Daily Sabah on 1st February reported warrants were issued for 394 people in mass simultaneous operations carried out by Turkish police across the country against online betting and gambling sites operating illegally. Investigations are said to have found that 72 front companies were established in the cosmetics, logistics and food sectors to hide their betting activities relating to football matches and other sports events.
On 1st February, OFAC amended 2 FAQ, FAQ 595 and FAQ 648, and issued 11 new FAQ in connection with the January 28th designation of Petróleos de Venezuela, S.A. (PdVSA).
1st February 2019
PANAMA SIGNS MULTILATERAL COUNTRY-BY-COUNTRY REPORTING PACT
MNE Tax on 31st January reported that the agreement is designed to make it easier for countries to exchange country-by-country reports on large multinational firms, and exchanges should make it easier for tax authorities to detect tax avoidance by MNE through transfer pricing and other means.
TRUMP ADMINISTRATION EASES REGULATIONS ON SMALL ARMS EXPORTS, RAISING CONCERNS
The New York Times carried an article on 31st January saying that under the changes, many US gun and ammunition manufacturers that sell primarily to consumers would no longer be required to register with the State Department, which currently licenses international arms sales, or to pay the department an annual fee. Instead, those sales would be licensed by the Commerce Department, which has a simpler process and does not charge a fee. The change began under Obama, designed to promote export opportunities for US companies and refocus regulatory attention on sales that could pose national security risks.
ENGLISH COURT OF APPEAL CLARIFIES TEST FOR DETERMINING JURISDICTIONAL CHALLENGES
An article from Latham on 28th January reports that applicants challenging jurisdiction must satisfy a single 3-limbed test, rather than establish a ‘good arguable case’ and ‘better of the argument’. It says that a recent judgment confirms that an applicant seeking to challenge the jurisdiction of the English Courts must satisfy the single, 3-limb, test laid down in Goldman Sachs v Novo Banco, and not the old 2-part test of ‘good arguable case’ and ‘better of the argument’. Nonetheless, it says, the 3-limb test is not entirely clear and straightforward, and practitioners should continue to approach it with care.
HEAD OF BUCHAREST CHAMBER OF COMMERCE SENTENCED TO JAIL FOR MISUSE OF EU FUNDS
Romania Insider on 31st January reported that the President of Bucharest Chamber of Commerce and Industry (CCIB), Sorin-Petre Dimitriu, was sentenced by the Bucharest Court to 4 years and 1 month in jail. 3 others were also sentenced alongside Dimitru.
DUBLIN-BASED COMPANY DRAWN INTO SOUTH AFRICAN CORRUPTION SCANDAL
The Irish Times on 31st January reported that oil and gas company Falcon is accused of offering contracts for changes to fracking law – by a whistleblower testifying at a commission of inquiry investigating public sector bribery and fraud. Falcon holds a technical operations permit that covers about 7.5 million acres which allows the holder to carry out desktop studies, and acquire existing seismic and other data, but does not include any exploration activities.
CHINESE POLICE SEIZE $193 MILLION IN CASH DURING CRYPTO SCAM BUST
Crypto Globe on 30th January reported that police in China in August busted a massive cryptocurrency scam operation called “I Am a Clown” (IAC) in the Jian’an District of Xuchang City. It claimed to be a social media platform based on blockchain technology, big data, and artificial intelligence. However, the project was nothing but in fact was designed to bring investors into a pyramid scheme.
FRAUDSTERS SWISS ACCOUNTS FROZEN, ARRESTS OVER MULTIMILLION EURO SCAM
KYC 360 on 1st February reported that over 60 investors fell victim to the organised crime group, which was involved in large-scale financial fraud and money laundering across Europe. In a joint operation between officials from Germany, Italy, Spain and Eurojust, several bank accounts were frozen in Switzerland and Portugal. At the same time, bank accounts were seized and bank safes searched in Germany.
CHANGE TO UK EXPORT CONTROL ORGANISATION HELPLINE
On 1st February, the helpline email address for the Export Control Joint Unit (ECJU) has been changed to: firstname.lastname@example.org. The Helpline phone number remains: 020 7215 4594.
UK NEW OGEL PUBLISHED COVERING EXPORT OF DUAL-USE ITEMS TO EU MEMBER STATES
On 1st February, the UK Department of International Trade published Notice to Exporters 2019/03 about a new open general export licence for the export of dual-use items to EU Member States. Should the UK leave the EU without a deal on 29th March, licences will be required to export dual-use items to the EU. Licences are not currently required to export these items within the EU. The purpose of this OGEL is to allow, subject to certain conditions, the export of dual-use items (with both a civilian and military application) from the UK to EU member states and the Channel Islands after the UK leaves the EU.
UK SANCTIONS AND EXPORT CONTROL REGULATIONS FOR POST-BREXIT
On 31st January, the UK published several sets of regulations concerned with preparation for when the UK leaves the EU, and for continuing of current export control and Burma/Myanmar, Venezuela and Iran sanctions regimes.
£21 MILLION DAMAGES BILL FOR GRANT THORNTON’S ‘FLAGRANT’ AUDIT FAILURES
On 1st February, Accountancy Daily reported that Grant Thornton has been ordered to pay an audit firm record of £21 million in damages to a former client after a High Court judge branded its auditing of the company, which nearly collapsed as a result of an accounting scandal, to be a ‘flagrant breach of professional standards’, exhibiting failures ‘of the utmost gravity’.
UK: GAMBLING REGULATOR WARNS FIRMS OVER USE OF GAGGING ORDERS
The Guardian on 31st January reported that the Gambling Commission has warned the industry over the use of gagging orders (non-disclosure agreements), after incidents of problem gamblers being paid substantial sums of money in return for agreeing not to talk to the regulator.
RUSSIAN TRANSIT BAN ON GOODS FROM UKRAINE
EurActiv reported on 1st February on the reaction of the EU to a new move by Russia that requires goods travelling from Ukraine to the territory of the Republic of Kazakhstan of the Kyrgyz Republic, have to go via Belarus, be subject to tough controls and monitoring, including via the global navigation technology satellite system GLONASS (the Russian GPS), and face significantly longer journey times.
DIRTY MONEY RISKS ENCROACH ON ESTONIA’S DIGITAL UTOPIA
EurActiv on 1st February reported that Estonia’s push to become a digital society has left it vulnerable to dirty money and sanction breaches, according to the country’s top banking regulator. It says that a key part of e-Estonia is e-residents, foreigners who have been given a digital ID card allowing them to access some online services such as government portals. It can also be a stepping stone to banking in Estonia, a member of both the EU and the euro zone currency bloc. Anyone can apply, including citizens of countries subject to US sanctions such as Iran and North Korea. Banks including Estonia’s largest locally-owned lender LHV, as well as Sweden’s SEB Bank and Swedbank, allow e-residents to open accounts after they prove their identity and business links to Estonia.
GUERNSEY: MAN WHO HELPED MASTERMIND CON OF STATES JAILED FOR 9½ YEARS.
On 1st February, Guernsey Press reported that a man who helped mastermind an operation that conned the States out of £2.6 million has been jailed. Bayo Awonorin, 44, was originally arrested in 2012 but fled the UK while on bail. He appeared on the NCA 10 most wanted fraudsters campaign. He was wanted in connection a fraud and money laundering investigation in which public bodies including Guernsey’s States and Lincolnshire Partnership NHS Foundation Trust were defrauded of more than £12 million.
INTERNATIONAL DRUG TRAFFICKING NETWORK DISRUPTED
A news release from Europol on 1st February reported that German and Dutch police had dismantled an organised crime group (OCG) involved in international drug trafficking and money laundering. The gang involved 13 members, and the suspects in the Netherlands prepared parcels or envelopes with drugs, which were mailed to Germany. The perpetrators in Germany used various mailboxes and post offices to ship the packages on to recipients around the world. The orders were made online through the darknet, using cryptocurrency, such as bitcoin and paysafecards.
UNODC AND PARTNERS RELEASE PRACTICAL GUIDE FOR REQUESTING ELECTRONIC EVIDENCE ACROSS BORDERS
The UN Office for Drugs and Crime on 1st February published an article asking how can electronic evidence be produced when it is stored by a service provider in another country? How can electronic evidence be preserved before it is deleted or changed in format? How can data be speedily produced from a service provider to avert an emergency? It says one requires a thorough understanding of criminal, privacy and human rights law; data protection policies; and mutual legal assistance channels. Having knowledge and access to communication service providers’ up-to-date law enforcement guidelines is also essential in answering these questions. Aiming to build the capacity of investigators and prosecutors worldwide, UNODC, the UN Counter-Terrorism Committee Executive Directorate (CTED) and the International Association of Prosecutors (IAP), have jointly drafted and launched the Practical Guide for Requesting Electronic Evidence Across Borders. The guide is being made available to Member States’ criminal justice officials.
CHINA’S SANCTIONS ENFORCEMENT AND FUEL PRICES IN NORTH KOREA: WHAT THE DATA TELLS US
38 North on 1st February reported that China is by far North Korea’s largest trading partner, accounting for up to 90% of its trade flows. It argues that, while Chinese sanctions enforcement has been relatively stringent in the era of “maximum pressure,” the PRC has sought to ensure stability and help North Korea avoid strenuous hardship by adjusting its fuel supplies according to geopolitical circumstances, among other factors. The fluctuation in Chinese fuel supplies over the past 18 months suggests that Beijing has been opening and closing its tap largely according to its national security priorities, rather than a robust and abiding commitment to comply with the letter and spirit of the international sanctions regime.
WHY WE SHOULD BE SCEPTICAL ABOUT RECENT REPORTS ON NORTH KOREA’S BIOLOGICAL WEAPONS PROGRAMMES
Another article from 38 North on 30th January says that assessments made about the extent and sophistication of North Korean biological weapons capabilities that are based on very little information.
84 BALES OF CANNABIS RESIN WITH A STREET VALUE OF AROUND £14 MILLION WASHED UP ON BEACH IN GIBRALTAR
On 1st February, the Gibraltar Chronicle reported that a total of 84 bales of cannabis resin weighing under 3 tonnes with a street value of around £14 million was recovered from the shore at Camp Bay. Following a distress call, a Rigid-Hull Inflatable Boat with 3 passengers and laden with bales suspected to contain cannabis resin had been sighted. The RHIB eventually capsized, spilling its cargo of bales into the sea which eventually washed up on shore.
FORMER INSURANCE EXECUTIVES CHARGED WITH LAUNDERING BRIBES TO BARBADOS MINISTER OF INDUSTRY
Buckley on 1st February reported that the US DoJ had filed charges against the former CEO and a former senior vice president of a Barbados-based insurance company, Insurance Corporation of Barbados Limited (ICBL), alleging that the ICBL executives participated in a scheme to launder approximately $36,000 in bribes to the then-Minister of Industry of Barbados in exchange for his assistance in securing government contracts for ICBL. CBL voluntarily self-disclosed the case to the DoJ and has been ordered to pay $93,940.
EU SANCTIONS 2018 YEAR-IN-REVIEW
On 31st January, Dentons published this review, which complements its earlier review of US sanctions. It examines the developments related to the sanctions on Russia, Syria and Venezuela, the EU’s reaction to the US withdrawal from the JCPOA, legislative initiatives taken as a consequence of Brexit and prospectively post-Brexit, enforcement actions by Member States and the recent case law of European Courts.
HIT BY SANCTIONS, ASIA’S IRAN CRUDE OIL IMPORTS DROP TO 3-YEAR LOW IN 2018
Hellenic Shipping News in an article dated 2nd February reported that Iranian crude oil imports by Asia’s top 4 buyers dropped to the lowest volume in 3 years in 2018, but China and India stepped up imports in December after getting waivers.
OPTIONS TO ENHANCE THE COMMON UNDERSTANDING OF END-USE/END-USER CONTROL SYSTEMS TO STRENGTHEN THEIR ROLE IN PREVENTING DIVERSION
A paper from the UN Institute for Disarmament Research says that evidence from conventional arms diversion cases suggests that differences between national end-use/end-user control systems (in particular the content, format and use of documentation), as well as a lack of common understanding of definitions and information to be shared among relevant stakeholders, help to facilitate diversion.
PODCAST: BLOCKCHAIN’S ROLE IN AML/CFT
In this episode of The Lawyers Weekly Show from 25th January, Jerome Doraisamy speaks with Piper Alderman partners Michael Bacina and Andrea Beatty about the place of cryptocurrency in AML/CFT.
EU ADOPTS NEW REGULATION ON TRADE IN GOODS FOR CAPITAL PUNISHMENT, TORTURE OR OTHER CRUEL, INHUMAN OR DEGRADING TREATMENT OR PUNISHMENT
EU Regulation 2019/125/EU has replaced the former Regulation, consolidating the changes made to that earlier one since 2005. The Regulation provides rules governing trade with third countries in goods that could be used for the purpose of capital punishment or for the purpose of torture or other cruel, inhuman or degrading treatment or punishment, and rules governing the supply of brokering services, technical assistance, training and advertising related to such goods.
ARRESTS RISE TO 130 IN VISA FRAUD SCHEME VIA FAKE US COLLEGE
VoA on 31st January reported that the fallout from a fake university scheme in the US grew with a federal official confirming to VOA that police have arrested 138 foreign nationals across the country — and more arrests may be coming. The scheme lured willing students to a school they knew would never grant them a degree, but would allow them to work legally in the US while technically being enrolled in higher education, potentially committing visa fraud. All but one of the 130 arrested “students” are Indian citizens, the remaining person is Palestinian. Department of Homeland Security agents created the bogus University of Farmington, outside of Detroit, Michigan, in 2015 and, since then, more than 600 foreign citizens enrolled in the school.
MONGOLIA SPEAKER EXPELLED AMID ONGOING BATTLE AGAINST CORRUPTION
Al Jazeera on 1st February reported that the dismissal of the parliament speaker comes as Mongolia reels from separate corruption scandal implicating top officials. The Mongolian parliament voted to expel House Speaker Miyegombyn Enkhbold, in what has become known locally as the “SME scandal”. 14 parliamentarians, 2 cabinet members and other high-ranking officials were accused in November of embezzling more than $1 million in government funds, diverting resources intended to support small and medium enterprise development to their family and friends.
On 1st February, GAFILAT, the regional FATF-style body, in December adopted the 2nd monitoring report. Published in January, it is a follow-up to the mutual evaluation report (MER) of July 2017. It analyses Nicaragua’s progress in addressing certain technical compliance deficiencies which were identified in Nicaragua´s MER. Re – ratings are given where sufficient progress has been made. The report also analyses Nicaragua’s progress in the implementation of the new requirements in relation to the FATF Recommendations that changed since the on-site visit to Nicaragua. It says that, overall, Nicaragua has been making significant progress in addressing the technical compliance deficiencies identified in its MER and has been rerated in Recommendations 5 to Largely Compliant, 11 to Compliant, 20 to Largely Compliant, 21 to Compliant, and 28 to Partially Compliant. Nicaragua will continue the enhanced follow-up process.
On 31st January, the UN announced that the Security Council had decided to extend its sanctions regime on the Central African Republic — including an arms embargo, travel ban and assets freeze — until 31st January 2020, while also extending the mandate of the Panel of Experts assisting the Central African Republic Sanctions Committee until 29th February 2020; unanimously adopting SCR 2454 (2019).
A briefing from Appleby on 30th January was concerned with a court decision in Cayman about international sanctions imposed by the UN in respect of Libya in 2011. The UN Resolutions were given effect by the EU and in the Cayman Islands through the Libya (Restrictive Measures) (Overseas Territories) Order 2011, which has been subsequently amended. A judge has decided that the prohibition on “use” of funds (in this case, shares) in the sanctions prohibitions does not extend to cover the exercise of voting rights by a shareholder. The briefing says the opposite decision would have had significant implications for the corporate governance of companies whose assets are frozen by international sanctions and would have led to perverse outcomes. The defendants in the case successfully argued that the claimant’s interpretation of the prohibition on “use” of shares would have been contrary to the plain and ordinary meaning of the legislation and inconsistent with the object and purpose of the asset freeze. It is said that the judge also provided helpful clarification on the prohibition of “use” of funds. Appleby says that whilst this is the first major decision in the Cayman Islands on international sanctions, its significance is not limited to Cayman Islands law and the interpretation of the prohibition on “use” in Article 10 of the Order. The judge found that the international sanctions regime (UN, EU, UK and Cayman) should be read a single harmonious code; and therefore this decision will therefore be highly relevant to the interpretation of UN and EU sanctions globally as well as UK domestic legislation implementing international sanctions.