25th July 2019
AUSTRALIAN WEAPONS SHIPPED TO SAUDI AND UAE AS WAR RAGES IN YEMEN
The Guardian on 25th July reported that, in the same week that UK courts declared British arms exports to Saudi Arabia to be unlawful, a large shipment of Australian-built remote weapons systems left Sydney airport. It was said to come from ATK Alliance Techsystems Operations (Orbital ATK), a US-based company which sells the equipment manufactured by an Australian company, Electro Optics Systems (EOS). The R400 remote weapons station allows small cannons, guns or missile launchers to be mounted on military and light vehicles and operated remotely. The newspapers notes that, in February, the then acting deputy secretary of the defence department’s strategic policy and intelligence group, repeatedly told a Senate estimates hearing that an export licence would not be approved if the weapons were going to be used in Yemen. However, the Australian government has admitted that it does not run any (end-use/end-user) checks once the product has left the country.
HONG RATES MONEY LAUNDERING/TERRORIST FINANCING RISK FOR STORED-VALUE FACILITIES AS MEDIUM
On 24th July, in its Hong Kong Regulatory Bulletin, Herbert Smith Freehills reported that the Hong Kong Monetary Authority had published its money laundering and terrorist financing risk assessment report for the stored value facility (SVF) sector in Hong Kong, showing that it continued to have a “medium” risk rating. An SVF is a facility which may be used for storing value of an amount of pre-paid money (or money’s worth), and used as a means of making payment for goods or services. It says that the HKMA has identified various areas for further action. Among other things, it plans to consult the industry in due course on proposed amendments to the AML/CFT guideline for SVF licensees, including updating the application of the risk-based approach. The article provides a brief summary of the assessment, and details the HKMA “to do” list. It also says that there are likely to be further enhancements to the AML/CFTregime for Hong Kong (in the SVF and/or other sectors), following the anticipated release in September of the FATF report on the mutual evaluation of Hong Kong.
DISSENTING DIRECTORS – A WARNING NOT TO GO PUBLIC
On 24th July, Herrington Carmichael Solicitors published an article saying that disagreeing company directors take note: don’t spill the beans outside the boardroom or you risk facing the courtroom. Dissenting directors tempted to go public could, as a recent ruling emphasises, risk breaching a number of company law responsibilities. Looking at a recent case, the article considers what duties did the director breach – fiduciary duties and service agreement conditions. The article concludes that the law requires directors to comply with important duties to ensure the company’s best interests are promoted, and this involves maintaining a high level of discretion over matters covered within the boardroom; and there are multiple sources for directorial duties. Despite having a service agreement which determines many of their duties, directors will still be subject to the fiduciary duties under company law, and any implied contractual duties. Being aware of these obligations and duties is a good first step in avoiding potential claims such as the one mentioned above.
UK: SUSPICION SUFFICIENT FOR BANK TO GET RID OF A CUSTOMER
On 23rd July, Stephenson Harwood published an article saying that the recent High Court judgment in N v The Royal Bank of Scotland Plc provides a useful guide to a bank’s duties under the current law. In particular, it addresses when a bank can terminate a customer’s account if it suspects a connection with the proceeds of crime. It is noted inter alia that account terms said that the Bank could refuse to process any payment if (among other things) in the Bank’s reasonable opinion it was prudent to do so in the interest of crime prevention. The bank suspected that credit balances on the main accounts constituted or represented benefit from criminal conduct and that N was engaged (whether innocently or otherwise) in money laundering. The High Court expressly rejected the contention that the Bank was required to establish complicity or prove fraud; and made clear that there are wider public interests of the prevention of crime and the protection of the victims of crime which should also be considered as part of the decision-making process.
SPANISH PROSECUTOR ASKS COURT TO PUT BBVA UNDER INVESTIGATION IN SPYING CASE
KYC 360 reported on 25th July that Spain’s anti-corruption prosecutor has asked Spain’s High Court to put the country’s second-biggest bank, BBVA, under formal investigation as part of a probe into an alleged industrial espionage case. The bank has officially acknowledged that it hired Grupo Cenyt, a security firm owned by ex-police chief Jose Manuel Villarejo’s firm, , who was arrested in 2017 as part of a separate investigation and remains in jail. But it says it has not found any evidence of spying.
BERNIE MADOFF ASKS TRUMP TO REDUCE HIS PRISON SENTENCE FOR MASSIVE PONZI SCHEME
On 25th July, KYC 360 reported that Bernie Madoff is asking that President Donald Trump reduce his 150-year prison sentence. He is requesting clemency from Trump in the form of a sentence commutation, or reduction.
2 CHARGED WITH ‘TERRORISM’ OVER BULGARIA’S BIGGEST DATA BREACH
EurActiv on 25th July reported that prosecutors have charged 2 workers at a cybersecurity company with terrorism as part of an investigation into Bulgaria’s biggest-ever data breach – a cyber-attack on the country’s tax agency, in which nearly every Bulgarian adult’s personal data and financial records were compromised.
FORMER BILLABONG SURFWEAR BOSS STRUCK OFF AS LAWYER OVER $13.5 MILLION FRAUD
On 25th July, WA Today in Australia reported that Matthew Perrin has been officially struck off Queensland’s legal roll. In 2016, he was convicted of fraud after he forged his wife’s signature on mortgage documents and used those to defrauded a bank $13.5 million and sentenced to 8 years in prison. The pair made about $57 million from their investment in Billabong and had lived a life of luxury.
GEORGIAN BANK TBC CHAIRMAN AND DEPUTY RESIGN OVER MONEY LAUNDERING CHARGES
Reuters reported on 25th July that chairman Mamuka Khazaradze and deputy Badri Japaridze had decided to step down from the board with immediate effect, a day after prosecutors charged them with money laundering. They founded the bank in the early 1990s, but have been charged with laundering illegal revenues worth over $16.75 million.
MALAYSIA: 18 LUXURY CARS IMPOUNDED IN OPERATION TO PREVENT SMUGGLING OF FOREIGN VEHICLES
On 25th July, Bernama reported that 18 luxury vehicles of various makes were impounded by the Royal Customs Department (JKDM) in a special operation with the Malaysian Anti-Corruption Commission (MACC) to prevent the abuse of facilities and smuggling of foreign vehicles into Sarawak.
CHINA’S “BELT AND ROAD” PROJECTS UNDER GROWING FCPA SCRUTINY BY US
On 24th July, an article from Thomson Reuters on the reported focus by prosecutors in the US to prioritise Foreign Corrupt Practices Act (FCPA) violations by companies in China. The article says that recent corruption scandals related to investment activity in the Belt and Road Initiative have made such activity glaring targets for FCPA enforcement actions. It mentions the 1MDB scandal in Malaysia, with investments in the Initiative by the fund and former prime minister, Najib Razak discussed. It is said that it is highly likely that US regulators will examine businesses involved in the Initiative more closely for potential FCPA issues and indicators of financial crime that may have been conducted through the US financial system; and that many of the investment projects associated with the Initiative have also involved industries which are highly susceptible to bribery, such as the infrastructure sector.
CHINA AND BELARUS IMPLEMENT AEO CUSTOMS AGREEMENT
On 25th July, Customs Today reported that an agreement on mutual Authorised Economic Operator (AEO) status signed between China and Belarus has come into effect, offering easier customs clearance for exporters from both countries. Companies that obtain the AEO status in the two countries will enjoy simplified customs procedures, including reduced examination and prioritised clearance, when they export products to the other country. It explains that the AEO system, initiated by the WCO, aims at facilitating customs clearance for enterprises through the authentication by customs of enterprises with a high level of law compliance, credit status and safety. China has signed mutual AEO agreements with 41 countries and regions including Singapore, Korea, the EU, Switzerland and New Zealand.
UK LAUNCHES PROBE AFTER HUMAN REMAINS REPORTEDLY FOUND IN SHIPPING CONTAINERS SENT TO SRI LANKA
On 25th July, Customs Today reported that over 100 shipping containers sent to Sri Lanka appeared to carry human remains disguised as recyclable metals. Sri Lanka has ordered the return of 111 containers after finding extremely hazardous materials mixed in with mattresses, plastics and clinical waste, and DEFRA in the UK said it was investigating reports that human organs and body parts were inside the container.
THE BASICS: DOES LEGAL PROFESSIONAL PRIVILEGE (LPP) APPLY TO ALL COMMUNICATIONS WITH OR THROUGH A SOLICITOR?
In the latest of its series of basic guides, on 24th July Gowling WLG published an article saying that the principle that a client should be able to consult a lawyer in confidence without fear of having to disclose communications between them at a later date is a fundamental right that has long been recognised by common law. However, it warns, whether a document is privileged will always depend on the facts. The article sets out to take a look at the principles governing the ability of a party to claim privilege and how to ensure communications that are privileged, stay privileged. It ends with a list of things to remember to ensure communications that should be privileged, are privileged and will remain so.
TRUMP ADMINISTRATION ROLLS OUT MORE STRINGENT EB-5 FOREIGN INVESTMENT VISA RULES
Law.com’s Daily Business review reported on 25th July that, from 21st November, foreign investors will have to put in a minimum of $900,000, up from the previous $500,000 base, nearly doubling the amount foreigners must invest and raise other thresholds, making it harder for immigrants and projects to qualify under the federal visa programme.
US REQUIRES FOREIGN TRADEMARK OWNERS TO ENGAGE US-LICENSED ATTORNEYS OR THEY WILL BE UNABLE TO REGISTER US TRADEMARKS
On 24th July, Crowell Moring published an article saying that, with effect from, 3rd August, the US Patent and Trademark Office (USPTO) will require all foreign-domiciled trademark applicants, registrants, and parties to a trademark proceeding to be represented by an attorney who is licensed to practice law in the US. This requirement will apply to any entity with a principal place of business outside of the US and its territories and any individual with a permanent legal residence outside of the US and its territories.
FENTANYL EXPOSURE JEOPARDISING US CUSTOMS AGENTS’ LIVES
On 20th July, Homeland Security Today reported that, during an ongoing audit of US Customs and Border Protection’s (CBP) storage of seized drugs at permanent drug vaults, the Office of the Inspector General (OIG) determined that CBP does not adequately protect its staff from the dangers of powerful synthetic opioids such as fentanyl. The amount of fentanyl seized by agents and stored in vaults has leapt from 70 lb in 2015 to 3,500 lb so far this year.
ICE REMOVES TURKISH MAN CONVICTED IN SCHEME TO VIOLATE US SANCTIONS ON IRAN
Homeland Security Today on 25th July reported that on 23rd July, US Immigration and Customs Enforcement’s (ICE) deported Mehmet Hakan Atilla, 48, who had entered the US lawfully in 2017. In 2018, he was sentenced to 32 months in prison for his participation in a scheme to violate US economic sanctions on Iran involving billions of dollars in Iranian oil proceeds held at Atilla’s employer, a Turkish bank.
MAPPING THE IMPACT OF ILLICIT TRADE ON THE UN SUSTAINABLE DEVELOPMENT GOALS
This report was launched at a UN Conference on Trade and Development (UNCTAD) and Transnational Alliance to Combat Illicit Trade (TRACIT) co-hosted event held on 18th July in Geneva. Findings show that illicit trade across 12 sectors significantly compromises achievement of the SDG by crowding out legitimate economic activity, depriving governments of revenues for investment in vital public services, dislocating hundreds of thousands of legitimate jobs and causing irreversible damage to ecosystems and human lives. Amongst the topics covered are counterfeiting and piracy, illegal unreported unregulated (IUU) fishing, and precious metals and gems, as well as trafficking in persons
An executive summary is available at –
and the full report is at –
EU COMMISSION REFERS BELGIUM TO THE EU COURT DUE TO ITS TAX TREATMENT OF TAXPAYERS INVESTING IN PROPERTY ABROAD
A news release from the EU on 25th July advised that the Commission had decided to refer Belgium to the CJEU for its failure to properly implement rules related to the calculation of rental income. This situation can result in different tax treatment and discourage Belgian residents from buying property abroad. The CJEU had previously established the incompatibility of Belgian legislation with EU law in a preliminary ruling procedure, which gave rise to the judgment in 2014. In the absence of measures to comply with this judgment, the Commission decided to open infringement proceedings against Belgium by sending a letter of formal notice in November 2018, but since then, Belgium has not modified the relevant legislation.
EU COMMISSION REFERS GERMANY TO THE EU COURT FOR ITS FAILURE TO APPLY EU RULES ON VAT FOR FARMERS
A news release from the EU on 25th July advised that the Commission had decided to refer Germany to the CJEU for not applying the EU VAT scheme for farmers correctly. Germany applies the flat-rate scheme by default to all farmers, including owners of large farms, regardless of whether they encounter such administrative difficulties – the only farmers who cannot benefit from the scheme are commercial livestock breeders. German farmers to whom the flat-rate scheme applies are also being overcompensated for the VAT they have paid.
VENEZUELA “TURNED AIRPORT TAXES INTO BITCOIN TO AVOID SANCTIONS”
On 25th July, Coindesk reports a story from Spanish newspaper ABC that Maduro and his administration appear to be leveraging tax revenue and cryptocurrencies as part of a broader effort to evade economic sanctions. ABC claims that it has uncovered a scheme by which Maduro and his associates were using a digital wallet app to turn tax revenue from domestic airports into bitcoin and other cryptocurrencies that were then transferred to exchanges in Hong Kong, Hungary, Russia and China. The funds were converted and sent back to Venezuela. The claim involved the Jetman Pay app and automated payments at Maiquetia International Airport (IAIM) near Caracas.
CANADA: PROBE CLEARS EXPORT AGENCY IN CORRUPTION CLAIM RELATED TO SNC-LAVALIN
The Star on 25th July reported that Export Development Canada says an independent review has cleared its personnel of any wrongdoing after a claim that its staff turned a blind eye to bribery and corruption in a 2011 transaction involving construction company SNC-Lavalin, when it provided SNC-Lavalin with between $250 million and $500 million worth of “political risk insurance” for its deal to work on the Matala Dam in Angola.
CHINA: FORMER HEAD OF XINJIANG PROVINCE PLEADS GUILTY TO BRIBERY
On 25th July, Channel News Asia reported that Shenyang Intermediate People’s Court said Nur Bekri – who rose to become head of China’s national energy administration – pleaded guilty to accepting $11.5 million in bribes, and had “showed repentance” during the trial.
UK: TAXATION IN THE CONSTRUCTION INDUSTRY
On 25th July, the House of Commons Library published a briefing paper saying that, after a long period of consultation, the ‘Construction Industry Scheme’ for taxation in the sector was reformed in 2007. This paper discusses the background to this reform, and recent reforms to tackle VAT fraud in this sector.
MALTA WILL HAVE IMPLEMENTED ALL MONEYVAL RECOMMENDATIONS BY DEADLINE, SAYS PM
Malta Today on 25th July reported that Prime Minister Joseph Muscat has said that since data for the report was collected last year, Malta had already addressed a majority of the points raised.
GUERNSEY TAX REGIMES NOT HARMFUL TO GLOBAL ECONOMY, SAYS OECD
Guernsey Press on 25th July reported that the OECD had reviewed 12 jurisdictions that have no or low rates of corporate taxation, which included Guernsey, Jersey and the Isle of Man. It says that the OECD concluded that Guernsey’s taxation regime is not harmful when reviewed against the OECD’s standards concerning the requirement for legal persons to have sufficient economic substance. This is said to correspond to a similar decision by the European Council of Finance Ministers in March 2019.
OECD SEEKS FEEDBACK ON DISPUTE RESOLUTION IN 10 JURISDICTIONS
On 25th July, Tax News reported that the OECD has requested stakeholders’ input on the dispute resolution processes in place in Andorra, Anguilla, Bahamas, Bermuda, BVI, the Cayman Islands, the Faroe Islands, Macau (China), Morocco, and Tunisia. It is reviewing these territories’ implementation of the base erosion and profit shifting (BEPS) Action Plan minimum standard on tax treaty dispute resolution.
COLOMBIA’S ARMY CHIEF CAUGHT IN CORRUPTION SCANDAL
On 25th July, Colombia Reports reported that a growing scandal over the rampant corruption in Colombia’s military has reached the country’s army commander, General Nicasio Martinez, who allegedly blocked investigations into the theft of army supplies. He is said to already be controversial because Human Rights Watch linked him to 23 homicides, including that of a 13-year-old girl, and because the New York Times revealed military concerns that Martinez’ orders to double the army’s combat kills and captures could incentivise the mass killing of civilians.
NETHERLANDS: FORMER ISLAND OR URK A HOTBED OF CRIME, SAYS GOVERNMENT CRIME AGENCY
On 25th July, Dutch News reported that the small district of Urk (a former island until cut off from the sea in 1939), which is described as staunchly Protestant, and with a population of some 22,000, has been described as a hotbed of crime, often involving whole families. The claim comes from one of the 10 Regional information and Expertise Centers in the country, part of the Home Affairs Ministry.
ISLE OF MAN: SECURITY OF CLIENTS’ ASSETS – THEMATIC FEEDBACK FOR TCSP
On 24th July, the Isle of Man FSA issued a news release advising that it had published thematic feedback to Trust and Corporate Service Providers (TCSP) to assist TCSP in protecting the assets of trusts and companies to which they provide services on the security of non-monetary assets belonging to client companies and trusts. It says that one of the FSA’s regulatory objectives is “securing an appropriate degree of protection for… the customers of persons carrying on a regulated activity”. The protection of clients’ assets is a key aspect of this objective, and it says that it is therefore essential that licence-holders make adequate arrangements to segregate clients’ assets from their own, and that they establish and maintain appropriate policies and procedures to limit the risk or potential for loss to clients. In March, the FSA issued feedback on client money and other assets covered by the Clients’ Assets Report. The new feedback complements that earlier report and addresses the protection of other types of clients’ assets which are held by TCSP, concentrating on physical assets such as yachts, aircraft, property and chattels.
CRIMINAL CODE CHANGES AFFECTING MONEY LAUNDERING IN CANADA, RECKLESSNESS AND WHAT YOU NEED TO KNOW
On 25th July, Dentons published a briefing saying that on June 21st, a Criminal Code of Canada amendment came into force that will dramatically change how money laundering can be investigated and enforced. It says that an amendment has added an alternative mental element of “recklessness” to the offence of money laundering, and this wording allows a criminal offence to be established by the authorities where it can be demonstrated that actions were reckless as to whether property had been obtained or derived because of a “designated offence” (which term captures most indictable offences, including corruption offences). In essence, the article says, a money laundering offence may now be committed in cases where an individual is aware of a risk that the property may be proceeds of crime, but, in the face of that risk, continues to carry out the prohibited activity.
US: FORMER PRECIOUS METALS TRADER PLEADS GUILTY TO ATTEMPTED COMMODITIES PRICE MANIPULATION
On 25th July, a release on Mondo Visione reported that a former precious metals trader, Corey Flaum, 41, of Mount Kisco, New York, who worked at the New York offices of a US bank and a Canadian bank has pleaded guilty to attempted price manipulation of precious metals futures contracts. Between approximately June 2007 and July 2016, he placed thousands of orders to manipulate the prices of gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX).
FCA ANNOUNCES FURTHER DETAILS OF INVESTIGATION INTO LONDON CAPITAL & FINANCE PLC
On 25th July, a release on Mondo Visione reported that Dame Elizabeth Gloster, has made a first announcement of how she will conduct the investigation into the relevant events relating to the regulation of London Capital & Finance plc.
IRAN THREATENS TO CUT BRAZILIAN IMPORTS IF IRANIAN VESSELS ARE NOT REFUELLED
Hellenic Shipping News on 25th July reported that Iran has threatened to cut its imports from Brazil unless it allows the refuelling of at least 2 Iranian ships stranded off the Brazilian coast. Corn shipments to Iran jumped over 30% last year compared to 2017, though other agricultural exports fell. State-controlled oil company Petrobras refuses to supply the ships — which have been floating for over a month off the port of Paranagua, about 450 km south of Sao Paulo — due to the risk of US sanctions.
DECAYING OIL TANKER NEAR YEMEN COAST COULD SOON EXPLODE
On 25th July, Hellenic Shipping News reported that an abandoned and decaying oil tanker near the coast of war-torn Yemen could soon rupture or explode, the UNhas warned, potentially triggering one of the world’s largest oil spills. Safer FSO, which is believed to contain approximately 1.14 million barrels of oil, has been anchored and left without maintenance off the Yemeni coast of Al Hudaydah since early 2015.
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