14th October 2019
IN BREAKAWAY ABKHAZIA, A LOOPHOLE FOR NORTH KOREAN WORKERS AMID BEACHES AND SOVIET RELICS
An article in the Washington Post on 13th October looks at how North Korean workers continue to be used in the area, despite UN sanctions signed up to by Russia, which backs the statelet. It says that around 400 North Koreans — mostly men with wives and families back home to support — have been relocated from Russia to this subtropical strip of land, with many in the main city, Sukhumi, building apartment blocks and pharmacies and laying railway tracks in a region still pockmarked by the secessionist conflict of the early 1990s when Abkhazia, backed by Moscow, broke away from Georgia. It also points out that about 10,000 North Korean workers remain in Russia and that it has promised to send them home by a December 22nd deadline. Russia recognised Abkhazia as independent in 2008 and cash from Russia flooded in, although the UN and Western nations still see Abkhazia as part of Georgia.
CHINESE CLAMPDOWN ON SUGAR SMUGGLING CAUSES EXCESS SUPPLIES IN ASIA
The Hindu on 14th October reported that a crackdown on sugar smuggling into China has left abundantly supplied markets elsewhere in Asia struggling to absorb excess supplies, causing a broader storage problem for global markets. It says that sugar is smuggled into China, produced mostly in India or Thailand and shipped to Myanmar, Laos or Vietnam before entering the Chinese mainland. However, the flow should more than halve this year to about 800,000 tonnes. In May 2017, China imposed hefty tariffs on sugar imports and started to levy extra tariffs on out-of-quota sugar imports from all origins in August 2018, and this is combined with the smuggling crackdown.
MALAYSIA TO FORM NEW ANTI-FINANCIAL CRIME BODY
Regulation Asia on 13th October reported that, expected to launch in January, the National Anti-Financial Crime Centre (NAFCC) will co-ordinate the efforts of 12 enforcement agencies – including BNM (Bank Negara Malaysia), the Malaysian Anti-Corruption Commission, Customs Department and the police – to tackle financial crime. It will establish, administer, maintain and manage a centralised data system which contains all the relevant information that it receives or gathers. Data will be and analysed and used to plan and co-ordinate integrated operations among government entities and enforcement agencies to prevent financial crimes. It will look into all financial crimes including money laundering cases, but it will not replace the existing 16-member National Coordination Committee (NCC) to counter money-laundering, where BNM is the secretariat.
DEUTSCHE BANK REMOVING ITS CORRESPONDENT BANKING SERVICES TO MALTA FINANCIAL INSTITUTIONS
On 14th October, KYC 360 reported that Deutsche Bank has confirmed that it is removing its correspondent banking services to local financial institutions, making it more difficult for them to offer dollar-denominated transactions. The decision follows Moneyval report about Malta’s failure to adequately combat financial crime. It is understood the bank will stop offering correspondent banking services in all currencies by the end of December.
NEW ZEALAND: $4 MILLION PENALTY FOR AUCKLAND MONEY SHOP UNDER AML LAWS
On 14th October, KYC 360 reported that Jin Yuan Finance has to pay $4 million following a lawsuit from the Department of Internal Affairs, in the second case to involve consulting company Starfish Consulting. The DIA accused Jin Yuan of failing to CDD, monitor accounts and transactions, and comply with the requirement to report suspicious transactions.
MEXICO: EXTENSIVE BRIBERY AT PEMEX REVEALED IN SECRET RECORDINGS
KYC 360 reported on 14th October that, in 2017, Israeli private investigation company Black Cube secretly recorded senior officials at Petróleos Mexicanos describing widespread bribery and corruption at the state-run oil company. These recordings form part of the evidence in a lawsuit filed last year against the Mexican government by a Mexican oil-field drilling company called Oro Negro. It is also said that the evidence from the lawsuit forms part of a broad-ranging US investigation into corruption at Pemex by the DoJ and SEC.
SWITZERLAND REMOVED FROM THE EU TAX GREY LIST
On 10th October, Charles Russell Speechlys LLP published an article saying that, in December 2017 the EU had placed Switzerland on the “grey list”, which includes co-operative jurisdictions who are subject to the successful delivery of their commitments in tax matters. Switzerland had been placed on this list due to the existence of special corporate tax regimes and was given 1 year to enforce a tax reform.
BUSINESS AND HUMAN RIGHTS UPDATE
On 30th September, Covington & Burling LLP published an article providing an update on developments in this area. These included the implementation of the Child Labour Due Diligence Act in the Netherlands. This requires companies to identify, prevent and assess the issue of child labour in their supply chains, and covers companies that sell or supply goods or services to Dutch customers, including companies registered outside of the Netherlands. The article also mentions the recommendations of an independent review of the Modern Slavery Act in the UK, and the draft Transparency in Supply Chains Act completed by a parliamentary committee in Canada. The article also reviews the position of the UN’s Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises. A revised draft applies not only to business operations “of a transnational character” and would require states to legislate to mandate human rights due diligence for business by requiring businesses to “take appropriate steps to prevent human rights violations or abuses in the context of it business activities…”, and establish liability (including criminal liability) for failure to prevent another natural or legal person with whom a business has a contractual relationship with from causing harm to third parties.
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NETHERLANDS: CONTROVERSIAL COUNTER-TERRORISM BILL COULD END UP CRIMINALISING AID WORKERS
An opinion piece on EurActiv on 14th October warns that a controversial counter-terrorism Bill could end up criminalising aid workers in the Netherlands if they enter conflict hotspots when assisting the world’s most vulnerable people. The draft Bill from the Ministry of Justice and Security will make it an offence to be present in a ‘terrorist area’ without permission. The Netherlands already has legislation in place that makes it a crime to travel abroad to commit a terrorist offence.
EU REPORT PUBLISHED ON COUNTERFEIT GOODS, INCLUDING TOYS AND CLOTHING, ENTERING THE EU
On 11th October, HK TDC reported on EU data showing the increasing number of interceptions of fake goods entering the EU due to the rising number of small parcels, express and postal traffic. The report released by the Commission emphasises the importance of cooperation of the customs authorities with the rights-owners in order to maintain the competitiveness of European businesses. Mainland China and Hong Kong have been identified as among the top origins of goods infringing intellectual property rights. It points out that goods for daily use (including body care articles, medicines, toys and electrical household goods) made up 37% of the detained articles; and (for the benefit of the site’s Hong Kong readers) the EU detained, in particular, high numbers of fake watches, mobile phones and accessories, ink cartridges and toners, CD/DVD, labels, tags and stickers from Hong Kong. Most of the articles (88%) detained in the past years were detained by customs authorities due to suspicions that they infringed an EU, international or national trade mark, and suspected infringement of design and model rights was the second most common reason.
GAMBLING: ITALY PLANS TAX ON WINNINGS AND RETAIL CASH BAN
On 13th October, Calvin Ayre reported that the Italian government has proposed more tax hikes on the sector, this time targeting the operators’ customers. It plans to boost the tax rate on large lottery jackpots (i.e. over €100 million); a new 12% tax on gamblers’ winnings under €500, which account for the majority of punters’ profits and currently aren’t subject to taxation; and is considering a curb on tax evasion by retail operators through a proposed ban on cash payments for gambling services.
$400,000 OF FAKE LUXURY WATCHES SEIZED IN PHILADELPHIA
Patch on 11th October reported that customs officers found fake Rolex, Invicta, Rado, and Hublot brand watches at a Philadelphia Port that had arrived from Hong Kong.
CUSTOMS OFFICERS AND AGENCIES TO RECEIVE AWARDS FOR REFRIGERANT SEIZURES
Cooling Post on 13th October reported that customs authorities and individuals from 24 countries are to be recognised for the seizure of over 250,000 kg of illegal refrigerants in this year’s Montreal Protocol Customs Award, organised by the UN Environment Programme’s OzonAction, the Ozone Secretariat and WCO. 587 seizures were reported by 24 countries. It was also reported that Poland has launched an initiative to set up a EU working group on F-gases to determine risks, identify and apply best working practices – to draw up recommendations that would help in enforcement on illegal trade, develop tools for effective customs actions and training on HFC, and promote co-operation.
SOUTH AFRICA’S INTERCEPTION LEGISLATION HELD TO BE UNCONSTITUTIONAL
On 11th October, Baker McKenzie reported that the High Court in Pretoria recently ruled that certain provisions of South Africa’s interception legislation, the Regulation of Interception of Communications and Provision of Communication Related Information Act (RICA), were unconstitutional. It says that this could have an impact, not only in South Africa, but abroad. The challenge arose when an investigative journalist group discovered that one member was being spied on during South Africa’s infamous “Zuma Spy Tapes” saga. The High Court found that RICA was deficient in a number of key respects and failed to justify its invasive interception mechanisms. Essentially, it did not regulate surveillance in a manner sufficient to justify the significant dilution of privacy rights arising from it. Its bulk interception practices were considered to unreasonably and disproportionately encroach upon constitutionally entrenched privacy rights. The High Court has afforded Parliament 2 years to remedy the law.
US SANCTIONS HIT GLOBAL OIL FLEET AS TRADERS SHUN NEARLY 300 TANKERS
Hellenic Shipping News on 14th October reported that industry sources have claimed that nearly 300 oil tankers globally have been placed off limits as companies fear violating US sanctions against Iran and Venezuela, driving freight rates to new highs.
BRAZILIAN GOVERNMENT TO CREATE SINGLE CITIZEN DATABASE
ZD Net on 11th October reported that the database would contain a wide range of personal information about the country’s population of over 200 million people, to be fully shared across departments. Data sharing will be categorised on 3 levels: public data is not subject to any access restrictions; data protected by confidentiality, though access will be granted to all government bodies for the purpose of execution of public policies; and confidential data, with access granted to certain agencies for legal purposes.
PROBLEMS IN SANCTIONS SCREENING KOREAN NAMES
A feature from SQA Consulting says that Korean personal names which can prove difficult to screen, outlining the potential problems – including the fact that they can appear in 3 different formats, there are different transliterations into Latin can produce wildly different spellings of the same original language name; and (as with other nationalities) there are a lot of people sharing the same name. It used the North Korean ruling Kim family tree as an example of names. It points out that, like many countries in the Far East, names are presented family name first, followed by the given name – and this is more than just how the name is written, it is how it is spoken as well. Matching algorithms also have problems because of the presence of short names – the article saying that 74% of Korean people have a family name that is less than 4 characters long.
SEC SUES CRYPTO START-UP TELEGRAM GROUP OVER ICO
On 11th October, the Wall Street Journal reported that the SEC has sued Telegram Group Inc that raised $1.7 billion through a cryptocurrency offering that became one of the largest such deals ever. The crypto asset, known as “gram”, by Telegram, founded by 2 Russian brothers who also developed the messaging app that is popular with cryptocurrency traders and developers. The SEC order seeks to block the company from distributing in the US an asset that regulators say cannot legally be traded in the country.
MIAMI FINANCIAL ADVISER PLEADS GUILTY TO FACILITATING BRIBES IN ECUADOR
On 11th October, the Wall Street Journal reported that Frank Roberto Chatburn Ripalda, 42, a financial adviser based in Miami has pleaded guilty to participating in a scheme that involved paying nearly $3 million in bribes to officials at a state-owned oil company in Ecuador. He played a central role in setting up a scheme to bribe former officials at Petroecuador, a state-owned and state-controlled oil company, while serving as a financial adviser to an unnamed oil-services contractor.
REPORT ON POTENTIAL APPLICATION OF BLOCKCHAINS AND CRITERIA FOR FRESH REGULATIONS
On 11th October, Bird & Bird announced the launch of a report which explores the potential application of blockchain technologies and highlights where new regulation may be needed. It outlines 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.
SOUTH KOREAN JUSTICE MINISTER RESIGNS OVER CORRUPTION ALLEGATIONS
On 14th October, UPI reported that Justice Minister Cho Kuk has resigned amid an ongoing probe into corruption allegations involving his family. His wife is suspected of forging a university award to help the couple’s daughter gain admission to medical school and of involvement in a dubious private equity fund investment.
EU: 439 STOLEN CARS SEIZED IN 12 DAYS AS PART OF FRONTEX-LED OPERATION
A news release from EU frontier agency, FRONTEX, on 14th October announced that 439 stolen cars, 11.9 million illegal cigarettes and 20 tonnes of raw tobacco were recovered in a 12-day operation led by Frontex and focused on the detection of stolen cars and car parts, smuggling of migrants and related document fraud.
NORTH KOREA SAID TO BE SET TO TRIM STATE WORK FORCE AS SANCTIONS TAKE TOLL ON ECONOMY
Asahi Shimbun in Japan on 12th October said that North Korea is undertaking a massive downsizing of its government work force apparently because of the negative effects of international sanctions on its economy. Quoting a “source knowledgeable about what is occurring in North Korea”, it said about one-third of government workers would be let go over the course of a year.
LATIN AMERICA FRAUD & CORRUPTION ENFORCEMENT REVIEW FOR Q3 2019
On 14th October, US law firm King & Spalding published a newsletter which starts by saying that enforcement authorities throughout the US and the Americas continue to aggressively investigate fraud and corruption across the region in the third quarter of 2019. The newsletter highlights some recent developments and updates prior observations from the first the half of this year. One case involves Avianca Airlines, Colombia’s national airline, which disclosed an internal investigation into potential violations of the FCPA or other potentially applicable anti-corruption laws in the US and abroad. This, it says, follows similar investigations into the business practices of several aviation-related Latin American companies.
COSCO PARENT REPORTEDLY EXITING LONDON-BASED MARINE INSURERS
On 14th October, Insurance Marine News reported that, in the wake of US sanctions on part of the group, China-based COSCO Shipping Corp is reported to be switching most of its tanker fleet to China-based marine insurers, including ships that are not directly owned by its 2 sanctioned subsidiaries.
€10,000 CASH TRANSACTION LIMIT TO BE IMPOSED IN MALTA
Lovin’ Malta on 14th October reported that a €10,000 cash transaction limit will be imposed on the purchase of real estate, vehicles, yachts, art, and precious metals after the government unveiled one its plans to combat money-laundering concerns in Malta during the budget speech.
SHAREPRICE OF FTSE 250 MINING COMPANY FALLS AS CEO NAMED IN UKRAINE FRAUD AND MONEY LAUNDERING CASE
Master Investor reported on 14th October that the shares in Ferrexpo fell after its CEO and majority shareholder Kostyantin Zhevago was been named as a suspect in absentia by the Ukrainian authorities which are investigating money laundering and embezzlement at a business that he previously owned.
MALTA: PONZI FRAUDSTER CHARGED WITH MONEY LAUNDERING ALONGSIDE DAUGHTERS OF FORMER EU COMMISSIONER
On 14th October, Malta Today reported that a court was told that Marie Eloise Corbyn Klein, 75, who is accused of running a Ponzi scheme was assisted by John Dalli – the former European Commissioner – and his daughters, to process payments from gold investments.
US: PRESIDENT ISSUES EXECUTIVE ORDERS ON GUIDANCE DOCUMENTS AND TRANSPARENCY
On 9th October, an article from Seyfarth Shaw LLP said that President Trump had issued 2 Executive Orders that have the stated intent to make closeted or last-minute agency guidance and interpretations of federal rules a thing of the past. The Orders require notice and publication of the guidance and interpretations along with the creation of comprehensive online databases where they may be easily searched out and found. This is said to be important because many agencies, including the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Department of Labor utilise guidance documents to provide the public, as well as agency enforcement and litigation personnel, with the agency’s interpretation of a policy, procedure or regulation. The Orders are said to be intended to improve public access to internal agency guidance documents and to protect the public from previously-undisclosed interpretations of regulations.
CHICAGO MAN CHARGED WITH RUNNING AN ILLEGAL ONLINE SPORTSBOOK IN COSTA RICA
On 14th October, Calvin Ayre reported that Michael Frontier (aka Ira Goldberg – he is said to have other aliases), 35, is charged with running an illegal sportsbook based out of Costa Rica.
GIBRALTAR BENEFITS FROM ANNOUNCEMENTS IN QUEEN’S SPEECH
A news release from the Gibraltar Government on 14th October claimed that the Queen’s Speech announcing the new legislation for the forthcoming UK Parliament contained good news for Gibraltar – saying that the Financial Services Bill will ‘ensure that the UK maintains its world-leading regulatory standards and remains open to international markets after we leave the EU.’ It further provides that one of the main elements of the Bill is to deliver on the British Government’s ‘commitment for long-term market access to the UK for financial services firms in Gibraltar as part of the UK family’.
UNCERTAINTY ABOUT THE APPLICATION IN THE UK OF NEW EU RULES REQUIRING THE DISCLOSURE OF CERTAIN CROSS BORDER TAX ARRANGEMENTS
An article from Out-Law on 14th October said that there is “considerable uncertainty” about the application in the UK of new EU rules requiring the disclosure of certain cross border tax arrangements, according to a tax law expert. The UK published draft regulations in July on the implementation in the UK of the EU DAC 6 Directive, which is designed to enable tax authorities to share information about cross-border tax schemes with other EU Member States. The consultation period on those regulations ended on 11th October.
GUAYAQUIL PORT REMAINS ECUADOR’S BUSY COCAINE GATEWAY TO EUROPE
Insight Crime on 14th October reported that Ecuador’s port city of Guayaquil has long been a key transshipment point for drugs coming from neighbouring countries. In the latest incident, 300 kg of cocaine was seized on 5th September, concealed in a tuna cargo aboard a ship scheduled to stop at ports in Spain and Belgium. Authorities in Ecuador have already seized a total of 55 tons of cocaine in 2019. Guayaquil is the country’s largest city and home to its largest port. In addition to the port of Guayaquil, the article says, Ecuador also sees drugs leave through the port of Puerto Bolivar. However, a former DEA official said that only 3% of the shipments leaving Ecuador ports are searched.
US: CUSTOMS BROKERS OUTLINE BURDENS OF IMPORTER VERIFICATION RULE
On 14th October, American Shipper carried an article saying that the brokers’ trade body NCBFAA generally supports Customs and Border Protection’s goal to protect against illicit importers but said the agency’s proposed importer verification rule has “grossly miscalculated the cost” to customs brokers. It warned that it could become a burdensome requirement for the country’s customs broker industry if certain adjustments are not made. A proposed rule would require a customs broker to collect 12 data elements or documents at the time that a power of attorney is obtained from the importer. According to CBP, there are about 350,000 importers actively transacting customs business with the agency through the nation’s customs brokers, and the agency estimates that the customs broker industry will collectively spend about $22.3 million from 2019 to 2023 to comply with the new rule.
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