21st July 2018
HOW BRITAIN ENABLES ROUTINE, EVERYDAY CORRUPTION AND FRAUD IN THE EX-USSR
On 20th July, The Herald in Scotland carried another article on the use (abuse) of Scottish Limited Partnerships (SLP) to facilitate frauds in the former Soviet Union. It says that there are so many international revelations, big and small, about SLP and similar English, Northern Irish and Scottish entities called limited liability partnerships or LLP, that it would need a special edition of newspaper just to cover them all. Hence the article says that it catalogues just a few recent scandals to emerge since an announcement of a crackdown on SLP – and with a consultation on changes ending. An example given is in In Armenia, where a business called Norfolk Consulting last year secured a monopoly on handling customs processing for cargo from neighbouring Turkey, China and the UAE. 3 men (with reported links to the Transnistria leadership) have been charged with tax evasion with perhaps some $7 million in import duties lost. The official owner of the SLP is a man with an Armenian name who lives in Moscow.
ERICSSON PAYS PENALTY FOR SANCTIONS VIOLATION
On 20th July, Bass Berry & Sims published an article about the case where OFAC and Ericsson, the Swedish telecommunications company, reached an agreement for the company to pay approximately $145,000 for violating US sanctions on Sudan. It says that, among other things, this is one of the few OFAC enforcement actions explicitly premised on a non-US actor causing a US company to violate US sanctions – by causing a US seller of a satellite hub to export that hub from the US to Sudan, even though an Ericsson employee was informed that the purchase of the satellite would violate Ericsson’s own sanctions compliance policy. The employee then structured the acquisition so that the satellite hub was shipped through several other countries, including with help from a third party in Lebanon, before eventually arriving in Sudan. The article says that the enforcement action highlights the importance of empowering compliance personnel to prevent transactions prohibited by US economic and trade sanctions.
4 SENTENCED IN MULTIMILLION DOLLAR INDIA-BASED CALL CENTRE SCAM TARGETING US RESIDENTS
Click On Detroit in the US on 20th July reported that 21 members of the scheme have been sentenced to terms up to 20 years, while the 3 others were sentenced earlier this year. Callers are said to have duped victims into believing that they owed money to the US government and would be arrested or deported if they did not pay immediately. After the victims transferred money to the callers, a network of US-based runners moved to launder fraud proceeds through the use of anonymous stored-value cards. In a typical scenario, call centres directed the runners to purchase stored-value reloadable cards and transmit the unique card number to India-based co-conspirators who registered the cards using the misappropriated personal identifying information (PII) of US citizens. The India-based co-conspirators then loaded these cards with scam funds obtained from victims and runners used the stored-value cards to purchase money orders that they deposited into the bank account of another person. The article contains full details of those charged and with what.
THE $20 BILLION OIL BOOM QUESTION FOR GUYANA
On 20th July, the New York Times carried an article asking if Guyana was prepared for the effects of an oil boom. It says that following independence from Britain in 1966, a plague of ethnic tribal politics produced a fragile state with an economy propelled by drug trafficking, money laundering, and gold and diamond smuggling. The article asks if oil wealth help Guyana overcome its history, or will the windfall that will flood government coffers merely turn the page to a new tragic chapter? Economists say the country’s current GDP of $3.6 billion will at least triple in 5 years. It says that neighbouring Venezuela and Trinidad & Tobago show how large oil reserves have not prevented hunger, shortages of medicine and hyperinflation from producing widespread misery (and it could have added, generated corruption).
MALTA: PM ASKS AG TO PUBLISH EGRANT INQUIRY INTO ALLEGATIONS OF WIFE’S PANAMA PAPERS COMPANY
The Malta Independent on 21st July reported that that the inquiry into claims that Michelle Muscat, wife of Prime Minister Joseph Muscat, is the owner of a secret Panama company Egrant, has concluded, and the findings were handed over to the Attorney General and the PM has asked the Attorney General to publish the inquiry after he concludes his internal review.
GERMAN CONSTITUTIONAL COURT DRAWS FORMAL LIMITS TO THE PROHIBITION OF SEIZURE OF EVIDENCE ON LAWYERS’ PREMISES
On 20th July, White & Case published an article which begins by saying that the protection from seizure by law enforcement, which the client-attorney privilege affords to the findings gathered by lawyers who are commissioned with internal investigations at businesses, has narrow limits. The affiliate of a law firm’s client has been denied protection from seizure by the German Federal Constitutional Court in a case that relates to the VW emission scandal. VW had asked a US-based law firm to conduct internal investigations, provide legal advice and to represent them in the US. All the constitutional complaints have thus turned out unsuccessful, and the public prosecutor’s office in Munich may now proceed and use the secured material in its action against Audi – the prohibition of seizure only holds if there exists a client-attorney relationship between the law firm and a specific (group) company. Hence, the law firm advises that creating a broadly conceived client-attorney relationship may be advisable to uphold as much of the prohibition of seizure as possible. The new German federal government has vowed to create “statutory provisions” for internal investigations.
FCA UPDATES GUIDANCE ON ITS APPROACH TO PAYMENT SERVICES AND ELECTRONIC MONEY
An article from Shearman & Sterling on 20th July reporting that the FCA has updated its Approach Document on payment services and electronic money to reflect final guidelines issued in December 2017 by the European Banking Authority on security measures for mitigating operational and security risks under the revised EU Payment Services Directive. The changes will affect all payment service providers. The FCA has also updated its webpage on reporting requirements for payment services providers and e-money issuers to reflect these changes.
2 MEN CHARGED WITH DRUG IMPORTATION FOLLOWING MAJOR SEIZURE OF COCAINE ON A YACHT AT NEWLYN, CORNWALL.
The NCA on 20th July published a news release saying that Dutch nationals, Maarten Peter Pieterse, 59, and Emile Adriaan Jeroen Schoemaker, 44, had been arrested after the boat they were travelling on was intercepted by a Border Force Cutter, HMC Vigilant, off the south west coast of Cornwall.
CHINESE SCAMMERS “PICKING THE POCKETS OF SPANISH SLOT MACHINE OPERATORS THROUGH THE USE OF ALTERED €5 BILLS”
Calvin Ayre on 20th July reported that a reported scam in Spain that involves cutting a €5 note in half vertically, then taping the halves together but leaving a small 2- or 3mm gap in between and inserting the doctored bill into the currency slot of an electronic gambling machine, which spits the note back out as unacceptable. It is then reinserted multiple times after which, for some reason, the machine’s account balance suddenly changes to read €50.
US COAL EXECUTIVE CONVICTED OF BRIBERY TO DODGE ENVIRONMENTAL CLEAN-UP
Law 360 on 20th July reported that a former Balch & Bingham environmental partner, Joel Gilbert, and a coal company executive, David Roberson, have been convicted of bribing an Alabama legislator for his help in dodging clean-up liability with the Environmental Protection Agency.
US SENATE PANEL PROBES USE OF TRADE PROTECTIONS UNDER ENFORCE ACT AND ALLOW “ADMINISTRATIVE PROTECTION ORDERS”
Homeland Preparedness on 20th July reported that a US senator has called on US Customs and Border Protection (CBP) to use existing tools to crack down on illegal trade that involves countries illegally importing goods by transhipping them through other countries. The ENFORCE Act allows domestic producers to petition CBP to investigate potential anti-dumping and countervailing duty protections and to use administrative protection orders to co-ordinate information-sharing among interested parties. In response, the CBP Administrator testified that using the administrative protective order process is “something we have looked at”, but whilst he also expressed willingness to talk to Congress about it but added that CMP does not have the authority or resources to implement it. Both agreed that ENFORCE Act processes should allow people to file claims — through an administrative protective order or another confidential means — without knowing the importer.
BRIBERY ALLEGATIONS AGAINST HEDGE FUND EXECUTIVES BY SEC DISMISSED AS TIME BARRED
Buckley Sandler on 20th July reported that a New York judge had dismissed the SEC’s civil suit against 2 former executives of a US hedge fund management firm. The allegations involved charges that they had violated the FCPA between May 2007 and April 2011 by causing the firm to induce Libyan authorities to invest in funds managed by the firm and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and DRC. The claims were barred by the FCPA’s 5-year statute of limitations.
LATEST CONVICTION IN VENEZUELAN (PDVSA) BRIBERY CASE
On 20th July, Buckley Sandler reported that on July 16th Luis Carlos De Leon-Perez, a dual US-Venezuelan citizen pleaded guilty to charges that he bribed officials at state-owned oil company, PDVSA and laundered money for bribes to other company employees.
HOW A SYDNEY TRADER LANDED IN THE CENTRE OF US FRAUD BUST
The Sydney Morning Herald in its 22nd July edition carried an article about a 31-year-old ambitious young trader from Sydney’s northern suburbs called Jim Zhao could be linked to a trillion-dollar stock market crash and a landmark US white collar crime case implicated at least 4 of the world’s biggest banks in a 7-year conspiracy to manipulate commodities markets in Chicago. He was one of 8 men charged in January with manipulating futures contracts, which traders use to wager on anticipated price changes in those assets. They are accused of spoofing – the practice of placing fake orders and quickly cancelling them, in order to artificially raise or lower prices, then capitalising on it by concurrently placing genuine orders to buy or sell. Deutsche Bank, UBS AG and HSBC have agreed to pay $46.6 million in penalties while Bank of America Merill Lynch, although implicated, was not sanctioned. All 4 received reduced penalties for providing significant assistance to investigators.