Panama Covid-19 update – as the end of the gender-based restrictions loom (on 12 September), things beginning to look a bit better, with “only” 635 new cases and 9 new fatalities (2,116 to date). Of the 25,507 active cases, 134 are in ICU, 1,142 other wards and 376 in hotel rooms, with 23,855 at home and 71,419 “recovered”.
9 September 2020
TREASURY AND DELAWARE AGREEMENT TO BOOST SANCTIONS ENFORCEMENT
On 9 September, the Wall Street Journal reported that OFAC and the Delaware Department of Justice have reached an agreement, an MoU to enforce US sanctions, and is designed to encourage information-sharing and coordination on investigations and to promote compliance with US trade and economic sanctions laws. The newspaper says that Delaware’s corporate formation requirements have traditionally allowed for a degree of anonymity, which can limit the ability of authorities to quickly collect beneficial ownership information.
JPMORGAN PROBING EMPLOYEES’ ROLE IN MISUSE OF RELIEF FUNDS
On 9 September, KYC 360 reported that JP Morgan Chase & Co in the US is said to be probing the role of some employees who may have enabled misuse of Covid-relief funds in what it calls potentially illegal activities. PMorgan issued about 280,000 loans totalling more than $29 billion.
EU PLANS TO CLOSE LEGISLATIVE AND TECHNICAL LOOPHOLES THAT ALLOW MONEY LAUNDERING TO REMAIN RAMPANT IN MANY MEMBER STATES
On 9 September, OCCRP reported the remarks of the head of the European Commission’s Financial Crime Unit, with the aim of the new approach being to remove any weak links in the EU’s rules and have a central, independent EU element.
ISRAEL: 30 ARRESTED IN MASSIVE TAX GRAFT
On 7 September, the Times of Israel reported that the suspects allegedly filed false paperwork declaring takeover of hundreds of companies, then issued fake invoices, laundered money in their names; some also sold diluted gasoline. The scam involved the fraudulent takeover of hundreds of companies in the fuel sector that were then used to issue fake financial paperwork to “outwit” the country’s registrar of companies.
UK: DISTRESSED COMPANIES, DIRECTORS’ DUTIES AND CONFLICTS OF INTEREST
On 7 September, Taylor Wessing published an article about a recent court case in the UK which emphasises that, as a fiduciary of a company, a director must not profit from his position of trust, even if that profit could not have been made by the company concerned. This stringent approach is even more appropriate when the company is nearly insolvent or is insolvent, because such companies have a greater need for protection.
An article from Irish law firm Mason Hayes & Curran LLP on 4 September is concerned with “sandbagging” – which refers to a scenario in which the buyer has knowledge of a given potential liability, but has the ability, in spite of that knowledge, to bring a claim against the seller for breach of that warranty following completion. It refers to the position under English law and in the US, and looks at the position in Ireland in the light of Covid-19.
NEW AND AMENDED AML/CFT REGULATIONS FOR LUXEMBOURG’S INSURANCE, FINANCIAL AND ASSET MANAGEMENT SECTORS
On 27 August, an article from CMS Law about 2 important texts from an AML/CFT perspective and says that both texts, which either amend or replace previous provisions, have been adopted in order to take into account the current legislative framework on the fight against money laundering and terrorist financing.
PODCAST: UIGHUR FORCED LABOR IN CHINESE FACTORIES
In the latest TRACE podcast, Penelope Kyritsis, Assistant Director of Research at the Worker Rights Consortium, discusses the detention of China’s Uighur Moslem minority in internment camps. Uighurs have been compelled to work in these camps, primarily in Xinjiang – but they are now also separated from their families and relocated to factories across China, making it difficult for companies to undertake meaningful due diligence on forced labour in their Chinese supply chains.
US CUSTOMS SEIZE $27 MILLION IN CASH ON BOAT IN PUERTO RICO
On 3 September, a news release from US Immigration & Customs Enforcement announced that special agents, working jointly with Caribbean Corridor Strike Force (CCSF) officers, had seized approximately $27 million in cash in San Juan. It was found during an outbound cargo inspection on board a vessel and contained in house removal boxes, with a total of 34 cargo boxes containing additional undeclared currency.
PRIVATE PROSECUTIONS: A BLURRED LINE BETWEEN RECOVERY OF DAMAGES AND PUBLIC JUSTICE?
In the latest edition of Fifty One magazine from BCL Solicitors in the UK an article discusses the safeguards surrounding the use of private prosecutions and their role in obtaining damages. This came as the House of Commons Justice Committee heard evidence in connection with its inquiry into whether there are enough safeguards in place to prevent miscarriages of justice in private prosecutions, and the use of private prosecutions by the Post Office during the scandal involving charges of fraud against sub-postmasters and counter staff, which appears to be unwarranted. While civil proceedings are probably the proper vehicle for obtaining compensation, the article says that a prosecution commenced with financial recovery as its primary motivation may be permissible so long as the prosecutor can also argue, for example, that his motivation is allied with the public interest in seeing criminals brought to justice and deprived of the proceeds of their offending – the article says that this is not a particularly difficult hurdle.
DOUBLE EXTORTION – AN EMERGING TREND IN RANSOMWARE ATTACKS
In August, BCL Solicitors published an article saying that one of the most pernicious type of cyber attack is the double extortion ransomware attack which emerged from the US in 2019. It explains that ‘double extortion’ combines the traditional variant with a data breach, where the cybercriminals threaten to leak the stolen data unless their demands are met. To illustrate the potential impact of such an attack, the article mentions Travelex, the currency exchange service, which went into administration with the loss of 1,300 UK jobs.
CYPRUS: LICENCES OF 2 LAW FIRMS REVOKED OVER AML FAILURES
On 9 September, the Cyprus Mail reported that the bar association has revoked the licences of 2 law firms who had fallen foul of AML regulations while 5 other cases relating to the citizenship by investment (CBI) programme were pending and would soon be tabled before its board.
DIRTY MONEY FLOWS THROUGH THE US, BUT IF IT CHOSE TO, IT COULD SWITCH IT OFF
An article in American Interest on fighting kleptocracy looks at the situation involving anonymous shell companies in the US, starting with a look at the case of Viktor Bout. It highlights the weakness of the US systems at home with the aggressive enforcement of tax (and other) US laws abroad, and how although the OECD “Common Reporting Standard” (CRS) system launched in 2013 was inspired by the US, the US did not sign up to implement it at home. The article says that a lot of the problem has its roots in a key component of the US governmental system: federalism. In the US there is no solely federal incorporation system, and each state sets its own standard for what it takes to make a corporation. It says that even beneficial ownership requirements would not be a panacea, but that the solution is simple, in theory: these professionals should be required to submit SAR when they come across behaviour that displays warning signs for money laundering – the same requirement applied to banks by the USA PATRIOT Act in 2001. In addition, regulators should also impose stiff penalties on professionals who fail to conduct adequate due diligence, allowing their services to be used to launder money.
UK RENEWS TERRORIST SANCTIONS LIST FOR 2 TERRORIST ORGANISATIONS
On 9 September, a Notice from HM Treasury advised that the sanctions designations for Ejercito de Liberacion Nacional (ELN) of Colombia and Sendero Luminoso (SL) (aka “Shining Path”) of Peru had been renewed on 8 September.
NEW UK SANCTIONS REGULATIONS
On 9 September, the UK published 3 sets of regulations concerned with sanctions –
Afghanistan (Sanctions) (EU Exit) Regulations 2020 – to replace EU sanctions provisions after the end of the Brexit transition period;
Sanctions (EU Exit) (Miscellaneous Amendments) (No.3) Regulations 2020 – make corrections and amendments to a number of sanctions regulations which have been made under section 1 of the Sanctions and Anti-Money Laundering Act 2018. The main amendments are to introduce a new exception into these regimes to provide that a prohibition or requirement is not contravened if conduct is authorised by a licence or other authorisation issued under the law as it applies in a British Overseas Territory or Crown Dependency;
Sanctions (EU Exit) (Miscellaneous Amendments) (No.4) Regulations 2020 – ditto.
TYCOON WHO CRITICISED CHINA’S ‘EMPEROR’ AND ‘CLOWN’ FACES CORRUPTION TRIAL
On 9 September, the South China Morning Post reported that Ren Zhiqiang, a prominent real estate tycoon and a vocal critic of the Communist Party leadership, will stand trial for alleged corruption. The charges include graft, embezzlement, bribery and abuse of power as an employee of a state-owned enterprise.
MALABU SCANDAL: NIGERIAN GOVERNMENT DEMANDS $1.1 BILLION FOR DAMAGES ADVANCE FROM ENI, SHELL IN GRAFT CASE
On 9 September, Sahara Reporters reported that Nigeria has asked a court in Milan, Italy, to order Eni and Royal Dutch Shell to pay just over $1 billion as an immediate advance payment for damages in one of the oil industry’s biggest-ever corruption scandals. This is said to be the first time a foreign government had asked for damages in an Italian court.
UK INTERNAL MARKET BILL INTRODUCED
On 9 September, the Cabinet Office and others issued a joint news release advising that this Bill has been published. From the end of the Brexit transition period on 1 January, this Bill is intended to guarantee companies can trade unhindered in every part of the UK as they have done for centuries, ensuring the continued prosperity of people and business across four parts of the UK, while maintaining our world-leading high standards for consumers, workers, food, animal welfare and the environment. This is the Bill that has sparked controversy in that it apparently violates international law and the Northern Ireland agreements.
UK AMENDS GUINEA-BISSAU SANCTIONS LISTING FOR COLONEL TOMAS DJASSI
On 9 September, a Notice from HM Treasury advised of a correction to the expiry date of his passport.
UK PREPARES NETWORK OF LORRY PARKS IN 29 PARTS OF UK FOR POTENTIAL BREXIT FREIGHT CHAOS
On 9 September, Lloyds Loading List reported that the UK Government has enacted emergency powers to build lorry parks in up to 29 parts of the UK in order to deal with the additional checks required after Brexit. It will be able to start construction in 29 different council areas without the approval of local officials – and has already started constructing holding facilities for lorries in Kent that will be used to park goods vehicles that may lack the correct paperwork to take good into the EU
US HAEMORRHAGING WEAPONS TO MEXICO, ONE AT A TIME
On 8 September, an article in Insight Crime says that a recent UN report shows that traffickers move weapons from the US to Mexico in small quantities, even a single firearm at once, in a divergence from global arms trafficking trends; and that the flow of firearms at the US-Mexico border “appears to occur in smaller individual batches than the general global pattern”. It says that exceptionally large seizures — defined as 18 guns or more — accounted for roughly half of seizures at borders worldwide, whereas seizures of fewer than 6 firearms accounted for between 60% to 70% of all those seized at the US-Mexico border.
FIRST USE OF HMRC CIVIL PROCEEDS OF CRIME POWERS
On 9 September, an article from Out-Law says that powers introduced by the Criminal Finance Act 2017 allow assets seized by law enforcement agencies under the POCA 2002 to be subject to forfeiture without the need for a prosecution. The same powers already applied to cash seized under POCA. The first use of the powers is to auction 8 gold bars seized from a passenger at Manchester Airport in 2018 – the passenger not being prosecuted.
FCA FINAL NOTICE IN RESPECT OF CONOR FOLEY, THE FORMER CEO OF WORLDSPREADS, PUBLICLY CENSURING HIM FOR MARKET ABUSE AND BANNING HIM FROM PERFORMING ANY ROLES LINKED TO REGULATED ACTIVITY
On 9 September, a release on Mondo Visione advised that after Foley provided evidence of his serious financial hardship, the FCA withdrew its £698,000 financial penalty and imposed a public censure in lieu of the financial penalty. It is said that Foley misled investors in the Worldspreads Group and manipulated the market for its shares in a concerted and deliberate scheme.
OFAC CIVIL PENALTIES AND ENFORCEMENT INFORMATION
Information on OFAC penalties and enforcement action since 2003 is contained on a webpage which also provides links to further information on policies, statutes, rules and regulations and additional guidance.
CYPRUS: 14 PEP CASES RAISE QUESTIONS SAYS AUDITOR-GENERAL
On 9 September, Cyprus Mail reported that there are 14 cases of PEP under investigation by the audit office “which at first glance appear to raise issues”, the auditor-general has said at a House ad hoc committee investigating PEP loans. It is reported that the investigation is focused on a list of 162 PEP that served as ministers, MPs or party leaders from 1 January.
EXPOSING CORRUPTION IN TOGO’S OIL SECTOR LANDS JOURNALIST IN TROUBLE
On 9 September, Ifex reported that Togolese investigative journalist Ferdinand Ayite is being threatened and sued for defamation for exposing malfeasance in the country’s petroleum industry. He is being sued for defamation following an article exposing alleged embezzlement by senior officials of the country’s petroleum industry and runs the risk of being victimised.
PAKISTAN: THE COURT HAS DEFERRED THE INDICTMENT OF FORMER PRESIDENT ASIF ALI ZARDARI, HIS SISTER FARYAL TALPUR, AND OTHER ACCUSED IN MONEY LAUNDERING CASE
In its 10 September edition, the Business Recorder reported that the Accountability Court has deferred the indictment of the former president, his sister and other accused in the money laundering case after the Pakistan Peoples’ Party (PPP) leader filed another application seeking acquittal in the supplementary reference.
TOUGHER GAMBLING RULES PUSH GAMBLERS TO ILLEGAL SITES
On 9 September, Business Matters carried an article saying that laws to govern the legal online gambling industry are often enacted and amended to rein in the unscrupulous operators. However, many of these laws could turn out to be counterproductive since the compulsive gamblers are driven to illegal sites, making it risker than before.
MEXICO TO PROBE THE DIVERSION OF US CHEMICALS INTO DRUG TRADE
On 8 September, Bloomberg Quint reported that Mexico’s President said his government will not allow the diversion of chemicals sold by private companies to make the heroin and methamphetamine fuelling an American drug epidemic and enriching cartels. It is said that Bloomberg has found that chemicals legally produced and sold in Mexico by US companies have been easily diverted, on a massive scale, to make 2 of the main narcotics bound for America’s streets in the last decade.
UK: INTERNATIONAL LAW FIRM TO PAY £19,000 FOR DUE DILIGENCE FAILINGS
On 9 September, the Law Society Gazette reported that Taylor Vinters LLP has made a regulatory settlement agreement with the SRA after admitting four rule breaches under money laundering regulations. It is said that the firm acted from 2014 in 161 matters for 88 overseas nationals buying expensive off-plan property plots in London, recieving £16.8m into the client bank account but an employee or manager of the firm had met only half of the clients, and in 17 matters no CDD was undertaken: in 26 further matters the firm held some due diligence documents such as passports but had not still completed all the checks required.
CYBERCRIMINALS PREFER ‘OLD SCHOOL’ MONEY LAUNDERING METHODS
On 9 September, Data Breach Today reported that cybercriminals still prefer to use “money mules” and drug trafficking to launder money tied to their bank hacking activities rather than cryptocurrency transactions, according to a report from SWIFT.
STATEMENT FROM THE OPCW DIRECTOR-GENERAL ON ALLEGATIONS OF CHEMICAL WEAPONS USE AGAINST ALEXEI NAVALNY
On 9 September, a news release from the OPCW says that States Parties to the Chemical Weapons Convention deem the use of chemical weapons by anyone under any circumstances as reprehensible and wholly contrary to the legal norms established by the international community.