2nd October 2019
INFORMAL PAYMENTS COST GOVERNMENTS HUNDREDS OF BILLIONS IN REVENUE EACH YEAR
NORTH KOREA BEATS SANCTIONS ON MONEY TRANSFERS BY PLACING REMITTANCE AGENT IN DANDONG, CHINA
On 1st October, Radio Free Asia reported that a North Korean remittance agent is located in the Chinese border city of Dandong to oversee money transfers across the Sino-Korean border, and runs and manages several borrowed-name accounts at Chinese banks.
COSCO SHIPPING LINE PARENT BEGINS MARINE INSURANCE EXIT FROM LONDON AS SANCTIONS BITE
On 1st October, Lloyds List reported that many of the 49-strong fleet of very large crude carriers (VLCC), suezmax and aframax tankers linked to the Cosco subsidiaries now made subject to US sanctions are now entered with the China Shipowners Mutual Assurance Association. It says that COSCO Shipping Corp appears to be shifting most of its tanker fleet to China-based marine insurers — even those vessels that are not directly owned by its 2 sanctioned entities. It is said that the subsidiaries control or manage some 49 ships, including 21 VLCC, while Cosco Shipping Energy Transportation (CSET) is the beneficial owner of 155 tankers and gas carriers, and Cosco as a whole has more than 1,000 vessels in its fleet, including the world’s largest dry bulk and containership fleet. The article notes concern about the effect of secondary sanctions related to Iran which can be imposed on anybody who is a non-US citizen and who is “knowingly providing significant financial, material, technological, or other support” to activities or transactions that benefit the energy, shipping or shipbuilding sectors of Iran.
IRISH MAN JAILED IN US FOR SMUGGLING RHINOCEROS HORN
On 1st October the Irish Times reported that Richard Sheridan, an Irish man with a Cambridge address, has been sentenced to 14 months in prison and 2 years of supervised release in the US on wildlife smuggling charges, after he pleaded guilty at a court in Miami to smuggling a valuable rhinoceros horn. He and another man had been indicted in 2014, and charged with an offence involving the export from the US of a cup made from rhinoceros horn.
PRACTICAL IMPLICATIONS OF UK SFO RECENT GUIDANCE FOR INTERNATIONAL ORGANISATIONS
An article from Morgan Lewis on 25th September says that the Corporate Cooperation Guidance published in August has implications for organisations operating inside and outside the UK, and that international organisations should take the Guidance into account in practical terms when conducting cross-border investigations and reviewing their own internal investigations and incident response protocols. The Guidance will be used to assist the SFO in assessing the level of co-operation it has received in making charging decisions. The article outlines the key provisions of the Guidance and says that it indicates that the SFO expects to be told by an organisation of any contact it receives from another law enforcement agency or regulator. Another factor considered is that the Guidance anticipates that the SFO will be notified and consulted before an organisation interviews potential witnesses or suspects during an internal investigation, but this approach may not prove possible in many internal investigations for a host of reasons – saying that the Guidance presents a more restrictive approach to internal investigations than is the practice in the US. The article goes on to consider how (if) the conflicts it highlights between the Guidance and its practical application can be resolved, and says that organisations need to review their approach to evidence gathering generally and on a case-by-case basis to ensure the best chance of preserving cooperation credit in the UK and elsewhere.
CANADA ADOPTS NEW EXPORT CONTROLS AND BROKERING REQUIREMENTS
An article from McCarthy Tetrault on 30th September is concerned with what it describes as “ground-breaking” changes. After joining the UN Arms Trade Treaty Canada amended its Export and Import Permits Act and adopted a package of brokering regulations, which came into force on 1st September. The changes impose controls over brokering activities – a significant development for Canadian industry, as this is the first time such controls have been introduced in Canada. Therefore, it says, anyone involved in international trade in defence goods or technology should review the changes thoroughly, and assess the implications for their business activities. The amended Act prohibits unauthorised brokering by any Canadian company or individual whether one is located in Canada or abroad, which essentially means that new Canadian brokering obligations apply on an extraterritorial basis. The Act defines brokering as activity aimed “to arrange or negotiate a transaction that relates to the movement of goods or technology included in a Brokering Control List from a foreign country to another foreign country”. In assessing brokering activities, the authorities will take account of the “substantial risk” of the activity undermining of peace and security; being a serious violation of international humanitarian law or international human rights law; being an offence under international conventions or protocols relating to terrorism or transnational organised crime to which Canada is a party; or giving rise to serious acts of gender-based violence or serious acts of violence against women and children.
The Brokering Control List is at –
UAE ISSUES A NEW AML LAW IN CONTEXT OF ITS FATF EVALUATION
On 1st October, the National Law Review published an article saying that FATF is undertaking a mutual evaluation review of the AML/CFT systems in the UAE this year. UAE has undertaken a number of proactive initiatives to ensure best practice AML/CFT measures, including enacting an important new law from October 2018 and seeking to combat financial crime in co-operation with international partners. The article considers the new law in detail.
BANK OF IRELAND EXECUTIVES TO BE QUESTIONED ON ONECOIN SCAM
On 1st October, Coingeek reported that US authorities are seeking to have executives from the Bank of Ireland testify in the cryptocurrency scam case against OneCoin. They would provide material inculpatory testimony about Mark Scott, one of the proprietors of OneCoin. It is said that the witnesses include the head of BOI’s AML team, a former executive vice-president and director of relationships, a team member of the bank’s foreign direct investment team and another executive who reportedly worked closely with Scott.
HOW ABUSIVE TAX AND TRADE PRACTICES HARM HUMAN RIGHTS
Christian Aid has published a report prepared in advance of a meeting in September at which world leaders at the UN General Assembly in New York would hold high-level talks on finance for development. Christian Aid estimates that illicit financial flows (IFF) cause tax losses of $416 billion in the global South. This is money, it says, that could enable governments to deliver much-needed public services, and bring us closer to a world where all experience dignity, equality and justice – but what has been missing until now has been a robust definition of IFF. It provides a list of examples, such as abusive practices that have harmed Nepal – a country that is still recovering from a major earthquake in 2015. Christian Aid is calling for the debate around IFF to shift towards a rights-based one, and it wants the definition of IFF broadened to refer to ‘cross-border flows of money that are either illegal or abusive of laws in their origin, or during their movement or use’ – saying that it is not about whether it’s illegal, but immoral. Practices mentioned include tax abuse, abusive tax incentives, abusive use of bilateral and multilateral trade treaties, misuse of double tax treaties, odious debt, abusive use of mutual arbitration procedures, harmful tax practices, unjust investment agreements, money laundering, trade mis-invoicing, abusive transfer pricing, illicit money transfers, crime, bribery, the illicit drugs trade, corruption and the ‘offshore’ trust industry. The report makes a number of recommendations intended to shift the debate concerning IFF towards a rights-based definition – a definition that is based not merely on what is already illegal, but also on what is harmful and abusive.
RISE IN NUMBER OF WORLD’S RICH BUYING UK ‘GOLDEN VISAS’
On 27th September, the Guardian reported that the number of wealthy foreigners investing at least £2 million in the UK in exchange for a “golden visa” has risen to a 5-year high, despite a clampdown on the scheme in the aftermath of the Skripal novichok poisoning attack. 255 people received Tier-1 investor visas in the first half of 2019, allowing them to live and work in the UK for 5 years – this was the most in a 6-month period since 2014.
ITALY DECLARES WAR ON TAX DODGERS IN BID TO FIX FINANCES AND CUT TAXES
On 27th September, Reuters reported that Italy’s government has announced a new crackdown on tax evasion as part of its 2020 budget. Tax dodgers cost the country €109 billion on average each year between 2013 and 2015 and Italy has the highest level of VAT evasion in the EU, the European Commission says. One move proposed is to reduce the threshold at which tax evasion is considered a criminal offence to €50,000 from the current level of €150,000.
EU EXTENDS LIBYAN SANCTIONS TO APRIL 2020
EU Council Decision 2019/1663/CFSP has extended the current EU sanctions involving Libya to 2nd April 2020.
UK: IMPORTING AND EXPORTING WASTE IF THERE’S NO BREXIT DEAL
On 2nd October, DEFRA published updated information on what UK waste importers and exporters must do to prepare for changes to rules around waste shipments if the UK leaves the EU with no deal.
UKRAINE INVESTIGATING FORMER TOP PROSECUTOR FOR ALLEGED CONNECTIONS TO ILLEGAL GAMBLING OPERATIONS
Calvin Ayre on 1st October reported that Ukraine is investigating a former top prosecutor, Yuri Latsenko, for his alleged connections to illegal gambling operations but which could have much more to do with his role in America’s current political infighting. He is said to be is suspected of “abuse of office for facilitating illegal gambling”.
US CONGRESSMAN RESIGNS AMID INSIDER TRADING SCANDAL
On 1st October, Jurist reported that US Representative Chris Collins (Republican, of New York) has resigned after being accused of insider trading. He is accused of using his position as a board member of Innate Immunotherapeutics to provide insider information to members of his family; and it is said he would plead guilty.
3D-PRINTED PARTS USED ON UK PASSENGER TRAINS FOR FIRST TIME
On 2nd October, CILT reported that the tech is not yet being used for engines and wheels, but it has still been tipped to provide a boost to industry efficiency. Armrests and grab handles have been 3D-printed for use on Chiltern Railways services linking London and Birmingham, with huge time savings compared to traditional manufacturing methods.
2 JUDGMENTS OF THE ITALIAN COURTS APPLYING THE EU BLOCKING REGULATION
On 2nd October, the EU Sanctions Blog reported on 2 cases about the Regulation, which prohibits compliance in the EU with some US sanctions on Iran – in one court ordered an injunction to prevent a bank from terminating its services, which it said would be a breach of Article 5 of the EU Blocking Regulation; and in the other a court found that US designation of a bank to be ineffective in the EU, and ordered release of funds that had been blocked.
UK: BANKING PROTOCOL SCHEME IS GOING FROM STRENGTH TO STRENGTH
A blog post from UK Finance on 2nd October concerned the rapid response scheme known as the Banking Protocol. This initiative allows bank branch staff to contact police if they suspect a customer is in the process of being scammed, with police making an immediate priority response to the branch. This can prevent customers from falling victim to fraud, while allowing police to catch the fraudsters in the act. Since March 2018, it has been operational across all police forces of the UK. The post says that in the first half of this year alone, over £23 million of fraud has been prevented and 134 arrests have been made thanks to the Banking Protocol. This means, it says, that over £71 million of fraud has now been stopped since this initiative was first introduced in 2016. The post also says that there has also been a gradual increase in the amount of fraud being prevented through the Banking Protocol, as both police and banks continue to improve their ability to spot potentially fraudulent transactions.
PODCAST: THE US COLLEGE ADMISSIONS SCANDAL
In the latest TRACE podcast, Jonathan Turner, Vice President, Ethics & Compliance, at Smith & Nephew in Memphis, discusses the admissions scandal that has rattled several top-tier US universities and ties some of the lessons learned back to the work of compliance professionals.
EU EXPORT CONTROL: AMENDMENT TO INCREASE TRANSPARENCY
On 2nd October, the EU Sanctions blog reported that implementation of EU Council Decision 2019/1560/CFSP to increase transparency of arms controls and licensing in the EU. The changes involve clear annual reporting deadlines for Member States to produce a national report on arms exports on/by 30th June each year); further guidelines on the substance and process of reporting; and development of a searchable online database to allow for analysis of Member States’ data on arms exports.
BRIEFING ON BURUNDI
On 2nd October, the House of Commons Library produced a briefing paper on the situation in Burundi, saying that the country has been in renewed crisis since 2015, when President Jean-Pierre Nkurunziza controversially stood for a third term in office and was re-elected. National elections are due again in 2020. It says that there are widespread concerns that the conditions for reasonably free and fair elections next year will not be in place.
REGULATING THE INTERNET OF THINGS
On 2nd October, a briefing paper from the House of Commons Library has been prepared ahead of the debate to be held in Westminster Hall on 3rd October. It says that, in May 2019, the UK Government released a consultation on regulatory proposals on consumer IoT security. The consultation said the Government wanted to better protect homes and the wider economy from the risks of a lack of cyber security provisions in consumer IoT devices.
PREPARING FOR NO-DEAL BREXIT IF YOU WORK IN GAMBLING
One of a series of guidance release from the UK Government published on 2nd October, this document offers an 8-point checklist to understand what you need to do to prepare for no deal Brexit if you work in gambling.
PAKISTAN FACES £17 MILLION COSTS FOR SEIZING FORMER PRIME MINISTER’S LONDON FLATS
On 2nd October, Desiblitz picked up a story saying that Pakistan is facing a £17 million claim from an asset recovery firm over an unpaid bill in relation to ex-Prime Minister Nawaz Sharif’s London flats. Asset recovery firm Broadsheet made the claim against the country and its anti-corruption agency. Sharif was jailed for 10 years in July 2018 on corruption charges, and his daughter Maryam and son-in-law Safdar Awan were also convicted. Leaks linked Sharif’s children to the purchase of London flats through BVI companies during the mid-1990s.
CO-FOUNDER OF CRYPTO-MINING MARKETPLACE ARRESTED IN GERMANY FOR ALLEGED $63 MILLION THEFT
Ambcrypto reported on 2nd October that NiceHash co-founder Matjaz Skorjanec was allegedly apprehended by German federal police on a US warrant.
TOP EXECUTIVES AT ITALIAN BANKS UNDER INVESTIGATION IN DIAMOND PROBE
On 2nd October, Reuters reported on a probe into alleged fraudulent diamond selling by some of Italy’s top banks, having investigated high-profile executives working for UniCredit and Intesa Sanpaolo – with the number of people involved in the probe had risen to 87 from 68 originally under investigation, along with 5 banks and 2 diamond brokerages. Banks are suspected of colluding with diamond brokers to scam their own customers and alleged to have sold diamonds at vastly inflated prices while marketing them as sound financial investments.
2 NEW YORK BROKERAGES FINED $25 MILLION IN US OVER FOREIGN EXCHANGE OPTIONS
Reuters reported on 2nd October that BGC Financial LP agreed to pay $15 million in civil penalties, while GFI Securities LLC will pay $10 million, under settlements announced by the Commodity Futures Trading Commission and the New York Attorney General. It is alleged that they employed fraudulent practices to solicit and accept orders from traders to buy and sell foreign exchange options.
US: FCC CLOSES LEGAL LOOPHOLE OVER TEXT MESSAGE SPOOFING
An article from Manatt, Phelps and Phillips LLP on 2nd October said that the Federal Communications Commission has adopted new rules banning caller ID “spoofing” (using a “fake” caller ID number) for text messages and foreign calls, described as the latest step in the agency’s efforts to combat spoofing. It is reported that the FCC has already received more than 35,000 consumer complaints about caller ID spoofing in just the first half of 2019 alone. The new rules take effect in February.
UAE ECONOMIC SUBSTANCE REGULATIONS
On 2nd October, an article from Morgan Lewis provided 5 things which it said one should know about the economic substance test introduced from April 30th, and the requirement from 2020 to make reports to a regulatory authority in order to comply with a new set of regulations. The changes are designed to help the UAE avoid inclusion on an EU blacklist of non-cooperative nations for tax purposes.
US SAYS DETAINED IRANIAN TANKER DELIVERED OIL TO SYRIA DESPITE ASSURANCES
Hellenic Shipping News on 2nd October reported that the Iranian tanker Adrian Darya 1 is still delivering oil to Syria, despite Iran’s Foreign Minister’s promises to the UK, US Secretary of State Mike Pompeo has said. Pompeo shared a satellite image of the tanker near the Syrian coast.
MASTERCARD COMPLIANCE TRAINING VIDEO ON THE PERILS OF GETTING TOO CLOSE AND COMFORTABLE WITH THIRD PARTIES – BE THEY SUPPLIERS, AGENTS, OR OTHER INTERMEDIARIES
A post on the FCPA Blog on 2nd October reported that Mastercard has followed the success of its first compliance training video with a second release, this time about the perils of getting too close and comfortable with third parties, be they suppliers, agents, or other intermediaries. A short trailer and contact details are provided in the post.
ITALY: BOEKHOORN AND PARTNERS ACCUSED OF MONEY LAUNDERING AND FUNDING ACQUISITION OF GAMING SOFTWARE COMPANY WITH CRIMINAL MONEY
On 2nd October, OCCRP reported that Italian prosecutors said that they have accused Dutch billionaire Marcel Boekhoorn of using money made through a business partner’s criminal activities to finance his private equity fund’s acquisition of an Italian gaming software. The allegations concern Ramphastos Investments’ 2017 purchase of an 80% stake in Talenta Labs, a casino game designer. Ramphastos Investments issued a statement saying that it emphatically denies that any irregularities have occurred. OCCRP says that, whilst probing mafia ties within the Italian gambling industry, the Reggio Calabria prosecutor’s office found enough evidence to charge the owner of Ramphastos Investments, his 2 associates, Philip Van Wijngaarden and Diedrik Oost, and a business intermediary, Bruno Michieli, with money laundering.
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