14th February 2018
DEPARTMENT OF FINANCE REVIEWING CANADA’S AML/CFT REGIME
On 12th February, Blakes in Canada published an article concerned with a consultation paper from the Canadian Department of Finance linked to the 5-year review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and which sets out policy considerations that call for amendments to the current AML/ATF regime. Responses are required by 30th April. The consultation includes including proposals to considerably widen the scope of the regime, bringing in many sectors not covered, or currently partially covered. It also proposes a great many amendments, clarifications and new or revised powers, requirements and controls.
The consultation is at –
VALENTINES DAY WARNING ON “TRANSACTION LAUNDERING”
Payments Source on 13th February warns businesses that Valentines Day is a perfect cover for launderers to use “transactions laundering” – a form of money laundering that occurs when an unknown business uses an approved merchant’s payment credentials to process card payments for unknown products and services. The sophisticated, merchant-based fraud scheme takes advantage of the e-commerce ecosystem by funnelling illegal, illicit or unknown transactions through legitimate merchant accounts.
THE WORLD’S WORST MONEY LAUNDERING COUNTRIES
In coverage of the latest Tax Justice Network Financial Secrecy Index, the blog site Boing Boing says that the US has moved up in the Index to number 2, behind Switzerland; in reality, though, the UK is the world’s worst money-laundry, but because its laundering activities are spread out over its overseas territories — taken as a whole, the UK leads the world in helping criminals and looters hide their fortunes.
UK SUB-POSTMASTERS LEGAL FIGHT TO CLEAR NAMES BACKED
Manx Radio reports that hundreds of sub-postmasters in the UK have secured funding for a class action lawsuit against the Post Office following an IT fiasco which left them accused of false accounting or theft, with an allegedly faulty computer system which mistakenly showed their branches to be in financial deficit. The Post Office has previously said that it intends to defend the sub-postmasters’ claim and denied any general issues with the system, Horizon. It reports that Sky News has said that Therium Capital Management, a specialist litigation funder, has agreed to back the claim, which has attracted more than 550 participants to date.
UK HAULAGE DIRECTOR DISQUALIFIED FOR REMOVING ASSETS
On 13th February, CCH Daily reported that the director of a Perth-based haulage company has been disqualified for 7 years for selling company assets for his own benefit, leaving creditors including HMRC unpaid, following an Insolvency Service investigation. Gilmour McFarlane was the sole director of Garden Haulage Ltd.
BULGARIA ADOPTS NEW ANTI-CORRUPTION LEGISLATION
On 9th February, CMS Law published a briefing relating that, on 19th January, a new Anti-corruption and Forfeiture of Assets Act (AFAA) entered into force in Bulgaria, replacing 2 existing pieces of legislation – the Prevention of Conflict of Interest Act, and the Forfeiture of Illegally Acquired Assets Act. In addition, the AFAA creates a single commission to enforce the law from the various commissions that existed before.
FAQ: HOW CUSTOMS UNIONS WORK
In the light of the ongoing Brexit discussions, Politico has provided its guide to how customs union work.
FINCEN ISSUES REQUESTS FOR COMMENTS ON RENEWAL OF BSA CURRENCY TRANSACTION REPORTING (CTR) AND SAR REQUIREMENTS
On 12th February, Buckley Sandler published an article which says that FinCEN has issued 2 notices and requests for comments in the Federal Register seeking renewals without change of currently approved Bank Secrecy Act regulatory requirements for covered financial institutions – concerning the continuance of currency transaction reporting (CTR) requirements, and the addressing suspicious activity reporting requirements. Comments must be received by April 10th
ONE-STOP SECURITY ARRANGEMENT BETWEEN EU AND SINGAPORE ENTERS INTO FORCE
The Transportwatch blog posted an entry on 13th February about the One-Stop Security arrangement provides for the mutual recognition of security screening rules at airports, so that passengers and baggage originating from Singapore airport can transfer onto a connecting flight in the EU and in the EEA without going through security checks a second time. The arrangement will also reduce time and costs for airport operators and airlines.
CANADA ANNOUNCES 2 NEW INITIATIVES TO HOLD COMPANIES ACCOUNTABLE FOR HUMAN RIGHTS VIOLATIONS ABROAD
On 13th February, Littler Mendelson published a briefing about initiatives to strengthen Canada’s approach to responsible business conduct for Canadian companies doing business and operating abroad – an independent Canadian Ombudsperson for Responsible Enterprise, and the creation of a multi-stakeholder Advisory Body comprising civil society and industry experts to advise the Government and the Ombudsperson on corporate conduct abroad.
HOW DOES INTERPOL DEAL WITH REQUESTS TO DELETE RED NOTICES ON POLITICAL AND OTHER GROUNDS?
Nyman Gibson Miralis on 9th February published a briefing that summarises 2 cases in 2017 in which the Commission for the Control of Interpol’s files (CCF) reviewed requests to delete an Interpol Red, and which illustrate a range of factors taken into consideration by the CCF in the decision-making process, including the existence of political factors.
A Red Notice is an electronic alert published by the INTERPOL General Secretariat seeking the detention, arrest or general restriction of movement of a wanted person, and is often used to detain a person for the purpose of extradition.
19TH ANNUAL REPORT FROM EU ON THE CONTROL OF EXPORTS OF MILITARY TECHNOLOGY AND EQUIPMENT
On 14th February, the EU published this report which covers statistics on licences and exports of conventional arms from EU Member States during the 2016 calendar year, and non-exhaustive information on intra-EU transfers of defence-related products. It lists the third countries that have aligned themselves with the EU rules and established an information-exchange arrangement – Albania, Bosnia and Herzegovina, Canada, the former Yugoslav Republic of Macedonia, Georgia, Iceland, Montenegro and Norway. Member States have also put in place separate arrangements for the exchange of information on arms brokers’ licences granted and denied.
AN INDIAN BANK JUST UNCOVERED A $1.7 BILLION FRAUD AT A SINGLE BRANCH
Quartz Media on 14th February reported that Punjab National Bank (PNB), India’s second-largest government-owned lender, has discovered a fraud worth $1.77 billion at one of its branches in Mumbai. This amount is nearly a third of the bank’s market value. It reports that PNB was already under scrutiny, after the Central Bureau of Investigation (CBI) booked billionaire diamond merchant Nirav Modi, his business partner, and his family members for allegedly cheating the bank in 2017, with 2 employees also alleged to have colluded with Modi.
CHINESE PROVINCE SAYS FORMER LEADER’S GRAFT CASE INVOLVES HUGE SUMS
Reuters on 14th February reported that the corruption case against former senior Chinese official Sun Zhengcai involves massive sums rarely seen in the country’s modern history, the government of one of the provinces he used to run said. Chinese prosecutors this week charged Sun with bribery during various posts going back 15 years in Chongqing, Beijing, Jilin province, and as Minister of Agriculture, the latest development in a corruption probe into a man once considered a contender for top leadership.
SRI LANKA LAUNCHES PROGRAMME TO COMBAT FRAUD AND CORRUPTION
Eurasia Review on 14th February reported that Sri Lanka’s Presidential Secretariat has made arrangements to implement a wide programme to combat bribery, corruption, fraud, malpractices and waste, and will function under the centre for combating corruption, bribery, fraud, malpractices and waste set up at the Presidential Secretariat.
FCA FLEXES MUSCLES WITH FIRST ‘SERIOUS CRIME’ ORDER
On 14th February, the Law Society Gazette carried a report on the first use of a Serious Crime Prevention Order (SCPO) in the UK, against an illegal moneylender. The order prevents him from conducting any business in the credit sphere, limits the number of bank facilities he is permitted to operate, and requires him to make disclosures of those banking facilities to the FCA. Breaching the terms can result in a 5-year jail term.
UK REPORT ON KURDISH ASPIRATIONS
On 11th February, the House of Commons Library published a report about aspirations of the Kurds and UK interests, and saying that there’s a clear risk of new fighting in the Middle East.
FROM 2020, RUSSIA WILL INTRODUCE A COMPULSORY SYSTEM FOR TRACKING PHARMACEUTICALS FROM MANUFACTURER TO END-USER
On 13th February, Dentons published an article saying that to ensure effective quality-control for pharmaceuticals and afford protection against fake and counterfeit medicines in Russia, a federal state IT system is going to be set up in Russia for monitoring the movement of pharmaceuticals from manufacturer to end-user.
GIBRALTAR GOVERNMENT AND GIBRALTAR FSC ANNOUNCE PLANS FOR TOKEN LEGISLATION
On 12th February, a news release formally announced that the parties are developing legislation relating to tokenised digital assets (tokens), essentially those created and traded using distributed ledger technology (DLT). It says that after taking into account stakeholder feedback, work has now started on drafting legislation to regulate: the promotion, sale and distribution of tokens by persons connected with Gibraltar; secondary market activities relating to tokens, carried out in or from Gibraltar; and the provision, by way of business, in or from Gibraltar of investment advice relating to tokens.
COCAINE WORTH NEARLY £1 MILLION SEIZED IN ‘TRUMP’ BRANDED PACKAGES AT HARWICH PORT
The East Anglian Daily Times on 14thFebruary reported that more than 12 kg of cocaine packaged with “Trump” branded American flags was seized. Border Force officers discovered the Class A drugs in a lorry load of paper towels at Harwich International Port after an X-ray scan revealed an anomaly.
WHY NORTH KOREA AND IRAN GET ACCUSED OF NUCLEAR COLLUSION
On 12th February, the Bulletin of Atomic Scientists carried this article saying that recent allegations have run the gamut from speculation about new political ties between the 2 countries to claims that they are building a nuclear weapon together. At first glance, it would seem that Iran-North Korea military or even nuclear co-operation makes sense. However, this article says that while this logic seems to suggest that Iran and North Korea are meant for each other, the record of the last 3 decades points to a different conclusion, and it quotes a source that interviews with Russian and Ukrainian specialists aiding the Iranian missile program during the late-1990s suggest that co-operation between Pyongyang and Tehran was isolated and not comprehensive, and on the nuclear front, there appears to have been no co-operation. The article suggests there may be deliberate attempts to mislead about the level of co-operation.
FIFTH AMENDMENT AND FINANCIAL CRIME: CAN STAYING SILENT PREVENT ASSET FORFEITURE?
KYC 360 on 14th February carried an article in which Stefan Cassella of Asset Forfeiture Law, LLC summarises a recent case in which the US Government’s attempts and queries to seize the alleged criminal funds of a Defendant were met with ‘silence’ – the Defendant refused to discuss them, saying requiring him to respond in greater detail would violate his 5th Amendment right against self-incrimination. The defendant argued that requiring him to respond in greater detail would violate his 5th Amendment right against self-incrimination, but the court held that the defendant had waived that right when he gave a partial answer to the questions put to him.
FINANCIAL INTELLIGENCE UNIT (TIPPING OFF) REGULATIONS 2018
On the agenda for the February sitting of Tynwald in the Isle of Man are these Regulations (SD 2018/37) which, from 1st March, have the effect of making “tipping off” an offence. The FIU has identified there is a need to deter persons in receipt of requests for information made by the FIU from tipping off by making tipping off an offence.
ISLE OF MAN UPDATES SOMALIA SANCTIONS LEGISLATION
Also on the agenda for the February sitting of Tynwald in the Isle of Man are the European Union (Somalia Sanctions) (Application) (Amendment) Order 2018 (SD 2018/ 0016) and Somalia Sanctions (Amendment) Regulations 2018 (SD 2018/17) which, with effect from 11th January, gave full effect in the Island to Council Regulation (EU) 2017/2415.
GAMBLING (ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM) ACT 2018 AND CASINO (AMENDMENT) ACT 2018 IN THE ISLE OF MAN
Also on the agenda for the February sitting of Tynwald in the Isle of Man was the Gambling (Anti-Money Laundering and Countering the Financing of Terrorism) Act 2018 (Appointed Day) Order 2018 (SD 2018/42) which brings into operation the Gambling (Anti-Money Laundering and Countering the Financing of Terrorism) Act 2018 which provides the Gambling Supervision Commission the necessary powers to conduct regulatory oversight of the gambling sector’s compliance with AML/CFT legislation; to provide sanctions for non-compliance; and for connected purposes, with effect from 24th January.
At the same time, the Casino (Amendment) Act 2018 (Appointed Day) Order 2018 (SD 2018/43) brings into operation the Casino (Amendment) Act 2018 which permits the revocation of a licence in cases of non-compliance with AML/CFT legislation; to permit the premises in which casinos are located and the facilities and amenities provided under casino licences to be varied; to permit the Council of Ministers additional discretion in relation to deposits for concessions; and for connected matters, with effect from 24th January.
ISLE OF MAN CUSTOMS AND EXCISE BILL TO BE SIGNED
Finally, also on the agenda for the February sitting of Tynwald in the Isle of Man is for the Customs and Excise Bill to be signed. To come into operation on a date to be announced, the Bill makes various amendments to customs and export control law. Amongst other things, the Bill implements a Moneyval recommendation that the Treasury be obliged to maintain full records of cash declarations made to the customs service, and will require an annual report to Tynwald of cash declaration and cash seizures by the service. It also extends the ability of the service to co-operate with authorities outside the Island where civil (as opposed to criminal) inquiries or civil penalties are involved. Finally, it makes a small amendment to existing legislation to facilitate the submission of sanctions-related reports to the FIU (to enable it to fulfil the role of a “one-stop shop” for all forms of financial crime reports).
OFAC TARGETS COLOMBIANS LINKED TO OFICINA DE ENVIGADO CRIME BOSS
On 14th February, OFAC designated longtime Colombian criminal Javier Garcia Rojas (aka “Maracuya”) and 2 other Colombian nationals as Specially Designated Narcotics Traffickers (SDNT) for their links to previously designated SDNT, Jose Bayron Piedrahita Ceballos, and the Colombian criminal group La Oficina de Envigado (aka “La Oficina”). OFAC also designated 4 Colombian companies owned, controlled, or directed by the designated individuals. The designations are said to be for their attempts to undermine joint US-Colombian investigations into the criminal activities of La Oficina and Jose Bayron Piedrahita Ceballos. The 4 companies designated include 2 Medellin-based agricultural businesses owned by Javier Garcia Rojas (Agroconstrucciones Las Palmeras S.A.S. and MMAG Agricultural Global S.A.S.) as well as an investment company controlled by Ruth Garcia Rojas (Pinzon & Garcia S. En C.S.) based in Cali. Also designated is a small automotive repair business in Medellin called Euromecanica, owned by Wilton Cesar Hernandez Durango.
GAME-CHANGERS AND WHISTLE-BLOWERS: TAXING WEALTH
A posting on the IMF blog on 13th February puts forward some possible solutions to how tax systems can assist in addressing excessive increases in wealth inequality, as recently discussed at the World Economic Forum in Davos. These include – Go after the big money, with a risk-based approach to high net wealth individuals; the design of the tax system matters, it may make sense to tax different types of wealth in different ways; go after the hearts and minds to get to the pockets; bring in coalitions for support, utilise civil society, journalism etc; and think about the wealth managers, intermediaries who help hiding wealth care about their reputations.
SOUTH AFRICA: GUPTA NEPHEW AMONG 5 ARRESTED FOLLOWING POLICE RAIDS
Times Live in South Africa on 14th February reported that at least 3 close Gupta associates‚ including the nephew of controversial brothers Atul‚ AJ and Rajesh Gupta‚ are to appear in the Bloemfontein Magistrates Court on charges of money laundering‚ corruption and theft of state money. They include Gupta lieutenants Ashu Chawla and Ronica Ragovan‚ and nephew Varun Gupta – and were among 5 people arrested in raids by the specialist police unit, the Hawks, on 14th February. The raids were carried out on the Gupta family’s Saxonwold compound‚ homes in Bedfordview and Houghton‚ as well as at the Sahara Computer head office in Midrand‚ Johannesburg. Simultaneous raids were also carried out at Free State provincial government offices.
Meanwhile, Baker McKenzie reports that the ANC on 14th February unveiled plans to sack South African President Jacob Zuma via a parliamentary no-confidence vote, hours after armed police raided the luxury home of his friends the Gupta brothers, investigating corruption allegations. The raid marked a dramatic escalation in the pressure on Zuma and the political faction around him accused of milking state resources for their own ends. Zuma, 75, denies any wrongdoing and it remains unclear whether he will throw in the towel or dig in deeper.
GUATEMALA EX-PRESIDENT, 10 CABINET MEMBERS ARRESTED ON CORRUPTION CHARGES
Jurist on 14th February carried a report on the arrest of Guatemala’s former president Álvaro Colom and 10 former cabinet members on corruption and graft charges, including Alberto Fuentes Knight, the former finance minister who is now the chairman of Oxfam International.
BANK NEGLIGENT AFTER PAYING OUT CLIENT MONEY ON FRAUDULENT INSTRUCTION FROM SOLE DIRECTOR
Out-Law on 14th February reported on a Court of Appeal case where a bank which made payments from a client account on the fraudulent instruction of the client’s director and sole shareholder was liable in negligence after the client company went into liquidation. However, it is stressed that this was an unusual case; and it was unlikely that banks would face a “flurry of similar claims”, according to financial litigation. In the decision, the first to go against the general rule that banks are not liable if the customer authorised the payment, it was said that where a bank has concerns about a customer being in financial difficulty it should pay close attention to any unusual payment instructions received from one director of it.
INTEROPERABILITY BETWEEN EU INFORMATION SYSTEMS FOR SECURITY, BORDER AND MIGRATION MANAGEMENT
A briefing paper has been produced for the EU Parliament as the initial appraisal of a European Commission Impact Assessment of 12th December. The EU has an initiative which aims to make information exchange and data sharing between the various EU information systems more effective and efficient, fully upholding fundamental rights, so as to boost the protection of the EU’s external borders, improve migration management and enhance internal security. However, the Impact Assessment says that there are 2 basic problems – first, information provided by EU systems is not always complete, accurate and reliable; and second, end-users do not always have fast and systematic access to all the information they need to perform their tasks. It identified 2 problem drivers: a fragmented architecture of data management for borders and security where information is stored separately in unconnected systems, leading to blind spots; and a complex landscape of differently governed information systems. The appraisal criticises the Impact Assessment, ad says that the range of options offered are limited.
SWISS BANKING REGULATOR IDENTIFIES VIDEO CLIENT ON-BOARDING ABUSE RISK
KYC 360 on 14th February reported that the Swiss Financial Market Supervisory Authority (Finma) has launched a consultation (until 28th March) towards updating the due diligence requirements for client on-boarding through digital platforms, 2 years after its video and online identification procedures were enacted. Although the digital identification experience has been ‘positive’ and financial intermediaries have adapted their processes, new risks of misuse have also emerged, Finma has explained, with suggestions that such risks could be linked to money laundering. Finma proposes that video identification process may still be carried out despite evidence of a higher risk level. However, the business relationship may be established only after the consent of the line manager, a superior instance or senior management, and other changes to processes are proposed.