18th December 2018
EXPANDING USE OF SEGREGATED PORTFOLIO COMPANIES IN THE BVI
On 14th December, Maples published an article saying that whilst previously, the advantages of the SPC regime were only available to insurance companies and regulated funds, the enactment of the BVI Business Companies (Amendment) Act, 2018 and the Segregated Portfolio Companies (BVI Business Company) Regulations, 2018 have significantly expanded the potential uses of this type of entity, and permit a company to be incorporated as an SPC or to re-register as an SPC subject to submission of the requisite documentation to the BVI Financial Services Commission. As with a protected cell company (PCC), a segregated portfolio company (SPC) may create individual segregated portfolios in order to segregate the assets and liabilities of one segregated portfolio from those of the other segregated portfolios, and from the company’s general assets.
US DoJ LAUNCHES CHINA-FOCUSED CRIMINAL ENFORCEMENT INITIATIVE
On 13th December, Jones Day published an article saying that the DoJ has announced a new criminal enforcement initiative that targets China, with the stated goal of using criminal enforcement tools to counter alleged Chinese trade policies. To help implement the new “China Initiative,” the DoJ created a working group of federal prosecutors from 5 US Attorney’s Offices to work together with its National Security Division and the FBI.
USE OF SCREENING SOFTWARE FOR OFAC SANCTIONS COMPLIANCE
An article from Stroock & Stroock & Lavan LLP on 14th December considers the recent case where a US business which had violated US sanctions law by shipping products through its distributors in Canada and Russia to an entity in Russia that was majority owned by a person on the SDN list. The company had relied on third-party software to screen its counterparty, but the software failed to generate an alert for the subsidiary. The article says that the case appears intended to raise a number of compliance lessons relating to the use of and reliance on third-party screening software for OFAC sanctions compliance; including not being complacent about the use of such software, about having software that is able to screen not just the immediate counterparty, but also those behind it or involved with it, and not relying on the screening software alone to carry out compliance checks.
CAYMAN EU ECONOMIC SUBSTANCE LEGISLATION
On 16th December, Silveroak Legal published an blog post saying that in early December, the Cayman Islands released the EU Economic Substance Bill which certain Cayman entities to have an adequate level of economic substance in the Cayman Islands. It is scheduled for debate in the second half of December, and will in all likelihood take effect in its final form on 1st January.
EU PARLIAMENT AND COUNCIL AGREE NEW RULES TO FIGHT NON-CASH PAYMENT FRAUD
Hogan Lovells on 13th December published an article saying that the European Parliament and Council have reached agreement on the European Commission’s proposal to strengthen rules for combating fraud and counterfeiting of non-cash means of payment, such as bank cards, cheques, mobile payments and virtual currencies. It says that the EU estimated that, in 2013, at least €1.44 billion was stolen by criminals through non-cash payment fraud, and around 36 billion of phishing messages are also sent every year to European citizens.
FLORIDA SHIPPING COMPANY OWNER FACES RECORD EXPORT FINE
Bloomberg Law on 17th December reported that Eric Baird, former owner and chief executive officer of Access USA Shipping LLC, faces a record fine after pleading guilty to felony smuggling and violating US export control laws. He faces a $17 million penalty and a 5-year denial of export privileges, as part of a plea a plea agreement. He pleaded guilty to 1 count of felony smuggling and admitted to 166 administrative violations of US export control laws.
SIERRA LEONE NEWS: CUSTOMS DISCOVER ILLEGAL HARBOUR
On 15th December, Awoko reported that the Customs Department of the National Revenue Authority has uncovered huge smuggling activities of food, medicine and timber. Timber was discovered coming to a wharf but to be exported to Guinea illegally using boats that brought in the smuggle goods. Apparently, smuggling has been happening there for over 2 months and the people failed to report it.
ALIGNMENT OF THE CROATIAN AML LAW WITH THE 4TH EU DIRECTIVE
On 17th December, Eurofast published an article saying that the most recent and valid AML law was adopted on November 3rd 2017 and became effective as of January 1st 2018. Outlining the status of Croatian AML law, the article says that it continues the fight against money laundering and terrorist financing and we can expect further amendments by January 10th 2020, which is the deadline for adoption of the provisions of the 5th EU AML Directive.
NEW YORK BRANCH OF INDUSTRIAL BANK OF KOREA (IBK) AVOIDED PENALTIES AFTER REVAMPING ITS COMPLIANCE SYSTEM
On 18th December, Pulse reported that the New York branch of the state lender Industrial Bank of Korea (IBK) has avoided penalties from US authorities after revamping its compliance system in line with local money laundering regulations, and after a probe into the bank’s AML programme.
HISTORY OF UK LEGISLATION AND OTHER INITIATIVES ON LATE PAYMENT OF DEBTS
On 17th December, the House of Commons Library published a briefing paper on this topic.
UK TO REMAIN IN COMMON TRANSIT CONVENTION AFTER BREXIT
HM Treasury on 17th December reported that continued membership of the convention will ensure simplified cross-border trade for UK businesses exporting their goods. Common Transit is used for moving goods between the EU Member States, the EFTA countries (Iceland, Norway, Liechtenstein and Switzerland) as well as Turkey, Macedonia and Serbia. Membership will help ensure that trade moves freely between the UK and other members after the UK leaves the EU.
VIGILANCE REQUIRED IN OFAC SANCTIONS COMPLIANCE INVOLVING VIRTUAL CURRENCIES AND DIGITAL ASSETS
In December, Dechert published an article summarising the US authorities’ approach to sanctions compliance and crypto assets. It says that, having been put on notice by both OFAC and FinCEN, counterparties and financial institutions should greater scrutiny on businesses operating in or dealing with digital currency.
WILL THE PROPOSED REFORMS TO UK EXPORT LICENSING SAVE MORE TREASURES FOR THE NATION?
On 18th December, Art Law & More from Boodle Hatfield carried an article which explains that under the current system, dating from the 1950s, the government can defer issuing an export licence to buyers of cultural goods, if those goods are deemed to be national treasures. The deferral enables UK museums time to raise funds to make a matching offer. The consultation proposes making an owner’s agreement to sell his national treasure to a museum, gallery or private purchaser at a fair market price legally binding.
NORTH KOREA TURNS COAL INTO GAS TO SURVIVE SANCTIONS
The Wall Street Journal on 17th December reported that North Korea has accelerated a little-known programme to use its abundant coal supply to produce synthetic gas, helping the isolated nation reduce its dependence on foreign oil and withstand sanctions aimed at curbing its nuclear programme. It is relying on coal gasification to buttress its economy against UN sanctions affecting its petroleum imports.
UK: CUSTOMS, VAT AND EXCISE REGULATIONS: LEAVING THE EU WITH NO DEAL
On 18th December, HMRC issued an updated collection that brings together regulations, explanatory memoranda, and an impact assessment in preparation for Day 1, if the UK leaves the EU with no deal.
EU: NEW RULES ON NON-PERSONAL DATA ENTER INTO FORCE
On 18th December, the EU announced that the EU Regulation on the free flow of non-personal data enters into force. The Regulation will allow public and private sector bodies to store and process non-personal data anywhere in the EU in the most efficient and cost-effective way, as well as raise trust in cloud computing and make it easier for customers to switch or end their cloud contracts. This new Regulation does not in any way affect the application of the GDPR, as it does not cover personal data. The 2 Regulations will function together to enable the free flow of all data in the EU, creating a single European space for data.
UK: OFFENSIVE WEAPONS BILL
On 18th December, the House of Lords Library published a briefing paper for the 2nd Reading of the Offensive Weapons Bill in the House of Lords on 7th January. The Bill will prohibit the possession of corrosive substances in a public place and the sale of corrosive products to those aged under 18; strengthen the arrangements for the online sale of bladed articles, bladed products and corrosive products; prohibit the possession of certain offensive weapons (such as flick knives and butterfly knives); and prohibit the possession of certain firearms. This briefing provides background to the Bill and its provisions, including statistics on crime in England and Wales involving certain offensive weapons, and provides a summary of the Bill’s House of Commons stages.
A NEW OLD THREAT – COUNTERING THE RETURN OF CHINESE INDUSTRIAL CYBER ESPIONAGE
On 18th December, ETH Zurich published this post saying that China is once again conducting cyber-enabled theft of US intellectual property to advance its technological capabilities. To combat the problem, it says, the US should build a multinational coalition, sanction Chinese companies, and strengthen cyber defences. The sanctions should, it says, be imposed on companies, universities, researchers, and individuals caught using cyberattacks to steal US intellectual property — a step US authorities have reportedly considered.
HMRC CONSULTING ON DRAFT LEGISLATION FOR TAXATION OF HEATED TOBACCO
On 18th December, HMRC launched a consultation inviting views on the draft legislation for the excise duty tax category definition – tobacco for heating – that will come into force on 1st July. The consultation closes on 11th February.
CLAIMS THAT NORTH KOREA WANTS TO REIN IN BRIBERY
UPI on 18th December reported that the DPRK regime is waging war against widespread corruption among cadres but the economy of bribe-giving in North Korean society may be hard to rein in, according to South Korea-based analysts. However, A survey from the Institute for Peace and Unification Studies at Seoul National University suggests breaking the cycle of bribery and corruption in North Korea is difficult.
DIAMOND SCAM REVEALED IN SLOVAKIA
The Slovak Spectator on 18th December reported that experts are said to have revealed a diamond certification fraud. An inferior diamond in a ring was accompanied with a certificate for a different gem of higher value. While in the past a natural gem was directly replaced by a synthetic one or synthetic gems were added to a natural one, in this case the diamond had a false number of the original gem with certification laser branded on it.
EUROPEAN COMMISSION: LATEST REPORT ON THE AUTOMATIC EXCHANGE OF TAX INFORMATION (AEOI) TO PREVENT TAX EVASION
Accountancy Daily on 18th December reported that the European Commission has presented its latest report on the automatic exchange of tax information. Amongst its conclusions are that Member States have recognised that the tax information received via AEOI can be used in different ways. The tax authorities mainly use the information for risk assessment and personal income tax assessment. However, several Member States still make very limited if any use of the information they receive; and they send information which does not include all necessary identification elements which would permit an automated matching of this information with the one available nationally.
The report is available at –
UNIVERSAL WEALTH PRESERVATION ‘FRAUDSTER’ STEVE LONG JAILED OVER MISSING £25 MILLION
On 18th December, the BBC reported that an alleged fraudster, Steve Long, accused of ripping off hundreds of pensioners has been jailed after failing to help clients track down £25 million of their investments. A judge ordered him to provide information to help track down the missing money, but he was jailed for 8 months for failing to provide the information. No criminal charges have been brought, but he is now facing 27 damages claims from families amidst what lawyers say is “cogent evidence” of a “massive fraud”.
GARDAÍ SEIZE €500,000 WORTH OF COUNTERFEIT TOYOTA PARTS
The Journal and others on 18th December reported that Gardaí have seized an estimated €500,000 worth of car parts from premises in Co Monaghan. Toyota Landcruiser jeep bullbars, tail lights, mud flaps, and body panels, all bearing Toyota trademarked logos, were seized.
UBS FINANCIAL SERVICES FINED A TOTAL OF $15 MILLION FOR AML FAILURES IN US
Kenneth Rijock in his blog reported on 18th December that the problems involved the UBS brokerage office in San Diego, where many non-resident aliens from Panama, Mexico and Venezuela had accounts. The $15 million was split between the SEC and FinCEN. The FinCEN Director is quoted as saying that broker-dealers providing banking-like services must properly mitigate the AML risks associated with this kind of service. These services enable the flow of funds through mechanisms such as wire transfers, check writing, and ATM withdrawals, creating AML risks that need to be properly addressed. It is said that the company failed to provide sufficient resources to ensure day-to-day AML compliance, and inadequate staffing led to a significant backlog of alerts and decreased its ability to timely file suspicious activity reports.
EU COURT UPHOLDS SYRIA SANCTIONS LISTINGS
On 18th December, the European Sanctions Blog reported that the EU General Court had upheld the sanctions measures imposed on Ehab Makhlouf (cousin of the Syrian President), Razan Othman, and Syriatel Mobile Telecom.
BERMUDA ALLOWS CANNABIS INVESTMENT FUNDS
On 18th December, an article from Conyers, Dill & Pearman said that Bermuda’s authorities have given the go-ahead for investment vehicles interested in taking advantage of the legal cannabis sector. The article seeks to explain why Bermuda is the clear choice for setting up ventures investing in cannabis-related enterprises. On 14th December the Bermuda Monetary Authority (BMA) confirmed that it will permit Bermuda incorporated/organised investment entities whose investment strategy is linked to the cannabis industry to register with it provided such business activity is legal on all government levels where it is being conducted.
FORMER WILMINGTON TRUST BANK PRESIDENT SENTENCED TO 6 YEARS IN FEDERAL PRISON FOR FRAUD
Baker McKenzie on 18th December reported that Wilmington Trust’s former president and former CFO each will go to prison for 6 years, pending appeals, for their roles in hiding from investors hundreds of millions of dollars’ worth of toxic loans at what was once Delaware’s largest independent bank.
WHY HAS ISIL BEEN MORE SUCCESSFUL THAN ITS PREDECESSOR, AL QAEDA, IN RECRUITING INDIVIDUALS WITHIN THE US?
A paper from the RAND Corporation in the US examines this question. The authors consider whether the demographic profile of individuals drawn to foreign terrorist organisations (FTO) has changed over time or whether new groups are more successful appealing to the same segment of the population. Amongst its findings are that recruits are more likely to be Caucasian/white or African American/black, to have been born in the US, and are more likely to be younger and less educated. They are more likely to have converted to Islam as part of their radicalising and, although they are still primarily male, recruits are increasingly likely to be female. It says that, perhaps most important, recruits are at present more likely to be drawn to or influenced by ISIL rather than al-Qaeda or its affiliates during their process of radicalisation and journey to terrorism.
SUB-SAHARAN AFRICAN PRODUCERS, EXPORTERS, AND IMPORTERS OF SMALL ARMS
On 18th December, the Small Arms Survey produced a report which says that at least 15 sub-Saharan African states industrially produce small arms and/or ammunition; official data indicates that South Africa was the largest sub-Saharan African exporter and importer of small arms during 2013–15; and the largest transparent small arms exporters to sub-Saharan Africa for 2013–15 appear to be Bulgaria, Serbia, France, Spain, and Italy. Exporters such as China, the Russian Federation, and Turkey also concluded significant deals to supply small arms.
THE EUROPEAN MARITIME SINGLE WINDOW
On 18th December, the EU Parliament Research Service published a briefing paper which provides an initial analysis of the strengths and weaknesses of the European Commission’s impact assessment accompanying the Commission proposal for a Regulation establishing a European Maritime Single Window environment, submitted on 17th May and referred to Parliament’s Committee on Transport and Tourism (TRAN). The paper concludes that the impact assessment provides a thorough analysis of the current problems related to reporting obligations of ships when calling at a port. The new proposal will replace requirements for reporting formalities for ships arriving in and/or departing from ports of the Member States as currently set out in Directive 2010/65/EU (aka the Reporting Formalities Directive or RFD).
For some background see –
APPEALING AN INTERPOL RED NOTICE
On 18th December, Corker Bining published an article prompted, it seems, by concerns about the political neutrality of the INTERPOL bodies making decisions about when red notices should be issued and deleted are particularly important when an individual affected by the red notice claims that it is tainted by political motives. The article goes on to explain the limited appeal process available. It notes that the UK extradition law interpretation of “political opinion” is wider than that used by Interpol. The article suggests that an individual faced with a red notice may (at present) be in a better position contesting extradition and/or claiming asylum, and using success obtained in those proceedings as a basis to persuade Interpol to remove the red notice, but, it says, the absence of such a decision is not fatal to an individual’s chances of securing the removal of a red notice.
FCA PUBLISHES NEW RULES FOR BANKS OVER FRAUDULENT APP PAYMENTS
KYC 360 on 18th December reported that the FCA has introduced new rules that will allow victims of scams to complain to the bank to which fraudsters divert their money under authorised push payment (APP) frauds, or that holds the fraudster’s account. Currently, the sending bank, the payment services provider (PSP), and not the receiving PSP, has to handle these complaints. These obligations have now been extended to the receiving PSP and victims can refer their complaints to the Financial Ombudsman Service if they are unhappy with the outcome. The new rules will come into force on 31st January.
NEW YORK AUTHORITIES FINE BARCLAYS BANK PLC $15 MILLION FOR VIOLATIONS OF NEW YORK BANKING LAW STEMMING FROM AN INVESTIGATION INTO ATTEMPTS BY THE BANK’S CEO TO IDENTIFY THE AUTHOR(S) OF 2 WHISTLEBLOWING LETTERS
A news release on Mondo Visione on 18th December reported that the Financial Services Superintendent had announced that the Department of Financial Services (DFS) has fined Barclays Bank PLC and its New York branch $15 million for violations of New York Banking Law stemming from a DFS investigation into attempts by the bank’s CEO to identify the author(s) of 2 whistleblowing letters in contravention of Barclays’ established whistleblowing policies and procedures.
ESTONIA DETAINS 8 IN MONEY LAUNDERING CASE LINKED TO DANSKE BANK
On 18th December, Reuters carried reports from Estonia media saying that the state prosecutor has detained 8 people in connection with a money laundering case linked to Danske Bank.