13th September 2018
ENGLISH HIGH COURT ORDERS INDEMNITY COSTS FOLLOWING DISCONTINUANCE OF PROCEEDINGS ALLEGING SERIOUS FRAUD
On 12th September, Herbert Smith Freehills published an article saying that the High Court has ordered indemnity costs against a claimant (Aeroflot, the Russian airline) which made repeated and serious allegations of fraud against the defendants and then discontinued the proceedings without explanation. The case involved the airline alleging that the individuals who were 2 of the defendants conspired to cause the claimant to enter into substantial loan agreements with companies (also a defendant), which were unnecessary and were used to misappropriate vast sums of money. The defendants contested every aspect of the claim and alleged that the proceedings were politically motivated. Shortly before the trial one of the defendants was found murdered and, shortly after that, the claimant served notice discontinuing the proceedings without explanation. The defendants sought an order for their costs to be awarded on the indemnity basis.
LATVIA: NEW AML ACTION PLAN FLOATED
LSM, the state broadcaster in Latvia, on 12th September reported that the Financial Sector Development Council, a working group called by the Prime Minister in the wake of the ABLV bank scandal, has approved an action plan to strengthen Latvia’s AML capabilities, and its ability to combat the financing of terrorism and weapons proliferation. It replaces a previous plan, which outlined steps to fight money laundering and terrorist financing for the period 2017-2019 but signally failed to impress US authorities. The new plan addresses 11 areas identified in a MONEYVAL report which said that the Latvian government needed to improve its effectiveness. The text of the plan will be released after it had been approved by cabinet following discussions “in the coming weeks”.
IRAN TO SUE ATR OVER UNDELIVERED AIRLINERS
AIN Online on 12th September reported that the Iranian government plans to file a lawsuit against ATR for breach of its contract to deliver all of the 20 ATR 72-600 ordered by Iran Air. Having delivered 13 of the order, ATR is reportedly reallocating the 7 undelivered airplanes after US sanctions came back into force on August 7th. Iran has accused ATR of unnecessarily yielding to political pressure.
ITALIAN BIRD SMUGGLERS LINKS TO TO MALTA
The Times of Malta reported on 12th September on an Italian case saying that recently arrested Italian gang of bird smugglers are believed to have been involved in bringing protected species to Malta. Europol said the operation had resulted in over 50 protected species of birds being rescued, some of which so young that were still featherless, including hawfinches, jackdaws, goldfinches and serins. Europol said collecting hatchlings and eggs from the nests of protected birds was a new trend in wildlife crime, which was causing a degradation of natural habitats and bringing protected species to the brink of extinction.
SINGAPORE: PUBLIC FEEDBACK SOUGHT ON NEW RULES FOR DEALERS OF PRECIOUS STONES AND METALS
The Straits Times on 13th September reported that the Singapore government is consulting until 12th October on a new AML/CFT regulatory regime for precious stones and metals dealers (PSMD). Currently, PSMD are not subject to AML/CFT supervision or requirements beyond the cash transaction reporting regime introduced in 2014. The government says that that given precious stones and metals are portable, valuable, and easily convertible to cash, the PSMD sector is exposed to inherent money laundering and terrorism financing risks.
5 KENYAN BANKS FINED $3.89 MILLION FOR HANDLING STOLEN FUNDS
The Journal du Cameroun reported on 12th September that 5 commercial banks have been fined by the Central Bank of Kenya (CBK) for handling transactions worth billions of Kenya Shillings stolen from the National Youth Fund (NYS). for failure to report large cash transactions; failure to undertake adequate customer due diligence; lack of supporting documentation for large transactions; and lapses in the filing of SAR to the Financial Reporting Centre. Senior Kenyan government officials were arrested in May for stealing from the NYS, and reportedly used the banks to channel the illicit funds.
1MDB: NAJIB RAZAK’S LAWYER CHARGED WITH MONEY LAUNDERING
The South China Morning Post and others on 13th September reported that Muhammad Shafee, who is leading a defence team for Najib of former Malaysian prime minister Najib Razak, was charged with money laundering on Thursday by anti-graft agents looking into how billions of dollars went missing from state fund 1Malaysia Development Berhad (1MDB). He is accused of receiving $2.29 million from illegal activities by means of cheques received from Najib.
TOOL LAUNCHED TO REDUCE “UNINTENDED CONSEQUENCES” OF AML RULES
Global Trade Review on 12th September reported that the Asian Development Bank (ADB) has launched a tool devised to “move the needle” on the effects of AML rules in trade finance. The Trade Finance Scorecard is designed to help mitigate some of the unintended consequences of regulators’ crackdown on money laundering in trade. The diagnostic tool gives an industry-wide rating of between 1 and 10 to assess how a range of “elements of effective regulation” are being deployed to deal with money laundering. It is said that the tool will provide guidance to banks as to areas in which they may be “over-complying” and to those in which they can improve. The article provides a brief overview of how the tool works. Contributions to the scorecard also came from the Bankers Association for Finance and Trade, the Financial Services Board, FATF, the IMF, the International Chamber of Commerce, the Institute of International Finance, and the WTO.
NEW LIABILITY FOR SELLERS OF INSOLVENT COMPANIES IN UK?
On 11th September, MacFarlanes published a comment piece on the UK Government reaction to responses to the consultation launched in March on reforming the UK’s corporate governance landscape in the context of insolvent companies. It reminds one that one of the core proposals was to attach personal liability to the directors of a holding company that sells an insolvent subsidiary where that subsidiary later goes bust. This would mean that it is not only the directors managing a failing business who could be in the line of fire, but also the directors of the company’s parent. Despite the objections raised in the consultation exercise, the Government has confirmed in its response that it intends to press ahead with this proposal. The article discusses the potential difficulties such a proposal might cause. It says that the new measures will make directors of holding companies more likely to put troubled subsidiaries into administration or liquidation straightaway than to give someone else a chance to turn them around by selling them, if doing so could expose those directors to liability if the attempted turnaround is unsuccessful.
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IRS ENFORCES PASSPORT RESTRICTIONS TO COLLECT TAX DEBT
Rhoades McKee in the US on 21st August published an article about the US tax code provision which permits the IRS to certify to the State Department individuals who have serious delinquent tax debt. Once the State Department receives a certification, it may deny or revoke the passport of that taxpayer or limit the passport to permit only return travel to the US. Currently, the article says, some 362,000 individuals are at risk of losing their passports.
GRECO PLACES DENMARK IN ITS NON-COMPLIANCE PROCEDURE
On 12th September, the Council of Europe announced that its group of anti-corruption experts, GRECO, has placed Denmark in its non-compliance procedure due to lack of sufficient measures taken to prevent corruption in respect of members of parliament and in the judiciary. Despite the perception of Denmark as one of the least corrupted countries in Europe, it needs concrete action in preventing and combating corruption.
FORMER EL SALVADOR PRESIDENT PLEADS GUILTY TO MONEY LAUNDERING
TAG News on 13th September reported that former El Salvadoran President Antonio Saca pleaded guilty in court to embezzlement and money laundering involving more than $300 million during his government. Saca pleaded guilty in July in a document sent to the attorney general in exchange for reducing his sentence from 30 to 10 years in prison. Saca, who was arrested in 2016, was president from 2004 to 2009. He and 6 other former high-level public officials are on trial for the charges.
2 US STATES ASK AUTHORITIES IN INDIA TO SEIZE PROPERTY OF BITCONNECT PROMOTERS
CCN News on 13th September reported that Illinois and Arizona, have asked the Criminal Investigation Department (CID) in India to seize the property of several BitConnect promoters. BitConnect was an open-source cryptocurrency and an investment programme accused of running a Ponzi scheme but closed in January.
OVER 22,000 PEOPLE ARRESTED IN GAMBLING RAIDS THIS PAST YEAR IN MALAYSIA
Calvin Ayre reported a Star Online story on 13th September that said that targets were gambling dens as well as unlicensed lottery operations. Total cash seized from the raids was $1.13 million. This was up from last year’s haul of $901,000, which came from 12,628 raids and 24,338 arrests.
IMPORTANT IRISH COURT DECISION ON FOREIGN JUDGMENT DEBT CLAIMS
Matheson on 12th September reported that the law firm had achieved an important victory for its clients. The decision is authority for the proposition that Irish Courts will be reluctant to act in vain by allowing recognition and enforcement of a foreign judgment if there is no apparent prospect of the plaintiff realising any recoveries in Ireland out of the enforcement proceedings because the defendant has, and is unlikely to have, any assets in the jurisdiction.
MAN BEHIND PONZI SCHEME THAT LED TO ARREST OF TEXAS STATE SENATOR SENTENCED TO 15 YEARS
Baker McKenzie on 12th September reported that Stanley Bates, the former CEO of failed fracking sand company FourWinds Logistics, a co-conspirator of former state senator Carlos Uresti has been sentenced to 15 years in federal prison months after pleading guilty for his part in a scheme that stole millions of dollars from investors.
FORMER DETROIT CITY OFFICIAL BOUND FOR PRISON IN BRIBERY CASE
Baker McKenzie on 12th September reported that Charles Dodd, 48, Detroit’s former director of information technology services has been sentenced to 20 months in federal prison for accepting more than $29,500 in bribes from 2 information technology companies that provided services and personnel to the city.
TRUMP’S ELECTION MEDDLING SANCTIONS WILL NOT DETER RUSSIA
An article from the Atlantic Council on 12th September commented on the Executive Order just signed by President Trump, saying that the EO is a mixed bag; it directs cabinet officials to produce reports on interference following every US federal election — a good step toward showing seriousness — but the sanctions in the EO do not substantially change the status quo, especially from the perspective of providing an effective deterrent to Russian aggression.
THE INTERPLAY BETWEEN NORTH KOREAN SANCTIONS AND US FORCED LABOUR IMPORT RESTRICTIONS
On 12th September, Crowell Moring published an article which says that, as a consequence of US and UN sanctions on North Korea, companies increasingly need to co-ordinate compliance efforts across the typically distinct worlds of economic sanctions and import/customs compliance. This is particularly necessary with respect to identifying, and mitigating the risk of DPRK-related labour in supply chains. The article summarises the expanded UN sanctions and the forced labour restrictions and how the rules have been implemented and expanded in the US in increasingly complex ways. One point highlighted is that all products manufactured in whole, or in part, with DPRK national labour are presumptively considered to be produced with forced labour and are therefore prohibited to enter the US, unless the importer can demonstrate through “clear and convincing” evidence that the DPRK nationals were not forced labour (e.g. by demonstrating they are asylum seekers).
UNITED TECHNOLOGIES TO PAY $13.9 MILLION TO SETTLE SEC BRIBERY CASE
The Wall Street Journal on 12th September reported that UTC had agreed to pay $13.9 million to settle SEC allegations that it made illicit payments in its elevator and aircraft engine businesses for business in Azerbaijan and China, and provided trips and gifts to foreign officials in multiple countries, primarily in Asia, through 2 subsidiaries.
LETTERS ON ‘NO DEAL’ BREXIT ADVICE FOR VAT-REGISTERED BUSINESSES ONLY TRADING WITH THE EU
On 13th September, HMRC said that it had written to 145,000 VAT-registered businesses across the UK, including Northern Ireland, which only trade with the EU. It says that the letters explain changes to customs, excise and VAT in the unlikely event that the UK leaves the EU without a deal, and what businesses can do to prepare. It says that HMRC will also continue to engage with businesses, representative organisations, intermediaries and infrastructure providers to ensure they have the information and support they need.
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TAXATION (CROSS-BORDER TRADE) ACT 2018
On 13th September, the Stationery office published the text of this new Act.
EU GENERAL COURT UPHOLDS RESTRICTIVE MEASURES ADOPTED BY EU COUNCIL AGAINST RUSSIAN BANKS AND OIL AND GAS COMPANIES IN CONNECTION WITH THE CRISIS IN UKRAINE
On 13th September, Curia news release 132/18 advised that a number of undertakings and banks affected by the sanctions measures had brought actions for their annulment before the General Court of the EU. The General Court, having decided it had jurisdiction to hear the case, ruled that the reasons given by the EU Council for the contested acts are sufficient and that the statements of reasons enabled the entities concerned to ascertain the reasons for the restrictive measures affecting them and to challenge them. It said that the stated objective of the contested acts is to increase the costs of Russia’s actions to undermine Ukraine’s territorial integrity, sovereignty and independence, and to promote a peaceful settlement of the crisis; and that such an objective is consistent with the objective of maintaining peace and international security, in accordance with the objectives of the European Union’s external action set out in Article 21 TEU. It said that the question whether the restrictive measures at issue are compatible with the EU-Russia Partnership Agreement has already been settled by the Court of Justice in its Rosneft judgment of 28th March 2017. It concluded that interference with the freedom to conduct a business and the right to property of the entities concerned cannot be considered to be disproportionate.
TRAVELLING IN THE COMMON TRAVEL AREA IF THERE’S NO BREXIT DEAL
On 13th September, the Home Office issued a news release containing confirmation that the Common Travel Area arrangements and the associated rights and privileges of British and Irish citizens are protected if the UK leaves the EU with no deal. The CTA is a long-standing arrangement between the UK, the Crown Dependencies (Jersey; Guernsey; Isle of Man) and Ireland. It has its origins in the 1920s and ensures that British and Irish citizens can move freely between and reside in these islands. The CTA is not reliant on membership of the EU, formed before either the UK or Ireland were members, but based on domestic legislation and bilateral agreements.
FINANCIAL SUPERVISORY AUTHORITIES MAY HAVE AN OBLIGATION TO DISCLOSE INFORMATION COVERED BY PROFESSIONAL SECRECY IN ORDER TO SAFEGUARD THE RIGHTS OF THE DEFENCE OR IN ORDER THAT THE INFORMATION MAY BE USED IN CIVIL OR COMMERCIAL PROCEEDINGS
Curia news release 129/18 on 13th September contained details of the outcome 2 cases before the Court of Justice of the EU, concluding that It is for the competent national authorities and courts to weigh up the opposing interests of the parties involved where such confidential information is sought. One case, from Luxembourg, involved the director of a registered entity who was obliged to resign in the wake of the Bernie Madoff affair. In order to be able to defend his rights, the claimant had requested the regulatory body to send him certain documents that it had collected during its investigation of a firm he had been involved with and its depository bank, UBS. The second case, from Italy, involved a man who received only partial reimbursement when the credit institution with which he had an account was liquidated. In 2015, with the aim of obtaining additional information in order to assess whether it is appropriate to bring legal proceedings against the Italian central bank and the liquidated institution, the claimant requested the central bank to disclose several documents relating to the supervision of the institution.
UK ASSET RECOVERY STATISTICAL BULLETIN: 2013 TO 2018
On 13th September, the Home Office published a news release which provided a 5-year data snapshot of asset recovery, using Proceeds of Crime Act 2002 powers (as amended by the Criminal Finances Act 2017) and including data on the use of the Asset Recovery Incentivisation Scheme. It also contains recent data provided by the NCA, relating to progress against priority orders.
CORRUPTION IN COUNTER-TERRORISM AID PROGRAMMES FUELS EXTREMIST GROUPS, SAYS NEW REPORT
Defense News on 13th September reported that a report by the Center for International Policy’s Security Assistance Monitor finds that US counter-terrorism aid intended to bolster US and its allies’ efforts to combat violent extremists has also had the unintended consequence of fuelling corruption and funding terrorist group activities and recruitment. The report says that there are still important gaps in US government efforts to assess, monitor, and evaluate US counter-terrorism aid, particularly related to corruption risks. Over the current 2-year budget period, it says that the US proposed an estimated $24 billion in US counter-terrorism aid to 36 countries in Africa, the Middle East, and South and East Asia – 24 of which have engaged in at least 3 of the 5 key defence corruption practices that have fostered counterterrorism challenges in the past. Key corruption indicators are said to be nepotism; ghost soldiers; theft or delay of soldiers’ pay; bribery; and illicit economic activities on the part of a nation’s armed forces.
OLAF: SLOVAKIA MIGHT HAVE TO PAY €300 MILLION TO THE EU
The Slovak Spectator on 13th September reported that Slovak custom officers are facing allegations of having not properly checked clothes and shoes from China to the EU, with the alleged fraud taking place in 2013 and 2014 and involving losses in EU revenue exceeding €300 million. It was alleged that the Slovak authorities have either overlooked or directly co-operated on the fraudulent transactions. The article says that OLAF reports that the goods from China were first shipped to Hamburg where it was loaded on trucks and taken for the custom process to another Member State – the UK, Slovakia, Czech Republic, France, or Malta – where it was possible to lower the value of the goods to secure lower custom fees. The UK authorities is said to have caused a loss of some €1.9 billion to the EU budget.
SOUTH AFRICA: SENIOR FISHERIES OFFICIAL IN ABALONE THEFT SAGA
IOL on 13th September reported that a senior fishery official, Department of Agriculture, Forestry and Fisheries (Daff) deputy director-general Siphokazi Ndudane, has been implicated in the theft of confiscated abalone and faces 155 counts of fraud, 37 counts of theft, extortion, forgery and defeating the ends of justice. The thefts are said to have taken place between September 2017 and May 2018. Ndudane is accused in connection with falsified rock lobster catch documents, as well as misappropriation of payments were made for confiscated abalone stock.
TAIWAN CABINET APPROVES BILLS AGAINST MONEY LAUNDERING, TERRORISM FINANCING
Taiwan Focus on 13th September reported that the Cabinet had approved draft amendments to the Money Laundering Control Act and the Terrorism Financing Prevention Act, which aim to tighten supervision of financial and other institutions.
ERITREA AND ETHIOPIA EMBRACE, BUT FOR HOW LONG?
An article from RUSI on 13th September says that Eritrea and Ethiopia claim that their long-standing military confrontation is now over. This time, perhaps it really is. [The rapprochement is likely largely due to the new-ish Ethiopian leadership]. The article says that long-standing ‘Eritrean problem’ is often lumped along with the Israeli–Palestinian conflict as an intractable ‘historical conundrum’, with cultural divergences, historical grievances and ideological difference all combining.
FORTHCOMING US SANCTIONS REPORT “WILL NAME AND SHAME CARIBBEAN COUNTRIES THAT AID NORTH KOREA SANCTIONS EVASION”
On 13th September, Kenneth Rijock in his blog said that the US has announced that it will shortly release details of its efforts to thwart North Korea’s massive sanctions evasion programme, and that it will “most certainly” include information on vessels registered in the Commonwealth of Dominica, and by Antigua & Barbuda, both of which East Caribbean states are known to be aiding and abetting the DPRK sanctions evasion programme, by shipping goods, especially petroleum products, to North Korea.
FDA ANNOUNCES CRACKDOWN ON E-CIGARETTES MANUFACTURERS AND RETAILERS
On 13th September, Jurist said that the US Food and Drug Administration announced major policy updates and enforcement efforts on electronic cigarettes such as JUUL and their distribution and sale to teens. It has sent more than 1300 warning letters and civil penalties/fines to retailers for selling the e-cigarettes to minors after an investigation over the summer. In addition, the FDA sent letters to 5 top e-cigarette manufacturers — JUUL, Vuse, MarkTen XL, blu e-cigs, and Logic — compelling them to submit plans describing how each will address the problem of widespread youth access and use of their products within the next 60 days – or face restrictions.
‘CORRUPTION TIED TO CONFLICT’ SHOULD TRIGGER INTERNATIONAL SANCTIONS
Out-Law on 13th September published an article reporting that bribery and corruption tied to conflict should trigger international sanctions, John Prendergast, director of US human rights organisation Enough Project, and a global anti-corruption expert has said. He said that the UN Security Council add ‘corruption tied to conflict’ as a distinct sanctions criterion under its existing sanctions programmes.
KEY PLAYERS IN THE WEST AFRICA OIL AND GAS SECTOR
On 13th September, Control Risks published an article on the extractive industries in West Africa, providing 3 tips for stakeholder mapping, essential for safe and secure operation; and providing thumbnail sketches of 5 prominent persons in Senegal, Guinea, Ivory Coast, Niger and Chad.
DETAILED TECHNICAL MEASURES FOR THE DEFINITIVE EU VAT SYSTEM
On 13th September, the EU Parliament Research Service published a briefing paper saying that the common European VAT system was set up in 1967 and reformed to adapt it to the entry into force of the internal market in 1993. Therefore, the existing rules governing intra-Community trade, which were intended to be transitory, are 25 years old. The briefing covers a proposal for a Council Directive amending the current VAT Directive 2006/112/EC as regards the introduction of the detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States, for the intra-EU business to business (B2B) trade of goods.