12th July 2019
CHINA TO RELEASE ITS “UNRELIABLE ENTITY LIST”
Baker McKenzie reported on 11th July that the Ministry of Commerce of China (MOFCOM) announced on 31st May that the Chinese government will introduce an “Unreliable Entity List” regime, under which foreign entities or individuals that boycott or cut off supplies to Chinese companies for non-commercial purposes and causing serious damages to Chinese companies would be listed as “Unreliable Entities”. The list and relevant rules are to be published shortly. This new regime may be used by China as a countermeasure against export control measures of foreign governments targeting Chinese companies.
CHINA: CUSTOMS SEIZE 1,500 TONNES OF SMUGGLED FROZEN FOOD FROM SOUTH KOREA AND 500 TONNES OF SUGAR
Hellenic Shipping News reported that Chinese customs seized frozen food worth $7.3 million, arresting 8 suspects and confiscating 52 containers at the port of Tangshan in the province on 28th June. It also reported the seizure of 500 tonnes of sugar when Chinese customs dismantled a sugar-smuggling network in the eastern city of Suzhou, saying that customs in Suzhou have intercepted 6 sugar-smuggling networks since the start of 2018, seizing 2,758 tonnes of sugar worth about $9.6 million.
HUNGARY: GOVERNMENT AML/CFT WATCHDOG BODY TO IMPROVE CONTROLS AND CRAFT STRONGER AML RULES
ACFCS reports that the Hungarian government has published a resolution setting up a body of experts to make AML recommendations and measures to combat terrorism funding. The Anti-Money Laundering Coordination Council will include government ministers as well as the heads of the tax office, the police, the TEK counter terrorism centre and the Central Statistical Office
SPANISH AUTHORITIES REVEAL GAP IN AML POLICY EXPOSING BITCOIN ATM
Blockchain Reporter on 12th July reported that Spanish law enforcement has said that bitcoin ATM are being widely used for illicit drug payments. The Spanish authorities believe that crypto automated teller machines pose a vulnerability that sidestep the restrictions set for EU AML Regulations, and criminals may take advantage of a loophole in the restrictions that doesn’t extend to the cash machines’ owners. Spanish police revealed that bitcoin ATM are being widely used for illicit drug payments, and this news comes after the Spanish Authorities exposed a laundering operation that used Bitcoin ATM in May 2019.
JERSEY: AML/CFT HANDBOOK FOR REGULATED FINANCIAL SERVICES BUSINESSES UPDATED
Ogier reported that, following the Money Laundering Amendment No.10 Jersey Order 2019 coming into effect on 12th June, the AML/CFT Handbook for Regulated Financial Services Businesses has been updated. It includes a reference to e-ID to make it clear that e-ID is an option to verification when obtaining evidence of identity.
MONEY FROM 1MDB DEUTSCHE BANK LOANS USED TO BUY CONTROVERSIAL SUPER YACHT
On 12th July, The Independent in Singapore reported that the DoJ says ’emergency’ loans from Deutsche Bank to Malaysia’s 1MDB worth $1.2 billion in 2014 found its way into the hands of those who bought a luxury yacht (the Equanimity) which became a controversial issue in Malaysia during Najib Razak’s reign as Prime Minister. The 1MDB scandal contributed largely in bringing Najib’s regime down in 2018. A US civil asset-forfeiture complaint repeatedly describes Deutsche Bank as being misled by 1MDB actors. 1MDB took 2 loans from the German bank, with the first loan worth $250 million and at least $142 million allegedly ended up in personal bank accounts of fugitive businessperson Jho Low.
UK PLAN TO TACKLE ECONOMIC CRIME WOULD FAIL TO HOLD COMPANIES SUFFICIENTLY LIABLE FOR ILLICIT ACTIVITY BEYOND BRIBERY AND TAX EVASION
KYC 360 on 12th July reported that anti-corruption campaigners claim that a new UK plan to tackle economic crime would fail to hold companies sufficiently liable for illicit activity beyond bribery and tax evasion. It says that non-profit groups and others have campaigned for reforms that would make it possible to prosecute companies even when a “directing mind” cannot be explicitly tied to criminality, but one person is quoted as saying that the absence of any mention of corporate-liability reform in this plan is a major failure of political will.
FUGITIVE JEWELLER CONVICTED OF MONEY LAUNDERING IN UK
KYC 360 on 12th July reported that the man is linked to the high-profile Tabernula insider-trading case and has been convicted of laundering the proceeds of the scheme with the help of offshore companies and false invoices. Richard Baldwin set up a company in Panama with a bank account in Zurich to launder £1.5 million. Baldwin absconded and was tried in his absence (he is still at large), the FCA said, and the crimes took place between 2007 and 2008 and the verdict was delivered in July 2017, but could only be reported now after a court restriction was lifted.
CANADA INVESTS IN WHISTLEBLOWER AWARDS, AND REAPS THE REWARDS
On 11th July, an article from the Tax Justice Network says that Canada’s ‘Offshore Tax Informant Program’, set up by the Canadian tax authority in 2014 to track down tax cheats, has yielded some interesting results; and that an investment of less than C$1 million dollars for a potential return of C$50 million dollars, with C$19 million recovered so far, is a good investment.
EU THREATENS TURKEY WITH SANCTIONS OVER CYPRUS DRILLING
EurActiv on 12th July reported that the EU is set to curb contacts and funding for Turkey in retaliation for what it calls its “illegal” drilling for gas and oil off Cyprus and stands ready to ramp up sanctions further, according to a draft statement.
KIMBERLEY PROCESS FOR CONFLICT (BLOOD) DIAMONDS: NEW EU REGULATION CONTAINS CONTACT DETAILS, ADDING GABON
EU Regulation 2019/1189/EU of 8th July amended Regulation 2368/2002 to update the details of contacts in countries party to the Kimberley Process, which supervises the trade in potential blood or conflict diamonds.
UK ECONOMIC CRIME PLAN 2019 TO 2022
On 12th July, the Home Office issued 2 news releases concerned with the plan that the Home Offices says provides information on action being taken by the public and private sectors to ensure that the UK cannot be abused for economic crime. The economic crime plan sets out 7 priority areas that were agreed in January 2019 by the Economic Crime Strategic Board, the ministerial level public-private board charged with setting the UK’s strategic priorities for combatting economic crime.
The minutes of the meeting of Board in January were also published. In discussing the recent FATF mutual evaluation of the UK, it was agreed that 3 main gaps in coverage had been highlighted – SAR reform (which should move from design to delivery); there was much to do to enhance professional body supervisors’ risk-based approach, and FCA should review risks regularly; and Companies House’s information quality. The discussion also touched on the need for open de-risking discussions, and that professional body supervisors might need stronger enforcement powers.
See also HM Treasury news release –
INSOLVENCY SERVICE REVIEW: VOLUME PROVIDERS OF INDIVIDUAL VOLUNTARY ARRANGEMENTS (IVA)
On 11th July, the House of Commons Library published a briefing paper which summarises the Insolvency Service’s “Review of the monitoring and regulation of insolvency practitioners” published in September 2018. In this document, the Insolvency Service detailed significant concerns about the practices and regulation of Insolvency Practitioners working for volume providers of IVA and made several recommendations. An IVA is a legally binding agreement under which an individual, with the agreement of their creditors, repays part of what they owe to their creditors, generally over a period of five years – it must be supervised by an authorised Insolvency Practitioner. The number of people seeking debt relief through an IVA has significantly increased to over 59,000 in 2017 compared to 49,400 in 2016 – up until 2003 there were fewer than 10,000 annually. The way IVA are supervised has consolidated into a limited number of “volume providers” – with 10 providers accounting for over 80% of new IVA registered in 2017.
See also –
ITALIAN PROSECUTORS LAUNCH PROBE INTO RUSSIA COLLUSION CLAIMS
Al Jazeera on 12th July reported that Italy’s far-right deputy PM faces probe after reports say his League party received millions of euros via covert Russian deal, and that a covert Russian oil deal was devised to funnel millions of euros to his ruling League party.
IRELAND: PROPOSAL TO PROHIBIT LOTTERY BETTING
On 11th July, Calvin Ayre reported that, as Ireland is in the midst of updating its old gambling laws, some Irish politicians want to prohibit bookmakers from offering lottery betting either online or in their betting shops. An amendment to a gambling Bill has been put forward that would prohibit Irish bookmakers from offering bets on lottery outcomes. The bookmakers’ trade body said its members have been offering lottery betting for a quarter-century, and lottery betting is estimated to account for 10% of retail turnover and 5% online.
AML/CFT RISKS AND MITIGATION FOR NON-REGULATED COMPANIES
Allen & Overy has published a briefing which says that most commentary on AML issues focuses on regulated companies, which have been subject to significant additional AML/CFT requirements and enforcement for some time. In this paper, the firm sets out to examine some of the risks for non-regulated companies and explore how these risks might be better understood and mitigated. It lays out the basics, including controls and requirements in the UK; then moves on how to mitigate AML/CFT risks, including in merger and acquisition situations.
THE CASE FOR GOOD ENVIRONMENTAL AND SOCIAL GOVERNANCE (ESG) IN THE MINING SECTOR
Field Fisher on 11th July published an article saying that ESG has, for a long time, been a woolly issue for the global mining industry. It says that, chiefly because there were no hard and fast rules on how to develop and implement ESG policies, nor any penalties for failing to do so, many companies felt they could legitimately ignore calls to operate ethically and sustainably – but it seems that the balance is finally starting to tip in favour of “good” ESG. Industry bodies and NGOs have introduced codes and principles that set minimum standards for ESG, and governments have laid down legislation – and perhaps more significantly, money is also starting to talk. The article says that, as advisers to the mining industry, the firm has observed 4 main drivers of improvement in ESG – corporate values; compliance requirements; competitive advantage; and improved risk management on potential asset losses. The article goes on to examine each in more depth. It ends with points to remember when considering ESG.
FLORIDA SUBSTANCE ABUSE RECOVERY CENTRE OWNER PLEADS GUILTY TO $57 MILLION LAUNDERING SCHEME
On 11th July, Baker McKenzie reported that Kyle Ryan Marcotte, 36, owner of a Jacksonville substance abuse treatment centre pleaded guilty for his role in a $57 million money-laundering conspiracy associated with a billing scheme involving laboratory testing services. Marcotte, a principal of Beaches Recovery Services LLC, entered into an arrangement with a laboratory owner to send urine samples from patients to the lab for drug testing in exchange for receiving 40% of the insurance reimbursements. The lab owner, in turn, arranged with the managers of 2 hospitals to have the testing billed to private insurers and reimbursed at favourable rates under the hospitals’ in-network contracts with insurers.
MODERN SLAVERY REPORTING IN UK COULD BE STRENGTHENED BY NEW RULES
An article on Tech UK on 11th July commented on a Home Office response to a report commissioned to look at how the Modern Slavery Act can be improved and which has made several recommendations. It says that a significant number relate to transparency in supply chains. Under the Act, any company turning over £36 million or more needs to set out in a statement how they are looking to remove modern slavery from their operations and supply chains, but there have been criticisms on the lack of enforcement for non-complying companies, the variation in report quality and lack of meaningful comparators. The Home Office is consulting on ways to strengthen reporting requirements and the article lists the proposals made.
US COAST GUARD ISSUES VESSEL CYBERSECURITY GUIDELINES
On 11th July, Homeland Preparedness reported that the USCG has released a best practices Safety Alert in the wake of what is categorised as a growing cybersecurity threat landscape amid expanded reliance on technology to support vessels.
WHAT DRIVES ILLICIT TRADE IN NORTH AFRICA?
On 5th July, ENACT Africa published an article saying that poor governance, corruption and porous borders are among the underlying reasons for the increase in illicit trade in North African countries like Algeria, Egypt, Morocco and Tunisia. It says that North Africa is a source of a variety of smuggled and contraband goods and products. These include various staple commodities, fuel, cigarettes, alcohol and medicines. The region is also affected by illicit transfers of weapons and drugs across borders.
CÔTE D’IVOIRE HAS SEIZED NEARLY 400 TONNES OF FAKE MEDICINE OVER 2 YEARS AS IT BATTLES THE SCOURGE OF COUNTERFEIT DRUGS
An article on the ADF website on 3rd May looked at how the country is battling the scourge of counterfeit drugs, particularly in Abidjan, which has become a West African haven for the crime. Counterfeit medicine results in 100,000 deaths annually in Africa, according to the WHO. It is said that in Ivory Coast, 30% to 40% of medicines are bought off the streets, and they are reputed to be cheaper, and at best they are ineffective and at worst toxic, causing death. The American Society of Tropical Medicine and Hygiene estimated in 2015 that 122,000 children under 5 died due to taking poor-quality anti-malarials in Sub-Saharan Africa. Anti-malarials and antibiotics are the two most in-demand medicines and are the most likely to be out of date or counterfeit.
THE EVOLUTION OF ILLICIT DRUG MARKETS AND DRUG POLICY IN AFRICA
On 9th July, the Global Initiative Against Transnational Organised Crime published an article which reflects on the changing drug policy environment in Africa. It includes a brief history of the drug trade in Africa, for example tracing khat back to at least the 12th Century and saying that cannabis, originally imported from Asia, has a history of at least several hundred years of production and use.
CHINESE SURVEILLANCE SOFTWARE IN USE ACROSS RANGE OF NORTH KOREAN FACILITIES
NK News on 12th July reported that video surveillance software made by Chinese state-owned industry leader Hikvision appears to be in use across schools and workplaces in North Korea. US government agencies have been prohibited from buying equipment from Hangzhou Hikvision Digital Technology Co Ltd since 2018 due to security implications of the company’s state-owned status. The news site that there are also reports of use of ZTE and Huawei systems.
EGYPT TO SUE CHRISTIE’S OVER REPATRIATION OF TUTANKHAMUN BUST
On 12th July, Art Law & More from Boodle Hatfield reported that Egypt intends to sue the auction house over the sale of a “stolen” Tutankhamun bust for £4.7 million on 4th July. The Egyptian government believes the bust was looted from a site near Luxor in the 70s. Christie’s, however, insist the piece had been in Germany since the 60s.
DEUTSCHE BANK PAYS $197 MILLION TO SETTLE VESTIA BRIBERY CASE
The Business Times reported on 12th July that Deutsche Bank AG has settled a lawsuit in London – with no admission of liability – from a Dutch affordable-housing provider that said the lender was responsible for bribery over derivatives trades. The case had featured testimony from a middleman who’s confessed to bribery, and tales of expensive sushi, “bubbly” wine and meals at a Michelin-starred restaurant. Stichting Vestia – a housing provider that nearly collapsed as a result of derivatives losses totalling more than €2 billion – sought to recoup some of the money, saying some of those derivatives transactions were “flawed”.
TOP OFFICIAL OF RUSSIAN PENSION FUND DETAINED ON SUSPICION OF BRIBERY
RAPSI in Russia reported on 12th July that a Moscow court had detained deputy board chairman of the Russian Pension Fund, Alexey Ivanov, suspected of receiving a bribe, and the court is also set to consider the investigators’ motion to detain director of one of the departments of Technoserv Management, Alexey Kopeikin, suspected involvement.
KENYA’S GAMBLERS HAVE BEEN ORDERED TO WITHDRAW THE MONEY FROM THEIR ONLINE ACCOUNTS BY DEADLINE
Calvin Ayre on 12th July reported that the Kenyan government had given online gamblers until midnight on 12th July to withdraw funds, or face losing the funds, after 27 operator licences were revoked (the government claimed they owed tax or had committed other licence violations). The popular M-Pesa payment system is already reported to have blocked payments to some gambling operators.
CANADA: LARGE CRIMINAL ORGANISATIONS RESPONSIBLE FOR 9 OUT OF 10 MORTGAGE CRIMES
On 12th July, Baker McKenzie reported that organised crime is behind an estimated 90% of mortgage fraud in Canada, according to a former RCMP top investigator, and warned that savvy criminal ventures are taking advantage of elevated prices in hot housing markets like Toronto and Vancouver.
FORMER NEW YORK CREDIT UNION CEO CHARGED IN BRIBERY SCHEME
On 12th July, Baker McKenzie reported that Alan Kaufman, former CEO of the troubled Melrose Credit Union, and whose family founded the credit union, has been indicted in New York City, on charges of accepting bribes. Melrose, which made millions of dollars in loans to taxi drivers in New York City, was taken over by the NCUA in October, after which NCUA filed civil charges alleging bribery. The new indictment is in a federal court.
NEW BELGIAN COMPANIES’ CODE EXTENDS POSSIBILITY TO ESTABLISH AN ELECTRONIC SHAREHOLDERS’ REGISTER
An article from Dentons on 12th July reported that the new Code approved in February provides private limited liability and co-operative companies with the possibility to maintain shareholder information in an electronic share register. In March, the Belgian Federation for Notaries Public and the Belgian Institute for Accountants and Tax Consultants also announced that they are collaborating to launch a tool for these electronic share registers.
DEVELOPING THE FIRST-EVER FACILITY FOR THE SAFE DISPOSAL OF SPENT FUEL
On 10th July, an article from the International Atomic Energy Agency (IAEA) says that, following several decades of committed implementation of disposal strategies in Finland and Sweden, as well as co-operation in the development of a safe disposal solution based on a Swedish design, the first-ever deep geological repository for spent fuel removed from nuclear reactors is being constructed in Finland. Sweden, along with other countries, is also working towards building such a facility. After spent fuel is removed from nuclear power reactors, it continues to generate significant heat for several decades, and spent fuel remains highly radioactive for several thousands of years and needs to be isolated for several hundred thousand years. One way to dispose of spent fuel — when declared as waste — once the heat has decayed is to bury it in engineered facilities several hundred metres below ground level, in deep geological disposal facilities.
THE EVOLUTION OF ONLINE VIOLENT EXTREMISM IN INDONESIA AND THE PHILIPPINES
On 10th July, RUSI published a Paper which outlines the evolving use of online platforms by pro-Daesh groups in Indonesia and the Philippines and how this has enabled extremists to develop and strengthen their networks. Social media and encrypted chat apps have shaped the development of extremism in Indonesia and the Philippines in 4 main areas: branding, recruitment, fundraising, and the increasing role of women. The Paper briefly discusses government responses to online extremism, noting that there have been mixed results between Indonesia and the Philippines – Indonesian authorities having undoubtedly been the more successful of the 2 regimes.
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