27th September 2018
AUSTRALIA: UNDERSTANDING US INFLUENCE ON DEFENCE EXPORT CONTROLS
Australia Defence Magazine carried an article reminding readers about the effects, including extra-territorial effects, of US export controls, including the recent arrest of an Iranian researcher while he was studying at the University of Queensland. It says that an application by an Australian supply chain member for an ITAR (military) or EAR (dual-use) item – either tangible or intangible – may be needed in order to fulfil a contract requirement and therefore SME must be entrusted to remain compliant and fully aware of their obligations when granted this access.
Meanwhile, in India, the Institute for Defence Studies and Analyses published a comment piece on 26th September –
CAATSA SANCTIONS AND INDIA
The article commented on the effect of the US CAATSA sanctions on military supplies to India where Russian or Chinese companies were listed – following the listing by the US of a Chinese company, the Equipment Development Department (EDD) of China’s Central Military Commission (CMC), and on its Director, on 20th September. In its analysis, the article says that 11 of the 12 prescribed sanctions under CAATSA would have little or no effect on India’s current dealings with Rosoboronexport, the export arm of the Russian defence industry (with which India has extensive contracts). and hence on India-Russia defence relations. However, the 12th has the potential to completely derail the India-US Defence and Strategic Partnership unless the sanction were to be waived. This, it says, needs some elaboration and explanation. Amongst its conclusions the article says that, even if the US grants a waiver to India under CAATSA, this would not assist re payments to Rosoboronexport, because it faces identical multiple sanctions under various other legislative Acts and Executive Orders. However, it says that a waiver of the CAATSA sanction is essential if the India-US strategic partnership is to survive.
WHERE US SANCTIONS BITE CHINA’S MILITARY
The Diplomat on 26th September published an article saying that some of the new CAATSA sanctions are harmless, from China’s perspective, but one is likely to hurt. This is those on the Equipment Development Department of the Chinese military, and its director, Li Shangfu, for military purchases from Russia. The article poses the questions – what is the real-world impact of the sanctions on China? Do they bite at China’s capability to procure military equipment and services, or its abilities to continue operating and fulfilling its requirements? It says that the US sanctions affect 4 areas – US property, a visa ban, export denial, and the US financial system. The article says that examining the potential for major impact of each sanction shows where China is most likely to feel the pain, and where it is more or less immune. It argues that the greatest risk to China may result from the area of sanctions involving “a prohibition on foreign exchange transactions under United States jurisdiction,” and “a prohibition on transactions with the United States financial system”.
US AUTHORITIES PREPARED TO RETURN SMUGGLED ANTIQUITIES TO INDIA
On 26th September, Smarajya published an article saying that a high-level team from the Archaeological Survey of India (ASI), Delhi, will visit the US to bring back 180 antiquities that were smuggled out of India in the past. The article highlights the continuing problem of such antiquities being stolen from, and removed from, India. It complains that Indian authorities have been either slow to react or have simply done the wrong things in cases involving items found or known to be in other countries. It describes one case which, it says, is a classic example of how official inaction and red tape stifle an honest investigation.
SALFORD STUDENT MADE A SMALL FORTUNE WITH DUTY-FREE TOBACCO SCAM
The Manchester Evening News on 26th September reported that a student bought airline tickets for countries outside the EU but would instead travel to other parts of the UK to sell on the cigarettes. The example cited was where the student, who worked part time as a travel agent, was caught trying to smuggle 9,600 cigarettes that he bought for £1,264 at Gatwick Airport in November 2016, using a boarding card for Geneva. But instead of flying out to Switzerland, which is outside of the EU and means he can buy duty-free products, he got onto a flight bound for Glasgow to sell them on for profit.
ILLEGAL JADE MINING AND SMUGGLING FROM BURMA/MYANMAR
DVB in Norway on 26th September published an article saying that the profits from the jade trade are mostly enjoyed by Burmese and Chinese businessmen, the military elite and ethnic armed groups. 3 years since a landmark investigation by Global Witness that revealed the industry’s worth $31 billion dollars, questions still abound about what improvements have been made by Aung San Suu Kyi’s government to share those revenues and stop jade being smuggled across the border into China.
‘MODERN-DAY BOOTLEGGERS’ BUSTED FOR MULTI-MILLION DOLLAR CIGARETTE SMUGGLING RING IN NEW YORK
NBC in New York on 26th September reported on a case in New York where an alleged group of smugglers made millions of dollars in illegal profits by buying cheap cigarettes outside of New York State and selling them in-state with counterfeit tax stamps. Search warrants recovered around 6,267 cartons of untaxed cigarettes, in addition to $2.3 million in illegal proceeds. The article says that $953,000 in taxes would have gone to New York City and New York State if the cigarettes had been sold with legal tax stamps.
EGMONT GIVES NIGERIA CLEAN HEALTH BILL, LIFTS SUSPENSION
Business Day in Nigeria on 26th September reported that Egmont, the international body for FIU, has lifted the suspension of the Nigerian FIU imposed in July 2017. Following allegations by a former director, the NFIU had been placed in the Egmont support and compliance process, which necessitated a review of the entire compliance requirement of the NFIU.
FORMER MEXICAN STATE GOVERNOR JAILED FOR 9 YEARS FOR MONEY LAUNDERING AND LINKS TO ORGANISED CRIME
On 27th September, Devdiscourse reported that Javier Duarte, who governed the Gulf coast state of Veracruz for outgoing President Enrique Pena Nieto’s Institutional Revolutionary Party (PRI) until 2016, has been sentenced to 9 years in prison for money laundering and links to organised crime in a case that public auditors said was the worst they had ever seen in Mexico. The court also fined Duarte $3,123 and seized 40 properties.
MALTA: FIRM NAMED IN PANAMA PAPERS AND USED FOR OFFSHORE ‘INVESTMENTS’ REBRANDS
The Times of Malta on 26th September reported that a Maltese firm used by the Prime Minister’s chief of staff, Keith Schembri, for offshore “investments” exposed in the Panama Papers has announced a rebranding exercise. MFSP Financial Management has been renamed Zenith.
ICE DEPORTS PAKISTANI MAN CONVICTED AND ORDERED TO PAY $71 MILLION IN LAUNDERING SCHEME
A news release from US Immigration and Customs Enforcement on 25th September reported that Muhammad Sohail Qasmani, 50, who was convicted in 2017 for conspiracy to commit wire fraud and sentenced to 48 months imprisonment and ordered to pay restitution in the amount of $70,960,070.73, has been deported on release from prison.
ANOTHER RULING SUPPORTS CFTC’S ACTIONS AGAINST VIRTUAL CURRENCY SCAMS
Finance Feeds on 27th September reported that the US Commodity Futures Trading Commission (CFTC) has managed to secure another ruling that supports its stance that virtual currencies are commodities and that, hence, the regulator can take actions against cryptocurrency scams. The defendants’ principal argument had been that CFTC failed to state a claim because My Big Coin (MBC), the allegedly fraudulent virtual currency involved in the scheme, is not a “commodity” within the meaning of the Act. The Judge denied the defendants’ motion to dismiss the case against them, explaining that virtual currencies are commodities under the Commodity Exchange Act.
OFAC ENFORCEMENT: THE EPSILON CASE AND THIRD-PARTY RISKS
Michael Volkov has published an article on 26th September saying that the case is important because it confirms a broad reading of third-party risks for companies when dealing with the Iran Sanctions Program (and the Cuba Sanctions Program). Companies can be held liable for a sanctions violation when they ship a product to a third-party in another country and know or have reason to know that the third party intends to reship the product to Iran. Consequently, companies have to conduct due diligence and document appropriate assurances that the third party is not intending to ship the goods to Iran. But, he asks, what does OFAC have to prove – that the products actually ended up in Iran or that the company had “reason to know” that the third party intended to ship the goods to Iran. There is a big difference here, he says, between the two standards of proof. The Court of Appeals has affirmed that an exporter may be found liable if it ships goods from the US to a third country, with reason to know that those goods are specifically intended for reexport to Iran, even if the goods never arrive in Iran. However, for 5 transactions involved the Court found that the evidence did not satisfy the “reason to know” standard, and remitted the case back to OFAC for it to recalculate the penalty due.
CHINA: CUSTOMS OFFICERS SEIZE SMUGGLED RARE ANIMAL PARTS
ECNS on 27th September reported that customs officers in Guangzhou, Guangdong Province, have seized 7.26 metric tonnes of pangolin scales after cracking down on a series of smuggling cases involving endangered animals and their products in July and August – the largest amount of pangolin scales seized by Guangzhou Customs this year.
NEW REPORT ON THE SECURITY IMPLICATIONS OF CHINA’S 21st CENTURY MARITIME SILK ROAD
On 4th September, the Stockholm International Peace Research Institute published The 21st Century Maritime Silk Road: Security implications and ways forward for the European Union. This examines the impact of the 2 most strategic maritime spaces that the initiative traverses: the South China Sea and the Indian Ocean Region. It assesses the implications of the project for EU foreign and security interests, but should also be relevant to all stakeholders of the Road.
EXPERTS CAST DOUBT ON EUROPE-IRAN PAYMENT CHANNEL
The Wall Street Journal on 26th September reported that the EU plan for a special-payments channel to keep business flowing with Iran was met with scepticism by sanctions experts, who said it was unlikely to work. The payment channel, which would be a special purpose vehicle created by the EU “to facilitate legitimate transactions with Iran,” intended as a way for countries to keep the 2015 nuclear agreement intact.
BRITISH COLUMBIA LAUNCHES MONEY LAUNDERING PROBES INTO REAL ESTATE, HORSE RACING, CAR SALES, FINANCIAL SERVICES
The Star in Canada on 27th September reported that the British Columbia government is launching separate reviews into the possibility of money laundering involved in the real estate market, horse racing, luxury vehicle sales and the financial services sector. The investigations arise from a report by former RCMP deputy commissioner Peter German who concluded there was money laundering in the provincial gaming industry.
SEC FILES A SECURITIES FRAUD LAWSUIT AGAINST TESLA CEO ELON MUSK
Politico on 27th September, alongside many other sources, reported that prosecutors allege that Musk made a “series of false and misleading statements” on Twitter last month that he had secured funding to take the company private. The suit alleges Musk made the claim despite the fact that he “had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source”.
SEC TAKES ACTION AGAINST BINARY OPTIONS MARKETERS
Finance Feeds on 27th September reported that the SEC has charged a group of internet marketers who created and disseminated videos to lure retail investors to trade binary options. It says that investors were defrauded of tens of millions of dollars through these marketing campaigns, which promised that investors would make large amounts of money by opening binary options accounts and using free or secret software systems to trade in them. The regulator alleges that the marketers were paid for each new brokerage account that investors opened and funded.
PETROBRAS HIT WITH $853 MILLION CORRUPTION FINE
The BBC on 27th September reported that Brazil’s state oil company, has agreed to pay more than $853 million to the US and Brazil, ending a long-running corruption investigation. The probe stemmed from a bribery scheme at the firm, which involved millions in payments that were concealed from investors and regulators. The payments were facilitated by executives at the “highest levels”.
UK HEDGE BUSINESS FINED £400,000 OVER COMPLIANCE FAILURES
Citywire on 27th September reported that hedge fund incubator and prime broker Linear Investments has been fined £409,000 by the FCA for failing to manage its risk of market abuse for more than 2 years to mid-2015.
BEING ALERT TO THE RISKS OF FALSIFIED AND SUBSTANDARD MEDICINES
The Irish Times on 27th September carried a feature saying that, in Ireland, almost 1 million counterfeit or sub-standard medicines were seized in 2017. Of these, 47% were anabolic steroids, 23% were sedatives and 13% were medicines for erectile dysfunction. It also says that about 10% of medicines worldwide are falsified and this figure rises to 70% of all pharmaceuticals in some countries.