13th May 2019
RUSSIAN JAILED IN US, CHARGED WITH SMUGGLING F-16 FIGHTER JET MANUALS TO MOSCOW
On 12th May, the Standard-Examiner reported that Oleg Mikhaylovich Tishchenko has been jailed in Weber County and is facing trial in August, charged with smuggling F-16 fighter manuals to Moscow and trying to obtain guides for other front-line US Air Force jets. The investigations began in June 2011, when Tishchenko posted in a Russia-based video game forum seeking help for shipping fighter jet manuals. He described himself as a developer for the Moscow-based Eagle Dynamics video game company, and said that he only wanted to get manuals to “understand how stuff works” for implementing various fighters into the company’s Digital Combat Simulation World game. However, export licences are needed for overseas shipment of any items on the US Munitions List, including combat systems manuals.
NEW ZEALAND: 10 FORMAL AML/CFT WARNINGS ISSUED
Scoop reported on 13th May that the Financial Markets Authority had issued a news release saying that it had issued formal warnings to 10 reporting entities under section 80 of the Anti-Money Laundering and Countering Financing of Terrorism Act, after it carried out a risk-based assessment of independent audit reports for reporting entities it supervises in February this year, targeting 69 reporting entities. 5 formal warnings were given to reporting entities for failing to have their risk assessment and AML/CFT programme audited every 2 years; and 5 formal warnings to reporting entities who had their risk assessment and AML/CFT programme audited, but where the audit was not done in a timely manner, occurring months after its due date.
LEADING ESTATE AGENTS VOICE SERIOUS CONCERNS OVER AML IN UK
The Negotiator reported on 13th May that leading property firms including Chestertons and Winkworth says implementation of AML in the UK is too patchwork and poorly policed. The group, which met in London, included 14 of the industry’s best-known businesses including Chestertons, Kings Group, Miles and Barr, auctioneer I Am Sold, Millbank, Laurent Residential, AZ Real Estate, Winkworth Franchising, Legal Eye, Warnerheath, Jeremy Leaf, Remax and LDG Estate Agents. They complained about inconsistencies of approach, compliance and policing across the sector, and said that members of the public are too ignorant of rules and that there is too much duplication of work created by the multiple government agencies involved.
CYPRUS SEC DIRECTIVE FOCUSING ON MONEY LAUNDERING
On 13th May, In Cyprus reported that the Cyprus Securities and Exchange Commission has sent out a directive which requires that additional targeted training should be provided by regulated entities to their staff especially in the area of suspicious activity monitoring, and that regulated entities should also appoint a senior staff member who has the ability, the knowledge and the expertise as a ‘money laundering compliance officer’.
JAPAN: WHISTLEBLOWING CERTIFICATION REGIME LAUNCHED
On 13th May, Nagashima Ohno & TsuneMatsu published an article saying that several reports have recommended changes to corporate whistleblowing systems which, in hindsight, were deemed to have been functioning incorrectly, and the Consumer Affairs Agency launched an independent investigation into the issue. The final report published in 2016 suggested that the establishment of a whistleblowing certification system would incentivise businesses to voluntarily enhance their own whistleblowing systems and thereby gain the trust of various stakeholders, including shareholders, counterparties and consumers; and the Consumer Affairs Agency created a certification regime for corporate whistleblowing systems (the whistleblowing compliance management system (WCMS). The article briefly describes the regime, saying that while the WCMS certification regime is in its infancy, there are already signs that companies are embracing the self-certification aspect.
CHINA INDICTS FORMER INTERPOL CHIEF ON BRIBERY CHARGES
KYC 360 on 13th may reported that Chinese prosecutors have indicted former Interpol president Meng Hongwei on charges of accepting bribes, the latest development in a case that began with his disappearance while on a journey to Beijing.
PANAMA: NEW DUE DILIGENCE RULES FOR BANKS AND FIDUCIARY COMPANIES ARE ESTABLISHED
Law firm Aria reports that a new Agreement from the Banking Superintendence of Banking about additional requisites which banks and fiduciary companies must take into account when determining their clients’ profiles and when assigning them risk profiles, including the Tax ID number from their country of origin and an affidavit stating that the flows of income and the exiting of funds towards the banking or fiduciary entity comply and will continue to comply with the tax obligations in place in their country of tax residence. Furthermore, offshore entities will have to submit to banks and fiduciary companies an affidavit which demonstrates they comply with their respective tax obligations.
UK: PRACTICAL ADVICE FOR DIRECTORS OF DISTRESSED COMPANIES
On 9th May, Ropes & Gray published a briefing saying that, when a company enters a period of financial distress, there is a shift of emphasis in the duties of the directors: directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members. In particular, directors must be mindful to minimise potential losses to creditors and can incur personal liabilities for failing to do so (for wrongful trading, fraudulent trading, misfeasance, breach of duty, etc). The brief covers such things as wrongful trade and continuing to trade, engagement with stakeholders and proposed law changes.
EU TOBACCO TRACK AND TRACE WILL BE FULLY FUNCTIONAL IN A YEAR
However, EurActiv on 13th May reported that critics have pointed out a number of shortcomings in the system that will possibly result in delays and market disruption. In order for the new track and trace system to be fully operational across Europe, all Member States should be compliant; otherwise, tobacco products will not be able to move in the EU Single Market. Not all Member States are ready regarding the appointment of ID issuers and the Commission has authorised economic operators in the tobacco supply chain to use the services of a functioning operator in another Member State on a temporary basis.
IRELAND: IMF CONCLUDING STATEMENT OF THE 2019 ARTICLE IV MISSION
On 10th May, the IMF published this Statement, which included saying that it should broaden the tax base in a growth-friendly manner (and that the increase in the VAT rate for the hospitality sector is a welcome step); Ireland should continue its proactive approach to the international corporate tax reform agenda; and Ireland should continue to strengthen its AML regime and ensure the integrity of its globally interconnected economy. Following the transposition of the 4th AML Directive, authorities should ensure ongoing implementation of requirements regarding CDD; transparency of beneficial ownership; and suspicious transaction reporting by banks, the real estate sector, lawyers, and TCSP. However, it also warns that a disorderly no-deal Brexit would have significant and immediate adverse consequences for the Irish economy and reduce long-run output.
SOUTH AFRICA: PROBE INTO FRAUD AND CORRUPTION AT NATIONAL LOTTERIES COMMISSION
The Ground Up website on 13th May reported that an investigation has been launched by the Department of Trade and Industry (DTI) into the National Lotteries Commission (NLC) following allegations of fraud and corruption involving grant allocations to “good causes”.
CHARTERED INSTITUTE OF TAXATION RESPONSE TO HMRC PROPOSAL TO BECOME PREFERENTIAL CREDITOR (AGAIN)
On 10th May, the CIOT published its response to the HMRC consultation document. Legislation will be introduced to make HMRC a preferred secondary creditor for certain tax debts paid by employees and customers (VAT, PAYE, employee NIC and CIS deductions). The new rules will come into force for insolvencies that commence from 6th April 2020. HMRC will remain an unsecured creditor for taxes directly on businesses, such as corporation tax and employer NIC. In other words, the consultation is proposing partially to restore Crown preference which was abolished in 2003.
CUSTOMS DOG SNIFFS OUT €1.2 MILLION IN CASH AT DÜSSELDORF AIRPORT
Customs Today on 13th May reported that a sniffer dog named Luke has tracked down huge bundles of cash from passengers at Düsseldorf Airport in the last 6 months. The 3-year-old German shepherd is the only cash sniffer dog in Germany who is trained to work with humans at airport security, authorities say. He has sniffed out €1.2 million in cash from 21 passengers.
ESTONIA UPS REQUIREMENTS FOR VIRTUAL CURRENCY LICENCES
Banking Tech on 9th May reported that the Estonian government has approved a Bill to toughen the regulation on granting virtual currency activity licences to service providers, calling this a significant step forward in preventing money laundering in the field of cryptocurrencies and saying that it is determined that it must not be the last step.
LAW FIRM CENTRAL TO SCHEME THAT LOST ‘HOTEL ROOM’ INVESTORS £52 MILLION
Legal Futures on 13th May reported that a dubious ‘hotel room’ investment scheme involving a law firm cost nearly 900 investors up to £52 million, a decision of the Solicitors Disciplinary Tribunal (SDT) – concerning Sheena Kay Taylor, a non-solicitor fee-earner who was head of investment property at Graham & Rosen – has revealed. Also involved was “Solicitor X”, who faced a large number of allegations over his involvement in dubious and/or illegal investment schemes, inadequate advice, a failure to safeguard client money, and a conflict of interest. Whilst allegations against a Mr palmer, former senior partner at Graham & Rosen, has not been determined, he has given an undertaking that he removes his name from the roll of solicitors, never re-apply for re-admission and never work in the profession in the future. Ms Taylor was found to have facilitated the schemes, or assisted Solicitor X to do so. The scheme involved 26 developments where investors bought leases for rooms in hotels, student accommodation and care homes, generally off-plan. The returns were meant to accrue from the income generated by the eventual occupants of the rooms, but all the schemes failed, meaning investors’ deposits were lost.
COUNTERFEITING AND PIRACY AND THE SWEDISH ECONOMY
On 10th May, the OECD published a book saying that the threats of counterfeiting and piracy are growing – and Sweden is vulnerable. It measures the direct economic effects of counterfeiting on Swedish industry, government and consumers, and it examines both the impact of the imports of fake products to Sweden and – more importantly – the impact of the global trade in fake products that infringe on the IP rights of Swedish innovative companies.
RELEASE OF CARGO WITHOUT PRODUCTION OF ORIGINAL BILL OF LADING PROVES COSTLY
On 13th May, Insurance Marine News pointed one to an article from law firm, Clyde & Co, published on 9th May and about a case where a cargo of containerized tyres was shipped from from China to, Brazil. As the buyer failed to pay for the cargo, the original Bill of Lading remained in the claimant’s possession. In December 2015, the cargo was discharged, and was then registered with the Brazilian Foreign Trade Comprehensive Database. The cargo was subsequently transferred by local Customs to a bonded warehouse and released to the consignee. Not having been paid by the consignee, the claimant lodged a claim against the shipping line for release of the cargo without production of the original Bill of Lading. The view fo the Chinese court involved view was that a carrier should not be deemed automatically liable for a cargo owner’s loss where the cargo is released without the production of the original Bill of Lading. The carrier should instead only be considered liable if it can be shown that it “assisted in” or “led to” the consignee taking delivery of the cargo. In other words, Clyde & Co conclude, if there is evidence that the carrier had no control over the cargo after discharge or that the carrier’s act did not cause the release of the cargo (whether intentionally or negligently), it should have a reasonable defence.
The briefing itself is available at –
UAE: COMMERCIAL VESSELS TARGETED BY SABOTAGE OPERATIONS
On 13th May, the BBC and others reported that 4 commercial vessels have been targeted by suspected sabotage operations near the territorial waters of the UAE. The incident occurred near the emirate of Fujairah, which serves as part of a vital global oil and gas shipping route separating the Gulf states and Iran. Saudi Arabia confirmed that 2 Saudi oil tankers sustained “significant damage”. 1 of the other 2 vessels targeted was Norwegian-registered.
TENSIONS MOUNT OVER TURKEY’S DRILLING OFF CYPRUS
EurActiv on 13th May reported that Turkey launched a major naval exercise in a show of force that comes amid mounting tensions over its plans to start drilling off Cyprus. Meanwhile, Turkey’s first drilling vessel, “Fatih”, sailed off to the Mediterranean to start the country’s first deep-sea drilling operations off the southern coast of Cyprus. EU Member States have called on Ankara to immediately stop its “illegal drilling activities” in Cyprus’ exclusive economic zone (EEZ).
IN SOUTH AFRICA, ILLICIT CIGARETTES ARE A SMOKING GUN ON CORRUPTION
On 13th May, an article from the Atlantic Council says that, in South Africa, cigarettes are ubiquitous on the black or grey market. They are mostly sold loose or in packs at roadside kiosks and small informal shops known as spazas. This illicit market accounts for a large portion of the total market for cigarettes. Yet, it says, both the smaller companies accused of smuggling cigarettes and the multinationals that rail against the practice have been implicated in, at least, serious impropriety and, in the worst cases, corruption, money laundering and tax evasion. It also says that a case study in and Atlantic Council working paper on the illicit tobacco trade shows how failures in the South African state from 2013 to 2018 led to an explosion in this activity. It says that the illicit cigarette trade began to pick up in South Africa around 2002 at a time when there was a rise in the presence of counterfeit products on the market and cross-border smuggling from Zimbabwe. But it wasn’t until 2006, when the modus operandi switched from cross-border smuggling to under-declaration, that the illicit cigarette trade started to flourish.
The Study, published on 1st March, is available at –
UK’S FIRST CANNABIS RESTAURANT RAIDED BY POLICE
On 13th May, the Natural products website reported that Canna Kitchen, the Brighton restaurant that opened in December 2018, claiming to be the first in the UK to offer cannabis-infused cuisine, has been raided by Sussex Police. A spokesperson for the café said that a quantity of stock was seized from the shop at the premises and its products are defined as industrial hemp, and are clearly and transparently imported as such, with all taxes and duties paid. The products contain CBD and trace elements of THC in line with the UK legal guidelines for pharmaceutical definitions and UK legal definitions of CBD products. The statement also said that if trace elements of THC render these products illegal, then by default all CBD products must be illegal in the UK, and this would mean that many large high street chains are currently breaking the law.
EU TO REMOVE UK AND DUTCH OVERSEAS TERRITORIES FROM TAX HAVEN BLACKLIST
Reuters on 13th May reported that EU finance ministers are set to remove the UK overseas territory of Bermuda, the Dutch Caribbean island of Aruba and Barbados from the its blacklist of tax havens, an EU official said. The islands were added to the list in March because the EU found shortfalls in their tax rules that could favour tax evasion in other states.
PAPUA NEW GUINEA PIONEERS TRANSPARENCY ON EXTRACTIVES
Public Finance International on 13th May reported that the PNG government has adopted a policy to institutionalise the Extractive Industries Transparency Initiative standard and will introduce new mechanisms to suppress corruption and earn public trust. With the help of the Adam Smith Institute, it is now drafting a law to establish an Extractive Industries Transparency Commission.
IRAQ REVEALS BIG CORRUPTION FILE IN BASRA OIL CONTRACTS INVOLVING 2 INTERNATIONAL COMPANIES
Kurdistan 24 on 13th May reported that Iraq’s Commission of Integrity has revealed corruption marred contracts between the state-run Basra Oil Company and 2 international companies over the purchase of loading arms, said to worth a total of $126 million, while the actual price should not have exceeded $40 million. The price assigned in the contract for a single loading arm was $42 million, with the actual value estimated at $13 million, the Commission added. According to the Transparency International 2018 Corruption Index, Iraq ranks 168th, the 12th most corrupt country out of a total of 180.
SOUTH KOREA: PROSECUTION SEEKS ARREST WARRANT FOR EX-VICE JUSTICE MINISTER
KBS World Radio on 13th May reported that the prosecution is seeking a court warrant to arrest a former Vice Justice Minister Kim Hak-ui over allegations that he received bribes and sexual favours from a local land developer.
UNICEF BELGIUM DIRECTOR STEPS DOWN AMIDST ADOPTION FRAUD ALLEGATIONS
The Brussels Times on 13th May reported that Bernard Sintobin, who was appointed interim director of the Belgian branch of UNICEF only last week, has been asked to step down from his functions by the president of the fund, after allegations of adoption fraud emerged against him.
NEW YORK COUNTERFEIT AIRBAG SELLER SENTENCED TO 24 MONTHS IN PRISON
On 13th May, IP Pro reported that Raymond Whelan has been convicted of conspiracy to traffic in counterfeit goods by a US District judge. He operated Rayscarparts71.com, an online automobile parts company that sold counterfeit airbags. Multiple undercover purchases were made from the platform, with all purchases deemed counterfeit. The fake airbags infringed trademarked automobile brands including Honda, Subaru, Nissan, and others.
A PRIMER ON CANADIAN SANCTIONS LEGISLATION
On 13th May, Blake Cassels & Graydon LLP provides an overview of the key elements of the Canadian sanctions legislation and related prohibitions and obligations as of December 4th, saying that there are 5 federal statutes under which the Government of Canada imposes economic sanctions and trade restrictions.
ILLEGAL AIR TAXIS: 6 CHANNEL ISLAND PLANES BEING MONITORED
The Jersey Evening Post on 13th May reported that at least 6 aircraft suspected of being used for illegal ‘taxi’ flights in and out of the Channel Islands are being closely monitored by aviation authorities, the director of civil aviation has revealed. Non-commercial pilots are today being warned that they could be fined thousands of pounds if they are caught carrying passengers for a profit – under the terms of their licence they can only receive payments to cover the cost of the flight. Grey charters have come under the spotlight following the death of Premier League footballer Emiliano Sala and pilot David Ibbotson in a crash off the coast of Alderney in January.
VIETNAM SEIZES HALF TONNE OF KETAMINE IN CRACKDOWN ON SYNTHETIC DRUGS
MSN.com on 13th May reported that Vietnamese police have seized half a tonne of ketamine worth $21 million in Ho Chi Minh City, a key transit hub that has seen record busts of synthetic drugs in recent weeks as narcotics gangs use its ports and air links to shuttle drugs across the region. 3 Taiwanese citizens and a Chinese man were arrested. The ketamine was allegedly brought in overland to Vietnam and was destined for Taiwan.
THE INTERNATIONAL TAX COMPLIANCE LANDSCAPE IN 2019
On 13th May, Eversheds published an article from the Tax Journal which says that the international tax compliance landscape has become increasingly complicated and is often unclear. The main reason for this, it says, has been due to a proliferation in domestic measures (sometimes with extraterritorial application). This is compounded by measures introduced through international instruments, it says.
CHINA COMMITS TO DECLASSIFICATION OF MILITARY-TECHNOLOGY PATENTS
Janes.com on 13th May reported that China has declassified more than 7,000 military-technology patents in the past 2 years as part of efforts to encourage private-sector participation in defence development and production activities. The government declassified about 3,000 patents in 2017 and more than 4,000 patents in 2018.
US DoJ GUIDANCE ON FALSE CLAIMS ACT
On 7th May, the DoJ published its policy on the factors that prosecutors can consider when determining whether to reduce civil penalties in False Claim Act cases as a way to reward companies for being co-operative. It says that the DoJ has taken important steps to incentivize companies to voluntarily disclose misconduct and co-operate with investigations; enforcement of the False Claims Act is no exception. Co-operation credit in False Claims Act cases may be earned by voluntarily disclosing misconduct unknown to the government, co-operating in an ongoing investigation, or undertaking remedial measures in response to a violation. Even if the government already has initiated an investigation, for example, a company may receive credit for making a voluntary self-disclosure of other misconduct. The Act is a federal law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programmes.