28th October 2019
UK SELLS WHITE PHOSPHORUS PRODUCTS TO TURKEY
On 27th October, The Times reported that concerns have been raised over Britain’s sales of phosphorus products to Turkey, amid evidence the incendiary chemical has been used against Kurds in Syria. More than 70 export licences for military products that can contain phosphorus to Turkey in the past 2 decades. Military items sold by Britain include smoke and pyrotechnic ammunition, decoy and countermeasure equipment and signalling devices and illuminators. However, it should be noted that, despite recent upsets, Turkey was and remains a NATO ally, and the products mentioned are not themselves weapons.
UK: HIGH COURT CONFIRMS RULES FOR PRODUCTION ORDERS FOR SPECIAL PROCEDURE MATERIAL
On 27th October, in its regular case law newsletter, 6KBW reported on a High Court judicial review involving the BBC which confirmed that a 1996 decision of the House of Lords remains binding authority for the proposition that a person cannot be ordered to produce material under paragraph 2 of Schedule 1 to the Police and Criminal Evidence Act 1984, unless it is likely that the material, if produced, will be immediately admissible in evidence and it is not enough that the material will become admissible if particular events happen at the trial. Under the 1984 Act, ‘special procedure material’ includes journalistic material which is not ‘excluded’ material (which has special protection).
CONTRACT LAW: FRAUDULENT MISREPRESENTATION AND THIRD-PARTY LOSS
On 24th October, Stephenson Harwood published a briefing saying that a recent Court of Appeal case saw 2 important points of contract law were clarified: the test for “inducement” in fraudulent misrepresentation; and when a Claimant can recover for third-party losses. The case involved the supply of eggs, with some of the eggs supplied by a sister company to the supplier. However, the customer suspended performance of the contract for alleged breach of warranty and the Claimant brought proceedings for loss of profits. The firm cautions that, had the parties not excluded the Contracts (Rights of Third Parties) Act, the Claimant might have been able to recover for its sister company’s loss, and that the ability to claim for a third-party’s loss remains very much an exception to the normal rules of contract.
UK COURT OF APPEAL: BASIS UPON WHICH A PROFESSIONAL ADVISOR CAN BE HELD LIABLE FOR LOSSES FLOWING FROM NEGLIGENT ADVICE CLARIFIED
On 24th October, Stephenson Harwood published an article about a case involving Grant Thornton providing negligent advice regarding the accounting treatment of interest rate swaps, which resulted in their client breaking the swaps early and incurring mark-to-market losses of £32.7 million and transaction fees. The Court affirmed existing principles laid down in previous cases, and the firm warns that the scope of a professional’s duty needs to be clearly defined at the outset. Where an adviser’s role is nuanced, it’s important to clarify whether or not it is taking responsibility for the decision to enter into the transaction and / or “guiding the whole decision-making process”.
UK: UNDERSTANDING THE NEW SOLICITORS’ PRINCIPLES AND CODE
On 24th October, Kingsley Napley published a briefing about the new set of Principles which will be in force from 25th November. These would accompany the 2 distinct Codes of Practice for solicitors – one for individuals; and one for firms. The briefing examines the Principles, saying that the main message to take away is that the Principles comprise the fundamental tenets of ethical behaviour. The Principles apply universally to all those the Solicitors Regulation Authority regulates – including solicitors, registered European lawyers (REL) and registered foreign lawyers (RFL), as well as authorised firms and their managers and employees (who can be non-solicitors). The article also takes a briefer look at the 2 new Codes.
EY: GOLD, DRUG MONEY AND A MAJOR AUDITOR’S ‘COVER-UP’
On 28th October, the BBC released an exclusive report (linked to a BBC TV “Panorama” programme) claiming that EY failed to report suspicious activity at one of the world’s largest gold refineries and then altered a compliance report to hide the crime. The case involved a gang selling 3.6 tonnes of gold to the Kaloti refinery in Dubai. Members of a gang had collected cash from drug dealers in the UK and other European countries, then laundering the dirty money by buying and selling black market gold using their company, Renade International. 27 members of the gang were jailed in France in 2017. Both EY and Kaloti deny any wrongdoing. It is said that the auditors discovered that Kaloti had paid out a total of $5.2 billion in cash in 2012, but failed to report suspicious activity to the money laundering authorities; and EY also helped to cover up a crime – the export to Dubai of gold bars that had been disguised as silver to avoid export limits on gold, by allegedly rewriting the auditor’s report to hide details that were known to the firm.
The programme is being screened on BBC TV on 28th October.
UK: COVERT RECORDINGS A FACT OF PROFESSIONAL LIFE
A briefing from Harneys on 23rd October was concerned with a High Court case where it was confirmed that there is no hard rule that evidence obtained unlawfully or improperly must be excluded; rather, the question will turn on the relevance and probative value of the evidence and the effect that admitting or not admitting it would have on the overall fairness of the litigation. The case involved a situation where the claimant had secretly recorded the examinations by the defendants’ experts but did not make any recordings of her own experts. It was accepted that the mere fact the recordings had been obtained unlawfully, or at least improperly, did not render them automatically inadmissible. Although the Court considered the covert nature of the recordings reprehensible, it took the view that they were not unlawful, and in fact accepted that “covert recording has become a fact of professional life”.
IS A BREAKDOWN IN MUTUAL TRUST AND CONFIDENCE ENOUGH TO WIND A COMPANY UP?
An article from Harneys on 24th October posed this question in relation to a case before the Court of Appeal and involving a company that was a quasi-partnership between brothers. It was argued that it was just and equitable for the company to be wound up given that there was a breakdown in trust and confidence between the brothers. The complaining brother had been removed as a director, it being determined that he who was in breach of fiduciary duties, that he was solely responsible for the situation, and it was held that that the breakdown in mutual trust and confidence was not enough by itself, to justify the winding up of the company.
HOW JHO LOW PARKED HIS MONEY AT AN OBSCURE, KUWAITI-OWNED BANK
On 28th October, KYC 360 reported on the Banque Fédérale de Commerce, a small commercial bank chaired and owned in full by Sheikh Sabah Jaber al-Mubarak al-Hamad al-Sabah, a well-connected member of Kuwait’s royal family. It is said that Sabah helped Jho Low and Tan Kim Loong — a frequent associate of Low’s, also known as Eric Tan or “Fat Eric” — open offshore accounts at the bank in the summer of 2016 and, to bypass rules prohibiting business from non-residents, the sheikh wrote a letter to the Banque Fédérale de Commerce authorising the transaction as the chair of the bank’s board.
SINGAPORE: PRECIOUS STONES AND METALS DEALERS (PSMD) REGISTERED FOR AML
According to KYC 360 on 28th October reports that a new law in Singapore has seen close to 1,600 dealers signed up by the deadline of 9th October. Dealers must keep records, carry out due diligence on customers, and report certain trades in 8 precious metals and alloys, as well as 6 precious stones: diamonds, sapphires, rubies, emeralds, jades and pearls. Dealers previously had to take these steps only for cash transactions of more than S$20,000.
SOUTH KOREA: NEW BRIBERY CHARGES LODGED AGAINST EX-MINISTER’S BROTHER
On 28th October, KBS reported that the prosecution is looking into another charge filed against former Justice Minister Cho Kuk’s brother, who was earlier accused of dereliction of duty and other allegations related to the operation of an academic foundation run by the Cho family. It is said that the brother, also surnamed Cho, is under investigation for bribery in addition to charges of irregularities in hiring practices at the Ungdong School Foundation. Cho has been serving as secretary-general at the foundation since 2006.
US CPA FACES UP TO 10 YEARS IN JAIL OVER PONZI SCHEME
On 24th October, ICAEW reported that a California-based accountant and investment adviser has admitted charges that he helped to orchestrate a $909 million alternative energy tax credit Ponzi scheme. Ronald Roach, together with his co-defendant Joseph Bayliss, an electrical contractor, pleaded guilty to playing an important role in the massive scam, which raised the money from 17 investors between 2011 and 2018.
DENTONS CANADA 2019 DOING BUSINESS IN CANADA GUIDE
On 28th October, Dentons announced the publication of the guide, described as an easy-to-use guide highlights current issues, regulatory and policy changes, legal precedents and trends affecting business owners. Topics covered included income and commodity tax considerations for businesses; Canada’s bilateral and regional trade agreements; foreign investment protection and promotional agreements; import and export considerations for businesses; protection of intellectual property; privacy laws in Canada; labour and employment law; and federal consumer product and labelling standards.
The guide can be downloaded from the website.
TRADE EFFECTS OF 3D PRINTING
On 28th October, VOX, the CEPR Policy Portal, said that the conventional wisdom is that 3D-printing will shorten supply chains and reduce world trade. The article examines the trade effects of the shift to 3D-printing in the production of hearing aids. It shows that adopting the new technology in production increased trade by roughly 60% as production costs came down. An analysis of 35 other products that are increasingly produced using 3D-printing also finds positive effects but suggests that product characteristics such as bulkiness can affect the relationship between 3D-printing and trade. The article refers to a new paper which focuses on hearing aids, a product that since the mid-2000s has almost exclusively been produced with 3D-printing, and then extends the analysis to 35 other products that are increasingly using 3D-printing. The evidence suggests that businesses (and countries) will continue to specialise and 3D-printing will stimulate rather than hamper trade growth.
TANKERS SAIL AFTER US ALLOWS SANCTIONS-HIT COSCO UNIT TO WIND DOWN OIL DEALS
An article on Hellenic Shipping News on 28th October says that at least 3 tankers are on their way to Asia with US oil cargoes after the US gave temporary approval to wind down transactions with a Chinese shipping company that it sanctioned last month, according to data and shipping sources. On September 25th, OFAC announced sanctions on Chinese tanker companies, including COSCO Shipping Tanker (Dalian), a subsidiary of China’s state-owned shipping group COSCO. However, a new licence on 24th October allowed for the “maintenance or wind down of transactions” including offloading non-Iranian crude oil involving the COSCO subsidiary until December 20th.
ZEEBRUGGE PORT BOSS SAYS JUST 1% OF CONTAINERS ARE X-RAYED
In the wake of the discovery of 39 dead trafficking victims in a container lorry in the UK, Hellenic Shipping News on 28th October reported that just 1 in every 100 sealed containers at Zeebrugge are x-rayed, and none are checked for heat, according to authorities at the port through which the 39 people found dead in the back of a lorry in Essex are believed to have travelled. It is said that €1 million is spent each year to protect the terminal involved, which is one of several at the port, and which processes up to 7,000 containers daily and is guarded round the clock by security staff, who deploy 6 sniffer dogs. It is also said that some containers spot-checked by police and customs officials were x-rayed, but it is estimated that just 1% of trailers were subject to the procedure, and that’s not to find people – Customs are focusing on goods. It is mentioned that 19 years ago, 58 Chinese migrants suffocated in a lorry in Dover after travelling through Zeebrugge.
EGYPT ORDERED NORTH KOREAN ARMS AND TRIED TO COVER IT UP
On 26th October, Quartz reported that, despite voting in favour of an arms embargo on North Korea, in 2016 Egypt ordered arms from North Korea. Egypt received the arms but later tried to cover it up, as suggested by foreign ministry records the Washington Post recently obtained. In August 2016, following a US tip-off, Egyptian Customs seized a ship, Jie Shun, which was flying a Cambodian flag. It found 30,000 rocket-propelled grenades hidden under bins of iron ore, and the UN declared it the biggest seizure of ammunition in the history of sanctions against North Korea. Meanwhile, Egypt touted its supposed transparency and co-operation with UN officials.
FAR RIGHT EXTREMIST USED 3D-PRINTED GUN IN ATTACK ON GERMAN SYNAGOGUE
On 25th October, the Wall Street Journal reported that, on 9th October, a gunman tried to massacre worshippers on Yom Kippur at a synagogue in Halle, Germany, and it was the first time a terrorist perpetrated a deadly attack with homemade weapons using 3D-printed components—including a 3D-printed gun. It is reported that, in an online manifesto that authorities have confirmed the terrorist authored, the man styled himself a pioneer on a trial run, hoping to inspire others to use the emerging technologies and perfect his tactics. Authorities don’t know how the killer acquired the expensive 3D printer used to manufacture components to a 9mm sub-machine gun, a 12-gauge shotgun and a pistol. Such weapons have no serial numbers, so their pedigree, sale and ownership cannot be tracked and because they are made of plastic, they are invisible to metal detectors.
CONTAINER DAMAGE THAT CAN LEAVE SHIPPERS IN A FINANCIALLY TOUGH SPOT
The Container Xchange website carried an article about cargo container insurance, saying that container damage can leave shippers in a financially tough spot. Container damage could be broken doors, dents, heat damage, dropped in the ocean and so on. There could be times when it is hard to find the origin of the damage to see who is responsible to compensate for the damage. It says that many shippers overlook container insurance as they want to save costs – but says that the insurance can help prevent unnecessary costs, stressing that cargo insurance (covering the contents) is different from insurance on the container. The article outlines the various kinds of container insurance, and what it might not cover. It warns that, when the containers are returned to the owner, it is inspected for damages. If damages are found, the owner makes a cost estimate for fixing the damages and sends it to the container user. The user arranges another inspection to recheck the charges and negotiates in case of disagreements. Without insurance, the user might face a sizeable bill.
KENYA ON THE RIGHT TRACK IN ANTI-GRAFT WAR, SAYS IMF DIRECTOR
On 28th October, the Daily Nation reported that Kenya is on the right path in its fight against corruption, Mr Abebe Selassie, Director for African Departments at the IMF said, while praising President Uhuru Kenyatta for leading the way. He is also quoted as saying that the IMF is satisfied with the stable economic growth that averages between 5.5% and 6% as a result of fiscal reforms to ensure macroeconomic stability.
RUSSIA: 2 FORMER DAGHESTANI SENIOR OFFICIALS SENTENCED TO JAIL FOR FRAUD
On 28th October, Rferl reported that a Moscow court has sentenced 2 former senior government officials in Russia’s North Caucasus region of Daghestan to prison terms for fraud. They were former Acting Prime Minister Abdusamad Gamidov and Acting Deputy Prime Minister Rayudin Yusufov and were accused of for misappropriating more than $630,000. The case is said to be part of a larger investigation into corruption in the region, which is said to have been at the centre of a wave of violence by organised criminal groups linked to business turf wars, political disputes, clan rivalry, and the spread of militant Islam in recent years.
BVI ISSUES FINAL ECONOMIC SUBSTANCE RULES
On 28th October, Tax News reported that, on 9th October, the BVI International Tax Authority finalised rules governing the application of the territory’s new economic substance requirements, which became effective from January 1st.
CURRENT UK TRADE SANCTIONS, INCLUDING ARMS EMBARGOES AND OTHER RESTRICTIONS
On 28th October, the Export Control Joint Unit published updated information which provides details of arms embargoes, trade control restrictions, defence export policies and restrictions on terrorist organisations.
RUSSIA HAS APPROVED A NEW CASINO ZONE FOR ITS ANNEXED CRIMEAN TERRITORY
On 28th October, Calvin Ayre reported that the Russian PM had formally approved the creation of a new ‘Golden Coast’ gaming zone in Crimea. The zone, which the government expects will open its first casino by 2022, will be located near a small village called Katsiveli in the Yalta region on the Black Sea. Due to sanctions, the only operators likely to propose building a Crimean casino will either be Russian or from some other nation with friendlier relations with Russia, such as China or Cambodia. The article mentions that NagaCorp, a Cambodian operator, is currently preparing the 2020 launch a casino in Vladivostok.
ILLEGAL TOBACCO RING BUSTED AFTER INTERNATIONAL OPERATION IN EUROPE
A news release from Europol on 28th October advised that authorities from 7 states have dismantled an international organised crime group which was involved in the large-scale illegal trade of tobacco. 18 persons from different nationalities have been arrested, who are suspected of money laundering and the illegal trade and storage of around 670 tonnes of tobacco. The illegal trade has led to a loss of customs and excise duties for the Dutch fiscal authorities of approximately €70 million. A total of 29 searches have taken place in Italy, Poland, Belgium, UK and the Netherlands, with authorities from Romania and Cyprus contributing actively to the operation. The criminal organisation allegedly bought tobacco in Italy, which was then processed and sold to traders for the use in illegal cigarette factories. Since last year already illegal cigarette factories have been dismantled in Poland, the Czech Republic and the Netherlands, whose operators had close links to the criminals who have now been arrested.
CHINESE CUSTOMS HAS CRACKED A SMUGGLING CASE INVOLVING $45.35 MILLION WORTH OF LUXURY GOODS INCLUDING GARMENTS, BAGS AND WATCHES
On 28th October, China Daily reported that Shenzhen Customs, in a joint effort with Shanghai Customs, cracked the case which began after 2 women with suitcases filled with pricy garments, bags and seafood products were caught when passing the checkpoint at West Kowloon high-speed railway station in Hong Kong. A company was uncovered that collected orders through WeChat and hire people to buy luxury products in countries like Italy and the US, with the products then shipped to a warehouse in Hong Kong and were later taken or sent to the Chinese mainland with fake product names and false prices.
WORLD BANK CONCERNS OVER INVESTMENT IN BRIDGE INTERNATIONAL ACADEMIES IN EAST AFRICA
A release on Ekklesia on 28th October advised that the World Bank’s independent recourse and accountability mechanism has published a report raising “substantial concerns” regarding Bridge International Academies (BIA) and announcing the intention to conduct a compliance investigation into investment in the company. Bridge International Academies is a for-profit, multinational commercial chain of low-cost private schools running over 500 institutions in Kenya, Uganda, Nigeria, Liberia and India. The decision to launch the investigation comes after a comprehensive appraisal of a complaint filed in April 2018 by 10 Kenyan citizens which outlined alleged contravention of IFC performance standards and abuses of human rights.
EXAMINATION OF SFO CASE PROGRESSION PROCESSES
A blog on the FCPA Blog on 28th October examined the HM Crown Prosecution Service Inspectorate report on case progression in the SFO. The post says that the report provides an exceptional opportunity to understand the workings of the SFO, the practical problems it faces and how it is seeking to improve case efficiency. As the Inspectorate recognises, timely case progression is often very difficult, and many challenges the SFO faces will be outside its control. Lisa Osofsky has stated that one of her key tasks as Director of the SFO is to review the cases on its books and remove those that do not meet the Full Code Test. Amongst the findings were that unused material was handled well, and there were good examples of consideration of material and disclosure strategies – though there were inconsistencies; cases are accepted for investigation in good time, but the Inspectorate found some examples of delays; and the SFO had clear internal case work processes and an operational handbook, but there was some inconsistency in application by individual case managers.
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