17th April 2018
CHINA’S ZTE HALTS SHARE TRADING FOLLOWING US EXPORT BAN
The Macau News Agency reported on 17th April that Chinese telecom giant ZTE had halted trading of its shares in Hong Kong and Shenzhen Tuesday following the announcement of a US ban on its purchase of sensitive technology. In March 2017 the company had pleaded guilty to the illegal sale of goods to Iran and North Korea and was hit with $1.2 billion in fines, the largest criminal penalty in US history in an export control case. But US Commerce Department investigators said it made additional false statements multiple times about having taken actions against the employees responsible, when it had not, and so the US has imposed a 7-year export ban it had formerly suspended. It is said that the company deleted emails of employees involved in the scrubbing of records and required employees with information about the illegal exports to sign non-disclosure agreements. It also covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct and failed to issue letters of reprimand.
ITALY RETURNS SMUGGLED HISTORICAL HEADSTONE TO IRAN
Iran Front Page on 16th April reported that Italian Police have confiscated a 17th Century headstone smuggled out of Iran and handed it over to the embassy in Rome. According to the Italian police, the gravestone was abandoned by the smugglers near a cemetery in Ferentino, a town 65 km south-east of Rome. In 2015, Italian police also found 30 cultural relics dating back to the post- and pre-Islamic eras which had been smuggled out of Iran, and handed them over to the Embassy in Rome.
POLITICIANS AND BUSINESSMEN BEHIND FUEL SMUGGLING ONTO GHANAIAN MARKET
GBC in Ghana on 16th April reported that the Chamber of Petroleum Consumers Ghana is accusing those in politics and businessmen of being behind the smuggling of huge quantities of fuel onto the Ghanaian market.
CRIMINALITY HAMPERS BRANDING, INNOVATION IN CHINA’S SEAFOOD SECTOR
Seafood Source on 16th April reported that China’s seafood industry has become inextricably linked with criminality. Chinese TV news shows are constantly filled with reports on fraud, illegal fishing, smuggling, and intentional (mis)use of toxic substances.
BAHAMAS: INSURER’S ‘BIG RELIEF’ AT REMOVAL FROM AML/CFT ENHANCEMENTS
Tribune 242 in the Bahamas reported that a top insurance executive has hailed the decision not to impose additional regulatory requirements on the sector that were “in the opposite direction” to improving the ‘ease of doing business’. He said that including property and casualty insurers in the Financial Transactions Reporting Act’s (FTRA) definition of ‘financial institutions’ would have imposed an unnecessary and significant cost/bureaucratic burden on the sector. Property and casualty insurers, frequently known as general insurers, were removed from the definition and consultation between industry and the Government. The changes are being introduced to address deficiencies in the Bahamas’ anti-crime defences identified last year by the Caribbean Financial Action Task Force (CFATF), ahead of a June evaluation by FATF. The insurance industry argued against ‘overreach’, saying that the FATF standards did not include general insurance on the ‘defined institutions’ list, and that the Bahamas was going beyond global standards in a move that would have forced property and casualty insurers to undertake KYC due diligence on all accounts, adding significant costs and ‘red tape’.
OUTRAGE AS WHISTLEBLOWER IS PROSECUTED FOR WARNING ABOUT COMPANIES HOUSE FRAUDS
The Mirror in the UK on 16th April carried a bizarre story about a businessman has been prosecuted for setting up a company falsely naming Liberal Democrat leader Vince Cable as a director. The man involved, Kevin Brewer, 65, said he wanted to highlight how easy it was to use fake details when incorporating a limited company using the Companies House online service. He had written to Cable in 2013 to Vince Cable, then the Business Secretary, about the ability to abuse the online system, and saying that he had created a fictitious company citing Cable as a director. Brewer runs private company formation agency called National Business Register. He also created other fake companies naming directors such as the then minister responsible for Companies House. Now he has pleaded guilty at Redditch Magistrates’ Court to filing false information on the UK’s company register. The government issued a news release citing the case as evidence of how it will come down hard on people who knowingly break the law and file false information on the company register [but only perhaps if the person breaking the law writes to them to tell them what they have done…], even Cable is quoted as describing the punishment (£1,602 fine and £10,462 costs) as heavy handed.
US BANS ALBANIAN LAWMAKER OVER CORRUPTION ALLEGATIONS
Rferl on 16th April reported that the US State Department has said that Tom Doshi, a lawmaker formerly with the Social Democratic Party, was barred from entering the US, as were his wife and children. The statement alleged that Doshi was involved in “significant corruption,” though it did not provide details of the accusation.
CANADA: THE DOCTRINE OF KNOWING ASSISTANCE TO FRAUD – CAN YOU BE LIABLE WHEN YOU DID NOTHING?
On 12th April, O’Connor MacLeod Hanna LLP published an article about a recent case where the defendants convinced investors to invest with them in various commercial real estate projects, in which they would claim they were investing equal amounts with their victims, but in fact would use the investment from one project to invest in the next one – never actually investing any of their own money. They took money from Investor 1 and entered into an equal shareholding agreement with him in a corporation that held a property. They never invested any money with Investor 1, but instead basically took his money, heavily leveraged the properties in question, and then used his money to provide the funds necessary to enter into an agreement with Investor 2. The court had to consider, among other legal issues, the doctrine of “knowing assistance” – where a stranger, with actual knowledge, participates or assists a trustee or fiduciary in a fraudulent and dishonest scheme. It was also asked, what does the court do when you have 2 equally innocent parties who both want their money back from fraudsters? In a long and complicated judgment, the Court of Appeal decided that the second group of companies had provided “knowing assistance” to the fraud and so should be liable to Investor 1. Obviously, this conclusion seems very unfair to Investor 2 who did nothing wrong.
US WIDE-RANGING CAMPAIGN AGAINST ELDER FRAUD
In an article published on 13th April, BakerHostetler reported that the US DoJ launched a wide-ranging campaign against elder fraud in February 2018, the DoJ saying that each year, an estimated $3 billion are stolen or defrauded from millions of American seniors. Every US Attorney’s office to appoint an “elder justice coordinator” to execute the campaign in individual districts. The Attorney General praised the Federal Trade Commission (FTC) for assisting in the effort: the FTC has been focused on elder-fraud cases, and announced 2 new complaints against alleged fraudsters on the same day that the campaign rolled out – the article provides some details of the scams involved.
TACKLING COUNTERFEIT MEDICINES IN INDIA
On 12th April, Deloitte published a briefing saying that India is one of the leading global producers of low-cost generic medicines due to its high domestic demand and inexpensive manufacturing costs. The country’s pharmaceutical market is the world’s 3rd largest in terms of volume, but the 13th largest in value. However, counterfeiting is pervasive, with an estimated 20% of India’s drug market comprised of counterfeit drugs. The article considers some of the reasons why counterfeiting is so prevalent. The large counterfeit trade in India has created a number of complex challenges for the health care and life science industries which the article details. It says that there are a number of strategies that can be implemented to tackle the issue of counterfeit medicines. The article concludes that the counterfeiting crisis is putting India at risk of losing foreign investments. Improvements to the regulatory landscape, and stricter punishments for manufacturers of counterfeits could significantly improve investor sentiment, and without strong rhetoric and action, India risks losing valuable investment from the pharmaceutical industry, and consequently, undermine the health of its population.
UK: SALES OF “GREY” GOODS CAN BE A CRIMINAL OFFENCE ALLOWING PRIVATE PROSECUTION
On 13th April, Mishcon de Reya published an article saying that criminal trade mark offences can apply not only to the distribution and sale of counterfeit goods but also to ‘grey’ goods. It mentions a case where Appellants unsuccessfully challenged a Court of Appeal decision that they could be prosecuted for unlawfully selling various branded goods, some of which were counterfeit and some of which were grey goods. The article also provides a strong argument that unauthorised parallel imports – that is, goods manufactured and sold with the trade mark owner’s authorisation in a non-EU country but which have subsequently been imported and sold in the EU without consent – could also potentially be a criminal offence. It will also, the article says, allow brand owners to bring private prosecutions against anyone trading in grey goods, as well as counterfeits.
BANGLADESH: 6 EX-OFFICIALS OF ORIENTAL BANK JAILED IN GRAFT CASE
On 17th April, the Daily Star reported that 5 former officials of Oriental Bank Limited have been jailed for 68 years while another for 34 years in 4 corruption cases. The private bank was hit by scams in 2005-06. In 2006, Bangladesh Bank took over the bank and appointed an administrator. Later, the bank was sold to a Malaysia-based business group and renamed as ICB Islamic Bank in 2009.
PERPETRATOR OF BINARY OPTIONS FRAUD FOR $2.1 MILLION FACING 20 YEARS IN US PRISON
Finance Magnates on 17th April reported that a binary options scheme Blue Bit Banc run by Blake Kantor (aka Bill Gordon) allegedly defrauded 713 people.
GHOST INSURANCE BROKER POSED AS SOLICITOR AS PART OF FRAUD
On 17th April, the Law Society Gazette reported that a conman from Oldham who went on an extraordinary and multi-faceted spree of insurance fraud worth a potential £321,000 has been jailed. Abdul Hakim, 27, posed as a broker to lure drivers into buying fake car insurance, then used their details to make a string of fraudulent personal injury claims – even posing as a solicitor and claims management company to further his scam.
NO FURTHER US RUSSIA SANCTIONS OVER SYRIA FOR NOW
On 17th April, the European Sanctions Blog (which normally gets things correct) reported that, despite earlier claims to the contrary, a White House briefing now says that said while new measures were currently being evaluated, but that there was “nothing to announce right now” – reports suggest that President Trump has told national security advisers that he is uncomfortable imposing the planned new sanctions without another “triggering event” by Russia.
US FINDS DUMPING OF TUBING IMPORTS FROM 6 COUNTRIES
Customs Today on 17th April reported that the US Department of Commerce has announced the results of anti-dumping duty investigations into imports of cold-drawn mechanical tubing from China, Germany, India, Italy, South Korea, and Switzerland. The department also determined that critical circumstances exist for certain exporters/producers of cold-drawn mechanical tubing from Italy.
HMRC TO STOP OR DELAY TRANSFORMATION PROJECTS TO ENSURE CUSTOMS SYSTEM IS READY FOR BREXIT
Computer Weekly on 16th April reported that HMRC CEO confirms several major programmes will be affected due to prioritising development of new customs IT systems and to ensure it has the capability and capacity to complete its new Customs Declaration Services (CDS) project in time for Brexit. CDS is intended to replace the current Customs Handling of Import and Export Freight (CHIEF) which currently handles imports from outside the EU. After Brexit, HMRC is expecting to see an increase in customs declarations from the current 60 million a year to 255 million, which CHIEF could not handle.
INDIA: PREVENTION OF MONEY LAUNDERING ACT WILL NEED MORE CHANGES
Baker McKenzie on 16th April reported that India will have to make money laundering an explicitly standalone offence to upgrade its compliance ahead of the on-site mutual evaluation by FATF, due in November-December 2020. Despite several amendments, the Prevention of Money Laundering Act (PMLA) remains a predicate-offence-oriented law.
THE MISSILE TECHNOLOGY CONTROL REGIME (MTCR) AND SHIFTING PROLIFERATION CHALLENGES
In April, the Arms Control Association published an article which begins by saying that with North Korea conducting multiple flight tests of missiles that can carry nuclear payloads to the US and Iran testing intermediate-range missile systems at will, an observer might conclude that the current map of global missile developments shows a lawless landscape of missile proliferation run amok. In reality, such a map reveals much the opposite: a world in which the proliferation of missiles able to deliver WMD has been suppressed to a remarkable degree. It says that the MTCR is the cornerstone of this. The article provides a short history of the MTCR and the current situation.
ISLAMIC BANKS FACE UNEVEN IMPACT FROM CORRESPONDENT BANKING DECLINE
Baker McKenzie on 16th April carried an article saying that an industry body for Islamic banks, Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI), has warned of uneven impact from a decline in correspondent banking, reinforcing concerns that small lenders in developing economies will be most affected from “de-risking” by international lenders. The body raised the issue in a letter to the Financial Stability Board, which co-ordinates financial regulation for the G20. Islamic banks in Africa and South Asia were among those most severely affected, with banks in the Gulf and Europe relatively unscathed, CIBAFI said in the letter.
WCO/INTERPOL: LAUNCH OF THE CUSTOMS – POLICE CO-OPERATION HANDBOOK
On 17th April, the World Customs Organisation reported the launch on 23rd March of the Customs – Police Cooperation Handbook, jointly drafted by the WCO and INTERPOL. It was developed to further the goal of enhancing co-operation and collaboration between the agencies. This guidance material aims to describe the complementary roles of each institution and identify the opportunities for collaboration. The Handbook also provides an overview of the typologies of co-operation models that exist and presents the key elements and initiatives that can be implemented to foster better co-ordination and enhanced co-operation. Finally, the guide contains an assessment tool that seeks to evaluate the state-of-play of relations between Customs and Police at national level.
ASSESSMENT OF THE HOW THE MEDIA OVERSTATES THE THREAT POSED BY THE SO-CALLED ‘LONE-WOLVES’
Real Clear Defense on 16th April published an article by a freelance analyst who holds a master’s degree from King’s College London’s Department of War Studies. It argues that media outlets, commentators, and prosecutors continue to use the ‘lone wolf’ typology to refer to any kind of individual attacker, which overlooks how the majority of these perpetrators have radicalised in contact with other like-minded individuals. As a result, the threat arising from supposedly ‘undetectable terrorists’ has been markedly overstated, to the point of sowing unnecessary fear.
ASSAD REGIME’S ‘DIRTY MONEY’ AND UK ASSETS SHOULD BE SEIZED, JOHN McDONNELL URGES
The Huffington Post on 17th April reported that Labour Shadow Chancellor, John McDonnell hs said that key figures in the Assad regime should have their British-based assets seized as part of a new crackdown on ‘dirty money’ from overseas. McDonnell said that £5 billion in assets was held worldwide by the Assad regime, yet just £151 million had been frozen in the UK so far, and that no ‘unexplained wealth orders’ had yet been issued against any Syrians with financial links to the UK.
BAHAMAS LOSES OVER $200 MILLION A YEAR TO CORRUPTION
The Nassau Guardian reported on 17th April a speech by the Prime Minister at a Latin America summit, in which he said that the Bahamas loses over $200 million a year due to corruption, and that corruption itself accounts for about 5% to 10% of loss of GDP revenue. In a recent report, the IMF explained that The Bahamas incurs a cost of 4.7% of GDP because of crime and ranks third among 17 countries in the region in relation to the cost of crime, behind Honduras and El Salvador, and the IMF said the Bahamas incurs the highest crime-related costs within the Caribbean. Last year, 3 former Progressive Liberal Party (PLP) parliamentarians were arrested and charged on counts of extortion, bribery and misconduct in public office (all have pleaded guilty).
GERMAN CUSTOMS AUTHORITY STRETCHED TO THE LIMIT
Handelsblatt on 17th April reported that Germany doesn’t have enough customs officers partly because they keep getting saddled with new tasks. The authority has a huge backlog of money laundering cases — and a hard Brexit could prove the last straw. It has 40,000 staff but needs 3,500 more, the head of its trade union, told Handelsblatt. Its duties now also include curbing illegal employment, checking whether businesses are paying the statutory minimum wage introduced in 2015, collecting vehicle tax and combating money laundering, and it will also be put in charge of collecting car road tolls in future.
BILL FOR CASH TRANSACTION LIMIT IN INDONESIA READY FOR APPROVAL
The Jakarta Post on 17th April reported that a Bill that aims to set a limit on cash transactions as part of an effort to crack down on money laundering is set to be presented to the President. Under the Bill, Rp 100 million (US$7,260) would be the transaction limit.
ASPLIN/DAS FRAUD CASE: BOSS KEPT CONTRACTED COMPANIES OWNERSHIP HIDDEN, COURT HEARS
The Insurance Times on 17th April reported that the prosecution opened their case against former DAS CEO Paul Asplin and 5 others over alleged fraud.
HONG KONG SECURITIES REGULATOR ACCUSES ICO OF BEING ‘DOWNRIGHT FRAUD’
The Coin Journal on 17th April reported that the Hong Kong Securities Regulator has taken a highly sceptical tone towards initial coin offerings (ICO), referring to them as fundraising efforts of ‘Downright Fraud’, citing a lack of oversight and regulation as being a significant danger. Speaking at an investment industry function, the deputy head of the Hong Kong Securities and Futures Commission (SFC) spoke of the risks attached to such a new area of the investment world. It says that Hong Kong has taken increasingly strong steps against unauthorised ICO, and that in 2017 Hong Kong hosted numerous, multimillion dollar ICO. But a regulatory clampdown demonstrates that the nation seeks a greater level of transparency.
STRATEGIC EXPORT CONTROLS: UK LICENSING DATA
On 17th April, the Department for International Trade published updated reports and data on export control licensing compiled by the Export Control Organisation.
139 YEARS FOR HEATHROW COCAINE SMUGGLING GANG
On 17th April, the NCA released a news release saying that a criminal network that used corrupt baggage handlers to smuggle at least £16 million worth of drugs through London’s Heathrow Airport have been sentenced to a total of over 139 years in prison. The conspiracy was brought to an end in December 2016 following an 18-month investigation led by the NCA, with support from Border Force and Heathrow Airport, during which over 100 kg of cocaine and 44 kg of cannabis was seized.
2 COLONELS OF RUSSIAN SECURITY SERVICE DETAINED FOR TIES TO ORGANISED CRIME
On 17th April, OCCRP reported that 2 colonels of the Russian Federal Security Service, FSB, were detained on suspicion of receiving bribes and being tied to the Zakonovskie organized crime group, according to Crime Russia. It reports that Sergey Gudovannyi and Pavel Chermashentsev allegedly received monthly payments from Neftetrade LLC and a bribe of more than 1 million roubles – around $16,300 – for not detecting violations by the oil shipping company MO TNP. The Zakonovskie organized crime group criminal group first appeared in the 1990s and controlled clothes markets and commercial enterprises. Since then, the group has had various leaders, each one following the footsteps of their murdered predecessor.
EMPLOYMENT TAX ISSUES AND THE CORPORATE CRIMINAL OFFENCES IN THE UK
Out-Law on 17th April published an article saying that employment tax compliance is a significant risk area for the UK’s new corporate criminal offences of failing to prevent the facilitation of tax evasion. It goes on to say that an employee who deliberately turns a blind eye to a contractor misrepresenting their position could be facilitating tax evasion, exposing their employer to criminal liability. The use of agencies is a particular concern and businesses should insist on agencies taking their own steps to prevent the facilitation of evasion. It would send a powerful signal if a business is prosecuted for employment tax compliance failures and then cannot bid for government contracts.
CHINA’S FORMER INSURANCE REGULATOR CHARGED WITH TAKING ‘HUGE BRIBES’
Baker McKenzie on 17th April reported that the former head of China’s insurance watchdog, and one of the highest profile targets in President Xi Jinping’s campaign to tackle corruption in the financial industry, has been charged with corruption. Xiang Junbo was charged with using his position to further the illegal interests of others in return for “huge” bribes, the People’s Daily reported.
SPECIAL REPORT: CHINESE FIRM HELPS IRAN SPY ON CITIZENS
A Reuters special report on 17th April says that a Chinese telecommunications equipment company has sold Iran’s largest telecom firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications. The system was part of a $130.6 million contract for networking equipment supplied by ZTE Corp to the Telecommunication Co of Iran (TCI). The report says that the ZTE-TCI deal, signed in December 2010, illustrates how despite tightening global sanctions, Iran still manages to obtain sophisticated technology, including systems that can be used to crackdown on dissidents.