25 February 2020
DIGITAL BANK REVOLUT MISTAKENLY FROZE THE ACCOUNTS OF A FRENCH COMPANY IN A BLUNDER THAT HAS RAISED QUESTIONS OVER ITS COMPLIANCE PROCESSES AS IT GROWS AT BREAKNECK SPEED
On 25 February, KYC 360 reported that the case involved a refund from a supplier unable to complete an anticipated order, returning the money paid from the Czech Republic to France. It is said that, after realising it had made an error, Revolut blundered a second time by returning the money to the supplier. The owner of the French company alleges that alleges that the bank’s algorithms locked the accounts without humans having “meaningful” oversight of the process.
ESG: WHAT DOES IT MEAN AND WHY IS IT IMPORTANT FOR YOU?
On 21 February, an article from Charles Russell Speechlys explains that companies operating in almost every sector are now coming under pressure to report on their ESG credentials and policies. ESG stands for Environmental, Social and Governance and is linked to the UN’s 17 Sustainable Development Goals (SDG) adopted in September 2015. The SDG relate to poverty, inequality, climate change, environmental degradation, peace and justice and the UN’s aim is to achieve them all by 2030. It adds that ESG is sometimes used synonymously with such terms as corporate social responsibility; responsible investing; and sustainable investing. It says that it is important that ESG is embedded into a company’s considerations and not something that mere lip service is paid to, and that it should matter to you as it is something that investors now and, in the future, will demand.
POLICE IN THE EU PLANNING PAN-EUROPE NETWORK OF FACIAL RECOGNITION DATABASES
On 21 February, The Intercept reported that a report drawn up by the national police forces of 10 EU Member States, led by Austria, calls for the introduction of EU legislation to introduce and interconnect such databases in every Member State. It is reported that the new facial recognition network will likely be connected to similar databases in the US, creating what privacy researchers are calling a massive transatlantic consolidation of biometric data. The report was produced as part of discussions on expanding the Prüm system, an EU-wide initiative connecting DNA, fingerprint, and vehicle registration databases for mutual searching. The EU Commission has also funded a study to map the current situation of facial recognition in criminal investigations in all EU Member States.
IRAN: SMUGGLED CIGARETTE MARKET TURNOVER AT $1 BILLION
The Finance Tribune in Iran on 24 February reported claims that the smuggled cigarette market in Iran has a turnover of over $1 billion. The claims was made at a ceremony to mark the launch of a tracking system for cigarette packs to fight smuggling. The Ministry of Industries, Mining and Trade estimates that 8.67 billion cigarettes were smuggled into Iran during the 9 months to 21 December.
G20 STATEMENT ON THE DIGITAL ECONOMY – COGNISANT OF RISKS INCLUDING MONEY LAUNDERING
Crowdfund Insider on 25 February reported on a statement issued by the G20 following its summit in Saudi Arabia, a joint communique outlining shared goals for the group of the largest 20 economies in the world. The document said it was important to “consider the implications associated with the growing entry of Big Tech in finance”, and states that the G20 states “remain vigilant to potential risks arising from financial innovations”. Risks are said to include money laundering, systemic concerns, macroeconomic implications and “monetary sovereignty issues”.
AUCKLAND LAWYER AND COMANCHEROS BIKER GANG OFFICIAL SENT TO PRISON FOR MONEY LAUNDERING
On 25 February, TV Nez Zealand reported that a senior member of the Comancheros gang and an Auckland lawyer acting for them have been sentenced to jail for laundering millions of dollars. Vice-president of the chapter Tyson Daniels and lawyer Andrew Neill Simpson pleaded guilty to the charges in November. The pair were among 6 people charged after a sting on the organised crime group last year, where police seized millions of dollars of assets including property, luxury cars and motorbikes.
MONEY LAUNDERING INQUIRY KICKS OFF IN VANCOUVER
City News 1130 in Canada on 25 February reported that a money laundering inquiry has started in Vancouver, in which the Cullen Commission will inquire into dirty money funnelled through British Columbia casinos, real estate, and luxury car sales. Since 2017, the provincial government has commissioned 3 reports that raised red flags about billions of dollars in dirty money being funnelled through the province, and detailed the extent of the criminal activity – in 2018 alone, it’s believed $5 billion were laundered just through real estate in the province.
US: HOUSE OF REPRESENTATIVES COMMITTEE TO REPORT TO FULL HOUSE ON BILL TO EXTEND STATUE OF LIMITATIONS ON SEC CIVIL PENALTY ACTION FROM 5 TO 10 YEARS
On 24 February, Cadwalader Cabinet reported that the Financial Services Committee voted to report to the full House a Bill to establish a new statute of limitations applicable to SEC enforcement actions seeking civil monetary penalties, introduced in July by 2 Democratic members. The Supreme Court has held that a 5-year statute of limitations applies to claims for the disgorgement of ill-gotten gains obtained through violations of federal securities laws.
FILM HIGHLIGHTS CORRUPTION AND THEFT FACED BY SEAFARERS
On 25 February, Seatrade Maritime News reported that a new video by Cardiff University and with funding support from Lloyd’s Register Foundation, and based on interviews with seafarers, highlights the level of corruption and theft faced by seafarers in carrying out their day-to-day work on board ship.
UN LAUNCHES NEW PROJECT TO ADDRESS LINK BETWEEN TERRORISM, ARMS AND CRIME
On 23 February, Homeland Security Today reported that cheap and easily accessible small arms are increasingly becoming the “weapon of choice” for many terrorist groups, the UN counter-terrorism chief told an event aimed to raise awareness of the nexus between terrorism, organised crime and illicit small arms trafficking. The article says that it is widely acknowledged that the connection between terrorism and organized crime, including illicit small arms and light weapons trafficking, is a serious threat to international peace and security. It is also an obstacle to sustainable development and a menace to the rule of law. The UN Global Counter-Terrorism Strategy underlines the connection between terrorism and the illicit small arms trafficking, conventional ammunition and explosives, and calls on Member States to strengthen coordination and cooperation to address this challenge. It is reported that UN agencies have been working to develop a project enhancing national legislative, strategic and operational capacities to prevent, detect and counter the firearms trafficking and other illegal activities related to terrorism and organised crime in Central Asia.
ARMENIA’S OUSTED PRESIDENT SARGSYAN STANDS TRIAL ON CORRUPTION CHARGES
On 25 February, EurActiv reported that former Armenian president Serzh Sargsyan has gone on trial charged with corruption, nearly 2 years after he was ousted from power by a popular uprising following a decade in office. He was president form 2008 until his resignation in 2018. He was charged in December with organising an embezzlement scheme that allegedly helped enrich government officials; and was banned from leaving the country and if convicted could face up to 8 years in jail. It is alleged that, in 2013, he helped to organise a scheme for a private company to supply diesel fuel for the government’s agricultural assistance programme at a deliberately inflated price. He is not the only former Armenian leader being prosecuted — his predecessor Robert Kocharyan went on trial in May on charges of “overthrowing the constitutional order” for allegedly tipping 2008 presidential polls in favour of Sargsyan.
KOSOVO WAR CRIMES PROSECUTOR FILES FIRST INDICTMENTS
On 25 February, EurActiv reported that the prosecutor for a Hague-based court has handed down the first indictments over alleged war crimes committed by Kosovo guerrillas during a 1990s conflict. The Kosovo Specialist Chambers, was established in 2015 to investigate crimes by independence-seeking ethnic Albanian guerrillas against mainly Serb civilians during the 1998-1999 war, did not identify the suspects.
MEN BEHIND THE ‘LARGEST ILLEGAL TOBACCO FACTORY’ EVER FOUND IN THE UK JAILED FOR A TOTAL OF 30 YEARS
On 25 February, the Daily Mail reported that the masterminds behind a £10 million fraud which saw the UK’s largest illegal tobacco factory produce 140 packs of cigarettes a minute have been jailed. They led a 12-man gang who made millions of counterfeit cigarettes which were distributed across the North of England. The factory had more than 24 tonnes of tobacco inside, along with 500,000 cigarettes, old Imperial Tobacco machinery and products used to make the cigarettes. HMRC also discovered caravans that were being used by the factory workforce.
GUATEMALAN ANTI-GRAFT CRUSADER GRANTED ASYLUM IN US
On 25 February, OCCRP reported that the US has granted asylum to Guatemala’s former chief prosecutor, Thelma Aldana, 64, just days after her country filed an extradition request based on embezzlement, lying and tax fraud charges she claims were raised in retaliation for her anti-corruption efforts. She prosecuted and jailed former President Otto Perez Molina and launched investigations against his successor, ex-President Jimmy Morales and members of his family. In 2017 alone, her office won 9,358 convictions, and that same year she was named one of Time Magazine’s 100 Most Influential People. After numerous death threats and incidents of harassment, Aldana was forced to resign. He bid to become president herself was blocked based on a corruption indictment, and after an arrest warrant was issued against her, Aldana left the country.
2 TOP FORMER UZBEK OFFICIALS CONVICTED ON CORRUPTION CHARGES
On 25 February, Rferl reported that 2 top former Uzbek officials have been convicted of corruption in a case involving more than a dozen defendants from the public sector. Ikhtyor Abdullaev, the former chief of Uzbekistan’s State Security Service, was sentenced to 18 years in prison after being found guilty of organising a criminal group, bribe-taking, abuse of office, extortion, the theft of private property, violating customs regulations, and other crimes. Former Prosecutor-General Otabek Murodov was found guilty of bribe-taking and sentenced to 5 years of freedom limitation – a sentence with parole-like restrictions. 7 other defendants in the case, including former subordinates of Murodov and Abdullaev, were sentenced to prison, while more than a dozen other defendants received sentences that did not include jail time.
FORMER PERUVIAN PRIME MINISTER ARRESTED FOR ALLEGED CORRUPTION
On 25 February, Prensa Latina reported that ex-Prime Minister Yehude Simon was included in the list of former Peruvian presidents and politicians who have been arrested for alleged corruption. It is alleged that, as governor of the northern region of Lambayeque, he favoured the Brazilian company Odebrecht with a contract to execute the Olmos-Tinajones irrigation project. His right-hand man, the manager of the Olmos-Tinajones project, Pablo Salazar Torres, was also arrested.
HOW CORRUPT IN BELARUS?
On 25 February, independent TV channel Belsat published an article saying that the number of corruption crimes reported by the prosecutor general has been significantly growing. It looks at its Transparency International rating – much better than that for Russia and Ukraine. However, it says, at the same time, many spheres continue to be strongly affected by corruption. It is said to be flourishing especially in state-owned enterprises and factories, many of which are loss-making. Almost every year there emerges a bribery scandal, involving high-flyers working for state-run enterprises.
CORRUPT FOOTBALL OFFICIALS CORNERED IN SPAIN – €10 MILLION FROM “GHOST FOOTBALLERS” ALLEGEDLY LAUNDERED
A news release from Europol on 25 February advised that, since 2018, the Spanish Civil Guard (Guardia Civil) has been investigating 2 football agents linked to one of the most relevant player representation agencies in Europe. They are suspected of money laundering and tax evasion. The operation has led to 5 prosecutions and, in the following weeks, several dozen will be called for court hearings. The investigation uncovered that the football agents were part of a criminal network which manages football clubs in several countries, among which are Belgium, Cyprus and Serbia. The ghost player transfers were first revealed through social media and the 2016 investigation on football leaks.
OECD RECOGNISES LEGITIMACY OF CAPTIVE INSURANCE
On 24 February, Eversheds Sutherland published an article concerned with an OECD report released on 12 February on “Transfer Pricing Guidance on Financial Transactions”. One chapter of the report, it says, deals specifically with transfer pricing issues related to captive insurance arrangements. The article says that the OECD acknowledges valid business reasons for captive insurance, but goes on to discuss whether a captive insurance company is undertaking a genuine insurance business. However, according to the article, the requirements for some of the indicators are unclear. It is reported that the chapter also addresses transfer pricing issues that arise in the context of a captive insurance arrangement. The article includes observations by the law firm on the contents of the chapter.
UK AND BREXIT: CARRYING OUT INTERNATIONAL ROAD HAULAGE FROM 1 JANUARY 2021
On 25 February, a news release from the Department for Transport provides information on what UK goods vehicle operators need to do to carry out international road haulage from 1 January.
At the same time, the DfT also provided other news releases –
UK AND BREXIT: AVIATION SECURITY FROM 1 JANUARY 2021
On 25 February, a news release from the Department for Transport contained information on measures in place to ensure cargo can fly to and from the EU without disruption from 1 January. It says that the UK intends to recognise EU cargo security rules to minimise disruption to air cargo networks. Airlines flying from airports in the EU, Switzerland, Norway, Iceland and Liechtenstein will be able to fly cargo to the UK in the same way as they do now – and the EU intends to recognise the UK cargo security regime allowing cargo to continue to fly into the EU. Cargo will be able to fly from the UK to the EU, Switzerland, Norway, Iceland and Liechtenstein without a security designation, in the same way as it does now. For international imports, a UK-only inbound cargo scheme will be set up and this will mirror the EU scheme and grant security designations from 1 January to allow all cargo to continue to ship smoothly while maintaining existing security standards.
IRAN HITS BACK AS SAMSUNG AND LG PULL OUT
World ECR reported that Iran’s Foreign Ministry has hit back against South Korean tech giants Samsung and LG for pulling out of the country in response to US sanctions. Samsung is reportedly Iran’s largest mobile phone provider, with a 2018 market share of around 55%, and both Samsung and LG had opened assembly plants in Iran, but have now closed them. The companies stopped direct sales in the country when US sanctions came into force, but have kept up with advertising until this month.
E-COMMERCE LOGISTICS MARKET TO EXCEED €500 BILLION BY 2024
On 25 February, Lloyds Loading List reported that logistics service providers (LSP) are unlikely to see many benefits of this growth, as retailers heap pressure onto their supply chain partners to limit costs while improving service levels at the same time. An LSP is a company that provides management over the flow of goods and materials between points of origin to end-use destination. The provider will often handle shipping, inventory, warehousing, packaging and security functions for shipments.
ECONOMIC SUBSTANCE UPDATE FOR BVI, CAYMAN ISLANDS AND BERMUDA
An article from Appleby on 25 February provided an update following the news that the BVI and Bermuda had been moved onto the EU “white list” after having implemented legislative changes to fit in with the tax governance requirements of the EU. Meanwhile, the Cayman Islands (and the Seychelles) found themselves put on the EU “black list” on non-cooperative jurisdictions.
OECD DIGITAL TAX PLANS ‘WILL RADICALLY CHANGE WHOLE INTERNATIONAL TAX SYSTEM’
An article from Out-Law on 25 February says that OECD plans to make the tax system more responsive to digital services are not really about digital taxation at all, but about radically changing the system of international taxing rights across all consumer-facing industries. The plans involved are not, it says, restricted to digital services and apply to all multinational companies with consumer-facing businesses, something all companies should be aware of.
GIBRALTAR: RELATIVES OF ARRESTED RHIB SMUGGLING CREW ALSO ARRESTED WHEN THEY ARRIVED TO PAY THE FINE
On 22 February, the Gibraltar Chronicle reported that when 6 Spanish people arrived to pay the fine of others arrested for attempted smuggling using a RHIB were themselves arrested after they tried to pay the fine in cash and were unable to prove where the money came from.
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