An article from Arent Fox on 31 January said that the US State Department has finally brought the International Traffic in Arms Regulations (ITAR) into the 21st Century by means on of a new interim final rule adopting cloud computing encryption standards. As a result, the article says, companies will be able to use the Cloud for both ITAR and Export Administration Regulation (EAR)-controlled technology without ensuring that all of the cloud servers are located in the US. The new rule comes into operation on 25 March. However, there are conditions, including that the technology involved cannot include any classified information, and the encryption must be truly end-to-end. It also notes that the new rule does not cover non-US export-controlled technology, such as that controlled under EU laws, although the US Government says that it is in talks with allies regarding the adoption of global standards.
Month: January 2020
LAST DEFENDANT CONVICTED IN STANDFORD BANK $7 BILLION INVESTMENT FRAUD SCHEME
A release on Mondo Visione on 30 January advised that the DoJ had announced that Leroy King, the former chief of Antigua’s Financial Services Regulatory Commission (FSRC) has pleaded guilty for his role in connection with the Stanford International Bank (SIB) Ponzi scheme.
UK: HIGH COURT RULES DIRECTORS CANNOT BUY ASSETS OF THEIR LIQUIDATED COMPANY ON THE CHEAP
On 30 January, Local Government Lawyer reported that a law firm involved said that the case was the first to consider which director’s duties survived the insolvency of a company and what restrictions a director will face in purchasing assets from an insolvency practitioner. In the case, the sole director of a company which was placed into administration and subsequently entered creditors’ voluntary liquidation was found to have unfairly bought a 2-bedroom house from the original insolvency practitioner involved for £75,000 less than it was worth, 18 months after his company went out of business.
UK SANCTIONS GUIDANCE FOR USE FROM JANUARY 2021
On 30 January, HM Treasury made available a web page which tells you what you’ll need to do from 1 January 2021, saying that it will be updated if anything changes. It contains links to 40-page general guidance on UK sanctions, and a separate 7-page guide to Russian sanctions. It says that the Sanctions and Anti-Money Laundering Act 2018 will enable sanctions to continue uninterrupted on 1 January 2021 (i.e. after the end of the Brexit transition period). Secondary legislation under the Act will transfer existing EU sanctions into UK law. While, during the transition period, the UK can also bring into force autonomous sanctions regimes under the Act, most sanctions regimes, for which regulations have been laid under the Act, will not come into force fully until 11pm on 31 December 2020.
https://www.gov.uk/government/publications/uk-financial-sanctions-guidance
USED GOODS, NEW RISKS: MITIGATING PROLIFERATION IMPACTS OF THE GLOBAL SECONDARY MARKET
In the latest edition of the Strategic Trade Research Journal includes a paper that addresses this issue, saying that export control requirements apply to WMD-related commodities even beyond first sale, but knowledge of these requirements is sometimes lost as commodities are sold and resold—and many “outdated” products can still contribute to a WMD development programme. The paper concerns a study to assess the secondary market and form recommendations to plug gaps in training and awareness, as well as control programmes. It is said that the secondary market for listed commodities may pose proliferation risks and export control challenges that may not be well understood, and that while measures may exist to mitigate the risks posed by the secondary market, those measures may not have been systematically integrated into export enforcement and outreach programs and secondary market resellers may not be aware of the requirements associated with exporting these commodities.
OFAC DESIGNATES 1 IRANIAN INDIVIDUAL AND THE ATOMIC ENERGY ORGANIZATION OF IRAN (AEOI)
On 30 January, a news release from OFAC announced that Ali Akbar SALEHI and the ATOMIC ENERGY ORGANIZATION OF IRAN (AEOI) had been added to its Iranian sanctions lists.
https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20200130.aspx
TRADE-BASED MONEY LAUNDERING: BANKS HAVE ‘LIMITED VISIBILITY’ INTO 80% OF TRADE TRANSACTIONS
On 29 January, the US Government Accountability Office released a report which says that whilst trade-based money laundering is believed to be on the rise, financial institutions charged with flagging payments linked to it often have little insight into the nature of the deals. In the report, “open-account” trade is described as “one of the primary vulnerabilities of the US financial and trade systems”. Most international trading is done using open-account, as opposed to “documentary transactions”, in which banks review related documentation (bills of lading, invoices, packing lists etc) and so can mitigate the risks of providing letters of credit or other financing and potentially detect or prevent money laundering. The GAO cites a claim by the Wolfsberg Group of leading banks that 80% of world trade is carried out using open-account trading.
https://www.gao.gov/products/GAO-20-314R
(NOT) UNDERSTANDING FINANCIAL CRIME RISKS IN E-COMMERCE
On 29 January, an Occasional Paper from RUSI in the UK which shows that e-commerce continues to be exploited by criminal actors, and says that regulators and governments can do more to prevent this. It identifies that E-commerce businesses can be exploited for criminal purposes in 4 major ways:
- Committing fraud against the customer by failing to deliver goods or services;
- Buying goods or services using stolen bank card data;
- Creating e-commerce businesses as a front for illicit transactions (for example, to accept bank card payments for drugs); and
- Abusing online marketplaces to move criminally obtained funds (for example, through the sale of computer-generated books sold via Amazon).
It also says that the latter two present particular money laundering and terrorist-financing (financial crime) threats because they involve consensual transactions that are intended to remain undetected. However, the paper argues, these purposes remain poorly understood, including so-called “transaction laundering” using bogus or disguised online payments. The paper says that there has been no examination of the effectiveness of online marketplaces’ defences against financial crime, and makes a number of recommendations – including that the FCA should consider a thematic review of risks related to transaction laundering and financial institutions’ ability to detect it, with a view to identifying best practices; and that the UK’s next national risk assessment of money laundering and terrorist financing addresses the risks of phantom transactions and mispricing involving online marketplaces/
https://www.rusi.org/sites/default/files/20191312_e_commerce_risks_moiseienko_final.pdf
BULGARIA CHARGES GAMBLING CZAR BOZHKOV IN ABSENTIA
On 29 January, Rferl reported that Bulgarian gaming czar Vasil Bozhkov has been charged in absentia with extortion and attempted bribery among other crimes, and placed on an international wanted list. He is one of Bulgaria’s richest men and has dominated the country’s gaming business since the early 1990s as well as owning the country’s biggest lottery. He also owns Levski Sofia, one of the two most popular soccer teams in the Balkan country, as well as a stake in Georgia’s national lottery, and a collection of antiques and paintings.
https://www.rferl.org/a/bulgaria-charges-gambling-czar-bozhkov-in-absentia/30405701.html
FATF CONSOLIDATED AML/CFT ASSESSMENT RATINGS
Following the publication of the most recent reports on Belarus and Slovenia, FATF has published an updated version of its consolidated schedule of all AML/CFT ratings.
http://www.fatf-gafi.org/media/fatf/documents/4th-Round-Ratings.pdf
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