Day: January 12, 2019

11th January 2019

USE NATURAL ACIDS ON HUMANS TO DETECT TRAFFICKING, SMUGGLING VICTIMS IN CARGO

On 4^th January, Homeland Security Today carried an article about a research study which examined the use of specific organic acids emitted from humans being monitored as an effective method to discover the presence of hidden people in enclosures like containers and trucks.  The method involves sampling the air from the inside of the enclosure through the air vent and enriching the collected vapor trace on a nano-carbon-coated sample card.  The enriched sampled is immediately analysed for the specific acid metabolites lactic and pyruvic acids and the results reported in a span of 1-2 minutes.

https://www.hstoday.us/subject-matter-areas/customs-immigration/perspective-use-natural-acids-on-humans-to-detect-trafficking-smuggling-victims-in-containers/

ECONOMIC SUBSTANCE CHANGES – BVI AND CAYMAN LAWS IN FORCE

On 11^th January, law firm Harneys published 2 articles, one each for the BVI and Cayman Islands changes.

https://www.harneys.com/insights/

CALCULATING THE FATAL DOSE OF NOVEL PSYCHOACTIVE SUBSTANCES

On 10^th January, the Pharmaceutical Journal published an article following on from an earlier article about the use of so-called “legal highs”, or New/Novel Psychoactive Substances (NPS), saying that one problem is that many of these NPS have very limited or no data on which to base assessments of their toxicity.  The article claims to provide a method to measure such toxicity.

https://www.pharmaceutical-journal.com/opinion/correspondence/calculating-the-fatal-dose-of-novel-psychoactive-substances/20205940.article

See also –

NEW PSYCHOACTIVE SUBSTANCES – QUICK REFERENCE GUIDE

Issued by the Royal Pharmaceutical Society, a summary factsheet of the guide is available to non-members –

https://www.rpharms.com/Portals/0/RPS%20document%20library/Open%20access/Science/RPS%20NPS%20Fact%20sheet.pdf?ver=2018-06-18-141822-160

 

12^th January 2019

US PROBES BOEING SATELLITE DEAL BACKED BY CHINA

On 11^th January, the Wall Street Journal reported that SEC and the Department of Commerce are investigating Boeing’s relationship with a satellite start-up company, Global IP, backed by a Chinese government-owned firm.  The SEC requested that the company retain all documents about its work with Boeing and a number of other individuals and entities, including state-owned Chinese lender, the China Orient Asset Management Company.  In December, Boeing cancelled an order for a geostationary satellite, ordered in 2016 and designed to provide internet services across Africa from this year, citing Global IP’s inability to pay.  Global IP was said to be funded, and allegedly controlled, by the Chinese state-owned entity. Global IP’s founders, who had left the company, had said in a lawsuit filed last year that they were concerned the Chinese government could gain access to sensitive, export-controlled technologies through the Boeing contract.

https://www.wsj.com/articles/u-s-probes-failed-boeing-satellite-deal-backed-by-china-11547248296

ISRAEL SELLS “SUICIDE DRONE” TO AZERBAIJAN

On 11^th January, the Jerusalem Post reported that Israeli defence company, Elbit Systems, had sold Azerbaijan its latest combat UAV, SkyStriker, said to be capable of long-range “kamikaze strikes”.  The very quiet UAV has an electric motor, can loiter for 2 hours, and has a warhead of up to 10 kg.  Azerbaijan is the first international customer for the UAV.  In 2018, another Israeli company, Aeronautics, was said to have engaged in a “live firing” demonstration of another UAV in Azerbaijan against an Armenian target.  Azerbaijan was also reported to have used “suicide drones” against Armenian targets in 2016.  Azerbaijan and Armenia are involved in the disputed territory of Nagorno-Karabakh, and Azerbaijan is reported to have doubled its military expenditure since 2016.

https://www.jpost.com/Israel-News/Israels-Elbit-Systems-sells-Azerbaijan-SkyStriker-suicide-drone-577053

KENYA AT CENTRE OF DONKEY SMUGGLING RACKET

All Africa on 11^th January reported that Kenya has been identified as a conduit for smuggling donkeys from neighbouring countries.  It says that demand for donkey skin, which is used in China for making traditional medicine, has been blamed for halving Kenya’s donkey population, but that donkeys remain crucial to rural economies.  In China, they are used in production of ejiao, a traditional medicine made from gelatine extracted from boiled donkey hides.

https://allafrica.com/stories/201901110587.html

GOLD SMUGGLING INTO INDIA FROM REFINERIES IN MYANMAR BY JEWELLERS

The Times of India on 11^th January reported that the arrest of 2 jewellers in Hyderabad, said to be behind the use of “mules”, with 3.3 kg of gold seized.

https://timesofindia.indiatimes.com/city/hyderabad/jewellers-arrest-reveals-hyderabads-golden-nexus-with-myanmar/articleshow/67480567.cms

MEXICAN NARCOS ARE USING CHINESE CRYPTO MONEY LAUNDERING SYNDICATES

Coin Central on 11^th January reported that a US Senate Judiciary Sub-Committee has heard that Mexican drug cartels are now more than ever relying on Chinese cryptocurrency money laundering networks.  It says that the co-operation in obtaining precursor chemicals used to process drugs such as methamphetamine (meth).  It says that China is a major supplier of controlled substances such as ephedrine and pseudoephedrine, which are vital ingredients in the production of methamphetamine.  It is also a major exporter of Fentanyl.  The Chinese Underground Banking Systems (CUBS) is an intricate network of money and cryptocurrency brokers who move currencies in and of the economy while sidestepping the country’s banking system – and is estimated to have over 10,000 clients and believed to launder over $100 billion every year.  As a result, cash seizures are said to be in decline, with a 90% drop on the Arizona-Mexico border since 2011 cited as an example.

https://coincentral.com/mexican-narcos-are-using-chinese-crypto-money-laundering-syndicates/

MPs ATTACK MINISTERS OVER DELAY TO TAX HAVENS’ PUBLIC REGISTERS

The Guardian on 11^th January reported that the UK Government has been accused of defying parliament by delaying plans to require British tax havens such as the BVI to bring in beneficial ownership public registers.  The FCO has told the Overseas Territories that they did not need to introduce compulsory public registers until 2023 – 3 years after the date MPs had thought they had set by law.  It says that ministers appear to have backtracked after the 2020 deadline caused outrage in the overseas territories, which are reportedly worried that this timetable for disclosure requirements would lead to a flood of business decamping to other more secretive tax havens.

https://www.theguardian.com/world/2019/jan/11/mps-attack-ministers-over-delay-to-tax-havens-public-registers

ETHIOPIA CHARGES FORMER MILITARY FIRM BOSS WITH CORRUPTION

Defence Web on 11^th January reported that Ethiopia has charged Kinfe Dagnew, the former head of military-run industrial conglomerate METEC, with corruption almost two months after he was arrested.

http://www.defenceweb.co.za/index.php?option=com_content&view=article&id=54180:ethiopia-charges-former-military-firm-boss&catid=49:National%20Security&Itemid=115

NEW ZEALAND FRAUDSTER WHO RIPPED OFF $1.3 MILLION FROM VICTIMS DECLINED PAROLE IN FRANCE

Stuff in New Zealand in its 13^th January edition reported that Ian Ludwig, who fleeced 7 people of $1.3 million will remain in jail for now after he appeared before the Parole Board in December.  Ludwig, a New Zealand Homes Loans franchisee, convinced friends to invest in his business but took the money and spent it on lifestyle-gambling, buying properties, and taking holidays.  He is now acting as a problem gambling counsellor in jail.

https://www.stuff.co.nz/national/109860179/fraudster-who-ripped-off-13m-from-victims-declined-parole

RUSSIA: COMPANY OF PUTIN-CONNECTED OLIGARCH WINS STATE ANTI-CORRUPTION TENDER

Rferl on 12^th January reported that Granat, a company owned by Russian billionaire oligarch Arkady Rotenberg, has been awarded a state grant to conduct training on civil-society development and combating corruption.  Rotenberg is a childhood friend and former judo partner of Russian President Vladimir Putin.

https://www.rferl.org/a/company-of-putin-connected-oligarch-rotenberg-wins-state-anticorruption-tender/29705966.html?src=ilaw

HIZBOLLAH IN SOUTH AMERICA

A report from Infobae on 11^th January is concerned with Hizbollah links to drugs gangs in the tri-border area of Brazil, Argentina and Paraguay, where it is said to be raising funds to finance terrorism, with Lebanese families said to control much of the trade.

https://www.infobae.com/america/america-docs/2019/01/11/hezbollah-en-la-triple-frontera-cocaina-para-la-revolucion/

INTERNATIONAL HACKER-FOR-HIRE JAILED FOR CYBER ATTACK ON LIBERIAN TELECOMS

On 12^th January, an NCA news release advised that Daniel Kaye, a British cyber criminal has been sentenced to 2 years and 8 months for conducting attacks that disrupted a Liberian telecommunications provider, resulting in losses estimated at tens of millions of US dollars.  He had pleaded guilty to creating and using a botnet and possessing criminal property.  He was living in Cyprus when he began carrying out intermittent Distributed Denial of Service (DDoS) attacks on the Liberian telecommunications provider Lonestar MTN in October 2015 using rented botnets and stressors.  The company spent some $600,000 as a result of the attacks.  A European Arrest Warrant was issued for Kaye and when he returned to the UK in February 2017, he was arrested by NCA.

http://www.nationalcrimeagency.gov.uk/news/1542-international-hacker-for-hire-jailed-for-cyber-attacks-on-liberian-telecommunications-provider

5 REASONS WHY LATIN AMERICAN ORGANISED CRIME WILL STRENGTHEN IN 2019

An article in Insight Crime on 11^th January reports on what it says are the 5 reasons why organised crime in Latin America will get stronger this year – There is no no integrated or transnational response to organised crime; repetitive and tired responses by national governments to organised crime threats; Top-level corruption (the number of current or former Latin American presidents under investigation, or condemned, on charges of corruption it describes as “staggering”); Booming criminal economies (cocaine production is at a record high and the US is in the grip of its deadliest drug crisis with opioids); and Agile and increasingly clandestine transnational organised crime.

https://www.insightcrime.org/news/analysis/reasons-latam-organized-crime-strengthen-2019/

https://www.insightcrime.org/news/analysis/reasons-latam-organized-crime-strengthen-2019/

Introduction

When (or if?) the UK exits the EU, the Isle of Man (which had no vote or say in the matter) will be bound to follow.  Although, like the Channel Islands, not a Member State or part of a Member State, its close ties to the UK, as well as the need to ensure it met its international commitments, meant that where sanctions and export controls were concerned, its policies and procedures were largely governed by EU legislation and policies.  For sound practical reasons too, it made sense for the Island to make use of EU legislation to give effect to such things as sanctions prohibitions and restrictions, even where, strictly speaking, the relevant EU Regulations had no effect in themselves in the Island.

As with the UK, the Island faces the problem of continuing to have a satisfactory and effective sanctions regime after withdrawal, and to replace the current structures with something at least as effective for the future.

Leaving aside export controls and counter-proliferation measures, the Customs and Excise[1] pages on the Isle of Man Government website currently list 25 separate sanctions regimes.  Furthermore, and again like the UK, the Island has spent 45 years where EU law has increasingly become entwined with, influenced, complemented or even replaced domestic legislation.

What does the Island have to do with its sanctions regimes, and how will they, or could they, be maintained and replaced?

 The position as I see it

There appear to be three aspects to consider –

1. There would need to be an interim, temporary measure to retain, with such modifications as considered necessary, existing sanction measures imposed using EU instruments after the withdrawal date (or the final withdrawal date, should there be a transit period);
2. There would be a need to impose or reimpose existing (and new) sanctions after the date of withdrawal – using powers contained in domestic or applied UK law;
3. The export control legislation, where impacted by sanctions measures (such as reference to EU sanctions in any orders imposing prohibitions or restrictions[2]), would require amendment to remove or amend reference to the EU measures, where relevant.

On the face of it, section 63 of the Sanctions and Anti-Money Laundering Act 2018 (see below) would appear to meet the requirements of, at least, a and b above.  An order-in-council (or even orders-in-council) could deal with the matters involved, and would likely delegate the powers and responsibilities of the “appropriate minister” in the 2019 Act to the Treasury in the Isle of Man (which currently has responsibility for sanctions matters, financial and trade-based, in the Island).

Such an order or orders may also be the means by which any changes to export control legislation is given effect[3].

To date, no such order-in-council has been published by HMSO in the UK.

In addition, the European Union and Trade Act (see below) provides for dealing with existing orders and regulations in any interim or transit period.  Indeed, section 6 of that Act explicitly provides that any statutory document made under section 2A or 2B (again, see below) of the European Communities (Isle of Man) Act 1973, as it has effect immediately before “exit day”, continues to have effect in Island law on and after exit day[4].

A further housekeeping requirement would be to amend or revoke as necessary all the existing orders-in-council implementing UN sanctions measures[5], orders applying relevant EU Regulations creating or amending sanctions regimes, and regulations made in the Island to implement such sanctions by providing for powers, offences, penalties etc.

The European Union and Trade Act

This Act will be the equivalent, broadly speaking, to the European Union (Withdrawal) Act 2018 of the UK[6].  One of its main purposes One purpose is to save any statutory documents (the term used in the Island for what are called stator instruments, such as orders and regulations) made under sections 2A or 2B of the European Communities (Isle of Man) Act 1973[7] so that they will continue to have effect in Island law on and after exit day following the repeal of the 1973 Act.   These saved statutory documents will form part of a new category of law which will be called “retained EU law”.  Normally, such a a statutory document would automatically lapse when the primary legislation under which it was made is repealed, unless the statutory document is expressly saved by the repealing legislation.  However, under the European Union and Trade Act any saved statutory documents will have effect as if made as regulations under that Act.

It is important to note that, aside from some trade measures that might be construed as having direct effect in the Island under the terms of Protocol 3[8], sanctions measures (like AML/CFT controls, such as the EU’s 3^rd and 4^th Money Laundering Directives, nor even the VAT Directives) do not have effect in the Island[9].  This is why such sanctions measures had to be given effect by means of Island law, whereas they could have automatic effect in the UK.  Such applied sanctions measures thus became part of Island law, not EU law, despite their obvious origin, and any changes made by the EU to the underlying instruments were not, unlike in the UK, carried over in the Island but had to be legislated for by means of amending orders or regulations[10] .  It was the aforementioned section 2A of the 1973 Act that was used to apply EU Regulations in the Island, and section 2B that was used to make the domestic regulations necessary to implement and enforce them.

The previous situation in the Island

As far as financial sanctions are concerned, the latest and current guidance issued by the Isle of Man Treasury on the implementation of financial sanctions in the Island is contained in a Notice issued in September 2018[11].  This describes them as prohibitions and restrictions put in place by the UN, EU, UK and Isle of Man, with the aim of maintaining or restoring international peace and security.  They can limit the provision of certain financial services; and/or restrict access to financial markets, funds and economic resources.

It explains that in the Island financial sanctions legislation is generally made under –

• the United Nations Act 1946 (an Act of Parliament) – now rarely used[12], though some orders remain in force; and
• the European Communities (Isle of Man) Act 1973 (an Act of Tynwald). – the favoured method in recent years. Application orders apply the relevant EU Regulation, with the necessary modifications, and regulations are then made under the Act to provide for enforcement powers, penalties for infringements, licensing arrangements etc.

As the Notice goes on to explain, in certain circumstances, the UK can impose its own financial sanctions and restrictions under other domestic legislation – the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010); the Counter Terrorism Act 2008 (CTA 2008); and the Anti-Terrorism, Crime and Security Act 2001 (ATCSA 2001).  As explained in the Notice, the policy of the Island is to maintain its sanctions regime so that they correspond to those in the UK, and so it will ensure that any such “domestic” or national sanctions measures are replicated.

The Notice also explains that, in certain circumstances, the Island can impose its own financial sanctions and restrictions under the Terrorism and Other Crime (Financial Restrictions) Act 2014 (TOCFRA 2014).   This Act also ensures that –

• when a person or entity is listed/delisted under UN sanctions that relate to terrorism (i.e. Al-Qaida, ISIL and the Taliban) this has automatic effect in the Island; and
• anyone designated by UK under its terrorism sanctions[13] is also automatically deemed to be a designated person under Island law as well[14].

Proscribed (i.e. terrorist) organisations in the UK are also automatically proscribed in the Island, under provisions found in section 2 of the Anti-Terrorism and Crime Act 2003 (an Act of Tynwald)[15].

Section 2 of the Notice explains that the Isle of Man Government’s policy with regard to financial sanctions is to maintain the lists of those affected so that they correspond to those adopted by the UK; this being said to be for both constitutional and practical reasons.

One also has to be aware of trade and other sanctions measures (such as travel restrictions – including visa bans – where UK action would also be replicated in the Island under the terms of the immigration law arrangements), as well as export controls, including those for anti-terrorism and counter-proliferation purposes.

Arms and other trade embargoes and controls may also be part of UN or EU measures, or stem from a UK national decision.  In any case, these too would be replicated in the Island as would the financial sanctions.  This may be by inclusion of the relevant provisions in the applied UN or EU instrument (with the necessary implementing regulations in the case of the latter), or by an order made under export control legislation – where once again the Island policy to have its controls correspond to those in the UK, and for same basic reasons as mentioned above.

Since May 2004, the main legislation concerned with export licensing controls is to be found in various orders made under the Export Control Act 2002 (an Act of Parliament), which have been made a part of Island law[16].

Changes made to UK sanctions law

In the UK, the Sanctions and Anti-Money Laundering Act 2018 has been enacted to enable the UK to continue to implement UN sanctions regimes and to use sanctions to meet national security and foreign policy objectives when (or if) the UK is unable to rely on EU-derived measures implemented through the European Communities Act 1972 or through other legislation made under that Act (which will be repealed on leaving the EU).  By November 2018 the bulk of the Act was in force.

The Act is also intended to enable the UK to keep its AML/CFT measures to be kept up to date, to protect the security and prosperity of the UK and meet international standards (such as those laid down by FATF)[17].

The Act provides powers to both create new sanctions regimes and contains procedures relating to the review of sanctions.  It also includes temporary powers to enable the addition or removal of names from sanctions lists made under EU law that are retained as of the date of withdrawal from the EU.

The Act also provides powers to create AML/CFT regulations, and contains provisions relating to registers of beneficial owners of overseas entities and beneficial owners of companies registered in British Overseas Territories[18].

Travel bans are also provided for by means of an amendment to the Immigration Act, allowing the Government to impose them as part of its sanctions controls.  Those controls can also extend to ships and aircraft, as well as trade sanctions.

Hence the new Act seeks to deal with several varieties of sanctions – financial sanctions (including asset freezes, as well as prohibitions on the provision of financial services and on asset transfers), immigration (i.e. UK travel and visa bans), trade (including real property as well as in goods and services) and transportation including by sea and by air.  It also provides for the so-called “Magnitsky sanctions”, named after the Russian lawyer of that name who died in prison in Russia in 2009, and which are intended for use as a deterrent to gross violations of human rights, to promote respect for human rights and ensure compliance with international human rights law.

A new aspect introduced by the Act if that a “designated person” can not only be an identified, named person but also an individual who is an “involved person” will falls into a certain category or person[19].   This is said to be the first time that UK law has allowed for unnamed persons to be designated by description or category in this way.

Another aspect of the Act that has been highlighted is also said to represent a significant change in policy and procedure.  The Act provides for a form of automatic listing[20], saying that implementing listings by the UN Security Council, the UK is obliged to designate persons listed by the UN even if the UK minister regards those designations as being, for example, based on mistaken identity.  This has been described aa a form of “rubber stamping”.

The Act also borrows the term “United Kingdom person” from export control law for situations involving extraterritorial controls[21].  In such cases, the sanctions measures may extend not only to the territory of the UK and its territorial sea[22], but also to conduct elsewhere if it is by such ‘a United Kingdom person’.  Such a provision is clearly necessary to effectively enforce certain trade-based sanctions measures (as they have proven necessary in enforcing trafficking and brokering trade control measures under export control law).

On 7^th January 2019, the Sanctions Review Procedure (EU Exit) Regulations 2018 came into force[23].  Made under the 2019 Act, these Regulation dealt with procedures whereby a person could request a review, variation or revocation of a designation or ship specification that has been made under the Act.

Section 63 of the 2019 Act allows that an order-in-council may extend (with or without modifications) to the Isle of Man[24] and of the provision contained in –

• Part 1 of the Act (which deals with sanctions – the power to impose them, review procedures, temporary powers re existing EU sanctions lists, court reviews using a judicial review procedure, and other miscellaneous matters);
• section 51 (which is concerned with the public registers of beneficial ownership in the Overseas Territories); and
• Part 3 of the Act (which contains definitions and other general matters, such as the requirement for reports. It also allows for “transitory” arrangements to cover any hiatus or interim following withdrawal from the EU).

 

Ray Todd

12^th January 2019

—————————————————————————————————————————————–

[1]  In the Island, the Customs and Excise Division of the Treasury is responsible for the implementation and administration of trade and financial sanctions measures.

[2]  And which would have been applied, with necessary modifications, using Island law to become themselves part of Island law.

[3]  Although more specific instruments could be employed.  Such as happened when the Export of Objects of Cultural Interest (Control) (Amendment etc.) (EU Exit) Regulations 2018 amended the existing 2003 Order to change the definition of what an “EU licence” meant for the purposes of the export of cultural objects.

[4]  This “exit day” is also defined in the Act as being 29^th March 2019 (more specifically 11 am on the 29^th), though the Act also make provision for this date to change, if required, to cover any transit period.

[5]  This would be the responsibility of the UK authorities.

[6]  http://www.legislation.gov.uk/ukpga/2018/16/contents

[7]  https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/1973/1973-0014/EuropeanCommunitiesIsleofManAct1973_4.pdf

[8]  The Protocol to the UK Act of Accession to the then EEC, and which governs the relationship of the Isle of Man and Channel Islands with the EU.

[9]  The Island not being a part of the EU or of an EU Member State.  It was often found that only some parts of an EU Regulation or other instrument would apply to the Island under Protocol 3, whilst other parts did not – thus requiring a dual approach.

[10]  With the exception of the lists of designated persons and entities, which the application order would allow to apply as changed from time to time (as long as the enabling power covering the designation(s) had been applied – if it was a new power added to an existing Regulation, a further order applying the amendment had to be made before the new listing could have effect).

[11]  https://www.gov.im/media/1362741/financial-sanctions-guidance-september-2018-final.pdf

[12]  Chiefly because it relied on the UK authorities to take action and make the appropriate order-in-council, something that was significantly delayed, or even overlooked, in the past.  This led the responsible bodies in the Island to instead use the EU legislation, which would mirror the UN measures and which the Island could implement using its own domestic powers.

[13]  Such as the Terrorist Asset-Freezing etc Act 2010.

[14]  Section 24, TOCFR 2014 refers.

[15]  https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2003/2003-0006/Anti-TerrorismandCrimeAct2003_11.pdf

[16]  For more detailed information on export controls, and trade controls (on trafficking and brokering activities), see Notice 279MAN: https://www.gov.im/media/88875/notice-279-man-export-licensing-controls-2-jul-18.pdf

[17]  Will this also be used to enable the UK to meet developing EU AML/CFT requirements under its 5^th, 6^th etc money laundering Directives?

[18]  The implementation of such registers is to be deferred until 2023, it was recently announced.

[19]  Section 12, Sanctions and Anti-Money Laundering Act 2018 refers.

[20]  Section 13, Sanctions and Anti-Money Laundering Act 2018 refers.

[21]  A UK national or a body incorporated or constituted under the law of any part of the UK.  A similar term exists in the Isle of Man’s export control legislation as “an Island person”, with broadly similar purpose.

[22]  And to UK-registered ships and aircraft.

[23]  http://www.legislation.gov.uk/uksi/2018/1269/contents/made

[24]  And the other Crown Dependencies and the Overseas Territories.

Taiwan English News on 11^th January reported that a Taiwanese woman was intercepted entering Taiwan from China with 24 live gerbils wrapped in stockings and taped to her lower legs.

http://taiwanenglishnews.com/gerbil-smuggling-operation-intercepted-in-kinmen-county/

On 10^th January, McCarter & English published an article which details the effect of the US Government shutdown on the key international trade-related agencies impacted by the shutdown, with suggestions on how industry should properly respond – OFAC (limited capacity), the Department of Commerce including its Bureau of Industry and Security (BIS), CFIUS controls (will continue to perform certain national security functions), and the State Department.

https://www.mccarter.com/2019-Government-Shutdown-The-Export-Controls-International-Trade-and-CFIUS-Edition-01-10-2019/