Day: May 21, 2018

On 21^st May, the US Treasury advised that President Trump has signed a new Executive Order which prohibits certain transactions with Venezuela.  The transactions affected included dealings such as –

• the purchase of any debt owed to the Government of Venezuela (including accounts receivable);
• in any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order (including accounts receivable);
• in the sale, transfer, assignment or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government has a holding of 50% or more

https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_eo_20180521.pdf

Eurasia Review on 21^st May reported that illegal wood trafficking is the most profitable crime against natural resources and the world’s third most important crime, according to a report titled “Transnational crime and the developing world,” published in March 2017 by Global Financial Integrity.  The report estimates that, globally, this transnational crime generates $52 billion to $157 billion a year.  The UN Environment Program (UNEP) estimates that 30% of the wood sold in the world has been illegally obtained.  Latin American forests are the second most vulnerable in the world to illegal timber logging, after Asian forests.  In late 2012, it says, INTERPOL confiscated over 50,000 m³ of illegally obtained timber with an estimated value of $8 million as a result of an operation named Project LEAF, in which law enforcement agencies from 12 Latin American countries worked together to crack down on illegal timber logging.  Wood trafficking is linked to a series of crimes such as deforestation, labour exploitation, land invasions, tax evasion, document forgery, state corruption and even the murder of community leaders who are fighting to preserve forests.  Another report published in January 2018, sheds light on the practice known as “timber washing,” meaning the sale of illegally obtained timber with fake permits.  It also revealed that Peruvian timber — including timber that has been legally obtained — is exported to China, the Dominican Republic, the US, Mexico, France, Cuba, South Korea, Belgium, Puerto Rico, Australia, Taiwan, Spain, Chile, Ecuador, Uruguay, Canada, Israel and Japan.

http://www.eurasiareview.com/21052018-illegal-logging-an-organized-crime-that-is-destroying-latin-american-forests/

Lloyds Loading List on 21^st May reported that a new analysis by Drewry finds that while sanctions against Russia and Iran will have little direct effect on demand growth in the container segment, future growth opportunities will be stifled.  It comments that neither Russia nor Iran had regained throughput to match their pre-sanctions peaks, with Iran’s representing only 90% of its 2011 peak and Russia’s representing only 87% of its 2013 record year.  Before the imposition of sanctions, however, both countries had been growing rapidly, with Iran’s container ports recording a 5-year compound average growth rate of 18% and Russia recording a 5-year CAGR of 9% before limited sanctions were imposed in 2014.

https://www.lloydsloadinglist.com/freight-directory/news/Container-shipping-sector-shrugs-off-sanctions/71966.htm#.WwLnd_ZFx9A

On 11^th May, coinciding with the introduction of the new Customer Due Diligence Requirements for Financial Institutions” Rule issued by FinCEN, the Federal Financial Institutions Examination Council (FFIEC) issued new customer due diligence (CDD) and beneficial ownership examination procedures.  The new Rule clarifies CDD requirements and also includes a new requirement for covered financial institutions to identify and verify the identity of beneficial owners of certain legal entity customers.  The FFIEC is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions.  The separate attachments for CDD and beneficial ownership checks state as their objectives –

• Assess the bank’s compliance with the regulatory requirements for customer due diligence; and
• Assess the bank’s written procedures and overall compliance with regulatory requirements for identifying and verifying beneficial owner(s) of legal entity customers.

The guidance explains just who the “legal entity customers” would be, record and retention requirements, identification and verification requirements (including where relying on third parties).

https://www.ffiec.gov/press/pr051118.htm

On 21^st May, HM Treasury issued a Notice saying that the entries for 2 individuals and 2 entities on the Al-Qaida/ISIL sanctions lists had been amended in line with EU Regulation 2018/733/EU.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/709182/2018.733_ISIL.pdf

On 21^st May, HM Treasury published updated information on the approach OFSI takes to financial sanctions and monetary penalties for breaches in financial sanctions.  This includes specific documents containing FAQ for the charity sector and the import/export sector.

https://www.gov.uk/government/publications/financial-sanctions-faqs#history

Reuters, and many other sources, reported on 21^st May that, according to a Parliamentary committee, Russian money hidden in British assets and laundered through City of London financial institutions damages the government’s efforts to take a tough stance against Moscow’s aggressive foreign policy.  A report by the Foreign Affairs Committee said Russian money was undermining Britain’s criticism of Russia and supporting what it called a campaign by President Vladimir Putin “to subvert the international rules-based system”.  The committee chairman is quoted as saying that “the scale of damage that this ‘dirty money’ can do to UK foreign policy interests dwarfs the benefit of Russian transactions in the City”.  The committee said that the UK should work with international allies to make it more difficult for Russia to issue sovereign bonds, which are not subject to sanctions, via banks which are subject to sanctions, and more needed to be done domestically to tighten sanctions on individuals and at an international level to close loopholes that allow Russia to issue sovereign debt with the help of sanctioned entities.

https://uk.reuters.com/article/uk-britain-russia/russian-dirty-money-flowing-through-london-damages-britain-uk-lawmakers-idUKKCN1IL0WM?src=ilaw

The report of the Committee, “Moscow Gold: Russian Corruption in the UK”, is available at –

https://www.parliament.uk/business/committees/committees-a-z/commons-select/foreign-affairs-committee/news-parliament-2017/commonwealth-summit-report-published-17-19/?src=ilaw

Amongst the evidence given to the committee is the titbit that in Russia, one of the names for a shell company — one of the words people use — is “BVI”.  They just call them “BVIs” as shorthand.  The report also notes that the BVI was the first to introduce an accessible (though not public) register of beneficial ownership.  It introduced in 2017 a secure, non-public and technologically innovative search platform called BOSS (Beneficial Ownership Secure Search System).  BOSS is a central register of all persons who directly or indirectly own 25% or more of companies registered in the BVI or under BVI law and is accessible by competent authorities in the BVI and the UK.  However, companies registered elsewhere that own more than 25% of BVI-registered companies do not have to be included in the database.  Amongst the committee recommendations are that the Government should set out its plans for assisting the governments of the Overseas Territories to establish publicly accessible beneficial ownership registers before 31^st December 2020.  It calls on the Government to provide the same level of assistance to the Crown Dependencies, and to encourage them to take steps to meet the same standard of transparency.