17th May 2018
RETURN OF THE SANCTIONS: “BANKS SHOULD STEER CLEAR OF THE CENTRAL BANK OF IRAN”
The National Interest on 16th May reported that the US Treasury had designated 2 networks that had “procured and transferred millions in U.S. dollar-denominated bulk cash” for the Islamic Revolutionary Guard Corps Quds Force (IRGC-QF). The lynchpin of both schemes was the Central Bank of Iran (CBI). Whilst coming in the wake of President Donald Trump’s decision to withdraw from the JCPOA, the actions, however, were tied to existing counterterrorism sanctions, not the nuclear sanctions affected by the agreement. As part of the second set of sanctions, the department also took the unprecedented step of designating the head of the CBI.
MIDDLE EAST DRONE WARS HOT UP AMID SURGE IN ARMED UAV SALES
Middle East Eye reported on 16th May that the number of states deploying armed drones has quadrupled in the past 5 years and is set to double in the next 2 years, according to a new report. At least 7 Middle East states now operate indigenous armed drones or have launched strikes from armed drones imported from China. Countries that currently operate drones include Iran, Turkey, Iraq, Saudi Arabia, UAE, Israel and Egypt. As recently as 2013 just 3 countries – UK, US and Israel – operated armed drones. The main international agreement controlling the proliferation of drones, the Missile Technology Control Regime (MTCR), is coming under increasing pressure from the US defence industry and voices within the Trump Administration. It reports that last month, the US State Department loosened restrictions on the marketing and the sale of armed drones by US firms, after complaints that many of Washington’s allies and top defence customers were turning to Chinese or Russian made drones due to strict US export rules. Some non-state militant groups, including Islamic State, the PKK, Hezbollah, Hamas, Yemeni Houthis have also deployed weapons-carrying unmanned aircraft. A drone researcher is quoted as saying that many of these drones effectively toys, yet can also be used as a very effective weapon of war, and that drones should potentially be considered dual-use items and controlled in a similar way to other defence technologies, but considering how small and cheap these drones are, it will be very difficult, if not impossible, to control their proliferation into other conflict areas.
US EXPORT REFORM TRIGGERS GUN, AMMO CONTROL SHIFT
American Shipper on 16th May carried a short piece highlighting the news that the US Commerce Department’s Bureau of Industry and Security (BIS) and State Department’s Directorate of Defense Trade Controls (DDTC) had posted proposed rules to transfer certain items from US Munitions List (USML) categories to the Commerce Control List (CCL). The move would affect Categories I (firearms, close assault weapons and combat shotguns); II (guns and armament); and III (ammunition/ordnance). Firearms and related articles inherently for military end use or that aren’t widely available in retail outlets will remain subject to State Department export licensing controls, a State Department spokesperson said. The proposed rules would switch all non-automatic and semi-automatic firearms from the USML to the CCL, and the USML will continue to control all fully automatic firearms, including guns up to .50-calibre, guns at .50-calibre and above and shotguns, a State official said. The USML also will still control silencers, sound suppressors and mufflers, as well as large parts and components for automatic weapons that are the functional part for the weapon itself, including barrels, receivers, bolts, bolt carriers, slides and gears, for both automatic firearms and firearms using caseless ammunition, the official said.
HONG KONG CUSTOMS SEIZES SUSPECTED SMUGGLED BIRD NEST
7th Space on 16th May reported that Hong Kong Customs had seized about 12 kg of suspected smuggled bird nest with an estimated market value of about $640,000. Customs officers intercepted an outgoing private car and seized the batch of suspected smuggled bird nest underneath the passenger seats and in the boot of the private car.
THE ANTI-AVOIDANCE FRAMEWORK IN BELGIUM
On 10th January, Loyens & Loeff published a structured guide to anti-tax avoidance legislation and regulation in Belgium. This is available through the free Lexology website.
CONVERTING YOUR CHARITABLE COMPANY TO A CIO
On 14th May, Wrigleys Solicitors LLP published an article on the possible pros and cons of using the new process to convert your charitable company to a charitable incorporated organisation (CIO). It starts by explaining that CIO were introduced in the UK in 2013 as a specially designed corporate vehicle for use by charities only. They enjoy the benefit of limited liability, whilst only having one regulator (the Charity Commission), unlike charitable companies which report both to Companies House and the Charity Commission. A CIO can be either a foundation CIO (the trustees are the same people as the members) or an association CIO (where the membership is wider than its trustees). In contrast to a charitable company, CIO impose a duty on their members to act in a way which furthers the interests of the CIO.
ANTI-CORRUPTION & BRIBERY IN THE UK
On 17th April, Dechert LLP produced a structured guide to bribery and anti-corruption legislation, regulation and enforcement in the UK. This is available through the free Lexology website.
SINGAPORE MAN JAILED FOR FRAUD USING MINISTER’S NAME
On 17th May, Channel News Asia reported that Reichie Chng Teck Kiam, 51, has been jailed for 8 years for various cheating, forgery and money laundering offences involving more than S$1.4 million. He created fake WhatsApp conversations using the name of Education Minister Ong Ye Kung, to make his victims believe that the scheme they were investing in – a legal moneylending business promising monthly returns of 3% to 8% – was legitimate. He pleaded guilty to 30 charges for offences including cheating, committing forgery to cheat others, money laundering and obtaining a personal loan while he was an undischarged bankrupt.
CYBERLAUNDERING FUNDS TERROR AND FLOODS INTERNET WITH FAKE TRANSACTIONS
On 17th May, the Guardian carried an article saying that digital laundering is expected to double by 2020 with rise of cashless society and UN anti-crime chief says it must be tackled. It mentions such examples as £2,000 fake e-books on Amazon and phony listings on Airbnb, as well as ghost journeys on Uber and in-game currencies on video games. It says that around £200 billion, 10% of the estimated $2 trillion laundered annually, is cyberlaundered today. By 2020 the proportion laundered digitally v traditional cash methods is expected to double, as economies become increasingly cashless. It mentions that “microlaundering” is the most obvious way to circumvent PayPal’s payment limits, saying that you just run thousands of payments through various accounts and thus it’s almost impossible to detect.
UK LAW FIRM ACCUSED OF FAILINGS OVER AZERBAIJAN LEADER’S DAUGHTERS’ OFFSHORE ASSETS
The Guardian on 16th May claimed that solicitors Child & Child set up secret company in BVI and claimed Leyla and Arzu Aliyev had no political connections. The Solicitors Regulation Authority (SRA) said it had referred Child & Child’s senior partner, Khalid Sharif, to the Solicitors Disciplinary Tribunal Sharif re allegations that he failed to ascertain whether the 2 sisters were “reportedly linked with the proceeds of crime” or were “politically exposed persons (PEP)”. This is the first time the SRA has taken action against a firm implicated in the Panama Papers.
US REGULATORS FINE CHINA’S ICBC BANK $6.1 MILLION FOR AML OVERSIGHT FAILURES
On 16th May, Reuters reported that the Industrial and Commercial Bank of China Financial Services agreed to pay $5.3 million to settle charges by the Financial Industry Regulatory Authority that it did not have adequate AML systems in place to monitor and detect suspicious transactions. Separately, the SEC said that ICBC’s financial services unit agreed to pay an $860,000 fine for problems also related to its AML policies, including failing to file suspicious activity reports. This is the latest in a string of regulatory probes or fines by US and European regulators over AML and KYC controls by Chinese banks.
FORMER HONG KONG MINISTER PATRICK HO’S ATTEMPT TO FEND OFF BRIBERY CHARGES FACES REBUTTAL IN US COURT
The South China Morning Post on 16th May reported on the ongoing trial, saying that lawyers for defence say their client was not read his rights and prosecutors were taking too long sifting through emails. The prosecutors disagree. Hong Kong’s home affairs secretary from 2002 to 2007, was arrested at John F Kennedy International Airport last November and a month later was charged on 8 counts – 3 of money laundering and 5 of violating the Foreign Corrupt Practices Act (FCPA) by offering US$2.9 million worth of kickbacks to government officials in Africa. The kickbacks, it is alleged, were intended to help secure oil rights in Uganda and Chad for a Shanghai-based energy firm he represented.
INCOMPLETE DATA OF 50,000 UK BUSINESSES COULD LAND DIRECTORS IN PRISON
Business Matters on 16th May reported that 57,2271 UK businesses are not yet compliant with new regulations that mean they must declare those people with significant control (PSC) over each business. The rules surrounding PSC were tightened in June last year following their introduction in April 2016, with every UK company now legally obliged to maintain a register of PSC and to record this information with Companies House within 14 days. PSC are those who own at least 25% of a company’s shares or finances, who control at least 25% of its voting rights, or have control over appointments to the board of directors.
CRACKDOWN BEGINS ON ESTATE AGENTS WHO IGNORE BRIBERY, CORRUPTION AND MONEY LAUNDERING
The Negotiator on 16th May reported that the Royal Institute of Chartered Surveyors (RICS) to require agents to adopt ‘personal statement’ including promise to report fellow agents breaking law, and sporting donations. The ‘professional statement’ they will need to sign up to which will now be consulted on until the end of July. It will require estate agents to report any breaches by other agents of anti-bribery and corruption laws and to say if they receive charity sponsorship donations from suppliers that could be construed as a bribe. Once the consultation is finished, the new ‘Professional Statement’ will be adopted by member agents and branches to minimise their exposure to the risk of bribery, corruption, money laundering and terrorist financing during their day-to-day activities.
WHAT IS A “ROUTED EXPORT TRANSACTION”?
An article from Shipping Solutions poses this question. It appears that a routed export transaction occurs when the foreign buyer of the goods (and not the seller) contracts with a freight forwarder or other agent to export the merchandise from the US. Why is this important? Because it impacts who is required to file the electronic export information (EEI) through the Automated Export System (AES) when required by the US Foreign Trade Regulations. The website offers more details and a free downloadable white paper to explain the background and reasons for care.
LEGAL PRIVILEGE IN TAX AVOIDANCE DISPUTES
Out-Law on 9th May published an article saying that in UK tax avoidance disputes there are practical difficulties in asserting legal privilege to prevent legal advice being disclosed to HMRC where the taxpayer has to explain the motivations behind a transaction, but properly asserting privilege should never be seen as being ‘unco-operative’. It warns that if care is not taken the taxpayer may inadvertently waive privilege through its conduct, and HMRC may become entitled to see the privileged advice despite a taxpayer’s objection to disclosing it. Legal advice privilege (LAP) applies to confidential communications between client and lawyer concerning the seeking or giving of advice. Material covered by LAP does not have to be disclosed to HMRC. It is fair to say that HMRC does not always look favourably on a taxpayer asserting LAP in alleged avoidance cases and it is common for HMRC to ask the taxpayer to agree to waive privilege, in the ‘spirit of co-operation’. The article cautions that, thilst the tribunal will not be entitled to draw an adverse inference where a taxpayer properly asserts LAP, if non-disclosure leaves the taxpayer with an evidential gap regarding its intentions, its case may be placed on a considerably weaker footing.
THE UK SHOULD PROACTIVELY TACKLE CORRUPTION IN CENTRAL GOVERNMENT, SAYS INTERNATIONAL WATCHDOG
The Council of Europe on 17th May reported that the UK has a wide range of standards and procedures to help tackle corruption in central government and law enforcement agencies, according to the Council of Europe’s Group of States against Corruption (GRECO), but a number of shortcomings remain. GRECO notably encourages the UK authorities to be more proactive in tackling corruption in central government, rather than reacting to problems as they arise.
NUCLEAR WASTE: EU COMMISSION REFERS AUSTRIA, CROATIA AND ITALY TO COURT FOR FAILING TO NOTIFY NATIONAL PROGRAMMES
On 17th May, an EU news release advised that the European Commission has decided to refer Austria, Croatia and Italy to the Court of Justice of the EU for failure to notify their final national programmes for the management of the spent fuel and radioactive waste, as required under the Spent Fuel and Radioactive Waste Directive. This type of waste is also the by-product of the non-power use of nuclear and radiation technologies, such as research in science and various medical applications. It is a priority for the Commission to ensure that the highest safety standards for radioactive waste and spent fuel management are in place.
ONLINE GAMBLING TAX RISE TO OFFSET FOBT STAKE CUT
On 17th Accountancy Daily reported that the UK government’s decision to cut the maximum stakes on fixed odds betting terminals (FOBT) from £100 to £2 is likely to result in a hit to the estimated £450 million tax take from the machines each year, with HM Treasury looking to increase taxes on online gambling to address the shortfall. There are over 33,600 FOBT in use in the UK, each of which take more than £53,000 from gamblers per year. HM Treasury takes an estimated £450 million a year in machine gaming duty from FOBT, with a 25% levy on the total of £1.8 billion a year that goes through the machines. In a statement the government said that to cover any negative impact on the public finances, and to protect funding for vital public services, this change will be linked to an increase in remote gaming duty, paid by online gaming operators, at the relevant Budget.
The Government response to the consultation on proposals for changes to Gaming Machines and Social Responsibility Measures is also available –
UK – EMBARGOES AND SANCTIONS ON IRAN
On 15th May, the FCO and others published further updated guidance.
CANADA: EXCISE DUTY GUIDANCE AND LICENCE APPLICATIONS FOR CANNABIS PRODUCERS
On 17th May, Blake Cassels and Graydon published an article saying that on May 14th the Canada Revenue Agency (CRA) published its first guidance for cultivators, producers and packagers of cannabis products, as well as the application forms for excise duty licences and the cannabis excise stamping regime. The CRA has also committed to publishing at least one additional excise duty notice to explain how the proposed additional cannabis duty, which is imposed on behalf of the provinces, would be administered.
ITALY: LIVE VAT INVOICING UPDATE
On 14th May, VAT Live reported that the Italian tax authorities have issued further details on the real-time VAT invoicing regime in Italy to be introduced from 1st January 2019. Known as SdI, this will require all resident and non-resident VAT payers to electronically submit sales invoice to the authorities before they are then sent to customers.
TURKISH BANKER WHO FACILITATED IRAN OIL-FOR-GOLD SANCTIONS EVASION RECEIVES SHORT SENTENCE IN US
On 17th May, Kenneth Rijock in his blog reported that Mehmet Atilla, the number 2 at Turkey’s state-run Halkbank, who aided Reza Zarrab’s in moving $4 billion in illegal iranian oil profits, has been sentenced to 32 months by a US District Judge in New York. Federal prosecutors had recommended 15 to 20 years, as Atilla was a major player in the massive oil-for-gold sanctions evasion scheme.
ALLIANZ PULLS BACK FROM IRAN AMID US SANCTIONS THREAT
On 17th May, Law 360 reported that Europe’s largest insurer, Allianz SE from Germany, is preparing to withdraw from Iran after the US government abandoned an international nuclear deal and warned that it could impose sanctions on companies trading with Tehran.
OECD: SWITZERLAND MUST ‘URGENTLY’ DO MORE TO TACKLE BRIBERY AND PROTECT WHISTLEBLOWERS
On 17th May, Customs Today reported that Switzerland must urgently do more to protect whistleblowers and stop money laundering and bribery, according to the OECD. After a year-long investigation, the OECD said companies, lawyers and trustees operating in Switzerland must face tougher penalties for perpetrating or facilitating bribery taking place abroad.
US THREATENS SANCTIONS AGAINST EU IN LONG-RUNNING AIRCRAFT SUBSIDY DISPUTE
On 17th May, Sandler Travis Rosenberg reported that the Trump administration said that it “will have to move forward with countermeasures” on EU products if the EU does not end subsidies to large aircraft manufacturer Airbus. The US Trade Representative office has said that a report from the WTO Appellate Body confirmed that “billions of dollars in launch aid to the [Airbus] A350 XWB is causing significant lost sales of Boeing 787 aircraft” and that “subsidies to the [Airbus] A380 continue to cause significant lost sales of Boeing 747 aircraft, as well as impedance of exports of Boeing very large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets”.
HUNGARY: GOLDEN VISAS TAKE NEW FORM IN ORBAN’S GOVERNMENT
OCCRP on 17th May reported that a Hong Kong-based company is advertising a new, even cheaper immigration programme than the one suspended last year, promising Hungarian residency permits to those who invest $92,000 in real estate and pay almost $60,000 in fees. The former “Golden Visa” system launched in 2013, was suspended due to allegations of corruption. More than 24,000 foreign nationals, mostly from China, obtained permanent or temporary residency permits between 2013 and 2017.
PROTECTION AGAINST IDENTITY FRAUD FOR COMPANY DIRECTORS – REMOVAL OF RESIDENTIAL ADDRESS FROM THE COMPANY REGISTER
On 15th May, Field Fisher reported that new regulations, which came into force on 26th April, will allow directors to remove their residential address from the register of companies held by the Registrar, whilst still ensuring transparency at Companies House. The new regulations remove the requirement that a director must show a serious risk of violence or intimidation arising from a company’s activities; and allow applications in respect of information filed before 1st January 2003.
DELAYED SERVICE SUFFICIENT TO STRIKE OUT FREEZING ORDERS
Out-Law on 16th May published an article saying that the Court of Appeal has upheld a decision to strike out freezing orders granted on behalf of French bank Société Générale (SocGen), after finding that the bank had taken too long to issue the relevant claim forms. An expert is quoted as saying that the court will not grant such orders lightly and will expect compliance with the myriad of undertakings that a court can order in return for exercising its discretion to freeze assets.
JAPAN BUSINESS POURS CASH INTO MYANMAR DESPITE ROHINGYA CRISIS
The Nikkei Asian Review on 17th May reported that real estate leads record investments of $1.4 billion that aim to capture emerging market. It says that Japanese companies are investing aggressively in Myanmar with help from Tokyo, even as their European and American counterparts shy away while hundreds of thousands of Rohingya Muslims flee the country to escape persecution. Japan is one of the biggest investors in Myanmar for 2017 – roughly half of the Japanese investment went into property development.
BOSNIAN PARTY LEADER CLEARED OF CHARGES HE OBSTRUCTED DRUG CASE
Rferl on 17th May reported that Fahrudin Radoncic, Bosnian tycoon and a former owner of Bosnia’s largest newspaper, Dnevni Avaz, as well as leader of the Union for a Better Future (SBB) party in the ruling coalition, has been cleared of charges he organised a criminal group and interfered in a high-profile court case in Kosovo against Balkan drug boss Naser Kelmendi. He had said the case brought against him in 2016 was “politically fabricated”.
COMMONWEALTH GAMES VISA OVERSTAYERS IN AUSTRALIA
On 16th May, a news release from the Australian Border Force says that while the vast majority of individuals who came to Australia for the Commonwealth Games have already departed, the ABF is aware that some individuals have remained in Australia. It has set up a dedicated operation to ensure those that should depart Australia do so. Those who are removed may also face a 3-year re-entry ban from Australia and may owe a debt to the Australian Government for the cost of their removal.
80 DETAINED FOLLOWING BIG ROMANIAN ANTI-ORGANISED CRIME OPERATION
Romania Insider on 17th May reported that prosecutors from the Directorate for Combatting Organized Crime and Terrorism (DIICOT) have taken preventive measures against 102 people following the 238 house searches carried out on May 16th, as part of Operation Z Day (Ziua Z). The operation was aimed at combating organised crime and the searches were carried out simultaneously in 28 counties and the capital Bucharest. It targeted 227 suspects.
THE MIDDLE EAST’S NEW BATTLE LINES
On 16th May, the European Council on Foreign Relations released a new report saying that 2 opposing coalitions in the Middle East define a rivalry that threatens to tear the region apart. As competition for dominance intensifies, the confrontation between Iran’s network of state and non-state actors, and a counter-front of traditional Western allies – centred on Saudi Arabia, the UAE, and Israel – has become the region’s central battle line.
THOUSANDS OF UNSAFE FIDGET SPINNERS SEIZED DURING RAID IN MANCHESTER
The Manchester Evening News on 12th May reported that thousands of unsafe fidget spinners and hundreds of fake designer goods were seized during raids at a business in north Manchester. Himalaya Fashion Enterprises Ltd has been ordered to pay thousands of pounds after the illegal goods were found by Trading Standards. A total of 2,136 incorrectly labelled fidget spinners were found on the premises during a raid in May 2017. The toys were tested and deemed to be dangerous as the battery was easily accessible without a tool, meaning a child could take it out and digest it, council bosses warned. Fake Chanel, Vivienne Westwood and Dior jewellery was also found at the premises during another raid last year. Himalaya Fashion Enterprises Ltd and company director Mohamad Hakimi pleaded guilty to a number of trademark and safety offences on April 12th. The company was ordered to pay £3,000, costs of £2,433, and a victim surcharge of £300. Mohamad Hakimi was ordered to undertake 150 hours of unpaid work and to pay costs of £1,000 with a surcharge of £85.
POLICE RAID HOME OF EX-MALAYSIAN PM OVER 1MDB CORRUPTION SCANDAL
The Guardian on 16th May reported that 5 locations linked to Najib Razak searched for evidence relating to 1MDB affair, which saw $3.2 billion in funds go missing. Mahathir Mohamad, the newly elected prime minister, has pledged that all those who are found to have committed any wrongdoing as part of 1MDB will be brought to justice.
LATVIA’S AML CHIEF WANTS MORE HELP FROM BANKS
On 17th May, Reuters reported that Latvia’s new AML chief pledged to improve control of financial crime, urging the Baltic state’s banks to become more hands on in spotting and preventing it. Ilze Znotina, who will lead Latvia’s AML agency from June, said she wanted to change the tendency of local banks to share ‘low quality’ information with the authority about suspect transactions. The appointment is the latest step by the country to tighten control of its banks, after some were accused of laundering hundreds of millions of euros for wealthy Russians and others from former Soviet states.
IRELAND RELEASES VIRTUAL CURRENCY TAX AND VAT GUIDANCE
Tax News on 17th May reported that on 15th May the Irish Revenue has issued an eBrief to clarify how “normal tax rules” apply to transactions involving cryptocurrencies.
The eBrief 88/18 is available at –
EU COUNCIL ADOPTS DIRECTIVE TO MAKE COMPANY OWNERSHIP DATA PUBLIC
On 17th May, Tax News reported that the European Council has approved a new package of rules which include allowing the public access to information on the beneficial ownership of companies. Amendments to Directive 2015/849 are intended to close down criminal finance without hindering the normal functioning of payment systems. The changes were approved at a meeting of the General Affairs Council following agreement with the European Parliament in December 2017 and Parliament’s approval of the agreed text in April. The new Directive will provide for enhanced access to beneficial ownership registers, with the aim of improving transparency on the ownership of companies and trusts.
DOCUMENT DISTRIBUTOR HAD DOZENS OF FAKE ID
An NCA news release on 17th May reported that a man who was at the centre of a fake identity document distribution ring has been jailed for more than 5 years. Albanian national, Arsen Baculi, 23, was arrested by the NCA in east London in February after picking up a consignment of counterfeit documents, including a Greek passport and ID card with his picture on. A search of his flat led to the discovery of a hoard of other ready-to-go documents, including a false passport, a number of driving licences, residency permits and construction industry cards bearing different names and images. A small quantity of bagged up cocaine and electronic scales were also found. Baculi pleaded guilty to charges of possessing false documents and class A drugs and was sentenced to 5 years and 2 months years in prison. He will also face deportation after serving his sentence.