16th May 2018
GERMAN ARMS FIRM H&K’S EX-STAFF ON TRIAL OVER MEXICO GUN DEAL
Brinkwire on 16th May reported that 6 ex-employees of Heckler & Koch have gone on trial in Stuttgart for selling assault rifles to Mexico. They are accused of violating Germany’s War Weapons Control Act and its Foreign Trade Act by selling thousands of G36 assault rifles to Mexico — while knowing that they would be used in 4 violence-ridden Mexican states.
US EASING OF GUN EXPORT CONTROLS COULD SEND NEW WAVE OF ARMS EXPORTS
On 15th May, Insight Crime reported that a new reform that would ease firearm export controls for US weapons manufacturers, could increase the already high number of US-sourced firearms used in criminal activities in Latin America. Finally published on May 14th the proposals would shift authority to regulate exports of certain firearms and related products from the State Department to the Commerce Department. The rule would apply to “commercial items widely available in [US] retail outlets and less sensitive military items,” the proposal states. That definition would cover products like assault-type rifles, military-grade sniper scopes, armour-piercing ammunition and most handguns.
KOREAN AIR HEADQUARTERS RAIDED OVER LUXURY GOODS SMUGGLING
On 16th May, The Standard in Korea reported that South Korea’s customs authorities said its officials had raided the headquarters of Korean Air Lines Company over allegations that it had violated foreign exchange laws in a widening inquiry into the chairman’s family. The customs office has been looking into allegations Chairman Cho Yang Ho’s family smuggled luxury goods into the country without paying due taxes.
MAN SEARCHED AT BELFAST INTERNATIONAL HAD €180,000 IN LUGGAGE
Belfast Live on 15th May reported that a 39-year-old man has been arrested by Border Force officers at Belfast International Airport on suspicion of money laundering. The man, an Irish national, had been at the airport with a ticket to fly to Alicante in Spain. His baggage was searched and officers found €180,000.
HEZBOLLAH SAID TO BE LAUNDERING MONEY IN SOUTH AMERICAN TRI-BORDER REGION
The Wall Street Journal on 15th May reported that Hezbollah is using a money laundering mini-state in Latin America that poses an escalating risk to US national security, according to a report. The illicit activities in the so-called tri-border region linking Brazil, Argentina and Paraguay have long been a source of concern for US security officials.
FRENCH COURT UPHOLDS EX-BUDGET MINISTER’S TAX FRAUD CONVICTION
The Guardian on 15th May reported that Jérôme Cahzuac, the former French budget minister who led a crackdown on tax avoidance while secretly hiding millions of euros of his own money from authorities, has had his conviction for tax fraud upheld by an appeals court. Cahuzac and his ex-wife, Patricia Ménard, who was also convicted of tax fraud, had jointly run a lucrative hair-transplant business treating some of France’s biggest celebrities. They hid millions of euros from the tax authorities for two decades, moving their money across the world from Switzerland to Singapore and the Isle of Man.
NO LIMITATION PERIOD IN BREACH OF DUTY CLAIM AGAINST DIRECTOR
On 15th May, Hogan Lovells published an article saying that a recent UK Supreme Court decision establishes that where a director unlawfully transfers property to a company he controls, a subsequent breach of duty claim will not be subject to a limitation period. It says that liquidators should be aware that there may be no limitation period for breach of duty and misfeasance claims where property is transferred by directors to companies in which they have an interest.
THE IMPORTANCE OF COMPLYING WITH THE DUTY OF FULL AND FRANK DISCLOSURE WHEN APPLYING FOR A FREEZING INJUNCTION
On 11th May, Mayer Brown, and on 14th May, Lewis Silkin, both published articles on the recent UK court case of Banca Turco Romana S.A. (in liquidation) v Cortuk and Others. This underlined the need for applicants to give full and frank disclosure when seeking relief at ex parte (without notice) hearings. As a result of substantial and serious failings, some apparently deliberate, the judge set aside an earlier freezing order he had made in favour of a liquidator and declined to continue it. The background was that Çörtük had perpetrated a substantial fraud against Banca Turco Romana (BTR) which had ultimately led to its insolvency. Criminal and civil proceedings followed in Romania and Çörtük was convicted of fraud and sentenced to 13 years imprisonment. He was also held liable to pay BTR a sum in excess of US$70 million together with interest. The judgment remained unsatisfied and Çörtük evaded arrest and absconded. Criminal proceedings followed in Switzerland – where a limited recovery was achieved of c.US$2.8 million – along with an action in New Jersey where Mr Çörtük now resides.
SANCTIONS AND IRAN: PRESIDENT TRUMP’S ANNOUNCEMENT AND WHAT THIS MEANS FOR NON-US SHIPPING
On 15th May, Reed Smith produced a briefing on the implications of the Trump Administration decision to withdraw the US from the Joint Comprehensive Plan of Action (JCPOA) and to reimpose on Iran a multitude of sanctions that were lifted in January 2016 under the JCPOA. It emphasises that the 180-day wind-down period is most relevant to the shipping industry. After this period, which ends on 4th November, the US will reimpose, among other things, the following secondary sanctions –
- Sanctions on Iran’s port operators and shipping sectors
- Sanctions on petroleum-related transactions, including petroleum products from Iran. Note also that certain entities will be redesignated, including NIOC and IRISL
- Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and other designated Iranian financial institutions
- Sanctions on Iran’s energy sector
The briefing goes on to discuss, briefly, calling in Iran after 4th November, voyage and time charters.
TERRORISM AND THE FUTURE LONE WOLF THREAT IN AMERICA
On 16th May Cipher Brief commented on a Washington Post report in March that the TSA (which is responsible for transportation security in the US) is adjusting its methods as terrorists turn increasingly toward lone wolf terror attacks. It carried an interview with a former Associate Director at the CIA National Counterterrorism Center, who said that the US has fortunately not had to deal with the large number of ISIS returnees. ISIS has found France, in particular, to be a fruitful recruiting ground because of the large Muslim French-speaking diaspora, many of whom are French citizens but still not fully integrated into the French society and economy.
In the Washington Post article from 7th March the new chief of the Transportation Security Administration is quoted as saying that adapting his agency to grapple with solo operators who may claim allegiance to a cause without having genuine connections to a terrorist group has been his focus since taking over as head of the TSA in August. The public face of the 60,000-member TSA is at airport security checkpoints, but the agency’s mandate is to protect all modes of transportation against attacks, monitoring rail stations, transit systems and bus terminals.
INDEPENDENT ANALYSIS OF UN COUNTER-TERRORISM EFFORTS IN ADVANCE OF THE SIXTH REVIEW OF THE UN GLOBAL COUNTER-TERRORISM STRATEGY IN 2018
On 16th May, the Global Center on Cooperative Security released “Blue Sky IV: Clouds Dispersing”. The report and its recommendations focus on ways to improve the development, coordination, delivery, and impact of UN efforts in countering terrorism and preventing violent extremism (PVE).
EU AMENDS ITS NORTH KOREAN SANCTIONS LISTS
On 16th May, the EU published EU Regulation 2018/714/EU, which made amendments to Regulation 2017/1509/EU following the moving of 6 persons to Annex III to Council Decision 2016/849/CFSP from Annex II. They remain designated.
See also Council Decision 2018/715/CFSP
LANDMARK UK PROPERTY FRAUD APPEAL CASE DECISION ROCKS CONVEYANCING WORLD
The Negotiator on 16th May carried an article saying that the Judges’ decision to allow some elements of the Dreamvar and P&P Properties’ appeals is likely to spark a wholesale reform of the house selling process. It says that solicitors acting for vendors can no longer hope to pin the blame for a property fraud on other parties in the sale, the Court of Appeal has so indicated in a decision that will have far-reaching effects on the whole property industry. The 2 negligence cases, which concerned frauds completed in 2013 and 2014, were originally brought by unrelated London developers ripped off by different criminals posing as the vendors of properties they did not own. During the appeal process both vendors’ solicitors were highlighted by the judges for their weak identity checks.
AN INTRODUCTION TO UK ARMS EXPORTS
On 16th May, a House of Commons Library briefing explains what arms exports are, what controls are in place and the process for granting licenses. It briefly looks at some of the most commonly raised concerns about UK arms exports.
UK DEFENCE INDUSTRY EXPORTS
On 15th May, the Library published another briefing which provides an overview of UK defence industry exports covering the 3 main sources of data on the subject. The paper looks at trends over time, the regions of the world where UK defence exports are going, and the type of goods that are being exported.
NO CHANGES TO US INTERNATIONAL BOYCOTT COUNTRY LIST
Sandler Travis Rosenberg on 16th May reported that the US Treasury has published its quarterly list of countries that require or may require participation in, or co-operation with, an international boycott – Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, UAE, and Yemen and is unchanged from the previous list. US law prohibits US companies and their foreign affiliates from participating in foreign boycotts that the US does not sanction. The Arab League boycott of Israel is the principal foreign economic boycott that US companies must be concerned with, but the anti-boycott laws apply to all boycotts imposed by foreign countries that are unsanctioned by the US.
THE STRANGE EVOLUTION OF HUNGARY’S GOLDEN VISA PROGRAMME
On 16th May, OCCRP carried an article that says that from 2013 an investor from outside the EU wanting to live in Hungary had to buy a special state bond from one of 8 companies with exclusive rights to sell them on behalf of the government. The bonds initially cost €250,000; later €300,000. The programme was suspended in 2017 after public criticism. Nobody knew who owned most of the companies — 7 of the 8 were anonymously registered in offshore tax havens, making it impossible to know who pocketed the profits. The 8 companies pulled in at least $600 million in fees during the 4 years the program was in operation. Now an investigation reveals that the way those companies were chosen may have violated Hungarian law. The intermediary that sold the most bonds was the Hungary State Special Debt Fund (HSSDF), which was established in the Cayman Islands in 2012 and owned by 3 enterprises registered in the BVI.
BANK INDONESIA RE-REGULATES E-MONEY
Allen & Overy reported on 15th May that Bank Indonesia has issued a new Electronic Money Regulation. The foreign ownership limits introduced by the Regulation are arguably the most crucial point in the Regulation. It revokes the previous regulations on the same subject and is effective from 4th May.
COURT CLARIFIES SINGAPORE’S APPROACH TO TAX INFORMATION EXCHANGE
Out-Law on 16th May reported that a legal challenge to the Comptroller of Income Tax’s decision to share information about certain taxpayers with the Korean tax authorities in response to an exchange of information (EOI) request has been dismissed by the Court of Appeal in Singapore. The decision helps shed light on the manner in which the Singapore tax authorities deal with EOI requests from foreign governments, particularly where the EOI process was executed ‘covertly’ without notice to the subject of the EOI request.
MASS TRIAL OF ALLEGED JIHADISTS INDICATES HIGH ATTACK RISK FOR WESTERN TARGETS IN SENEGAL FROM RETURNING FIGHTERS
Janes.com on 16th May reported that suspected jihadists were allegedly planning to attack French targets in Senegal and to spread Islamist influence into neighbouring countries. Senegal remains a likely top target for Al-Qaeda-linked groups due to its strong connections with France. The most likely perpetrators would be Mali-based coalition Jamaat Nasrat al-Islam wal Muslimin, using some experienced Senegalese militants to target the capital, Dakar, or tourist sites to the south.
THE ABC OF INTERNAL INVESTIGATIONS FROM THE XYZ DEFERRED PROSECUTION AGREEMENT (DPA)
On 16th May, law firm Corker Binning published an article on the situation where the High Court in England handed down a decision heavily criticising the SFO approach to a prosecution which followed the second deferred prosecution agreement (DPA) secured under the Crime and Courts Act 2013 (CCA). It says that there remain some very serious questions about the SFO’s approach to investigating large corporate defendants and the individuals who work for them. The article says that this was the first case of judicial scrutiny of the processes leading to a DPA from the perspective of an individual who is not party to it. The article says that the case highlights the importance of giving careful consideration to the rights of the potential individual defendants when determining what steps to take in an investigation and self-report.
SEC CHARGES BROKERAGE FIRM AND AML OFFICER
Mondo Visione on 16th May reported the SEC announced settled charges against broker-dealers Chardan Capital Markets LLC and Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) for failing to report suspicious sales of billions of penny stock shares.