19th March 2019
REPORT: PANAMA PAPERS LEAK LED TO REFORM IN 1 OUT OF 5 COUNTRIES
On 19th March, the Irish Times carried an article on research undertaken at Oxford University. Nearly a fifth of countries in which the investigation was reported saw at least one instance of concrete reform, researchers found. The reform included a new law or policy designed to address problems exposed. “Gauging the global impacts of the ‘Panama Papers’ three years later” – found that 147 distinct outcomes arose from the investigation.
The report can be found at –
TIGHTEN NORTH KOREA SANCTIONS BY TARGETING BANKS, EXPERTS SAY
VoA on 18th March reported that the US needs to target banks that facilitate illicit transactions for Pyongyang to increase sanction pressure on North Korea to the maximum, according to the recent UN panel of experts’ report. The report indicated foreign banks facilitate North Korea’s financial transactions for “illegal ship-to-ship transfer of petroleum products and an increasing number of ship-to-ship coal transfers”. The report said “financial sanctions remain some of the most poorly implemented and actively evaded measures”.
TOKYO RETAILER ARRESTED (AGAIN) FOR ALLEGED SMUGGLING FAKE MARC JACOBS WATCHES FROM HONG KONG
Tokyo Reporter on 19th March reported that the president of an apparel retailer in custody over the alleged sale of fake brand-name watches has been arrested again for smuggling. In February, police first arrested him for selling fake wristwatches by labels Armani and Burberry. It says that Tokyo Customs are aware of 60 such smuggling operations conducted by the man. “I did it because it is profitable,” the suspect was quoted in admitting to the allegations.
TANZANIA TRADING CENTRES TO CURB GOLD SMUGGLING
Business Day on 18th March reported that new centres will give small-scale miners, which currently illegally export 90% of their output, access to the formal market. Tanzania has ordered all mineral-producing regions to set up government-controlled trading centres by the end of June, accelerating efforts to curb illegal exports of gold and other precious minerals. The first mineral trading centre was inaugurated in the north-western town of Geita, close to the country’s biggest gold mine. Small-scale miners produce about 20 tonnes of gold a year in Tanzania, but an estimated 90% of the output is illegally exported. Tanzania is Africa’s fourth-biggest gold producer and gold exports are a key source of foreign exchange. Tanzania has also been locked in a prolonged conflict with London-listed Acacia Mining after authorities banned exports of gold and copper concentrates and accused the miner of tax evasion, which it denies.
ESTONIA TO ESTABLISH AML CENTRE FOR STRATEGIC ANALYSIS
ERR on 19th March reported that Estonia is to establish a centre for strategic analysis that would operate under the FIU. The centre will be granted access to the databases and registers of various institutions, and the developing of smart IT solutions in particular will be a very important.
PNB FRAUD: ARREST WARRANT ISSUED AGAINST NIRAV MODI IN UK
Huffpost in India on 19th March reported that, after the arrest, Modi will be brought before the court to secure bail and the legal proceedings for his extradition will begin.
SPAIN “SUSPECTED LATE EX-ADVISER TO RUSSIAN PRESIDENT MIKHAIL LESIN OF MONEY LAUNDERING”
The website Crime Russia on 18th March claimed that former Russian Press Minister and ex-Head of Gazprom Media Mikhail Lesin was suspected of money laundering in Spain. It says that Spanish authorities have discovered many items of properties in Spain that belonged to Mikhail Lesin, his family, and people associated with him, including through offshore companies. Lesin was founded dead in a Washington hotel room in 2015.
INVESTORS IN 19 COUNTRIES SUE DANSKE BANK OVER MONEY LAUNDERING SCANDAL
PYMNTS.com on 19th March reported that an international coalition of pension funds, government entities and asset managers is suing Danske Bank over a far-reaching money laundering scheme tied to Russia, and its subsequent cover-up. The lawsuit alleges that Danske knew about the problem since 2013, but failed to take any action, deciding instead to continue to keep the issue covered up.
SOUTH AFRICA POLITICIAN ARRESTED IN KILLING OF WHISTLEBLOWER
The New York Times on 18th March reported that a high-ranking politician in South Africa’s governing ANC was arrested in connection with the assassination of a party member who had exposed corruption in a public works project, officials said. Mluleki Ndobe is one of the most influential ANC power brokers in KwaZulu-Natal Province. The victim was shot inside his car in 2017 by 2 hit men who sprayed the car with gunfire; and a man suspected of being one of the killers was arrested in September.
US: FORMER HIGH-RANKING UNION OFFICIAL CHARGED IN CORRUPTION PROBE AT FIAT CHRYSLER
The Wall Street Journal on 19th March reported that a former UAW vice-president is accused of accepting illegal payments from Fiat Chrysler Automobiles executives.
WHEN AN IRANIAN OIL COMPANY IS DEFRAUDED IN A FAILED ATTEMPT TO CIRCUMVENT EU SANCTIONS – DOES ITS CLAIM SURVIVE THE ILLEGALITY TEST?
An article from RPC on 19th March was concerned with a claim by the Iranian Offshore Engineering and Construction Company (IOEC), which was a contractor in the offshore oil and gas sector. In 2012, it paid $87 million to a company established in the BVI and controlled by one of the defendants, Dean, as an advance payment for an oil rig. Dean failed to acquire the relevant oil rig the payment was misappropriated by several of the defendants, including IOEC’s managing director at the time. The English High Court found in favour of IOEC in almost all respects. The then MD had been central to the fraud and the other defendants in the proceedings had provided wide-ranging assistance. Some of the defendants used an illegality defence, and argued that IOEC should not succeed due to the sanctions on trading with Iran in place at the time, which they said made the transactions involved illegal. The article says that the case involved considerations of illegality and of public policy, and required the court to ask itself whether such considerations defeated the otherwise good claims brought by IOEC. To decide the questions, the High Court applied the test laid out in Patel v Mirza. RPC says that this case provides an interesting example of the extent to which entities complicit in the breach of EU sanctions are still able to bring legal proceedings relating to matters arising out of those breaches.
AND ANOTHER “ILLEGALITY DEFENCE” CASE – IN THE CAYMAN ISLANDS
An article on 14th March from Ogier is concerned with unpicking what was said about the illegality defence in a complex case, and what lessons can be derived for future Cayman Island cases where this defence might be engaged. The Court found that the fraud perpetrated was an enormous, long standing scheme (and was effectively a Ponzi Scheme) which had defrauded more than a hundred banks. Whilst the circumstances of the case meant that there was no need for the Court to find that the defendant Cayman companies (represented by a number of different official liquidators) could invoke an illegality defence, perhaps in anticipation of the appeal to be heard in 2019, said that if its factual finding of complicity was overturned then the illegality defence would have been engaged. Consequently, the Court gave useful guidance on how to approach the ‘notoriously knotty’ defence of illegality. The article goes on to explain the defence of illegality. It says that a new test confirmed in the case goes some way to clarify the law in an area which has traditionally been marked with considerable confusion. This new “tripartite” test involved 3 stages –
- the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim;
- any other relevant public policy on which the denial of the claim may have an impact; and
- whether denial of the claim would be a proportionate response to the illegality.
The conclusion says that the case appears to confirm that the defence of illegality will be successfully invoked where the claimant is complicit in the wrongful act of the defendant -but that is unlikely to be invoked in circumstances where the company seeks redress against the fraudulent insider itself and such defence would permit the fraudster to defeat the claim by reliance on his own wrongdoing.
EU AMENDS SANCTIONS LISTING FOR HAMZA USAMA MUHAMMAD BIN LADEN
From 20th March, EU Regulation 2019/431/EU amends the listing of Hamza Usama Muhammad bin Laden under the ISIL/Al-Qaida/Da’esh sanctions, bringing its listing into line with that of the UN.
UK: TOBACCO PRODUCTS (TRACEABILITY AND SECURITY FEATURES) REGULATIONS 2019
These Regulations implement Articles 15 and 16 of the Tobacco Products Directive (2014/40/EU) to provide for a track and trace system for the supply chain of tobacco products and a system of security features to authenticate tobacco products. This means that each pack of tobacco will carry a unique code to track it from the producer to the retailer, and a label incorporating security features that can be used to check the product is genuine. They also set out sanctions for non-compliance and make consequential amendments to existing legislation to allow packs of tobacco products to carry traceability codes and security features. The introduction of a track and trace system is a requirement of the WHO Framework Convention on Tobacco Control Illicit Trade Protocol, which the UK has ratified, and the track and trace system along with new security features are introduced by the EU Tobacco Products Directive. The track and trace system aims to contribute to reducing the circulation of non-compliant tobacco products (products which do not meet all legal requirements in terms of content, packaging and duty payable), reduce artificially cheap supplies of illegal tobacco products, and protect public health, state budgets, and legitimate businesses.
PERSONAL SERVICE COMPANIES & IR35
On 18th March, the House of Commons Library published a briefing paper which says that the so-called ‘IR35’ rules to prevent the exploitation of personal service companies for tax avoidance were introduced in April 2000, following a long and contentious consultation exercise. This legislation, it says, remains unpopular among freelancers who use this corporate form to provide services. The publication looks at debates as to the effectiveness of these rules and wider concerns about the use of employment intermediaries to avoid tax, before discussing recent developments as to their application in the public and private sector.
IRELAND: MEN “TOOK IN €5.5 MILLION IN FORESTRY INVESTMENT FRAUD”
On 19th March, RTE reported that 2 men who ran a multi-million euro ‘Ponzi Scheme’ took in over €5.5 million in a forestry investment fraud, the Dublin Circuit Criminal Court heard. More than 140 people from Northern Ireland, the UK and Europe invested in Arden Forestry Management which the court heard was a fraudulent investment scheme. Investors were sent a welcome pack with false timber certificate and land folio documents endorsed by legitimate companies without their knowledge.
HEAD OF JAPAN’S OLYMPIC COMMITTEE STEPS DOWN AMID TOKYO 2020 CORRUPTION PROBE
NPR reported on 19th March that the president of the Japanese Olympic Committee said he will step down amid allegations of corruption into the successful bid for Tokyo to host the 2020 Olympics. He maintains his innocence and intends to serve out the rest of his 10th term as president, resigning in June.
BRAND-NEW EUROPEAN PUBLIC PROSECUTOR STARTS HIRING IN LUXEMBOURG
The Luxembourg Times on 19th March reported that the EU’s first public prosecutor, an independent body which will investigate crimes against the EU budget, is about to start hiring 117 staff for its Luxembourg headquarters. The European Public Prosecutor’s Office (EPPO) will open in November 2020 and is now looking to elect a chief prosecutor and supporting staff to fight crimes such as fraud and cross-border VAT fraud.
GRECO PUBLICLY DECLARES BELARUS NON-COMPLIANT WITH THE COUNCIL OF EUROPE ANTI-CORRUPTION STANDARDS
On 19th March, the Council of Europe’s Group of States against Corruption, in an unprecedented move, has publicly declared Belarus non-compliant with its anti-corruption standards.
NCA LAMENTS ‘DEARTH’ OF SUSPICIOUS ACTIVITY REPORTS FROM LAWYERS
On 19th March, the Law Society Gazette reported that lawyers have not been forthcoming in reporting suspected suspicious activity related to money laundering, NCA director Donald Toon told MPs, saying that the majority of SAR come from banks.
UK REGULATORS HOST THE FIRST MEETING OF THE NEW CLIMATE FINANCIAL RISK FORUM
Shearman & Sterling published an article on 19th March saying that the FCA and the Prudential Regulation Authority have published press releases following the first meeting of the Climate Financial Risk Forum on March 8th. The CFRF aims to encourage financial sector approaches towards managing the financial risks from climate change as well as supporting green finance. The CFRF will develop practical tools and approaches to reduce the barriers for firms looking to adopt a strategy for minimizing financial risks from climate change. The regulators are concerned with both the impact of climate change itself and the transition to supporting a low carbon economy.
WOMAN BELIEVED TO HAVE HELPED ALBANIAN ORGANISED CRIME GROUPS OBTAIN AROUND 500 UK PASSPORTS ARRESTED BY NCA
A news release from the NCA on 19th March reported that a 37-year-old Albanian woman from Ilford was apprehended during an NCA-led multi-agency day of action, targeting a criminal network suspected of facilitating British citizenship and passports, false accounting and money laundering for criminals. Officers believe the network have provided services to criminals involved in drug trafficking, people smuggling, human trafficking, child abuse, kidnapping and serious violence.
BUSINESS AND HUMAN RIGHTS: NAVIGATING A CHANGING LEGAL LANDSCAPE
On 19th March, law firm Clifford Chance published a paper in which the Global Business Initiative on Human Rights and Clifford Chance consider developments around the world, focusing on what companies need to know to position themselves to navigate the changing legal landscape. It says that elements of the corporate responsibility to respect human rights are now embedded in legal requirements in several jurisdictions – new laws in this area are likely to emerge in the coming years. It also says that businesses that are already working seriously to implement respect for human rights in their organisations are likely to be well-placed to meet new legal requirements, and those that are not already working to implement respect for human rights should start now. The paper summarises the key human rights-related legal initiatives to date.
AMERICAN BAR ASSOCIATION WHITE PAPER ON CRYPTOCURRENCIES AND DIGITAL ASSETS
On 19th March, the ABA issued a news release saying that a research group of the ABA had released a comprehensive white paper addressing jurisdictional issues associated with digital products, such as cryptocurrencies, and digital processes, including blockchain. It says that the white paper tackles a number of topic areas relevant to the ever-changing cryptocurrency and digital asset landscape. These include FinCEN regulation of digital assets, in relation to AML and KYC requirements; and international regulation of digital assets and blockchain technology throughout Europe, Asia, Australia, and globally.
FRANCE ‘SEEKING ARREST’ OF 2 RUSSIAN EX-ATHLETICS OFFICIALS
Rferl on 19th March reported that France has issued arrest warrants for 2 former Russian athletics officials as part of an investigation into doping cover-ups – Valentin Balakhnichev, a former president of the Russian athletics federation, and Aleksei Melnikov, an ex-coach of Russia’s national long-distance-running team. Both were banned for life in January 2016. French magistrates have also issued an arrest warrant for Papa Massata Diack, whom the Senegalese government refuses to extradite to France – he is the son of ex-IAAF chief, Lamine Diack, who was arrested in 2015 over charges that he had received millions of dollars to cover up doping violations by Russian athletes.
REVENUE SEIZE OVER A MILLION CIGARETTES IN DUBLIN PORT
A news release from the Irish Revenue Commissioners on 19th March reported that, during routine operations, Revenue seized just over 1 million smuggled cigarettes in Dublin Port. The cigarettes, labelled as “Marlboro” were shipped from Rotterdam.
KUWAIT ARRESTS SYRIAN TYCOON LINKED TO ASSAD AND ON EU SANCTIONS LIST
On 19th March, the Kuwait Times reported that Mazen Al-Tarazi, a long-time Kuwaiti resident, and a prominent Syrian businessman with close ties to Syrian President Bashar Al-Assad has been arrested in Kuwait, his lawyer said. Kuwaiti newspaper Al-Qabas, citing unnamed informed sources, reported that the businessman is accused of money laundering and printing texts without authorisation. He is on the EU sanctions lists.
EAG TO PRESENT EVALUATION REPORT ON BELARUS’ AML SYSTEM IN NOVEMBER
Belarus News reported on 19th March that the FATF-style regional body, EAG, is to present the evaluation report on the country’s AML/CFT system at the EAG Plenary in November.