25th July 2018
PERTH PROPERTIES FROZEN IN $7.5 MILLION TAX CASE AGAINST SANDALWOOD TRADER
The West Australian on 24th July reported that a mysterious Asian businessman – Wei Hsiung “Francis” Chen, along with his family, has run Sandalwood Passion Pty Ltd for 15 years -who has seemingly made millions from the sandalwood trade has had 3 Perth properties frozen by the Federal Court over an alleged $7.5 million tax bill — while also facing criminal charges over alleged illegal exports of the wood.
https://thewest.com.au/news/wa/perth-properties-frozen-in-75m-tax-case-ng-b88905992z
£10 MILLION GIOTTO PAINTING DENIED UK EXPORT LICENCE AS ILLEGALLY REMOVED FROM ITALY
The Guardian on 24th July reported that the High Court has ruled that Arts Council England was justified in rejecting application to export it from UK to Switzerland – rendering it “effectively unsellable” according to one expert. It was brought to Britain by someone who purchased it in Florence for about £3,500 in 1990, without it being thought to be a Giotto. The High Court has now ruled that under EU law, the Arts Council England had no power to grant an export licence. Concluding that the “competent authority” under EU law for a licence was the Italian authorities, it offered instead to issue an export licence for the return of the painting to Italy.
WHY THE EGMONT GROUP IS YET TO LIFT SUSPENSION ON NIGERIA
NG Today in Nigeria on 24th July reported that the recently-enacted Nigeria Financial Intelligence Unit (NFIU) Act is not an automatic ticket for the lifting of Nigeria’s suspension from the Egmont Group. A source said the NFIU Act was just one of several requirements that Nigeria now had to fulfil for the suspension to be lifted.
https://www.today.ng/news/nigeria/nfiu-egmont-group-lift-suspension-nigeria-sources-135649
SEAGRAM’S HEIRESS CLARE BRONFMAN CHARGED IN CONNECTION WITH ALLEGED SEX CULT NXIVM
CBC in Canada on 24th July reported that Bronfman and 5 others accused of racketeering related to operations of cult-like pyramid group. She has been charged with racketeering in the US in connection with the operation of a cult-like group whose leader has been accused of sex-trafficking. She is accused alongside NXIVM leader Keith Raniere, Smallville actress Allison Mack and 3 others of working to achieve the aims of a pyramid-like scheme that used shame, guilt and blackmail to recruit and groom sexual partners for Raniere.
https://www.cbc.ca/news/canada/british-columbia/nxivm-bronfman-sex-cult-racketeering-1.4759640
UBS CENSURED OVER AML CONCERNS
On 24th July, Financial Adviser IQ reported that the US Office of the Comptroller of the Currency has censured UBS for deficiencies in how it handles AML matters, although the firm avoided a monetary penalty. The Swiss company allegedly had inadequate systems for spotting potentially illegal financial transactions and, in addition, failed to properly monitor those systems, with deficiencies in how it performed due diligence on clients.
ASIA PACIFIC DUTY-FREE SHOPPING ACCOUNTS FOR ALMOST HALF OF WORLD TOTAL
A feature from HKTDC on 17th July says that thanks partly to the generous spending by Chinese mainland tourists, duty-free revenue from the region made up 45% of global total – with revenue of $30.6 billion, an 11.6% year-on-year increase.
EBA PUBLISHES FINAL GUIDELINES ON FRAUD REPORTING BY PAYMENT SERVICE PROVIDERS UNDER PSD2
Bird & Bird on 24th July published an article saying that the European Banking Authority (EBA) has published the final guidelines on fraud reporting under the revised Payment Services Directive, which EU Member States ensure that all “payment service providers” submit to their competent authorities, at least on an annual basis, statistical data on fraud relating to different means of payments. It also requires the competent authorities to provide the EBA and the European Central Bank with such data on an aggregated form. The Guidelines lay out forth the methodology, definitions and data breakdowns so payment service providers in the EU/EEA can collect and report data on payment transactions and “fraudulent payment transactions” in a consistent manner.
The guidelines themselves are available at –
ESMA – MEASURES TO RESTRICT THE PROVISION OF CFD AND PROHIBIT THE PROVISION OF BINARY OPTIONS TO RETAIL INVESTORS
On 24th July, Dentons published a briefing about 2 decisions by the European Securities and Markets Authority and published on 1st June formally adopting new measures on the provision of contracts for differences (CFD) and binary options to investors categorised as “retail clients”. The marketing, distribution or sale to retail clients of binary options was prohibited from July 2nd for 3 months, and, prior to its expiry date, ESMA will decide whether it will prolong the ban. The ban applies across the entire EU but also to non-EU established clients and non-EU nationals. Restrictions applied to CFD (detailed in the briefing) apply from August 1st and will last for 3 months. As with the, the briefing says, measures on binary options, ESMA will decide on a possible prolongation prior to the end of the 3-month period.
A binary option is defined as any cash-settled derivative in which the payment of a fixed monetary amount depends on whether one or more specified events in relation to the price, level or value of the underlying occurs at, or prior to, the derivative’s expiry (for example the underlying has reached a specified price (‘the strike price’) at expiry). Crucially, Dentons says, the July Q&A issued by the ESMA expands the definition by confirming that this includes contracts in which payment is contingent on multiple events occurring and/or products in which payment to the client increases if certain events occur.
CFD is a derivative other than an option, future, swap or forward rate agreement, the purpose of which is to give a long or short exposure to fluctuations in the price, level or value of an underlying, irrespective of whether it is traded on a trading venue, and that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event. CFD are often traded on a margin, which means that the exposure under the contract is leveraged. For example, in case the notional value of a CFD is €10,000 and the investor deposits €1,000 as initial margin, in this case, the CFD is leveraged at 10:1. As a result, supervisors are concerned that the financial leverage in the CFD’s design can mean that losses can exceed the initial margin deposited.
FRAUDULENT EMAIL INTERCEPTIONS
On 24th July, Irish law firm, Matheson, published a Client Alert saying that there has been a spate of email interception attacks impacting several high-profile companies and putting their data, and that of their customers, at risk. he affected companies have been the target of fraudsters gaining access to employee email accounts (often by obtaining usernames and passwords using phishing techniques or by using other fraudulent means). The perpetrators then typically seek to intercept emails relating to the payment of invoices and divert customer payments to their own account.
https://www.matheson.com/news-and-insights/article/client-alert-fraudulent-email-interceptions
WHY E-WALLETS ARE GAINING POPULARITY AMONGST ONLINE CASINO USERS
Banking Tech on 24th July reported on why e-wallets are becoming more popular with online gambling websites.
ALLEGED PARTNERSHIP OF CANADIAN CASINO COMPANY WITH HONG KONG GAMBLING TYCOON COULD TRIGGER NEW INVESTIGATION
Global News in Canada on 25th July reported that a Hong Kong tycoon suspected of links to organised crime in Macau casinos was allegedly a partner with British Columbia-based Great Canadian Gaming in a casino ship venture in the South China Sea: the China Sea Discovery. Its cruise only lasted for about a year, ending in 2001, and was plagued by problems with Chinese gangsters and armed junket operators. The tycoon, Cheng Yu Tung was not registered to participate in BC-based gambling businesses and the revelation is said to open the necessity of a public inquiry, into what happened in BC.
https://globalnews.ca/news/4328072/canadian-bc-casino-link-vip-hong-kong-tycoon-investigation/
IS HONG KONG DESTINED TO BE THE MAJOR SHIP FINANCE CENTRE IN ASIA?
On 24th July, Mayer Brown published an article saying that Asian owners have increased their world market share from 38% to 40%, of which Chinese owners now control 12%. The Chinese leasing companies are competing to grow further and 20% is not an impossible target. By contrast, European owners have gradually lowered their market share from 47%-45% of the global fleet. There are signs that banks can see as a window of opportunity in the Far East. The article details the indications of this window of opportunity. The article concludes that Hong Kong has a long tradition in providing shipping finance but the number of Hong Kong born and bred owners in its sphere of influence is reducing. There needs to be a boost of measures to keep its existing owners and managed fleets in the territory, beyond looking at the numbers of ships registered under the Hong Kong flag; and new measures have to be introduced to attract new owners, leasing companies and managers to set up business in Hong Kong, which in turn will attract more business for the ship lending community.
See also –
EU COMMISSION CONCERNED WITH POLAND’S ‘WASTE MAFIA’
EurActiv on 25th July reported that in recent months hundreds of thousands of tonnes of garbage have been burned in Poland, coming not only from the country itself but also from abroad: from the Czech Republic, Italy or the UK. On 22nd July, the Daily Telegraph had reported waste transferred from the UK to Poland, where it is – under unknown circumstances – burned; also saying that a “waste mafia” earns millions of Polish zlotys. EurActiv says that the waste problem intensified in January this year, after China introduced a ban on the import of plastic intended for recycling.
CONSULTATION LAUNCHED ON UK NATIONAL SECURITY AND INVESTMENT WHITE PAPER
Notice to Exporters 2018/19 from the Department for International Trade says that the Government has published a White Paper and begun a public consultation on the veto on mergers, takeovers etc on national security grounds. The consultation closes on 16th October.
HOW TO IDENTIFY AND AVOID BUYING FAKE CAR PARTS
On 25th July, the UK Intellectual Property Office published guidance, which also spells out the risk and consequence of buying counterfeit parts.
https://www.gov.uk/government/publications/counterfeit-vehicle-parts
UK SHIP INSURERS OPEN SUBSIDIARIES IN EUROPE IN ANTICIPATION OF BREXIT
Loadstar on 25th July reported that the UK marine insurance business is preparing for Brexit by opening new subsidiaries in the EU. The London P&I Club, for example, has opted for Cyprus. 6 P&I clubs, amongst 13 major global P&I insurers, all of which have announced EU-based subsidiaries, account for more than half the industry’s revenue. Protection and indemnity insurance is a form of mutual maritime insurance provided by a P&I Club and provides cover for open-ended risks that traditional insurers are reluctant to insure. It provides risk pooling, information and representation for its members.
https://theloadstar.co.uk/uk-ship-insurers-open-subsidiaries-eu-post-brexit/
http://www.euronews.com/2018/07/20/uk-ship-insurer-london-club-setting-up-cyprus-office-over-brexit
GREEK AUTHORITIES DISMANTLE MAJOR PROSTITUTION RACKET
Ekatherimini on 15th July reported that the Greek police’s organised crime and human trafficking unit has dismantled a large-scale operation that exploited migrant women, forcing them to work as prostitutes. members of the gang would smuggle women into Greece, mainly from former eastern European counties, with promises of finding them legitimate employment. They would place the women in apartments in Athens, take away their travel and identification papers to prevent them from running away and force them by violence to work at as prostitutes at various nightclubs, and also supplied brothels and strip clubs in other parts of the country. In order to legitimise their status in Greece the gang would arrange for the women to conduct civil unions with men they would locate and pay.
ETIAS: SCREENING TRAVELLERS BEFORE THEY ARRIVE IN THE EU
On 4th July, the EU Parliament News website provided information on ETIAS, saying that travellers who don’t need a visa will in the future be screened before they arrive in the EU using the European Travel Information and Authorisation System (Etias). The idea behind the screening is to detect criminals, terrorists or anyone else posing a risk before they arrive in the EU, which could start as early as 2021 – and would likely also affect post-Brexit UK.
CHINESE INVESTMENT IN SOUTH AFRICA: SET FOR SUCCESS, IF COMMON MISTAKES ARE AVOIDED
On 25th July, Control Risks published an article saying that 2018 marks the 20th anniversary of diplomatic relations between South Africa and China and that China is South Africa’s biggest trading partner. It says that, despite the change in leadership, the future for the China-South Africa relationship looks promising. However, it says that investors should not forget that the country still has a very challenging operating environment that presents a number of security threats to Chinese companies and their employees. It says that to overcome some of the key challenges of operating in South Africa, Chinese investors should be aware of common mistakes (which it lists) and how to avoid them.
https://www.controlrisks.com/our-thinking/insights/chinese-investment-in-south-africa
FCA BANS 4 FORMER DIRECTORS OF ONLINE CONSUMER CREDIT BROKER FOR MISLEADING CUSTOMERS
On 25th July, Mondo Visione carried an FCA report that the FCA has banned David James Carter Mullins, Edward John Booth, Christopher Paul Brotherton and Mark Robert Kennedy, the former directors and shareholders of Secure My Money Limited (now dissolved). The firm took fees of over £7.2 million from approximately 124,000 online customers by duping them into believing they had been approved for short term loans.
PODCAST: US CONGRESSMAN DUKE CUNNINGHAM AND THE BRIBE MENU
In the latest TRACE podcast, Marcus Stern, the Pulitzer Prize winning investigative reporter who broke the story, describes the bribery scheme that landed then Congressman “Duke” Cunningham in jail for 7 years.
https://www.traceinternational.org/bribe_swindle_or_steal
HOUTHI ATTACK DAMAGES SAUDI SHIP OFF YEMEN COAST
Defence Web on 25th July reported that Yemen’s Houthi movement attacked a Saudi oil tanker in the Red Sea, causing slight damage, the Western-backed Arab coalition said, after the Houthis reported targeting a Saudi warship in the area.
UK COURT REJECTS VIJAY MALLYA’S PLEA SEEKING PERMISSION TO CHALLENGE ORDER ON FREEZING ASSETS WORTH £1.145 BILLION
First Post in India on 25th July reported that the Court of Appeal has refused Vijay Mallya permission to appeal against a court order in favour of 13 Indian banks to recover funds. He is also facing an extradition trial in a UK court over fraud and money laundering charges by Indian authorities. As a result of the high court order, the Indian banks have the right to enforce the Indian judgment against Mallya’s assets in England and Wales.
INDIA: TAX HAVENS ACCOUNT FOR HIGHEST INCREASE IN FOREIGN DIRECT INVESTMENT (FDI) INFLOWS
On 25th July, the Economic Times reported that FDI inflows from tax havens such as Cayman Islands, the Bahamas and Liechtenstein have jumped by leaps and bounds in the last year, official data showed.
SOUTH AFRICA ORDERS PROBE INTO $150 BILLION STATE PENSION FUND
On 25th July, Reuters reported that South Africa’s finance minister has ordered an independent inquiry into state pension manager the Public Investment Corporation (PIC), following corruption allegations involving high-ranking executives.
EXECUTION OF A EUROPEAN ARREST WARRANT CANNOT BE REFUSED ON THE GROUND THAT A DECISION OF THE PUBLIC PROSECUTOR’S OFFICE HAS CLOSED A CRIMINAL INVESTIGATION WHEN, DURING THAT INVESTIGATION, THE REQUESTED PERSON WAS INTERVIEWED AS A WITNESS ONLY
A decision of the Court of Justice of the EU (CJEU) in a case involving a Hungarian national, the chairman of the board of directors of a Hungarian company against whom criminal proceedings have been initiated in Croatia, suspected of having agreed to pay a considerable amount of money to a holder of a high office in Croatia, in return for the conclusion of an agreement between the Hungarian company and the Croatian Government. Croatia asked the Hungarian authorities for assistance by interviewing the suspect, but despite an investigation being commenced (which was then closed on the basis that no criminal offence seemed to be involved) the suspect was interviewed as a witness only, and not as a suspect. Croatia then issued a European Arrest Warrant, which the Hungarian judicial authorities refused to execute the warrant on the ground that criminal proceedings had already been closed in Hungary in respect of the same acts as those on which the arrest warrant was based. Croatia sought a ruling from the CJEU which has now said Hungary was wrong.
https://curia.europa.eu/jcms/upload/docs/application/pdf/2018-07/cp180118en.pdf
UK COMPANIES HOUSE WEBINARS AND PODCASTS
On 25th July, Companies House issued a calendar of upcoming webinars in August and September, and a link to podcasts it produces – 2 of the 3 listed being on the subjects of AML and LLP.
https://www.gov.uk/government/publications/companies-house-events-calendar
EUROPEAN COURT SETS ASIDE THE JUDGMENT ON THE ‘SPANISH TAX LEASE SYSTEM’ USED TO PURCHASES SHIPS
On 25th July, a news release from the Court of Justice of the EU reported that the Court had set aside the decision of the (lower) General Court which had annulled the decision of the EU Commission that the Spanish tax lease (STL) system constituted illegal state aid. Complaints were made about STL from 2006 that the system allowed maritime shipping companies to benefit from a 20-30% price reduction when purchasing ships constructed by Spanish shipyards, to the detriment of the shipyards of other Member States. STL involved an arrangement whereby, when a ship was sold, a bank interposed a leasing company and an economic interest company (EIG) set up by the bank between the seller and buyer. The aim of the arrangement was to generate tax advantages for the investors in the EIG and to transfer part of those advantages (between 85% and 90%) to the maritime shipping company in the form of a rebate on the price of the vessel. In 2013, the Commission the view that 3 of the 5 fiscal measures under examination constituted illegal State aid to the EIG and their investors and had been unlawfully implemented by Spain since 2002. An appeal was made to the General Court to annul the Commission’s decision, and in 2015 the General Court annulled the decision. Now that the CJEU has set aside that ruling, the case will referred back to the General Court once more.
https://curia.europa.eu/jcms/upload/docs/application/pdf/2018-07/cp180115en.pdf
EUROPEAN ARREST WARRANT – REQUESTED STATE MUST CONSIDER RISK OF INFRINGEMENT OF SUSPECT’S RIGHTS
In a decision concerned with an appeal by a Polish national in Ireland against a European Arrest Warrant from Poland, the CJEU has held that a judicial authority called upon to execute a European Arrest Warrant must refrain from giving effect to it if it considers that there is a real risk that the individual concerned would suffer a breach of his fundamental right to an independent tribunal and, therefore, of the essence of his fundamental right to a fair trial on account of deficiencies liable to affect the independence of the judiciary in the issuing Member State.
https://curia.europa.eu/jcms/upload/docs/application/pdf/2018-07/cp180113en.pdf
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