Panama Covid-19 update – another 191 new cases added to the totals today, taking us up to 4,673, with 10 more fatalities, taking that figure to 136 to date. The proportion of the population affected by being confirmed infections stands at around 0.11%, and fatalities at 0.003%. The comparable UK rate for fatalities is around at least 0.025%. Meanwhile, it has been confirmed that there will be no more international scheduled flights for at least another 30 days, and I have to venture out tomorrow during my short spell of freedom…
20 April 2020
PIRATES BOARD CONTAINERSHIP OFF BENIN
On 20 April, Seatrade Maritime News reported that pirates are reported to have attacked the Portuguese-flagged containership Tommi Ritscher off Cotonou, Benin holding 8 of the crew hostage.
MALAYSIA ARRESTS 14 CHINESE MEN WHO TARGETED VICTIMS FROM CHINA IN CRYPTOCURRENCY SCAM
On 20 April, KYC 360 reported that the suspects targeted victims from China by impersonating successful investors.
MEXICAN AUTHORITIES QUERY 50 BANKS IN PROBE OF EX-PRESIDENT PEÑA NIETO AND HIS FAMILY
On 20 April, KYC 360 reported that the federal government has ordered that all accounts and financial movements made by former President Enrique Peña Nieto and his closest relatives during his administration be traced in at least 50 national and foreign banking institutions. The FIU has also requested from the National Banking and Securities Commission (CNBV) all financial information on accounts, movements, signed contracts, credits or houses, in detail, of the current PRI federal congressman Luis Enrique Miranda, who was Peña Nieto’s social development secretary, and his wife, Alma Laura Saldaña Farach.
SOUTH KOREANS SENT $22.74 MILLION IN AID TO NORTH KOREA LAST YEAR
On 20 April, NK News reported that South Koreans sent a total of $22.74 million in public and private sector humanitarian assistance to North Korea last year – the highest amount of aid since 2015.
US: LIST OF COUNTRIES REQUIRING COOPERATION WITH INTERNATIONAL BOYCOTTS
On 9 April, Thompson Hine LLP published an article saying that the Department of Commerce’s Bureau of Industry and Security (BIS) is charged with administering and enforcing the anti-boycott laws under the Export Administration Act, require US companies to refuse to participate in foreign boycotts that the US government does not sanction. Every 6 months, the US Treasury releases a notice to the public of countries that require or may require participation in, or cooperation with, an international boycott. The latest was released on 9 April.
UPDATE ON CUM-EX: A LONG-RUNNING BANKING SCANDAL IS COMING TO A HEAD
On 5 April, Forensic Risk Alliance published an article saying that the conviction of 2 former London-based investment bankers in a German trial on 18 March has established Cum-Ex trading as a form of criminal tax evasion. But, it says, the end of this trial begins a new chapter for bankers that should be prompting financial institutions across Europe to consider their risk exposure. It warns that anyone directly or indirectly involved in the borrowing and lending of European equities around dividend dates will be affected – including investment bank trading desks, inter-dealer brokers, settlement agents and custodian banks. The article provides a summary of what the Cum-Ex scandal involved and asks what regulators will be looking at.
UK: CROWN PREFERENCE RETURNS – CREDITORS BEWARE!
On 16 April, Katten Muchin Rosenman LLP published an article saying that plans to reintroduce Crown Preference for HMRC has now been introduced in the Finance Bill 2020, with the later start date of 1 December. It will restore to HMRC a preferential right to claim ahead of floating charge holders in respect of certain unpaid taxes in company insolvencies – without this preference, HMRC can only claim as an unsecured creditor, behind fixed charge holders, insolvency process costs, preferential creditors and floating charge holders. The preference was abolished in 2003.
THE IMPACT OF CAYMAN’S EU BLACKLISTING
On 15 April, an article from Dillon Eustace focused on the fallout from the February decision to add the Cayman Islands to the EU list of non-cooperative jurisdictions for tax purposes. It appeared that changes being made or planned had come too late to avoid blacklisting. The EU has encouraged Member States to apply one or more legislative measures on transactions with non-cooperative tax jurisdictions from 1 January 2021, and Luxembourg for one has recently passed legislation which is expected deny tax deductions on interest and royalty payments to related entities located in non-cooperative tax jurisdictions.
GUIDANCE TO HELP GOVERNMENTS AND REGULATORS DEAL WITH TRADE FINANCE MARKET DISRUPTIONS CAUSED BY COVID-19
On 20 April, the International Chamber of Commerce reported the release of 2 guidance publications to help governments and regulators deal with trade finance market disruptions caused by COVID-19. The ICC says that trade finance transactions rely almost exclusively on hard-copy paper documentation to process payments and, ultimately, clear the release of goods to buyers. This is because, in many jurisdictions, electronic trade documents are either prohibited or their legal status is unclear. Yet with banks unable to handle documents in-person as government authorities seek to limit COVID-19 transmission, there is a risk that the underlying trade in goods, including essential medical and food products, will be further disrupted. The ICC has produced both technical guidance to practitioners and a roadmap for regulatory reform for policymakers – and is calling on governments and central banks to immediately void the legal requirement for paper-based documentation, and to adopt the UNCITRAL Model Law on Electronic Transferable Records.
PIRACY AND ARMED ROBBERY A THREAT TO SHIPS’ CREWS
On 14 April, the International Maritime Bureau, part of the International Chamber of Commerce, published a report saying that seafarers face continuing threats from pirates and armed robbers on the world’s seas. It reports 47 attacks in the first 3 months of 2020, up from 38 in the same period last year. Pirates boarded 37 ships in the first quarter of 2020. It says that the Gulf of Guinea remains the world’s piracy hotspot – 17 crew were kidnapped in 3 incidents in these waters, at distances of between 45 and 75 nautical miles from the coast.
EXPORT CONTROLS IN THE AGE OF ARTIFICIAL INTELLIGENCE: IS YOUR COMPANY COMPLIANT?
Shumaker, Attorneys at Law, on 17 April published a Client Alert which involves a brief introduction to the US regulatory framework. It considers the application of the International Traffic in Arms Regulations (ITAR), saying that recent amendments to the ITAR are particularly important to AI companies. Since the ITAR is concerned with ‘export’ to a ‘foreigner’, the article says that it is important to understand how the ITAR defines each of those terms, and recommends a robust compliance programme in the light of the risks. It says that it is important for AI companies to remain current on any developments or rule clarifications regarding ITAR. It then looks at the Export Administration Regulations (EAR), saying that although the core of the EAR provisions relates to exports from the US, some EAR provisions broadly define the term “export.” Additionally, it warns, some EAR provisions can also apply to transactions outside of the US, or apply to activities other than exports. As a result of the broad definition of the term “export” under some EAR provisions, certain actions that may not constitute an export in other contexts will constitute an export subject to the EAR. Finally, the article considers the Committee on Foreign Investment in the United States (CFIUS) which, inter alia, provides oversight of foreign investments in the US AI market to prevent threats to national security, as well as to prevent US competitors from improperly gaining access to critical technologies. It is said that items and technology controlled by either the ITAR or EAR will also be considered as critical technology by CFIUS for CFIUS purposes.
INDUSTRIAL BANK OF KOREA (IBK) FINED $35 MILLION FOR FLOUTING US AML LAW
On 20 April, The Korea Times reported that the Industrial Bank of Korea (IBK) must pay a $35 million fine for violating the New York Bank Secrecy Act which governs AML laws, New York’s State Department of Financial Services (DFS) has said. DFS said IBK had repeated problems in maintaining adequate policies and procedures for anti-money laundering compliance, from 2010 to 2019.
VIJAY MALLYA’S APPEAL AGAINST EXTRADITION TO INDIA REJECTED BY UK COURT
The Times of India on 20 April reported that the High Court in London has dismissed liquor tycoon Vijay Mallya’s appeal against a 2018 order to extradite him to India over charges of fraud and money laundering. He has been fighting extradition since 2017. He now has 14 days to lodge an appeal before the Supreme Court.
ARGENTINA FINALLY HAS A BENEFICIAL OWNERSHIP REGISTER
The Tax Justice Network on 20 April reported that Argentine tax authorities have approved regulations to require beneficial ownership registration for a wide range of legal vehicles including companies, partnerships and investment funds. However, the register will not be public and so, says TJN, falls short of its full potential as a tool for transparency and tax justice. Regulation 4697 establishes a beneficial ownership registration to be centrally managed by the tax authorities (AFIP). Argentina’s definition goes beyond ownership criterion (anyone holding at least 1 share), to also include anyone with voting rights or with control through other means. The new beneficial ownership applies to entities incorporated in Argentina, but also adds disclosure requirements in relation to foreign entities that have Argentine shareholders, directors, or people with a power of attorney over the foreign entity. However, TJN notes that trusts are not covered and, although when a beneficial owner owns or controls an entity indirectly, information on the full ownership chain must be kept by the company this information need not be registered with the tax administration.
IS VENEZUELA’S GOLD A LIABILITY FOR SWITZERLAND?
On 20 April, Swissinfo carried an article posing this question and saying that Venezuela is illegally mining and trading in gold, and Switzerland could be one of its clients, according to Swiss media reports. The media site says that it spoke to law enforcement, customs and financial authorities to find out whether they are taking action. It says that, faced with potential illegal operations that would link Switzerland to the Venezuelan gold market, Swiss authorities confirm that they are all vigilant, but do not report whether there are any investigations under way.
HONG KONG: REGULATOR IMPOSES $19.6 MILLION FINE ON BOCOM INTERNATIONAL SECURITIES FOR INTERNAL CONTROL FAILURES
On 20 April, Finance Feeds reported that the Hong Kong’s Securities and Futures Commission (SFC) had announced that it has reprimanded and fined BOCOM International Securities Limited (BISL) a total of $19.6 million for a series of regulatory breaches, including failures concerning the handling of third party fund deposits and the maintenance and implementation of a margin lending and margin call policy, and failure to ensure compliance with the Guideline on AML/CFT.
THE CORONAVIRUS PANDEMIC AND THE CYBER LANDSCAPE
On 20 April, RUSI published a Commentary saying that the coronavirus pandemic has increased our reliance on the digital world and has highlighted 5 fundamental security challenges – a surge in cyber crime; exploiting of technology (e.g. Zoom) used in new ways, such as with increased home working; pressure on cyber investment; added concerns about China and 5G; and the spotlight on globalised technology, supply chains and investment.
THE RECORD AML FINE IMPOSED ON SWEDBANK
On 19 April, Orrick published an article looking at the $386 million fine imposed by Sweden’s financial supervisory authority on Swedbank AB for deficiencies in its AML processes and controls. It then lists 6 takeaways for financial institutions’ compliance personnel as they evaluate their own institutions’ AML compliance programmes.
CHINA’S ANTI-ONLINE GAMBLING EFFORTS TURNING FOCUS TO CROSS-BORDER MONEY MOVEMENT
On 20 April, Calvin Ayre published an article saying that as ‘underground banking’ has come to play a larger role in funding international online gambling activity. A recent online video conference from the Ministry of Public Security was apparently intended to ensure everyone understood the Ministry’s recent anti-online gambling effort was no passing fancy. The article also refers to a recent case where Malaysian police announced the arrest of 54 Chinese nationals suspected of operating a China-facing online gambling call centre, seizing 60 computers and 313 mobile phones, with which the operation promoted gambling services via WeChat to mainland residents.
US: FURNITURE IMPORTERS PAY $5.2 MILLION FOR EVADING CUSTOMS DUTIES
On 17 April, the Woodworking Network reported on the case of Florida companies Blue Furniture Solutions LLC, its successor XMillenium LLC, and 2 former executives, agreeing to pay more than $5.2 million to resolve allegations that they violated the False Claims Act by evading customs duties and fees on wood bedroom furniture imported from China.
UK: IR35 – COULD YOUR BUSINESS BE FACILITATING TAX EVASION?
On 20 April, Eversheds Sutherland published a briefing posting this question. It says that, despite the government having delayed implementation, if a business is still engaging and using contractors who supply their services via their own personal service companies (PSC) care will need to be taken to ensure that the company does not become guilty of committing the corporate offence of facilitating tax evasion. It outlines “reasonable prevention measures” and explained what it considers that businesses should be doing.
INDIA: RBI ASKS BANKS ETC TO CARRY OUT MONEY LAUNDERING RISK ASSESSMENT PERIODICALLY
On 20 April, the Economic Times reported that the Reserve Bank of India, the central bank, had issued a new Master Direction on KYC. It requires regulated entities to carry out risk assessments periodically and saying that they should adopt a risk-based approach (RBA) for mitigation and management of the identified risk and should have Board-approved policies, controls and procedures in this regard.
SWEDEN: ALL 4 DEFENDANTS IN THE FALCON FUNDS AND OPTIMUS FRAUD CASE SENTENCED TO PRISON
On 20 April, European Pensions reported that the case is said to have affected around 20,000 pension savers and the Swedish Pensions Authority described the ruling as a “success” in its efforts to recover the money that pension savers in Optimus have missed out on. In the fraud, private pension savers in Sweden saw their money for Malta-registered Falcon Funds, transferred to the Optimus High Yield Fund. Main suspect Mark Bishop was sentenced to 7½ years in prison while Max Serwin received 6-years and 9 months. Serwin had been about to be extradited from the UK to Sweden but fled, being later located in Hungary.
MANAGING THROUGH UNCERTAINTY – BREXIT GUIDANCE
Gowling WLG has made available online content prepared for its Spring 2020 ThinkHouse programme. It says that, while the onset of COVID-19 has brought unprecedented challenges for businesses and changed ‘business as usual’, there are other issues that still remain high on the agenda – such as responding to Brexit. The material offered includes presentations and slides on EU law after Brexit, data privacy and Brexit, free trade and cross-border trade after Brexit and contracts in a post-Brexit world.
OFAC ENCOURAGES PERSONS TO COMMUNICATE OFAC COMPLIANCE CONCERNS RELATED TO THE COVID-19
A notice from OFAC on 20 April encourages persons, including financial institutions and other businesses, affected by the COVID-19 global pandemic to contact OFAC as soon as practicable if the person believes it may experience delays in its ability to meet deadlines associated with regulatory requirements administered by OFAC. It supplied links to use, to self-disclose etc.
US DoJ DISTRIBUTES ANOTHER $378 MILLION TO BERNIE MADOFF VICTIMS
On 20 April, a release on Mondo Visione advised that the DoJ has announced that the Madoff Victim Fund (MVF) began its fifth distribution of approximately $378.5 million in funds forfeited to the US Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to over $2.7 billion to nearly 38,000 victims worldwide.
SEC $5 MILLION WHISTLEBLOWER AWARD
A release on Mondo Visione on 20 April advised that the SEC had announced a $5 million award to a whistleblower who provided significant information that led to a successful enforcement action. It says that the whistleblower provided critical evidence of wrongdoing, which helped save time and resources in the SEC’s investigation, and the whistleblower suffered a unique hardship as a result of raising concerns internally. This award is the seventh award the SEC has announced to individual whistleblowers in the last month.
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