28th August 2019
ACCOUNTING FIRM RSM US SETTLES SEC CHARGES OVER AUDIT INDEPENDENCE
On 27th August, Investment Executive reported that RSM US had reached a $950,000 settlement with the SEC over charges that it violated its auditor independence requirements by claiming to be independent in audit reports for clients, while the firm and its international affiliates provided a variety of non-audit services (such as payroll, bookkeeping and corporate secretarial services) to affiliates of those audit clients. The alleged violations involved more than 100 audit reports and at least 15 audit clients.
AID GROUPS WARN AGAINST KENYA’S UN BID TO SANCTION AL SHABAB
The National in the UAE reported on 27th August that Kenya is urging the UN to list Al Shabab under the same sanctions as Al Qaeda and ISIS, but foreign donors say the move could leave millions in drought-stricken Somalia without aid, and where 2.2 million people, or nearly 18% of the population, face severe hunger. Al Shabab is already targeted under broader sanctions imposed by the UN on Somalia. Kenya wants to tighten the screws on the militant group after several deadly attacks on its soil.
SMUGGLED NORTH KOREAN CIGARETTES BECOME INCREASINGLY POPULAR IN CHINA
Radio Free Asia reported on 27th August claims that Chinese smokers looking to save money on their costly habit are turning to smuggled North Korean cigarettes, which have become extremely popular in the border region. The Myong Shin cigarettes are said to be of similar quality to high-end Chinese cigarettes, but cost one-tenth the price. UN sanctions do not ban the export of such cigarettes.
NEW LAWS FOR TRUST SECTOR IN CAYMAN ISLANDS
On 27th August, the Cayman News Service reported on 2 new pieces of legislation which have now come into force that it says will tighten up the regulatory regime for the management of private trusts and their administrators. They are said to provide clearer definitions for terms given to those involved in the administration of trusts and list the information that must be maintained and updated by a trustee for a trust constituted under Cayman law. The article explains that the Cayman Islands is under a 1-year “Observation Period” by FATF, ending February 2020, in which it is expected to correct AML/CFT strategic deficiencies. The FATF will review the progress made by the jurisdiction next June to determine if positive and tangible progress has been made. The article also lists the 14 new laws passed in the last 5 months which are designed to strengthen AML/CFT controls.
SEYCHELLES REVIEWING FRAMEWORK FOR REAL ESTATE TRANSACTIONS IN BID TO PREVENT SHADY SALES
The Seychelles News Agency reported on 27th August that a consultation process is underway to review the framework governing estate agents and land registration to combat anti-money laundering and terrorist financing activities. This follows FIU concern over on the increasing number of unlicensed individuals undertaking licensable activities as real estate agents.
BRITISH COLUMBIA: BILLIONAIRE BROTHERS’ USE OF KPMG ISLE OF MAN OFFSHORE TAX SCHEME EXPOSED
On 27th August, CBC in Canada reported that the Chan family is one of the wealthiest in British Columbia and is known for donating millions to philanthropic causes. However, internal emails filed in court this Summer reveal the Chans’ involvement in a KPMG offshore scheme. It appears that they were part of a group of more than 20 wealthy Canadians whose families had at least $5 million to invest in a sophisticated KPMG tax dodge first developed out of the accounting firm’s Vancouver office in the late 1990s and using shell companies in the Isle of Man. Court records show the Chans did not disclose their offshore companies in the Isle of Man during a 2005 audit, even after being required to list all their global assets. The tax authority CRA discovered their involvement in late 2016 from officials in the Isle of Man. KPMG has said its Isle of Man scheme complied with all laws, but also said it would no longer support this kind of offshore tax planning. To date, the CRA has settled all court actions related to the KPMG scheme instead of going to trial.
FRENCH INVESTIGATORS FOCUS ON PARTNER OF DENTSU ADVERTISING GIANT IN SPORTS CORRUPTION PROBE
On 28th August, KYC 360 reported that French authorities investigating corruption in international sports believe a Swiss partner of Japanese advertising giant Dentsu Inc played a “central and essential role” in deals used to embezzle sponsorship money – though they accuse neither of wrongdoing in alleged fraud relating to former IAAF chairman Diack and his son. It is also said that the role of Dentsu and partner AMS could come under scrutiny in a second, ongoing inquiry by the French into alleged bribes related to the Olympics and the World Athletics Championships.
PHILIPPINES TO STUDY ECONOMIC IMPACT OF HALTING ONLINE GAMBLING
On 28th August, KYC 360 reported that the Anti-Money Laundering Council is studying the scope of the country’s online gambling industry to determine the impact on the economy if it stopped operating. Philippine offshore gambling operators (POGO) are seen as a boon for the local economy, drawing many visitors from China who work in them, fuelling property demand and retail spending, but bar Filipinos from playing, and contribute to national coffers through license fees.
THE BENEFITS OF CANADIAN LIMITED PARTNERSHIPS TO NON-RESIDENTS OF CANADA
On 21st August, Blaney published an article saying that Limited Partnership (LP) offers many advantages to non-residents of Canada, making LP a popular investment vehicle for foreign investors contemplating doing business in Canada. It describes the requirements for an LP in Canada. It notes that an LP is not considered a separate legal entity subject to taxation, all profits realised by the LP flow through the LP to its partners, who subsequently pay tax as required by the legislation of their country of residence; and therefore LP are not required to file tax returns or pay any income tax in Canada. The article, in particular, highlights that use of an LP allows for the creation and use of a highly prestigious Canadian business vehicle (though perhaps the experience of the UK and its Scottish Limited Partnerships should be a caution)
DEFRA IMPORT AND EXPORT NEWSLETTER – RE IMPORT OR EXPORT OF ANIMALS AND PRODUCTS OF ANIMAL ORIGIN (POAO) BETWEEN UK AND EU
Trade body BIFA has reproduced the latest DEFRA Newsletter of 22nd August, which includes a “to do” list to prepare for the anticipated Brexit date of 31st October. It also says that DEFRA is undertaking user experience testing of the new online export service. The Department also says that it will publish helpful process maps, run a series of online WebEx sessions, provide video content and publish social media material through the Defra Twitter handle to help one understand the steps importers/exporters need to take. It says that it will also attend key industry events across the UK where officials can speak to them face to face.
EUROPE ON HIGH ALERT AS DEADLY PIG DISEASE SWEEPS THROUGH ASIA
EurActiv on 28th August reported that African Swine Fever (ASF), a deadly pig disease, has started spreading through Asia and Eastern Europe. The disease had been detected in 9 EU member states: Belgium, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Romania, according to the EU Food Safety Authority (EFSA). It is said that the situation in Asia was catastrophic, with outbreaks reported in China, Vietnam, Cambodia, Mongolia, North Korea and Laos.
DEVON MARKET TRADER JAILED FOR £900,000 VAT FRAUD
On 28th August, Accountancy Daily reported that Terence Sickelmore, co-owner of Dairy World, a dairy products business in Exmouth Market, submitted dozens of fake VAT returns for his business to fraudulently claim repayments of £913,729, and was sentenced to 3 years in prison at Exeter Crown Court.
NEW ZEALAND: ACCUSED MONEY LAUNDERERS BARRED FROM ANZ BANK
Newstalk ZB on 28th August reported that at least 3 of 6 people arrested in a major police investigation into alleged money laundering have been barred from stepping foot inside an ANZ bank; this following about $9 million in assets being seized by authorities during Operation Menelaus in Auckland. After appearing in court, the 3 were ordered to surrender their passports, while their bail conditions included being prevented from going to an ANZ branch or any other financial institution to deposit cash or cheques.
EX-UKRAINIAN HEALTH MINISTER DETAINED ON FRAUD CHARGES ON ARRIVAL IN KYIV
Rferl on 28th August reported that Ukraine’s former Health Minister Rayisa Bohatyrova has been detained in Kyiv upon her arrival from Minsk, following 5 years of self-imposed exile. She served as Ukraine’s health minister in the government of President Viktor Yanukovych.
GERMAN COURT UPHOLDS PROHIBITION AGAINST SO-CALLED ‘SECONDARY LOTTERIES’
On 28th August, Calvin Ayre reported that a Higher regional Court has upheld a district court ruling barring an unspecified Gibraltar-licensed online lottery betting operator from offering services to German customers, in a case arising from a state lottery operator complaint that unauthorised competition from such secondary lotteries had trimmed its 2017 sales by nearly 7%.
US: HALF-MILLION DOLLAR PENALTY FOR IMPORTED COMPOSITE WOOD PRODUCTS AND FORMALDEHYDE CONTENT
Sandler Travis Rosenberg on 28th August reported that the Environmental Protection Agency reported recently its first enforcement action for violations of regulations that limit how much formaldehyde can be released from composite wood products. It is reported that a US construction company has agreed to pay a $544,064 penalty to resolve violations and has also agreed to take corrective actions to come into compliance.
IS THERE A ROLE FOR THE BIOLOGICAL WEAPONS CONVENTION IN OVERSIGHT OF LAB-CREATED POTENTIAL PANDEMIC PATHOGENS?
An article in the Bulletin of the Atomic Scientists on 27th August suggests that the probability of accidental release into the community from one of the laboratories involved in a research enterprise into mammalian-airborne-transmissible, highly-pathogenic, avian-influenza live viruses is uncomfortably high. Such viruses could be transmitted through the air, similar to seasonal human influenza. Questions posed include – should details of this dual-use research be published, and could they be employed as biological weapons? The article argues that there is an urgent need for international oversight and regulation of this research, though countries that are party to the Biological Weapons Convention (BWC) may not believe it to be within the BWC mandate to oversee academic research whose goal is public health. The article concludes that, hopefully, the states that are party to the BWC will set in motion a process for overseeing relevant new research and technologies; and if they decide that lab-created potentially pandemic pathogens are within the BWC mandate they could speed up the enactment of guidelines and regulations. At the very least, it says, BWC member countries could be the catalyst to launch discussions for a new international treaty on oversight and regulation of the creation of and research on highly dangerous pathogens.
UKRAINIAN AIRCRAFT-ENGINE PLANT CAUGHT UP IN US-CHINA RIVALRY
On 27th August, Rferl carried an article about the problems that Ukrainian tycoon Vyacheslav Boguslayev is having selling his defence company, Motor Sich – a maker of engines for missiles, helicopters, and jets. It is one of the few plants in the former Soviet Union that can build an entire aviation engine from scratch and offers a wide variety of products. The proposed sale to Chinese interests provoked a raid of its headquarters by Ukraine’s Security Service in early 2018 and the seizure of its shares – the service citing as “state sabotage” plans to transfer technology by opening a plant in China. It is thought acquisition of the company would enhance China’s capabilities, particularly for engines for cruise missiles. The US is hoping that Ukraine will block the sale.
ISIL STILL A GLOBAL THREAT BOASTING AFFILIATED NETWORKS AND RESIDUAL WEALTH
A news release from the UN on 27th August reports comments of a senior counter-terrorism officials before the UN Security Council. It is said that Islamic State in Iraq and the Levant (ISIL/Da’esh) may have lost its territorial foothold in Syria, but it remains a global threat through a network of affiliates stretching from West Africa to SE Asia and residual wealth estimated at up to $300 million. ISIL continues to evolve into a covert network, with a growing number of attacks in Government-controlled parts of Syria reflecting a pattern seen in Iraq since 2017; in Africa, ISIL’s West Africa province is among its strongest affiliates, while in Europe, radicalization in prisons and the risk posed by returnees upon their release from detention are a major concern. In Asia, the threat posed by ISIL persists despite military pressure, he said, noting that the group has between 2,500 and 4,000 fighters, as well as women playing a role in the planning and executing attacks.
QATAR HAS ESTABLISHED AN INVESTMENT PARTNERSHIP WITH SOMALIA TO BUILD A NEW PORT
On 20th August, Port technology reported that the Ministry of Transport and Communications in Qatar said that the partnership between Qatar Ports Management Company and Somalia will see the construction of the Hobyo Port in the Mudug region of central Somalia. The Hobyo Port is in proximity to the Bab al-Mandab Strait, one of the world’s most important sea crossing points. Hobyo is also important due to its location in the Mudug region, which links the south and north of Somalia. The latest news follows reports in March 2018 that Qatar and Sudan made a $4 billion deal to develop Sudan’s second-biggest port, Suakin.
IS THE WORLD TRADE ORGANISATION (WTO) BECOMING A NEW TRADE BATTLEFRONT?
An interesting article from Hellenic Shipping News on 28th August asks why is President Trump critical of the organisation, and where do India and China stand in this confrontation? Trump took issue with the “developing country” status enjoyed by India and China at the WTO. He argued that these countries are not developing economies, as they claim to be, but instead grown economies that do not deserve any preferential trade treatment from the WTO over developed countries such as the US. The “developing country” status allows a member of the WTO to seek temporary exception from the commitments under various multilateral trade agreements, and as many as two-thirds of the 164 members of the WTO have classified themselves as developing countries. The article points out that, since the WTO allows countries to unilaterally classify themselves as “developing”, many countries have been happy to make use of this freedom. Even many developed economies such as Singapore and Hong Kong which have per capita income levels higher than the US, have made use of the provision to classify themselves as growing economies. Trump’s criticism of the WTO is seen by many as the opening of a new front in his trade war against China. The article suggests that, while initially envisaged as a global body to promote free trade, the WTO has now deteriorated into a forum where competing governments fiercely try to protect their narrow interests.
THE UNREALISED POTENTIAL OF PALESTINIAN OIL AND GAS RESERVES
An article from the UN Conference on Trade and Development on 28th August says that oil and natural gas resources in the occupied Palestinian territory could generate hundreds of billions of dollars for development. According to a UNCTAD study, geologists and resources economists have confirmed that the territory lies above sizeable reservoirs of oil and natural gas wealth, in Area C of the West Bank and the Mediterranean coast off the Gaza Strip, perhaps worth $524 billion. However, so far the Palestinian people have been prohibited from exploiting the oil and gas reserves in their own land and water to meet their energy needs and generate fiscal and export revenues. Other states have been or are to exploit reserves in the eastern Mediterranean, and Israel has begun exploiting reserves in the area.
HOW LIBYA’S SKIES BECAME A BATTLEGROUND FOR UAE-TURKEY PROXY WAR
A report in Middle East Eye on 27th August said that both Khalifa Haftar and his Libyan National Army and the UN-backed Government of National Accord appear to have turned to drones. This includes the use of Chinese-made Blue Arrow 7 missile on Chinese-made Wing Loong 2 unmanned aerial vehicles supplied to the LNA by the UAE. Meanwhile, the GNA have deployed Turkish-built drones in response. It is reported that GNA forces, however, did not possess the experience or technical know-how to operate the drones, so Turkish operators had been deployed to Libya to fly them. The acquisition of armed drones is said to have enabled the 2 protagonists to overcome their lack of air power and precision strikes in urban areas – with a proliferation of UAV – Chinese-made Wing Loongs, Tukishes Bayraktar TB2, Israeli-made Orbiter-3 tactical drones, engaged in reconnaissance, guiding and striking operations in and around Tripoli.
EXXONMOBIL CHALLENGES OFAC PENALTY FOR DEALINGS WITH ROSNEFT CEO
EU Sanctions Blog on 28th August reported that the US oil company is asking a federal court to overturn the $2 million penalty from 2017 received for dealing with Igor Sechin, the designated CEO of Rosneft. It argues that the Excutive Order involved targets Sechin’s personal business, assets and wealth, but it does not apply to the companies he manages.
COCAINE WORTH £20 MILLION SEIZED FROM YACHT OFF WALES COAST
Yahoo News on 28th August reported that 250 kg of cocainewith has been seized after police intercepted the Sy Atrevido, a yacht off the coast of Wales carrying the illegal drug to the UK from South America. Police have arrested 6 people following the operation.
US: WIDENING CORRUPTION PROBE HITS HOME FOR UAW UNION PRESIDENT
On 28th August, Reuters reported that the FBI had conducted searches at the home of United Auto Workers President Gary Jones, a union retreat and multiple other locations as part of a corruption probe into allegations of illegal payments to union officials by Fiat-Chrysler.
GREECE: CORRUPTION PROSECUTOR CHARGES BANKERS OVER ILLEGAL LOANS
Ekathirimini on 28th August reported that the government prosecutor had brought charges against 38 people in connection with the alleged disbursement of illegal loans by Piraeus Bank and the transfer of money abroad while capital controls had been in place. The suspects include employees of the bank, facing charges of breach of faith and money laundering while charges against 2 high-ranking bankers who had originally been implicated have been dropped due to a lack of evidence.
FRENCH POLICE TEAM DESTROYS VIRUS THAT HIT NEARLY 1 MILLION COMPUTERS
Time Magazine on 28th August reported that a police team in France, C3N, has destroyed a computer hacking network that affected more than 850,000 computers around the world. It found and destroyed the pirate server, located in the Paris area that controlled a network of computers infected by a virus that reportedly made millions of euros through fraud, and described as the control tower for the ‘botnet’ network of infected computers.
UK SANCTIONS CURRENTLY IN PLACE AND HOW TO APPLY FOR A LICENCE
On 28th August, the FCO issued information which included links to guidance on import, export and sanctions licences.
CHINA AND VIETNAM JOINT ONLINE GAMBLING CRACKDOWN
On 28th August, Calvin Ayre reported that China’s war against online gambling has entered a new phase thanks to the country’s first joint operation with authorities in Vietnam, with a major bust of an illegal online gambling and telecom fraud operation based in Vietnam. A total of 77 Chinese nationals were arrested in Vietnam and deported to China 3 days later, and Chinese authorities arrested a further 31 suspects in China.
REPORT: SOUTH AFRICAN POLICE THE MOST CORRUPT PUBLIC SERVANTS IN COUNTRY
On 28th August, OCCRP reported that corruption among police officers in South Africa has grown and has for the first time overtaken other sectors like schools, health and local government, according to a report from Corruption Watch.
SOLUTIONS TO THE GROWING SYNTHETIC DRUG TRADE ARE ADVANCED AT SINGAPORE REGIONAL MEETING
A news release from the UN Office on Drugs and crime on 27th August was concerned with a meeting of criminal intelligence analysts, forensic specialists and customs officials from ASEAN member states, Australia, Canada, China, Japan, the Republic of Korea, US and the WCO Regional Intelligence Liaison Office Asia Pacific, to discuss latest developments and strategies. It says that synthetic drugs have rapidly become the most profitable illicit business in the region as organised crime groups have innovated their business model and engineered an expansion of the methamphetamine market, which is now valued at up to $61.4 billion annually. Regional and international experts at the meeting echoed the view that reducing the supply of precursor chemicals required to manufacture synthetic drugs would be one of the most effective measures to address synthetic drug challenges in the region. Several countries have raised concerns about detection and forensic capacities which limit their ability to identify and seize new synthetic drugs and precursor chemicals. Delegates agreed to address precursor chemical and pharmaceutical diversion in a co-ordinated way moving forward.
THE WINDING-UP OF C&J ENERGY LIMITED IN BERMUDA IN 35 DAYS: A CASE STUDY OF ACCELERATED WINDING-UP IN BERMUDA
On 28th August, Appleby published an article saying that the company was dissolved only 35 days from the grant of winding-up orders for the Bermuda companies. T he expediency of the Bermuda companies’ liquidations was the result of the Bermuda companies’ use of 3 separate but interrelated mechanisms in the Bermuda winding-up regime. The article considers each of the 3 mechanisms that were necessary to achieve the accelerated dissolution.
UNDERSTANDING THE ROLE OF US INDUSTRY IN THE UN ARMS TRADE TREATY
A report from the Stimson Center on 20th August considered the ATT – the first legally binding international agreement to regulate the global trade in conventional arms by establishing common international standards for countries to incorporate into their national transfer control systems – and the role of the defence industry in the US in creating it. The aim of the industry was to ensure that there were no unintended consequences that would undermine the legitimate trade in conventional weapons or create additional costs or burdens for industry doing business in legal and responsible ways. As of 1st July, the ATT has 104 States Parties and an additional 33 signatories. It aims to stop the irresponsible and illegal transfer of conventional arms, which are often used to commit violations of human rights and international humanitarian law. The Treaty promotes co-operation in the global arms trade by establishing clear elements for national control systems and facilitating transparency to build confidence among trading partners. The US signed the treaty in September 2013 but has never ratified it, and inn April 2019, during a speech at the annual meeting of the National Rifle Association, President Trump announced that the US would “unsign” the ATT. Nevertheless, the report argues that the defence industry’s involvement in the ATT process is essential to avoid potential consequences subjecting transactions to multiple, inconsistent export control regimes. If industry engages more directly in the ATT process, it could avoid unintended consequences for the legitimate arms trade.
HOUTHI USE OF DRONES DELIVERS POTENT MESSAGE IN YEMEN WAR
An article from the International Institute of Strategic Studies on 27th August said that the Houthi movement, Ansar Allah, has made use of UAV as a low-cost way to punish the Saudi-led coalition and inflict reputational and political damage. It is claimed that it conducted over 50 unmanned aerial vehicle (UAV) attacks into Saudi Arabia between May and August of this year. It says that the group’s deployment of UAV serves 2 key functions – punishment and propaganda. But while the tactical advantage of using UAV is limited, their symbolic value against the coalition and their territories is significant. This use began in a low-key way, in 2015, when it flew a DJI Phantom series quadcopter – a commercially available hobbyist system – that it had allegedly stolen from a local TV station. Later seized UAV were said by the UN Panel of Experts to be ‘virtually identical in design’ to that of an Iranian Ababil-T UAV. Any locally produced or modified UAV would rely on acquired Indian and Chinese components, it is said.
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