31st August 2018
FINE FOR MALTA FIRM LINKED TO VENEZUELA
The Times of Malta on 30th August reported that the Malta Financial Services Authority fined Portmann Capital €62,000 2 days after The Malta Independent on Sunday reported on August 12th the company was linked to a $1.2 billion Venezuelan money laundering scheme. Portmann Capital is suspected to have laundered about €500 million, embezzled from Venezuela’s State-owned oil company PDVSA and it allegedly took a €20 million cut to launder the funds. A day after police reportedly swooped in on Portmann Capital’s offices on August 21st, the MFSA ordered the firm to halt all transactions and to not take on any new clients. The MFSA said that the €62,000 fine imposed on the company could not be announced before due process was completed.
FORMER ECUADORIAN OIL EXECUTIVE FORFEITS 6 SOUTH FLORIDA PROPERTIES TIED TO MONEY LAUNDERING
The Real Deal (which reports on Florida real estate) on 30th August reported that Marcelo Reyes Lopez, a former executive with PetroEcuador, Ecuador’s national oil company, has been sentenced in July to more than 4 years in prison for allegedly laundering money through 6 South Florida properties.
FIJI: FORMER DIPLOMAT CHARGED WITH CORRUPTION OFFENCES
The Fiji Sun on 31st August reported that Ms Azreen Shabnam Khan, a former employee of the Ministry of Foreign Affairs appeared in the Suva Magistrates Court facing 4 different corruption-related charges laid by the Fiji Independent Commission Against Corruption (FICAC). She is alleged to have fraudulently caused payments amounting to $40,559.37 from January 2017 to March 2018 from monthly allowances sent by the Ministry to the Fiji High Commission in New Delhi where she used to serve as the Second Secretary.
KENYA-UK SIGN DEAL TO REPATRIATE ASSETS AND PROCEEDS OF CRIME
The Herald in Zimbabwe on 31st August reported that Kenyan President Uhuru Kenyatta has signed a deal with Theresa May to boost fight against corruption in the country, that will see repatriation of assets and proceeds of crime to Kenya. In July, President Uhuru signed a similar deal with Switzerland to facilitate the return of stolen cash.
THE WTO AND POWER IN THE INTERNATIONAL TRADING SYSTEM
ETH Zurich on 31st August published an article in which the author contends that a spiral of protectionism threatens to expose the limits of the World Trade Organization’s (WTO) ability to protect against abuses and prevent trade wars. The reason for this is astonishing, she says: the US Trump administration asserts that the existing rules – which the US played a leading role in writing – disadvantage the US. So is there anything to this claim, she asks? And how should the EU respond to the current US trade policy approach? Trump has threatened to withdraw from the WTO if it doesn’t reform (in the favour of the US). The article reminds one of the 3 pillars of world trade anchored in the WTO:
- the “most-favoured nation”; and
- the “non-discrimination” principles
ensure that all imports are treated alike – and at the lowest tariff – at the border regardless of where they originate from; and
- the “national treatment” imported goods that have passed customs must be treated no worse than domestic products.
The author does say that a strengthened WTO would be helpful for adjudicating the present trade conflicts and perhaps even launching new initiatives, but simply to concede to Trump’s demands for lower tariffs (for example on cars) would appear risky.
LOAN DECEPTION RESULTS IN 9-YEAR BAN FOR BIRMINGHAM HAULAGE BOSS
Commercial Motor on 31st August reported that A Birmingham haulage company boss, Neil Avery Hughes, 51, a director of Contact Transport, has been banned from running companies for 9 years after falsely claiming £1 million worth of work to secure advance payments from lenders. Contact Transport had entered into an invoice discounting agreement with an external lender, allowing the company to get advances on cash it was owed from customers rather than waiting for them to pay. But during an April 2017 audit the lender became aware of discrepancies between what Contact Transport had claimed and what it was actually owed from its clients.
DRUG SMUGGLING BY TAIWANESE IN SOUTH KOREA ON THE RISE
Customs Today on 31st August reported a statement by the Taiwanese Ministry of Foreign Affairs that the number of drug-smuggling cases in South Korea involving Taiwanese suspects has risen sharply over the past 2 years.
BLOCKCHAIN, CRYPTOCURRENCIES AND ICO: AN OFFSHORE LAWYER’S PERSPECTIVE
A briefing from Conyers Dill & Pearman contains a discussion with 2 lawyers from the firm’s Hong Kong office about what is described as the brave new world of blockchain, cryptocurrencies and ICO: the opportunities and challenges they present, and the benefits of establishing issuers offshore. They explain what an ICO is, how digital coins or tokens work, what cryptocurrencies are, how blockchain fits in, why are ICO so popular and what is the typical process for setting up an ICO? It touches on the legal challenges an ICO might face, and how different jurisdictions view ICO.
FENTANYL SAFETY RECOMMENDATIONS FOR FIRST RESPONDERS
A You Tube video released on 30th August from the US provides unified, scientific, evidence-based recommendations to first responders so they can protect themselves when the presence of Fentanyl is suspected during the course of their daily activities such as responding to overdose calls and conducting traffic stops, arrests, and searches.
HUNDREDS OF FAKE ID TURNED OVER TO UNIVERSITY AND LOCAL POLICE IN PHILADELPHIA AFTER CUSTOMS BUSTS
NJ.com on 31st August reported that customs officers in Philadelphia intercepted nearly 500 phony driver’s licences in a series of seizures that kept the fakes from reaching underage college students, including counterfeit identifications purporting to be issued by states including Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Florida, Connecticut and Washington. They arrived by air cargo from Canada, China and from countries in south-west Asia, with the latest seizure in mid-August.
E-DISCOVERY IN IRELAND
McCann Fitzgerald has published the chapter on e-discovery in Ireland, which was authored by 2 members of its staff and which is contained in International E-Discovery: A Global Handbook of Law and Technology. The chapter says that in Ireland e-discovery in litigation and investigations is not only now commonplace it is the norm.
ASA RULES AGAINST 2 GAMBLING OPERATORS FOR BREACHES OF ADVERTISING CODE
On 30th August, CMS Law reported that on 22nd August the Advertising Standards Authority published rulings in relation to website adverts by gambling operators Annexio Ltd t/a Lottogo.com (formerly World Lottery Club) and Rieves Lotteries Ltd and their compliance with the UK Code of Non-Broadcast Advertising. The ASA found that Lottogo’s advert was misleading, whilst Rieve’s advert was socially irresponsible and likely to be of particular appeal to children. Both adverts were found to be in breach of the CAP Code.
UPDATE ON THE PROPOSED INTRODUCTION OF SUBSTANCE REQUIREMENTS FOR CERTAIN ISLE OF MAN TAX RESIDENT COMPANIES
KPMG on 16th August provided an update on what the Isle of Man had done to address the concerns of the EU Code of Conduct Group (Business Taxation) regarding economic substance. The Group had concluded that the Crown Dependencies were compliant with most of the EU principles of tax good governance, including the general principles of “fair taxation”. However, it did raise concerns regarding the lack of legal substance requirement for doing business in and through the respective jurisdictions.
US SENATE FINDS IUU FISHING VALUED AT TENS OF BILLIONS
Stimson on 28th August reported that the US senate has seen a draft Bill to create an inter-agency working group addressing the national, economic, environmental, and food security challenges posed by IUU fishing. This would be because, to quote one of its sponsors, IUU fishing is complex with many moving pieces, and no one federal agency can combat it alone: to be successful it will take a whole of government approach. It is estimated that 20% to 50% of the global fish catch is either illegally caught, mislabelled, never reported, or from a fishery without any management regime. Illegal profits from IUU fishing are known to fund illicit trafficking networks, fuel piracy and transnational organised crime. A report from Stimson on the threat is also available.
A factsheet is available at –
PRIVATE ECONOMY AND CAPITALISM IN NORTH KOREA?
Beyond Parallel has produced a report on 26th August saying that the North Korean economy is still theoretically run under a centrally-controlled and state-planned system. However, on-the-ground conditions show a reality that is quite different. Information from various sources, including internal in-country and external out-of-country data, demonstrates that the North Korean economy is increasingly penetrated by private market activity.
CANADA CONSIDERING HANDGUN AND ASSAULT WEAPONS BAN
The Firearm Blog on 30th August reported that Prime Minister Justin Trudeau has directed his ministers to examine a full ban on handgun and ‘assault weapons’. The move comes in the wake of the recent Danforth shooting which saw 3 killed and 13 more injured. He has issued a mandate letter to Bill Blair, the minister for Border Security and Organised Crime Reduction Minister to work with colleagues to examine banning handguns.
RUSSIA BLOCKING UN REPORT FINDING NORTH KOREA IS VIOLATING UN SANCTIONS
Rferl on 31st August published an article reporting claims that Russia is blocking publication of a UN report finding North Korea in violation of UN sanctions limiting its imports of fuel, including through some illegal transfers of oil at sea involving Russian ships. Besides finding violations of fuel import limits imposed by the council, the 62-page report also found violations of bans on North Korean exports of coal, iron, seafood, and other products that generate millions of dollars in revenue for Kim Jong Un’s government, media reports said.
EU CUSTOMS WAREHOUSING AND TRADE MARK RIGHTS
UDL on 17th August carried an article on the CJEU having made an interesting ruling — that the owner of a trade mark is entitled to prevent a third party from de-branding its goods without consent in an EU customs warehouse, before applying a different mark and importing them into the EEA. The case involved importers which were bringing goods into a customs warehouse and then replacing Mitsubishi’s branding with their own, before modifying the trucks to make them compliant with EU standards. The article says that the reason why this case is important is that it means trade mark owners can rest easy, knowing that their exclusive rights may still be protected even if their marks are removed from goods by unauthorised third parties.
BIG TOBACCO COMPANIES SOURCE OF TWO-THIRDS OF SMUGGLED CIGARETTES, STUDY FINDS
Illicit Trade on 24th August reported that the BMJ journal Tobacco Control has published a report based on leaked documents from the university’s Tobacco Control Research Group (TCRG) which shows how the industry has gone to great lengths to undermine the Illicit Trade Protocol (ITP), a treaty signed in 2012 that aims to eliminate the illicit trade in tobacco products. The research from academics at the University of Bath in the UK has revealed that big cigarette manufacturers are continuing to facilitate the smuggling of tobacco while funding studies that routinely overestimate the size of the illicit trade in its products. The study found the tobacco industry remains the source of roughly two-thirds of all smuggled cigarettes across the globe.
ARMS EXPORTS TO REPRESSIVE STATES AND/OR FOR ILLICIT USE
On 31st August, the Oxford Research Group published an updated research note which aims to measure the extent of countries’ arms sales according to 3 criteria:
- the total volume of arms exports per capita;
- the proportion of exported arms sold to internally repressive states; and
- the proportion sold to countries whose militaries are engaged in illicit use of force abroad.
It has been updated to show “scores” for the 49 arms-exporting states grouped into 3 categories of UN arms Trade Treaty (ATT) states parties (those that have ratified the Treaty), ATT signatories, and ATT non-signatories do not show any meaningful difference or progression. In theory the ATT would regulate states’ ability to sell weapons to states acting repressively at home or abroad. Of all states, in 2016-2017 the global averages of arms exports going to internally repressive and externally interventionist states were about 40% and 32%, respectively.
THE OTHER WEAPONS OF MASS DESTRUCTION
A research paper from the Oxford Research Group on 30th August that asks, with the rapid erosion of the prohibition on use by states of chemical weapons, and the rise of radical non-state groups seemingly willing to utilise whatever weapons of mass destruction they can obtain, what can the international community do to restrain their use? And what do advances in neuroscience portend for the development and use of new kinds of chemical control agents? The paper itself summarises what is more fully considered in Preventing Chemical Weapons: Arms Control and Disarmament as the Sciences Converge, (Michael Crowley, Malcom Dando and Lijun Shang (editors), Royal Society of Chemistry, London, August 2018). The paper considers both immediate and longer-term concerns. The immediate concerns the actual use of chemical agents, especially in the Middle East and an erosion of previous prohibitions. In the longer term focuses primarily on rapid developments in the neurosciences, many of them likely to be highly desirable for human well-being but also with dangerous potential for misuse. The paper concludes by saying that there is the need for positive action, including at the forthcoming Chemical Weapons Convention (CWC) Review Conference, even more urgent.
A NEW ‘TAXONOMY OF CORRUPTION’ IN NIGERIA FINDS 500 DIFFERENT KINDS
National Public Radio in the US published an article on 28th August saying that there is a new “taxonomy” tool in Nigeria that classifies each type of corruption according to the tactic employed (bribery, extortion, etc.) and the sector it’s used in (agriculture, electoral politics, etc.). The result, first published by the Carnegie Endowment for International Peace is a compendium of more than 500 distinct species of corruption in Nigeria.
THIRD COUNTRIES ALIGN WITH EU SANCTIONS REGIMES
On 31st August, the EU announced that –
- Macedonia, Montenegro, Serbia, Albania, Bosnia and Herzegovina, Iceland, Moldova and Armenia had all agreed to align their sanctions prohibitions and restrictions in line with the revised list of designated persons and entities issued by the EU on 30th July;
- Montenegro, Albania, Norway, and Ukraine had agreed to align themselves with both types of sanctions concerned with Ukraine and Russia;
- Macedonia, Montenegro, Serbia, Albania, Bosnia and Herzegovina, Liechtenstein, Norway, Moldova and Armenia have agreed to align themselves with EU sanctions concerning the Maldives, with EU sanctions on ISIL (Da’esh)/Al-Qaida, its North Korean sanctions, and the sanctions relating to Libya
AUCKLAND FINANCE DIRECTOR SENTENCED FOR LAUNDERING DRUG MONEY
The New Zealand herald on 31st August reported that Xiaolan Xiao, a banned Auckland finance director has been fined $5.3 million after laundering dirty money for a high-profile multi-national drug deal. He is now also bankrupt after a High Court judge sentenced him for his “calculated and contemptuous disregard” for anti-money-laundering laws in connection with more than 1,500 transactions totalling $105.4 million.
9 PEOPLE CHARGED WITH £1.3 MILLION ONLINE CAR SALES FRAUD OFFENCES
The BBC on 31st August reported that 9 people have been charged by police in Kent investigating alleged sales scams with almost 200 victims reported paying cash to online car traders between August 2013 and August 2017, with no vehicles provided in return. A London joinery company was also allegedly defrauded, losing about £279,000.
TUNISIAN ENERGY MINISTER AND OFFICIALS SACKED OVER GRAFT ACCUSATIONS
Reuters on 31st August reported that energy minister, Khaled Kaddour, and 4 other senior figures linked to that ministry have been sacked over corruption accusations. The prime minister ordered an investigation and the merger of the ministries of energy and industry. Those sacked were accused of allowing a Tunisian investor to explore the Halk Manzel oilfield – one of the country’s most important sites – without having to go through a licensing round.
TIMESHARE TARGET FOR ‘RECOVERY FRAUD’
Professional Security Online on 31st August reported that fraudsters are looking to exploit previous fraudulent or mis-sold timeshare schemes and are telling victims that they are owed compensation. Victims who have invested in timeshares abroad are being contacted by what are claimed to be reputable authorities. Victims are being offered the chance, by phone call or letter, to reclaim money back from their timeshare or to exit early for a fee. Victims, who are from across the UK, are aged between 50 and 81.
COUNTERFEIT LEGO BRAND ORDERED TO PAY £1.7 MILLION IN DAMAGES
Gizmodo on 31st August reported that the Lego Group has just won a court case against Lepin, one of the most prolific Chinese manufacturers of cloned Lego sets. Lepin has been in operation for a number of years, taking Lego’s trademarked brands and recreating them to sell at much lower prices.
EU REGULATORS TO DISCUSS TIGHTENING CRYPTO REGULATIONS OVER TRANSPARENCY CONCERNS
Baker McKenzie on 31st August reported that finance ministers from the 28 EU Member States are reportedly going to hold an informal meeting in Vienna on 7th September to discuss tightening cryptocurrency regulations amid concerns over their potential use in illicit activities.
BRITISH COLUMBIA CASINOS CLAIM REVENUE DOWN BECAUSE OF NEW AML RULES
Baker McKenzie on 31st August reported that, according to financial results released in August, Great Canadian Gaming Corporation saw a fall in BC revenues in the first 6 months of 2018 due in part to declines in money earned at gaming tables at the River Rock Casino in Richmond. The company said that was primarily attributable to a new requirement requiring casinos to complete disclosures on the source of cash deposits or bearer bonds of more than $10,000 implemented in late December 2017 in response to interim recommendations from an independent review by Peter German, a former RCMP deputy commissioner.
Out-Law on 31st August published an analysis which says that recent sanctions imposed by the Financial Conduct Authority (FCA) on Canara Bank show the regulator’s increasing focus on AML systems and controls. The UK branch of the Indian bank was fined £896,100 by the FCA in June 2018 for breaching Principle 3 (taking reasonable steps to organise its affairs responsibly and effectively, with adequate risk management systems) of the FCA’s Principles for Businesses. It was also banned from accepting deposits from new customers for 147 days. The bank failed to maintain adequate AML systems and failed to take sufficient steps to remedy weaknesses in its AML systems and controls once notified by the FCA. The article says that the FCA has increasingly been using non-financial penalties in addition to imposing fines. The FCA has also shown that it will hold the relevant persons responsible for the failure to report AML system weaknesses to the FCA, or to implement the relevant requirements. Recent FCA notices found “systemic” weaknesses or failures in the banks’ AML systems and controls, and repeatedly noted that these failings were at “all levels” of the business and management; and there are repeated references to a “culture” of AML risk or failure to instil responsibility for compliance within the banks.
Silicon on 31st August reported that hackers may have accessed detailed passport information on Air Canada customers after the airline’s app was hacked, and which is integrated with its Aeroplan frequent flyer programme.
World ECR reports that Citibank has agreed to pay $60,000 in a settlement agreement with the US Department of Commerce’s Bureau of Industry and Security for breaches of the Export Administration Regulations concerning anti-boycott rules. It was accused of violations in supplying information about business relationships with boycotted countries or blacklisted individuals and complying with a foreign country’s boycott or embargo that the US does not recognise or permit its nationals to comply with.
See the settlement at –
The Economist on 30th August carried an article saying that according to the National Honey Board, per person consumption of the regurgitated nectar has doubled in America since the 1990s, and as demand has increased, prices have followed, but domestic production has not. This has given honey-sellers an incentive to dilute it with cheaper things like corn, rice and beet syrup. According to the US Pharmacopeia’s Food Fraud Database, honey is now the third-favourite food target for adulteration, behind milk and olive oil. Much comes from Asia, but high tariffs on Chinese honey also leads to diversion and misdescription to avoid these.
On 29th August, law firm HFW issued a briefing outlining the position of the re-imposed US sanctions on Iran and the effect of the EU Blocking regulation, which sets out to mitigate the effects of the re-imposed sanctions. It details the US sanctions being re-imposed w.e.f. from 6th August and 4th November. It examines the 4 key aspects of the Blocking Regulation. The article makes several recommendations for those who might be affected, including maintaining careful records to document the reasons for any decision to stop work or cease business operations in Iran on the basis of the EU operator’s own assessment of the economic situation, as opposed to the US extraterritorial sanctions which are the target of the EU Blocking Regulation.
On 29th August, Cadwalader Wickersham & Taft LLP published an article about recent examples of victims (or their dependants) filing actions in the US courts against US companies that they said were guilty of providing support for terrorist organisations. The examples it quotes are where –
- military veterans and the relatives of troops killed in Iraq filed a lawsuit against several large international pharmaceuticals, accusing them of aiding and abetting terrorism by selling products to Iraq’s Ministry of Health which were used to finance operations by the notorious Mahdi Army; and
- a woman injured in the 2015 Paris attacks by ISIL sued Facebook, Twitter, and Google, alleging that the social media platforms assisted terrorists by allowing them to recruit members, distribute propaganda, and co-ordinate activities.
The argument being advanced is that financial services, social media, life sciences, and other companies have become targets of ATA actions on the theory that, by processing financial transactions and engaging in other commercial activities with terrorist groups, they are complicit in terrorist attacks. The article examines the background and the history of the 1987 Act, the standard for liability under the Act and provides advice for US companies which may be at risk. It says that financial institutions and public companies with global operations should be wary of potential exposure under the ATA, and should implement defensive measures to avoid inadvertently doing business with individuals or organisations associated with terrorism. Lawsuits under the ATA are a growing area of liability, the article contends, against which financial institutions and public companies should protect themselves, and recent moves are to make the Act more expansive.
On 22nd August, Bright Line Law published an article saying that on 11th July, the UK Supreme Court handed down a decision in an appeal of a pre-trial ruling on the test for ‘suspicion’ in the context of terrorist financing. The article sets out to distil the key findings from the decision and explores the implications for ‘suspicion’ in the context of the principal and secondary money laundering offences in Part 7 of the Proceeds of Crime Act 2002. It says that the decision puts to rest any doubt that the offence of being concerned in terrorist funding is focused on an objective suspicion of terrorist financing as opposed to one subjectively held – where the information known to a person, examined objectively, gives reasonable cause to suspect that property will be used for terrorist purposes even if the person did not actually hold any such suspicion. However, due to what it calls discernible differences between POCA and the Terrorism Act 2000, the extent to which the decision informs the interpretation of the money laundering offence provisions in Part 7 POCA is limited.