OTHER THINGS YOU MAY HAVE MISSED – NOVEMBER 5

Panama Covid-19 update – the weather, the side effects of Hurricane Eta further north, has eased for us at least, and even sunny today. A further holiday today as well. but in the north bad floods, roads and bridges closed, and the fishermen banned from going to sea. For all that it is awful, on the news channel it is always “mal tiempo” (bad weather)!

Meanwhile, another 543 new cases (18,733 now active – this number gradually falling, unlike in US and Europe) with 12 more fatalities and another 4,329 tests carried out.

5 NOVEMBER 2020

SEC WHISTLE-BLOWER GETS $28 MILLION

On 5 November, KYC 360 reported that the SEC has paid $28 million to another whistle-blower who provided information that led to a successful enforcement action.  The SEC did not provide information on the individual’s identity or the company involved, citing federal law that protects confidentiality.

https://www.riskscreen.com/kyc360/news/sec-whistle-blower-gets-28-million-in-another-huge-2020-payout/

CRYPTOCURRENCY EXCHANGES COINBASE, PAXFUL, GEMINI AND BITFINEX HAVE JOINED THE ANTI-HUMAN TRAFFICKING CRYPTOCURRENCY CONSORTIUM

On 3 November, Coin Telegraph reported that the companies have joined the ATCC, which was launched in April 2020 by the Anti-Human Trafficking Intelligence Initiative, a non-profit consortium focused on intelligence sharing, best practices and the development of tools to fight trafficking.  ATCC brings together crypto exchanges, blockchain intelligence firms and law enforcement.

https://cointelegraph.com/news/coinbase-gemini-and-others-join-forces-to-combat-human-trafficking

EU MINISTERS AGREE TO SET UP EU AML BODY

On 4 November, Reuters reported that EU European Union have agreed to set up an EU body that would fight money laundering, supporting a European Commission proposal from May.

https://www.reuters.com/article/eu-economy-ministers/eu-ministers-agree-to-set-up-eu-anti-money-laundering-body-idUSL1N2HQ1YX

UK: THE RETURN OF CROWN PREFERENCE – IS THE TIME RIGHT TO CHANGE THE ORDER OF PRIORITY?

On 3 November, Brodies LLP published an article saying that the preference will be restored on 1 December, coming into force just before a new Covid-19 lockdown takes effect and at a time when many businesses, having taken advantage of the option to defer VAT payments, or fallen behind with payments as a result of the pandemic, have greater than normal HMRC liabilities.  The article lays out the current list of priorities for money realised from the assets of an insolvent company as applied to meet claims of creditors.  It then says that, for insolvencies commencing on or after 1 December, amounts due to HMRC in respect of the following will be categorised as secondary preferential debts – VAT, PAYE Income Tax, employee National Insurance contributions (NIC), student loan deductions and Construction Industry Scheme (CIS)deductions.  The preference applies to all such tax debts regardless of when they arose. It is not limited to a specific period pre-insolvency nor is it restricted to any such debts arising on or after 1 December.  HMRC will thus come after fixed-charge holders, expenses of the insolvency process and ordinary preferential debts (primarily limited to certain employee claims), but before other charges, such as floating charges.

https://brodies.com/insights/restructuring-and-insolvency/the-return-of-crown-preference-is-the-time-right-to-change-the-order-of-priority/

THE EUROPEAN PROJECT ICS2 (IMPORT CONTROL SYSTEM)

On 3 November, MME Legal Tax Compliance published an article saying that ICS2 stands for Import Control System 2, which is a freight prior information system through which data is collected on all goods imported into the joint security area (Switzerland, EU and Norway) before they reach the external border of the security area and enable custom authorities to carry out targeted risk analysis based on the pre-declaration data, to identify high-risk consignments.  The article considers how ICS2 applies in respect of Switzerland.

https://www.mme.ch/en/magazine/magazine-detail/url_magazine/the_european_project_ics2/

FIGHTING REPORTED IN ETHIOPIA

On 4 November, the Guardian reported that fighting has been reported in northern Ethiopia after the country’s prime minister, Abiy Ahmed, ordered a military response to an “attack” by the ruling party of the restive Tigray region on a camp housing federal troops.  It warns that a stand-off between the federal government and the Tigray People’s Liberation Front (TPLF) could plunge Ethiopia into a bitter and bloody civil conflict.

https://www.theguardian.com/world/2020/nov/04/ethiopia-on-brink-as-pm-orders-military-response-to-attack

 

ISLE OF MAN: CHECKLIST FOR RESIDENTS AND BUSINESSES AS BREXIT TRANSITION PERIOD NEARS END

On 5 November, a Government’s website and updated interactive guide ‘Are you ready for 2021?’ together offer the latest information and advice on a broad range of topics, including travel to the EU, trading goods and important steps for EU nationals living in the Isle of Man. 

https://www.gov.im/media/1370597/20047-areyouready2021-interactive-281020.pdf

US COMMERCE DEPARTMENT AMENDS NATIONAL SECURITY LICENSE REVIEW POLICY FOR ITEMS DESTINED TO CHINA, RUSSIA, AND VENEZUELA

On 5 November, an article from Baker McKenzie reported that, on 29 October, the US Commerce Department’s Bureau of Industry and Security issued a final rule amending the licence review policy under the Export Administration Regulations for items controlled for national security reasons when destined to China, Russia, or Venezuela.  The amendments add Venezuela to the list of countries to which the policy applies and modify the policy to replace the reference to military capabilities with a new, more nuanced standard for assessing the contribution an item would make to those countries’ weapons systems.

https://sanctionsnews.bakermckenzie.com/us-commerce-department-amends-national-security-license-review-policy-for-items-destined-to-china-russia-and-venezuela/#page=1

HOUTHIS ACCUSED OF SMUGGLING 14,000 HISTORICAL YEMENI MANUSCRIPTS

On 5 November, Asharq Al-Awsat reported that the Yemeni government has accused Houthi militias of looting and smuggling more than 14,000 ancient manuscripts and artifacts.

https://english.aawsat.com/home/article/2607406/houthis-accused-smuggling-14000-historical-yemeni-manuscripts

SOUTH AFRICA: EXPLOSIVES SMUGGLING – USED FOR ILLEGAL MINING AND ROBBERIES

On 5 November, the Daily Maverick reported that the smuggling of explosives has become a growing problem in South Africa and the Southern African region.  Originating from the mining and construction industries in the region, explosives find their way across the South African border.  They are used by illegal miners and organised criminals in attacks on armoured vehicles transporting large amounts of cash as well as bombings of ATM.  Reports have identified large amounts of smuggled explosives originating from Zimbabwe and intercepted by authorities at the Beit Bridge border.

https://www.dailymaverick.co.za/article/2020-11-05-explosives-smuggling-south-africas-ticking-time-bomb/

TAIWANESE BILLIONAIRE WITH MALAYSIAN, CAMBODIAN, INDONESIAN TITLES ARRESTED FOR ALLEGED MONEY LAUNDERING

On 5 November, Taiwan News reported that the “Legendary” tycoon had escaped Taiwanese authorities during underworld bust in August.  The billionaire chairman of a financial holding headquartered in Taichung, Taiwan, has been arrested for his alleged connection to illegal gambling and money-laundering, and was being held in Changhua, Taiwan.

https://www.taiwannews.com.tw/en/news/4046317

e-MONEY LAUNDERING IN JAPAN NEARLY TRIPLED IN 2019

On 5 November, Japan Times reported that almost 4,000 cases of suspected money laundering, many of which were linked to e-money transfer providers, were reported to police in 2019, nearly triple the figure recorded the previous year, the National Police Agency (NPA) said.  The 3,913 cases reported by nonbank operators of funds transfer services compare to 1,391 in 2018. 

https://www.japantimes.co.jp/news/2020/11/05/national/crime-legal/e-money-laundering-japan/

GANGS IN LATIN AMERICA USE BRIBERY, SECRET ROUTES TO SMUGGLE JAGUAR PARTS TO CHINA

On 5 November, Reuters reported claims that criminal organisations in Bolivia and other Latin American countries are bribing police and circumventing customs restrictions to smuggle parts of jaguars to mainland China.  Jaguar parts in China are passed off as tiger products and sold for their reputed medicinal properties.

https://www.reuters.com/article/us-latam-jaguars/gangs-in-latin-america-use-bribery-secret-routes-to-smuggle-jaguar-parts-to-china-report-idUSKBN27L1R6

SHINING A LIGHT ON THE ISSUE OF WINE FRAUD

On 5 November, Newswise published an article saying that University of Adelaide wine researchers are developing a fast and simple method of authenticating wine – a potential solution against the estimated billions of dollars’ worth of wine fraud globally, but also offering a possible means of building regional branding.

https://www.newswise.com/articles/shining-a-light-on-the-issue-of-wine-fraud

2 RECENT SEC CASES INVOLVING CRYPTOCURRENCY OFFERINGS

On 4 November, an article from Faegre Drinker Biddle & Reath LLP says that the cases represent additional milestones in the debate over whether, and when, cryptocurrency offerings involve US securities laws as officials have expressed the view that cryptocurrencies sold only to be used to purchase a good or service, such as Bitcoin or Ethereum, may not be securities.  It is said that the different results in the cases demonstrate that ICO may be viewed by the SEC and courts as offerings of securities, but that legal issues remain controversial and somewhat unsettled. 

https://www.jdsupra.com/legalnews/two-recent-sec-cases-involving-43361/

ITALY ARRESTS DOZENS OF SUSPECTED NIGERIAN MAFIA MEMBERS

On 4 November, OCCRP reported that, in a sweeping operation in 2 Italian cities, police arrested 74 members of the Nigerian mafia, including the alleged leader, 50-year-old Emmanuel “Boogye” Okenwe.  The self-styled “King of Ferrara” headed the gang known as the ‘Arobaga Vikings’ or ‘Norsemen Kclub International’.  Turin has been the centre of the Nigerian mafia in Italy for over a decade.  Apart from Turin or Ferarra, they have established a wide network, with individual cells, known as “decks” in cities across the country. 

https://www.occrp.org/en/daily/13348-italy-arrests-dozens-of-suspected-nigerian-mafia-members

THE ILLEGALITY PRINCIPLE IN CIVIL CLAIMS REMAINS INTACT DESPITE THE UK SUPREME COURT FINDING IN FAVOUR OF A MORTGAGE FRAUDSTER IN A DISPUTE WITH A LAW FIRM

On 5 November, the Law Society Gazette reported that, in a recent case, ruled unanimously last week that a negligence claim should not be barred by the illegality defence, despite revelations that the former client of the law firm had procured a mortgage advance by fraud.  However, lawyers reflecting on the judgment indicated that the court has not ruled out the possibility of using the illegality defence in some circumstances.

https://www.lawgazette.co.uk/law/fraud-does-not-oust-negligence-claim-supreme-court-rules/5106257.article

BREXIT – IMPLICATIONS FOR CONTRACT DISPUTES FROM 1 JANUARY

On 5 January, an article from Eversheds Sutherland says that managing disputes involving a UK counterparty will become more complex and costly from 1 January, and ask what changes can you make to your contracts to ensure that disputes can be resolved in a timely and cost effective manner?

https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/global/ireland/brexit_implications-for-contract-disputes

SECURITIES COMMISSION MALAYSIA WARNS THE PUBLIC ON THE SHARP INCREASE OF CLONE FIRM SCAMS THIS YEAR

A release on Mondo Visione on 5 November said that Securities Commission Malaysia (SC) has cautioned the public on the sharp increase of clone firm scams this year, with scams are perpetuated by companies that fraudulently impersonate a legitimate entity, including misusing the name and logo of a PLC to dupe investors and to solicit funds.

https://mondovisione.com/media-and-resources/news/securities-commission-malaysia-warns-on-rising-clone-firms-using-plcs-names/

SOUTH KOREA WILL BAN DOMESTIC CIRCULATION OF PRIVACY COINS

Finance Magnates on 4 November reported that South Korea’s Financial Services Commission (FSC) has announced its decision to ban anonymous digital currencies that possess a high-risk of money laundering.  The new rules will come into force in March next year, barring all domestic cryptocurrency exchanges from offering services with such privacy coins.  All domestic cryptocurrency exchanges will have to confirm the users’ real names by verifying them against their personal identities; and the exchanges need to report their operational activities with the regulator.

https://www.financemagnates.com/cryptocurrency/regulation/south-korea-will-ban-domestic-circulation-of-privacy-coins/

BARBADOS BANK GOVERNOR HITS BACK AT AML ‘BLACKLISTING’

Central Banking on 4 November reported that the governor of the Central Bank of Barbados has criticised the country’s ‘blacklisting’ for money laundering weaknesses by the EU, describing it as unfair and badly timed.

https://www.centralbanking.com/central-banks/governance/7706386/barbados-governor-hits-back-at-aml-blacklisting

HONG KONG POLICE OFFICER AMONG 11 ARRESTED OVER SUSPECTED MONEY LAUNDERING

On 5 November, the South China Morning Post reported that an officer from the emergency unit of New Territories South regional headquarters allegedly processed a total of HK$210 million (US$26 million) in suspected crime proceeds.  The arrests of 8 men and 3 women, aged 19 to 30, were made after police’s financial investigations division launched a probe upon receiving intelligence last month.

https://www.scmp.com/news/hong-kong/law-and-crime/article/3108673/hong-kong-police-officer-among-11-arrested-over

US SEIZES ANOTHER 27 WEBSITES – LINKED TO IRAN’S ISLAMIC REVOLUTIONARY GUARD CORPS

A news release from the US DoJ on 4 November advised that the US authorities had seized 27 domain names that Iran’s Islamic Revolutionary Guard Corps (IRGC) unlawfully used to further a global covert influence campaign. 4 of the domains purported to be genuine news outlets but were actually controlled by the IRGC and targeted audiences in the US, to covertly influence United States policy and public opinion, in violation of the Foreign Agents Registration Act (FARA).  The remainder targeted audiences in other parts of the world.  This seizure follows an earlier seizure of 92 domains used by the IRGC for similar purposes.

https://www.justice.gov/opa/pr/united-states-seizes-27-additional-domain-names-used-iran-s-islamic-revolutionary-guard-corps

TIPS FOR BORROWING AND LENDING AGAINST ART

On 2 November, an article from Field Fisher sees its art finance experts offer some tips for borrowers and lenders. Increasingly, international private banks offer art loans and there are a number of specialist lenders and auction houses that have operated in this field for many years, and set out a number of practical but often overlooked points we regularly address in any art loan.

https://www.fieldfisher.com/en/insights/tips-for-borrowing-and-lending-against-art

BHS BUYER DOMINIC CHAPPELL GIVEN 6 YEARS FOR TAX EVASION

On 5 November, the Guardian and others reported that the 53-year-old bankrupt has been sentenced to 6 years in jail for evading tax on the £2.2 million income he received from his doomed takeover of the chain store BHS.  He spent hundreds of thousands of pounds on luxury items, including a yacht, a holiday to the Bahamas, a Bentley car and Beretta guns, instead of paying £600,000 due in tax, and after buying the department store chain from the billionaire Sir Philip Green for £1 in March 2015.  But just a year into his ownership, it collapsed with the loss of 11,000 jobs and a £571 million pensions black hole.

SFO INVESTIGATES BOMBARDIER OVER INDONESIAN AIRLINER DEALS

On 5 November, Reuters and others reported that the SFO was investigating the Canadian aerospace company over suspected bribery and corruption related to deals with the airline Garuda Indonesia.  Garuda bought 18 airliners from the company, parts for which were made at the company’s factory in Northern Ireland.  Bombardier sold its regional airliner business to Mitsubishi last year, with US company Spirit acquiring the Belfast factory.

https://uk.finance.yahoo.com/news/sfo-investigates-bombardier-over-indonesian-164237281.html

https://uk.reuters.com/article/uk-bombardier-sfo-investigation/canadas-bombardier-faces-uk-bribery-probe-shares-fall-idUKKBN27L22U

US: DISRUPTION OF 2 TERRORISM FINANCING CAMPAIGNS THAT UTILISED CRYPTOCURRENCY DONATIONS (AND A THIRD THAT DIDN’T) FOLLOWING A MULTI-AGENCY INVESTIGATION

A release on Mondo Visione on 5 November announced that the DoJ confirmed the disruption of terrorism financing campaigns following a multi-agency investigation conducted by the FBI, HSI, and IRS-CI.  The investigation led to the largest-ever seizure of cryptocurrency assets related to terrorism financing, with more than $1 million worth of cryptocurrency recovered from terror finance campaigns and financial facilitators operating unlicensed money services businesses (MSB).  It says that Chainalysis tools aided in the investigation of the 2 campaigns relying on cryptocurrency donations.

https://mondovisione.com/media-and-resources/news/chainalysis-in-action-us-department-of-justice-announces-takedown-of-two-terror/

THE DAWN OF FINTECH IN LATIN AMERICA

A paper from the Bank for International Settlements on 5 November takes stock of how it is transforming financial services in the region.  It describes the fintech landscape in terms of investment, firms and services provided and finds that fintech has quickly gained traction in Latin America, mainly in the areas of payments and alternative finance.  It also evaluates the prospects for fintech by exploring the institutional framework to supervise and regulate it.  It is said that the fintech regulation in the region takes an activity-based approach rather than an entity-based one, except in Mexico.  The paper finally presents the challenges that fintech faces in becoming a game changer for the region, and concludes that fintech can be a strong catalyst to improve financial and social conditions in Latin America by incorporating the unbanked into the financial system and providing alternative sources of finance to firms.

https://www.bis.org/publ/bppdf/bispap112.pdf

ISLE OF MAN – SEVERAL SETS OF SANCTIONS-RELATED REGULATIONS ON NOVEMBER ORDER PAPER

The Order Paper for the Island’s parliament for 20 November includes several sets of regulations concerned with sanctions measures and which would bring Island law more fully into line with that of the UK.  The regulations relate to Burundi, Bosnia-Herzogovina, Nicaragua, Mali and Lebanon, counter-terrorism sanctions, Guinea and Guinea-Bissau, and the chemical weapons and cyber sanctions regimes.  They are all made under the Sanctions and Anti-Money Laundering Act 2018 (of Parliament) which will replace the existing EU Regulations which currently have effect in the Island, as a consequence of the UK’s departure from the EU.

https://www.tynwald.org.im/business/opqp/opqp/2020-PP-0192.pdf

https://www.tynwald.org.im/business/opqp/sittings/20182021/2020-SD-0447-0450-0492-0449-0453-0451-0448-0456-0455-MEMO.pdf

INSURANCE FRAUD E-BOOK

The CRI Group has produced an e-book as a primer for any insurance fraud professional and companies looking to avoid becoming victims of insurance fraud claims.  It provides the tools and knowledge needed to effectively combat insurance fraud.

https://www.crigroup.com/download-a-file/?dynamictext_945=https://crigroup.com/wp-content/uploads/2020/09/Unseen-Enemy-Insurance-fraud_ebook.pdf

IRANIAN PARLIAMENT APPROVE BILL SPECIFYING INCREASED URANIUM ENRICHMENT

On 5 November, Nuclear Engineering International reported that Iran’s parliament has approved a Bill requiring the Atomic Energy Organisation of Iran (AEOI) to produce at least 120 kg of 20% enriched uranium a year at its Fordow nuclear facility.  AEOI is required to start this process within 2 months and store the enriched uranium inside the country.

https://www.neimagazine.com/news/newsiranian-parliament-approve-bill-specifying-increase-uranium-enrichment-8347157?mkt_tok=eyJpIjoiTlRZd016azFZelEwWmpsaSIsInQiOiJlSHB1SFwvMkJLV3JDNTh2Z2FPK2tDaFQrVm9nUDZxNWEzeVk3ZE85YVk0b25uUW1QSXFQM1wvRFNndXJRXC9cL0d3bDgzdEJiMnpHc3p1dkV4UFRlbFVrQUlDWjkxcTE2QlNHb3V3ZGNiS3NsOUc5NjZxREVFUTI2MmtXVmVLZ3dKdGYifQ%3D%3D

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

UK: FCA BANS 3 INDIVIDUALS FROM THE FINANCE INDUSTRY FOR NON-FINANCIAL MISCONDUCT

A release on Mondo Visione on 5 November advised that the FCA has prohibited Russell David Jameson, Mark Horsey, and Frank Cochran from working in the financial services industry following findings that they are not fit and proper persons.  Each of them had been convicted of serious non-financial indictable offences while working in the financial services industry.  In July 2018, Jameson was convicted of serious criminal offences involving the making, possession and distribution of indecent images of children.  In September 2018, Horsey was convicted of voyeurism, contrary to the Sexual Offences Act 2003 after he had surreptitiously observed and video recorded his tenant having a shower without their consent.  In April 2018, Cochran was convicted of sexual assault, engaging in controlling and coercive behaviour and an offence contrary to the Protection from Harassment Act 1997.  All 3 committed the various offences whilst they were “approved persons”.

https://mondovisione.com/media-and-resources/news/uk-financial-conduct-authority-bans-three-individuals-from-working-in-the-financ/

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

“REASONABLE EXCUSE”: WHEN CAN A PERSON LAWFULLY WITHHOLD DOCUMENTS ON RECEIPT OF A COMPULSORY PRODUCTION NOTICE IN A CRIMINAL INVESTIGATION?

A post from Corker Bining on 5 November is concerned with situations where a person does not destroy documents, but rather refuses to provide documents when compelled to do so in a criminal investigation – are there general principles that determine when the recipient of a compulsory production notice can lawfully withhold the documents sought?  It is not a reasonable excuse to withhold documents on the basis that they incriminate (or might incriminate) a person, and it would  be an extraordinarily unusual case in which the recipient of a notice can lawfully withhold documents by asserting the privilege against self-incrimination.  What might be reasonable excuse –

  1. The first (and easiest) category of “reasonable excuse” to identify is legal professional privilege (LPP);
  2. Overseas persons who receive a notice compelling the production of documents held outside the UK where the person has “insufficient connection” to the jurisdiction;
  3. Where the notice identifies vast swathes of irrelevant documents and/or is so onerous that it would be impossible to collate the documents in a reasonable timeframe;
  4. Where the disclosure of documents to the investigator would breach other legal duties and/or compete with countervailing public policy considerations; and
  5. (Possibly) where compliance with the notice would necessarily involve the commission of a criminal offence. 

The post highlights the potential use and problems with each of the above.

https://www.corkerbinning.com/reasonable-excuse-withhold-documents-receipt-compulsory-production-notice-criminal-investigation/

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

KOSOVO’S PRESIDENT THACI RESIGNS AFTER WAR CRIMES INDICTMENT CONFIRMED

On 5 November, EurActiv reported that Kosovo’s President Hashim Thaçi resigned with immediate effect after learning that the Kosovo war crimes tribunal had confirmed his indictment for war crimes. At the same time, Jakup Krasniqi, a former ethnic Albanian rebel spokesman and Kosovo politician has been arrested in Pristina and transferred to a court in The Hague set up to probe war crimes during the 1990s Kosovo conflict.

https://www.euractiv.com/section/enlargement/news/former-kosovo-rebel-spokesman-arrested-sent-to-hague-tribunal/

https://www.euractiv.com/section/enlargement/news/kosovos-president-thaci-resigns-after-war-crimes-indictment-confirmed/

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

DONORS TO SERBIAN POLICE RAISE EYEBROWS

On 5 November, Balkan Insight carried a report saying that a list of donors to Serbia’s interior ministry raises questions about conflicts of interest.  It asks what a Belgrade arms company blacklisted by the US, a car trader favoured for a string of lucrative Serbian government contracts and a cluster of companies at the centre of a scandal over gas pipeline construction have in common?  It seems that they have all dug deep to donate to the Serbian police, according to data for the past 6 years.  Serbia’s Law on Donations allows private individuals and companies to donate money or goods to state institutions even in cases in which those institutions are tasked with monitoring or even investigating those same individuals or companies; but there is no public register of donations, nor any control mechanism to determine whether such donations may influence the work of state institutions in monitoring, investigating or striking deals with their donors.  The interior ministry said it acts fully in accordance with the law, but experts say the law is fundamentally flawed.

https://balkaninsight.com/2020/11/05/currying-favour-or-just-generous-donors-to-serbian-police-raise-eyebrows/

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

FBI SAYS ‘BOOGALOO’ EXTREMISTS BOUGHT 3D-PRINTED MACHINE GUN PARTS

On 4 November, Wired reported a court case where it is alleged that a West Virginia man disguised the plastic components as wall hangers and sold hundreds of them online.  It says that criminal charges against one West Virginia man suggest that the digital gunsmithing method has been adopted by violent, anti-government domestic extremists: the Boogaloo movement.  Timothy Watson is accused of selling more than 600 3D-printed plastic components of automatic rifles through his website, Portablewallhanger.com.

https://www.wired.com/story/boogaloo-boys-3d-printed-machine-gun-parts/

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

BRIBERY VICTIMS PREVAIL IN RESTITUTION CLAIM AGAINST HEDGE FUND

On 4 November, the Wall Street Journal reported that a federal judge has approved restitution of more than $138 million to investors in a Congolese mine in a case over their status as victims of a bribery scheme by hedge fund Sculptor Capital Management Inc.  The payment is expected to be divided among more than 300 former investors and follows a 2016 settlement with the US DoJ over bribery schemes prosecutors said the fund orchestrated in Africa.

https://www.wsj.com/articles/bribery-victims-prevail-in-restitution-claim-against-hedge-fund-11604539146

I had omitted the following link (as it did not seem to generate much interest!), but it seemed time to add it again and say that, if you would like to make a (polite) gesture and help me with my removal and computer costs, I have a page at https://www.buymeacoffee.com/KoIvM842y

What has changed in the FATF approach to proliferation financing?

This note was basically a means and excuse for me to see what changes FATF had approved in respect of CPF at the recent Plenary…

WHAT HAS CHANGED IN THE FATF APPROACH TO PROLIFERATION FINANCING?

4 November 2020

On 23 October 2020, FATF issued a news release explaining the outcomes of the Plenary held 21-23 October[1].  It also issued a fuller Public Statement on Counter Proliferation Financing[2].

The Public Statement advised that FATF had adopted amendments to its Recommendations 1 and 2, and their respective Interpretative Notes.  These require member states and the private sector to –

  1. identify, and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to proliferation financing, as contained in FATF Recommendation 7[3];
  2. to take action to mitigate these risks; and
  3. to enhance domestic co-ordination.

The changes made are intended to strengthen the global response to WMD proliferation financing, as identified by UN Security Council Resolutions (UN SCR)[4], in response to a call to do so from the G20 in June 2019.

“Proliferation financing” has been defined by FATF in 2010 as being the act of providing funds or financial services that are used, in whole or in part, for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual-use goods used for non-legitimate purposes), in contravention of national laws or, where applicable, international obligations[5].

The changes were described by FATF thus

  1. The revision of Recommendation 1 and Interpretive Note to Recommendation 1 require countries, financial institutions and DNFBPs to identify and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to proliferation financing, as contained in FATF Recommendation 7, and to take action to mitigate these risks; and
  2. The revision of Recommendation 2 and a new Interpretive Note to Recommendation 2 insert a reference to counter proliferation financing in the context of national co-operation and co-ordination; and the Interpretive Note sets out that there should be an inter-agency framework to promote domestic co-operation, co-ordination and information exchange.

The new obligations imposed by the changes made are intended to ensure that financial institutions and DNFBP should identify and assess the risks of potential breach, non-implementation or evasion of targeted financial sanctions when dealing with their customers, and take appropriate mitigating measures commensurate with the level of risks identified. 

The idea appears to be that the requirement would then mean that the financial institutions and DNFBP  are aware of the risks involved in their businesses and professions, and do not unwittingly support or become part of the proliferation financing networks or schemes (which would be in contravention of the existing relevant obligations).  This will also then ensure appropriate allocation of resources by countries and the private sector entities to their CPF efforts, commensurate with the level of risks faced.

It is said that FATF will develop Guidance to assist countries and the private sector in assessing and mitigating the proliferation financing risk; and will also begin the process of revising its own Methodology for assessing these new obligations.

As part of a phased introduction, FATF says that it will begin assessing jurisdictions for implementation of these requirements at the start of the next round of mutual evaluations, to allow time for the jurisdictions to put the necessary domestic measures in place.

FATF Recommendation 7 is concerned with targeted financial sanctions related to proliferation –

Countries should implement targeted financial sanctions to comply with UN SCR relating to the prevention, suppression and disruption of proliferation of WMD and its financing.

These UN SCR require countries to freeze without delay the funds or other assets of, and to ensure that no funds and other assets are made available, directly or indirectly, to or for the benefit of, any person or entity designated by, or under the authority of, the UN Security Council under Chapter VII of the Charter of the UN.

There is also an Interpretative Note to Recommendation 7.  Amongst other things, this noted –

  1. Recommendation 7 only applied to sanctions imposed pursuant to UN SCR that relate to the prevention and disruption of the financing of proliferation of WMD (and hence would seem to only directly apply, at the time of writing, North Korea[6]);
  2. The focus of Recommendation 7 is on preventive measures that are necessary and unique in the context of stopping the flow of funds or other assets to proliferators or proliferation; and the use of funds or other assets by proliferators or proliferation, as required by the UN Security Council;
  3. An obligation exists for countries to implement targeted financial sanctions without delay against persons and entities designated under relevant UN sanctions;
  4. Countries should require all natural and legal persons within the country to freeze, without delay and without prior notice, the funds or other assets of designated persons and entities;
  5. The obligations to freeze assets extends to –
    • all funds or other assets that are owned or controlled by the designated person or entity, and not just those that can be tied to a particular act, plot or threat of proliferation;
    • those funds or other assets that are wholly or jointly owned or controlled, directly or indirectly, by designated persons or entities; and
    • the funds or other assets derived or generated from funds or other assets owned or controlled directly or indirectly by designated persons or entities, as well as funds or other assets of persons and entities acting on behalf of, or at the direction of designated persons or entities
  6. Have mechanisms for communicating designations to financial institutions and DNFBP immediately;
  7. The need to provide clear guidance, particularly to financial institutions and other persons or entities, including DNFBP, that may be holding targeted funds or other assets, on their obligations in taking action under freezing mechanisms;
  8. A requirement for financial institutions and DNFBP to report to competent authorities any assets frozen or actions taken in compliance with the requirements of the relevant UN SCR, including attempted transactions, and ensure that such information is effectively utilised by competent authorities;
  9. Protect the rights of bona fide third parties acting in good faith when implementing the obligations under Recommendation 7; and
  10. There will be a publicly known procedures to unfreeze the funds or other assets of such persons or entities in a timely manner, upon verification that the person or entity involved is not a designated person or entity (i.e. a false positive).

Recommendation 7 and its Interpretative Note contain some provisions that apply to or affect only countries, e.g. considering having a mechanism to propose persons or entities that could be considered for listing under relevant UN sanctions.

Recommendation 1 requires jurisdictions to assess AML/CFT risks and adopt a risk-based approach, so as to be able to apply resources to the higher risk elements.  It also required jurisdictions to demand that financial institutions and DNFBP similarly identify, assess and take effective action in respect of AML/CFT risks.

The amendment to Recommendation 1 extends the risk assessment and risk-based approach to proliferation financing risks[7]; and also the requirement that financial institutions and DNFBP identify, assess and take effective action in respect of proliferation financing risks.

The Interpretative Note to Recommendation 1 is amended to provide a explanation of the “proliferation financing risk” – being and only that relating to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7.

The Interpretative Note also required countries to take appropriate steps to mitigate proliferation financing risks, develop and understanding of those risks and ensure that financial institutions and DNFBP take appropriate action (particularly where a higher risk is identified).

FATF Recommendation 2 is concerned with national cooperation and coordination and, as amended, required –

  1. National AML/CFT/CPF policies, informed by the risks identified, and which should be regularly reviewed;
  2. Effective mechanisms  to enable national authorities and agencies, including the FIU, law enforcement and policy-makers to cooperate and exchange information for the development and implementation of policies and activities to combat money laundering, terrorist financing and the financing of proliferation of WMD.

Therefore, the changes contained in the amendments adopted by the FATF Plenary appear limited to ensuring that member states, and their financial institutions and DNFBP, include CPF in their risk assessment and mitigation processes, and for a risk-based approach to be adopted, as for AML/CFT risks.  This, I would argue, is nothing more than should be expected.

I would also argue that the proliferation financing risk is wider than merely focusing on UN SCR on North Korea, taking into account other states and non-state actors – and as covered by UN SCR 1540, although the primary focus of that UN SCR was the implementation of a suitable and effective export control system.

UN SCR 1540 places obligations on all member states to both have and to enforce appropriate and effective measures against the proliferation of nuclear, chemical and biological weapons, and their delivery systems., and all member states should adopt and enforce appropriate effective laws and domestic controls to prevent any non-State actor being involved in the manufacture, acquisition, possession, development, transportation, transfer or use of CBRN weapons and their means of delivery, in particular for terrorist purposes, as well as in attempts to engage in any of the foregoing activities, participate in them as an accomplice, assist or finance them; as well as preventing illicit trafficking.

In Notice 1008 MAN, I said that “proliferation financing” can be –

  1. Terrorism financing – where it provides financial support to terrorist organisations that would want to acquire and/or use an WMD; or
  2. Financing from a state, or a state-controlled or state-sponsored entity with the aim of providing a state with a WMD, or to enhance, improve or replace an existing one.

I would argue that having a more holistic approach to risk assessment, considering potential risks on a broad basis – proliferation, terrorism, export control – makes more sense than continuing to treat each as if in a separate silo.  This is especially the case as consignments and funding are likely to be disguised, with origin, destination and purpose similarly obscured.  This was certainly the position that I adopted and which I would recommend.

Ray Todd

Panama

4 November 2020


[1]  http://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-fatf-plenary-october-2020.html

[2]  http://www.fatf-gafi.org/publications/financingofproliferation/documents/statement-proliferation-financing-2020.html

[3]  http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf

[4]  Note the narrow definition, contrasted to that in Notice 1008 MAN: https://www.gov.im/media/1352777/notice-1008-man-proliferation-and-proliferation-financing-risks-15-jul-20.pdf

[5]  FATF, Combating Proliferation Financing: A Status Report on Policy Development and Consultation, 2010

[6]  As those relevant UN sanctions on Iran were lifted, pursuant to the JCPOA, w.e.f. 16 January 2016.

[7]  See the consultation on the proposed amendments: http://www.fatf-gafi.org/publications/financingofproliferation/documents/consultation-recommendation-1.html