some terrorist organisations may experience the need for specialists in civilian professions who cannot be recruited on ideological grounds (e.g. engineers, doctors, IT specialists, financiers, professional money managers.). The costs of obtaining and engaging the service of such specialists can easily exceed the salaries of ordinary members.
NEARLY A QUARTER OF UK ESTATE AGENCIES WOULD NOT PASS AML SPOT CHECKS, CLAIM
On 26th January, Property Industry Eye reported that a significant number of estate agency businesses would struggle to pass an AML spot check, while nearly a quarter could be breaking the law because they don’t have an AML officer in place. That’s the warning from identity verification business Credas, which polled 100 estate agency businesses. It found that 22% of those businesses didn’t have an AML officer and processes in place, despite risking potentially large penalties from HMRC for failing to comply with regulations. Credas also claimed that of those surveyed, businesses spend an average of four days per month completing AML checks, with one of the main barriers to completion being cited as getting hold of clients.
EU PILOT ONLINE DRUGS USE SURVEY REACHES 50,000 PARTICIPANT MILESTONE
The European Monitoring Centre for Drugs and Drug Addiction reported that, as of mid-January, more than 50,000 people had already participated in the European Web Survey on Drugs, a pilot project designed to improve understanding of patterns of drug use at European level; which collects information from different groups of drug-users, on topics currently not covered by routine data collection. The project, which started with a first wave of 6 countries in 2016, entered its second phase in late 2017 with an additional 9 countries running the survey. The web-based survey targets people aged over 18 who have used one or more drugs over the last 12 months.
HUGE HAUL OF ELEPHANT TUSKS AND PANGOLIN SCALES IN IVORY COAST
On 27th January, Defence Web reports that around 600 kg of elephant tusks and 600 kg of pangolin scales have been seized in Ivory Coast, ready to be sent to Vietnam and other Asian countries, authorities said. In an operation lasting several days to dismantle a major trafficking network, 6 suspects were arrested.
US OBTAINS SWISS BANK RECORDS FOR GERTLER CONGO CORRUPTION PROBE
On 26th January, the ICIJ reported that a Swiss court has confirmed ongoing criminal investigations into the businesses of Dan Gertler, an Israeli diamond dealer suspected of large-scale corruption in the Democratic Republic of the Congo (DRC). Switzerland’s Federal Criminal Court released a 13-page judgment that details how the US has sought information, including banking records, about Gertler’s business since 2012. His companies appealed a Swiss decision to provide information to the US. The court rejected the appeal and published its decision.
5 MEMBERS OF INTERNATIONAL CONSPIRACY INDICTED IN MORE THAN $9.5 MILLION COUNTERFEIT DOCUMENTS FRAUD SCHEME IN US
On 26th January the US DoJ issued a news release saying that 5 of 6 alleged members of an international criminal conspiracy were arrested and appeared before a court in Dallas on charges related to their alleged roles in an international fraud scheme that has used counterfeit driver’s licenses and counterfeit money orders to obtain monies from victim bank accounts around the US. The indictment alleges that from about April 2013 to December 2017, the defendants conspired with each other and individuals in other countries including Nigeria to obtain money through various acts of fraud. This included posting misleading advertisements of detailed descriptions of job opportunities, such as for mystery shopper positions that were not valid job opportunities. The defendants are alleged to have conspired to pose as employers of these fraudulent job opportunities to lure victims, who resided throughout the US and Canada.
LEADER OF FRAUDULENT MEDICAL DEVICE SCHEME IN US PLEADS GUILTY
In a news release on 26th January, the US DoJ reports that a South Dakota man, Robert “Larry” Lytle, 82, pleaded guilty today in connection with a scheme to defraud consumers by selling light-emitting devices known as the “QLaser System” as a treatment for more than 200 different diseases and disorders, after a 3-year effort by the DoJ and the US Postal Inspection Service to stop distribution of the fraudulent devices to consumers.
US TREASURY SANCTIONS ADDITIONAL INDIVIDUALS AND ENTITIES IN CONNECTION WITH THE CONFLICT IN UKRAINE AND RUSSIA’S OCCUPATION OF CRIMEA
On 26th January, the US Treasury designated 21 individuals and 9 entities under 4 Executive Orders related to Russia and Ukraine, including 3 individuals and 2 entities related to Russia’s transfer of 4 turbines made by a Russian-German joint venture to Crimea. It targets 11 Ukrainian separatists –
- Ekaterina Matyushchenko
- Natalya Nikonorova
- Vladimir Pavlenko
- Elena Radomskaya
- Aleksandr Timofeev
- Elena Kostenko
- Svetlana Malakhova
- Pavel Malgin
- Dmitry Ovsyannikov
OFAC is also designating 3 individuals and 4 entities who have supported the illicit coal trade –
- ZAO Vneshtorgservis
- Vladimir Pashkov
- Gaz-Alyans, OOO
- Oleksandr Melnychuk
- Doncoaltrade Sp. Z O O
- Serhiy Melnychuk
- Ugolnye Tekhnologii, OOO
The designations also involve 4 other Russian officials and two entities –
- Andrey Cherezov
- Evgeniy Grabchak
- Aleksandr Pentya
- Evro Polis Ltd.
- Bogdan Kolosov
- Instar Logistics
The sanctions also targets a construction entity and 2 associated individuals operating in Crimea –
- VAD, AO
- Valeri Abramov
- Viktor Perevalov
OFAC is also designating 1 individual and 2 entities related to Russia’s transfer of 4 turbines made by a Russian-German joint venture to Crimea –
- Limited Liability Company Foreign Economic Association Technopromexport (Technopromexport LLC)
- Sergey Topor-Gilka
- PJSC Power Machines
OFAC also identified 12 subsidiaries of Surgutneftegaz as being 50% or more owned by Surgutneftegaz, which was added to the Sectoral Sanctions Identification List (SSI List) in September 2014. The subsidiaries identified were already subject to the same restrictions as their parent entity.
See also –
NHS COUNTER FRAUD AUTHORITY AND SUPPLEMENTAL DIRECTIONS 2017
On 26th January the UK Department of Health and Social Care issued directions that set out the functions and reporting requirements of the NHS Counter Fraud Authority (NHSCFA). NHSCFA was established on 1st November to carry out the Secretary of State’s counter-fraud functions in relation to the health service in England. he directions to NHS Trusts and Special Health Authorities describe their role in the prevention, detection and investigation of fraud in the health service, following the establishment of the NHSCFA.
UK GOVERNMENT LAUNCHES “LANDMARK” REVIEW INTO PRESCRIPTION DRUG ADDICTION
On 26th January the UK Government blog reported that Public Health England is to undertake a review that will consider why:
- Prescribing of addictive medicines has increased 3% over 5 years
- 1 patient in 11 (8.9%) is prescribed one of these medicines
- Anti-depressant prescriptions in England have more than doubled in the past 10 years
- A recent survey also found that 7.6% of adults had taken a prescription-only painkiller not prescribed to them
PHE will assess the scale of the problem, the harms caused by dependence and withdrawal, how they may be prevented and the best way to respond.
UK RENEWS DESIGNATION OF ETA
On 25th January, HM Treasury renewed the designation of Euzkadi Ta Askatasuna (ETA) under the Terrorist Asset-Freezing etc. Act 2010 with effect from 22nd January.
UK MAGNITSKY SANCTIONS
The European Sanctions Blog reports that the coming into force of certain provisions of the Criminal Finance Act 2017 means that the UK will be the 5th country with ‘Magnitsky-style’ sanctions in force; the others being the US, Canada, Lithuania and Estonia. Section 13 of the Act allows for the imposition of such sanctions on the grounds of gross human rights violations and abuses.
SWISS TAX DODGE GETS US MAN 6 MONTHS JAIL AND TO PAY $14 MILLION
Customs Today on 27th January reports that a US resident has been sentenced to 6 months in prison for failing to report to the US Treasury more than $28 million in funds he maintained in secret bank accounts in Switzerland. According to federal investigators, Hyong Kwon Kim, a citizen of South Korea, lived in the US as a legal permanent resident while running family businesses. He was also ordered to pay $14 million in penalties and restitution of $250,000.
UNODC LAUNCHES HANDBOOK ON CHILDREN RECRUITED AND EXPLOITED BY TERRORIST GROUPS
On 26th January the UN Office for Drugs and Crime published the Handbook on Children Recruited and Exploited by Terrorist and Violent Extremist Groups: The Role of the Justice System, the first UN publication on the topic. It aims at providing guidance to law- and policy-makers, as well as practitioners on the treatment of children. The publication focuses on the prevention of child recruitment; justice for children; and rehabilitation and reintegration.
The handbook is at –
QUESTIONS OVER NEW INTERIM PRESIDENT OF INTERNATIONAL BOXING BODY
Inside the Games website reports that Gofur Rakhimov, last month linked by the US Government to organised crime, has been named interim President of the International Boxing Federation (AIBA) after Franco Falcinelli stepped down from the position. Rakhimov has been repeatedly been named as an Uzbek mafia boss in the media with strong links to organised crime, although he has never been prosecuted of anything.
See also –
CREDIT SUISSE PLEADS GUILTY TO FOREX PRICE-FIXING IN US
Monde Visione reports a US DoJ news release of 26th January that BNP Paribas USA Inc, a subsidiary of BNP Paribas SA, has pleaded guilty to participating in a price-fixing conspiracy in the foreign currency exchange (FX) market. It is the 6th major bank to plead guilty in the ongoing investigation. BNPP USA has agreed to pay a criminal fine of $90 million. Both the government and BNPP USA have agreed to recommend no probation, in light of, among other factors, the bank’s substantial efforts relating to compliance and remediation.
MALTA ASKS ABOUT INCREASING NUMBER OF PASSPORTS FOR SALE
On 27th January, Politico reported that the Maltese government is asking its citizens via SurveyMonkey whether they’d be happy to lift the cap on the number of passports that can be sold to oligarchs from Russia and the Middle East. The scheme netted Malta €277 million last year, with Henley & Partner, the firm behind the scenes, making €13 million.
PONZI SCHEME IN KENYA AND ITS RUSSIAN CREATOR
On 27th January the Daily Nation carried an article on frauds in Kenya that have apparently ensnared thousands. These schemes include the MMM Ponzi scheme run by Russian Sergey Mavrodi, and pyramid schemes like the best-known Decci and Clip Investment Sacco Ltd. – the offshore connections of which were uncovered by the Panama Papers. Mavrodi is described as a former Duma deputy (MP) in Russia, and his first bogus scheme collapsed in 1994, after which he allegedly bribed his way into obtaining a Duma seat and accompanying immunity from prosecution, only to later becoming the first deputy to be stripped of his seat by fellow members. He then went to the US, created a fake online gambling business called Stock Generation before being arrested in 2003. He created MMM, in several forms, after being released – with versions in African and Eastern European states.
CHINESE REGULATOR FINES 12 BANKS FOR ILLEGAL TRADING
Reuters reported on 27th January that China’s banking regulator had fined 12 Chinese lenders after uncovering illegal trading of $1.25 billion of bank bills that showed the lack of internal controls and poor compliance at the institutions involved. The article explains that a bank can issue a bill to a payee and promise to pay up by a certain date, with the agreement based on trust. Ahead of the due date, a bank may choose to sell it to another bank.
IRAN OIL MINISTRY EMBEZZLEMENT CASE
Iran Daily on 27th January reported that Iran’s Oil Minister had said that he fired several managers at the Department of Oil Exploration following an embezzlement case valued at around $22.7 million. It is said that the decision on the dismissals does not mean that the individuals were involved in the crime but because of their failure to properly fulfill their tasks. However, an official in the accounting department said to be involved had fled Iran and authorities are seeking Interpol assistance.
MONEY LAUNDERING AND THE FUSS OVER ATM WITHDRAWALS IN HONG KONG
The South China Morning Post carried an opinion piece on 27th January saying that Hong Kong banks have been hit by an unprecedented HK$20 billion per month surge in suspicious ATM withdrawals, exposing a loophole that could deal a blow to Beijing’s battle against illicit capital flight via its notorious underground banking system.
CHARITY SHIPMENTS TO NORTH KOREA STOPPED AT CHINESE PORT, AID GROUPS SAY
In a report dated 28th January, the South China Morning Post reported that 2 shipping containers full of hygiene kits languish for weeks in a Chinese port, unable to reach North Korea. It says that they intended for people with tuberculosis or hepatitis, not to advance nuclear or missile programmes, but Chinese customs officers see something objectionable in the cargo: nail clippers. After 2 weeks, Chinese customs gave special permission for the shipment to proceed. A Quaker charity group claims that it cannot even send shovels, or anything made of steel.
UK NUCLEAR SAFEGUARDS BILL: IMPACT ASSESSMENT
The Department for Business, Energy and Industrial Strategy in the UK has released the Impact Assessment for nuclear safeguards under the Nuclear Safeguards Bill dated 8th December that explains that the civil nuclear sector is subject to robust international non-proliferation measures, which include nuclear safeguards. Nuclear safeguards are reporting and verification processes by which states demonstrate to the international community that civil nuclear material is not diverted into military or weapons programmes. These safeguards consist of processes including nuclear material accounting and inspections at civil nuclear sites. Nuclear safeguards arrangements are essential to enable the UK to engage in civil nuclear trade. It explains that the options considered were to adopt domestic standards of nuclear safeguards of broad equivalence to those adopted by Euratom; or meet nuclear safeguards standards, without replicating Euratom’s standards. It was the first option that was chosen.