26 January 2020
NEW DATA REVEALS SCALE OF CHINESE ARMS INDUSTRY
On 26 January, the Stockholm International Peace Research Institute published a new report which suggests that China is the second-largest arms producer in the world, behind the US but ahead of Russia and represents the most comprehensive picture of Chinese companies’ weapons production to date. The 4 major Chinese arms companies chosen for the study can now finally be compared with the major arms companies from the rest of the world, and 3 of the companies would be ranked in the world top 10. The largest of is Aviation Industry Corporation of China (AVIC), which with arms sales totalling $20.1 billion would rank 6th largest in the world. China North Industries Group Corporation (NORINCO), which would be 8th with sales of $17.2 billion, is in fact the world’s largest producer of land systems.
US: STOPPING IMPORTS MADE WITH FORCED LABOUR IS PART OF NEW ANTI-TRAFFICKING STRATEGY
On 24 January, HKTDC in Hong Kong reported that interdicting imports of goods made with forced labour is one of the objectives of the US Department of Homeland Security’s recently released strategy for combating human trafficking. DHS states that it plans to publish within 180 days a plan for implementing this strategy that includes specific deliverables, timelines and metrics for key results. DHS is already taking steps to prevent the importation of goods produced with forced labour.
WHERE HAS THE REPUBLIC OF CONGO OIL MONEY GONE?
The NGO Global Witness has released a report saying that the Republic of Congo, Sub-Saharan Africa’s third largest oil producer, is facing bankruptcy. In July 2019, it received its fourth multimillion-dollar bailout from the IMF. It says that SNPC, its national oil company, has been plagued by corruption scandals since its incorporation in 1998. It appears that Congo is getting so little in return for its oil – the dollar equivalent of just over 2% of the country’s total oil production in 2017. The NGO says that its report reveals apparent abusive commercial practices by foreign oil companies and millions of dollars in missing funds. The report details questionable charging by multinational oil majors, including even to subsidise salaries and pensions. Total’s predecessor Elf even managed to get a $50 million ‘signature bonus’ – a one-off signing fee. Global Witness also says that publicly-listed Italian oil major Eni may have written-off over $280 million in liabilities amid a licence renewal process that is the subject of a corruption probe in Italy. $156 million in dividends, which should have been paid to the Congolese state, SNPC’s sole shareholder, appear to have gone missing, and at the end of 2018, SNPC was owed $1.18 billion – a sum that exceeds its annual turnover – by mostly unidentified entities. The NGO asks to whom is SNPC lending money and why?
27 January 2020
REPORT TO US CONGRESS ON EFFECTS OF IRAN SANCTIONS
On 23 January, the US Congressional Research Service published a report which says that the sanctions regimes of successive administrations have adversely affected Iran’s economy but have had little observable effect on Iran’s pursuit of core strategic objectives such as its support for regional armed factions and its development of ballistic and cruise missiles. The comprehensive report of 117 pages, looks at the background and effects of the sanctions, including those for counterterrorism purposes, humanitarian exemptions, the effects on Iran’s energy sector and its weapons and WMD capabilities, as well as its financial industries. Human rights and cyber sanctions elements are also considered, as well UN and EU responses and actions.
HMRC HAS HELPED UNCOVER £200 MILLION WORTH OF SUSPECTED TAX EVASION AND MONEY LAUNDERING IN THE UK IN INTERNATIONAL OPERATION
On 27 January, KYC 360 reported that a series of investigations in Australia, Canada, the Netherlands, the US and the UK is centred around a Central American financial institution whose products and services are believed to be facilitating tax evasion and money laundering worldwide – and a number of UK clients used this institution to conceal and transfer wealth anonymously to evade tax obligations and launder the proceeds of crime.
HOW A FAILED CYPRUS-BASED INSURER WAS SEIZED BY ALLEGED BULGARIAN GANGSTERS
KYC 360 reported on 27 January an OCCRP report that Cypriot police are nearing the end of their probe into the allegedly fraudulent recapitalisation of an insurance company, Olympic Insurance Company, that collapsed in 2018, leaving more than 200,000 drivers mainly in Bulgaria without coverage, and unpaid claims of €44.8 million.
HOW THE NORTH KOREAN HACKERS BEHIND WANNACRY GOT AWAY WITH A STUNNING CRYPTO-HEIST
On 24 January, the MIT Technology Review reported on the theft of just over $7 million from the Singapore-based exchange DragonEx in March 2019, an extremely elaborate phishing scheme which involved not only fake websites but also fake crypto-trading bots. It says that DragonEx was not the first crypto exchange to be victimised by th the Lazarus Group. The Lazarus Group is widely believed to have been behind several headline-grabbing hacks, including the breach of Sony Pictures in 2014 and the WannaCry in 2017.
COMPANY FORMATION GIVEN UNDERSIZED ROLE IN FINANCIAL GATEKEEPING
On 27 January, KYC 360 reported that the lead investigator with Transparency International says that HMRC needs to start looking at the formations sector and applying the same principles as well—so larger fines and, if necessary, people losing licenses. This is in the light of the Formations House case, which was able to continue operating despite an inquiry and prior warning from HMRC.
OFAC SETTLEMENT WITH SHIPPING COMPANY OVER APPARENT VIOLATIONS OF BURMA SANCTIONS
On 27 January, OFAC announced that Eagle Shipping International (USA) LLC, a Marshall Islands company with its headquarters in Stamford, Connecticut, has agreed to pay $1,125,000 to settle its potential civil liability for 36 apparent violations of the Burmese Sanctions Regulations, and re its dealings in the property interests of Myawaddy Trading Limited and the provision of transportation services from Burma to Singapore for a land reclamation project for the benefit of the Burmese company.
US AGENCY RAISES AWARENESS OF HUMAN TRAFFICKING WITH OUTREACH IN ADDITION TO ENFORCEMENT
On 22 January, Homeland Security Today reported that US Immigration and Customs Enforcement is engaging in national and regional efforts to raise awareness about human trafficking as the agency works with law enforcement partners to identify and break apart global trafficking networks as January is National Slavery and Human Trafficking Prevention Month.
US ADOPTS FENTANYL ACT IN FACE OF TENS OF THOUSANDS OF DEATHS
On 27 January, the always-useful EU Sanctions blog reported that, In December 2019 and as part of the National Defence Authorisation Act, the US Congress adopted the above Act which requires a report within 180 days comprising a list of those determined to be foreign opioid traffickers on which sanctions are to be imposed. The Act also calls on China to implement new regulations to control the production and export of fentanyl.
UAE HAS BANNED CARGO OPERATORS FROM MOLDOVA FROM ITS AIRPORTS OVER SAFETY CONCERNS
On 27 January, Loadstar reported that the ruling will affect Aerotrans Cargo, Air Stork and Global Air Transport and comes into effect on 1 February.
US WITHDRAWS PROPOSAL THAT WOULD HAVE RESTRICTED US COMPANIES FROM EXPORTING TECHNOLOGY CONTAINING OVER 10% OF US-ORIGIN CONTENT TO HUAWEI WITHOUT A LICENCE
On 24 January, the Washington Post reported that the US military had opposed the plan to reduce the percentage of origin from 25%. The newspaper claims that the Pentagon feared additional limits would cost US companies so much revenue that their research spending would suffer, causing them to fall behind their global rivals and imperilling the US military’s technological edge. Currently, US companies can export technology with up to 25% of US-origin content without a licence.
LOCAL MEDIA COMMENTS ON AML/CFT ASSESSMENT OF TURKS AND CAICOS ISLANDS
On 27 January, the Turks & Caicos Weekly News ran an article about the recently-published CFATF evaluation report. It notes that the FATF-style regional body has told the territory to develop a deeper understanding of the risks of terrorist financing, including the risks associated with cross-border movement of cash such as wire transfers and travellers cheques through customs. It is also noted that the report recommends that the Financial Services Commission should ensure that the corporate service provider, legal, real estate and trust sectors are complying with their obligations to identify high-risk customers. The attorney general is quoted as saying that the report found that there are structural elements in place in the islands for an effective AML/CFT system, and that the report should give confidence to investors, since it underlines that the Turks & Caicos is committed to tackling money laundering on all fronts. She also acknowledged that it had experienced challenges in ensuring that there is sufficient progress being made in compliant with newly-introduced international standards, that deal with statistics and being able to prove the effectiveness of the system.
NEW MONEY LAUNDERING REGULATIONS CAUSE CONFUSION AT LONDON ART FAIR
On 27 January, the Art Newspaper reported that implementation of the 5th Money laundering Directive in the UK for the art sector had caused problems and confusions, with claims that some galleries were pricing works below the €10,000 threshold to avoid dealing with new client ID requirements. It appears it is smaller and medium-sized galleries that are most affected, with larger galleries working in higher value items seemed less concerned.
NORTHERN IRELAND: DISSIDENT SMUGGLER AIDAN GREW AT CENTRE OF £215 MILLION DIRTY CASH PROBE
On 27 January, the Belfast Telegraph claimed that who it described as “wealthy dissident smuggler Aidan Grew” is at the centre of a £215 million money laundering probe. It says that security sources have linked the convicted IRA bomber turned millionaire crime boss to the cross-border scam. Grew served a jail sentence for evading duty on millions of illegal cigarettes smuggled into Northern Ireland from China.
SMARTER RULES FOR SAFER FOOD (SRSF): IMPORTANT INFORMATION REGARDING PRE-NOTIFICATION OF IMPORTS
Trade body BIFA reports that DEFRA has provided some further information on which importers may need to take action. It contains information on the use of TRACES, the European Commission’s multilingual online management tool for all sanitary requirements on intra-EU trade and importation of animals, semen and embryo, food, feed and plants, and plans of the EU to switch off TRACES Classic shortly, and the need to register for TRACES NT.
HMRC LETTERS TO BUSINESSES ABOUT TRADE ARRANGEMENTS AFTER THE UK HAS LEFT THE EU
Trade body BIFA reported that letters have been sent to VAT-registered businesses trading with the EU, or the EU and the rest of the world. They explain actions to take to prepare for changes to customs arrangements after the transition period, including getting a UK Economic Operator Registration and Identification (EORI) number and customs facilitation.
AUTHORITIES IN UKRAINE PLANNING TO TRACK ALL CRYPTO TRANSACTIONS THAT EXCEED $1,200
On 27 January, the Bitcoin Exchange Guide reported that the head of the Ukraine Ministry of Finance has suggested that the State Financial Monitoring Service (SCFM) could perform the role, although Ukrainian law doesn’t yet define cryptocurrency as an asset class.
AIRBUS POISED FOR DEAL WITH REGULATORS TO SETTLE CORRUPTION PROBES
The Irish Times on 27 January reported that a deal with regulators in the UK, France and the US is expected in the coming days, with analysts forecasting fines of more than €3 billion. Such a deferred prosecution agreement struck with Airbus would, it says, mark a significant milestone for the UK SFO. It is said that the company has also overhauled its ethics and compliance procedures, established an independent review panel of outside experts, and significantly cut down the number of third-party agents used to secure deals.
PORTS AND PORT SYSTEMS: UK CYBER SECURITY CODE OF PRACTICE
On 27 January, the Department for Transport has published the 2020 version of guidance, entitled ‘Good practice guide: cyber security for ports and port systems’, an updated version of a publication first released in 2016. The code of practice is for use by those with responsibility for protecting the technical systems of port facilities and vessels docked in ports. It complements a guide for cyber security for ships.
US FEDERAL COURT OF APPEAL PROVIDES EASIER PATH FOR CRIMINAL INSIDER TRADING CASES
On 27 January, Perkins Coie published an article which says that the decision held that an insider-trading case brought pursuant to certain federal criminal statutes does not require the government to prove that the insider providing confidential information received a personal benefit — a departure from established insider trading caselaw.
UK GAMBLING COMMISSION: LICENSEES NEED TO BE ABLE TO DEMONSTRATE WHERE THEY GET THE CASH TO MAKE MAJOR ACQUISITIONS AND FUND THEIR OPERATIONS
On 27 January, Calvin Ayre reported that the Gambling Commission, had issued a statement on lessons learned from the June 2019 revocation of an online gambling licence which took place after the regulator discovered that the company had undergone a change of corporate control without alerting the Commission.
LARGEST DRUG SEIZURE IN SEVERAL YEARS IN BOSNIA AND HERZEGOVINA
On 27 January, OCCRP reported that Bosnia and Herzegovina police have confiscated some 400 kg of skunk (cannabis) worth several million dollars in the central Bosnian town of Gornji Vakuf. The country is mostly a transit country for trafficking illicit drugs.
ROTENBERGS: THE US MANSIONS ABANDONED IN THE FACE OF US SANCTIONS
OCCRP on 27 January published a report saying that an investigation by Transparency International-Russia and OCCRP has uncovered 3 pieces of prime real estate belonging to the couple scattered around Georgia’s state capital, worth an estimated total of around $3.7 million.
SOUTH-EAST ASIA: INTERPOL SUPPORTS ARREST OF CYBERCRIMINALS TARGETING ONLINE SHOPPING WEBSITES
A news release from Interpol on 27 January advised that a cyber operation coordinated by Interpol against a strain of malware targeting e-commerce websites has identified hundreds of compromised websites and led to the arrest of 3 individuals running the malicious campaign in Indonesia.
US CUSTOMS FINDS $900,000 COUNTERFEIT BANKNOTES FROM CHINA
On 27 January, KSTP reported that 45 carton of counterfeit $1 notes were found in a commercial rail shipment that originated in China.