6th July 2018
US FORCES SMARTPHONE GIANT ZTE TO FIRE ITS CEO AND LEADERSHIP TEAM
Ars Technica on 5th July reported that Chinese smartphone giant ZTE has completely replaced its corporate leadership, naming new people to be CEO, CTO, CFO, and several vice presidents. The move comes a week after ZTE named a new board of directors. The US government demanded that ZTE make these changes as a condition of lifting a crippling export ban against the company over the company’s sale of US technology to Iran and North Korea in violation of US sanctions rules.
AUSTRALIAN BANKING ASSOCIATION REJECTS ADDITIONAL CASH LIMIT REPORTING
Investor daily on 6th July reported that the ABA had accepted the federal government’s proposal to limit cash payments to $10,000, but is resisting increased compliance reporting. The government launched a consultation on 23rd May on imposing the $10,000 limit – transactions exceeding $10,000 would have to be made electronically or in cheque, with the aim to “stamp out opportunities for criminals to launder the proceeds of crime into goods and services and will make it harder for businesses to hide transactions to reduce their tax liabilities”. As well as saying that additional reporting by banks was not necessary, the ABA also said that the rule should not apply to cash withdrawals, and that local shop owners, manufacturers and others must be given enough time to adapt to the new policy.
FBI: ENTREPRENEUR AGREED TO LAUNDER COLOMBIAN DRUG MONEY THROUGH TEXAS RESIDENTIAL DEVELOPMENT PROJECT
A local CBS station in Texas reported on 5th July that a luxury residential community — marketed as a 5-star resort built to withstand a nuclear war — is now at the centre of an FBI money laundering investigation. Trident Lakes owner and manager John Eckerd reportedly faces 2 counts of money laundering and 1 count of conspiracy to commit money laundering. It is alleged that he and an unidentified co-conspirator accepted $200,000 in purported drug money from undercover FBI agents over the past year in a that saw Eckerd allegedly agreeing to launder $1 million from Colombian drug dealers through Trident Lake.
PUERTO RICO MAYOR AND OTHER OFFICIALS INDICTED FOR CONVERSION OF FEDERAL FUNDS, FRAUD AND MONEY LAUNDERING
Caribbean Business on 5th July reported that the mayor of Sabana Grande, Puerto Rico, Miguel Ortiz, has been indicted and arrested for his participation in a conspiracy to “steal federal funds involving fraudulently obtained contracts” from the island’s Education Department. Separetly, Víctor Cruz, former director of finance, and Ángel Santos-García, former interim director of finance of the municipality of Toa Baja were charged with theft, conversion, and misappropriation of funds from the US Departments of Housing and Urban Development (HUD) and Health and Human Services (HHS).
VIRTUAL CURRENCY AND CANADA’S AML FRAMEWORK
On 26th June, Dentons published what it said was the first of a 3-part summary of the proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFA), announced by the Department of Finance on June 9th. Part 1 discusses amendments relating to virtual currency, money services businesses (MSB) and foreign MSB. Part 2 will consider the amendments made to the Regulations to address money laundering concerns regarding open-loop prepaid cards. Part 3 will consider other notable amendments.
LONDON COURT ORDERS SEIZURE OF VIJAY MALLYA’S UK ASSETS
The Economic Times in India on 5th July reported that a UK High Court judge has issued an enforcement order in favour of a consortium of 13 Indian banks, seeking to recover funds owed to them by liquor baron Vijay Mallya. Mallya separately fighting extradition to India on fraud and money laundering charges.
INTRODUCTION TO THE BELT & ROAD INITIATIVE, AND THE NEW SILK ROAD
On 5th July, Bird & Bird published an introduction to the initiative and shares its insights how this initiative will impact the financing of energy and infrastructure projects and the legal market for M&A. It says that the Silk Road Economic Belt and the 21st Century Maritime Silk Road is a cross-continental development strategy conceptualised by the Chinese government in 2013. The initiative is first known as the One Belt and One Road Initiative (BRI), now repackaged to Belt and Road Initiative (BRI). The BRI aims to achieve better connectivity and economic co-operation among countries in Eurasia.
PNB FRAUD: MUMBAI COURT ISSUES NON-BAILABLE WARRANTS AGAINST GITANJALI GEMS BOSS MEHUL CHOKSI AND 5 OTHERS
First Post in India on 6th July reported an arrest warrant against Gitanjali Gems owner Mehul Choksi, accused of perpetrating the $2 billion Punjab National Bank (PNB) scam with nephew Nirav Modi. This comes after an application for the court to confiscate Choksi’s assets. Choksi and his firms – Gitanjali Gems Ltd, Gili India Ltd and Nakshatra Brand Ltd – have been charged with obtaining “fraudulently issued letters of undertaking (LoU) and fraud involving foreign letters of credit.
NORTH KOREA WANTS JAPAN TO LIFT SANCTIONS
Japan Today on 6th July reported that North Korea has said it will not comply with Tokyo’s demand for a resolution of the issue of Japanese citizens abducted by the DPRK decades ago unless Japan lifts unilateral economic sanctions. The demand to Japan is said to have been made during behind-the-scene talks regarding the abductions of Japanese nationals in the 1970s and 1980s. Japan officially lists 17 citizens as abduction victims and suspects the DPRK is involved in many more disappearances. 5 of the 17 were repatriated in 2002, but the DPRK maintains that 8 have died and 4 others never entered the country.
DUBAI CONTAINER OF 100 KG OF SHARK FIN SEIZED IN HONG KONG
The Standard in Hong Kong reported on 6th July that Customs said they seized 100 kg of dried shark fin belonging to endangered species and 220 kg of undeclared dried sea cucumber from a container at the Kwai Chung Customhouse Cargo Examination Compound. The container had been shipped from the UAE.
URANIUM: FROM EXPLORATION TO REMEDIATION
In June 2018, the International Atomic Energy Agency published a bulletin on ensuring the safe, secure and sustainable supply of uranium. If countries opt for nuclear power or decide to explore the possibility of producing uranium, the IAEA’s job is to help them do so safely, securely and sustainably. Through its advisory services, missions and expert advice, the IAEA helps national authorities to ensure that uranium, throughout its entire life cycle, is handled safely and securely. This edition of the IAEA Bulletin discusses the status of the industry and its possible future. It outlines the assistance provided by the Agency to countries in uranium mining, milling and mine remediation. For example, uranium mining and production is explained, along with safeguards.
EU PARLIAMENT VOTES TO SUSPEND EU-US PRIVACY SHIELD
Paul Hastings reported on 5th July that on July 5th MEP passed a non-binding resolution to suspend the Privacy Shield Framework “unless the US is fully compliant” by September 1st. The Privacy Shield Framework was designed by the US Department of Commerce and the European Commission to provide companies on both sides of the Atlantic with a mechanism to comply with data protection requirements when transferring personal data from the EU to the US and came into force in 2016 replacing the Safe Harbor similar but less restrictive agreement. However, the Privacy Shield has drawn controversy as not providing an “adequate level of protection” under applicable EU data protection laws.
PORT OF DJIBOUTI OPENS FREE TRADE ZONE
Port Technology on 6th July reported that Africa’s newest free trade zone, the Djibouti International Free Trade Zones (DIFTZ), has launched with the aim of making the Horn of Africa a global trading hub. The article says that this marks the next phase of a project that seeks to utilise the Djibouti’s place on many of the world’s biggest shipping routes.
WHEN DO CRIMINAL STATUTES BIND THE CROWN?
An interesting article from the chambers at 6 King’s Bench walk on 17th April posed this question and explores the general principles to be applied when considering whether a criminal statute binds the Crown; it compares and contrasts the position in the Bribery Act 2010 and the Terrorism Act 2000, on the one hand, and the Offences Against the Person Act 1861 on the other. The starting point is the general rule is that a statute does not bind the Crown (ministers, Crown servants, or, to use the modern terminology, individuals in the public service of the Crown) unless there is express provision to that effect or it arises by necessary implication.
BRITISH COLUMBIA TO CRACK DOWN ON HIDDEN OWNERSHIP OF REAL ESTATE WITH NEW REPORTING OBLIGATIONS
Blakes Cassels and Graydon published an article on 4th July about the British Columbia Ministry of Finance releasing a white paper on draft legislation that will require reporting on beneficial ownership of land. This follows the government’s announcement in the 2018 budget that it intends to collect and make available information about beneficial ownership of land in a public registry, with the intention behind the registry to end hidden ownership of real estate to prevent tax evasion, fraud and money laundering. The consultation extends to 19th August.
STATUS OF HMRC TAX POLICY CONSULTATIONS
On 6th July, HMRC published a schedule of current and past tax policy consultations and of any resulting legislation.
STATE AID: EU COMMISSION OPENS IN-DEPTH INVESTIGATION INTO TAX EXEMPTIONS FOR COMPANIES IN THE MADEIRA FREE ZONE
On 6th July, the EU Commission announced an investigation to examine whether Portugal has applied the Madeira Free Zone regional aid scheme in conformity with Commission Decisions of 2007 and 20013 approving it. It was created by Portugal in 1987 to support economic development in its outermost region Madeira, to attract investment to and create jobs in Madeira. In this context, Portugal put in place a regional aid scheme providing support to companies establishing themselves in the zone through certain corporate income tax reductions on profits resulting from activities performed in Madeira; and other tax reductions, such as an exemption from municipal and local taxes. The Commission has concerns that the Portuguese authorities may have failed to respect some of the basic conditions under the Decisions and in particular that tax exemptions granted by Portugal to companies established in the zone are not in line with the Commission Decisions and EU State aid rules.
FORMER PAKISTAN PM NAWAZ SHARIF SENTENCED TO 10 YEARS IN PRISON
Deutsche Welle on 6th July reported that a court in Pakistan has handed a jail term to the former PM in a Panama Papers corruption case. Sharif’s daughter, Maryam Nawaz, was given a 7-year jail term. The case, which relates to the purchase of 4 flats in London, was filed against Sharif and his family by the National Accountability Bureau (NAB). Sharif is currently in London to attend to his ailing wife. It is unclear whether Sharif would return to Pakistan.
FORMER BILLIONAIRE BATISTA SENTENCED TO 30 YEARS IN JAIL FOR BRIBERY IN BRAZIL
Baker McKenzie on 6th July reported that Eike Batista, the former oil and mining billionaire who lost his fortune and spent time in jail last year for alleged corruption, has now been sentenced to 30 years after being found guilty of bribing former Rio de Janeiro governor Sergio Cabral.
HOW FRENCH JOURNALISTS USED AN ICIJ DATABASE TO FIND LOCAL STORIES
On 6th July, ICIJ published an article on how a French local investigative website and a European collective of journalists based in Lyon, used ICIJ’s Offshore Leaks Database (into which information from the Panama Papers, Paradise papers etc are fed) to expose what they describe as “the banality” of tax evasion costing France millions of euros each year. They compiled the names of less well-known individuals and companies in the Lyon region whose financial dealings appeared in the database to document tax minimization SME, family businesses and individuals – and not the usual high-profile names that normally get the headlines.
INVESTIGATING AND PROSECUTING CASES OF THE NEXUS BETWEEN ORGANISED CRIME AND TERRORISM IN THE MIDDLE EAST AND NORTH AFRICA
On 4th July, the International Centre for Counter-Terrorism (ICCT) in The Hague published a report outlining the main themes raised in a workshop held in Qatar in April held to facilitate discussion between practitioners from Middle East & North African (MENA) and non-MENA countries on the nexus between organised crime and terrorism. The themes explored included –
- The stark imbalance between resources dedicated to terrorism over organised crime; with the latter suffering due to the focus on the former;
- Dissolution of the Caliphate and the return of foreign fighters could stress the system and will present a host of new challenges;
- Technology will continue to play an important role in the future of the nexus;
- The nexus has both local and transnational dimensions, which makes it difficult to combat; and
- A tactical focus hampers longer-term strategic planning in combating the nexus
The report outlined a number of recommendations and best practices, and lessons that had been learned.
A THIEF IS NOT NECESSARILY A FRAUDSTER. A FRAUDSTER IS NOT NECESSARILY A THIEF
A blog post from Corker Bining on 6th July starts off by saying that fraud and theft have the obvious common element of dishonesty. Whilst the UK Supreme Court last year in Ivey v Genting ruled that the test for dishonesty in criminal cases should be an objective one, proof of dishonesty alone, whether for theft or fraud, is not enough to secure a criminal conviction. A recent decision (R v Darroux) illustrates why it pays prosecutors to have long memories and signals a warning to those who fail to select the correct charge. It also demonstrates that the Court of Appeal will not necessarily come to the rescue of an errant prosecutor even where a jury has found a defendant to have acted dishonestly. In that case, an employee filed false records so as to receive extra overtime and other payment. She was charged with theft, alleging that she stole money from her employer. The blog article says that those with long memories stretching would recall the problems that arose with prosecuting mortgage fraud cases under the Theft Act in the 90s. After successful arguments that no property was obtained when funds were debited from the victim’s bank account and credited to a defendant’s bank account, the law was changed to cover such deception cases. The Fraud Act 2006 was to replace such deception offences but were not charged in the Darroux case and on appeal it was argued that there had been no “appropriation” of property – which is an essential ingredient of the actus reus of theft. It is not an ingredient of the actus reus of the offence of fraud by false representation under the Fraud Act.
IS HUNGARY THE NEW TAX HAVEN FOR INTERNATIONAL COMPANIES?
Hungary Today on 6th July carried an article saying that the Hungarian state doesn’t just provide financial aid (at a much higher level than neighbours, such as Poland) but also offers tax benefits. Officially the tax rate is 9% – which is already the lowest rate in the EU – but according to the calculation of mfor.hu, the effective tax rate (the most important number for investors) is around 5%. The newspaper asserts that with this level of taxation Hungary could make it a tax haven.
UK: THE IMPORT OF SALAMANDERS AND NEWTS
On 6th July, a UK Government news release told you what you need to do to import live members of the order Caudata (salamanders and newts): the appropriate establishments and the health certificates needed. EU law requires that, to import salamanders and newts from outside the EU, or to export them to another EU country you need access to a registered appropriate establishment. Imports also require the requisite health certificate from the country of origin.
INDIAN LAW COMMISSION RECOMMENDS REGULATED GAMBLING AND BETTING IN SPORTS TO CURB FRAUD
Live Mint on 6th July reported that the Law Commission of India has recommended regulated gambling and betting in sports to check fraud and money laundering. Regulation would not only empower the government to identify and prevent instances of gambling by minors and “problem-gamblers” but also enable it to “effectively curb the menace of black-money generation through illegal gambling,” the commission said in its report.
ESTONIA “DID NOTHING TO INVESTIGATE DANSKE BANK MONEY LAUNDERING ALLEGATIONS”
Postimees in Estonia on 6th July reported that a major money laundering scandal that concerned the Estonian banking sector and especially the Estonian branch of Danske Bank is growing. Revelations included €1.8 billion from Moldov and over €2.1 million from Azerbaijan. Then the Central Criminal Police’s Money Laundering Data Bureau confirmed in late May that the Estonian financial system had a total of €13 billion in dirty money pass through it. Suspicions include that Russian president’s nephew Igor Putin and Russia’s special services were involved, and that others included several eastern weapons manufacturers, including Rosoboronexport that is responsible for Russia’s arm exports. Inquiries have collected piles of information and investigations have been launched but with no results.
LIVERPOOL PROPERTY DEVELOPER NIGEL RUSSELL CLEARED OF ALLEGED INVESTMENT FRAUD
The Liverpool Echo on 6th July reported that property developer Nigel Russell, 56, was cleared of an alleged £3.6 million investment fraud after prosecutors offered no evidence. The alleged frauds related to city centre developments including student accommodation.
JCPOA JOINT COMMISSION ON CONTINUATION OF AGREEMENT AFTER US ANNOUNCEMENT
The European Sanctions Blog on 6th July reported on the meeting of the commission responsible for overseeing the implementation of the JCPOA agreement with Iran. Representatives from China, France, Germany, Russia, UK and Iran all reconfirmed their commitment to the full and effective implementation of the nuclear deal (and despite President Trump’s announcement). Amongst other things, the participants agreed to continue Iran’s export of oil and gas condensate, petroleum products and petrochemicals; preserve and maintain financial channels with Iran; promote export credit cover; practical support for trade with and investment in Iran; and protect companies from the extraterritorial effects of US sanctions.
SAUDI-BACKED YEMENI FORCES RECEIVED NEWLY-PURCHASED SERBIAN ASSAULT RIFLES
Defence Blog on 5th July reported that Saudi-backed Yemeni government forces had received the batch of new 7.62mm Serbian assault rifles M05 as military aid by Saudi Arabia. The M05 E1 is a new modular automatic assault rifle developed by Serbian Company, Zastava. The modular platform, based on Kalashnikov system, ensures perfect function in all climate and terrains conditions.
Meanwhile on 6th July, Balkan Insight reports that –
SAUDI ARABIA REMAINS KEY BUYER OF BALKAN ARMS
Afghanistan, Iraq and Algeria are emerging as new key destinations. A recently-released report on yearly arms exports in 2016 for Serbia, Montenegro, Bosnia, Albania and Macedonia says those countries sold Saudi Arabia more than €118 million worth of weapons and ammunition that year.
SHIFTING TRAFFICKING ROUTES FOR ILLICIT NARCOTICS AND THE IMPORTANCE OF SPAIN-US COUNTER-NARCOTICS CO-OPERATION
The Real Instituto Elcano in Spain on 25th June produced a report looking at drug trafficking routes from South America. It looks at the mechanisms used to combat such trafficking, law enforcement successes and challenges. It says that Spain’s geographically strategic location and its large consumer market make it one of the principal gateways for illicit drugs entering Europe and originating in South America, transiting via the Caribbean and West Africa. This puts Spain in a unique position of having to confront the transatlantic drug trade coming from multiple directions and using a variety of trafficking techniques.