On 31 August, KYC 360 reported that Slobodan Tesic, 55, subject to sanctions by the US continues to export weapons with licences issued by the Serbian government in return for favours to President Vucic’s Serbian Progressive Party, raising questions about an EU candidate and US ally. It mentions a shipment of 32,000 land mines, manufactured by a Serbian state company and delivered to Armenia by Vectura Trans, a company owned by Mr Tesic, in 2 tranches in 2019 and 2020.
Panama Covid-19 update – so far, over 334,000 tests carried out – about 7 -8% of the total population. This while Moody’s estimates a 10% reduction in GDP due to the crisis.
Meanwhile the figures appear to continue on their too gradual decline. 728 new cases reported and 12 new fatalities (so now very close to the 2,000 mark, at 1,995). There are 24,323 active cases, of which 157 are in ICU and 1,464 in other wards.
30 August 2020
CHINESE UCLA RESEARCHER INVESTIGATED FOR STEALING SOFTWARE FOR CHINA NOW CHARGED WITH DAMAGING HARD DRIVE SOUGHT BY FBI
American Military News on 29 August reported that Guan Lei, 29, a Chinese national and researcher at the University of California, Los Angeles has been arrested on federal charges of destroying evidence to obstruct an FBI investigation after he was observed throwing a damaged hard drive into a dumpster outside his apartment. The FBI recovered the damaged hard drive after Guan was not allowed to board a flight to China and after Guan refused the FBI’s request to examine his computer. Guan is being investigated for possibly transferring sensitive US software or technical data to China’s National University of Defense Technology (NUDT) and falsely denying his association with the Chinese military in connection with his 2018 visa application and in interviews with federal law enforcement.
CHINA CURBS EXPORTS OF SOME ARTIFICIAL INTELLIGENCE TECHNOLOGIES
On 30 August, the Hindu Business Line and others reported that technologies related to drones and to some genetic engineering methods and procedures were also added to the list, as well as exports of some artificial intelligence technology to safeguard national economic security, and will require government permits for overseas transfers. It is also said that it will affect ByteDance, owner of its popular video-sharing TikTok app, and it is unclear if the new rules will affect any potential sale.
SRI LANKA: NAVY SEIZED ABOUT 1,428 KG OF SMUGGLED TURMERIC
On 30 August, the Daily News reported that naval operations have led to the recovery of about 1,428 kg of dried turmeric attempted to be smuggled into the country by sea. Further investigations led the seizure of a total of 12,270 kg of dried turmeric to be smuggled and 25 suspects involved in turmeric smuggling have also been detained during these operations.
INDIAN COAST GUARD THWARTS SMUGGLING OF A TON OF SEA CUCUMBER INTO SRI LANKA
On 29 August, Zee News in India reported that, the Indian Coast Guard apprehended a fishing boat that was attempting to smuggle sea cucumber, an endangered species, into Sri Lanka.
US TREASURY CLEARS ZIMBABWEAN BANK OF HAVING TO PAY $385 MILLION PENALTY
On 30 August, BNN Bloomberg reported that OFAC had previously reviewed more than 15,000 transactions carried out by CBZ Holdings Ltd for ZB Bank Ltd. between 2009 and 2014 and has now sent the bank a letter saying that CBZ won’t face a penalty or sanctions.
HOW THE GLOBAL CONFLICT BETWEEN THE ISLAMIC STATE AND AL-QAIDA FINALLY CAME TO WEST AFRICA
An article in the July edition of the CTC Sentinel says that after the emergence of the Islamic State in the Sahel (or the Islamic State in the Greater Sahara) in 2015, the group existed in an uneasy alliance with al-Qaida’s various franchises in the region. Proving to be an exception to the rule that al-Qaida and the Islamic State fight each other in whichever territory they co-inhabit, the Sahel was for several years spared from such jihadi-on-jihadi fighting, in part because of personal relationships between jihadis in the rival groups. However, in recent months, this trend has been bucked by fighting between the jihadi forces in Mali and Burkina Faso.
CREDIT SUISSE UNCOVERS CLIENT FRAUD AT WEALTH MANAGEMENT BUSINESS
On 28 August, Bloomberg reported that Swiss-based Credit Suisse Group AG has discovered fraud at its international wealth management business, 2 years after it was criticised by a regulator in a similar case that rattled the bank and raised questions about controls. The case is said to involve a Zurich-based banker who forged documentation on an over-the-counter contract for an African wealth management client.
IRAN SAYS TO FIGHT U.S. SUIT TO SEIZE $1.7 BILLION HELD BY DEUTSCHE BOERSE UNIT
On 29 August, Reuters reported that Iran’s central bank has said it was taking legal steps to counter a lawsuit filed in a US court by creditors seeking to seize $1.7 billion of its assets held by the German stock exchange operator’s Clearstream unit.
PAYROLL HANDLER PLEADS GUILTY IN $100 MILLION NEW YORK FRAUD CASE
On 29 August, Bloomberg reported that a man will be ordered to repay $100 million embezzled from client payroll accounts after he pleaded guilty to a massive money laundering scheme.
CAPITAL ONE FINED $80 MILLION FOR INADEQUATE DATA CONTROLS
On 29 August, SCCE reported that the Office of the Comptroller of the Currency has fined Capital one $80 million for inadequate data controls leading to a 2019 data breach and for failing to fix the problems in a timely manner. The breach was one of the largest in history for a big bank, affecting credit card applications and accounts for more than 100 million customers.
In an article dated 31 August, Hellenic Shipping News reported that the US DoJ has announced the seizure of 3 websites used by 3 front companies: Mobin International, Sohar Fuel, and Oman Fuel, who arranged a multimillion dollar fuel shipment by the Islamic Revolutionary Guard Corps (IRGC) that was bound for Venezuela.
As part of revisiting and revising my own notes on various Panama-related matters, I have revised the following note which may be of interest or use to others. Any comments, or indeed corrections, would be welcomed.
FATF EVALUATION ASSESSMENT
Panama is a member of GAFILAT, the regional FATF-style regional body (FSRB), which has assessed Panama against the 40 Recommendations issued by FATF. These “set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction” and thereby establish an international standard against which countries can be measured.
FATF Technical Compliance and Immediate Outcomes
The country’s “technical compliance” with the Recommendations, e.g. by the enactment of the necessary legislation and the introduction of rules, regulations and structures, is assessed separately from the effectiveness of the legislation and systems themselves. The standard of compliance Or, indeed, non-compliance) is illustrated in chart form in the organisations’ reports (see below for December 2017 ratings for Panama). These technical compliance ratings may be adjusted if and when improvement is shown, such as when reassessed during follow-up reports (see below for comments on such follow-up reports).
Since 2013, FATF has also evaluated jurisdictions against 11 “Immediate Outcomes” to assess the effective implementation of the Recommendations and the overall robustness and effectiveness of the control regime in that jurisdiction. These so-called “IO” ratings were introduced as it was found that it was too easy for even a poorly compliant jurisdiction to have all the theoretically available structures in place, without the means or desire to use them.
The 11 Immediate Outcomes are included in the methodology laid down for carrying out of assessments (see Annex C for details of what the FATF Recommendations and Immediate Outcomes are).
Assessments are undertaken by means of mutual evaluation, a type of peer review using experts selected from other member countries of FATF or the FSRB concerned, and the results published in mutual evaluation reports (MER), both by the regional body and (after acceptance by a Plenary) by FATF itself. The experts carry out pre-visit examination of available information, carry out an on-site visit and also call for documents and information from the country being assessed, and subsequently enter into an ongoing dialogue with the country up to the time of the report being finalised.
The results of the assessments undertaken by the regional bodies are moderated and approved by FATF, and the markings published by FATF in a schedule of results for all jurisdictions that have been assessed.
The FATF rating systems
For technical compliance, FATF has 5 levels of grading –
- Compliant – There are no shortcomings;
- Largely Compliant – There are only minor shortcomings;
- Partially Compliant – There are moderate shortcomings;
- Non-Compliant – There are major shortcomings; and
- Not applicable – The requirement does not apply, due to the structural, legal or institutional features of a country.
For effectiveness, FATF has 4 levels of grading –
- High level of effectiveness – The Immediate Outcome is achieved to a very large extent, with only minor improvements needed;
- Substantial level of effectiveness – The Immediate Outcome is achieved to a large extent, with only moderate improvements need;
- Moderate level of effectiveness – The Immediate Outcome is achieved to som extent, but major improvements are needed; and
- Low level of effectiveness – The Immediate Outcome is not achieved or achieved to a negligible extent, and fundamental improvements are needed.
The Immediate Outcomes effectiveness ratings
The FATF 40 Recommendations are listed in Annex C attached to this paper. However, it might be helpful to explain the IO used to determine effectiveness before looing at the ratings obtained by Panama in the 2018 MER.
Policy, coordination and cooperation mitigate the money laundering and financing of terrorism risks.
IO.1 Money laundering and terrorist financing risks are understood and, where appropriate, actions coordinated domestically to combat money laundering and the financing of terrorism and proliferation.
IO.2 International cooperation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets
Proceeds of crime and funds in support of terrorism are prevented from entering the financial and other sectors or are detected and reported by these sectors.
IO.3 Supervisors appropriately supervise, monitor and regulate financial institutions, designated non-financial businesses and professions (DNFBP) and virtual asset service provider (VASP) for compliance with AML/CFT requirements commensurate with their risks.
IO.4 Financial institutions, DNFBP and VASP adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions.
IO.5 Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments.
Money laundering threats are detected and disrupted, and criminals are sanctioned and deprived of illicit proceeds. Terrorist financing threats are detected and disrupted, terrorists are deprived of resources, and those who finance terrorism are sanctioned, thereby contributing to the prevention of terrorist acts.
IO.6 Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations
IO.7 Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions.
IO.8 Proceeds and instrumentalities of crime are confiscated.
IO.9 Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions.
IO.10 Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit organisation (NPO) sector.
IO.11 Persons and entities involved in the proliferation of weapons of mass destruction (WMD) are prevented from raising, moving and using funds, consistent with the relevant UN Security Council Resolution.
The 2014 MER
After the previous MER in 2014, the International Cooperation Review Group (ICRG) of FATF placed Panama in its enhanced follow-up process, and GAFILAT also placed the country under an enhanced follow-up process (which had ended by the time of the next on-site visit in 2017). The role of the ICRG is to monitor and report on “high risk” jurisdictions. Referral to the ICRG is normally based primarily on the results of the jurisdiction’s MER, and jurisdictions whose MER reveals a significant number of key deficiencies are referred to the ICRG. Jurisdictions considered to be falling short may be given a short window (usually 12 months) to demonstrate improvements, and may be required to prepare and submit an action plan and to engage in meetings with FATF representatives, as well providing high-level political commitment to remedying any identified shortcomings.
The 2018 MER
The latest MER for Panama was published in 2018, this having followed an on-site visit by a team of evaluators from GAFILAT in May 2017. According to that MER, Panama was deemed “Compliant” for 10 and “Largely Compliant” for 22 of the FATF 40 Recommendations.
However, Panama only scored “Substantially Effective” for 2 of the 11 Immediate Outcomes, and failed to score “Highly Effective” for any.
One of the main risks facing Panama in terms of income from criminal activities was said to be the receipt of funds or other financial assets resulting from tax crimes committed abroad. This risk had not been considered in the NRA and in the MER GAFILAT said it was important to point out that tax crimes are not criminalised as a predicate offence for the purposes of money laundering in Panama, which (naturally enough) significantly affects the possibilities for prevention and investigation. The National Strategy Plan of 2017 (see Section 6 below) included criminalising tax crimes as one of its most important action points, and the MER identified this step as a priority action.
Illicit drug trafficking was seen as the illicit activity committed in the Panamanian territory which was most related to money laundering in the country, with the country being seen as primarily a transit point – not a production base – for drugs heading chiefly to North America.
The MER said a priority was for Panama to pay special attention to the free zones sector to prevent measures of improper invoicing of goods or other illegal foreign trade operations. It also said that measures must be taken to control the use of cash in free zones, as well as in the real estate and construction sectors.
The MER called for greater attention to be paid to the risks of terrorism financing and proliferation/proliferation financing, and for more effort on raising the awareness of the risks.
However, as was the case with the NRA, the MER noted that tax crime not being a predicate offence for money laundering enhanced the risks in some vulnerable sectors, such as the financial sector, the corporate sector and the free zones. In addition, the MER said that the current control mechanisms of operation of the corporate service sector were not considered enough to mitigate the risks associated to the operation of Panamanian corporations and private interest foundations, especially in the offshore sector (something that I think was underlined by the revelations of the Panama Papers).
January 2019 – first follow-up report
In January 2019, GAFILAT published the First Enhanced Follow-up Report on Panama. This
reviewed Panamá’s progress in addressing the deficiencies of technical compliance identified in the MER. This report also analyses Panama’s progress in implementing new requirements relating to FATF Recommendations which have changed since the onsite visit made to Panama in 2017.
New technical compliance ratings are granted when enough progress is observed, and, in general, countries are expected to have addressed most of the technical compliance deficiencies, if not all, before the end of the third year as from the adoption of their MER.
In summary, the new report concluded that Panama was making progress in addressing the technical compliance deficiencies identified in its MER.
As already pointed out, such a follow-up report does not deal with progress aimed at improving effectiveness. A subsequent follow-up assessment (evaluation) will analyse the progress on the improvement of effectiveness which may eventually result in the new rating of the Immediate Outcomes.
Improvements noted meant that Panamá received a new, improved rating in the following Recommendations –
- 14 (Money or value transfer services);
- 19 (Higher-risk countries);
- 32 (Cash couriers);
- 33 (Statistics).
Acknowledging progress, GAFILAT considered it did not justify rerating of the following Recommendations –
- 1 (Assessing risks and applying a risk-based approach);
- 3 (Criminalising of money laundering offences);
- 16 (Wire transfers information);
- 17 (Reliance of financial institutions on third parties);
- 20 (Reporting of suspicious transaction);
- 27 (Powers of supervisors); and
- 35 (Civil and criminal sanctions for non-compliance).
Since the adoption of Panama`s MER in 2018, FATF had amended Recommendations –
- 7 (Targeted financial sanctions related to proliferation) – changes in the requirements of Recommendation 7 were covered, so the rating remains unchanged as Largely Compliant;
- 18 (Internal controls and foreign branches and subsidiaries) – the rating remained as Compliant); and
- 21 (Tipping-off and confidentiality) – changes were said to be covered sufficiently to justify maintaining a rating of Compliant.
As a result, the revised set of Recommendation results were as follows –
August 2019 – second follow-up report
On 22 August 2019, GAFILAT published a second follow-up report. As with the first follow-up report, this examined only the progress, if any, on technical compliance, and not effectiveness (which, as said, has to await a further evaluation).
The new report said that Panama had made progress in addressing its technical compliance deficiencies identified in the MER in relation to the following Recommendations:
- Recommendation 24 (Transparency and beneficial ownership of legal persons), originally rated Non-Compliant;
- Recommendations 3 (Money laundering offences), 20 (Reporting of suspicious transactions), 25 (Transparency and beneficial ownership of legal arrangements) and 30 (Responsibilities of law enforcement and investigative authorities), all of which had originally been rated Partially Compliant.
As a result, GAFILAT had re-rated for all these Recommendations, except Recommendation 25 (Transparency and beneficial ownership of legal arrangements), where it was felt that progress did not justify a new rating.
For Recommendation 3 (Money laundering offences), GAFILAT noted that tax crimes had been criminalised and made predicate crimes for money laundering, though some doubts over the proportionality and effectiveness, and other minor deficiencies, meant that the Recommendation was re-rated to Largely Compliant from Partially Compliant (and not to a full C for Compliant).
On Recommendation 20 (Reporting of suspicious transactions), progress was sufficient to mark Panama as now being Compliant.
For Recommendation 24 (Transparency and beneficial ownership of legal persons), this was re-rated from Non-Compliant to Partially Compliant, with some “moderate” deficiencies that still need to be addressed, such as those relating to the information in corporations, and that some mechanisms mentioned in FATF guidance are not specified to ensure that information referred to in the guidance is accurate and kept updated in a timely manner.
For Recommendation 30 (Responsibilities of law enforcement and investigative authorities), Panama was re-rated to Compliant, it now being possible to initiate parallel financial investigations alongside investigation of a predicate offence.
One other Recommendation remained with its original rating. Recommendation 2 (National co-operation and coordination) remains rated Largely Compliant.
With these various adjustments taken into account, the revised Technical Compliance ratings were now as follows –
FATF places on “grey list” June 2019
Notwithstanding the foregoing, in June 2019, FATF placed Panama on the list of countries with strategic deficiencies on its AML framework.
In a note on a Staff Visit to Panama, on 23 July 2019, the IMF said that despite recent progress on financial integrity, including the recognition of tax evasion as a predicate offense to money laundering, the legal framework needed to be further strengthened and its effectiveness to be demonstrated. It further said that the authorities were fully committed to implementing the recommendations of the action plan agreed with the FATF and aim to be removed from the list as soon as it is possible. It commented that sustained efforts to enhance the AML framework and tax transparency will be crucial to strengthen Panama’s position as a regional financial centre.
Panama had made a high-level political commitment in June 2019 to work with the FATF and GAFILAT to strengthen the effectiveness of its AML/CFT regime – with some of the issues raised by FATF being addressed in the second follow-up report above.
Following a Plenary in October 2019, FATF announced that Panama remained on its “grey list”, saying that whilst the country had taken steps since June 2019 to improve its co-operation in the fight against money laundering, it had to “continue working on the implementation of its action plan to address its strategic deficiencies”.
Following the Plenary, FATF issued short statement on developments in Panama. It said that since June 2019, when Panama made its high-level political commitment to work with the FATF and GAFILAT to strengthen the effectiveness of its AML/CFT regime, it had taken initial steps towards improving its AML/CFT regime. This included drafting sectoral risk assessments for the corporate and DNFBP sectors and free trade zones.
However, FATF said that Panama should continue to work on implementing its action plan to address its strategic deficiencies, including by strengthening its understanding of the national and sectoral money laundering and terrorism financing risk and using the findings to bolster its national policies to mitigate identified risks. It was also said that it should proactively take action to identify unlicensed money remitters, applying a risk-based approach to supervision of the DNFBP sector and ensuring effective, proportionate, and dissuasive sanctions again AML/CFT violations.
Another thing mentioned by FATF was the need to ensure adequate verification and update of beneficial ownership information by obliged entities, establishing an effective mechanisms to monitor the activities of offshore entities, assessing the existing risks of misuse of legal persons and arrangements to define and implement specific measures to prevent the misuse of nominee shareholders and directors, and ensuring timely access to adequate and accurate beneficial ownership information.
Panama was also told to ensure effective use of FIU products for money laundering investigations, to demonstrate its ability to investigate and prosecute money laundering involving foreign tax crimes and to provide constructive and timely international co-operation with such offence, and continuing to focus on investigations in relation to high-risk areas identified in the NRA and MER.
In June 2020, FATF confirmed that Panama remained on its “grey list” of Jurisdictions under Increased Monitoring, adopted in February 2020.
30 August 2020
 Under the FATF framework, jurisdictions having deficiencies are placed in a follow-up process, with regular reporting back to FATF or its FSRB and reassessments from time to time. In cases of serious deficiencies, an “enhanced” follow-up process is instigated, with shortened timescales and increased pressure on the jurisdiction concerned. This happened to Panama following the 2014 MER.
 http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/MER-GAFILAT-Panama-Jan-2018.pdf For details of previous FATF assessments and reports, see http://www.fatf-gafi.org/countries/#Panama
 This was nevertheless an improvement over the previous MER of 2014, in which it was reported that Panama fully complied with only 1 Recommendation; mostly complied with 3 Recommendations; partially complied with 26 Recommendations; and did not comply with 19 Recommendations. It did not receive a compliant or largely compliant rating in any of the 16 Principal and Fundamental Recommendations: https://www.imf.org/external/pubs/ft/scr/2014/cr1454.pdf
 This conclusion being underlined by the Odebrecht affair (see above)
 However, in 2016, of 6.2 million TEU containers entering/leaving the country, only 56 were seized for containing counterfeit goods (and this was down from 233 the previous year), with 61% of the goods said to be in transit (i.e. not destined for the Panamanian domestic market). INTA, the International Trademark Association, identified the CFZ as “a sensitive hub of counterfeit goods”: https://www.inta.org/INTABulletin/Pages/Anticounterfeiting_Update_7214.aspx
 Involved in trade-based money laundering and other trade-based financial crime: https://www.gov.im/media/1348726/notice-1000-man-trade-based-money-laundering-july-18.pdf
 Which might include proliferation, sanctions-busting etc. In 2018, Panama adopted new export controls for dual-use goods, and also adopted the EU list of dual-use items (see below).
 See MER paragraph TC31.
 See Annex C for details of what FATF Recommendations and Immediate Outcomes cover.
 There should be designated law enforcement authorities that have responsibility for ensuring that money laundering, predicate offences and terrorist financing are properly investigated through the conduct of a financial investigation. Countries should also designate one or more competent authorities to identify, trace and initiate freezing and seizing of property that is, or may become, subject to confiscation.
 Such as trusts, foundations etc.
 This was, of course, prior to the introduction of the new beneficial ownership legislation in 2020 (see Section 8A below).
 This was that it was not expressly stated that the information should be available in the country, nor is the information that resident agents must keep on all shareholders or members of a company clearly established.
 Once again, it might be noted that this was prior to the introduction of the new beneficial ownership provisions in 2020 (see Section 8A below).
Panama Covid-19 update – after enjoying the first Saturday without lockdown (at least for men) for weeks, a monsoon arrived in the afternoon…but new cases continue to seem to reduce, at 713, but 17 new fatalities (so edging closer to 2,000 at 1,983 to date). Of the 24,235 active cases, 155 are in ICU, 1,314 in other wards and 414 confined to requisitioned hotel rooms.
29 August 2020
ALBANIA: 1.6 BILLION ILLICIT FINANCIAL FLOWS
On 28 August, the Tirana times reported that a significant portion of Illicit Financial Flows in Albania run on the illicit proceeds of corruption and drug trafficking, according to Global Initiative’s latest report. The report claims that up to 30% of the bid value of procurement contracts is paid in bribes. A second source of IFF in Albania is drug trafficking. According to the report, the cannabis industry in the country has generated illicit profits for a large part of society, ranging from villagers who cultivate the crops to organized criminal groups who smuggle it abroad and sell it across the EU.
ALLEGATIONS THAT CARTEL BOSS USED DALLAS WESTERN WEAR STORE TO LAUNDER $10 MILLION
On 29 August, Borderland Beats reported that Jose Valdovinos Jimenez (aka “La Roca”), along with 27 other co-defendants, are charged with smuggling meth and heroin in from Mexico and laundering the money through the strip mall western wear store, and sending the money back to the Jalisco New Generation Cartel.
THE BRAZILIAN GENERAL DATA PROTECTION LAW
An article from Dentons on 28 August says that the Law (aka LGPD) will come into operation shortly, but administrative sanctions for non-compliance will only come into force in August 2021 which, will allow for a timely adaptation to those who are bound by the LGPD and the effective creation of the Brazilian Data Protection Authority (ANPD), whom will be responsible for overseeing, enforcing the LGPD and applying its sanctions.
US CUSTOMS OPENS MASS SEARCHES OF DATA ON CONFISCATED TRAVELLER SMARTPHONES AND COMPUTERS
An article from Womble Bond Dickinson on 28 August expressed concerns about reports that the US CBP is now building a searchable database of all of the data taken off of device seized from travellers over the years.
EU PLANS FOR A DAC7 DIRECTIVE ON ADMINISTRATIVE COOPERATION, THE EXCHANGE OF INFORMATION ON ONLINE PLATFORMS’ SALES, AND NEW COMMUNICATION ON TAX GOOD GOVERNANCE
On 24 July, Lowtax reported that the Commission has announced plans for a new Directive on Administrative Cooperation, on the exchange of information on online platforms’ sales, and a new Communication on Tax Good Governance. DAC7 will set out a framework for Member States to automatically exchange the information they receive on the taxable activities of business users of online platforms.
Meanwhile, a reminder from Deloitte on the DAC6: EU Mandatory Disclosure Regime
BRINGING CLAIMS AGAINST CAYMAN ISLANDS ENTITIES SUBJECT TO INSOLVENCY PROCESSES
On 27 August, Ogier published an article on this topic and the provision in Cayman islands law which imposes a moratorium on commencing or proceeding with any suit, action or other proceedings against the company once Liquidators are appointed by the Court (including on a provisional basis).
US CUSTOMS SEIZE 3,000 COUNTERFEIT DRILLS
On 27 August, US Customs & Border Protection reported that officers had seized 3,000 single-speed electric drills from a rail container in Minnesota.
FRANCE: COMPLETION OF REINFORCED “ANTI- GIFT” RESTRICTIONS
An article from Clifford Chance reported that a new Decree reinforced the French “anti-gift” restrictions which should be implemented from 1 October onwards, with several significant subjects have been clarified. It concentrates on the healthcare & life sciences sector and operators must soon be ready to comply with them.
THE TRANSFER OF OWNERSHIP OF GOODS – UPDATING THE UK RULES
On 27 August, the Faculty of Law at the University of Oxford published a post saying that the Law Commission recently launched a consultation on a draft Bill to reform the rules that apply to the transfer of ownership of goods. In the post it explains the proposed reforms and the issues raised in the consultation. The current transfer of ownership rules are contained in the Sale of Goods Act 1979, and have remained largely unamended since 1893 and distinguish between “specific goods” and “unascertained goods”. Specific goods are goods which are identified and agreed upon at the time the contract of sale is made. Unascertained goods are goods which are not identified and agreed upon when the contract is made.
US SUPPORT TO SECURITY SECTOR REFORM IN FRAGILE STATES
On 26 August, a brief from CSIS says that the Global Fragility Act calls upon the US government to develop a strategy for addressing fragility and stabilising violent countries. A state of fragility, or a cycle of violence, often points to deficits of legitimacy or capacity among formal security and justice institutions. It says that policymakers should understand the correspondence between security actors and the nature of fragility and should be thoughtful and deliberate in deciding how best to support reform. Moreover, they should closely examine the compatibility of their reform agenda with other security objectives, such as counterterrorism and military interoperability. It says that the report card on US policy toward security sector reform in other states is mixed, in large part because US policy and practice have been uneven. Examples of successful interventions led or supported by the US that led to meaningful reforms do exist, such as the oft-cited case of defence sector reform in Liberia.
HONG KONG: MONETARY AUTHORITY RELEASES CONSULTATION PAPER ON ENHANCING THE REGULATION AND SUPERVISION OF TRUST BUSINESS
On 29 August, Baker McKenzie reported on 29 August that the Hong Kong Monetary Authority has released a Consultation Paper on Enhancing the Regulation and Supervision of Trust Business. It plans to introduce a Code of Practice for Trust Business to be incorporated into a new Supervisory Policy Manual applicable to all authorized institutions and local subsidiaries of locally incorporated AIs conducting trust business in Hong Kong.
UK: THE LEGAL TEST FOR DISHONESTY
On 25 August, PNLD published a briefing saying that an important requirement to be proved in many criminal offences is whether a person has acted ‘dishonestly’ or not; this applies to fraud offences under the Fraud Act, offences under the Theft Act, and many other offences which involve ‘dishonesty’. It provides an overview of the case law in relation to dishonesty, in particular the recent case of R v Barton and another 2020, which confirmed the overruling of the dishonesty test in R v Ghosh of 1982.
IS SEOUL PREPARED TO JOIN A FIVE EYES PLUS INTELLIGENCE FRAMEWORK?
On 24 August, 38 North reported that recently, there have been increased talks about expanding the Five Eyes (FVEY) intelligence-sharing alliance between the US, UK, Australia, Canada and New Zealand, to include Japan, Germany, France and South Korea. However, that may require South Korea to end its bilateral intelligence-sharing arrangement with Japan, which is set to expire on 24 August.
HOW EUROPE CAN DEFEND ITSELF AGAINST US ECONOMIC SANCTIONS
On 25 August, an article from the European Council on Foreign Relations in the light oif threats relating to Nordstream 2 says that Germany and Europe must defend themselves against US sanctions – saying that they can strengthen their armoury in 2 ways.
2 SOUTH KOREANS KIDNAPPED FROM FISHING VESSEL OFF GHANA
On 29 August, Yonhap News reported that 2 South Korean nationals have been kidnapped by unidentified gunmen in waters off Ghana after a Ghanaian-flagged fishing vessel was attacked in waters 200 km south-east of the coastal city of Tema. A total of 50 crewmen, including 2 South Koreans, were aboard the vessel.
IRANIAN VESSEL LOADS WITH VENEZUELAN ALUMINA AMID CLOSER TIES
On 29 August, an article on Hellenic Shipping News reported that an Iranian-flagged vessel loaded a cargo of alumina in Venezuela this month after delivering supplies for an Iranian supermarket, sources familiar with the shipment said, in the latest sign of closer ties between the countries.
EUROPEAN BANKING FEDERATION RESPONSE TO EU AML/CFT CONSULTATION
On 26 August, EBF published its response to the European Commission consultation on an action plan for a comprehensive EU policy on preventing money laundering and terrorist financing. It says that the EBF has conducted a gap analysis to identify in the light of its Blueprint those topics where the EBF has further input to provide. The EBF’s detailed answers to the questions of the consultation paper on the 6-pillar Action Plan.
The EBF Blueprint is at –
ANGOLA TO JOIN OIL AND EXTRACTIVES TRANSPARENCY GROUP
On 29 August, Reuters reported that Angola plans to join the Extractive Industries Transparency Initiative (EITI), an international effort to fight corruption in revenues from oil, gas and mineral extraction. Formed in 2003, it has more than 50 implementing countries.
SENTENCING AND CONFISCATION IN PROSECUTIONS FOR BREACHES OF PLANNING ENFORCEMENT NOTICES
A BRIEF FROM 5 St Andrews hill on 24 August was concerned with a case involving an appeal against a fine and a confiscation order following criminal proceedings for breach of an enforcement notice served under the Town and Country Planning Act 1990. The Court of Appeal dismissed the appeal against the conviction and confiscation order. It also rejected the argument that the benefit figure ought to have been calculated by reference to the net profit as opposed to the gross rental income.
WHISTLEBLOWER KIDNAPPED IN UKRAINE AFTER ACCUSING CRYPTO FIRM OF EXIT SCAM
On 27 August, Coindesk reported that ex-Bitsonar employee Yaroslav Shtadchenko. Shtadchenko’s had gone missing as he was coming home from work. It says that the harrowing incident highlights the proliferation of risky investment schemes and dubious operators in the crypto industry, but also blockchain technology’s potential to help track missing funds. It says that, before going missing, he called Bistonar’s CEO, Marius Ziubka, and told him he was going to file complaints about Bitsonar to law enforcement in different countries, including the FBI.
On 29 August, VRT News in Belgium reported that Patrick De Koster, manager of footballer Kevin De Bruyne was questioned for several following what is believed to be a complaint by the Manchester City star and Belgian international.
On 28 August, ICIJ reported that Carlos Manuel de São Vicente, the former CEO of a company with a lucrative government monopoly to insure Angola’s oil sector, has had his bank accounts frozen on suspicions of money laundering. It says that Swiss criminal proceedings are highly secretive and details of the investigation and order have only now been made public.
On 29 August, the Sydney Morning Herald reported that Australian racing officials are investigating Phoenix Thoroughbreds, a leading thoroughbred operation, after its owner was accused in a US court of being involved in an international money laundering scheme linked to a fake cryptocurrency. The outfit was banned from racing in France earlier this month after a prosecution witness alleged in a New York court that its Dubai-based owner Amer Abdulaziz Salman had stolen $161 million in the OneCoin cryptocurrency scheme.
Panama Covid-10 update – international flights may restart on 12 September, but a tourism trade website warns that this is dependent on ongoing good (or at least no bad) news – the infection rate staying low, and hospital bed availability staying below certain percentage occupancy.
Meanwhile, fewer new cases again – 642, with 18 new fatalities (now at 1,966 to date); 24,056 active cases including 154 in ICU, 1,346 in other wards and 425 in the hotels.
28 August 2020
HSBC ‘AIDING CHINA’S HONG KONG CRACKDOWN’
On 28 August, KYC 360 reported an article from The Times saying that HSBC is facing mounting pressure over its stance on Hong Kong after the US claimed that the bank was helping China to crack down on pro-democracy supporters.
UK: COURT DOES HAVE POWER TO RELEASE INFORMATION ON FROZEN SYRIAN FUNDS FOR PURPOSES OF US CIVIL JUDGMENT
On 28 August, the EU Sanctions blog reported that the High Court in London has said that information on frozen Syrian assets could be released to reinsurers of an Egyptian aircraft that was hijacked in a terrorist attack in 1985. It was held that the Government does have power to release the information because it would “facilitate compliance” with the EU sanctions regime within the meaning of the regulation, and remitted the matter back to HM Treasury for reconsideration.
PRESSURE MOUNTS TO DISBAND BRAZIL’S CRACK ANTI-CORRUPTION SQUAD
On 26 August, Reuters reported that political pressure is growing in Brazil to disband a high-profile team of anti-corruption prosecutors that has put dozens of former executives and politicians behind bars, despite its strong popular support and hundreds of cases still pending. A decision will be made on 10 September on whether to renew for another year the mandate of the team, which has repeatedly made headlines over the last 6 years with its sprawling ‘Car Wash’ corruption probe.
FINANCIAL REGULATORS CLARIFY USE OF CEASE AND DESIST ORDERS IN BSA/AML ENFORCEMENT
On 13 August, the ABA Banking Journal reported that, in a joint statement addressing how US regulators will address non-compliance with the AML requirements, they describe the circumstances under which an agency would issue a mandatory “cease and desist” order or, at its discretion, issue formal or informal enforcement actions or other supervisory actions to address BSA/AML deficiencies.
SINGAPORE-BASED NORDIC MARITIME AND ITS CHAIRMAN FINED BY US OVER THE COMPANY’S USE OF US-ORIGIN SUBSEA SURVEY EQUIPMENT IN IRANIAN TERRITORIAL WATERS
On 27 August, Splash 247 reported that the US Bureau of Industry and Security has imposed a $31.43 million fine on Nordic Maritime and its chairman, Morten Innhaug, over the company’s use of US-origin subsea survey equipment in Iranian territorial waters. BIS said Nordic used the controlled equipment to perform a 3D offshore seismic survey in the Forouz B natural gas field in Iranian territorial waters.
THE ROTENBERGS AND BRITISH AUCTION HOUSES
In Issue 1529, British satirical and humour magazine carried an article about the Rotenberg brothers and the fortunes that brothers Arkady and Boris squirrelled through Sotheby’s, Christie’s and Bonhams in New York and London, both before and after they were sanctioned following Russia’s invasion of Crimea in March 2014.
FORMER NIGERIAN STATE GOVERNOR IBORI AND MISTRESS APPEAR IN UK COURT VIA VIDEO LINK FOR CONFISCATION HEARING
On 28 August, the Premium Times reported that Ibori, who admitted to stealing more than $250 million from the state when he was governor, with his mistress and conspirator, Udoamaka Onuigbo, appeared in a UK court via video link as the confiscation hearing of assets he stole began. He was sentenced to 13 years in jail after he pleaded guilty to money laundering in 2012. He has since served his term and has returned to Nigeria where he remains among the power brokers in his state.
SEYCHELLES HAS LAUNCHED ITS 2020-23 AML/CFT STRATEGY
On 28 August, the Seychelles News Agency reported that, according to the Ministry of Finance, the National Anti-Money Laundering and Countering the Financing of Terrorism Strategy should be fully implemented by the end of 2022.
BRAZILIAN STATE GOVERNOR SUSPENDED DURING CORRUPTION PROBE
On 28 August, AP reported that a Brazilian court has temporarily removed Wilson Witzel, a former federal judge, Rio de Janeiro’s governor from office for 180 days while being investigated about corruption charges.
SHIPPING COMPANIES TOLD TO RESTRUCTURE OWNERSHIP TO VOID US-HONG KONG DOUBLE TAX
On 28 August, Lloyds List reported that shipping companies that have large exposures in both Hong Kong and the US are being advised to consider alternative business structures or operating models to prevent them being double taxed after the previous reciprocal agreement was scrapped.
US OFFERING $10 MILLION FOR TIPS THAT WOULD HELP AUTHORITIES PREVENT POSSIBLE CYBER INTERFERENCE IN THE NOVEMBER ELECTIONS
On 28 August, a Commentary from RUSI said that the US State Department is trying to deter such interference by offering rewards to people who turn in would-be interferers. Bounties alone will, however, not keep elections clean, the author of the Commentary argues.
FORMER CHIEF SECURITY OFFICER OF UBER ALLEGED TO HAVE HELPED COVER UP A CRIME USING BITCOIN
On 28 August, Calvin Ayre reported that a new criminal complaint in the US against the former Chief Security Officer of Uber, Joseph Sullivan, who was CSO for Uber until November 2017, alleges he helped cover up a crime, using Bitcoin to do so.
BREXIT: LOGISTICS UK SAYS FREIGHT SHIPPERS WANT THE PROPOSED CHANGES BROUGHT FORWARD AS SOON AS POSSIBLE TO MINIMISE FRICTION AT THE BORDER
On 28 August, Lloyds Loading List reported that freight shippers want proposed changes to UK border arrangements brought forward as soon as possible to minimise friction at the border, according to trade body Logistics UK. The organisation says that the quicker the changes are implemented, the sooner the UK can benefit from a joined-up approach – and it believes this must be before 2025.
UN GUIDE TO ASSIST POLICYMAKERS AND DECISION MAKERS IN THEIR EFFORTS TO PROMOTE THE INDEPENDENCE OF ANTI-CORRUPTION AGENCIES
On 28 August, the UN Office on Drugs & Crime announced the launch of the Colombo Commentary on the Jakarta Statement on Principles for Anti-Corruption Agencies saying that the UN Convention against Corruption calls for the establishment of independent anti-corruption bodies, yet a recent analysis undertaken by UNODC reveals that half of the States parties reviewed under the second cycle of the Convention’s implementation review mechanism received a recommendation to strengthen the independence of their anti-corruption body or bodies. The new publications aim to inspire and assist States parties and anti-corruption agencies in ensuring that national anti-corruption frameworks are developed and strengthened in line with the requirements of the Convention.
SALE OF ALMOST HALF OF SWISS MARITIME FLEET
On 28 August, Hellenic Shipping News reported that law firm HFW has acted on the sale of almost half of the entire Swiss maritime fleet. The firm acted in the sales of 40% of all Swiss-flagged commercial maritime vessels. A Swiss merchant navy was founded in 1941, with the purpose of supplying Switzerland with basic goods during the WW2.
CRYPTOCURRENCY AND THE DISMANTLING OF TERRORISM FINANCING CAMPAIGNS
On 28 August, an article in Lawfare said that the US DoJ has announced that U.S. counterterrorism authorities had dismantled a series of sophisticated online fundraising campaigns run by 3 separate US-designated terrorist organisations. The takedown of these networks underscores their vulnerabilities and also provides valuable lessons for future attempts at countering terrorism financing online.
AUSTRALIA: HOW TO UNDERTAKE AML/CFT RISK ASSESSMENT
On 28 August, AUSTRAC provided guidance on identifying and assessing the level of money laundering and terrorism financing risk to a business or organisation.
WHY AND HOW CYBER CRIMINALS TARGET SUPERYACHTS AND WHAT YOU SHOULD DO ABOUT IT
An article in the August/September edition of Compass magazine, says that the yachting industry is actively being targeted by multiple highly sophisticated criminal networks across the globe. Most superyachts and their owners will be the subject of “target packs” compiled on them by multiple international criminal groups. These are not tin-pot criminal opportunists, it warns, these are well financed, highly organised criminal businesses with business plans, budgets and resources available. It asks the questions of how criminals target superyachts and how they do so.
UK: INVESTMENT FRAUD
Action Fraud in the UK has produced information on “boiler room fraud”, where you get a cold call from someone pretending to offer you the opportunity to invest in a variety of schemes or products that are either worthless or don’t even exist. It says that it is also known as share sale fraud, hedge fund fraud, land banking fraud or bond fraud. The majority of investment frauds are run out of offices known as boiler rooms.
SHIPPING: UKRAINE FIGHTS FLAG-HOPPING CRIMEA CALLERS
On 28 August, Lloyds List reported that Lloyd’s List Intelligence data shows 17 ships de-flagged more than once for illegal Crimea visits, while one cargo ship has been de-flagged 4 times since 2017. Ukraine says the cat-and-mouse game around illegal shipping in Crimea is far from over, despite its efforts.
HERBALIFE NUTRITION TO PAY $123 MILLION TO RESOLVE FCPA VIOLATIONS
On 28 August, TRACE published a summary of the case involving Herbalife and saying that under the terms of an SEC cease-and-desist order, Herbalife will pay a total of approximately $123 million, including disgorgement of $58,669,993 and prejudgment interest of $8,643,504.50. The deferred prosecution agreement with the DoJ includes imposition of a criminal fine of $55,743,093. The penalties reflected the company’s prompt remediation and continuing cooperation.
EU: RETROACTIVE INTERCOMPANY TRANSFER PRICING ADJUSTMENTS AFFECTING CUSTOMS VALUATION OF IMPORTED GOODS
On 28 August, KPMG published an alert warning that many companies are not aware that retroactive inter-company transfer pricing adjustments could potentially affect the customs valuation of goods imported into the EU. It says that many companies are experiencing problems due to Covid-19 and, as a consequence, are considering making retrospective (retroactive) inter-company transfer pricing adjustments or additional payments (insofar as this has not already taken place as part of a company’s regular transfer pricing policy).
RUSSIAN NATIONAL ARRESTED FOR CONSPIRACY TO INTRODUCE MALWARE INTO A NEVADA COMPANY’S COMPUTER NETWORK
On 26 August, Homeland Security Today reported that the Russian was allegedly involved in a conspiracy to recruit an employee of a company to introduce malicious software into the company’s computer network, extract data from the network, and extort ransom money from the company.
US ORGANISATIONS DOING BUSINESS IN CHINA WARNED OF MALWARE IN TAX SOFTWARE
An article from Robinson & Cole on 28 August says that the FBI and the Cybersecurity and Infrastructure Security Agency (CISA) have issued a joint Flash Alert to US-based businesses doing business in China about a remote targeting campaign whereby the tax software that Chinese domestic banks require foreign companies to install is loaded with malware. It also said that researchers warned in June 2020 that they had discovered a backdoor in the required tax software used by the Chinese domestic banks.
US: $28 MILLION PONZI SCHEME TARGETED CHURCHGOERS
On 28 August, a release on Mondo Visione reported that the Commodity Futures Trading Commission (CTFC) has announced the filing of a civil enforcement action charging Dennis Jali, a South African citizen who previously resided in Maryland, with orchestrating a $28 million Ponzi scheme. The complaint alleges that the defendants fraudulently solicited participants to trade in foreign currency (forex) and digital assets such as bitcoin through pooled trading accounts controlled by Jali.
SEC CHARGES 2 MARYLAND COMPANIES AND THEIR PRINCIPALS OVER A SCHEME THAT ALLEGEDLY DEFRAUDED APPROXIMATELY 1,200 INVESTORS, MANY OF THEM AFRICAN IMMIGRANTS, OF MORE THAN $27 MILLION
A release on Mondo Visione on 28 August reported that Dennis Jali, John Frimpong, and Arley Johnson, directly and through their companies 1st Million LLC and The Smart Partners LLC, allegedly falsely told investors that their funds would be used by a team of skilled and licensed traders for foreign exchange and cryptocurrency trading, promising risk-free returns of between 6% and 42%.
BVI COURT HAS NO JURISDICTION TO GRANT FREESTANDING INJUNCTIONS IN AID OF FOREIGN PROCEEDINGS – FOR HOW LONG?
An article in FIRE Magazine for August 2020 reflected on the position following a decision of the East Caribbean Supreme Court in May, in which the Court conceded that its decision may appear undesirable in the current climate, it commented that legislative intervention was required to resolve the issue.
SINGAPORE: HOW CAN VICTIMS RECOVER ASSETS SEIZED BY POLICE?
Another article in the August 2020 edition of FIRE Magazine says that while there are civil remedies that victims of fraud can avail themselves of to recover the proceeds of fraud, there are occasions where Singapore’s law enforcement authorities will also commence criminal investigations and prosecution against the fraudsters. In criminal cases, when police use their powers to seize the property or proceeds of the fraud and hold on to the same until the conclusion of the criminal inquiry or proceedings against the fraudster, what can claimants do to effectively recover assets seized by the police?
LIMITS TO THE COLLECTION OF EVIDENCE IN SWITZERLAND FOR PROCEEDINGS AND INVESTIGATIONS ABROAD
Another article in the August 2020 edition of FIRE Magazine says that Switzerland’s legislation and jurisprudence relating to the handing out abroad of information available in Switzerland for the use in foreign proceedings is unusual and often unknown. It goes on to say that any direct transfer of documents and information abroad, if these documents qualify as evidence collected for a foreign country, and could even result in criminal prosecution. It looks at the blocking statute and what one can do.
On 28 August, The Africa Report said that the World Bank has suspended its Doing Business report, which ranks countries based on the costs of doing business, following a number of irregularities have been reported regarding changes to the data in the Doing Business 2018 and Doing Business 2020 reports. It did not name the authorities of the most affected countries.