30th October 2019
LOW-ENRICHED URANIUM BANK OFFICIALLY OPERATIONAL IN KAZAKHSTAN
On 29th October, The Diplomat reported that the International Atomic Energy Agency (IAEA)’s new low enriched uranium (LEU) bank in Kazakhstan has become officially operational, as it took delivery of its first shipment of LEU. The bank’s purpose is to provide assurance of supply for countries operating nuclear power plants; but the overarching aim is part of the IAEA’s non-proliferation agenda. It is intended to promote the peaceful use of nuclear power without generating avenues for nuclear weapons development, as the same facilities that enrich fuel can also be used to enrich material for weapons. There is also a Russian LEU bank, owned by Russia but operated under the IAEA. The article notes that Kazakhstan is also the world’s top producer of uranium, generating 41% of the world’s supply from mines in 2018.
INSOLVENCY LAW IN PANAMA
On 28th October, Morgan & Morgan in the US produced a short article about the insolvency law of 2016 which replaced the concept of “bankruptcy” with proceedings referred to as Reorganisation and Liquidation.
CHINESE FACTORIES RUSHING TO GET KNOCK-OFFS OF APPLE’S AIRPODS PRO TO LOCAL BUYERS THE DAY AFTER US RELEASE
On 30th October, the South China Morning Post carried a feature saying that Chinese factories are rushing to knock-off the latest versions of Apple’s best-seller in the country that go on sale on 30th October in the US for $249. It is said that counterfeit AirPods are one of the most popular electronic products sold online and offline in Shenzhen, the capital of China’s fake trade.
THE US-CHINA TRADE WAR: THE WAR OF THE LISTS AND HOW IT COULD AFFECT YOUR COMPANY
On 28th October, McDermott Will & Emery published an article saying that the use of administrative powers and “blacklisting” has been a frequent and powerful tool of the US and Chinese governments. In order to survive the turbulence brought on by the US-China trade war and the so-called “war of the lists,” it is critical to have at least a basic understanding of the 2 lists – the US BIS Entity List (inclusion on the Entity List greatly restricts a listed party from engaging in any transactions that require the exportation of US goods or technology), and China’s Unreliable Entities List (designed to identify foreign entities, organisations or individuals that have “harmed the interests of Chinese consumers”). The article considers the lists and discusses how US and international companies may be affected by inclusion on either.
AUSTRAC RELEASES MUTUAL BANKING SECTOR MONEY LAUNDERING AND TERRORISM FINANCING RISK ASSESSMENT
On 30th October, Mirage News reported that Australia’s mutual banking sector is urged to take note of Australia’s latest money laundering and terrorism financing risk assessment report specific to the sector. This shows the main threat to the sector is money laundering. Mutual banks are also a target for fraudulent activity such as identity theft and scams, tax evasion, and welfare fraud, particularly through their elderly customers. The report finds that while the mutual banking sector had a high level of vulnerability to financial crime, the overall money laundering and terrorism financing risk was assessed as medium.
The report is available at –
LITHUANIA: E-MONEY FIRM MISTERTANGO FINED OVER SYSTEMATIC AML FAILINGS
On 28th October, Payments Compliance reported that the Bank of Lithuania had fined the Vilnius-based firm €245,000 over repeated failings of its AML/CFT controls, as well as it being fined for data retention failings.
UK: PUTTING THE ML INTO AML
On 28th October, Slaughter & May published an article saying that the FCA and Bank of England have recently published the findings of their first-ever survey of the use of machine learning in financial services firms. AML and fraud detection are given as examples of back-office functions which have seen high levels of deployment of machine learning.
‘NEARLY ALL’ COUNTER-STRIKE COMPUTER GAME MICROTRANSACTIONS ARE BEING USED FOR MONEY LAUNDERING
On 29th October, the Vice website reported that Counter-Strike: Global Offensive players will no longer be able to trade container keys between accounts because the trade was part of a massive worldwide fraud network. Players earned cases in Counter-Strike containing weapons and cosmetic upgrades, but had to purchase the keys to open the boxes.
GHANA: CHINESE WOMAN ARRESTED OVER $ 313 MILLION MONEY LAUNDERING DEAL
Business Ghana on 29th October reported that the Economic and Organised Crime Office (EOCO) has arrested Chen Jianhua for allegedly transferring $313.59 million out of the country illegally. It is said that the EOCO found that large amounts of money in dollars, some of them linked to non-existent companies, moved through multiple bank accounts from Ghana to China between 2011 and 2019.
THE SHADY CRYPTOCURRENCY BOOM ON THE POST-SOVIET FRONTIER
On 30th October, KYC 360 reported that scenes are unfolding throughout the former Soviet empire, as a small army of developers and entrepreneurs use cheap electricity and abandoned buildings to get rich quick on cryptocurrencies. It looks at one example in Transnistria, an enclave that was formerly part of Moldova. The article examines the Russian regime love-hate relationship with cryptocurrencies, including their possible use to avoid US and other sanctions.
CYPRUS: ENHANCED DUE DILIGENCE CHECKS FOR PASSPORT BY CBI INVESTMENT APPLICANTS
On 30th October, KYC 360 reported that the Cyprus authorities will soon be applying enhanced due diligence checks on foreign nationals who from now on apply for Cypriot passports via the citizenship-by-investment (CBI) scheme, while at the same time it will comb through past applicants to ensure they comply with up-to-date eligibility requirements. 3 companies have been contracted to provide background screening services for the government: Sterling Diligence, S-RM Intelligence and Risk Consulting, and Kroll. An audit will cover the period 2008 up until 2018, when the criteria were tightened. The report says that the move comes in the wake of reports that 8 family members or allies of the Cambodian leader had received Cypriot citizenship in 2016 and 2017.
VATICAN CARDINALS LINKED TO MISSING MILLIONS AND FINANCIAL SCANDAL
On 30th October, the Catholic Herald reported on an alleged (new) financial scandal at the Vatican, with an Italian dermatology hospital and 2 senior cardinals said to be involved, and the financial collapse of the Istituto Dermopatico dell’Immacolata (IDI), an Italian hospital. Involved were a complicated series of transactions that financed the Vatican Secretariat of State’s 2015 acquisition of the hospital, which had collapsed under large-scale acts of theft and money laundering that led to the imprisonment of its president.
WHAT ARE THE LIMITS OF MUTUAL TRUST IN EXTRADITION RELATIONS BETWEEN COUNTRIES?
On 29th October, 6KBW College Hill Chambers published an award-winning essay which starts by asserting that a degree of trust is built into all extradition relations, as without it there can be no co-operation between states. The greater the trust, the less knowledge required before extraditing. The essay considers how courts in Europe approach inevitable gaps of knowledge around prison conditions and the right to a fair trial, and briefly compares how extradition operates outside the parameters of the EU and the ECHR, to show that the real limit on mutual trust is political circumstance. In doing so, it considers the role of the European arrest warrant, and touches upon the position re extradition outside Europe. The essay concludes that human rights considerations have done little if anything to put a limit on mutual trust, as the principle is shaped by internal and external political factors.
VALUE OF ART EXPORTED FROM THE UK JUMPS 25% TO £6.8 BILLION LAST YEAR
On 28th October, Boodle Hatfield reported that the value of art and antiques exported from the UK rose 25% to £6.8 billion to August 31st 2019, up from £5.4 billion in 2017/18. It comments that UK exports of art and antiques is being driven by strong demand from the US fuelled by a weaker sterling against the dollar, and this has enabled US collectors to purchase art more cheaply than in previous years, with 54% of all UK exports going to the US. It says that the UK also benefits from the lowest import VAT rate in the EU at 5%, allowing dealers and galleries to import art cheaply into the UK and then move it throughout the EU Single Market without paying any further tax (although it admits that Brexit is likely to impact this in due course).
WHAT IS GOING ON AT THE PCAOB IN THE US?
On 28th October, Cooley LLP published an article about the Public Company Accounting Oversight Board, which is a private-sector, non-profit that oversees the audits of public companies and other issuers in order to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports. In 2018, former staffers at the PCAOB and former partners of KPMG were charged by the SEC in connection with “their participation in a scheme to misappropriate and use confidential information relating to the PCAOB’s planned inspections of KPMG”. The Attorney’s Office for the Southern District of New York also filed criminal charges and some people went to prison. The article reflects on the (perhaps inevitable) disruption at the PCAOB.
US FEDERAL INCOME TAX IMPLICATIONS OF ISSUING, INVESTING AND TRADING IN CRYPTOCURRENCY
Greenberg Traurig has reproduced a chapter from Global Legal Insights which is said to be intended as a primer on the tax implications of cryptocurrencies and structures.
CHINA: SENIOR OFFICIALS SANCTIONED FOR INSIDER TRADING OF NINGBO MARINE SHARES
Splash 247 reported on 30th October that China Securities Regulatory Commission (CSRC) has announced sanctions on 6 individuals for insider trading of shipowner Ningbo Marine shares prior to a major restructuring of the company in 2017. It is said that 3 senior officials from Ningbo Marine’s parent Zhejiang Energy Group and affiliate Ningbo Beilun Shipping, colluded with their relatives. The CSRC has fined the 6 people $58,000.
WHISTLEBLOWER SUES EY OVER DUBAI MONEY LAUNDERING SCANDAL
On 29th October, the ICAEW reported that a former partner at EY Dubai, is bringing an employment case against the firm on the grounds that he was effectively forced to resign after blowing the whistle on money laundering at Kaloti Group gold refinery. This is in the wake of a BBC investigation which examined the trail of laundered British drug money through Dubai’s gold markets.
UNODC AND INTERNATIONAL OLYMPICS COMMITTEE LAUNCH GUIDE TO HELP DETECT WRONGDOING IN SPORT
On 29th October, the UN Office of Drugs and Crime announced that the 2 bodies had jointly published a guide – Reporting Mechanisms in Sport: A Practical Guide for Development and Implementation. It seeks to assist sports organisations, governments, and relevant stakeholders in the development and implementation of effective reporting mechanisms for use in sport. Ultimately the aim is to enhance the detection of threats to sport and promote effective ways to report them.
The guide is available at –
CRYPTOCURRENCIES AND THE CRITICAL VULNERABILITY TO A 51% ATTACK
On 29th October, Fintech Futures published an article saying that the popularity of cryptocurrencies was based on the fact they were billed as a safe, albeit not necessarily stable, payment platform. Thanks to strong cryptography, in theory it should be impossible for someone to be able to manufacture their own ‘coins’, steal someone else’s, or reverse any transactions. In most cases this is true, but there are other ways than breaking cryptography to steal them. The article looks at the problem of “51% attacks” – saying that, in January, one attacker exploited a flaw found in the majority of cryptocurrencies and made off with $1.1 million in Ethereum Classic. A “51% attack” involves hackers who obtain 51% of the mining power so that they could exclude transactions from their new version of the blockchain and eventually overtake the original version of the blockchain to become the ‘real’ accepted version. Amazingly, a 51% attack allows the hacker to double spend their funds – spending it once to purchase a different cryptocurrency and then regaining it to spend again.
IDENTIFYING LAW ENFORCEMENT NEEDS FOR CONDUCTING CRIMINAL INVESTIGATIONS INVOLVING EVIDENCE ON THE DARK WEB
On 30th October, the RAND Corporation in the US published a paper that flows from a workshop that the RAND Corporation and the Police Executive Research Forum (PERF) convened on behalf of the National Institute of Justice (NIJ) to bring together a diverse group of practitioners and researchers to identify the highest-priority problems and potential solutions related to evidence on the dark web. Participants identified 46 potential solutions, or needs, which include improving training for law enforcement officers, sharing information across jurisdictions, and investigating the gaps and shortcomings in current laws related to searching packages. Key findings were that improving training and information sharing will likely have the greatest impact, and there is a lack of knowledge about what the dark web is and how criminals leverage it. The paper makes a number of recommendations to overcome the shortcomings identified.
NORTH KOREA DISPATCHES 2,000 MORE WORKERS TO CHINA
On 30th October, Daily NK reported that at least 2,000 North Korean workers were recently dispatched to factories in China with non-work visas, and sent to various parts of the country. It is said that North Korean workers who entered China without work visas have exploited a loophole in the Chinese visa system where they can return to North Korea each month to renew their visas, and provincial Chinese governments appear to be turning a blind eye to this practice.
PODCAST: ANTI-BRIBERY EFFORTS IN SAUDI ARABIA
In the latest TRACE podcast, Sam Eversman with KsaUsaLegal in Riyadh talks about current anti-bribery efforts in Saudi Arabia, recently relaxed restrictions for women travellers and what, if anything, we can take away from the 2017 incarceration of the Saudi elite at the Ritz-Carlton Hotel.
AUSTRALIAN CAPITAL TERRITORY INCLUDING CITY OF CANBERRA LEGALISES PERSONAL CANNABIS GROWING AND CONSUMPTION
On 30th October, a news release from the European Monitoring Centre for Drugs and Drug Addiction noted a new law adopted by the Australian territory in September. The news release notes that, as in the US, this puts state-level criminal law in direct conflict with federal criminal law, which provides for a penalty of up to 2 years’ imprisonment for possession. However, in Australia the Commonwealth Criminal Code provides an exception to Commonwealth offences, where conduct is justified or excused under the law of a State or Territory.
EU WARNING TO ECUADOR THAT IT NEEDS TO STEP UP ITS ACTIONS IN THE FIGHT AGAINST ILLEGAL, UNREPORTED AND UNREGULATED (IUU) FISHING
A news release from the EU on 30th October advised that the decision is based on identified shortcomings about the country’s ability to comply with agreed standards under international law of the sea as flag, port and market state. Ecuador is encouraged to step up its actions to ensure that fish entering its market do not stem from IUU fishing and, in particular, it should develop an enforcement and sanctioning system to address IUU fishing activities. Fighting IUU fishing is part of the EU’s commitment to achieve a UN Sustainable Development Goal, and is covered by the 2010 IUU EU Regulation which since November 2012 has led to the Commission entered in formal dialogues with 25 third countries, i.e. they were officially warned them of the need to take effective action to fight IUU fishing (or else…).
UK: TRADING IN FIREARMS AND DRUG PRECURSORS IF THERE IS A NO-DEAL BREXIT
On 30th October, the Home Office published updated information. UK residents who want to travel to the EU with their firearms or shotguns will no longer be able to apply for a European Firearms Pass (EFP) if the UK leaves the EU without a deal. You’ll need to apply for an import and/or export licence when trading with EU countries in certain categories of drug precursor chemicals if the UK leaves the EU without a deal, and current rules for trading in these chemicals with countries outside the EU will apply to trade with the EU.
THOUSANDS OF BRITISH TOURISTS COULD BE OWED MONEY AFTER ‘BACKPACKER TAX’ RULED ILLEGAL IN AUSTRALIA
The Daily Telegraph on 30th October reported on the case of British waitress Catherine Addy, who worked in a restaurant in Sydney. She challenged and won a challenge against the tax on working visitors which meant all non-Australians would pay 15% tax on all of their income below $18,200, unlike Australians who were not taxed on similar earnings. The court held that the backpacker tax could not be applied to her because it violated a non-discrimination clause in a double taxation treaty between the UK and Australia.
LONDON COURT OF APPEAL URGED TO INTERVENE IN 1MDB SETTLEMENT ALLEGED TO HAVE BEEN A COVER FOR FRAUD
Malaysia Kini on 30th October reported that the Court of Appeal has been asked to intervene in the 2017 settlement with the Abu Dhabi-based International Petroleum Investment Corporation (IPIC) and its subsidiary Aabar Investments. It is alleged that an ongoing arbitration suit was pursued in order to ensure allegations of fraud were not resolved in a public venue, and that the 2017 settlement had been part of an attempt to cover up fraud involving $3.5 billion in payments from 1MDB to a supposed Aabar subsidiary.
WORLD BANK GROUP DEBARS CANADA-BASED MTZ EQUIPMENT FOR ALLEGED FRAUD
On 30th October, Compliance Week reported that the World Bank has imposed a 30-month debarment on Canada-based MTZ Equipment for fraudulent practices connected to Afghanistan’s On-Farm Water Management Project. MTZ is a distributor of agricultural equipment. The company is ineligible to bid on future World Bank Group-financed projects during the 30-month period, as part of a settlement agreement under which the company acknowledges responsibility for the underlying practices.
RUSSIAN ALUMINIUM PLANT SWITCHES TO BITCOIN MINING FOLLOWING US SANCTIONS
On 30th October, Coindesk reported that a Russian aluminium plant is turning to bitcoin mining after US sanctions forced the plant to shut down in 2018. Rusal is leasing its Nadvoitsy Aluminium Plant to a crypto start-up called the Russian Mining Corporation (RMC). It is said that RMC is renting out a small part of the plant and plans to use the plant’s cheap power and expansive footprint to install miners.
TEXAS MAN PLEADS GUILTY TO FRAUD SCHEME INVOLVING FAKE LETTERS OF CREDIT AND BANK DOCUMENTS
On 30th October, a news release from the DoJ announced that James Pierce, 43, had pleaded guilty to wire fraud and conspiracy to commit wire fraud in defrauding victims around the US by selling them fake “standby letters of credit” and other forged and fraudulent bank documents.
US AND 6 GULF ALLIES’ SANCTIONS ON 25 ENTITIES ALLEGEDLY ASSOCIATED WITH IRANIAN ISLAMIC REVOLUTIONARY GUARD CORPS AND HEZBULLAH
On 30th October, Naharnet reported that the sanctions were set by the Riyadh-based Terrorist Financing Targeting Center that includes Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the UAE and US. They targeted companies supporting the Basij Resistance Force, a subordinate group of the Revolutionary Guard. Among the 25 was Bank Mellat of Iran and mining, manufacturing and investment businesses that allegedly support the Basij. 4 of those listed were individuals running Hizbullah’s operations in Iraq. All 25 have previously been named in OFAC sanctions announced in 2018.
IRELAND: MAN ARRESTED IN CORK OVER ALLEGED €400,000 BOGUS SHARE SCHEME FRAUD
The Irish Examiner on 30th October reported that a man in his sixties was arrested in Cork on Tuesday in relation to the alleged fraud incident in 2017 that saw a foreign national defrauded of more than €400,000 in a bogus share scheme.
SPAIN’S HIGH COURT CHARGES BUILDER FCC OVER PANAMA CONTRACTS
On 30th October, Reuters reported that the High Court had charged Spanish building and infrastructure company FCC with corruption and money laundering in connection with €82 million in payments made in Panama, over allegations that FCC paid bribes to obtain metro and hospital contracts in Panama between 2010 and 2014.
FINANCIAL TIMES OWNER NIKKEI LOSES $29 MILLION IN APPARENT FRAUD
On 30th October, City AM reported that the Japanese media giant behind the Financial Times, is said to have lost roughly $29 million in an apparent wire transfer fraud. It is said to have taken place in September, and the company has filed reports with authorities in the US and Hong Kong.
60 E-COMMERCE FRAUDSTERS BUSTED DURING INTERNATIONAL OPERATION IN EU
A news release from Europol on 30th October about a 19-country 2019 e-Commerce Action (eComm 2019), intended to target criminal networks suspected of online fraud through coordinated law enforcement action within the EU, followed by an awareness-raising campaign. 60 people were arrested for fraud. The suspects arrested during the operation – which ran from 23rd September to 4th October – were responsible for almost 6,500 fraudulent transactions with compromised credit cards, with an estimated value exceeding €5 million. The investigation revealed that individual fraudsters are connected to organised crime groups and have been involved in other forms of crime, such as phishing, malware attacks, using stolen passports, money laundering, creating fake websites and using social media platforms to carry out fraud.
NEW REPORT OUTLINES THE EFFECT OF PROHIBITING HUMANITARIAN ASSISTANCE TO NORTH KOREA
Jurist on 30th October reported on a report by an international panel of experts, entitled “The Human Costs and Gendered Impact of Sanctions on North Korea”, which outlines the types of casualties associated with a lack of humanitarian intervention in the area.
MORE THAN 4 MILLION ILLICIT CIGARETTES SEIZED IN NORTHERN IRELAND
On 30th October, the Belfast Newsletter reported that more than 4 million illicit cigarettes have been seized by HMRC in a joint operation involving Border Force and PSNI in Belfast, as a trailer containing President cigarettes was detained at Belfast docks.
MOROCCO: POLICE SEIZE 12 TONS OF CANNABIS RESIN AT TANGIER-MED PORT IN 2 DAYS
Morocco World News reported on 30th October that the first operation took place on October 28th when police seized 8.83 tons of cannabis resin concealed in an international transport truck and arrested its Spanish driver. In the second incident, the following day police and customs services collaborated to seize 4 tons of cannabis at the port found on a Moroccan-registered truck. On the same day a ton of cannabis resin was also seized at the Guerguerat land crossing point with Mauretania.
AT PARIS’ ORLY AIRPORT, A DAILY DUEL BETWEEN CUSTOMS AND GUIANA DRUG MULES
International Business Times on 30th October reported on drug mules from French Guiana in South America, carrying cocaine in their luggage or their stomachs, playing a cat-and-mouse game with customs officials at Paris’ Orly airport. Last year, 1,349 mules in or from Guiana were arrested, double the 2017 number, police data shows, with an estimated 8 to 10 smugglers per flight, in an attempt to saturate the control capacities. With a 22% unemployment rate in Guiana – rising to 44% among 18- to 24-year-olds, there is no shortage of replacements for captured mules.
GAS THEFT – MEXICO’S LATEST CRIMINAL CONUNDRUM
With Mexico’s President touting his successes against oil theft, criminal groups have taken advantage of a similar opportunity: gas theft – says Insight Crime on 30th October. It reports that more than 500 clandestine taps of LPG infrastructure have been discovered in 2019 so far, up from 215 in all of 2018. The crime, referred to as “gaschicol” in Mexico, is very similar to oil theft, with gangs perforating pipelines and installing clandestine taps or outlets to divert the gas. Gas theft remains concentrated in Mexico’s heavily populated and industrialised central states.
FORMER GOVERNOR OF MEXICO’S THIRD-LARGEST STATE EXTRADITED TO US FOR TRANSNATIONAL MONEY LAUNDERING PROSECUTION IN SOUTH TEXAS
A news release from US Immigration and Customs Enforcement on 29th October reported that Jorge Juan Torres-Lopez, 65, a former governor of Coahuila, who has been in Mexican custody since February, was extradited to the US on 29th October. He is charged in a money laundering scheme that includes offences against a foreign nation involving bribery of a public official, and misappropriation, theft and embezzlement of public funds by or for the benefit of a public official; and he is also charged with bank fraud and wire fraud. The case is related to previous civil litigation in which authorities seized two foreign bank accounts located in Bermuda. Torres-Lopez and his former secretary of finance, Hector Javier Villarreal-Hernandez, allegedly opened these accounts to conceal stolen monies.
HOW NORTH KOREAN FRONT COMPANIES SELL THEIR SOFTWARE TO THE WORLD
On 4th October, the Middlebury Institute of International Studies published an article which is the 4th of a series produced by the James Martin Center for Nonproliferation Studies (CNS) at the Middlebury Institute of International Studies exclusively for NK News.
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