11th February 2018
UNRAVELLING THE “KPMG AUDIT SCANDAL” IN THE US
In a 15-minute podcast, Michael Volkov explains the background to the news that, in January 2018, the US DoJ and SEC announced criminal and civil charges against 5 KPMG partners/officials and a Public Company Accounting Oversight Board employee arising from sharing of confidential audit inspection information by PCAOB employees with KPMG audit partners. A further defendant, a KPMG official and former PCAOB employee plead guilty and agreed to co-operate with the government investigation. The 5 defendants are charged with multiple counts of fraud and conspiracy. PCAOB is a non-profit company that reports to the SEC on inspections of the audit performance of registered accountancy firms. The allegations are that KPMG employees used information to “game” the inspection procedure, and obtain confidential PCAOB inspection plans. Seemingly, KPMG fired everyone involved when the scheme came to light in 2017.
12th February 2018
IN LIBYA, WERFALLI CONTINUES EXECUTIONS IN DEFIANCE OF ICC ARREST WARRANT
On 9th February, Bellingcat reported that while Mahmoud Werfalli is wanted by the International Criminal Court (ICC) for the war crime of murder he has continued conducting executions in Libya. It explains that Werfalli is commander of the Saiqa Brigade, a unit attached to Mr Haftar’s LNA which controls large swathes of primarily eastern Libya. The LNA rejects the internationally recognised government in Tripoli and instead supports the separatist authorities in eastern Libya. It is widely believed Mr Haftar will run as a candidate in the elections that the UN wants to hold at the end of the year.
INTERNATIONAL HOTEL CHAIN ‘UNWITTINGLY ACCEPTED MILLIONS OF EURO IN IRISH DRUG MONEY’
On 11th February, The Journal in Ireland reported that an unnamed international hotel chain is co-operating with international police forces, as well as the Criminal Assets Bureau over allegations that it may have unwittingly accepted drug money from Irish criminals as an investment in new properties. It received significant investment from a corporation which appeared to be legitimate. However, it is suspected that the corporation served as a conduit for money laundering linked to the Kinahan drug cartel.
NO WRONGDOING IN $15 MILLION OFFSHORE TRANSFERS TO ERDOGAN FAMILY, SAYS TURKISH PROSECUTOR
Ahval on 11th February reported that Ankara prosecutor’s office said $15 million of bank transfers to Turkish President Recep Tayyip Erdoğan’s family in 2011 and 2012 does not indicate any wrongdoing. Turkey’s main opposition Republican People’s Party (CHP) in November said family members had sent cash to an offshore bank account in the Isle of Man. The banking documents instead show that the $15 million was transferred to Erdoğan’s family from an Isle of Man shipping company called Bellway Limited, prosecutors said, according to Turkish newspaper Cumhuriyet. The prosecutor’s office did not investigate the source of money, or the nature of the transfer, Cumhuriyet said.
ILLEGAL MINING: HEADACHE FOR AFGHANISTAN GOVERNMENT, INTERNATIONAL AND LOCAL INVESTORS
Eurasia Review on 12th February carried an article which reports that the majority of active mines sites in Afghanistan are not government regulated neither controlled. According to the constitution of Afghan mining law- all, mineral resources are the property of the state, but message has not been sent properly to the local communities hosting mineral wealth. It is estimated that mines that do not hold any licences for exploitation, exploration and mining, have cost the government of Afghanistan losses of around $250-300 million annually since the fall of Taliban. In says that insurgents and other actors involved in illegal and unregulated minerals extraction smuggle or illegally transport mineral resources to the neighbouring countries where they sell these minerals on less than of its half prices, thus it goes to international market under the name of neighbouring countries.
OECD UPDATES GUIDANCE ON COUNTRY-BY-COUNTRY REPORTING
CCH Daily on 12th February reports that the OECD’s inclusive framework on base erosion and profit shifting (BEPS) has released additional guidance to give certainty to tax administrations and multinationals on the implementation of country-by-country reporting (CBCR), in line with action 13 of its plan.
BARCLAYS BANK CHARGED OVER $3 BILLION LOAN TO QATAR
On 12th February, RTE reported that the UK SFO has charged Barclays Bank in connection with a $3 billion loan given to the State of Qatar as part of a side deal linked to its emergency fundraising in 2008. It extends a charge brought against the parent firm for “unlawful financial assistance” last July.
SENIOR UK BANKER’S SON ACCUSED OF $30 MILLION CRYPTOCURRENCY FRAUD
On 12th February, Citywire reported that Daniel Harrison, the son of a senior London banker, has been accused of committing a $30 million cryptocurrency fraud in a civil action lodged in Florida. He is the founder of US-based Monkey Capital LLC and Monkey Capital Inc in Singapore which raised the money for an advertised initial coin offering (IOC). He is quoted as describing the allegations as “ridiculous”.
NORTH KOREA SAYS IT CANNOT PAY UN FEES BECAUSE OF SANCTIONS
On 12th February, The Week reported that North Korea has told the UN that it is unable to pay more than £132,000 in fees to the organisation because financial sanctions imposed on Pyongyang last August have closed off any avenue for the funds to be transferred.
POLISH FORMER DEPUTY TREASURY MINISTER ARRESTED
On 12th February, Reuters reported that Poland’s anti-corruption agency arrested 6 people, including a former deputy treasury minister, Pawel Tamborski, in an investigation into the previous government’s privatisation of chemical firm, Ciech. Tamborski is a former CEO of Ciech. Tamborski served as deputy treasury minister when the government sold its shares in Ciech to KI Chemistry, controlled by Poland’s richest man, Jan Kulczyk, who died in 2015.
‘TUNISIA IS FINISHED’
On 12th February, the Guardian carried an article saying that growing unemployment, dwindling wages and tax hikes trigger rise in illegal migration and concerns over terrorism. It says, for example, that Tunisia estimates that a 29,000 were prevented from leaving the country during 2017 alone because of concerns about terrorism.
THE ELEPHANT IN THE ROOM: CONGO’S VICIOUS, ILLEGAL FIGHTERS
On 12th February, Pass Blue (which aims to provide independent coverage of UN matters) published an article about the problem facing the UN Security Council over DR Congo – largely, the article argues, one of the UN’s own making. President Kabila continues to refuse to go ahead with promised elections, and even if ousted, it says, there are 10,000 battle-hardened combatants and their officers will not easily stand down or relinquish their elite privileges. It says that the original UN arms embargo was meant to be an inducement for the warlords of the Congo Wars to join the transitional government headed by Kabila. The wars, which lasted from 1996 to 2003, pitted Congolese government troops, militias and warlords and their foreign supporters from 9 countries against one another. The arms embargo did not apply to those who joined Kabila’s transitional government, and it was later refined by applying it to all parties to the conflict in the DRC, except for police and government armed forces. The Garde Républicaine, or Republican Guard, is Kabila’s personal army that benefited, though it never really merged into the armed forces proper (the FARDC). The article says that Guard units serve as an elite vanguard deployed to murderous effect against demonstrators, opposition members and human-rights activists. The article proposes that the UN Security Council could more properly enforce the UN arms embargo- and offer the Guard the choice between integrating into the FARDC or facing sanctions would accomplish that goal and help to protect the electoral process – it is said to rely on regular shipments of such items as spare parts for tanks and trucks, ammunition and ordnance. The Security Council could also place on notice all individuals who support, command or benefit from the Guard’s fighting power that they risk being designated for targeted sanctions, the article suggests.
CYPRUS, TURKEY SPAR AFTER WARSHIPS BLOCK GAS DRILLING SHIP
On 12th February, EurActiv reported that Turkish warships blocked an Italian drilling ship on course to explore for gas in the politically sensitive waters around Cyprus. Italy’s energy company ENI told the Cyprus News Agency its vessel was ordered to stop by Turkish ships Friday over “military activities in the destination area” as it sailed to begin explorations in block 3 of Cyprus’s exclusive economic zone. It reports that Turkey and Cyprus are not the only countries at odds over resources in the eastern Mediterranean, with Israel and Lebanon also feuding over competing claims.
REPORT OF THE THIRD SESSION OF THE UN WORKING GROUP ON A BINDING INSTRUMENT ON TRANSNATIONAL CORPORATIONS AND OTHER BUSINESS ENTERPRISES WITH RESPECT TO HUMAN RIGHTS
In 2014, the Human Rights Council of the UN decided by a majority vote for the establishment of a process to create a human rights treaty to regulate business activity. Between October 23rd and 27th the working group convened and more than 100 states and 200 representatives of civil society organisations participated, during which draft elements for a treaty were discussed. The draft elements include suggestions on state obligations, prevention, effective remedy, jurisdiction, international co-operation, and enforcement mechanisms. A briefing on the Global Policy Forum website says that, despite persistent efforts by certain states to block the process, the march towards a binding treaty will continue. The Chair-Rapporteur will now hold informal consultations on the way forward and prospectively prepare a zero draft of the treaty up to the 4th session (expected in October 2018).
172 PEOPLE ARRESTED FOR ONLINE GUN SALES IN CHINA
Customs Today on 12th February reports that Police in China have arrested 172 people and busted 12 gangs allegedly involved in online sale of guns in eight provincial regions, the government said. The police has said they had also busted 13 gun manufacturing dens and confiscated 366 firearms, including air guns, pistols and shotguns, as well as over 20,000 accessories, state run Xinhua news agency said quoting the Ministry of Public Security (MPS) statement. However, the period during which the arrests were made was not specified. Police are said to have found that deals were mainly made on WeChat, the most popular messaging platform in China.
INDONESIAN NAVY SEIZES SHIP CARRYING A TON OF METHAMPHETAMINE
On 12th February, Customs Today reported that the Indonesian Navy has seized a vessel, MV Sunrise Glory, disguised as a fishing vessel, and 4 Taiwanese crew members for smuggling 1 tonne of crystal methamphetamine drugs into Indonesia. The methamphetamine was hidden in 41 rice sacks in the lower deck of the boat. The Indonesian Navy had first spotted the boat which was carrying a Singaporean flag, during a routine patrol at the water border between Indonesia and Singapore. The Navy later decided to stop the vessel out of suspicion.
IRISH CUSTOMS FIND 33 KG HERBAL CANNABIS FROM SPAIN
In a news release, the Irish Revenue Commissioners reported that on 9th February, in an intelligence-led operation, Revenue officers at Dublin Port seized 33.7 kg of herbal cannabis with an estimated street value of €675,000 n a consignment that was said to contain “dried goods”, when it arrived in Dublin Port from Spain.
2 TONNES OF GBL SEIZED ON IMPORT INTO AUSTRALIA
The Australian Border Forces in a news release reported that a joint Australian Federal Police and Australian Border Force operation has resulted in one of Australia’s largest seizures of the drug gamma-butyrolactone (GBL) – commonly referred to as liquid ecstasy, fantasy, or ‘coma in a bottle’. A 30-year-old man has been charged for his alleged role in the 2000 litre importation of GBL which has a street value of A$10 million. ABF Investigators received information and identified a high-risk shipping container arriving into Sydney. A ABF officer is quoted as saying that what people are actually ingesting is an industrial chemical solvent, and the WHO says it is the kind of substance commonly found in paint strippers, stain removers, and circuit board cleaners. GBL metabolises into the drug gamma-hydroxybutyrate (GHB) in the body, and it can cause abrupt loss of consciousness, memory loss, respiratory difficulties, coma, and death.
FRENCH HANDOVER OF ETA WEAPONS TO SPAIN COULD SHED LIGHT ON FORMER MILITANT GROUP
The Local on 9th February reported that a convoy of French police vehicles travelled to Madrid under armed escort to hand over all the weapons and documentation seized from the former Basque militant group ETA during 20 years of investigations in France. The weapons will be held in a Spanish archive and should help shed light on unresolved crimes and cases related to the group formerly committed to a separatist state by means of armed struggle, but which renounced the use of armed violence in 2011.
PHOTO ESSAY: SOMALI PIRACY
Interesting photos in this feature on Somali piracy.
REVISION OF THE SCHENGEN INFORMATION SYSTEM FOR BORDER CHECKS IN THE EU
On 12th February, the EU Parliament Think Tank published a briefing about a package of 3 legislative proposals from December 2016 aimed at revising the legal framework of the Schengen Information System (SIS). The SIS is a large-scale information database that supports external border control and law-enforcement co-operation in the Schengen area by enabling competent authorities, such as police and border guards, to enter and consult alerts on wanted or missing persons and lost or stolen property. The proposals are intended to enable them to respond more effectively to new migration and security challenges. The proposal on the establishment, operation and use of the SIS in the field of border checks provides for more effective use of fingerprints and facial images in the SIS, and imposes an obligation on the Member States to record all entry bans issued to third-country nationals who have been found staying illegally in their territory.
A further briefing is concerned with the proposal on the use of the SIS for returning illegally staying third-country nationals aims to enhance the enforcement of the EU return policy and to reduce the incentives to irregular migration to the EU. Among other things, the proposal introduces the obligation for Member States to enter all return decisions into the SIS.
A third briefing is focused on improving and extending the use of the SIS in the field of police co-operation and judicial co-operation in criminal matters. It clarifies procedures, creates new alerts and checks, extends the use of biometrics, and enlarges access for law enforcement authorities.
A FAMED US FISHING PORT STAGGERS AS ITS ‘CODFATHER’ GOES TO JAIL
On 11th February, the New York Times carried an article about Carlos Rafael, whose initials are emblazoned on boats all over the port city of New Bedford, Massachusetts boasted that his fishing empire was worth even more than official records showed. His trick? When he caught fish that are subject to strict catch limits, like grey sole or cod, he would report that his nets were filled with something far more plentiful, like haddock. The IRS agents — who posed as Russian mobsters interested in buying Mr. Rafael’s business — came along, and he was quick to talk to them. He pleaded guilty to lying about his catches and smuggling cash out of the country, nearly 2 dozen of his boats have been barred from fishing for species like cod and haddock, plunging the city’s fishing industry into crisis. In September, he was sentenced to about 4 years in prison.
ICELAND EXPECTED TO USE MORE ENERGY ON CRYPTOCURRENCY MINING THAN IN HOMES
KYC 360 on 12th February reports that Iceland is expected to use more energy “mining” bitcoins and other virtual currencies this year than it uses to power its homes. With massive amounts of electricity needed to run the computers that create bitcoins, large virtual currency companies have established a base in the island nation blessed with an abundance of renewable energy.
UK UPDATES ITS DRC SANCTIONS LISTS
On 12th February, HM Treasury issued a news release advising that the UK’s sanctions lists for the Democratic Republic of the Congo had been amended. The entries for Gedeon Kyungu Mutanga Wa Bafunkwa KANONGA; Muhindo Akili MUNDOS; Guidon Shimiray MWISSA; and Lucien NZAMBAMWITA were amended, and 2 new names added – Gedeon Kyungu MUTANGA; and Muhindo Akili MUNDOS.
MAKING THE UK ONLINE GAMBLING SECTOR FAIRER
In the Competition and Markets Authority blog, on 12th February, the CMA explained that on 1st February, the CMA announced that online gambling firms must stop using unfair promotions that trap players’ money; and thanks to its investigation, 3 leading gambling firms have formally committed to change their online terms and practices. But, it says, there’s more to do to get the sector to raise its game. It says that it opened a consumer law investigation into the online gambling sector in Autumn 2016, after the Gambling Commission approached it with concerns about potentially unfair terms and practices. Since then, its heard troubling accounts from more than 1,000 players about their experiences.
REGULATORY CONTROLS FOR RADIATION PROTECTION IN THE UK
On 12th February, the UK issued an update guide to who does what in the UK Government set-up in respect of the exemption, notification, registering and licensing of radioactive substances etc. This includes guidance on transporting radioactive waste (the Office of Nuclear Regulation); and the import or export of radioactive waste, spent fuel or radioactive sources (the Environment Agency).
US ASSISTANCE FOR EXPORTERS
On 12th February, US law firm Baker Donelson published an article reminding exporters of the existence of the US Department of Commerce’s US Commercial Service. This, for example, includes the Country Commercial Guides (CCG). These offer specific market factors and best practices for exporting to over 125 countries. The guides include overviews of top industry sectors, trade regulations and tariff information companies need to be aware of, and a breakdown of each region’s foreign investment climate. The Commercial Service also recently released a useful video series to accompany the CCG and to highlight business opportunities in 20 key export market destinations that account for nearly 70% of total US export value. It also boasts several other educational tools and resources designed to help exporters find international customers, navigate customs and documentation issues, and successfully break into new markets abroad.
For the CCG, see –
TURKEY-HAMAS TERRORIST BULK CASH FINANCING PIPELINE
On 12th February, Kenneth Rijock in his blog reported that Israeli security agencies uncovered an organisation, based in and operated by Turkey, that used a front company to bulk cash smuggle euros into the West Bank, for Hamas terrorist activities. A Turkish national was expelled, and a Palestinian arrested, after slightly less than €1 million, in cash, were seized from the suspects. The front company in Turkey said to be believed to have moved millions of Euros into Israel, as part of a Hamas terrorist financing syndicate based there. He also says that Turkey gives Hamas leaders a safe haven in its country.
MALTA GAMING AUTHORITY PROBING LICENSEES AFTER MAFIA-RELATED ARRESTS
Calvin Ayre on 12th February reported that Malta’s gambling regulator was conducting a review of its Italian online licensees, following the latest anti-Mafia police action targeting illegal gambling operations.
PROCEEDS OF CRIME ACT SUCCESSFULLY USED BY UK COUNCIL AGAINST LANDLORDS FOR BREACH OF LICENSING CONDITIONS.
An entry in the Nearly Legal: Housing Law News and Comment blog carries a posting about the use by Brent Council in London of POCA 2002 in respect of money illegally gained from exploited tenants of the defendants. The Council argued that the rent received in this case was the benefit of criminal conduct and not from a lawful contract.
NORTH KOREA SHORTAGE OF TRANSPORTER-ERECTOR-LAUNCHER VEHICLES
On 9th February, CNBC highlighted the apparent problem North Korea has with its nuclear missile programme, i.e. the lack of suitable, heavy duty transporter/erector launcher (TEL) vehicles. There appears to be a shortage of these vehicles that are used for carrying and helping to launch ICBM. North Korea claims it started producing its own TEL vehicles, but CNBC reports that experts say the recent military parade in Pyongyang appears to show “they haven’t quite mastered domestic production of these vehicles”. TEL make the ICBMs road-mobile capable and therefore tougher to detect and destroy before a launch.
UPDATE ON INDIAN NAXALITE COMMUNIST INSURGENTS
Janes.com on 12th February reported on attacks by Naxalite militants in India, saying that they have significantly reduced from about 768 in 2010 to 340 in 2017; with more than half of attacks aimed at security forces and government assets, and approximately 18% targeted industrial assets such as mining, construction, and cargo. However, a new leader from the leading Naxalite group – the Communist Party of India (Maoist) – last year might signal a risk of continuing conflict. The far-left extremists get their name from the name of the village Naxalbari in West Bengal, where the movement had its origin. Naxal or Naxalism can be a more generic name for Maoist communist insurgency.
See also –
PODCAST: ANTI-CORRUPTION AND THE PARADISE PAPERS
Latest Podcast from the Financial Integrity Network on 7th February was a discussion of the latest developments in anti-corruption, bribery, and transparency, with a special focus on the recent Paradise Papers leaks.