2nd April 2018
TAIWAN CENTRAL BANK PROPOSES MONEY LAUNDERING RULES FOR BITCOIN
Coindesk on 2nd April reported that the Central Bank of Taiwan is eyeing new rules that would bring bitcoin under its existing AML regulations.
3rd April 2018
LOST DURGA IDOL TO RETURN FROM NEW YORK TO INDIA
On 3rd April, DNA reported that an idol of Mahishasurmardini (the other name of Goddess Durga) is on its way back to India from the Metropolitan Museum in New York, after museum authorities recognised that its rightful place is Baijnath temple in Almora. The Museum had a nagging suspicion of the idol being bought off the art market illegally. The only information was that the idol had first surfaced in the art market sometime in 1980.
THE FALLEN RIO TINTO MINING EXEC, HIS ENCRYPTED BLACKBERRY AND THE COCAINE SHIPMENTS WORTH MILLIONS
9 News in Australia on 3rd April carries a feature, including video, on the downfall of a high-flying Rio Tinto executive who led a double life smuggling cocaine into Australia. It was Bennet Schwartz’s continual monitoring of the DHL website to track parcels filled with cocaine worth millions of dollars, and clever work by Australian Federal Police that ended with the private-schooled 29-year-old being sentenced to 8 years prison in the US. In 2016, AFP and Border Force units intercepted 2 packages containing 25 kg of cocaine that were linked to Schwartz, who was set to pocket a substantial payoff for moving the narcotics to other alleged Sydney underworld figures, including a man known as “Dr Octopus”.
ZIMBABWEAN GOVERNMENT TO TIGHTEN SCREWS ON MINERAL SHIPMENTS
Mining News on 2nd April reported that Zimbabwe intends on setting up a metallurgical laboratory to determine the exact value and quality of mineral export shipments, particularly the platinum group of metals (PGM), as it is said to be losing substantial amounts in potential revenue through smuggling across unsecure border points. The article says that minerals account for half of the country’s annual export revenue, with gold and platinum accounting for half of total annual export earnings. Currently, the bulk of PGM shipments are assayed in South Africa.
AUSTRALIAN CRYPTOCURRENCY EXCHANGES NOW MUST REGISTER WITH AUSTRAC
Website Cryptoninjas on 2nd April reported that, a of April 3rd, changes to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 in Australia will affect digital currency exchange (DCE) services. Australian exchanges will be required to register with AUSTRAC (Australian Transaction Reports and Analysis Centre) and meet its obligations.
UK NCA TO ‘REVIEW’ CASA MATERIAL ON PILATUS BANK
The Times of Malta on 2nd April reported that the NCA has said it would “review” material provided by MEP David Casa about what he termed as “evidence of systemic money-laundering” at Malta-based Pilatus Bank. This followed a letter sent to the NCA sent days before the arrest of Pilatus Bank’s owner, Seyed Ali Sadr Hasheminejad, in the US. Mr Casa said the bank’s clients were predominantly Azeri politically exposed persons, and provided the NCA with a number of documents to substantiate his calls for a UK investigation. The Director of the NCA said that the NCA would consider criminal allegations of bribery and corruption which potentially had an impact on the integrity of the UK as a financial sector. Pilatus Bank operated a Mayfair branch in London after it passported its Maltese banking licence to the UK.
HSBC IS INVESTIGATED OVER LINK TO £134 MILLION ‘TAX EVASION’ SCHEME
On 31st March, The Times reported that HSBC is implicated in a criminal investigation into a £134 million suspected tax evasion scheme created by the bank, with 3 former employees at HSBC’s London office interviewed under caution for their role in devising a tax scheme that sought to help wealthy backers save millions of pounds in tax. It is reported that HSBC earned fees of about £2 million for licensing the scheme, which involved the sale of film rights, to the finance company Zeus Partners in 2008.
ADVICE TO THE PUBLIC ON THE CONTROL OF POISONS AND EXPLOSIVES PRECURSORS REGULATIONS 2015
On 3rd April, the Home Office in the UK published updated advice on applying for a licence, covering such issues as eligibility, processing times, and the relevant legislation and concentration thresholds in the form of FAQ and on how to apply for a licence for home use. Controls include those of explosives precursors. If a member of the general public wants to buy any of the regulated substances, they need to apply to the Home Office for a licence to acquire, to possess and use. The regulation is intended to reduce the risks associated with allowing sales of chemicals that can be used to cause harm while still allowing those with a legitimate need for the chemicals to continue their activities. The explosives precursors involved are Hydrogen peroxide; Nitric acid; Nitromethane; Sodium chlorate; Potassium chlorate; Sodium perchlorate; Potassium perchlorate; and Sulfuric acid.
HOW TO BUILD A BETTER TAX HAVEN – THE CAYMAN ENTERPRISE CITY
On 3rd April, Eurasia Review carried an opinion article commenting on how, with apparently no taxation, the Cayman Islands operates and reflecting on the Cayman Enterprise City where companies in the zone have literally zero tax liability, period. This comes hand-in-hand with a streamlined, transparent, and light regulatory framework in the zone. This aggressively competitive governance structure has borne fruit, too: the Cayman Islands have the highest GDP per capita of any Caribbean nation.
VENEZUELA DEMANDS SWITZERLAND ENDS “HOSTILE” SANCTIONS
On 2nd April, Telesur reported that a formal note from the venezuelan government says that the economic sanctions and restrictions that the Swiss government placed on Venezuela “demonstrate the (Swiss) subordination to members of the European Union and the U.S. government”. The Swiss government ordered asset freezes and travel bans for certain Venezuelan companies, organizations, and functionaries, including seven Venezuelan ministers and high-ranking officials, including former National Assembly President Diosdado Cabello, Interior Minister Nestor Reverol, and Chief Justice Maikel Moreno.
SEC CHARGING 2 CASH-AND-CAR-LOVING CRYPTO FOUNDERS WITH FRAUD AFTER THEIR $32 MILLION ICO
Business Insider on 2nd April reported that US authorities have arrested and charged Sam Sharma and Robert Farkas, from Miami, 2 of the founders of Centra, with fraud related to the start-up’s initial coin offering. Centra, which claimed to be building a debit card for cryptocurrencies, raised $32 million in its September ICO. Centra sold “CTR Tokens” to investors in September, saying it planned to create a cryptocurrency debit card backed by Visa and Mastercard that could be used at stores just like a credit card and featured endorsements from the likes of boxer Floyd Mayweather and record producer DJ Khaled. The SEC alleges that Centra had no relationship with Visa or MasterCard.
FORMER MOBILE PHONE EXECUTIVE JAILED IN US FOR UNWANTED TEXT MESSAGE FRAUD
On 3rd April, Reuters reported that Darcy Wedd, the former CEO of Mobile Messenger, was sentenced to 10 years in prison after being convicted on US charges that he engaged in a scheme to defraud millions of consumers by charging them for unwanted text messages. Wedd is one of 8 people to be convicted on charges related to their participation in the fraud, which involved forcing consumers to pay monthly fees for unsolicited, recurring text messages without their knowledge or consent.
ALLEGATIONS OF WASHINGTON INSIDER USING CONTACTS FOR INSIDER TRADING
Reuters on 3rd April reported that a federal prosecutor said a political consultant used his Washington contacts as his “secret sauce” to uncover market-moving tips about policy decisions from a US healthcare agency, enabling a big New York hedge fund firm to conduct insider trading. It is alleged that consultant David Blaszczak, a former employee of the US Centers for Medicare and Medicaid Services (CMS), accepted tips from Christopher Worrall, who worked for CMS, about government plans to lower reimbursement rates for the costs of radiation cancer treatment and kidney dialysis. Blaszczak then allegedly passed tips to former Deerfield Management Co partners Ted Huber and Rob Olan, collecting fees while that hedge fund made $7 million of illegal profit.
SWITZERLAND URGED TO BE TOUGHER ON BRIBERY IN BUSINESS
ICAEW on 28th March reported that Switzerland has been urged by the OECD to be tougher on bribery in business. The OECD’s working group on bribery found that despite some efforts, Switzerland still needs to do more to combat bribery in international business transactions.
ILLEGAL LOGGING HIGHLIGHTS CORRUPTION IN PAPUA NEW GUINEA
Radio New Zealand on 3rd April claims that a Papua New Guinea landowner says it appears foreign forestry companies have been bribing government officials to illegally fell ancient trees on private land in remote areas. He said after gathering evidence and gaining support of their Provincial Governor to stop the operation there are now multiple court cases around the way PNG’s forestry sector gives permits to foreign loggers.
ISRAELI POLICE RAID NAIROBI OFFICES OF ISRAELI COMPANY IN BRIBERY PROBE
Israeli investigators raided the offices of Shikun & Binui in Kenya and froze some of the firm’s bank accounts. Shikun & Binui, through its foreign subsidiary Solel Boneh International Holdings, was chosen to build the World Bank-funded Mau Summit-Kericho-Kisumu Highway in 2010. The company – one of the largest construction firms in Israel – has been bidding for other projects in Kenya. The action is said to be linked to an inquiry into allegations of bribery of top transport ministry officials by an Israeli construction firm to influence award of road tenders in Kenya
US STATES THAT HAVE APPROVED MEDICAL CANNABIS LAWS SAW A DRAMATIC REDUCTION IN OPIOID USE
The University of Georgia, School of Public and International Affairs reported that States that have approved medical cannabis laws saw a dramatic reduction in opioid use, according to a new study by researchers at the University. Researchers examined the number of all opioid prescriptions filled between 2010 and 2015 under Medicare Part D, the prescription drug benefit plan available to Medicare enrollees. The researches concede that if medical cannabis is to become an effective treatment, there is still much work to be done. Scientists are only just beginning to understand the effects of the compounds contained in cannabis, and an effective “dose” of cannabis would need to be defined clearly so that each patient receives a consistent dose.
TRACE PODCAST: SPOTLIGHT ON ARGENTINA
In the latest TRACE podcast, Guillermo Jorge, a partner at Governance Latam in Buenos Aires, discusses the new Argentinian law that creates corporate liability for bribery that came into effect on March 1st.
LOW-COST OPTIONS FOR AIRBORNE DELIVERY OF CONTRABAND INTO NORTH KOREA
The RAND Corporation has published a research paper on how, for a number of years, various activist groups in South Korea have used hydrogen balloons — and, more recently, hexacopter drones — to carry political, religious, and humanitarian materials across the border into North Korea. The paper says that the balloon delivery techniques have evolved over time, and the activist groups are overtly interested in new technologies to pursue their goals. It also compares efforts in Korea with Cold War efforts to achieve similar goals in Central and Eastern Europe and assesses plausible technological developments that might improve the airborne delivery of contraband. It says that based on anecdotal reports, the balloons do not fly far across the border very often, and it may be that the balloons are “saturating” the border area with leaflets but not fulfilling their full potential to reach larger areas of the country.
IRAN: ASSESSING THE JCPOA PROCUREMENT CHANNEL
On 29th March, the International Institute for Strategic Studies published a paper saying that under the 2015 nuclear deal with Iran, a new mechanism was set up to regulate any procurements made by Tehran for its now limited nuclear programme. The research paper takes an in-depth look at the Procurement Channel, as it is known, examining its workings and effectiveness so far, and offers recommendations to policymakers to ensure its sustainability. The mechanism covers 3 categories of goods, and associated assistance and services –
- goods that are ‘especially designed or prepared for nuclear use’;
- dual-use goods with both nuclear and civilian applications – controlling this category of goods is generally more difficult because it comprises items which, in addition to their more sensitive use, also have wide industrial and commercial applications and which have comprised the bulk of Iran’s procurement activities; and
- any other items that are determined by the ‘relevant State’ as having the potential to ‘contribute to activities inconsistent with the JCPOA’ – this is akin to the catch-all provision in many national export-control regimes, the goal being to capture the less straightforward cases. These items typically have lower technical specifications than what would normally be used in a nuclear programme. Iran’s procurers have often focused on this type of goods once export-control enforcement has made purchasing others much more difficult.
To export any of the items in question to Iran, a company needs to go through the established licensing process in its home country whilst also submitting documents required by the Procurement Channel.
BRAZILIAN REGULATOR SAID TO BE PROBING BANCO ORIGINAL
KYC on 3rd April reported that Brazil’s securities regulator, CVM, has that it was probing possible insider trading at Banco Original, a bank that belongs to J&F Investimentos, which has been at the centre of a corruption scandal. The regulator will look into transactions in interest rate futures and derivatives that occurred before the release of a plea deal by J&F Investimentos controlling shareholders, Joesley and Wesley Batista.
SECOND EXECUTIVE PLEADS GUILTY TO FCPA VIOLATIONS IN SIEMENS CASE INVOLVING BRIBES IN ARGENTINA
On 30th March, Buckley Sandler reported that Eberhard Reichert, a former executive of a Siemens AG subsidiary, pleaded guilty in New York to conspiracy to violate the Foreign Corrupt Practices Act, including conspiracy to commit bribery, falsify corporate books and records, circumvent internal controls, and commit wire fraud. He was part of a decade-long scheme during which Siemens paid tens of millions of dollars in bribes to Argentine government officials to secure a contract to create national identity cards, which a Siemens subsidiary was awarded more than $1 billion from 1998. The Argentine government ended the project in 2001 and, since then, Siemens and its employees have faced prosecutions and enforcement actions around the world as a result of the bribes and related conduct.
UN DISARMAMENT COMMISSION DEBATES WAYS TO PREVENT ARMS RACE IN OUTER SPACE
On 2nd April, the UN News website reported on the opening of the 2018 session of the Commission in New York. The Commission has included prevention of an arms race in outer space in its agenda for this session. Recent trends include the massive growth in the number and diversity of actors operating in outer space, including governments and the private sector; the proliferation of hazardous space debris; and increasing dependence on outer space in the civilian, government and military sectors. The Commission was created in 1978 as a subsidiary organ of the UN General Assembly, composed of all Member States, to consider various issues in the field of disarmament and make recommendations.
FIRST DIGITAL CURRENCY EXCHANGE REGISTERED IN AUSTRALIA
On 3rd April, Mondo Visione reported that Independent Reserve, the Australian digital currency exchange, has became the first Australian exchange of its kind to be regulated.
US AMENDS EXPORT CONTROL REGULATIONS
On 2nd April, Crowell Moring reported that the US Bureau of Industry and Security had advised that the Export Administration Regulations (EAR) to take account of changes to Australia Group rules – which seek to ensure that exports do not contribute to the development of chemical or biological weapons – and the admission of India to the Group. The update identifies the Export Control Classification Numbers (ECCN) on the Commerce Control List (CCL) that have been updated.
The Yomiuri Shimbun
WOLFSBERG GROUP ISSUES FAQ ON COUNTRY RISK
On 29th March, law firm Shearman & Sterling published a briefing advising that the Wolfsberg Group had published a set of FAQ on financial crime country risk. Country risk is the additional risk created by investing in, or lending cross border to, a foreign country in the context of credit facilities.
The FAQ may be found at –
21ST CENTURY SLAVERY: EUROPEAN ANTI-TRAFFICKING EXPERTS RAISE THE ALARM OVER LABOUR EXPLOITATION
On 3rd April, the Council of Europe reported that trafficking for labour exploitation is on the rise across Europe. In several countries, it has overtaken sexual exploitation as the main form of human trafficking. Official figures underestimate the true scale of the problem and there have been few successful prosecutions and convictions. These are among the main findings of the latest annual report from the Council of Europe’s Group of Experts on Action against Trafficking in Human Beings (GRETA).
DUTCH PARLIAMENT FOLLOW DENMARK IN DEBATE ON ADDITIONAL RUSSIAN SANCTIONS
On 29th March, EU Observer reported that Dutch MPs are to debate imposing asset freezes and visa bans on Kremlin cronies in response to the UK attack, building on similar moves in Nordic and Baltic states.
ORGAN AND TISSUE DONATION: COUNCIL OF EUROPE GUIDE EXPLAINS PRINCIPLE PROHIBITING FINANCIAL GAIN
On 3rd April, the Council of Europe reported has just published a new guide promoting application of the principle that the human body and its parts must not, as such, give rise to financial gain. The principle prohibiting financial gain set out in the Oviedo Convention and its additional Protocol concerning transplantation of organs and tissues of human origin safeguards respect for human dignity.
DUMPING GARBAGE OVERSEAS IS NOT THE RIGHT WAY TO GO
EurActiv on 3rd April carried an article by Zhang Ming, Ambassador Extraordinary and Plenipotentiary and Head of Mission of the People’s Republic of China to the EU. During the recent meeting of the WTO Council for Trade in Goods, some representatives raised concerns about China’s ban on “foreign garbage” import. Some even asked China to halt its implementation. Zhang Ming explains China’s position. He says that China started importing solid wastes in the 1980s, whose annual volume surged from 4.5 million tons to 45 million tons in the past 20 years. A great amount of prohibited wastes, or “foreign garbage” as is often called, were mixed up in the imports, causing great harm to China’s environment and threatening public health.
UK EXPLOSIVES PRECURSORS REGULATIONS AMENDED
The Poisons Act 1972 (Explosives Precursors) (Amendment) Regulations 2018, SI 2018/451, w.e.f. 1st July add sulfuric acid in the list of regulated explosives precursors where it is concentrated above 15% weight in weight, and to include aluminium powders and magnesium powders (each above a concentration threshold of 70%, with a particle size less than 200μm), and magnesium nitrate hexahydrate in the list of reportable explosives precursors. The aim of the controls on such precursors is to restrict sales and use of chemicals that can be used to illegally make explosives.
MONEY LAUNDERING AND CORRUPTION SCANDALS HAUNT LATVIA AS ITS PRESIDENT MEETS TRUMP AT THE WHITE HOUSE
On 3rd April, CNBC reported that President Trump hosts the leaders of Latvia, Lithuania and Estonia at the White House. The principal topic will be the growing spectre of Russian aggression against NATO allies in Eastern Europe. Another national security concern, however, is likely to cast a shadow: Latvia’s apparent failure to curtail widespread money laundering and corruption in the nation’s banking sector.
CHINA SEIZES 50,000 BOTTLES OF FAKE PENFOLDS WINE
On 3rd April, website The Drinks Business reported that police have seized 50,000 bottles of fake Penfolds worth over $2.8 million – just 5 months after 14,000 were seized in Shanghai – highlighting the scale of counterfeit wines in the Chinese market. The crime ring has been producing fake Penfolds since April last year, police said, however what makes this crime ring different from previous busts is that the gang has developed a “sophisticated network” of production and distribution and seems to have only targeted Penfolds premium wines.
A UK MAGNITSKY ACT: WOULD IT WORK?
In a commentary on 3rd April, the Royal United Services Institute posed this question: in 2016, the Global Magnitsky Act was adopted in the US to redress the impunity of human rights abusers and kleptocrats around the world. In the wake of the Salisbury poisonings, would it work for the UK? One problem it highlights is any imposition of Magnitsky-like measures would require the release of evidence that has to stand up to judicial scrutiny (a problem that has previously affected terrorism and other sanctions cases).
TAXATION OF VIRTUAL CURRENCY TRANSACTIONS IN THE US
On 3rd April, law firm Snell & Wilmer published a briefing examining how virtual currency transactions are taxed. It explains that, at a high level, the IRS indicates that virtual currency will be treated as “property” for tax purposes, meaning that the normal tax rules for using property in commerce will apply. The briefing involves a discussion of some of the applicable rules, as well as some issues that await further guidance.
INTERPOL HOLDS FIRST DARKNET AND CRYPTOCURRENCIES WORKING GROUP: ALTCOINS IDENTIFIED AS SERIOUS LAW ENFORCEMENT CHALLENGE
A news release from Interpol on 3rd April advised that the rise of Altcoins, an alternative to Bitcoin, has been identified as an emerging threat by the first INTERPOL Working Group on DarkNet and Cryptocurrencies. Other challenges identified by participants included cryptocurrency mixers, anonymisation techniques, lack of altcoin tracing tools and decentralised escrow services. Police officers shared case examples of global Darknet and cryptocurrency investigations, along with the technical and legal challenges they face in various national contexts.
ALCOHOL LICENCES TO BE TIED TO IMMIGRATION CHECKS IN SCOTLAND
Out-Law on 3rd April reported that businesses in Scotland may be refused permission to sell alcohol on their premises if the person submitting the application for a licence is not entitled to work in the UK, under new legislation that has been proposed.
UK: INVESTIGATORS NEED MORE EFFECTIVE, CONSISTENT TRAINING ON THE DISCLOSURE PROCESS
The National Lead for Criminal Justice for the National Police Chiefs Council on 3rd April said that that there is a need for more effective, consistent training on disclosure, but sets out the need to ensure sensitive unused material is not automatically shared. The Council has responded to allegations of deliberate withholding of material relevant to ongoing court cases.
NOVICHOK AND THE CHEMICAL WEAPONS CONVENTION
On 19th March, a useful post on The Trench website reviews the position re the use of Novichok nerve agent in Salisbury and the Convention. It says that the question is whether and how the international organisation (the Organisation for the Prohibition of Chemical Weapons or OPCW) can contribute to resolving the matter, examining its compliance and investigative capabilities under the Convention.
GERMAN REGULATOR EXPLAINS CLASSIFICATION OF CRYPTOCURRENCIES AS FINANCIAL INSTRUMENTS
KYC 360 on 3rd April reported that German financial watchdog, BaFin, has published a statement outlining the manner in which crytpocurrencies such as bitcoin and related investments should be classified.