9th March 2018
DOES SAUDI ARABIA INTEND TO DEVELOP A NUCLEAR WEAPONS CAPABILITY?
On 8th March, the Carnegie Center published an opinion piece asking this question. It begins by saying that speculation about Saudi Arabia’s possible desire to acquire or develop nuclear weapons has arisen periodically since 1988, when the Saudis secretly acquired nuclear-capable Chinese missiles. Now Saudi Arabia is pressing ahead with its plans to build civilian nuclear power plants. It concludes that Saudi Arabia is highly unlikely to seek nuclear weapons, but it cautions that an assumption is that Pakistan’s nuclear missiles could be sent to Saudi, either to boost Saudi deterrence against Iran or to safeguard part of Pakistan’s strategic force in time of crisis with India.
STRENGTHENING BAN ON CHEMICAL WEAPONS: CASE OF SYRIA – ANALYSIS
On 9th March, Eurasia Review says that The legal framework prohibiting chemical weapons is considered the gold standard for multilateral disarmament – featuring both comprehensive provisions and intrusive verification measures. Yet, in the case of Syria, this framework (which extends to the UN Security Council) has proven insufficient. Syria joined the 1993 Chemical Weapons Convention (CWC) in 2013. Despite apparent evidence, achieving consensus on the Syrian Government’s responsibility for the use of CW has proven elusive, and Russia and Iran have maintained that opposition groups alone are responsible for the use of CW. The article asks what can be done to strengthen controls, and examines the recent French initiative, and the launch in January of the International Partnership Against Impunity for the Use of Chemical Weapons. The article, in asking how domestic law can help, points out that by now all states should have adopted measures to punish legal persons under their jurisdiction and control in their national legislation to implement the CWC and UN SCR 1540, and legal obligations require states to impose criminal sanctions on individuals engaged in the proliferation of nuclear, biological, chemical weapons and missile delivery systems.
75 PEOPLE CHARGED IN US IN NATIONWIDE DRUG MONEY LAUNDERING RING
On 8th March, KUSI and others reported that US authorities have unsealed federal indictments charging people with conspiring to launder tens of millions of dollars in drug money from cities across the US to cartels in Mexico. Law enforcement seized more than $6 million in cash.
LATVIAN BANKS STILL COMPLICIT IN MONEY LAUNDERING, CLAIMS US
The FT and others on 8th March reported that the US has told the Latvian government they believe Latvian banks are still involved in money laundering schemes, despite recent drastic action taken against ABLV bank that sent it into liquidation.
UK LINK EMERGES IN LAUNDERING CASE OF STOLEN MOUNT GOX BITCOIN
On 8th March, Cryptovest reported on a BBC Radio documentary that claimed that a UK-based entity named Always Efficient has been found linked to the Mt. Gox scandal, likely acting as a shell company to launder the money through BTC-e.
GLOBAL BRIBERY AND CORRUPTION OUTLOOK 2018
On 5th March, law firm Hogan Lovells published this briefing which begins by saying that, for the most part, 2018 will see countries do more to enforce their anti-bribery and corruption laws. How authorities plan to go about this — from co-operating with foreign counterparts to adapting others’ regimes — differs by jurisdiction. The topics covered include China’s new Anti-Unfair Competition Law which redefines commercial bribery, with wider coverage to include parties with influence over a transaction, for example, though who these are remains unclear and increased penalties. It also asks if the Trump Administration will adhere to the same policy as the Obama one – only time will tell, it concludes, but the signs are that it will. It also points out that in many corporate US Foreign Corrupt Practices Act (FCPA) resolutions with the DoJ, the company must agree to an independent compliance monitor, in addition to a monetary penalty. Having a monitor appointed is intrusive – it signals the enforcement authorities neither trust a company’s compliance programme nor believe the company can behave without outside oversight.
UK PORTS BY CARGO
8 TONNES OF DRUGS SEIZED BY AUSTRALIAN NAVY IN ARABIAN SEA
On 8th March, Defence Web reported that a Royal Australian Navy frigate has intercepted 2 vessels and seized approximately 8 tonnes of hashish valued at approximately $400 million during operations in international waters of the Arabian Sea. The ship has now seized 19.5 tonnes of hashish and 1.5 tonnes of heroin, valued in excess of $1.43 billion since deploying to the Middle East in November 2017.
ESTONIA: SCHEME USED BY HKSCAN MAY CONSTITUTE TAX FRAUD
err IN Estonia on 8th March reports that if the Finnish food group HKScan took €96 million out of Estonia as a loan upon the merger of its Estonian subsidiaries, as described in an edition of Eesti Ekspress, signs of tax fraud may be present in said actions, Estonia’s Ministry of Finance finds, when HKScan merged its Estonian subsidiaries Tallegg and Rakvere Lihakombinaat in 2014.
VENEZUELA’S PDVSA SUES MIAMI OIL TRADERS OVER ALLEGED CORRUPTION SCHEME
On 8th March, Reuters reported that PDVSA has sued a group of oil trading companies through a US trust over a multi-billion dollar corruption scheme to buy petroleum products below market value, and accuses a small Miami-based company called Helsinge Inc of obtaining inside information and rigging bid proceedings by bribing PDVSA officials.
NARCO SUB DEVELOPMENTS AND TRENDS
A fascinating article, with amazing photos of drug smugglers’ vessels, submarines and VSV (very slender vessel) speedboats used to evade radar, and patrolling aircraft and Coastguard ships.
Also fascinating, more information on “narco subs” in “Narco Subs 101” at –
BILLIONS MISSING FROM FROZEN GADAFFI FUNDS IN BELGIUM
ANI in India on 9th March reported that about $10 billion were reported by Belgian authorities to be missing from frozen Libyan funds, which were controlled by the inner circle of former Libyan President Gadaffi. It reports that 4 separate accounts opened for the LIA and LFIC investment funds in the Euroclear bank held over $16 billion after an investigation into money laundering sought to seize the assets, but Belgian authorities found the disappearance of a significant part of these funds in the fall of 2017. It turned out that in the accounts just over $5 billion dollars remained.
UK STATEMENT ON INFRACTION PROCEEDINGS ON VAT TREATMENT OF CERTAIN COMMODITY DERIVATIVES TRADING
On 9th March, HM Treasury issued a news release containing a public statement about infraction proceedings against the UK in respect of VAT treatment of certain commodity derivatives, trading under the Terminal Markets Order (TMO). UK law allows a specific VAT zero rate for derivative transactions in spots, futures (and options on) commodity contracts, when traded on an exchange. The statement makes clear that the UK Government will consider the Commission’s views, will respond in due course, and that there is no immediate effect on UK tax law and the matter will be subject to the normal infraction process, which is open to challenge. The tax treatment of commodity derivatives is unchanged. UK tax law stands unless and until such time as it is changed and therefore past and current trading activity under the Terminal Markets Order is not affected by the issuance of the Article 258 letter.
EU OMBUDSMAN REJECTS ONLINE GAMBLING BUSINESSES’ CLAIMS
Calvin Ayre on 9th March reported that the EU’s European Ombudsman’s office has dismissed a complaint filed in December 2016 by the European Gaming and Betting Association (EGBA) alleging official indifference by the Commission in dealing with protectionist gambling rules in many EU Member States. In December 2017 the EU said that it was not going to pursue all pending infringement cases involving online gambling against member states, saying there were “not a priority”, and the Ombudsman said that the Commission “enjoys wide discretion” when it comes to deciding whether or not to pursue infringement cases, and that this decision to drop all pending cases involving online gambling “is covered by this wide discretion.”
US CUSTOMS CAN IMPROVE EFFORTS TO ADDRESS COUNTERFEITS, GAO SAYS
On 9th March, Sandler Travis & Rosenberg reported that the US Customs and Border Protection plans to evaluate its efforts to enhance intellectual property rights enforcement and assess potential additional information sharing with the private sector, in accordance with recommendations in a recent Government Accountability Office report. The report had highlighted growth in e-commerce as contributing to a shift in the sale of counterfeit goods in the US, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products.
CHANNEL ISLANDS SHOULD ACT NOW TO GET SLICE OF GLOBAL FUNDS BOOM
This is Guernsey reports that a new report published by PwC in the Channel Islands – ‘Asset and Wealth Management Revolution: Putting the Channel Islands Centre Stage’ – has found there are opportunities and challenges for future growth as funds in Jersey grew to £265 billion in September 2017 and £269 billion in Guernsey. The report predicts that alternative asset classes will increase sharply as investors diversify to offset volatility.
UK ESTATE AGENTS UNDER CMA SCRUTINY FOR COLLUSION
On 8th March, The Lawyer carried an article saying that UK competition regulator, the Competition and Markets Authority (CMA) has opened a new investigation into the residential estate agents’ market. It has not yet named the companies involved.
EU CROWDFUNDING REGULATIONS PROPOSED ALONGSIDE NEW FINTECH ACTION PLAN
Out-Law on 8th March published a briefing saying that crowdfunding platforms will be able to provide their services across the whole of the EU via a system of regulatory ‘passporting’ under new laws proposed by the European Commission.
US CUSTOMS INTERCEPTS WORLD’S MOST DANGEROUS PEST IN PASSENGER BAGGAGE
US Customs and Border Protection on 8th March reported finding a particularly dangerous pest at 2 US airports. Trogoderma granarium, commonly known as Khapra beetle, is one of the world’s most destructive insect pests of stored grains, cereals and seeds, and it presents potentially crippling economic consequences to grain and cereal exporters such as the US. Due to those consequences, Khapra beetle remains the only insect in which CBP takes regulatory action, even when the insect is in a dead state.
SOUTH AFRICA: DA LAYS CHARGES OF MONEY LAUNDERING AGAINST BANK OF BARODA
Baker McKenzie on 8th March reported charges of money laundering and corruption against the Bank of Baroda (an Indian bank), which has been providing banking services to the controversial Gupta family. The bank is in a legal battle with a number of Gupta-owned entities after it announced its decision to close their bank accounts and then later on decided to close Baroda’s entire operation in South Africa.
REPORT SHEDS LIGHT ON PRIVATE SECTOR ROLE IN COLOMBIA CONFLICT
Insight Crime on 8th March said that a new report, from Colombian think tank Dejusticia, examines the relationship between private businesses and paramilitary groups during Colombia’s decades-long armed conflict, arguing that a post-conflict truth commission should investigate these potentially criminal dealings. The report details 439 instances of “corporate complicity” in human rights violations committed by paramilitary groups between 1970 and 2015.
LAW FIRM THAT SHOULD HAVE WARNED PROPERTY INVESTOR CLIENTS OF “MAFIA RISK” FAILS IN SUPREME COURT BID
Legal Futures reports on 9th March that a law firm with offices in Italy and England has reached the end of the line in challenging a ruling that it was under a duty to warn British and Irish property investors of the risks of investing in a part of Italy associated with organised crime.
PRAGUE NATIONAL MUSEUM DISCOVERS ‘PRICELESS’ DIAMONDS ARE CUT GLASS AND RUBIES ARE SYNTHETIC
On 9th March, MSN reports that diamonds and sapphires kept at the Czech National Museum in Prague and thought to be worth millions have been found to be fake. Half of the museum’s collection of rubies are also thought to be fakes. It is not known how the fakes have come into the museum’s possession, and while it is possible that they were not properly checked at the time of acquisition, they may also have been swapped by criminals and the real gems stolen. The discovery was made during an inspection of some of the museum’s 5,000 precious stones and minerals.
CUSTOMS AND EXCISE ACT 2018 APPOINTED DAY ORDER IN ISLE OF MAN
In the Isle of Man, at the March sitting of the parliament (Tynwald), the Customs and Excise Act 2018 (Appointed Day) Order 2018 (SD 2018/75) brings the Act into operation w.e.f. 1st March. Amongst other things, the Act amends existing legislation to allow the FIU to deal with sanctions reports in the same way as SAR, and will require an annual report to the parliament on the operation of customs cash seizure law.
CONNECTICUT BUSINESS OWNERS ADMIT TO PROFITING FROM UNLAWFUL EXPORTS TO PAKISTAN
On 5th March, the US DoJ published a news release saying that 2 men, MUHAMMAD ISMAIL, 67, , and KAMRAN KHAN, 38, had pleaded guilty to money laundering in connection with funds they received for the unlawful export of goods to Pakistan. A third defendant, IMRAN KHAN, had previously pleaded guilty. The 3 defendants received orders from a Pakistani company that procured materials and equipment for the Pakistani military. When asked about the end-user for a product, the defendants either informed the manufacturer that the product would remain in the US or completed an end-user certification indicating that the product would not be exported.
PRIVATE EYE: OTHER HOUSES IN LONDON THE NCA COULD LOOK AT
Private Eye magazine has identified several properties that it thinks that the NCA could look at if it is seeking properties that might justify an unexplained wealth order – now that the first such order has been granted.
HOW TO MAKE UN SANCTIONS FAIRER AND WORK BETTER?
PassBlue, which provides independent coverage of the goings on at the UK, on 8th March carried an article which starts by stating that criticisms over a lack of fairness of UN sanctions and inconsistencies in their application are frequent and routine — and not without justification. For decades, human rights experts have pointed to the paradox that unreliable practices, in the words of one expert, render “the UN sanctions system non-compliant with the UN’s human rights standards”. This is usually due the actions of the 5 permanent members of the Security Council in blocking developments they do not like. Also, as a new study has revealed, often individuals and companies are confronted with an asset freeze or travel ban despite questionable evidence. A step forward in having proper due process was the establishment of an independent and impartial Office of the Ombudsperson in 2009, tasked with reviewing delisting requests from UN sanctions – but this the office has been vacant since August 2017. The article also highlights anomalies that arise – such as in South Sudan where (because of disagreements between the permanent members) no arms embargo is imposed but the UN-appointed experts are tasked with having to “gather, examine and analyse information regarding the supply, sale or transfer of arms and related materiel, including through illicit trafficking networks”. The article concludes with a table (condensed from information in a 2017 report) that summarises ways it is said could enhance the implementation and monitoring system of sanctions.
ISLE OF MAN AMENDS ITS ISIL/AL-QAIDA SANCTIONS LISTS
On 9th March, the Isle of Man issued a news release saying that 2 individuals and 1 entity were subject to sanctions in the Island.
ISLE OF MAN: POSITIVE RATES OF REGISTRATION FOR BENEFICIAL OWNERSHIP
On 9th March, the Isle of Man Department of Enterprise published a news release saying that the Companies Registry has reported encouraging rates of registration for beneficial ownership, with over two thirds of listed companies having made their annual declaration. The Beneficial Ownership Act requires nominated officers or corporate service providers for legal entities to submit details of registrable beneficial owners where any beneficial owner holds more than 25% of the legal entities’ shares. After 9 months of operation, the database now holds the details of 68% of the legal entities to which the Act applies.
DUBIOUS SALE HAS POTENTIAL TO SINK BULGARIAN AND CZECH GOVERNMENTS
EurActiv on 9th March reported that the Bulgarian and Czech governments are trembling because of the unfolding scandals surrounding a deal to sell the assets of ČEZ Bulgaria to an obscure private company with no experience. ČEZ is a Czech state energy giant in which pro-Russian President Miloš Zeman has a lot of sway. On 22nd February, ČEZ officially announced the sale of its Bulgarian assets to the absolutely unknown Bulgarian company “Inercom Bulgaria”. The price for the purchase of the shares is €340 million, with which the buyer will acquire the business of supplying electricity to 40% of Bulgaria’s population. The article says that the most problematic aspect of the scheme is the envisaged financing by offshore companies owned by a Russian-Georgian businessman with Bulgarian citizenship, Paata Gamgoneishvili, whose name appears in the Panama Dossier investigation.
HOME OFFICE CIRCULARS: PROCEEDS OF CRIME ACT 2002 CHANGES
A number of Home Office Circulars were issued on 1st February that deal with a number of changes made to the Proceeds of Crime Act 2002.
Circular 012/2018: Criminal Finances Act: confiscation, enforcement, defendant’s money held by a third party
Circular 011/2018: Criminal Finances Act: confiscation reconsideration
Circular 010/2018: Criminal Finances Act: further information orders
Circular 009/2018: Criminal Finances Act: extension of powers and new assault and obstruction offence
Circular 008/2018: Criminal Finances Act: extending the moratorium period for suspicious activity reports
Circular 007/2018: Criminal Finances Act: sharing information within the regulated sector
Circular 006/2018: Criminal Finances Act: disclosure orders
Circular 005/2018: Criminal Finances Act: forfeiture of money held in bank and building society accounts
Circular 004/2018: Criminal Finances Act: unlawful conduct, gross human rights abuses or violations
Circular 003/2018: Criminal Finances Act: unexplained wealth orders
107 FIRMS LINKED TO NIRAV MODI UNDER SCANNER
The Hindu on 9th March reported that 107 companies and 7 Limited Liability Partnerships (LLP) linked to Nirav Modi and his uncle Mehul Choksi groups in connection with the Punjab National Bank scam are being looked at, according to the government.
SPANISH MONEY LAUNDERING NETWORK FRONTING AS KEBAB MEAT SUPPLIER DISMANTLED BY POLICE
On 9th March, in a news release Europol reported that the Spanish Guardia Civil led a police operation against an international criminal organisation that resulted in 5 arrests and pressing charges against 15 persons. The organisation operating both in Germany and Spain was involved in money laundering activities, and used a network of food establishments to conceal their activities, fronting as kebab meat suppliers.
NORTH KOREA TARGETED TURKISH FINANCIAL SECTOR IN CYBERATTACKS IN EARLY MARCH
Daily Sabah reports that anti-virus and security specialists, McAfee, says that a reputed North Korean hacker group, the Lazurus Group, targeted Turkey’s financial sector in a series of cyberattacks on March 2nd and 3rd. The hackers used a new variant of malware known as “Bankshot” in the attacks. The report has also reignited speculation Pyongyang could be unleashing cyberattacks once again.
PROPERTIES OF 2 SANCTIONS-LISTED ORGANISATIONS SEIZED IN PAKISTAN
The Express Tribune in Pakistan reports that all properties of the Jamaat-ud-Dawa (JuD) and its charity arm, the Falah-e-Insaniat Foundation (FIF), have been confiscated in Azad Jammu and Kashmir and Gilgit-Baltistan, while so far its 148 properties/assets have also been taken away in Punjab during the ongoing crackdown against the 2 organisations. The information was disclosed in parliament in connection with what measures the government had taken in view of Pakistan’s placement on ‘grey list’ of FATF. The organisations are subject to sanctions under UN SCR 1267.
EUROPEAN COMMISSION SURVEY ON MEANING OF ‘SPECIALLY DESIGNED FOR MILITARY USE’
UK Notice to Exporters 2018/06 is concerned with the call from the Export Control Joint Unit encouraging all exporters to take part in the survey on the meaning of ‘specially designed for military use’ – an expression widely used in export control legislation. The EU Commission has invited comments from European industry on draft guidance on the meaning via an online survey.
OVERSEAS BUSINESS RISK – SOUTH AFRICA
On 9th March, the UK Department for International Trade reissued its guide which looks at the intellectual property, organized crime, human rights, bribery and corruption and terrorism risks that UK businesses may face when operating in South Africa.
FCPA: FOREIGN CORRUPT PRACTICES ACT 2017 YEAR-END UPDATE
On 9th March, Baker Hostetler in the US produced a report on FCPA activity in 2017, the fortieth anniversary of the Act. The year-end update tracks major developments in FCPA enforcement trends, as well as enforcement actions, settlements, prosecutions and declinations.
UK POSTAL DELIVERY JAILED FOR SMUGGLING CORRUPTION
On 9th March, a NCA news release reports that a corrupt postal delivery driver who conspired to intercept and supply cannabis worth at least £1.2m which had been sent to addresses in north London has been jailed. He had been a Parcelforce Worldwide driver for over a decade, and was arrested after Border Force officers noticed an unusually high number of intercepted drugs packages had been posted to addresses on his delivery route.
SHKRELI GETS 7 YEARS IN PRISON FOR SECURITIES FRAUD
Law 360 on 9th March reported that former pharmaceutical executive Martin Shkreli was sentenced to 7 years in prison, following his conviction on charges of defrauding investors in his ailing hedge funds and conspiring to drain biotech Retrophin Inc.’s assets to pay off his debts.
US CONTINUES REMAINING SANCTIONS AGAINST ZIMBABWE FOR A FURTHER YEAR
On 2nd March, the White House confirmed that US sanctions against persons in Zimbabwe was to remain in place for a further 12 months.
THE BULGARIAN “GOLDEN VISA”: MISSED TARGETS AND A BANKING LOOPHOLE
On 9th March, OCCRP published an article on problems with the Bulgarian citizenship scheme for those investing at least €1 million. The €1 million fast track was introduced in 2013, and supplements an existing programme, and the new programme allowed the process to be sped up to just 2 years if applicants put down up an additional €500,000. An investigation has uncovered a loophole that allows foreigners in both programmes to meet investment requirements with a bank loan — meaning Bulgarian citizenship can be “bought” with little or no real investment in the country. Parliamentary investigators also found a number of highly suspicious approvals, most of them involving Russian applicants. Among the “new Bulgarians” was wealthy Russian businessman Sergei Adoniev, reportedly close to Putin’s circle, who was granted citizenship in 2008. An investigation published in January found Adoniev never carried through on his promise to invest €10 million in the country.
PASSPORT DEALERS OF EUROPE: NAVIGATING THE GOLDEN VISA MARKET
Meanwhile, Transparency International on 6th March published an article calling for the European Commission to scrutinise the so called “golden visa” schemes and looking at those available in Europe.
LARGE CROSS-BORDER VEHICLE THEFT RING BUSTED IN POLAND
Europol on 9th March reported that police have seized 55 cars and identified car parts stolen from Germany in a joint operation between German and Polish law enforcement, and brought down one of the largest organised crime groups involved in vehicle theft in both Germany and Poland.
EUROPOL AND SPANISH POLICE ARREST 6 IN ILLEGAL TV STREAMING CASE
On 9th March, Europol reported that Spanish National Police supported by Europol, arrested 6 individuals from a crime ring suspected of selling illegal TV signals. The signals were sold through a company which designed the application needed to illegally stream films, TV series and sport events. The company developed both the decoder device and the application needed to illegally access the paid channels. The decoder was sold for €120 and the server to transmit the illegal signal was hosted in France and controlled from the business in Spain.
VIDEO: ASYMMETRIC THREATS TO BUSINESS FROM EXTREMISTS
This video from Control Risks is one of 4 looking at 4 things in geopolitics that will impact the business environment in the coming years. This video considers how militant groups are connected to each other, the internet and global commons, how the threat to many businesses is increasingly indirect, and the lowering of barriers to extremist participation and entry.
INDONESIA ISSUES RULES ON BENEFICIAL OWNERSHIP
Baker McKenzie reported on 9th March that Indonesia has issued rules requiring corporations to reveal details of beneficial ownership to the government, as part of efforts to tackle money laundering and terrorism financing in SE Asia’s largest economy. This comes at a time when Indonesia is trying to join FATF. The country was put on an FATF list of jurisdictions with weak measures to combat money laundering and terrorism financing in 2012.
HONG KONG “SLOW TO ACT” ON SUSPECTED FRAUD AND MONEY LAUNDERING THAT DUPED FILIPINO MAIDS
Baker McKenzie on 9th March reported that legal experts have said that hundreds of Filipino domestic workers in Hong Kong were duped into paying for bogus jobs in Canada and the UK and may have been fraud victims as well as unwitting contributors to a money-laundering scheme that authorities have ignored. They also warned the city was fast becoming a “hotbed” for scams preying on migrant workers.