2nd January 2019
HOW ZAMBIA LOSES BILLIONS OF DOLLARS IN ILLICIT OUTFLOWS
On 2nd January, the Lusaka Times reported that billions of US dollars disappear each year without a trace and end up in tax havens and/or absorbed into Western economies and now China, forcing government to accumulate excessive debt to fill the gap created in order to carry out development projects. It refers to research showing that Zambia and other African countries are net creditors, which mean far more money flowed out of Zambia than into them. It says that there are 3 broad channels that billions of dollars are lost:
- through multinational enterprises (said to be the major culprits through the manipulation of trade transactions);
- smuggling of natural resources (it says that there is no doubt that there is illicit exploitation of natural resources such as gold, cobalt, uranium, timber, emeralds, diamonds , manganese and other precious metals and wildlife which is being exported abroad illegally); and
- through corruption and money laundering activities.
For misinvoicing, for example, research is quoted that says that in Zambia between 1996 and 2014, a record of $28.9 billion of copper exports to Switzerland is recorded, which is more than half of all its copper exports, but this did not reflect in Switzerland’s import statistics.
PROTESTS IN PERU AS TEAM INVESTIGATING ODEBRECHT CORRUPTION IS DISMISSED – DECISION THEN REVERSED…
The New York Times on 1st January reported that Peru’s attorney general dismissed a team investigating the far-reaching Odebrecht corruption scandal. President Martín Vizcarra quickly denounced the move, saying that it undercut Peru’s drive to purge corruption. Executives at the company have acknowledged that it distributed millions in bribes across Latin America, including $29 million in Peru, to obtain lucrative government contracts. The prosecutor’s office is investigating all of the Peruvian presidents who governed from 2001 to 2018 over accusations of corruption and money laundering.
STOP PRESS –
On 2nd January, the Kansas City Star reported that the attorney general had reversed his dismissal of the lead investigators in a sweeping corruption probe into top officials, retreating in the face of a growing public outcry and a bid by the president that could remove him from office.
KENYAN PRESIDENT DENIES CHINA PLANS TO SEIZE PORT OVER DELINQUENT LOAN PAYMENTS
Customs Today on 1st January reported that the Mombasa-Nairobi Standard Gauge Railway is an enormous project folded into China’s Belt and Road international infrastructure programme. It says that it has long been cited as an example of Chinese debt imperialism because the project required almost $5 billion in Chinese loans but is projected to lose $100 million from its first full year of operation, and may never actually turn a profit. Media reports had suggested this was deliberate allowing for plans to seize the Mombasa port and the Inland Container Depot in Nairobi. The Kenyan Auditor General had said China’s loan agreements with Kenya make it possible for Beijing to seize the assets of the Kenya Port Authority (KPA). Chinese officials deny they have designs on the port of Mombasa, and in fact challenged the authenticity of the entire Auditor General’s report.
LAW FIRM TOLD TO REPAY £22 MILLION OVER “ENDEMIC” LEGAL AID FRAUD
Legal Futures on 2nd January reported that founder and owner John Blavo was liable to repay £22.1 million in claims for thousands of cases which never took place. The 18-office firm was closed in 2015 on the grounds of suspected dishonesty shortly after its legal aid contracts were terminated. It had employed 200 staff and had contracts with 150 consultants.
TAX FRAUD SOLICITOR STRUCK OFF DESPITE POLICE PLOT PLEA
Legal Futures reported on 2nd January that a solicitor, Azhar Islam Khan, convicted of tax fraud has been struck off, with a disciplinary tribunal rejecting his claim that he had been the victim of a police campaign to “get” him. He was convicted in January 2017 of cheating the public revenue, because he failed to declare his income from his firm.
SIERRA LEONE ARRESTS FORMER DEFENCE MINISTER IN GRAFT CRACKDOWN
Defence Web on 2nd January reported that Alfred Paolo Conteh, a former Sierra Leone defence minister under ex-President Ernest Koroma, and Sannah Marrah, his deputy at the ministry, were arrested as part of a crackdown by President Julius Maada Bio’s administration on alleged graft by its predecessor, the country’s anti-corruption commissioner said.
BRIEFING ON KASHMIR
On 2nd January, the House of Commons Library published a briefing paper which covers events in Indian-administered Kashmir since 8th July 2016, which have been characterised by a dramatic upsurge in protest and violence on the ground – what some are calling the “worst crisis in a generation”.
RETAILERS TO LOSE $130 BILLION GLOBALLY IN CARD-NOT-PRESENT (CNP) FRAUD OVER THE NEXT 5 YEARS
On 2nd January, an article on Investorideas.com reported that a new study has found that retailers are set to lose some $130 billion in digital CNP (Card-not-Present) fraud between 2018 and 2023. It highlighted that increasingly complex approaches by fraudsters, alongside retailers’ inertia in adapting to new fraud prevention requirements, would be key factors behind the increases in fraud transaction value.
The study is available at –
BRAZIL: ODEBRECHT TO PAY £32 MILLION TO ELETROBRAS TO SETTLE CORRUPTION CASE
On 2nd January, Reuters reported that Brazilian construction conglomerate Odebrecht SA has agreed to pay £32.8 million to Centrais Eletricas Brasileiras SA, he state-run power holding company.
UK: FIREARMS DEALER CLEARED OF ‘STOLEN’ RIFLES CHARGES
On 2nd January, the BBC reported that Adrian Bull, of Wiltshire, had denied possessing 2 “counterfeit” SA80 rifles and a rifle part, but 3 other men remain on trial at Winchester Crown Court over the alleged theft of weapons from a private collection on a British Army base in Warminster.
FINANCIAL ADVISER JAILED AFTER BLOWING CONNED MILLIONS ON ‘PLAYBOY LIFESTYLE’
On 2nd January, Professional Adviser reported that Merseyside-based Neil Bartlett, a financial adviser, has been jailed for 8 years after blowing some £4.5 million of fraudulent money on Russian prostitutes, expensive hotels and gambling. From 2013 to 2018 he conned £4.5 million from lifelong friends and family while claiming to be investing their pensions and life savings.
NETHERLANDS CREATES ITS OWN TAX HAVEN BLACKLIST
International Adviser reported on 2nd January that the list of 21 jurisdictions, 16 more than the EU, and includes the Isle of Man, Jersey and Guernsey, BVI, Cayman Islands and UAE. The blacklist will be used in the fight against tax avoidance in 3 different measures, which are detailed in the article.
BAHRAIN INTRODUCES VAT ON TRIAL BASIS
Intergame on 2nd January reported that Bahrain has introduced 5% VAT for a trial period, to bring it into line with 2 other Gulf states that have already started applying the goods and services tax – Saudi Arabia and the UAE. The tax came in January 1st.
OVERLOOKED SOURCES OF DIGITAL EVIDENCE
On 2nd January, Control Risks published an article saying that as our world becomes increasingly digitalised, there are ever-increasingly creative ways to find information. The article looks at 5 cases that show the potential in underused and emerging types of digital evidence –
- Locational data – geotags;
- Wearable sensors and their GPS;
- Data from asset trackers – sensors and Internet of Things (IoT) devices;
- Network data reveals theft of trade secrets; and
- Data from vehicle infotainment, telematics and black box systems.
US: GEORGIA STATE SENATOR REPORTS TO JAIL FOLLOWING INDICTMENT ON CHARGES INCLUDING INSURANCE FRAUD
Law 360 on 2nd January reported that Georgia state senator and former Republican gubernatorial candidate Michael Williams turned himself into Hall County jail days after news broke that he had been indicted on charges that included alleged insurance fraud.
US JUSTICE DEPARTMENT SEIZES DOMAINS USED IN DENIAL-OF-SERVICE ATTACKS
On 2nd January, Homeland Preparedness News reported that the DoJ had seized 15 internet domains associated with denial-of-service (DDoS) attacks in December. The websites offered customers DDoS attacks that targeted computers with information and prevent them from being able to access the internet. These services are referred to as “booter” or “stresser” services.
DHS-RELATED WEBSITES HAVE GONE QUIET WITH US GOVERNMENT SHUTDOWN
Homeland Security Today on 26th December reported that the message: “Due to the Lapse in Federal Funding, This Website Will Not Be Actively Managed” appeared on a number of websites, including that of US Customs and Border Protection, US Coast Guard and the US Immigration and Customs Enforcement.
PODCAST: THE WORLD BANK: WORKING WITH SME AFTER MISCONDUCT
In the latest TRACE podcast, Lisa Miller, Integrity Compliance Officer with the World Bank Group, describes the work her team does to help bring small-to-medium sized enterprises (SME) back into the fold after sanctions.
SOUTHAMPTON ACCOUNTANT JAILED FOR £400,000 FRAUD TO FUND GAMBLING HABIT
On 2nd January, the BBC reported that Kathleen Weir, 40, an accountant, has been jailed for 7 years for stealing more than £400,000 from her employers to fund a gambling addiction. She spent £1.2 million on online sports betting from 2009 to 2016, prosecutors said.
TAIWAN: AML GUIDANCE TO BE REVEALED NEXT MONTH
The Taipei Times on 2nd January reported that guidelines on AML for financial institutions dealing with low-risk clients are to be announced after the Lunar New Year. The guidelines are said to include a reduction in examination frequency and are aimed to facilitate financial institutions’ client management without affecting their regular operations.
EXPLORING THE IMPACT OF THE US TREASURY’S SANCTIONS TARGETING BITCOIN
On 2nd January, RUSI published a paper saying that the US government’s move against 2 alleged cyber-criminals serves as a warning sign to the cryptocurrency community. The community may choose to respond by cloaking itself in an even heavier mantle of anonymity, or it may just understand that it stands to gain from policing its activities. OFAC had named 2 individuals – Iranians Ali Khorashadizadeh and Mohammad Ghorbaniyan – and added them to its SDN List for their roles in the SamSam ransomware campaign. In the designations, OFAC listed 2 Bitcoin addresses associated with the men, in the same manner as they specify other identifying information, such as passport numbers or known aliases. This action marks the first time that cryptocurrency addresses have been included on the SDN list, a move which effectively hands responsibility to the crypto community for policing its own probity. The paper argues that, given cryptocurrencies’ reputation as a facilitator of crime, it could be in the community’s best interest to deal with its own problems. For those who are wary of law enforcement, this could also be a way to address the problem without moving outside the trusted blockchain family.
THE US “BASE EROSION AND ANTI-ABUSE TAX” (BEAT) REGULATIONS
On 2nd January, an article from Proskauer said that on December 13th, the IRS and US Treasury released proposed regulations with respect to the “base erosion and anti-abuse tax” (the BEAT) under section 59A of the Internal Revenue Code. BEAT was created in 2017 and is an additional tax that has the effect of a minimum tax on certain large US corporations that make deductible payments to foreign related parties – designed to prevent these US corporations from using deductible payments to reduce (or “base erode”) their corporate tax liability. The new proposed regulations clarify which taxpayers are subject to the BEAT and how the BEAT rules apply, and the article provides background and summarizes some of the most important aspects of the regulations.
HOW US ENFORCEMENT AGENCIES TARGET OVERSEAS ILLICIT PROCUREMENT NETWORKS USING CIVIL COURTS
In September, the Nonproliferation Review published an article about the problem of how to contend with jurisdictional hurdles when sanctions violations occur overseas, in countries that are unable or unwilling to assist US enforcement efforts. To solve this problem, one such tool is to use civil legal procedures to seize assets linked to sanctions or export-control violations in jurisdictions that lack co-operative arrangements with US enforcement agencies. This article explores the political, legal, and technical implications of enforcing extraterritorial controls against overseas non-state actors by exploring the recent uses of civil-asset forfeiture against Iranian and North Korean procurement networks.