Day: October 14, 2019

On 14^th October, the US Treasury advised that OFAC had taken action against 2 ministries and 3 senior Turkish Government officials in response to Turkey’s military operations in Syria.  The Ministry of National Defence and the Ministry of Energy and Natural Resources, as well as the Minister of National Defence, Minister of Energy and Natural Resources, and the Minister of the Interior – Hulisi AKAR, Fatih DONMEZ and Suleyman SOYLU – are designated.  Persons that engage in certain transactions with those designated may themselves be exposed to designation; and any foreign financial institution that knowingly facilitates any significant financial transactions for or on behalf of the persons designated could be subject to US correspondent or payable through account sanctions.  The Treasury stresses that the action is not intended to affect or disrupt the operation of international humanitarian NGO or the UN in Turkey in rendering humanitarian assistance to Syrian communities in need.

https://home.treasury.gov/news/press-releases/sm792

https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20191014.aspx

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In June 2019, a paper was published by the Nonproliferation Review and says that while detection systems are now deployed at strategic locations for the purported purpose of detecting and deterring the smuggling of nuclear and radioactive materials (such as major UK container ports), and despite considerable investment in this area, few studies have examined how these programmes are implemented or the operational challenges they face on a day-to-day basis. The paper seeks to address this with a focus on radiation-detection efforts at maritime facilities.  It says that the results clearly demonstrate that the implementation of these systems varies significantly across different national and organisational contexts, resulting in a fragmented global nuclear-detection architecture, which arguably undermines efforts to detect trafficked nuclear-threat materials.  Greater consideration should therefore be given to developing international standards and guidance, designing and adopting tools to support key parts of the alarm assessment process, and broader sharing of good practice.  The theft and accidental loss of nuclear and radioactive materials, resulting in so-called material out of regulatory control (MORC), is a global issue of long-standing concern.  In the UK, under Project Cyclamen, fixed radiation-detection systems were installed to scan incoming goods at three major UK ports and one international airport.  This has since evolved into Programme Cyclamen, which now covers most major UK port facilities, major airports, and rail links with mainland Europe.  The paper says that there are particular challenges to detecting smuggled nuclear and radiological material in the maritime environment – largely due to the volume and speed of trade flows, and recent estimates put the number of 20- or 40-foot containers in circulation at over 43 million.  At a busy international port, such as Rotterdam, more than 10 million TEU pass through port facilities each year, processing tens of thousands of containers every day.

https://www.tandfonline.com/doi/pdf/10.1080/10736700.2019.1610256

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Maritime Executive on 14^th October reported that the Singapore Shipping Association (SSA), the International Chamber of Commerce (ICC) and Singapore tech start-up Perlin have teamed up to build an advanced digital blockchain ship registration preparation system for international adoption – the International E-Registry of Ships.

https://maritime-executive.com/article/blockchain-ship-registration-system-under-development

https://www.hellenicshippingnews.com/project-is-launched-to-transform-shipping-registries-globally/

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On 14^th October, the UN Conference on Trade and Development announced the Asia-Pacific Trade & Investment Report 2019, which says that non-tariff measures (NTM) are now affecting around 58% of trade in Asia and the Pacific.  These NTM can include government procurement limitations, subsidies to export and import restrictions as well as import and export bans through unilateral or multilateral sanctions. Meeting these complex and often opaque rules can require significant resources, affecting in particular SME.  Most of the NTM are technical regulations, such as sanitary and phytosanitary requirements on food.  In summary, while applied tariffs in the Asia-Pacific region have halved over the past 2 decades, the number of NTM – policy regulations other than tariffs affecting international trade – has risen significantly.

https://www.unescap.org/publications/APTIR2019

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In August, RDC published a White Paper about the so-called “Laundromats” in money laundering scandals in recent years.  The firm says that financial services professionals should understand and be able to identify the money laundering schemes known as laundromats – the Russian, the Azerbaijani and the Troika Laundromats.  The White Paper sets out to examine the major examples of the recently revealed laundromat schemes; the key characteristics of the schemes; and actions that they can take to protect a company and customers – what to look for and how they can ensure robust and appropriate protections are in place to thwart criminals.  It identifies 3 factors required for the laundromats – the main actors are ‘paper’ corporate vehicles with no infrastructure, staff, products, etc, and they are often formed by formation agents or Corporate Services Providers (CSP); companies’ accounts are held in an alternative jurisdiction to where they are registered; and transactions between the companies’ accounts are often covered with some fake transaction (e.g. the repayment of a defaulted loan in the case of the Russian Laundromat).

https://rdc.com/whitepapers/rise-of-the-laundromats/

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As the FATF Plenary continues in Paris, on 14^th October, FATF published the APG mutual evaluation reports for Taiwan, Pakistan and the Solomon Islands (previously published by the FATF-style regional body).  It also published a suitably updated consolidated schedule of assessment ratings for countries assessed.

http://www.fatf-gafi.org/media/fatf/documents/4th-Round-Ratings.pdf

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A statement from the Dutch Government on 14^th October announced that it had decided to tighten Dutch arms export policy with regard to Turkey.  Until further notice, no new licence applications for the export of military goods to Turkey will be considered and no new licences will be issued.   It also said that other EU states, such as France, Germany, Sweden, Finland, Norway and Belgium, have also tightened their national arms export policy.

https://www.rijksoverheid.nl/documenten/publicaties/2019/10/14/aanscherping-exportcontrolebeleid-turkije-na-de-inval-van-het-turkse-leger-in-noord-syrie

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The UK Office of Financial Sanctions Implementation has published its annual review for the year to March 2019.  This year included the FATF mutual evaluation report which was (perhaps surprisingly) a positive result.

Funds frozen as at September 2018.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/838178/Annual_Review_2018-19_FINAL.pdf

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VAT Live on 14^th October reported that the Netherlands has become the latest EU member state to block non-EU Customs Union companies acting as the exporter of record following the EU changing the definition of an exporter for customs from July 2018.  Germany, Belgium, Italy, Hungary, Lithuania and the Czech Republic have imposed the restriction to date, and it will apply to UK businesses in the case of a Brexit without a transition deal out of the Customs Union.

https://www.avalara.com/vatlive/en/vat-news/eu-blocks-off-non-eu-exporters.html

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On 1^st October, investigative site Bellingcat published an update on the situation regarding Scottish Limited Partnerships (SLP).  It refers back to a Bellingcat and Transparency International UK joint report in 2017, saying that since then SLP have continued to be implicated in further scandals, including the huge Azerbaijani Laundromat – though in 2017 SLP became obliged to register their Person of Significant Control (PSC) at Companies House, and the boom in registrations ended and SLP registrations are at their lowest level since 2010.  However, it points out that we still do not have the details of the business activities of the SLP involved in the pre-2017 period, who controlled them, or who their true beneficial owners were or are.  Bellingcat now says that it has been involved in an examination of the filings for 14,658 SLP and the groups of presenters who have been responsible for bulk registering thousands of anonymously owned partnerships between January 2015 and July 2019 – finding large numbers of SLP with controlling partners in secrecy jurisdictions, PSC disproportionately situated outside of the UK (largely in Ukraine and Russia), and thousands of SLP registered at mailbox addresses and virtual offices.  It also says it found SLP trading in high-risk money laundering areas, operating unregulated trading and gambling websites, in business as trade intermediaries (which is a high risk sector for trade misinvoicing), appearing in the Ukrainian criminal courts, involved with generic websites with no clear details of their trading activities (possibly set up to bypass money laundering checks), for sale online as shelf companies, involved in political lobbying, and others more directly involved in large-scale criminal activity.

https://www.bellingcat.com/wp-content/uploads/2019/09/Smash-and-Grab-The-UKs-Money-Laundering-Machine.pdf

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