20th August 2019
US: THE McDONNELL “OFFICIAL ACT” REQUIREMENT DOESN’T APPLY TO FCPA VIOLATIONS
On 13th August, DLA Piper published an article saying that a recent case in the US had shown that the “high bar” for corruption cases set by the US Supreme Court in McDonnell v. United States does not apply to prosecutions under the Foreign Corrupt Practices Act (FCPA) and prosecutors need not satisfy the heightened “official act” requirement established by the Supreme Court in McDonnell in order to prove an FCPA violation. This means that the Supreme Court’s McDonnell decision – which arose from the bribery conviction of former Virginia Governor Bob McDonnell – and which requires prosecutors prove that bribes were paid in exchange for an “official act” does not apply in FCPA cases.
UK: CONFISCATION AND WHAT TO DO WHEN THE PROSECUTOR COMES BACK FOR MORE
In July, BCL Solicitors LLP published an article about section 22 of the Proceeds of Crime Act 2002 which provides that a prosecutor may invite a ‘reconsideration of the available amount’, i.e. a review of the amount available for confiscation from the defendant in the light of new circumstances or information. The article explains that the idea of section 22 is that, where the amount then available for confiscation was lower than the benefit assessed of being what the defendant obtained from the crime, it should be possible to go back and recoup the rest (or at least, as much as might become available) at some point in the future. The article points out that, unlike other elements of the Act, section 22 allows for judicial discretion and the Court of Appeal will rarely interfere with the judge’s discretion, though they may have a role where complex legal issues are at stake.
SAUDI ARABIA’S NEW BALLISTIC MISSILE PROGRAMME WILL HEIGHTEN TENSIONS WITH IRAN
On 19th August, International Policy Digest reported that Saudi Arabia is said to be developing a domestic ballistic missile programme with the direct support from China, with a factory is situated at an existing missile base 230 km west of Riyadh. A military base deep inside Saudi Arabia appears to be testing and possibly manufacturing ballistic missiles. However, Saudi Arabia rejects all accusations of running a secret ballistic missile base on its soil. The article says that developing a local ballistic missile system is also a preventive measure taken by Saudi Arabia due to the frequent rocket attacks carried out by Iranian-backed Houthi rebels in Yemen.
US: ‘CODFATHER’ SETTLEMENT MEANS FISHING MAGNATE WILL NEVER FISH AGAIN
On 19th August, an AP report said that a fishing magnate, Carlos Rafael of Carlos Seafood, known as the “Codfather”, will never be allowed to return to US fisheries, the federal government said, in announcing it has settled its civil case against a man whose arrest for shirking quotas and smuggling profits overseas shocked the East Coast industry, and was once the owner of one of the largest fishing fleets in the US. He has been ordered to pay the National Oceanic and Atmospheric Administration (NOAA) a $3,010,633 civil penalty, and permanently cease all fishing. Rafael was based out of New Bedford, Massachusetts, and was sentenced to nearly 4 years in prison in 2017. He was owner of the one of the largest commercial fishing operations in the country. 17 of Rafael’s former fishing vessel captains also face penalties under the settlement. Rafael pleaded guilty to false labelling and other charges after federal authorities charged he was operating an elaborate fish fraud. They said his vessels claimed to catch haddock or pollock when they had actually brought species to shore that are subject to stricter quotas. He then smuggled proceeds to Portugal. In 2018, a federal judge ordered the seizure of 4 of his fishing vessels and their fishing permits as part of a plea deal
THE US EXPORT CONTROL REFORM ACT AND “EMERGING TECHNOLOGIES”
On 16th August, an article from Braumiller Law Group PLLC says that the intention of the Export Control Reform initiative, which began in 2009, was to simplify the export of controlled items while refocusing on critical national security policies, and the Export Control Reform Act became law in August 2018. It says that the impact of future controls on emerging and foundational technologies could have far-reaching implications and hurdles for the commercial technology industry. It considers the 2018 Act, in particular how it creates a regular process by which Bureau of Industry and security is obliged to continuously review, in conjunction with other agencies, emerging and foundational technologies that may need to be added to the Commerce Control List (CCL). In November, BIS sought public comment on 14 categories of technologies it could consider “emerging”, and these categories are listed in the article. BIS will determine the appropriate level of controls to give certain technologies and, in the interim, BIS has broad authority to control technology exports in specific circumstances or on case-by-case bases. The article goes on to consider the effects of the Act on the US agencies involved and on exporters, saying that the goal for the agencies is to ensure that those considering the new technologies are as informed as possible before creating controls that will be difficult to administer or that will stifle commercial industry and domestic advancement. The article uses the treatment of commercial satellites in the late 1990s as an example of what export controls can do to the domestic industry. At the time, it says, BIS imposed export controls on commercial satellites after sensitive data was illegally transferred to China. Subsequently, the domestic commercial satellite industry declined, possibly due to the added regulatory burden of the export controls. It is said that a recent study explored the effect proposed export controls would have on the advanced technology industry and found that US technology firms could lose between $14 billion and $56 billion in export sales over a 5-year period, and that missed export opportunities could threaten between 18,000 and 74,000 jobs in the technology industry.
THE CHARGES AGAINST A NOTORIOUS SUSPECTED SMUGGLER OF INDIAN ARTEFACTS
An article in Hyperallergic on 19th August says that Subhash Kapoor has been charged in the US with 86 felony counts for allegedly looting $145 million in antiquities over the last 50 years. Art dealer Subhash Kapoor was one of Manhattan’s premier dealers of Indian antiques, selling his stock to some of the world’s most renowned museums, and with a gallery called Art of the Past on Madison Avenue. However, he is not currently facing a trial in the US – as in 2011, Interpol agents arrested him in Frankfurt and he was extradited to India, where he currently awaits trial for allegedly running an international smuggling racket. The US complaint alleges that Kapoor worked a smuggling ring that encompassed Afghanistan, Cambodia, India, Nepal, Pakistan, and Thailand. He was charged alongside 7 co-conspirators, most of them overseas.
SINGAPORE: NEW CODE OF CONDUCT ADDRESSES CONCERNS OVER CRYPTOCURRENCIES, MONEY LAUNDERING AND TERRORISM FINANCING
On 19th August, the Global Legal Post reported on the introduction by the Association of Cryptocurrency Enterprises and Start-ups Singapore (ACESS), said to be facilitated by the Monetary Authority of Singapore, of a new code of practice under its SPICE initiative. The code is said to address AML/CFT concerns re the anonymity associated with the technologies and promotes best practice to strengthen compliance by companies involved.
AUSTRALIA: PAYING MORE THAN $10,000 IN CASH COULD MAKE YOU A CRIMINAL UNDER PROPOSED LAW
ABC News on 20th August reported that a number of stakeholders have called on the Federal Government to withdraw the proposed laws, which were first announced in the 2018-19 budget as part of measures to fight the so-called black economy. The Government’s Black Economy Taskforce had argued a $10,000 cash limit for transactions between businesses and individuals would help fight the cash economy by stamping out tax evasion, money laundering and other crimes – but would not apply to individual-to-individual transactions. The laws, if passed, would take force on January 1st, and for certain AUSTRAC reporting entities a year later, from January 1st 2021.
STATE SUPPORT AND CHINA’S BELT AND ROAD TO HELP EXPAND ISLAMIC FINANCE IN KAZAKHSTAN, KYRGYZSTAN, TAJIKISTAN AND UZBEKISTAN
On 15th August, Zawya carried an article saying that the prospects are good for Islamic finance in Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan thanks to government support, large Muslim populations as well as China’s Belt and Road Initiatives in the region. This is said to be according to a recent report by Moody’s Investor Service. The article says that the region is home to large, young and economically active Muslim populations, and other segments of the Islamic economy, from food to fashion, are relatively well established. The impact of China’s Belt and Road initiative is considered of utmost importance, with the majority of the countries’ participating in the Initiative, and this is expected to provide an impetus for the development of Islamic finance for infrastructure projects – and cites the Angren–Pap electrified railway line that connects Tashkent with eastern Uzbekistan, though the most high-profile project in Kazakhstan, a light railway system worth $1.9 billion, has hit a wall. However, it says, Islamic banking remains underdeveloped in the region and Islamic banking assets account for negligible shares in total banking assets.
IRS CLARIFIES US TAX TREATMENT OF CROSS-BORDER CLOUD AND OTHER ONLINE TRANSACTIONS
On 19th August, Greenberg Traurig published a briefing saying that the IRS had published draft regulations addressing the US federal income tax treatment of cross-border cloud transactions – noting that the last time the IRS meaningfully addressed the taxation of cross-border digital content transfers was in October 1998, which applied to software transfers. The article provides some detail of what the regulations would cover, oif or when implemented.
ARGENTINA RELEASES BUSINESSMAN WANTED IN MEXICO FOR TAX EVASION
On 20th August, OCCRP reported that Argentine authorities have released a businessman with dual citizenship who was briefly detained on charges of tax evasion, despite Mexico’s appeal for extradition. Carlos Ahumada Kurtz, a Mexican-Argentine entrepreneur, had been arrested in Buenos Aires for his alleged failure to pay roughly $75,000 in income taxes in Mexico.
NETHERLANDS: RABOBANK DROPS FOOTBALL CLUBS AS CLIENTS DUE TO CORRUPTION RISK
Dutch News reported on 20th August that the bank had decided not to take on any more professional football clubs due to the perceived risk of corruption, fraud and other issues. This is according to a leaked internal memo which refers to unacceptable risks. However, the bank handles banking for 80% of professional clubs in the country and sponsors several. Whilst declining to comment on the leak, the bank is quoted as saying that it “very reticent” to take on new clubs.
6 CHINESE COMPANIES OPERATING IN NIGERIA BLACKLISTED BY THE WORLD BANK OVER ALLEGED CORRUPTION
The Ripples news site in Nigeria reported on 20th August that the Bank’s website listed CCECC Nigeria Railway Company Limited, CRCC Petroleum and Gas Company Limited and CCECC Nigeria Company Limited, China Railway Construction (International) Nigeria Company Limited, China Railway 18th Bureau Nigeria Engineering Company Limited and CCECC Nigeria Lekki (FTA) Company Limited. It is said that they would not eligible to bid for Bank contracts until March 2020.
PARAGUAY DESIGNATES HIZBOLLAH, HAMAS, AL-QAIDA AND ISIS
On 19th August, in his blog Kenneth Rijock reported that Paraguay has designated Hezbollah and Hamas as an international terrorist organisation, and has named Al-Qaeda and ISIS as global terrorists. He says that, coming on the heels of Argentina’s anti-terrorist designation of Hezbollah, it indicates a movement towards recognition of the threats posed by global terrorist organizations operating in Latin America.
WHAT AMERICA’S USERS SPENT ON ILLEGAL DRUGS, 2006–2016
A report from the RAND Corporation on 20th August updates and extends estimates of the number of users, retail expenditures, and amount consumed from 2006 to 2016 for cocaine (including crack), heroin, marijuana, and methamphetamine in the US. It lso includes a discussion of what additional types of data would help quantify the scale of these markets in the future, including the new types of information produced by the legalisation of marijuana at the state level. The report found that people who use drugs in the USspent on the order of $150 billion on cocaine, heroin, marijuana, and methamphetamine in 2016. The marijuana market is roughly the size of the cocaine and methamphetamine markets combined, and the size of the retail heroin market is now closer to the size of the marijuana market than it is to the other drugs. Heroin consumption increased 10% per year between 2010 and 2016 and the introduction of fentanyl into heroin markets has increased the risk of using heroin.
US COMMERCE DEPARTMENT ADDS 46 HUAWEI AFFILIATES TO restricted “ENTITY LIST” BUT GRANTS 90-DAY EXTENSION TO ENFORCEMENT OF HUAWEI BAN
On 19th August, Tech Crunch reported that 46 Huawei affiliates had been added to the Commerce Department Entity List, joining more than 100 entries listed and subject to specific licence requirements for the export of certain items over connections to the embattled Chinese consumer electronics giant, as being engaged in activities that are contrary to US national security or foreign policy interests. Also announced was a further 90-day temporary licence, intended to allow businesses to wean themselves off use of Huawei equipment.
RUSSIA CALLS FOR URGENT ACTION BY NORTH KOREA TO CURB ILLEGAL FISHING
NK News on 20th August reported that, as the DPRK vice-minister for fishing headed for Moscow for talks on fisheries co-operation, Russia has called on North Korea to take steps to curb illegal fishing by its vessels in Russian waters. The news site reports that North Korean illegal, unreported, and unregulated (IUU) fishing (IUU) has become a major issue in the Far Eastern Primorsky region and a source of contention between the countries. Quotas for catches of various seafood products are negotiated each year, too, with each side allocated permits to fish the other’s waters. Recently, a Russian vessel and crew were detained in North Korea. The FSB has also commented that DPRK vessels interfere with the fishing of Russian vessels, including the theft of catches and tools used by Russian ships.
THE IMPACT OF SANCTIONS ON NORTH KOREA
In a podcast from NK News, the Asan Institute’s Go Myong-hyun discusses “maximum pressure” and its impact on the ground, and about the impact that sanctions are having for the government in Pyongyang, the North Korean people, and whether they are effective in the way outsiders imagine.
PIRATES KIDNAP CREW MEMBERS FROM 2 SHIPS OFF CAMEROON
The Wall Street Journal on 19th August reported that armed attackers have kidnapped 17 crew members from German and Greek vessels in piracy-troubled waters off the coast of Cameroon in 2 incidents and are seeking “huge sums” for their release. The pirates boarded the ships, forced the crew members on speed boats and fled, in both incidents, so it is said that “the villains are probably the same”. The South Atlantic Ocean region off the West African coast has become a notorious region for piracy, illegal fishing, oil theft and drug trafficking, and the International Maritime Bureau has issued a warning to all ships sailing off Cameroon to take extra precautions against attacks as more than 80% of all piracy attacks in the first half of this year have taken place in the sea area off West Africa.
GERMAN POLICE SHUT DOWN WEBSITE SELLING EXPLOSIVES AND TIPS ON SYNTHETIC DRUGS
Reuters on 20th August reported that about a thousand police officers launched raids in Germany, Lithuania and Croatia as part of a cybercrime investigation into a website (www.xplosives.net) that provided details on how to produce explosives and synthetic drugs. Police in Germany searched 34 buildings, questioned 22 suspects and seized 127 kg of chemicals used for making explosives, as well as fuses and detonators, weapons, ammunition and chemicals for making synthetic drugs.
NORTH MACEDONIA’S PROSECUTOR QUESTIONED OVER EXTORTION SCHEME
On 20th August, Reuters reported that North Macedonia’s special prosecutor in charge of investigating organised crime cases has been questioned as part of an investigation into an extortion case. She offered her resignation last month after local papers reported her alleged involvement in a scheme to take money from a businessman charged by her office over corruption allegations.
FORMER KANSAS BANK EXECUTIVE FOUND GUILTY IN $15 MILLION CONSTRUCTION LOAN FRAUD SCHEME
A DoJ news release on 20th August advised that a former Kansas bank executive, Troy A Gregory, 52, was found guilty by a federal jury yesterday for his participation in a bank fraud scheme to obtain a $15 million construction loan for certain bank customers based upon false and fraudulent representations. The loan was shared among 26 Kansas banks. https://www.justice.gov/opa/pr/former-bank-executive-found-guilty-15-million-construction-loan-fraud-scheme
ZIMBABWE FORMER VICE PRESIDENT TO FACE CORRUPTION CHARGES AND “ON THE RUN”
Bloomberg on 20th August reported that Zimbabwe’s former vice president, Phelekezela Mphoko, is now a “fugitive of justice,” the state-controlled newspaper Chronicle reported, citing a Zimbabwe Anti-Corruption Commission spokesman. He ost his job when former President Robert Mugabe was ousted in November 2017.
SEAFOOD DNA TESTING IN THE US – WHAT WAS FOUND – ILLEGAL FISHING AND MISREPRESENTATION
On 20th August, an article from the World Economic Forum reported that a US non-profit organisation sampled 449 fish purchased from shops and restaurants in 24 US states and the District of Columbia. DNA testing was used to establish the true identity of the samples. One-third of all shops and restaurants checked sold mislabelled seafood. Fish was most often misdescribed on restaurant menus (26%) and at smaller markets (24%). An eighth (12%) of samples from supermarkets was found to be mislabelled. The most commonly mislabelled species were sea bass (55%) and snapper (42%). It also found imported seafood was sometimes marketed as locally-caught, while vulnerable species like the Atlantic halibut were falsely advertised as a more sustainable catch. The non-profit says such fish fraud that s a worldwide problem, covering up illegal fishing and misleading customers trying to buy sustainable seafood. A report from the Forum earlier this year reported that illegal fishing accounted for a third of the fish taken from the oceans at an annual cost to the global economy of up to $23.5 billion.
The World Economic Forum white paper is at –
NORWAY: COURTS UPHOLDS GOVERNMENT’S PAYMENT BLOCKING PLAN FOR ONLINE GAMBLING
On 20th August, Calvin Ayre reported that a court in Norway upheld a proposal to compel financial institutions to block payments to and from internationally licensed online gambling operators who compete with the Norsk Tipping and Norsk Rikstoto state-owned gambling monopolies. However, the article notes that the Court has yet to rule on a separate aspect of the case, which is whether the payment-blocking is consistent with the rules regarding the freedom of movement of services within the EEA.
ISRAEL: MINISTER IN NETANYAHU’S GOVERNMENT FACES CORRUPTION CHARGES
OCCRP reported on 20th August that Attorney General Avichai Mendelblit has announced that he intends to charge Haim Katz Minister of Labor, Social Affairs and Social Services, with fraud and corruption, accusing him of benefiting from government contracts granted to a businessman.
SON OF AZERI LAWMAKER ARRESTED FOR ATTACKING TAX OFFICIALS WHO CAME TO SEE WHY HIS RECREATIONAL CENTRE HAD SUDDENLY DRASTICALLY REDUCED ITS TAX
OCCRP on 20th August reported that authorities detained the son of a lawmaker and 5 of his relatives for getting into a fight with tax inspectors who came to see why the recreational centre the son was running in the south of Azerbaijan has suddenly drastically reduced its tax contributions. Mirhamid Narimanli and his relatives prevented the inspectors from entering, attacked them and threw stones at their cars. The recreational centre called Relax consists of a hotel and dozens of villas with 142 rooms and offers visitors a giant aquapark with artificial waterfalls, shows at an open-air amphitheatre, horseback riding, paintball and other amenities and activities. It is managed by Narimanli, the son of Azerbaijan’s lawmaker Igbal Mammadov.
EGYPT TO SIGN MUTUAL ASSISTANCE CUSTOMS AGREEMENT WITH EU, US AND BELARUS
On 19th August, Egypt Today reported that the Ministry of Finance has announced signing a number of agreements related to mutual assistance in customs matters with countries including the US, Belarus, and EU. It adds that an Egyptian-European dialogue aims to reduce the time of release and the cost of import, which includes the adoption of commercial invoices for goods from the Chamber of Commerce in the country of export, and to verify all the information and data provided, especially in light of the goods received from the Egyptian – European Partnership.
US BILL WOULD ALLOW FOR INDICTMENT OF FOREIGN OFFICIALS FOR BRIBERY UNDER FCPA
On 20th August, Baker McKenzie reported on a Bill introduced into Congress, saying that the Foreign Corrupt Practices Act currently cannot be used against a foreign official who demands or takes a bribe for helping a company win a contract or retain business. The Act’s prohibition on paying bribes abroad is limited to companies in the US and those acting in that country. It has always excluded the foreign official who takes the bribe, and courts over the years have reaffirmed that.
CLAIM THAT A QUARTER OF ALL CD ‘FULFILLED BY AMAZON’ IN US ARE COUNTERFEIT
Illicit Trade on 19th August reported a claim by the Recording Industry Association of America (RIAA) that 25% of all CDs “fulfilled by Amazon” in the US are counterfeit. This followed a recent sample purchase programme conducted by the RIAA, which represents major labels, which revealed that 11% of new CDs offered for sale on Amazon were fake, and 16% of new CD sold on eBay were bogus. Included were “best of” or “greatest hits” CD or vinyl that purport to be from major record label artists on these platforms, even when the labels in question had never released such albums.
WHY DRUG TRAFFICKING CARTELS FAVOUR SMUGGLING THEIR ILLICIT CARGO IN CONSIGNMENTS OF FRUIT
On 20th August, Illicit Trade says that alongside the need for constant innovation, South American drug cartels have a small number of tried and tested smuggling methods they have stuck with through thick and thin over recent years; and perhaps one of the most popular of these is smuggling drugs concealed inside shipments of perishable goods such as fruit and vegetables, which recent seizures suggest remains a favourite among South American drug gangs. One of the main reasons drug traffickers favour concealing their illicit cargo inside shipments of perishable goods is because items such as fruit and vegetables are often fast-tracked through customs checks on account of their short shelf life. South America is also a major producer of several exotic fruits that are exported in large quantities to the markets the cartels want to reach.
FILLING THE GAPS IN THE DETECTION OF HOMEMADE EXPLOSIVE (HME) DEVICES
An interesting article on Homeland Security Today on 20th August says that the terrorism threat has largely changed to smaller, domestic, less-sophisticated groups and lone wolves making bombs in their garages. In the past, policy and technology in the US were developed and targeted toward events like the World Trade Center bombing in 1993, when an al-Qaeda-backed group set off a 1,300 lb bomb made of sophisticated and powerful nitrate-based explosives. However, 20 years later, 2 self-radicalised brothers, not connected to a major terrorist group, set off homemade bombs at the finish line of the Boston Marathon. The potential for death and injury was significantly less than a WTC attack, but the effect on Americans’ sense of safety was the same. Devices and systems have high success rates when detecting commercial and industrial explosive material, like C4 plastic explosive and dynamite and thanks in part to regulation, commercial and industrial explosive materials are not easy to procure. So terrorists and criminal have switched to commercially available Explosive Precursor Chemicals (EPC) and household items, to develop less sophisticated, but equally threatening Home Made Explosives (HME) for use in Improvised Explosive Devices (IED). Hence, lone wolves and smaller, less-organized groups are able to use materials like fertiliser, paint remover, car batteries, and airbag initiators to create pipe bombs, pressure cooker bombs, and suicide vests that can be easily concealed under clothing or in an everyday item like a backpack. It is far more likely that HME would be used in an attack than commercial or military explosives. However, a recent survey found that many US government officials were unaware that their existing technology was incapable of identifying certain elements of an HME. The article says that companies are beginning to emerge on the market with innovative solutions, such as an ability to detect inorganic explosive materials such as chlorates, perchlorates, nitrates – elements found in household items like fertiliser. The article concludes that it is imperative that attention stays focused on HME detection and protection and ensure security professionals have the tools to defeat this threat.
OFAC DESIGNATES DOMINICAN NATIONAL CESAR EMILIO PERALTA AND DOMINICAN REPUBLIC-BASED PERALTA DRUG TRAFFICKING ORGANISATION
On 20th August, a news release from US Treasury announced that OFAC had identified Dominican national Cesar Emilio Peralta and the Peralta Drug Trafficking Organisation as significant foreign narcotics traffickers pursuant to the Foreign Narcotics Kingpin Designation Act. OFAC designated 8 additional Dominican nationals for providing material support to, or acting for or on behalf of, Cesar Emilio Peralta and the Peralta DTO. OFAC also designated 6 entities in Santo Domingo, Dominican Republic, including a number of nightclubs owned or controlled by Cesar Emilio Peralta.
WARRANT TO SEIZE MONEY LINKED TO GRACE 1 REVEALS THE INVESTIGATIVE WORK BY US SPECIAL AGENTS BASED IN COLORADO
A news release from US Immigration and Customs Enforcement on 19th August advised that a warrant to seize the oil tanker Grace 1, the petroleum aboard it, and $995,000, reveals the investigative work by special agents based in Colorado. The investigation revealed an alleged plan to unlawfully access the US financial system to support illicit shipments from Iran to Syria by the Islamic Revolutionary Guard Corps (IRGC), a designated foreign terrorist organisation in the US. A network of front companies allegedly laundered millions of dollars in support of such shipments.
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