4th April 2019
CUM/EX SCANDAL – IMPACT ON THE FINANCIAL SERVICES INDUSTRY
Clyde & Co on 21st March published an article about the dividend arbitrage tax evasion scandal that originated in Germany and is said to affect some 100 financial institutions. An investigation has claimed that the scandal has cost taxpayers across Europe some €55 billion in lost tax. Whilst the UK has, thus far, not been directly implicated in the investigation, the FCA has warned banks and interdealer brokers about dividend arbitrage in 2017 following a review in which a “small number” of firms were found not to be doing enough to assess why clients were undertaking transactions with the ultimate aim of claiming withholding tax. This, says the article, is “one to watch”.
HONG KONG COURT OF APPEAL CONSIDERS CONSTITUTIONALITY OF THE REQUIREMENT TO DISCLOSE SUSPICIOUS TRANSACTIONS
On 19th February, an article from Herbert Smith Freehills discussed a case where the Court dismissed a challenge to the constitutionality of an aspect of Hong Kong’s money laundering legislation. The Court held that the statutory regime which obliges banks to disclose suspicious transactions relating to property known or believed to represent proceeds of a crime is not unconstitutional.
CAN THE SFO ‘CRACK’ MORE CASES BY GETTING SUSPECTS TO CO-OPERATE?
BCL Solicitors LLP published an article that looks at the considerations which can arise when entering into co-operation agreements under the Serious Organised Crime and Police Act 2005. Introduced in April 2006, the provisions added to rather than replaced the pre-existing common law mechanisms – as a section 71 agreement, which confers immunity from prosecution in exchange for a suspect’s full co-operation; or a section 73 agreement, which requires a suspect to plead guilty to an offence, but enables the court, when sentencing, to take into consideration the co-operation provided (often resulting in a substantial reduction in sentence). It asks if the SFO can overcome the difficulties mentioned in the article, saying that using SOCPA agreements to ‘crack’ more SFO cases is easier said than done.
CBD LAW – US POST MAILING GUIDELINES
Klein Moynihan Turco LLP on 21st March published an article about guidance issued in March to address how cannabidiol (CBD) products may be sent via US mail. USPS has advised that the guidance is temporary and will be revised once the Agricultural Improvement Act of 2018 is fully implemented. The article also mentioned that despite being removed from the list of banned “Schedule I” substances, problems are still encountered due to certain CBD edibles may not be sold because of Food and Drug Administration regulations, and trademarks for hemp-derived CBD products continue to be rejected by the United States Patent and Trademark Office.
FDA ISSUES MORE GUIDANCE ON CBD PRODUCTS
On 3rd April, the Fresh Toast website reported on a recent advisory press release issued by the FDA on hemp and hemp-derived cannabidiol, and the associated FAQ. It points out that, although the FDA has stated that the 2018 Farm Bill removed hemp from the Controlled Substances Act in the US, the FDA still retained authority over hemp CBD additives to foods (both human and animal), drugs, and dietary supplements.
RUSSIAN BUSINESSMAN ACCUSED OF HELPING PUTIN ASSOCIATES GET AROUND US SANCTIONS
On 3rd April, the Latvian-based Meduza website carried a report that scientist and businessman Alexander Plekhov, who was mentioned in the Panama Papers in connection with offshore accounts belonging to Sergey Roldugin, a friend of Russian President Vladimir Putin; and now the investigative outlet Proekt says that it has learned that Plekhov’s companies are also closely tied with a business owned by another friend of Putin’s, Yury Kovalchuk. Plekhov is said to own 33% of the leasing operator LiRoss, which offers technical and transport equipment for rent, and a report from Russia indicates that LiRoss helps Rossiya Bank avoid the effects of international sanctions.
SIG SAUER: GERMAN GUN-MAKER EXECS STRIKE COURT DEAL OVER ILLEGAL SALES
Deutsche Welle on 3rd April reported that 3 top executives will have to pay heavy fines for their role in unlawful weapons sales to Colombia. The transactions violated the company’s export licence. Sig Sauer was accused of exporting more than 38,000 semi-automatic pistols to its US sister company, Sig Sauer Inc., between 2009 and 2011 that were subsequently forwarded to the Colombian National Guard. This violated the company’s German export licence, which banned arms sales to Colombia due to an ongoing civil war.
Meanwhile, its US arms has announced an order from the Indian Army which agreed to pay the gun maker a reported $72 million for 72,400 rifles for its infantry. International deals have turned SIG Sauer into the US’s largest exporter of small arms.
MAN SMUGGLED 72,000 CIGARETTES INTO UK IN 4 LARGE SUITCASES
My London on 2nd April reported that a man has been sentenced to 8 months in jail for smuggling cigarettes into the country in 4 large suitcases. Christopher Olaniyi Samuyiwa, 53, was travelling alone when he flew into Leeds Bradford from Nigeria with cigarettes in 4 large suitcases. When interviewed by HMRC officers he told of his involvement in boxing, that he was a heavy smoker and that the cigarettes were for his personal use.
BULGARIAN CUSTOMS CONFISCATES 20 TONNES OF SMUGGLED ALCOHOL
Mena FN on 3rd April reported that the NCA said that officers at the Danube Bridge checkpoint near Vidin at the border with Romania have captured 19,360 litres of alcohol from a truck reported to be carrying professional floor cleaner from Bulgaria to the Netherlands.
TURKEY: POLICE RECOVER ANCIENT ARMENIAN KING’S TOMBSTONE IN ANTI-SMUGGLING OPERATION
Daily Sabah on 3rd April reported that anti-smuggling police seized a 2,000-year-old tombstone belonging to an ancient Armenian king.
NORWAY: A ROLE MODEL FOR PREVENTING CORRUPTION IN PARLIAMENT AND AMONG JUDGES AND PROSECUTORS
In contrast to the report on Malta, the Group of States against Corruption (GRECO) report on Norway, also published on 3rd April, said that Norway has implemented satisfactorily, or dealt with in a satisfactory manner, all 7 recommendations contained in a previous evaluation report. It says that Norway is a role model whose experience and endeavours could inspire other GRECO members.
UK GOVERNMENT IS CONSULTING ON MEASURES TO PREVENT THE MISUSE OF CONFIDENTIALITY CLAUSES
On 3rd April, Morton Fraser reported that confidentiality clauses, gagging orders, non-disclosure agreements (NDA) – whatever you want to call them – on the back of #MeToo are turning out to be one of the big issues for employment law for 2019. The UK Government has now published a consultation paper on measures to prevent misuse of confidentiality clauses in situations of workplace harassment or discrimination, the consultation closes on 29th April.
TRADE ETC. IN DUAL-USE ITEMS AND FIREARMS ETC (AMENDMENT) (EU EXIT) REGULATIONS 2019
These Regulations are one of a large number of such statutory instruments that deal with how existing EU legislation will 9or won’t) apply after exit day. These particular Regulations make amendment to the Export Control Act 2002 about export controls and trade controls (i.e. controls on trafficking and brokering of certain items); and the control of exports, transfer, brokering and transit of “dual-use” items. The regulations also make amendments in relation to the illicit trafficking of firearms and in particular amends EU Regulation 258/2012 which implements Article 10 of the UN Protocol against the illicit manufacturing of and trafficking in firearms, their parts and components and ammunition. It is said that, after EU exit, the legislation will enable the Secretary of State to control the export from the UK of strategic items, control the brokering of strategic items, and to control the provision of technical assistance related to the goods and technology and, as far as possible the legislation will operate as it does now.
CALLS FOR CORRUPTION CRACKDOWN IN VANUATU FOLLOWING EU AID FRAUD
ABC Radio in Australia on 4th April reported that there have been renewed calls for Vanuatu to crackdown on corruption within the government, following the conviction of a senior Vanuatu aid negotiator – Victor Rory, who worked in the Prime Minister’s office. He was found guilty of embezzling development funds, including more than A$182,000 intended for EU-funded projects. An inquiry is said to have discovered a lot of instances of corruption. EU delegates are expected to meet with Vanuatu officials later this month to discuss the fraud.
LATVIAN BANK TO BEGIN APPEAL OVER €80 MILLION FRENCH FINE
The Irish Independent on 4th April reported that an appeal by Latvia’s Rietumu Banka against an €80 million fine levied against it by French authorities for tax avoidance and aggravated money laundering is due to be heard in late September. The bank is one-third owned by Irish financier Dermot Desmond.
IRISH BUSINESSMAN PETER CONLON CLAIMED HIS CONVICTION FOR EMBEZZLING FROM CHARITIES WAS THE RESULT OF A FORCED CONFESSION
On 4th April, the Irish Independent reported that Peter Conlon has dramatically claimed his conviction for embezzling €3.8 million from charities including Red Cross and Trócaire was the result of a forced confession. He claimed “prosecutorial misconduct” by the Swiss, and says a report is being prepared for submission to the Irish Government and the European Commissioner for Human Rights.
EX-TRUCKING COMPANY CFO CHARGED IN $245 MILLION STOCK SCHEME
On 4th April, the Mail Online reported that Peter Armbruster, 60, of Milwaukee, the former CFO of a Wisconsin-based trucking company has been arrested and charged as part of an ongoing federal probe into what authorities say was a complex $245 million stock scam. He and 2 other men face an 19-count indictment that charges the men with conspiracy, securities fraud, wire fraud, bank fraud and attempting to influence auditors to falsify the company’s books in order to artificially inflate the firm’s earnings.
ONE BELT, ONE ROAD PROJECT ROAD TRANSPORT MILESTONE
On 3rd April, Loadstar reported that China’s One Belt, One Road project has passed a milestone, when Ceva Logistics became the first company to complete a shipment by truck from China to Spain. The 16-day journey involved the vehicle covering more than 13,600 km, carrying 7,000 kg of garments.
FORWARDERS SHOULD NOT PAY SURCHARGES FOR CONTAINERS THAT HAVE NOT BEEN CLEANED OR MAINTAINED, AND SHOULD CHARGE SHIPPING LINES FOR ANY COSTS INCURRED AS A RESULT OF POOR QUALITY BOXES
On 3rd April, Loadstar reported that trade body Fiata has recommended forwarders don’t pay surcharges for containers that have not been cleaned or maintained, and that they charge shipping lines for any costs incurred as a result of poor quality boxes – this being in a new “Best Practice” handbook issued by the organisation: Container Shipping and the Quality of Containers. It expresses concern that shipping lines, as owners of the containers, neglect their duties related to the quality of containers for cost reasons and the forwarder is then considered responsible.
BREXIT: CROSS-BORDER DISPUTES AND ENFORCEMENT OF FOREIGN JUDGMENTS
On 3rd April, Irish law firm Matheson published the latest of its series of Brexit briefs, and which takes a look at how Brexit will affect cross border disputes, in particular the enforcement of judgments obtained in such disputes.
NEW VIDEO HEARINGS PILOT IN UK TAX TRIBUNALS WILL TEST “MORE ROBUST SOFTWARE”
On 4th April, Legal Futures reported that video hearings are set to be piloted for a second time in the tax tribunal, this time using “robust” technology after questions were raised about its reliability last year, the Senior President of Tribunals has revealed.
CROWN PREFERENCE IN THE UK
On 4th April, Dentons published an article about the proposed reintroduction of Crown preference (abolished in the UK in 2003) in respect of tax debts. If this is implemented, HMRC will have priority to recover certain taxes from insolvent businesses ahead of other creditors from 6th April 2020. The article considers this question and the scope and rationale of the proposals, focusing on the impact on secured creditors in an insolvency.
ALL OF THE WORLD’S TOP 5 CARRIERS ARE NOW CALLING AT THE PORT OF LIVERPOOL
On 4th April, Port Technology reported that Peel Ports has announced that China’s COSCO will ship via Liverpool, following the conclusion of a successful trial in October 2018. This means all of the world’s top 5 carriers are now calling at the Port of Liverpool, which was upgraded to cater for the largest post-Panamax container ships through the construction of the $530 million Liverpool 2 terminal completed in 2016.
4 SEAFARERS SNATCHED IN CAMEROON PIRATE ATTACK
On 3rd April, Port Technology reported that 4 crew have been seized by pirates following an attack on a container ship off the coast of Cameroon in the Gulf of Guinea. According to Maritime Bulletin, the vessel was at anchorage when pirates boarded it and kidnapped the crew members.
ISO 37001 CERTIFICATION
A post on the FCPA Blog on 3rd April looked at if ISO certification can be regarded as an evidence of an effective anti-bribery programme. It concludes that if you wish to go through the certification process, make sure to choose the auditors well. Otherwise, a certification audit may turn into a rubber stamping exercise.
PRIVATE-JET CRYPTOCURRENCY GETS APPROVAL FROM SEC
Wall Street Journal on 3rd April reported that the restrictions on use of TurnKey Jet’s ‘digital tokens’ limit their appeal for investors broadly. The private jet company won the ability to sell a digital token that does not require oversight by financial regulators. The hitch is that the token won’t operate like others, diminishing its allure to fans of cryptocurrencies. The SEC told TurnKey Jet Inc that the company can issue “digital tokens” to people who sign up for its membership programme, and members can then, in turn, use the tokens to charter a private jet.
AMERICAN WOMAN AND HER DRIVER KIDNAPPED IN UGANDA’S MOST POPULAR WILDLIFE PARK
Defence Web on 4th April reported that gunmen demanding a ransom of $500,000, police said. Various illegal groups from Somali Islamists to Congolese-based rebels operate in Uganda from time to time, but identity of the kidnappers’ identity remains unknown.
BELGIUM’S FINANCIAL WATCHDOG UPDATES CRYPTO-RELATED BLACKLIST TO TOTAL OF 120 WEBSITES
On 4th April, Coin Telegraph reported that the Belgian Financial Services and Markets Authority (FSMA) has updated a blacklist of crypto-related websites associated with fraud. Belgian investors are said to have reported losses of about $2.5 million in crypto scams in 2017, which is evaluated to account for only 4% of overall crypto fraud cases, with the total losses estimated to amount to $152 million.
NEW ORDER CONTINUES BAHAMAS’ ECONOMIC SANCTIONS ON NORTH KOREA
On 4th April, the Nassau Guardian reported on the International Obligations (Economic and Ancillary Measures) (Democratic People’s Republic of Korea) Order 2019. The Bahamas, since 2008 with an amended order in 2010, has held economic sanctions against North Korea and the latest order revokes and replaces the 2008 order.
CONVICTED FRAUDSTER WHO OWES THE TAXPAYER £240,000 IS ORDERED TO HAND OVER HIS £30,000 POKER WINNINGS
The Daily Mail reported on 4th April that Adam Lulat was jailed for 28 months in 2015 for his involvement in a £40 million money laundering and VAT scam. However, when authorities tried to get back the money he made from the scam, he insisted he had no assets and only had to pay £1. But since being freed from prison, the 27-year-old has become a top poker player, winning tens of thousands of pounds at cards.
AMSTERDAM WANTS SHOPOWNERS TO REPORT CASH PAYMENTS OVER €1,000
The NL Times on 4th April reported plans by the Mayor of Amsterdam. Shopowners already have to report cash payments over €10,000, but the Mayor wants to reduce this threshold.
SFO CHIEF ATTACKS ‘BLANKET OF PRIVILEGE’ TACTICS
The Law Society Gazette on 4th April reported that the director of the SFO has warned that businesses over-using legal professional privilege (LPP) to protect the findings of internal investigations can expect a rough ride from the justice system. She said corporates that do their own investigation should preserve vital evidence such as first-hand accounts and witness testimony; and that she plans to introduce guidance for corporates and legal advisers to give them ‘added transparency’ about what they might expect if they decide to self-report fraud.
5 UK ONLINE GAMBLING WEBSITES ACCUSED OF ADVERTISING TO CHILDREN
Calvin Ayre on 4th April reported that the Advertising Standards Authority has found 5 online gambling operators in violation of the country’s rules for targeting ads at children. The ASA identified 5 brands for breaking the advertising laws – Vikings Video Slot (NetEnt), Redbet, Multilotto, Unibet and PlayOjo (SkillOnNet).
DENMARK ORDERS 25 GAMBLING WEBSITES BLOCKED FOR OPERATING ILLEGALLY
On 4th April, Calvin Ayre reported that Spillemyndigheden has contacted Denmark’s Internet Service Providers (ISP), requesting that they block access to all of the sites for not obtaining the requisite licences to provide their services in the country. 10 of the sites are i-gaming sites and the other 15 are skin gambling sites.
CAMBODIA TO DEPORT 165 CHINESE OVER ILLEGAL GAMBLING RING
On 4th April, Calvin Ayre reported that, following raids on 2 locations in March, police detained a large number of individuals, including 165 Chinese nationals. It is said that China is going to send a plane to retrieve the individuals. It is said that since the beginning of 2018, 1,724 foreign nationals have been deported. Of those deported, 927 were Chinese. Deportations were ordered due to a variety of reasons, including entering the country without a passport, overstaying a visa, using false documents to enter, drugs and online gambling.
IRISH REVENUE PROVIDES KEY BREXIT ADVICE FOR TRANSPORT COMPANIES AND THEIR DRIVERS
On 4th April, the Irish Revenue Commissioners issued a news release announcing a new phase of engagement with trade and business who may be transporting goods to, from or through the UK post-Brexit. The latest information from Revenue is vital, it says, in helping truck drivers avoid congestion and delays for trucks coming into, and moving out of, Irish ports.
UK: FEES YOU’LL PAY TO REGISTER FOR MONEY LAUNDERING SUPERVISION
On 4th April, HMRC published a guide to fees you need to pay when you register for money laundering supervision, and how to pay them.
EX-CROATIA PM JAILED AFTER COURT INCREASES HIS CORRUPTION SENTENCE
On 4th April, the Miami Herald reported that a top Croatian court has increased to 6 years the corruption sentence against former Prime Minister Ivo Sanader and ordered his immediate imprisonment. Sanader served as prime minister from 2003 to 2009. He is the highest-ranking official tried for corruption in Croatia.
DENMARK IGNORES ECB TO BAN €500 NOTE IN DIRTY MONEY BATTLE
The Peninsular in Qatar on 4th April reported that Denmark is ignoring a request by the European Central Bank and moving to ban €500 notes. The prohibition runs contrary to European agreements on the free movement of capital, but the bills’ use for criminal activities justifies the ban, according to Danish authorities. They cited the ECB’s decision to stop printing the notes, which also was recommended by FATF.
ARKANSAS LEGISLATURE PASSES BILL TO PREVENT DISCLOSURE OF INGREDIENTS OF LETHAL INJECTIONS
Jurist on 4th April reported that the Arkansas legislature passed a Bill that would ensure the confidentiality of certain capital offence procedures including the drug ingredients used in the state’s lethal injection. After pharmaceutical companies faced backlash for their drug products ending up in lethal injection formulas, the Arkansas Department of Correction has been unable to obtain the ingredients from drug manufacturers. (Note: there is, for example, an EU ban on the supply of certain chemicals used in lethal injections).
$100 BILLS IN CIRCULATION SOAR TO A RECORD – RISE IN GLOBAL CRIMINAL ACTIVITY?
On 4th April, Baker McKenzie reported that the number of US $100 bills worldwide has hit its highest level in history last year, growing by about 7%, or $92 billion year over year, to a record $1.3 trillion worth. Growth in US bills between $1 and $20 was much weaker at about 2.6% growth year over year. The number of outstanding $100 has doubled since the financial crisis.
MEXICO STILL STRUGGLING TO CURB ILLEGAL MEDICINE EPIDEMIC
Insight Crime on 4th April reported that a new proposed law would mean anyone found guilty of falsifying, contaminating or altering medication would face a prison sentence of up to 30 years and a potential fine of $573,000, and those convicted of stealing medicinal products serve up to 10 years behind bars. According to the Mexican Association of Pharmaceutical Research Industries 60% of medication sold in the country is either stolen, expired, falsified or produced without meeting minimum quality requirements it having the sixth-largest market for illicit medications in the world.
PRO-GUN BOLSONARO FIRES UP FOREIGN HOPES FOR BRAZIL DEFENCE MARKET
On 3rd April, France 24 reported that the right-wing former army captain, who relaxed gun ownership laws soon after taking power in January, has raised hopes among foreign firms that his next move will be easing investment restrictions on Brazil’s $55 billion defence sector. Some 450 Brazilian and foreign companies, ranging from makers of machine guns and rocket propelled grenade launchers to “target detection” technology and surveillance drones, are on display at the recent LAAD defence and security expo. Measures protecting local manufacturers from competition, including tax breaks and subsidies, have long frustrated access by foreign companies. Brazil is the third-largest exporter of small arms and ammunition in the world with annual sales topping $500 million, and it accounted for 27% of South American arms imports from 2014 to 2018.
EU REPORT ON SMALL ARMS AND LIGHT WEAPONS (SALW) STRATEGY PROGRESS
The EU Non-Proliferation and Disarmament Consortium has published a report examining the effect of the EU Strategy adopted in 2018 to combat the illicit proliferation of firearms, small arms and light weapons (SALW) and their ammunition – with the EU and Member States committed to co-ordinating their actions and initiatives on this security challenge. The report concludes that the Strategy can be considered a highly positive development, but stresses that more attention is needed on upgrading the export control policies of Member States. It recommends using the current review process of EU Common Position 2008/944/CFSP on arms exports to develop a truly comprehensive approach to combating the illicit proliferation of these lethal weapons.
IRISH REVENUE SEIZE ALMOST 3 MILLION CIGARETTES WORTH €1.6 MILLION IN KILDARE
On 4th April, a news release from the Revenue Commissioners reported that officers seized 2.9 million smuggled cigarettes during a search, under warrant, of premises in Newhall, Co. Kildare. The cigarettes, branded ‘NZ’, originated in Belarus and have a retail value of over €1.6 million.
US WAR ON DRUGS HAS HELPED TRAFFICKING CARTELS EXPAND IN CENTRAL AMERICA, STUDY FINDS
Illicit Trade on 4th April reported that the US decades-long war on drugs has helped narcotics cartels spread across Central America, according to a new study from researchers at the University of Alabama. A model showed that the war on drugs has been costly and ineffective over recent decades, and has resulted in the amount of land used by trafficking networks in Central America increasing from around 2 million square miles in 1996, to 7 million square miles in 2017. The study also said current US drug policy is making cocaine trafficking more widespread and harder to eradicate, and will continue in its current form to encourage cartels to move into new areas, making it easier for them to move their product north. A previous UN report had revealed that cocaine production hit a record high in Colombia in 2017.