On 23rd February, Stephenson Harwood published an article produced for Global Transport Finance of December 2017 about an alternative solution available to ship financiers trying to recover non-performing loans by selling mortgaged vessels – saying that for some, immediate enforcement is not the answer. The article comments that few financiers, however, are willing or able to operate a vessel while they search for better opportunities, given that there are commercial, legal and reputational risks involved. The article suggests “warehousing” – which involves setting up an external ownership structure to own a vessel temporarily: the “warehouse”, and depending on the financier’s priorities, warehousing is a consensual arrangement that is worth considering alongside other traditional enforcement options.
On 22nd February, Hunt & Hunt Lawyers in Australia published a short article warning of the risk of being caught up in customs duty evasion when the Incoterms DDP (delivered duty paid) method to account for the import changes is used. It wars that, even if not the importer you can be at risk, and that the risk is higher where DDP is used. Using DDP means that the overseas supplier has the responsibility for declaring values and accounting for charges. It refers to a US case from 2017 where a US clothing company, Notations Inc, agreed to a $1 million settlement in connection with underpaid duty on a goods it purchased on DDP terms. In that case, the Chinese supplier and its US subsidiary submitted false documents valuing the goods at 25% of their true value, and it was alleged that the US business had turned a blind eye to any discrepancies. The article sets out warning signs, and what an importer can do to protect itself (such as obtaining and examining documentation and valuation), and recommends an indemnity clause in a contract to allow for reimbursement of any additional charges.
For more information on such trade-based financial crime, a good place to start (which I am bound to say, having written it…) is Notice 1000 MAN published by Customs and Excise in the Isle of Man –
For more on the Incoterms rules – the “language of trade” used in contracts for the sale of goods worldwide, as well as invoices, customs declarations etc; and which provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade, see –
DDP means – “Delivered Duty Paid” – the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
The latest edition of the International Adviser digital magazine carries an article about Interpol Red Notices, and says that legal systems designed to make extradition of criminals possible across borders could be open to abuse by those with financial disputes. It explains how Red Notices fit into UK extradition processes.
On 26TH February, the UK Parliament website reported that the EU External Affairs Sub-Committee has received a response from the Minister for Europe and the Americas at the Foreign and Commonwealth Office, to its report, Brexit: sanctions policy, which was published on 17th December. The report had concluded that the effectiveness of UK sanctions will be undermined unless the UK can quickly agree arrangements for future sanctions policy co-operation with the EU. Without this, the UK could be left with the choice of imposing less effective unilateral sanctions or aligning with EU sanctions it has no influence over.
On 27th February, the EU published Regulation 2018/285/EU which amends Regulation 2017/1509 and brings EU measures into line with those of the UN. The UN Security Council had decided in December to strengthen the export ban on petroleum products and to impose an import ban on DPRK food products, machinery, electrical equipment, earth and stone; a ban on the export to the DPRK of industrial equipment, machinery, transportation vehicles and industrial metals; and further maritime restrictive measures. The new Regulation also deletes from EU lists 3 persons and 1 entity.
At the same time, Regulation 2018/286/EU amends EU sanctions lists to bring the list of vessels designated by the EU into line with that of the UN.
See also EU Council Decision 2018/293/CFSP.
The Sunday Post in Scotland on 27th February reported that, after a 5-year investigation, the Crown Office in Scotland has dropped the case against 4 men linked to the £400 million collapse of Isle of Man-based Heather Capital. The decision has prompted criticism from alleged victims and warnings from finance experts that police and prosecutors are not equipped to deal with such complex fraud inquiries. The hedge fund was launched in 2005 and attracted investors from around the world, loaning money to fund property deals. Lawyer Gregory King, originally from Glasgow, but who now lives in a gated millionaire complex in Marbella, founded the fund. He paid himself around £34 million from Heather Capital between 2005 and 2008. After Heather’s collapse in 2010 the firm’s liquidator claimed around £90 million was unaccounted for. A court judgment in the Isle of Man likened the Heather hedge fund to a Ponzi scheme. In a statement, the Crown Office has said that it reserves the right to take action, should further evidence become available in the future.
On 26th February, the Guardian picked up on the story that Denmark’s biggest bank believes cash was funnelled through British companies by people linked to Vladimir Putin’s family and the FSB spy agency through the bank’s Estonian division.
On 26th February, Payments Compliance reported that, on February 22nd, the Wolfsberg Group, published an updated Correspondent Banking Due Diligence Questionnaire (CBDDQ) and related guidance material. It has also revised its 2004 Anti-Money Laundering Questionnaire for Correspondent Banks, seeking to set an enhanced and reasonable standard for correspondent banking due diligence.
The Wolfsberg Group is an association of 13 global banks that aims to develop frameworks and guidance for the management of financial crime risks, KYC and AML/CFT policies. The Group says that the CBDDQ aims to set an enhanced and reasonable standard for cross-border and/or other higher risk Correspondent Banking Due Diligence, reducing to a minimum any additional data requirements, as per the Wolfsberg definition and current FATF Guidance. It is also the Group’s expectation that the Group members will begin to use the CBDDQ, in a phased approach, with all of their respondents.