On 12 February, the EU Sanctions blog reported charges against Nicholas Hovan, Zhenyu Wang (aka Bill Wang), James Fuchs Robert Thwaites, and Daniel Ray Lane for allegedly arranging to purchase Iranian oil to sell to a refinery in China using a Poland-based shell company.
Day: February 12, 2020
OTHER THINGS YOU MAY HAVE MISSED – FEBRUARY 11
11 February 2020
LISTENING WHEN SANCTIONS REGULATORS SPEAK
On 10 February, Hogan Lovells published an article saying that maintaining a robust sanctions compliance programme requires vigilance and responsiveness to updated standards set by regulator; and, to do so, one needs to be aware of regulators’ notices, advice and guidance. The article then reviews the OFAC and UK Government guidance. It highlights the 5 “essential components” of an effective sanctions compliance program (SCP) proposed by OFAC: management commitment; risk assessment; internal controls; testing and auditing; and training. OFAC framework guidance also highlights “root causes” of sanctions violations which include issues frequently encountered by non-US companies that find themselves subject to US sanctions laws. It concludes by saying that regulator statements related to sanctions compliance should serve as a starting point for benchmarking sanctions compliance efforts, with the need to both anticipate and respond to regulator concerns whilst tailored to their sanctions risk assessment.
NORTH KOREA’S INTERNET USE SURGES, THWARTING SANCTIONS AND FUELLING THEFT
The Straits Times in Singapore on 10 February reported that North Korea has vastly expanded its internet presence and use. A new study concludes that since 2017 its use of the Internet has surged about 300%. It is said that nearly half the traffic now flows through a new connection in Russia, avoiding dependency on a single digital pipeline through China. The director of the study is quoted as saying that “They have succeeded at an easy-to-replicate model of how to move large amounts of money around the world, and do it in a way our sanctions do not touch”. The report is said to help solve the mystery of why the country’s economy appears to have survived, and in some sectors actually grown despite grown sanctions enforcement. The study also says that that other nations, such as Iran, are watching the North Korean model, and beginning to replicate it. The article also mentions offensive use of the internet, through North Korean cyberattacks. However, the study says the country has figured out more effective ways to steal cryptocurrencies, as well as beginning to produce, or “mine,” its own, chiefly through Monero, a lesser-known alternative cryptocurrency to Bitcoin.
AUSTRALIA ARRESTS CONTAINERSHIP OVER POLLUTION DEBT OF $13 MILLION
On 11 February, Seatrade Maritime News reported that the Australian Maritime Safety Authority (AMSA) has arrested a ship over a pollution incident in 2018, as the authority demands the shipowner to pay a pollution debt of up to AS20 million. AMSA said the Taiwanese shipowner has refused to pay for the clean-up of the remaining pollution including the containers and their contents lost from a sistership of the one arrested in 2018. The seized ship had also been detained by AMSA in July 2019 in Sydney for systemic failure to safely stow and secure cargo.
A SUSTAINABLE MARITIME INDUSTRY NEEDS TO GET HUMAN RIGHTS ON BOARD
On 30 January, the Global Maritime Forum (an international not-for-profit organization committed to shaping the future of global seaborne trade to increase sustainable long-term economic development and human wellbeing) published a paper saying that anti-corruption and climate change has been high on the shipping agenda. However, it says, the human rights challenges for crew, in ship building, ship repair and not least ship-recycling are many and complex. The global maritime industry should build on that momentum and take collective action to increase its human rights performance and get human rights on board on a par with environmental and governance issues. The paper argues that there are many human rights risks throughout the lifecycle of a ship which the industry should pay attention to. The list is long: child labour in the mines that produce the metals needed for shipbuilding; modern slavery in shipyards; poor mental health of seafarers; and severe health and safety concerns in ship recycling. These are just some of the issues that illustrate the need for individual and collection action on human rights in shipping.
IRISH CRIME GANGS ‘USING CATTLE SALES TO LAUNDER CASH’
On 11 February, KYC 360 reported that the farming industry has become embroiled in the illicit cash trade in Ireland. It has been claimed that livestock marts, where cattle and sheep can still change hands for cash, have become the new sanctuary for organised crime. A senior bank official in a town close to the Border said a number of bank accounts held by some members of the farming community routinely hold upwards of a million pounds, often much more, with accounts cleared regularly.
https://www.riskscreen.com/kyc360/news/irish-crime-gangs-using-cattle-sales-to-launder-cash/
GREECE IS HANDING RESIDENCY TO THOUSANDS OF WEALTHY CHINESE
On 7 February, the Los Angeles Times reported that the business of selling Greek (and therefore EU) residency permits to Chinese, Turkish and Russian nationals has become a lucrative industry and one of the bright spots for the economy, stoking a revival in the moribund Greek property market. It says that 13,075 Chinese nationals and family members received residency last year, compared with 1,342 Turks and 1,000 Russians. The report goes on to discuss other Member States’ programmes, and those “golden visa” programmes that have cause concern – Malta, Bulgaria and Cyprus.
FIRST-EVER ANTI-CORRUPTION CHAPTER INCLUDED IN NEW US-MEXICO-CANADA TRADE DEAL
For the first time, anti-corruption has been addressed in the trade agreement between the US, Mexico, and Canada. The United States-Mexico-Canada Agreement (USMCA) that was signed into law by President Trump on 29 January, includes the first-ever chapter on corruption. Anti-corruption was not formally addressed in the North American Free Trade Agreement (NAFTA), the precursor agreement to the USMCA. The new treaty included a commitment to support each nation’s efforts to combat bribery and corruption. The chapter requires each party to adopt or maintain standards that prohibit a public official from soliciting or accepting a bribe; bribing a public official, including a foreign public official; and aiding or abetting any such offenses. All parties must also adopt or maintain standards to protect accusers that report to competent authorities.
MELIA HOTELS CONFIRMS ITS CEO BARRED FROM US – CLAIMS 50 OTHER COMPANIES RECEIVED SIMILAR
Melia Hotels issued a statement on 5 February saying that, in October, Melia Hotels sent out a letter confirming that the US State Department has barred the CEO of Melia Hotels International, Gabriel Escarrer. The company is said to have described the action as not acceptable and contrary to the EU Blocking Statute. Melia Hotels also said that it believed 50 companies with interests in Cuba have been sent similar letters.
VENEZUELA FAILS TO ANNUL EU ARMS EXPORT EMBARGO
On 11 February, the EU Sanctions blog reported that the EU General Court has declared inadmissible Venezuela’s application to annul the EU arms embargo imposed under EU sanctions regulations, saying that Venezuela did not have locus standi because it is not “directly concerned” by the contested measures.
US POISED TO CELEBRATE ITS FIRST PANAMA PAPERS TAX CONVICTION
On 11 February, ICIJ reported on the court case in New York where a German businessman, Harald Joachim von der Goltz, a former U.S. taxpayer, is charged with tax evasion and money laundering offences.
SWISS CANCEL CRYPTOGRAPHIC COMPANY’S EXPORT LICENCE AFTER CLAIMS OF SECRET CIA OWNERSHIP
On 11 February, the Washington Post and German broadcaster ZDF published an article revealing claims about Crypto AG, a Swiss cryptographic communications gear company that got its big break building code-making gear for the US Army in World War II, and has been a provider of encryption systems for more than 120 countries. Apparently, it was owned secretly by the CIA and German intelligence, allowing access to the communications of many countries, excluding China and the USSR. The Germans backed out of the deal in the 90s, but CIA ownership continued to 2016. It is said that more than a dozen countries still use encryption systems from Crypto AG – but the Swiss government has now revoked the company’s export licence.
2 RECENT SETTLEMENTS IN US HIGHLIGHT RISKS FOR PARTIES INVOLVED IN AVIATION AND SHIPPING OF INCURRING LIABILITIES FOR A BREACH OF SANCTIONS
On 11 February, Allen & Overy published an article saying that a US aircraft engine lessor – where a sub-lessee provided engines to a designated entity – and a US-based shipping company – whose subsidiary carried a cargo bought by a buyer from a designated entity – have each settled their potential liability for breaches of US sanctions. The briefing then sets out to explain how a lessor or shipowner can find itself in hot water for conduct of another party and what it can do to help protect itself from having to pay significant sums to settle claims related to such conduct, through active monitoring and compliance certificates.
https://www.jdsupra.com/legalnews/liability-for-breaches-of-sanctions-39402/
CAYMAN ISLANDS IMPLEMENTS KEY CHANGES TO ITS AML RULES
On 11 February, International Investment reported that the Cayman Islands have introduced a number of important amendments to its AML regulation, following recommendations made by the Caribbean Financial Action Task Force (CFATF) in last year’s mutual evaluation report on the jurisdiction’s AML regime. The changes include abolition of the ‘equivalent jurisdiction list’ from August 2020, and a 10% beneficial ownership test.
https://www.internationalinvestment.net/news/4010459/cayman-implements-key-changes-aml-rules
ISLE OF MAN REFUNDED £50 MILLION VAT ON PRIVATE JETS LAST YEAR
IOM Today on 11 February reported that almost £50 million of VAT was refunded on corporate jets imported into the EU via the Isle of Man last year, with VAT refunded on each of 19 claims. The news is considered relevant in the light of the Paradise Papers claims in 2017 that the routing of importation and ownership of private jets through the Island was a tax avoidance (or perhaps evasion) fiddle. Subsequently, a HM Treasury report found that UK and EU VAT law had been correctly implemented in the Isle of Man and allegations of widespread VAT avoidance on aircraft and yachts were not upheld.
http://www.iomtoday.co.im/article.cfm
UN: NORTH KOREA ENHANCED NUCLEAR AND MISSILE PROGRAMMES IN 2019 IN BREACH OF SANCTIONS
On 10 February, Reuters reported that a confidential UN report had concluded that North Korea continued to enhance its nuclear and ballistic missile programmes last year in breach of UN sanctions. It also illicitly imported refined petroleum and exported some $370 million worth of coal, as well as at least 1 million tonnes of sand from river dredging, worth at least $22 million, to Chinese ports. Most coal exports were conducted via ship-to-ship transfers from DPRK-flagged vessels to Chinese local barges.
DEFENCE INDUSTRY JOB LOSSES WILL CONTINUE IF SOUTH AFRICA CANNOT EXPORT – END-USER CERTIFICATE INSPECTIONS AT ISSUE
On 11 February, Defence Web reported comments by the Executive Director of the South African Aerospace, Maritime and Defence Industries Association (AMD). This came after the National Conventional Arms Control Committee (NCACC) revealed it is amending the wording of controversial end user certificates (EUC), and plans to replace a clause re on-site inspections objected to by importing countries. It is said that exports have been held up because major South African clients like Saudi Arabia and the UAE are reluctant to allow on-site inspection.
US: FORMER CHIEF COMPLIANCE OFFICER GUILTY OF AIDING AND ABETTING $4 MILLION FRAUD
On 11 February, Investment News carried a report about an Illinois-based former chief compliance officer of The Nutmeg Group, David Goulding, the Group being owned by his father (and who served 6 months in prison for a 1992 conviction for mail fraud, tax evasion and money laundering). He is charged with fraud for misappropriating client assets and misrepresenting the value of 15 investment pools in a case stretching back a decade.
https://www.investmentnews.com/former-chief-compliance-officer-guilty-aiding-abetting-fraud-188205
EX-LUXURY CAR DEALER ON FBI MOST-WANTED LIST IN $1.7 MILLION LOAN CON SURRENDERS AFTER 5 YEARS AT LARGE
On 11 February, Reuters reported that Afzal Khan, 37, aka Bobby Khan when he owned the Emporio Motor Group, was indicted in 2015 with 5 counts of bank fraud. He surrendered at a US Embassy in UAE in January, it is reported.
PORTUGAL ORDERS SEIZURE OF ANGOLAN BILLIONAIRE DOS SANTOS’ BANK ACCOUNTS
On 11 February, Reuters reported that Portugal’s public prosecutor’s office had ordered the seizure of Portuguese bank accounts belonging to Angolan billionaire and former first daughter Isabel dos Santos.
ANGOLA SEIZES PROPERTIES HELD BY CHINA INTERNATIONAL FUND
On 11 February, BNN Bloomberg reported that the National Service for Asset Recovery seized dozens of properties held by Hong Kong-based China International Fund and its country unit, CIF Angola, that were allegedly built with state funds.
https://www.bnnbloomberg.ca/angola-seizes-properties-held-by-china-international-fund-1.1388497
US CHARGES VIRTUAL CURRENCY SCHEME Q3 AND ITS FOUNDER WITH FRAUD
On 11 February, Finance Feeds reported that Commodity Futures Trading Commission (CFTC) has filed a complaint against Michael Ackerman and the entities he founded, Q3 Holdings, LLC and Q3 I, LP, accusing the defendants of fraud. Michael W. Ackerman, along with 2 business partners, is said to have raised at least $33 million by claiming to investors that he had developed a proprietary algorithm that allowed him to generate extraordinary profits while trading in cryptocurrencies.
https://financefeeds.com/cftc-charges-virtual-currency-scheme-q3-founder-fraud/
BERNARD MADOFF SEEKS COMPASSIONATE RELEASE FROM PRISON
In his blog on 11 February, Kenneth Rijock includes a copy of the application lodged on behalf of Bernie Madoff seeking early release from his 50-year sentence on compassionate grounds.
http://rijock.blogspot.com/2020/02/the-worlds-most-despised-white-collar.html
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