11th October 2019
MONEY LAUNDERING, TRAFFICKING, IVORY: CRACKDOWN ON ART CRIME INTENSIFIES
On 10th October, the Art Newspaper reported that pressure on the UK’s art trade is increasing as it faces a wave of legislative changes and increased attention from enforcement agencies. It refers to new sentencing guidelines for criminal damage to heritage assets, AML regulations that are coming into force in January and a judicial review of the Ivory Act 2018. Under the AML changes, anyone trading in works valued at €10,000 or more — regardless of whether the sum is paid in cash or otherwise — will be obliged to verify customers’ identity.
INTERNATIONAL REPORT ON THE POTENTIAL APPLICATION OF BLOCKCHAIN AND THE CRITERIA FOR FRESH REGULATION
On 10th October, Bird & Bird published a report which explores the potential application of blockchain technologies and highlights where new regulation may be needed. It sets out to outline the various issues that businesses are facing now and will face in the coming years. It explains the technology, its advantages and disadvantages and examines some of the legal considerations and how they apply across certain jurisdictions. It discusses how fresh regulation, when it comes – and if or where needed, should aim to provide confidence, stability, and certainty for blockchain users in financial services and other sectors.
NGO EXPOSE RIGHTS ABUSES IN EU SUPERMARKET SUPPLY CHAINS
On 10th October, EU Observer reported that more than 80 NGO and trade organisations have called on the EU institutions to deliver new legislation that establishes a mandatory human rights and environmental framework for businesses and companies operating and offering products or services in the EU. This follows a new Oxfam report which revealed that many of the people producing the food on sale in European supermarkets are victims of poverty pay, harsh working conditions, gender discrimination, and human rights abuses.
The report is at –
NEW ATA CARNET APP MAKES DIGITAL DECLARATIONS AND TRANSACTIONS POSSIBLE
The International Chamber of Commerce has reported that the ICC digital ATA Carnet lifecycle management system has begun a 6-month period of testing in 6 pilot countries, including the UK. The initiative is part of a plan to ensure that declarations and transactions are digitally recorded and tracked, making cross-border travel of goods easier, faster and safer for businesses and customs offices alike, and by simplifying these tedious trade processes, encourage more countries will join the ATA system. An ATA Carnet is a sort of “passport” for goods temporarily imported into a country. It comprises a front and back cover and includes two sheets for presentation at each foreign country you are visiting and 2 sheets for presentation to customs when leaving and returning to your home country. One sheet is to give to the foreign customs officials when entering the country and the other when you leave it. The same applies when exiting and entering your own country.
BANK OF IRELAND EMPLOYEES CHANGE STANCE ABOUT TESTIMONY IN ONECOIN CRYPTOCURRENCY FRAUD CASE
On 11th October, Finance Feeds reported that it has become clear that despite the witnesses’ previous representations that they were “willing” to provide testimony, that testimony would not be voluntary, and the witnesses would testify only in response to compulsory process, i.e. under the provisions of the United States-Ireland Mutual Legal Assistance Treaty (MLAT). On trial in the US is Mark Scott, who is said to have maintained corporate bank accounts through which he is alleged to have laundered several hundred million dollars in OneCoin fraud proceeds, accomplished through, among other means, misrepresentations made by the defendant to the witnesses. It is said that the US the Government has submitted an MLAT request to the Central Authority of Ireland to compel the witnesses’ live CCTV testimony from Ireland.
SEC GOES AFTER BINARY OPTIONS FRAUDSTERS BEHIND LBINARY AND IVORY OPTION
Finance Feeds on 11th October reported that Israelis Anton Senderov and Lior Babazara (aka Lior Bar), are accused of defrauding more than 2,800 US investors and causing them to lose over $5 million. They are said to have owned and controlled LianTech Finance Marketing, Ltd., which operated a call centre in Israel that functioned as a “boiler room”, as well as 2 online binary options brokers, LBinary and Ivory Option.
DEADLINE TO SUBMIT COMMENTS TO US CUSTOMS ON PROPOSAL TO REQUIRE CUSTOMS BROKERS TO COLLECT CERTAIN INFORMATION FROM IMPORTERS TO VERIFY IDENTITY
On 11th October, Sandler Travis Rosenberg reported that 14th October is the deadline to submit comments to CBP on a proposal to require customs brokers to collect certain information from importers (including non-resident importers) to enable the customs brokers to verify the identity of the importers. Customs brokers must currently hold a power of attorney to act for a client, and often the broker will collect additional information, but this is not mandatory and CBP considers the information contained in a power of attorney insufficient. CBP is proposing to amend its regulations to standardise the process by which customs brokers verify the identity of their importer and non-resident importer clients – the article lists the information to be sought.
ECONOMIC SUBSTANCE RULES RELEASED FOR THE BVI
On 10th October, Ogier published an article saying that the final version of the Economic Substance Code has now been published to implement the legislation setting out economic substance requirements which would apply to certain BVI entities in certain circumstances, and thus meet the requirements of the EU Code of Conduct Group. The Code has been renamed as the Rules on Economic Substance, but will not become effective until a further amendment to the Beneficial Ownership Secure System Act comes into effect. Ogier says that it provide a summary of the finalised Rules in due course.
GUERNSEY’S SUBSTANCE REQUIREMENTS – APPLICATION TO IP COMPANIES AND AUGUST AMENDMENTS
On 27th September, Carey Olsen published an article saying that, in March, the EU Council confirmed that Guernsey had met its commitment to introduce economic substance requirements and, as a consequence, Guernsey is regarded as a co-operative jurisdiction and is not listed on the ‘blacklist’ of non-cooperative jurisdictions. The relevant regulations were most recently amended with effect from 1st August and the article provides some details of the changes made. These include changes to the definitions of intellectual property assets and what is meant by a high-risk IP company; and clarification of what counts as core income generating activity (CIGA) for an IP company and of the type of information required to rebut the presumption that applies where a high-risk IP company fails to demonstrate applicable substance requirements. The article focuses on the application of the substance requirements to IP Companies.
ECHR RULES THAT ITALY VIOLATED RIGHTS IN “TOUGH” TREATMENT OF TERRORISTS AND MOBSTERS
On 10th October, Jurist reported that the European Court of Human Rights had rejected Italy’s request for referral in the case and making the judgement in the case final. The Court had held that Italy violated Article 3 of the Convention by imposing an irreducible sentence of life imprisonment on a defendant for Mafia-type activities along with murder, abduction, and other crimes. The Court ruled that it would be incompatible with human dignity … to deprive persons of their freedom without striving towards their rehabilitation and providing them with the chance to regain that freedom at some future date – and the defendant had been refused prison leave because he had refused to co-operate with judicial authorities.
EUROPOL: RECORD SEIZURES HIT SYNTHETIC DRUGS DURING LARGE-SCALE JOINT ACTION DAYS
A news release from Europol on 11th October advised that in September Europol co-ordinated large-scale Joint Action Days 2019 which targeted synthetic drugs and new psychoactive substances and, human trafficking, migrant smuggling, document fraud and environmental crime. Joint efforts of 16 Member States targeted drug traffickers across Europe, and resulted in seizure of drugs and precursors worth more than €85 million, including 11.3 tonnes of MAPA pre-precursor.
DIGITAL CURRENCIES: THE RISE OF STABLECOINS
On 11th October, Fintech Futures published an article about the increase in “stablecoins” – cryptocurrencies designed to minimise the volatility of the price by linking to some “stable” asset or basket of assets, such as a cryptocurrency, fiat money, or to exchange-traded commodities. It says that they are significantly different from the popular incumbents: cash or bank deposits.
TAXING THE DIGITAL ECONOMY – THE OECD PROPOSAL
On 11th October, Eversheds Sutherland published a briefing saying that on 9th October the OECD published its latest consultation paper on its proposals to address the challenges of taxing the digital economy. The consultation puts forth a suggested approach to addressing Pillar One of its previous proposals that focuses on issues of taxable nexus and profit allocation, which would apply to “large consumer-facing businesses,” not just businesses with highly digital models. The briefing examines the background to the proposals, which come against the backdrop of unilateral measures being imposed by individual jurisdiction, and the proposals themselves.
CAYMAN ISLANDS ANNOUNCES PUBLIC BENEFICIAL OWNERSHIP REGISTER AND CALL FOR OTHER OVERSEAS TERRITORIES TO FOLLOW SUIT
An article on Ekklesia on 11th October reported that, following an announcement by the Cayman Islands that it will introduce a public register revealing the real owners of companies registered there by 2023, Global Witness is calling on all other British Overseas Territories to immediately follow suit.
FRANCE: HOW A COMPANY ESCAPED PUNISHMENT IN FIRST SAPIN II CORRUPTION CASE
On 10th October, a post on FCPA Blog detailed how Sonepar, a French company, countered allegations that it had breached 5 of the 8 obligations imposed by Article 17 of the anti-corruption law, re failure of its risk mitigation and anti-corruption systems. The post explains the supervisory powers of the relevant agency, and then how the company countered with how it had met each of the 5 obligations involved.
US COURT: DESIGNATING SOMEONE A COMPLIANCE RISK DOESN’T CONSTITUTE DEFAMATION
On 10th October, the Wall Street Journal reported that, according to a federal appeals court in Chicago, designating someone a compliance risk doesn’t constitute defamation. This was a victory for medical device manufacturer Zimmer Biomet Holdings Inc, which was sued by a former employee after it placed him on a list of entities that the company said posed a risk to its compliance with anti-bribery laws. The lawsuit was filed in 2016 by Alejandro Yeatts, a former employee of a subsidiary in Argentina, who came under scrutiny after the company entered into a series of foreign bribery settlements with US authorities in 2012.
INSURANCE GHOST BROKERS CAMPAIGN
On 11th October, Professional Security Magazine reported that the Motor Insurers’ Bureau (MIB) Operation Drive Insured is a national campaign in October to catch uninsured drivers. Police are warning drivers to be wary of fraudsters who may have sold them fake car insurance. The “ghost brokers” are fraudsters who sell drivers apparently cheap motor insurance deals but issue policies that aren’t worth the paper they’re written on.
FCA FINES BROKER FIRM £15.4 MILLION
On 11th October, Financial Reporter reported that Tullet Prebon’s rates division had ineffective controls around broker conduct which allowed improper trading to take place, including ‘wash’ trades. It reported that Tullett Prebon is an electronic and voice inter-dealer broker, acting for institutional clients transacting in the wholesale financial markets, typically investment banks. It is said that senior management wrongly believed sufficient systems and controls were in place and obvious red flags of broker misconduct and opportunities to probe were missed.
JACOB ZUMA: EX-SOUTH AFRICAN LEADER TO FACE CORRUPTION TRIAL RELATED TO $2.5 BILLION DEAL
On 11th October, Sky News carried a report saying that he is accused of taking bribes from French arms manufacturer Thales in the 1990s when he was deputy president. Zuma, 77, was president from 2009 to 2018.
MARYLAND MAN SENTENCED FOR $396 MILLION PONZI SCHEME
On 11th October, the Seattle Times reported that a US federal judge has sentenced Kevin B. Merrill, 54, to 22 years in prison for fraud and conspiracy in a $396 million investment scheme that stole from people as far as Singapore. His wife Amanda Merrill had admitted to trying to hide her husband’s cash and will be sentenced in January.
SUDANESE BUSINESSMAN “FUELLING CORRUPTION IN SOUTH SUDAN”
On 11th October, Radio Tamazuj said that a new investigative report claimed that Ashraf Seed Ahmed, a Sudanese businessman, remains a major enabler of corruption and violence for President Salva Kiir’s government.
SWISS AIRCRAFT COMPANY PILATUS ALLOWED TO RESUME ACTIVITY IN INDIA DESPITE CORRUPTION PROBE
On 11th October, Swissinfo reported that the Indian government has partially lifted the ban on commercial dealings with the Swiss aircraft manufacturer Pilatus after a freeze in July due to a corruption investigation. It is accused of corruption and irregularities in connection with the supply of 75 training aircraft to the Indian air force.
OECD PROPOSES NEW PROFIT ALLOCATION RULE
On 11th October, a briefing from Out-Law was concerned with a new proposal published for consultation from the OECD. The proposal is that countries where multinationals operate would have a new taxing right over a portion of the ‘residual profit’ of certain multinational enterprises. The residual profit would be the profit that remains after allocating what would be regarded as a deemed routine profit on activities to the countries where the activities are performed. This deemed routine profit could be a fixed percentage with industry variances.
NORTH KOREAN SHIP SAILS WITH KIRIBATI FLAG AND LOITERS NEAR SHANGHAI
On 10th October, NK Pro cited another example of a North Korean ship sending unusual information to tracking systems. The So Baek Su is registered in North Korea, but signalled flying a Kiribati flag and broadcast its heading to China.
PEACE IS SLIPPING AWAY IN COLOMBIA
On 11th October, Foreign Affairs reported that a 2016 deal promised to disarm and reintegrate the members of the Marxist-Leninist insurgency known as FARC into Colombian society, and it included a plan to develop Colombia’s long-abandoned countryside and a substitution program for illicit drug crops, which were fuelling the violence, and guaranteed justice for victims of the conflict as well as the right of the FARC to participate in elections as a lawful political party. However, the deal is in jeopardy with, the article says, Washington turning a blind eye to the Colombian president’s slipshod implementation of the accord. The article argues that the US could, and should, help put the deal back on track.
USING OPEN DATA TO EXPOSE CORRUPTION IN MONGOLIA
On 11th October, an article from NGO Transparency international showed how access to public information helped uncover nepotism in the government loans system and hold those involved accountable. It is said that, in November 2018, it was reported that 110 out of 132 companies that received a low-interest loan from a government fund for SME were owned by politicians or their relatives – with nearly two thirds of the 74 members of parliament and 3 out of 16 cabinet ministers, including the prime minister’s younger brother, using the fund to finance their companies. It appears that this wrongdoing was uncovered by a local broadcaster through an updated right to information law which requires government bodies, including funds, to make all information transparent, and requires all companies to publicly reveal their owners and financial stakeholders.
FATF WEEK IN PARIS NEXT WEEK
FATF has advised that representatives from 205 countries and jurisdictions around the world, the IMF, UN, World Bank and other organisations, will meet in Paris from 13th October for 6 days of meetings which will focus on disrupting financial flows linked to crime and terrorism and discuss ways to contribute to global safety and security. Also up for discussion are virtual currencies and stablecoins, best practices on beneficial ownership and digital identities, progress made by Pakistan on AML/CFT and assessments of Turkey and Russia.
NO-DEAL BREXIT: A GUIDE TO HOUSE OF COMMONS LIBRARY RESEARCH
On 11th October, the House of Commons Library publish an index as an annotated bibliography of sources published by the House of Commons Library on a potential no-deal Brexit. It will be updated regularly and links to the papers included in the resource are made available online, while the downloadable version includes additional comment on some of the selected papers.
UK: VAT ON CONSTRUCTION
On 11th October, the House of Commons Library published a briefing paper that sets out the VAT treatment of construction work and the UK’s discretion in setting VAT rates under EU law, before looking at the debate on harmonising VAT rates on all types of construction work.
MOLDOVA: ARREST WARRANT ISSUED FOR THE FORMER DEMOCRATIC PARTY LEADER VLAD PLAHOTNIUC OVER ALLEGED MONEY LAUNDERING
On 11th October, the IPN Press Agency in Moldova reported that a court had issued an arrest warrant for Plahotnic, after he failed to appear before prosecutors.
CYPRUS AND MALTA LEAD EU RANKING OF $1.6 TRILLION ASSETS HELD OFFSHORE
On 11th October, the Cyprus Mail reported that, according to the EU Commission, EU taxpayers held assets worth at least $1.6 trillion offshore in 2016, equal to nearly 10% of EU output. It says that taxpayers in Cyprus and Malta held about 50% of their wealth abroad, the highest in the EU, compared to 12% in France, 10% in Germany and nearly 9% in the UK. The report also said wealth held offshore was likely higher than its estimates showed, as this did not include insurance contracts, real estate and cash.
SINGAPORE REGULATOR BANS 2 ADVISERS FOR MISCONDUCT AND FRAUD
On 11th October, International Adviser reported that the Monetary Authority of Singapore (MAS) has issued prohibition orders against 4 individuals banning them from providing financial advice after they were convicted for fraud and misconduct at the state courts of Singapore.
GIBRALTAR GOVERNMENT LAUNCHES BREXIT ADVICE BOOKLET
On 11th October, the Gibraltar Government advised that it had published a leaflet on preparations for a no-deal Brexit.
EUROPEAN COUNCIL ADOPTS EU-WIDE WHISTLEBLOWER PROTECTION RULES
On 11th October, a briefing from Out-Law was concerned with new EU-wide protections for whistleblowers who report breaches of EU law which have been adopted by the European Council. The new EU Directive requires EU companies with more than 50 employees or with an annual turnover of €10 million or more to set up internal whistleblowing reporting procedures. It will also apply to regional administrations and municipalities with 10,000 inhabitants or more and to breaches of the relevant laws listed in an Annex to the Directive.
COST OF ARMED GUARDS CRIPPLING SHIPPING BUSINESS OPERATORS IN NIGERIA SAY
On 11th October, Hellenic Shipping News reported that a cross section of the shipowners and brokers revealed that about 90% of vessels that call at the Port Harcourt port or Onne port come with armed guards. It is claimed that many indigenous shipping companies have closed down due to inability to afford the huge cost of private armed guards, which fluctuates between $30,000 and $50,000, and which follow a spate of insecurity plaguing the area.
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