21st March 2019
WHAT CAN WE LEARN FROM OFSI’S FIRST CIVIL MONETARY PENALTY?
On 20th March, Mayer Brown published an article about the first use by OFSI in the UK of its powers to impose financial penalties for breaches of sanctions legislation. OFSI had acquired the powers in April 2017 – so why only now, and why the bank involved? The article says that the fact that OFSI has used its powers for the first time to levy a very small penalty against a small bank in relation to single, very small transaction, has raised questions about why OFSI selected this particular violation for the first demonstration of its new powers, and what lessons can be drawn about its approach to enforcement. It suggests that OFSI wanted to test its powers (and, no doubt, its internal processes) with a relatively straightforward case before moving on to something more significant. This case indicates, the article says, that OFSI will investigate all apparent violations, and that even those of low value may be penalised. Banks and their lawyers cannot assume that, if they uncover some minor breach, OFSI would not be interested in it. The article suggests that it is worth remembering that only violations committed since April 2017 qualify for civil penalties; and says that it will have taken some time for OFSI to become aware of post-2017 April violations, investigate them, and assess its first penalty.
2 MEN ACCUSED OF SMUGGLING US ELECTRONICS INTO RUSSIA
On 20th March, the Courthouse News Service carried a report saying that 2 Russian nationals – Valery Kosmachov, 66, and Sergey Vetrov, 66 – are facing 52 charges for allegedly masterminding a scheme to smuggle electronic components from the US to Russia, including computer chips with military uses (Vetrov is still at large). They are said to have used 2 Estonia-based companies set up as fronts, and were able to obtain the components by falsely stating that they would be used by entities in Estonia. The components included dual-use programmable computer chips capable of operating in austere environments making them useful in both civilian and military applications.
HOW SHADOWY TAX HAVENS SKIRT CONSERVATION EFFORTS AND MAY FUND ILLEGAL FISHING AND DEFORESTATION
An article on the Massive Science website on 21st March is concerned with an investigation into the data by the Stockholm Resilience Center into the environmental consequences of an opaque global financial system. It used publicly available data from INTERPOL and other sources to uncover how secret financial dealings fuel 2 major conservation threats: overfishing in the world’s oceans and deforestation of the Brazilian Amazon. For example, it considered illegal, unreported, and unregulated (IUU) fishing. This is a serious cause of declining fish populations worldwide, and worth an estimated $23.5 billion a year. The research found that 70% of fishing vessels involved in IUU fishing are registered in tax havens, mainly Belize and Panama – whilst just 4% of all legally-registered fishing vessels originate in tax haven nations. The group also used publicly available data from the Central Bank of Brazil to track foreign investment in Brazil’s soy and beef industries, which are responsible for much of the deforestation in this region of the Amazon – and found that 68% of foreign investment into the 9 biggest soy and beef companies between 2000 and 2011— worth $18.4 billion—was funnelled through tax havens.
BRITAIN’S ARMS EXPORT WATCHDOG IN DANGER OF BECOMING TOOTHLESS
The Guardian on 20th March published an article which focuses on questions posed by a Parliamentary Committee to arms manufacturer Raytheon about the use of its products in Yemen. Raytheon UK has declined to appear before the Committee, instead proposing a trade body represent it and answer questions. The article says the snub comes as academics are questioning the Committee’s ability to hold the government to account over its seemingly endless authorisations for the supply of weapons to countries with dubious human rights records, like Saudi Arabia – and after the Committee’s call for more transparency following its review of 2016 arms exports saw the government reject many of its proposals, continuing to suggest that the UK already operates one of the most robust export control regimes in the world.
RELIANCE INDUSTRIES SELLING FUELS FROM INDIA TO VENEZUELA TO AVOID US SANCTIONS
NDTV in India reported on 21st March that Reliance Industries, operator of the world’s biggest refining complex, has turned to selling fuels to Venezuela from India and Europe to circumvent sanctions that bar US-based companies from dealing with state-run PDVSA, according to trading sources. Reliance had been supplying alkylate, diluent naphtha, and other fuel to Venezuela though its US-based subsidiary before the sanctions were imposed. Reliance, a conglomerate controlled by billionaire Mukesh Ambani, has significant exposure to the financial system of the US, where it operates subsidiaries linked to its oil and telecom businesses, among others. PDVSA’s second largest customer in India is Nayara Energy, partially owned by Russian energy firm Rosneft, one of PDVSA’s primary allies. The articles says that Reliance is among the biggest buyers of Venezuelan oil, although the company has recently said it has not increased crude purchases from Venezuela; and that in 2012, Reliance signed a 15-year deal to buy between 300,000 to 400,000 bpd of heavy crude from PDVSA.
THAI ARMY SEIZES 300,000 LITRES OF DIESEL SMUGGLED FROM MALAYSIA
The New Straits Times on 20th March reported that the army also detained 13 locals for investigation. It had discovered over 120,000 litres of diesel in a trawler and over 170,000 litres in another trawler. The diesel price in Malaysia is cheaper and that’s why they are taking advantage.
GUERNSEY’S RECOGNITION OF ELECTRONIC AGENTS AND SMART CONTRACTS
On 19th March, Carey Olsen published an article saying that the Guernsey parliament had approved a draft ordinance under The Electronic Transactions (Guernsey) Law, 2000 which has been designed to create certainty under Guernsey law in relation to the legal effect, validity or enforceability of a contract involving an electronic agent(s) – a computer programme or electronic or other automated means used independently without review or action by a natural person.
FRAMEWORK FOR THE SCREENING OF FOREIGN DIRECT INVESTMENTS INTO THE EU
On 21st March, the EU published EU Regulation 2019/452/EU establishing a framework for the screening of foreign direct investments (FDI). It shall apply from 11th October 2020.
AUSTRALIA: FORMER PROFESSIONAL SOCCER STAR ARRESTED FOR IMPORTING DRUGS
On 21st March, Channel 9 News reported that former Southampton and Portsmouth midfielder Jhon Viafara has been arrested in his native Colombia on a US drug warrant, officials said. Prosecutors in Texas believe he was part of a criminal network tied to the nation’s feared Gulf cartel, which for a decade moved large shipments of cocaine on fast boats and semi-submersible through the Pacific Ocean to Central America and onto the US.
PAKISTAN: TAX PROFESSIONALS BRIEFED ON AML/CFT
On 21st March, The News International reported that the Securities and Exchange Commission of Pakistan (SECP) has briefed tax practitioners on measures related to AML/CFT.
US ON THE HUNT FOR IRANIAN “GHOST TANKERS”
On 20th March, Oil Price.com reported that the US is now targeting vessels transporting Iranian crude oil in violation of sanctions, a senior State Department official is said to have told VoA. He also said that everyone involved in the transport and ship-to-ship transfer of Iranian oil in defiance of sanctions will be held accountable by Washington. As for the US call to foreign governments to join the effort of cutting access to Iranian oil to markets, so far only Panama has responded by delisting 59 ships.
HMRC LATEST LIST OF SERIOUS TAX DEFAULTERS
On 21st March, HMRC published the latest details of people who deliberately get their tax affairs wrong.
CHINA SMASHES COUNTERFEITING RING THAT SOLD $11 MILLION WORTH OF BRANDED GOODS
On 21st March, Reuters reported that Chinese police have arrested 32 members of a group they said made and sold up to £11.3 million worth of counterfeit luxury goods from brands such as Louis Vuitton and Loewe. Police in the Shanghai also closed 2 assembly lines used to make the counterfeits and seized more than 4,000 bags, clothes and accessories.
US EPA AND CUSTOMS CONTINUE VIGOROUS PORT INSPECTION AND ENFORCEMENT PROGRAMME FOR VEHICLE AND EQUIPMENT IMPORTS
On 21st March, Snell & Wilmer published an article saying that manufacturers, distributors, and retailers of recreational vehicles and lawn and garden equipment subject to EPA regulations should take no comfort in rumours of EPA’s reduced enforcement activity under the Trump administration. It says that the EPA has issued a press release touting its recent enforcement actions that have recently yielded over $500,000 in fines involving 10,000 engines and vehicles denied entry into the US. Cases highlighted included those involving recreational vehicles, as well as scooters, marine engines, generators, and jackhammers denied entry, resulting in significant penalties. Many of these cases involve EPA’s inspection of the catalysts used to control engine exhaust emissions.
SPRING 2019 – PROPOSED AMENDMENTS TO SOUTH AFRICA’S COMPANIES ACT
On 20th March, White & Case published an article saying that new amendments to the Companies Act have been proposed. Among other things, it says, they are intended to make the legislation more business-friendly. The consultation period for the changes closed in December 2018. The article examines the proposed changes.
BRAZIL GUNMEN SHOOT AT ROAD CONVOY CARRYING NUCLEAR FUEL
The BBC reported on 20th March that Gunmen have attacked a convoy of trucks carrying uranium fuel to a nuclear power plant near the Brazilian city of Rio de Janeiro, police say. The convoy came under attack as it drove past a community controlled by drug traffickers 90 miles from Rio. The convoy was carrying uranium fuel fabricated in Resende, in Rio de Janeiro state, to supply Angra 2, one of the 2 nuclear power plants in Angra dos Reis. The uranium was being transported in armoured containers.
UK EXPORT CONTROL JOINT UNIT WEBINAR: EXPORT CONTROLS AND EU EXIT
On 21st March, the Department for International Trade reported that its 1st March webinar was now freely available online. The webinar was designed to assist UK companies to understand the status of EU General Export Authorisations and the recently published OGEL – an open general licence to replace it. The Webex ARF player is required to playback the recording.
Details of the OGEL are at –
UKRAINE INTRODUCES NEW SANCTIONS AGAINST RUSSIA
On 20th March, VoA reported that Ukraine’s president has ordered new sanctions against Russian companies and individuals involved in construction and other activities in Crimea. It targeted those involved in building a bridge from Russia to Crimea and a November incident on the Black Sea in which Russia seized Ukrainian navy vessels and their crews. Individuals involved in staging local elections in areas of eastern Ukraine controlled by pro-Russia separatists were also targeted.
The Ukraine news release is at –
ISLE OF MAN: TAKE ACTION TO PROTECT YOUR BUSINESS NAME – REGISTRATION REQUIRED
On 21st March, the Isle of Man published a news release saying that a business’ name and brand will often be one of its greatest assets: if you have set up a business, and are trading under a company name other than your own, you must register your Business Name with the Companies Registry. If you have previously registered a Business Name, but not completed an Annual Declaration in the last 12 months, you should send a declaration to the Registry as soon as possible to prevent the name being removed from the Register.
ROMANIAN EXPORTERS FACE AN ARTIFICIAL BARRIER ENTERING SCHENGEN AREA
On 21st March, EurActiv reported that visions of trucks being stuck at the border in the event of a ‘no deal’ Brexit should also remind people of the delays faced by Romanian companies exporting into the Schengen area. The article, by a Romanian Government minister, says that over 75% of Romanian exports, amounting to €67.7 billion, are directed to the Single Market. The lines of trucks at the border last for too long, sometimes from half a day to 2 days. The losses incurred by exporters, either multinational companies or SME, irrespective of the origin of their capital, are huge. He says that, if we count an average cost of €10 per hour and per carrier paid for the stationary time coupled with an average of 6 hours per truck spent at the border for customs checks, we arrive at losses of almost €137 million losses suffered by carriers; and that is without factoring in penalties for delays and the current 10 hours waiting time of trains at the border.
UK: 5 MEN CONVICTED OF ATTEMPT TO SMUGGLE 1.4 TONNES OF COCAINE ON CATAMARAN
A news release from the NCA on 21st March reported that 5 men have been convicted of trying to import 1.4 tonnes of cocaine – with a street value of £112 million – which was hidden in a 60-feet sailing yacht heading for the UK. As part of an NCA-led operation, working with partners including Border Force, Devon and Cornwall Police, Maritime Analysis & Operations Centre (Narcotics) MAOC(N), the Irish Navy and the Irish Air Corps, the Border Force cutter HMC Vigilant intercepted the yacht, SY Nomad, on 29th August 2018 as it was sailing towards the UK having left Suriname, just south of Venezuela, at the beginning of that month. Officers believed the plan was for the RHIB to meet the SY Nomad at sea and transfer the drugs over for onward dissemination to the UK.
PHILIPPINES: BIG RETURN FROM UNLICENSED ONLINE GAMBLING CRACKDOWN
On 21st March, Calvin Ayre reported on the effect of the Philippines Amusement and Gaming Corp (PAGCOR) effort in regulating and cracking down on internationally-licensed operators. Newspaper reports say that there are now under 200 licensed operations, as opposed to the almost 30,000 unlicensed operations from a few years ago. It also reports that PAGCOR’s revenues has also gone up. Before the agency took over licensing international outfits, it received US$1.07 million in revenue. Since the introduction of the Philippine Offshore Gaming Operator (POGO) licence it is now bringing in US$110 million.
GIBRALTAR PUBLISHES BILL FOR AN ACT TO CONTROL THE SALE OF IVORY
On 21st March, a news release advised that following publication of a Command Paper several weeks ago, the Government has published a Bill for an Act to control the sale of ivory. It is intended to prevent ivory from being traded and so prevent it from providing a cover for the commercialisation of the killing of elephants. Elephants are being illegally hunted and there are serious concerns about the likelihood of extinction.
LATVIA’S BIGGEST PARTY LINKED TO LAUNDROMAT
On 21st March, OCCRP reported that Aivars Bergers was a welcome addition to the board of Latvia’s Harmony party almost a decade ago. He was a successful businessman and a generous donor, he has since helped the nation’s biggest party navigate corruption scandals and a controversial co-operation pact with Vladimir Putin’s United Russia. However, OCCRP says that new revelations show Bergers received payments from offshore companies used in 2 international money laundering schemes – the Azerbaijani Laundromat and the Magnitsky affair.
On 21st March, Control Risks published a fascinating infographic, saying that the well-established crime of kidnapping-for-ransom saw notable developments in 2018. Alongside this dynamism, there was also a broad continuity in global trends which will allow businesses to plan for 2019 and mitigate this threat.
DIRTY MONEY IS DRIVING UP TORONTO REAL ESTATE PRICES, REPORT SAYS
Baker McKenzie reported on 21st March that Toronto’s real-estate market welcomes criminals, giving them an easy way to invest dirty money and driving up housing prices for regular people, according to a report published by Transparency International Canada. Transparency International Canada studied all residential property transactions in the Greater Toronto Area since 2008 and discovered more than $20 billion in anonymous money entered the real estate market without any oversight or due diligence.
BANKS IN ESTONIA ADOPT INCREASED AML REGULATIONS
On 21st March, Baker McKenzie reported that the Estonian Banking Association has decided to task its member lenders to fulfil AML due diligence measures in an attempt to further heal Estonian banking reputation scarred by the Danske Bank scandal. The improved due diligence measures are in addition state-required safeguards, would apply to establishing business relations and to cases involving clients with above-average risks, including not just non-residents.
HOW VENEZUELA’S STOLEN GOLD ENDED UP IN TURKEY, UGANDA AND BEYOND
Insight Crime on 21st March carried an article saying that the Venezuelan Central Bank (BCV) sold 73.2 tons of gold in 2018 to 2 companies in UAE and one in Turkey. A Spanish website claims to have access to leaked documents that detailed how the gold exited the country throughout 2018. It points out that the total of gold exported by the Central Bank in 2018 was 8 times higher than the 8.65 tons of internal gold production registered in Venezuela up to May 2018 – and it is unknown whether that exported by Venezuela during 2018 came from the Bank’s reserves or from unreported production. One of the companies named in the article is also said to be subject to investigation by anti-corruption agencies in Europe and Africa for trading in “blood gold”.
UKRAINE SEIZES COCAINE WORTH $51 MILLION IN CARGO SHIP
Rferl on 21st March reported that Ukraine’s Security Service (SBU) says it has seized a shipment of cocaine worth some $51 million. The SBU said it found more than a quarter of a ton of cocaine hidden in “containers with bananas” during an inspection on a South American cargo ship that docked in the Black Sea port of Odessa.
CANADA IMPOSES NEW SANCTIONS ON RUSSIA
A news release from the Canadian Government on 15th march advised that Canada was joining with the EU and US in imposing additional sanctions n response to Russia’s aggressive actions in the Black Sea and Kerch Strait and Russia’s illegal annexation of Crimea.
HOW THE ISLAMIC STATE TERROR WAVE ROSE SO HIGH IN EUROPE
In the March edition of CTC Sentinel, an article said that Islamic State became such a potent threat in Europe partly because of special circumstances surrounding the war in Syria and rise of the Islamic State, and partly because the Islamic State built upon networks already established by Al-Qaida. Because Europe’s jihadi networks have grown considerably since the outbreak of the Syrian war and strengthened their ties to the global jihad movement through foreign fighting, it is possible there will be future big waves of attacks. There are 3 main determinants of the emergence of future jihadi cells in Europe in increasing order of importance: military interventions in Muslim countries, jihadi networks, and terrorist entrepreneurs.