6th April 2018
AFRICA AND ARMS CONTROL: CHALLENGES AND SUCCESSES
On 3rd April, NGO Relief Web produced a report saying that although many African countries have adopted regional and global policies on arms control, the continued illicit proliferation of small arms and light weapons is an indication of wider transnational organised crime on the continent that calls for more attention. Criminal networks exploit gaps in the regulatory systems, porous borders and weak law enforcement procedures. It claims that many African borders are porous, making it fairly easy for illicit traffickers to move arms, and says that the illicit arms market involves various actors, from the manufacturer to the end user, and usually a number of illicit brokers along the supply chain. It reports on the sources of illicit arms flows in Africa – battlefield “losses”; diversion from legitimate (government) stockpiles; and the complicity of international sources and internal actors. It identifies as factors the falsification of end-user certificates; exploitation of the “grey” market (disguising the real owner by use of fraudulent documents; disguising the military nature of the goods through fraudulent documents; falsifying declarations of the supply company to conceal its true identity; and disguising arms as ‘humanitarian aid’); porous borders; and transhipment (with no internationally agreed upon standards that govern the transiting and transshipment of arms and ammunition).
MORE THAN 65,000 MIGRANT SMUGGLERS IN EU, SAYS EUROPOL
Prensa Latina on 6th April reported that the head of Europol’s European Migrant Smuggling Center, told the media that this was the number of people accused of these crimes included in their database at the end of 2017. In September 2015, Europol reported some 30,000 alleged traffickers of people, a figure that rose to almost 55,000 in late 2016 and 65,000 in 2017.
INDIA’S CENTRAL BANK BANS FINANCIAL ENTITIES FROM DEALING WITH CRYPTOCURRENCIES
Block Tribune on 5th April reported that the Reserve Bank of India (RBI), the country’s central bank, has barred banks and financial institutions from providing services to any individual or business dealing in cryptocurrencies. It has given regulated entities 3 months to unwind their business relationships with crypto-related companies. In a news conference it was said that said that while the regulatory response to cryptocurrencies are not uniform internationally, it is universally felt that they can seriously undermine the AML and FATF framework.
VENEZUELA HALTS COMMERCIAL TIES WITH PANAMA, SUSPENDS COPA FLIGHTS, IN TIT-FOR-TAT RESPONSE
Swissinfo on 6th April reported that Venezuela said it was halting commercial relations with Panamanian officials and companies, including regional airline Copa, for alleged involvement in money laundering, prompting both countries to recall their ambassadors. The resolution names Panamanian President Juan Carlos Varela and nearly 2 dozen Cabinet ministers and top-ranking officials and says that Panama’s financial system had been used by Venezuelan nationals involved in acts of corruption. The statement came a week after Panama declared Venezuelan President Nicolas Maduro and some 50 Venezuelan nationals as “high-risk” for laundering money and financing terrorism. Venezuela’s civil aviation authority said in a statement that inbound and outbound Copa flights were suspended for 90 days, despite it being a crucial provider of international flights following a sharp reduction in airline services to crisis-stricken Venezuela. Meanwhile, Reuters reported that the government of Panama said that it would remove its ambassador from Venezuela and asked the crisis-stricken OPEC country to withdraw its ambassador from Panama as well, reflecting the escalating tensions between the countries.
LATVIA’S RIETUMU BANKA PUTS ASIDE €20 MILLION PROVISIONS AFTER MONEY-LAUNDERING CASE IN FRANCE
The Baltic Course on 5th April reported that Latvia’s Rietumu Banka has put aside provisions worth €20 million after it was hit with a heavy fine over a money laundering scheme in France, the bank said in its unaudited 2017 report. Rietumu Banka was charged in France with involvement in aggravated tax fraud and money laundering. In 2017, a Paris court imposed a €80 million fine on the Latvian bank and also ordered more than 20 defendants in the case to pay €10 million in a shared fine as part of a civil lawsuit. Rietumu Banka lodged an appeal against that ruling, but the date for hearing that appeal has yet to be announced.
OVERVIEW OF EU SANCTIONS AGAINST RUSSIA, THE POSSIBILITY HONG KONG BUSINESSES MAKING INVESTMENTS THERE
On 6th April, HK TDC published an article saying that it may be important for some Hong Kong traders to be reminded of EU-imposed sanctions against Russia, particularly should businesses with ties to the EU be considering investing in Russia. The article summarises the sanctions imposed.
SAUDI ARABIA EXPECTS NO OIL SUPPLY IMPACT FROM HOUTHI TANKER ATTACK
Defence Web on 5th April reported that an attack on a Saudi tanker by Yemen’s Houthis will not hit oil supplies, Saudi Arabia’s energy minister said. Houthis attacked the oil tanker off Yemen’s main port of Hodeidah.
FACTSHEET: A SNAPSHOT OF THE ALL THE ZUMA SCANDALS
On 6th April, Business Report provided a snapshot of the allegations against former South African President Zuma.
SOUTH KOREAN COURT SENTENCED DISGRACED EX-PRESIDENT PARK GEUN-HYE TO 24 YEARS FOR CORRUPTION
The Seattle Times on 5th April reported the sentencing of the former President.
IRISH REVENUE ‘ACTIVELY MONITORING’ NEW FACEBOOK SELLING FEATURE FOR POTENTIAL TAX EVASION AND COUNTERFEIT GOODS
Dublin Live reported on 6th April that low prices have fuelled suspicions that some of the items could be fake.
RWANDA: OVER 250 LAND TITLES, BANK ACCOUNTS SEIZED AS PROSECUTORS GO AFTER CORRUPT OFFICIALS
All Africa reported that Rwandan prosecutors have over the past 3 years seized up to 234 land titles and frozen 29 individual bank accounts as part of efforts to recover stolen taxpayers’ money. The seizures were conducted under the 2015 law governing public asset recovery. At the international level, assets acquired fraudulently are traced through mutual legal assistance requests, and joint investigations, with countries contacted by Rwanda in this effort, including Nigeria, Central African Republic (CAR), Canada, Uganda, Spain and Belgium.
RE-ANALYSIS OF THE ASSASSINATION OF KIM JONG-UN’S BROTHER
On 5th April, the Royal United Services Institute published an analysis, with an opportunity to look at North Korea’s capabilities in the use of nerve agents. One thing it says is, from an operational perspective, the use of VX was wholly unnecessary and carried exceptional risk; given the relatively lax travel and visa requirements between Malaysia and North Korea at the time, Pyongyang’s operatives had numerous conventional options to eliminate Kim Jong-nam, who was frequently on Malaysian soil. The assassination revealed a dramatic technical improvement in North Korea’s offensive chemical capabilities. Apart from the US and Russia, North Korea stockpiles the most CW agents in the world and is estimated to have 2,500 to 5,000 tonnes of CW agents, which serve as a formidable unconventional deterrent. The signal from Kim is clear: underestimate North Korea at your peril, and that Kim’s regime currently relies in part on maintaining a robust and operational chemical capability for credible deterrence and cash.
E-COMMERCE LOGISTICS OPERATORS TO BE HIT BY NEW HMRC RULES
Loadstar on 5th April reported that UK e-commerce logistics operators are to be hit by a wave of new regulations as tax authorities seek to claw back billions of unpaid import charges. Companies involved in distributing e-commerce goods will be subject to the new Fulfilment House Due Diligence Scheme, which HRMC is set to bring into law next year.
INSIDER TRADING: THE GALLEON HEDGE FUND SCANDAL
In the latest TRACE podcast, Anita Raghavan discusses Raj Rajaratnam and her book, “The Billionaire’s Apprentice, The Rise of the Indian-American Elite and Fall of the Galleon Hedge Fund”.
MAJOR GARDA OPERATION FOCUSED ON ORGANISED CRIME GANG IN DUBLIN
Dublin Live reported that a major Garda operation is underway across 5 counties in Ireland including Dublin. Officers are said to be targeting an organised crime gang based in Drogheda.
THE TRANSPORT AND SUPPLY CHAIN IN SAUDI ARABIA
On 4th April, Clyde & Co produced a briefing saying that Saudi reforms also means changes to the transport sector, with significant investments expected in seaports, road and rail networks to improve the efficiency of the transportation of goods within the Kingdom. The briefing deals with which issues the Saudi transportation sector is currently facing and how technology and other developments may impact it.
AUSTRALIA DROPS AML OBLIGATIONS FOR CASH-IN-TRANSIT AND DESIGNATED FIRMS
KYC 360 on 5th April reported that businesses providing cash-in-transit and insurance services, except car dealers, have been exempted from compliance and reporting obligations under Australia’s AML/CFT rules. They will also no longer be required to report transactions or suspicious matters, in accordance with the Financial Transaction Reports Act 1988, financial regulator AUSTRAC said.
US OPIOID CRISIS: FBI LEADS ENFORCEMENT ACTIONS TO DISRUPT ONLINE OPIOID SALES
Homeland Preparedness on 5th April reported that the FBI has led an enforcement action, called Operation Disarray, that led to hundreds of interactions and arrests of individuals involved in the online sale of opiates. The operation, the first of its kind to occur at the same time in all 50 states, was part of a broader DoJ initiative to disrupt the sale of opioids online. Hundreds of FBI agents and federal partners, including personnel from DEA, US Customs and Border Protection, Internal Revenue Service, Department of Homeland Security and US Postal Inspection Service participated in the operation by conducting searches, making arrests and carrying out “knock and talks” with individuals known to have bought or sold drugs through darknet marketplaces.
PODCAST: CHOKEPOINTS IN GLOBAL FOOD TRADE, AND HOW THE INTERNET IS CHANGING LANGUAGE
The latest Undercurrents podcast from Chatham House focusses on vulnerabilities in the global food trade, and a debate about how the internet is transforming the English language.
UKRAINE SEPARATIST MILITARY INDUSTRIAL COMPLEX
On 6th April, Medium carries an article reporting that separatist groups in eastern Ukraine are modifying weapons and producing additional firepower. Oplot is a pistol that is by far the most complex weapon to be produced from scratch by Russian-led separatists. The more well-known locally produced arms are rifles designated as counter-sniper rifles. While these arms are more powerful than the Oplot, they are also much less complex in their firing mechanisms. An example is the Donchanka single-shot 0.50 calibre rifle. The article says that, if nothing else, there is interesting innovation surrounding the small arms development in separatist-held Ukraine, and ambitious claims of a “military-industrial complex” in Donetsk are, by all indicators, overstated, but it is clear that there is some actual local production of new arms.
THE ISIS FILES
On 4th April, the New York Times carried an article saying that on 5 trips to battle-scarred Iraq, journalists for The New York Times scoured old Islamic State offices, gathering thousands of files abandoned by the militants as their ‘caliphate’ crumbled. The documents were pulled from the drawers of the desks behind which the militants once sat, from the shelves of their police stations, from the floors of their courts, from the lockers of their training camps and from the homes of their emirs. The New York Times worked with outside experts to verify their authenticity, and a team of journalists spent 15 months translating and analysing them page by page. The article provides an overview of the types of material found.
REVIEWING CANADA’S AML/CFT REGIME
On 4th April, Dentons produced an analysis of a consultation document that proposes a broad range of potentially significant changes and describes the most notable proposals. The Department of Finance released the consultation on 7th February. Responses are required by 30th April.
OFAC DESIGNATES MEXICAN MUSIC PROMOTER AND VENEZUELAN-ITALIAN FASHION PHOTOGRAPHER
On 6th April, OFAC designated Mexican music promoter Jesus Perez Alvear as a Specially Designated Narcotics Trafficker (SDNT) and Venezuelan-Italian fashion photographer Miguel Jose Leone Martinez, who helps lead an international prostitution ring associated with the Los Cuinis drug trafficking organisation.
TRANSPARENCY INTERNATIONAL HUNGARY HISTORY OF CORRUPTION IN HUNGARY BETWEEN 2010 AND 2018
On 29th March, Transparency International Hungary published its Black Book that deals with the history of corruption in Hungary between 2010 and 2018. The book gives a detailed analysis of Hungary’s anticorruption performance, major cases of domestic corruption, and the use of EU funds and corruption risks in public procurement. The English version of the Black Book also contains a description of 30 corruption cases, a figure that, it says, is still just the tip of the iceberg.
BAKER MCKENZIE EXPORT CONTROL WEBINAR, MARCH 2018
Some of the topics covered in the free webinar were the following.
China – draft Export Control Law (ECL)
- Includes – Consistent with international standards such as the Wassenaar Arrangement – Includes new concepts such as “re-export” and “deemed export” – Concerns re-export restrictions might impact use of Chinese inputs Key aspects – Establish a science-based export control listing system – To develop a rigorous export control management system that includes licensing, permitting and reporting – Enhance enforcement powers and streamlining compliance procedures.
- Blacklists – Can blacklist foreign importers and end-users that breach the ECL – Can prohibit the export of controlled items to such persons
- Retaliatory measures – China may adopt retaliatory measures if subject to discriminatory export control measures by any country National security – May implement controls to safeguard security and interests during wartime or urgent situations concerning international relations
EU Dual-Use Regulation – recast version may come into force later this year, proposals include –
- Modernised to take account of new technology risks (Cloud, cyber)
- Evolving foreign policy on WMD and access to nuclear weapons
- Insufficient harmonisation at present of licensing etc between Member States
- Extension for controls linked to human rights abuses
- Make changes more quickly in future
- Proposal for cyber-surveillance technologies as “a new category of dual use items” and with end-use controls on non-listed items, so “catch-all” controls on non-listed cyber-surveillance items in specific circumstances
- Specific prohibition on circumvention of export controls
- Control on cyber technologies used in warfare
- New EU general licences: EU007: Low Value Shipments (< €5,000); EU008: Intra-company transfer of software and technology; EU009: Encryption items
- Clarification of intangible technology transfer (ITT) controls and facilitation of low-risk technology transfers, as they only become subject to control when the dual-use technology is made available to a person in a third country, which is in particular expected to facilitate the use of cloud services
- Longer duration for individual licences granted by Member States and for EU Global Export Authorisation registrations – 2 years to reduce administration and give more time to focus on higher risk areas
- Licences will not be granted for cyber security items where likely to lead to serious violations of human rights
US Sudan export control: US sanctions and export controls remaining for Sudan include –
- SDN designations such as those related to Darfur and South Sudan remain in force
- Sudan remains a State Sponsor of Terrorism
- US arms embargo implemented on February 14th
- State-level divestment efforts targeting companies in Sudan
- 15 parties involved in South Sudan’s energy sector added to “Entity List” on March 22nd, so subject to export and other restrictions
OECD: LOWER RATING FOR BELGIUM ON INTERNATIONAL STANDARDS ON TRANSPARENCY AND THE EXCHANGE OF INFORMATION ON REQUEST
The Brussels Times on 6th April reported that Belgium’s rating in the latest peer review report by the OECD Global Forum on Transparency in respect of the international standards on transparency and the exchange of information on request has been reduced to only “largely compliant”. The previous review in 2014 had assessed it as “compliant”. The 2017 report, published on the 4th April, attributes this regression mainly to an unfinished adaptation into law of international standards and calls for progress on the relevant legislation in Belgium to be monitored. The review does report that Belgium is “largely open” to information exchange and provides prompt responses and qualitative information to its numerous partners.
KOSOVO INDICTS 11 FOR GIVING OUT STATE JOBS TO POLITICAL LOYALISTS
Reuters on 6th April reported that 11 people, including a minister and lawmaker from the ruling party, have been indicted for allegedly handing out state jobs to people based on their political affiliation. Almost all of the indictees are members of the ruling Democratic Party of Kosovo (PDK), including Besim Beqaj, the minister for innovation and entrepreneurship.
ENI OFFICES IN ITALY SEARCHED IN CONGO REPUBLIC CORRUPTION PROBE
On 6th April, Reuters reported that the offices of Italian oil major Eni have been searched and documents seized in an investigation by Milan prosecutors into alleged corruption in the Republic of Congo 2009-2014. The state-controlled company is also under investigation in a separate case over alleged corruption in Nigeria. Eni is the largest foreign oil and gas producer in Africa and has operated in the Congo Republic since 1968.
BORDEAUX WINE FRAUD: WINE MERCHANT ORDERED TO PAY €200,000
Decanter magazine on 6th April reported that Merchant Grands Vins de Gironde has been found guilty of wrongly labelling significant quantities of Bordeaux appellation wine and must pay a €200,000 fine, according to reports
INDIA ASKS HONG KONG TO ARREST JEWELLER NIRAV MODI IN BANK FRAUD
Reuters on 6th April reported that India has asked authorities in Hong Kong to arrest jeweller Nirav Modi, one of the main suspects in a $2 billion fraud at state-run Punjab National Bank suggesting that it believes the fugitive is in the Chinese territory.
UK NOTICE TO IMPORTERS 2901: ALUMINIUM PRODUCTS
On 6th April, the UK Department for International Trade issued a new Notice to Importers advising that the European Commission intends to expand its prior surveillance regime to cover aluminium products. It is expected that from early May 2018, imports of aluminium will require an import licence before they can be imported into the EU.
DRUG TRAFFICKER COLLECTED COCAINE ON CARIBBEAN CRUISE
On 6th April, the NCA reported that Kevin Enright, 55, from Dunstable, a convicted drug dealer who used a 3-week Caribbean cruise as a cover to bring cocaine worth more than £200,000 into the UK has been jailed for 9½ years, following an investigation by the National Crime Agency. He was intercepted by Border Force officers as he disembarked a cruise liner at Southampton Docks on 31st October. In total, there was almost 3 kg of cocaine in his luggage.
YEMENI REBELS TARGET SAUDI OIL INDUSTRY
Janes.com on 6th April reported that Yemeni rebels, Ansar Allah (Houthis), have announced 3 attacks on Aramco facilities in 10 days, and the Saudi-led coalition blamed them for an attack on an oil tanker in the Gulf.
ITALY ARRESTS TOP MAFIA BOSS
On 6th April, OCCRP reported that Italian police have arrested one of the most well-known ‘Ndrangheta bosses in an isolated hut in a village in southern Calabria. Giuseppe Pelle has been wanted since 2016 when he received a 2½ year prison sentence for attempted extortion and being associated to organised crime.
GLASS EEL SMUGGLERS EARNED MORE THAN €37 MILLION FROM ILLEGAL EXPORTS TO ASIA
On 6th April, Europol reported that it had supported Operation Elvers which was led by the Spanish Guardia Civil in collaboration with the Portuguese authorities. 10 members of an organised crime group involved in illegally exporting glass eels to Asia have been arrested. The ring was based in Spain, but also operated out of Portugal and Morocco. Police discovered how the criminals sent large amounts of glass eel from Madrid to Porto, Portugal and from Algeciras, southern Spain to Morocco. Consequently, they were able to block several deliveries at Portuguese airports and stop a van carrying 129 kg of eels heading to Morocco. In 2009 the European species Anguilla anguilla was listed in Appendix II of the Convention on International Trade in Endangered Species (CITES) of Wild Fauna and Flora. This meant that the eels could be sold, provided strict requirements were met and the corresponding permits were obtained. It soon became clear that these measures were insufficient; the EU therefore established a ‘zero quota’ to ban shipments to third countries.
MALAYSIA INTRODUCES “CORPORATE LIABILITY” BILL
On 6th April, Baker McKenzie reported that the Malaysian Government has proposed a Bill that will make corporations liable for the corrupt practices of its associated persons. An “associated person” includes directors and employees and could extend to third party service providers. The Bill imposes strict liability on commercial organisations, in that organisations can be liable regardless of whether they had actual knowledge of the corrupt actions of its associated persons. To avoid liability, organisations must be able to demonstrate that they had in place adequate procedures designed to prevent associated persons from undertaking corrupt practices.
SEC SECURES COURT ORDER AGAINST CRYPTOCURRENCY BUSINESS, LONGFIN
On 6th April, Mondo Visione reported that the SEC has obtained a court order freezing more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin Corp. stock involving the company, its CEO, and 3 other affiliated individuals. The SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi, and Suresh Tammineedi illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Altahawi, Penumarthi, and Tammineedi collectively reaped more than $27 million in profits.
UK FCA REQUIREMENT FOR FIRMS OFFERING CRYPTOCURRENCY DERIVATIVES TO BE AUTHORISED
On 6th April, Mondo Visione carried an article saying that cryptocurrencies are not currently regulated by the FCA provided they are not part of other regulated products or services. Cryptocurrency derivatives are, however, capable of being financial instruments under the Markets in Financial Instruments Directive II (MIFID II). Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable EU regulation. These derivatives include –
- cryptocurrency futures– a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties;
- cryptocurrency contracts for differences (CFD)– a cash-settled derivative contract in which the parties to the contract seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination; and
- cryptocurrency options– a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies
US, MEXICO AND COLOMBIA LAUNCH MAJOR MARITIME DRUG SMUGGLING CRACKDOWN
Homeland Security Today on 1st April reported that the US and Mexican governments may be sparring over immigration and trade, but the countries are joining forces on the high seas to go after drug smugglers. The US, Mexico and Colombia will target drug smugglers off South America’s Pacific coast in an operation expected to last for the foreseeable future.