2nd April 2019
MULTICHANNEL FRAUD IN RETAIL BANKING
BAE Systems has produced an infographic, saying that payment fraud often takes place using `money mules` to transfer funds. This is very difficult to detect, particularly when the mule accounts are not at your bank. The results can be substantial losses through account compromise and fraudulent payments. The infographic is designed to help one understand how some financial institutions automate detection across all channels in real-time, enabling payment mechanisms to hold suspicious payments and investigators to make adjudications on blocking them.
GIBRALTAR SPANISH TAX TREATY – THE IMPACT ON INDIVIDUALS
On 29th march, Hassans in Gibraltar produced a briefing saying that the Gibraltar Spanish Tax treaty aims to eliminate uncertainty around the tax position of people who are treated as tax resident in both countries. It will impact anybody who has connections to Spain and the implications should be carefully considered.
INDIA: PROCEEDS OF CRIME AND MONEY LAUNDERING UNDER THE PREVENTION OF MONEY LAUNDERING ACT
On 29th March, Vaish Associates Advocates published an article about a recent High Court case in India where the primary issue before the court was “What is Proceeds of Crime?”, for the purposes of the PMLA 2002. The Court held that –
- the expression “proceeds of crime” refers to a property, which is “derived or obtained” by any person as a result of criminal activity. Therefore, in order to pass an order of provisional attachment, it was necessary for the authorities to have reasons to believe that the property sought to be attached was “derived or obtained” from any scheduled crime; and
- the assumption that any amount used in commission of a scheduled offence would fall within the expression “proceeds of crime” as defined in the PMLA is fundamentally flawed.
CANADA EXPANDS SANCTIONS AGAINST RUSSIAN ENTITIES AND INDIVIDUALS
On 19th March, Borden Ladner Gervais LLP published an article saying that Canada had announced on a fresh round of Russian sanctions targeting 114 new individuals and 15 new entities, coordinated with the US, EU and Australia. These new designations were said to be in response to Russia’s recent naval actions near Crimea, including the capture of Ukrainian sailors in the Black Sea and blockage of the Kerch Strait, which connects the Sea of Azoz to the Black Sea.
INDIA’S FRAUD INVESTIGATOR ARRESTS EX-CHAIRMAN OF DEBT-LADEN IL&FS
On 2nd April, KYC 360 announced the arrest of the former chairman of debt-laden Infrastructure Leasing and Financial Services (IL&FS) in connection with an ongoing investigation into the lender. Hari Sankaran, the former chairman and managing director of IL&FS, is accused of “abusing his powers in IL&FS Financial Services Ltd through his fraudulent conduct”.
NEW ZEALAND: NO JURISDICTION WITHOUT SERVICE: DIFFICULTIES OBTAINING INTERIM INJUNCTIONS AGAINST OFFSHORE COMPANIES
On 2nd April, Wilson Harle published an article saying that the High Court dismissed an interim injunction for lack of jurisdiction. The judgment clarifies that the courts will not overlook the requirement for service and highlights the difficulty of seeking an interim injunction against companies that are based overseas. Parties facing difficulties in effecting service on overseas persons should therefore be mindful of the possibility of seeking an order for substituted service.
UK MUTUAL RECOGNITION OF CONFISCATION ORDERS
In a Court of Appeal judgment, the Court held that the Criminal Justice and Data Protection (Protocol No. 36) Regulations 2014 were to be read purposively so as to give effect to EU Framework Decision 2006/783 on the application of the principle of mutual recognition to confiscation orders. The prosecution had obtained a certificate to enforce the confiscation order over the Appellant’s Spanish property. The Regulations could be applied to confiscation orders made before their coming into effect unless it would cause real unfairness to do so. Furthermore, confiscation orders could extend to property which did not directly represent the proceeds of crime where the defendant had benefited from general criminal conduct. It was obvious from the wording and purpose of the EU Framework Decision that the whole scheme was designed to extend both to value confiscation and property confiscation systems. The available amount under POCA could include property which might have no taint of criminality, but where there was a link to the benefit obtained by the defendant through general or particular criminal conduct.
BREXIT: WHAT DO CUSTOMERS OF BRITISH FINANCIAL INSTITUTIONS IN GERMANY NEED TO KNOW?
Bird & Bird on 29th March published an article on a possible No-Deal Brexit, asking what would this mean for customers of British financial institutions, the European Passport and is German banking supervision prepared? Without the European Passport, British financial institutions lose their license to operate in Germany and other EU Member States – with a wide set of consequences for the customers of the affected institutions.
CAYMAN ISLANDS ECONOMIC SUBSTANCE REQUIREMENTS FOR CERTAIN ENTITIES – OVERVIEW
On 4th March, Maples published an article saying that the Economic Substance Law was amended on 22nd February and introduces certain reporting and economic substance requirements for ‘relevant entities’ conducting ‘relevant activities’. The article says that the extent to which an entity is affected will depend upon a number of factors including the entity type, the type of business the particular entity is engaged in and the way in which it operates. However, an initial step will be to determine whether an entity may fall within the classification of a ‘relevant entity’ and, if so, to determine if it is conducting or if it intends to conduct a ‘relevant activity’.
Separately, Maples published an article on the effect of the Law on shipping businesses.
ASSET RECOVERY IN MONACO
On 21st March, Donald Manasse Law Offices produced an article on civil and criminal asset recovery mechanisms in Monaco.
SWEDISH BANK OFF THE HOOK ON MAGNITSKY MONEY LAUNDERING
On 2nd April, EU Observer reported that Sweden’s financial authority has said it will not pursue criminal proceedings against Swedbank over €157 million of Russian money allegedly laundered there because the alleged crime took place prior to tighter due diligence laws imposed in 2014 and after a 5-year statute of limitations had expired.
EU ACCUSED OF FUNDING ‘FORCED LABOUR’ PROJECT IN ERITREA
The EU Observer on 2nd April reported that Dutch-based Foundation Human Rights for Eritreans (FHRE) says conscripts for a road construction project are “trapped for an indefinite period within the service” and used as forced labour. FHRE says some €20 million from the EU’s Emergency Trust Fund for Africa is being used.
EU WATCHDOG GAINS NEW POWERS TO FIGHT MONEY LAUNDERERS
On 1st April, EurActiv reported that Member States have approved giving new powers to the European Banking Authority (EBA) to fight money laundering and terrorism financing, as part of an improvement of the European supervisory agencies (ESA). The EBA will be bolstered with 10 people dedicated to fighting money laundering. The EBA would be able to command national authorities to launch investigations into suspected activities, and could recommend sanctions, whereas currently it authority can open only ‘post-mortem’ investigations.
EU EXTENDS LIBYA SANCTIONS TO OCTOBER
EU Council Decision 2019/539/CFSP has extended the Libyan sanctions regime to 2nd October.
US SUSPENDS TURKEY’S PARTICIPATION IN F-35 FIGHTER PROGRAMME OVER ITS PURCHASE OF RUSSIAN MISSILE SYSTEM
On 1st April, the Washington post reported that both the Trump administration and NATO have said would compromise the technology of the new-generation stealth fighter. Turkey already has officially taken delivery of 2 of the aircraft, but the aircraft have remained in the US while Turkish pilots are being trained. Turkey is also one of the co-producers of the $85 million jet, responsible for the manufacture of key components of the fuselage and cockpit.
AL-QAIDA- ASSOCIATED REBEL GROUP OPERATING IN MOZAMBIQUE
On 1st April, the Daily Monitor reported that the Allied Democratic Forces (ADF) rebels are said to be shifting their bases from DR Congo to a volatile part of northern Mozambique, it is also said that Madinat Tawhid-wa-I-Muwahidin (MTM), which is also fighting the Mozambique government, is there and that the ADF is now allied to Al-Qaeda. MTM is said to be led by a Ugandan associated with ADF.
CHINA CLOSES LOOPHOLE ON FENTANYL-RELATED SUBSTANCES
On 1st April, the Wall Street Journal reported that China is clamping down on more substances related to the deadly opioid fentanyl, to meet a promise made to President Trump. Chinese regulators announced that a wider range of fentanyl derivatives would be declared controlled substances from 1st May and laid out steps for further enforcement, including stepped-up investigations and better tracking of shipments.
ANNUAL GLOBAL THREAT/ATTACK INDEX INFOGRAPHIC
Now available online, provided by HIS Markit, is an interactive infographic produced by JTIC and which highlights key data and trends that enables one to better understand the global threat scenario. Over the course of 2018 JTIC recorded a worldwide total of 15,321 attacks by non-state armed groups, which resulted in a total of 13,483 non-militant fatalities. The attack figure represents a significant 33.2% decrease from the recorded number of attacks in 2017. The figures represented the lowest annual attack total since 2011 and the lowest annual fatality figures since JTIC began collecting comprehensive event data in 2009.
EU COMMISSION CONCLUDES PART OF A UK TAX SCHEME GAVE ILLEGAL TAX ADVANTAGES TO CERTAIN MULTINATIONAL COMPANIES
On 2nd April, the EU announced that the Commission has found that a UK tax scheme is partly justified and does not constitute State aid. However, it did find that the scheme unduly exempted certain multinational groups from these UK rules targeting tax avoidance, in breach of EU State aid rules. The general purpose of the UK’s Controlled Foreign Company (CFC) rules is to prevent UK companies from using a subsidiary, based in a low or no tax jurisdiction, to avoid taxation in the UK. It was found that a multinational active in the UK using an exemption was able to provide financing to a foreign group company via an offshore subsidiary paying little or no tax on the profits from these transactions. The Commission therefore concluded that multinationals claiming the Group Financing Exemption while meeting the “UK activities test” received an unjustified preferential tax treatment that is illegal under EU State aid rules. The UK must now recover the illegal State aid from the multinational companies that benefitted from it.
TERRORISTS PREFER CASH OVER CRYPTOCURRENCY, EVEN PRIVACY COINS
CCN.com on 2nd April reported that a report from the RAND Corporation concludes that cryptocurrency is less than ideal for terrorist organisations. Cash is still king for terrorists, for a variety of reasons, it says, including the liquidity barriers that regulation and legalisation of cryptocurrencies are presenting.
US CONTINUING TO MONITOR REMITTANCES TO PHILIPPINES FOR POSSIBLE TERRORISM LINKS
The Inquirer in the Philippines reported on 2nd April that the US Government has said that it continues to monitor closely remittances sent home by overseas Filipino workers.
FCA: THEMATIC REVIEW: AML/CFT AND THE E-MONEY SECTOR
On 2nd April, Allen & Overy published an article about a review that focused on e-money products, including prepaid cards and digital wallets. The scope of the review excluded other services (such as money remittance) and activities outside of the FCA’s supervisory remit (including gift cards that can be used only within a limited network, or any prepaid product denominated in a virtual currency). The article summarises the findings of the review.
PHILIPPINES; ILLEGAL ONLINE GAMBLING OPERATED RUN FROM INSIDE A JAIL
On 2nd April, Calvin Ayre reported that Philippines immigration operatives suspected an illegal operation was being run from inside prison, and launched a surprise raid on a Bureau of Immigration (BI) jail. It is said that they found several Chinese nationals, who were previously arrested for operating illegal gambling dens in the region, had cash, credit cards, checks, laptops, computer monitors, routers and cellphones, and were using these devices to continue running secret online gambling operations directly from jail.
ISLE OF MAN LEGISLATIVE UPDATE
On 1st April, Appleby published an article on legislation (and consultations) from the past quarter. This included the European Union and Trade Act 2019 and the Dormant Assets Bill 2018.
SWEDBANK: FINANCE CRIME AUTHORITY TO INVESTIGATE INSIDER TRADING, BUT NOT MONEY LAUNDERING
On 2nd April, Baker McKenzie reported that the financial crime authority will not open an investigation into Swedbank for suspected money laundering following a police report from American financier Bill Browder, but is investigating the bank for insider trading.
US UNHAPPY WITH JAMAICA’S PROSECUTION OF FINANCIAL CRIMES
On 2nd April, Baker McKenzie reported that one of the recommendations set out in the just-released 2018 International Narcotics Control Strategy Report reveals that the US has asked the Jamaican Government to take steps to build the capacity of its law enforcement, prosecution, and courts in order to successfully prosecute financial crime cases.
FORMER EXECUTIVE OF COLOMBIA’S GRUPO AVAL CONVICTED IN ODEBRECHT BRIBERY SCANDAL
On 2nd April, Baker McKenzie reported that a former CEO of a subsidiary of Colombia’s largest banking conglomerate, Grupo Aval, was convicted for bribing state officials. Jose Alias Melo was convicted for his role in the 2009 bribery of Gabriel Garcia, the former vice-Transport Minister.
MEXICO’S NEW AIRPORT BOSS LINKED INTERNATIONAL DRUG TRAFFICKING BY REPORT
Insight Crime on 2nd April reported that Deputy Director of Airports Supervision, Juan Manuel Hernández Palafox, has been said to allegedly have links to organised crime groups and facilitating the passage of drug shipments through Mexico City’s International Airport, as well as airports in Cancún, Guadalajara and Tijuana in reports originating from Mexico.
A GUIDE TO ANTI-CORRUPTION LEGISLATION IN THE ASIA PACIFIC
On 2nd April, Clifford Chance published the 6th edition of this publication, saying that businesses need to ensure that they are compliant with applicable anti-corruption laws in each of the countries in which they operate as well as with applicable international anti-corruption legislation with extraterritorial reach, such as the US Foreign Corrupt Practices Act and the UK Bribery Act.
NEW CREDIT UNIONS LEGISLATION IN ISLE OF MAN
On 2nd April the FSA reported that, following approval by Tynwald in March 2019, the FSA has introduced a new regulatory regime for credit unions with effect from 1st April.
WIPO UNVEILS AI-POWERED TRADEMARK SEARCH TOOL
The World Intellectual Property Review on 2nd April reported that the World Intellectual property Organisation has launched an artificial intelligence-powered image search engine to make it faster and easier for brands to establish the distinctiveness of a trademark. It said that the new technology will improve on previous tools because it will identify combinations of concepts within an image to find similar marks that have previously been registered. The current search tools primarily determine trademark image similarity by identifying shapes and colours.
AT THE CROSSROADS: COUNTER-TERRORISM AND THE INTERNET
In its April 2019 journal, the Texas National Security Review published an article which argues that counter-terrorism researchers need to tailor their recommendations to the corporate policymakers inside tech companies who want to do far more than the bare minimum. It says that digital counter-terrorism efforts will not and should not be driven primarily by governments, even in a more aggressive regulatory environment. Companies will continue to be primary actors in the counter-terrorism effort. The operative question is not whether they should work to improve, it is how, precisely, they should go about doing so. Counter-terrorism researchers should recognise this, and tailor their recommendations not just to regulators working to set baselines, but to the corporate policymakers who want to do far more than the bare minimum.
THE CRUCIAL ROLE OF THE MILITARY IN THE VENEZUELAN CRISIS
On 2nd April, the Stockholm International Peace Research Institute published an article saying that, since 1958, the Venezuelan armed forces have traded military support for the government in exchange for money, power and prestige. This bargaining process was reinforced under the Chávez administration, which offered the military political power, money and arms, and strengthened the development of a military–government symbiosis. Chávez acquired the right to approve promotions of colonels and generals—an instrument he used regularly to purge dissidents and promote loyal officers. As a result, military officers took on key positions in state-owned companies, ministries and funding agencies. The military’s influence on and within government has grown to a level not seen in Venezuela since the end of Marcos Pérez Jiménez’s dictatorship in 1948. It says that, by giving the military money, power and prestige, Maduro has—at least for the time being—‘bought’ the political backing of the armed forces.
EU EXTENDS SOUTH SUDAN SANCTIONS FOR ANOTHER YEAR
On 2nd April, the EU Sanctions Blog reported that the US is continuing the “national emergency” declared under an Executive Order for a further year.
EX-FIRST LADY OF EL SALVADOR WILL PLEAD GUILTY TO CORRUPTION
On 2nd April, OCCRP reported local media stories that the former first lady of El Salvador, Ana Ligia Mixco de Saca, will plead guilty to her role in a corruption scheme that saw $25 million of public money laundered during her husband’s presidential tenure.
UK “BACKPEDALLING” OVER FOBT REPLACEMENT GAMES
On 2nd April, Calvin Ayre reported that 2 UK bookmakers were withdrawing machines intended to fill the gap left following the reduction in maximum stakes for fixed-odds betting terminals from £100 to £2 with effect from 1st April. A third bookmaker is said to have been contemplating introducing such replacements. The bookmakers are said to have been responding to a warning from the Gambling Commission regarding new products, which resembled variants of roulette, the same product most prominently featured on FOBT, that would have allowed maximum stakes of £100 to £500 by circumventing the letter of the new regulations.