On 30 September, Transparency International marked the 5th anniversary since the release of the Panama Papers. While it says that various governments have so far recovered some $1.36 billion in tax as a result, and with civil and criminal cases against those accused of money laundering and corruption continuing, it also says that transparency loopholes in corporate ownership in Panama remain. In January 2020, the government approved a Law which established a regulatory framework to create of a beneficial ownership register in Panama and, while this was an important step towards detecting and fighting corruption, this framework was said to be “riddled with gaps”. It says that the government should address the weaknesses in its proposed framework for a beneficial ownership regime in the country and move towards implementing the framework to put an end to the abuse of anonymous companies.
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On 30 September, OFAC released new FAQ 932. This asks: do US sanctions prohibit US persons from visiting, or making donations to, the Imam Reza Holy Shrine in Mashhad, Iran? It notes that The Holy Shrine Organization is also considered blocked under Executive Order 13876 pursuant to OFAC 50% Rule to the extent it is 50% or more owned by Astan Quds Razavi (AQR), and that US persons are advised to act with caution when considering transactions or activities involving AQR or the Holy Shrine Organization.
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On 27 September, the Wisconsin Project on Nuclear Arms Control published a report saying that US counter to Chinese military defence industry culminated under the Trump Administration with the expansion of military end user-based export controls to China, the creation of the Military End User List, and the advent of investment restrictions on Chinese military-related companies. The report provides an overview of the policies and programmes driving Chinese defence industry modernisation, the key entities in China implementing these policies over time, and the strategic trade and investment restrictions that the US Government has developed in response. This response targets the Chinese military-industrial complex as a whole, as well as the specific entities that operate within it.
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On 30 September, the Isle of Man Treasury issued a General Licence and said that any persons intending to use the General Licence should the Licence for full details of the permissions and usage requirements. The General Licence allows that –
a Person may make payment(s) out of non-frozen funds to the Crimean Sea Ports for services provided at the ports of Kerch Fishery Port, Yalta Commercial Port and Evpatoria Commercial Port, and for services provided by Gosgidrografiya and by Port-Terminal branches of the Crimean Sea Ports;
a Person may be reimbursed out of non-frozen funds for payments it makes in accordance with the above;
relevant institutions may process payments made in accordance with the above.
The permissions in the General Licence do not authorise any act which the person carrying out the act knows, or has reasonable grounds for suspecting, will result in funds or economic resources being made available in breach of the relevant sanctions regulations, save as permitted under licences granted under the regulations.
On 30 September, a news release from INTERPOL advised that a new report from INTERPOL assesses the problem of trafficking in human beings for organ removal (THBOR), which is driven largely by the global shortage in organs for ethical transplant. While organ trafficking exists in all regions of the world, it is of particular concern in North and West Africa where impoverished communities and displaced populations are at greater risk of exploitation. The strategic assessment report, produced as part of Project ENACT, provides insight and analysis into the issues, to enable law enforcement agencies in North and West Africa to devise the appropriate responses.
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UK Finance has published this guidance saying that the ambiguity in interpretation adds costs and delay to corporate anti-bribery and corruption efforts and can reduce appetite for doing business with new markets. Varied interpretations in company policies can also hold back collective action and collaborative work, adding complexity to efforts to share risk intelligence on official corruption and to support public integrity initiatives. It says that it has therefore worked with its members to develop a practical and risk-based definition of public officials for the purposes of anti-bribery and corruption compliance. The resulting guidance sets out the technical approach and recommended guidance to help industry work to a consistent definition. UK Finance says that it recognises that each firm will need to apply its own risk appetite, but the guidance proposes a broad approach building on both international legal analysis and recent case law, including on borderline cases such as public contractors and state-owned enterprises.
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The new US-EU Trade and Technology Council has agreed upon the US and EU developing “convergent” export controls on sensitive technologies and working more closely on investment screening.
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A Notice from HM Treasury on 30 September advised that 5 individuals had been removed from the UK Consolidated List . The Isle of Man has followed suit.
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Panama Covid-19 update – finally caught up with yesterday’s data. 232 new cases and 2 new fatalities, with active cases down to 3,240, with 51 in ICU and 230 in other wards. The RT rate, it seems, is 0.82.
Update of the update – On 29 September, another 262 new cases and 4 more fatalities were reported. Active cases rose, to 3,314, while ICU numbers rose to 54 and the patients in other wards rose by 1 to 231.
29 September 2021
NEW EU DIRECTIVE: WHAT AREAS CAN A WHISTLEBLOWER REPORT INVOLVE?
On 22 September, Taylor Wessing published an article which, as the deadline for implementation of the EU Directive approaches, discusses the material scope of the Directive. A previous article considered the personal scope of the Directive. The areas which, within the meaning of the EU Directive, require special protection against breaches are very broadly defined – and are listed in the article. However, it notes that the Directive has a broader context, taken to cover all national and EU rules which regulate the rights and obligations in the areas indicated.
A REVIEW OF CYBER FRAUD INVOLVING PAYMENTS INTO FRAUDULENT BANK ACCOUNTS IN MAINLAND CHINA
On 27 September, Clyde & Co published an article about international trade-related cyber fraud incidents in which the assistance of the firm was sought in the recovery of funds wrongfully paid into a third-party bank account opened in China. The article reviews the common approaches used by fraudsters to take advantage of such bank accounts, and offers guidance on effective remedies for recovering the funds as well as precautions to minimise such risks.
INTERNATIONAL SALE OF GOODS: TERMINATION OF CONTRACT FOR “MATERIAL BREACH” – WHAT EXACTLY IS “MATERIAL”?
An article from Stephenson Harwood on 27 September posed this question. It says that if the parties have expressly defined what they mean by a material breach, then this should not give rise to much uncertainty if one party wishes to terminate. However, the article considers what happens if “material breach” is left undefined, as it is a question which the firm says that it has been asked by traders quite often in recent times. Such a breach goes to the root of the contract, or deprives a party of substantially the whole benefit of the contract, and will entitle the innocent party to terminate for what is known as “repudiation”. Whether a breach is material is a question of fact, and the common denominator in every case analysis is that a material breach must be substantial.
GERMANY: N26 DIGITAL BANK FINED FOR DELAYED MONEY LAUNDERING REPORTS
On 29 September, Market Watch reported that BaFin has issued a fine of €4.25 million to digital bank N26 for delayed reporting of fewer than 50 instances of suspicious money laundering activity. In May, BaFin ordered N26 to implement internal safeguards to prevent money laundering and terrorist financing, including by rectify deficiencies in IT monitoring and CDD.
US SANCTIONS SPUR CHINA AND RUSSIA TO BUILD UP CROSS-BORDER LINKS
On 29 September, Nikkei Asia reported that a 2,200-metre rail bridge across the Amur River, between China and Russia, was completed in August, part of a push to deepen economic ties between the 2 countries. Once the bridge begins operations early next year shipping of goods will become much faster. It is said that the countries’ shared rivalry with the US has spurred greater cooperation, and that they aim to nearly double bilateral trade by 2024. Major Russian exports to China include natural gas and lumber, while Chinese exports include appliances and machinery.
On 23 September, the Wall Street Journal reported that the SEC hhadas approved amendments to the rules governing monetary awards made to whistleblowers who voluntarily report potential wrongdoing. The SEC said that the new rules would add clarity to its whistleblower programme, which was started in 2011, and bring efficiency and transparency to the award determination process. A whistleblower can receive an award totalling between 10% and 30% of the fines levied in SEC civil enforcement actions that result from their tip, assuming the fines total more than $1 million.
TECH COMPANIES HAVE BLOCKED MORE THAN 11.6 MILLION TRANSACTIONS FOR ENDANGERED WILDLIFE ONLINE
On 28 September, the NGO TRAFFIC provided an update saying that companies signed up to its Coalition to End Wildlife Trafficking Online had removed or blocked over 11.6 million listings for endangered species and associated products from their online platforms to date. These listings included live tigers, reptiles, primates and birds for the exotic pet trade, as well as products derived from species like elephants, pangolins and marine turtles.
On 29 September, Bulawayo 24 and others reported that the UN will deploy a special rapporteur to Zimbabwe to probe the impact of sanctions on the country and determine if the government was not using them as an excuse for the prevailing economic crisis. He is expected to be in Zimbabwe 18 to 28 October at the invitation of government. Zimbabwe has been under US sanctions since 2001 and, in February, the EU renewed its sanctions, imposing an arms embargo and a targeted asset freeze against the Zimbabwe Defence Industries. The UK government also slapped an asset freeze and travel ban on 4 Zimbabwean senior security sector officials.
On 29 September, Business Daily reported that police have opened investigations into a suspected container smuggling racket at the port of Mombasa believed to be depriving Kenya of tax revenues. The Directorate of Criminal Investigations (DCI) is said to be targeting 3 top executives of the Kenya Ports Authority (KPA).
PROVISIONAL LIQUIDATOR OF ZAMBIA’S KONKOLA COPPER MINES CHARGED WITH MONEY LAUNDERING
On 29 September, Devdiscourse reported that Zambia’s previous government had handed control of Konkola Copper Mines (KCM) to the provisional liquidator in May 2019, triggering a legal battle with Vedanta Resources, KCM’s parent company.
US: 5 TAKEAWAYS FROM DoJ NATIONAL ENFORCEMENT ACTION – INCLUDING CONTINUED FOCUS ON OPIOIDS AND TELEMEDICINE
On 28 September, an article from Mintz.com said that the DoJ has released its latest national enforcement action related to health care fraud in which it filed criminal charges against 142 defendants. The National Enforcement Action, which alleges losses of $1.4 billion due to false or fraudulent billings, follows similar DoJ “take downs” over the last several years in that it focuses on telemedicine providers and the opioid crisis. The article provides 5 takeaways from the National Enforcement Action. The takeaways include noting that over one-third of the defendants in the National Enforcement Action were charged in the Southern District of Florida alone.
IRELAND: BENEFICIAL OWNERSHIP OF TRUSTS – CLOCK TICKING ON FILINGS TO CENTRAL REGISTER
On 29 September, Irish law firm Matheson said that 2021 regulations require trustees of express trusts to file beneficial ownership information in a newly created Central Register of Beneficial Ownership of Trusts. The Revenue Commissioners will operate the CRBOT and have established a trust register portal on Revenue’s Online Service (ROS) to facilitate registrations. Trustees ought to continue maintaining beneficial ownership registers but must now do so within a wider legislative framework. The article explains what types of trusts are affected and who is regarded as a beneficial owner. It also explains what a trustee or beneficial owner has to do. For pre-existing trusts, information must be filed by 23 October, i.e. 6 months from the commencement of the Regulations. For any trusts created after the commencement of the regulations, beneficial ownership information must be filed within 6 months of creation of the trust. Information may be disclosed to An Garda Síochána (police), the Revenue Commissioners, a competent authority or the Criminal Assets Bureau. A competent authority includes the Central Bank of Ireland, the Minister for Justice, Equality and Law Reform and any other competent authorities prescribed by regulations – and the information provided to such Irish authorities can in turn be shared with corresponding authorities in other EU Member States.
BULGARIA: CUSTOMS OFFICERS FIND OVER 500,000 CONTRABAND CIGARETTES
On 29 September, Novinite reported that customs officers found more than 500,000 contraband cigarettes in wooden panels in a truck with Turkish registration. Documents for the cargo – packaging foil and 3 pallets with wooden panels from Turkey – showed it to be destined for the UK.
DUTCH GOVERNMENT CONSIDERING BAN ON RANSOM PAYMENTS BY INSURERS
On 28 September, Out-Law reported that the Dutch government is reportedly considering banning insurance companies from paying ransom payments to hackers, in order to take away the financial incentive for criminals engaged in ransomware and other hacking attacks.
BRAZIL’S SANTA CATARINA BECOMING COUNTRY’S MDMA HUB
On 28 September, Insight Crime reported that authorities have made Brazil’s largest ever-seizure of ecstasy in the southern state of Santa Catarina in the latest example of how the production of the synthetic drug is spreading rapidly in the country. It is said that the southern state is the epicentre of MDMA production in the country. It is also said that Latin American consumption of MDMA has long been fed by production in Belgium and the Netherlands, the world’s synthetic drug super-producers – but that the emergence of domestic manufacturing in Brazil is therefore an important shift in the global narcotics trade.
On 20 September, the US Congressional Research Service published a briefing about the relationship and sanctions imposed since 2011. It considers developments in 2021.
TRAFIGURA PAID A RETIRED ANGOLAN GENERAL $390 MILLION FOR SHARES IN AN INTERNATIONAL FUEL SUPPLIER IT CONTROLS
On 28 September, Swissinfo reported that the deal in June 2020 provides a glimpse into the costs of unwinding one of the Swiss commodity trader’s most lucrative yet controversial relationships. It involved Leopoldino Fragoso do Nascimento — widely known as “General Dino” – who was a military adviser to Angola’s former President José Eduardo dos Santos and one of the most powerful businessmen in the country during the final decade of the leader’s 38-year rule. It is said that partnerships with Dino’s Cochan Holdings LLC helped Trafigura dominate the supply of petroleum products in Angola.
SFO LAUNCHES MONEY LAUNDERING PROBE INTO £150 MILLION LEASEHOLD INVESTMENT SCHEMES
On 29 September, City AM reported that the SFO has launched a fraud and money laundering investigation into 2 companies that are suspected of having misled investors into funnelling around £150 million into fraudulent leasehold schemes across the UK. It is suspected that they fraudulently mislead investors into purchasing leaseholds for student accommodation in Leicestershire, Lancashire, Staffordshire and West Yorkshire between 2014 and 2019.
TERRORIST FINANCING TRENDS IN AL-HOL AND ROJ DETENTION CAMPS IN SYRIA
On 29 September, the Combating Terrorism Center published a report about detention facilities holding Islamic State-affiliated adults and minors in north-eastern Syria, saying that camps like Al-Hol actually serve as a valuable hub for the region’s violent extremists and criminal networks. The report details how individuals, networks, and groups inside and outside Al-Hol and Roj camps raise, use, move, manage, store, and obscure funds for and from alleged Islamic State detainees held in the facilities. One of the uses of the funds is for detainees paying smugglers to facilitate their escape. The report makes the case that funds moving into, around, and out of Al-Hol and Roj camps enable some traditional terrorism financing issues and invite risks to the region by injecting funds that embolden facilitation networks involving violent extremists, criminals, and corrupt officials.
INTERNATIONAL CYBER CAPACITY BUILDING: GLOBAL TRENDS AND SCENARIOS
On 23 September, the EU Institute for Security Studies published a report about international cyber capacity-building projects which involve countries, companies and organisations helping each other across borders to develop functioning and accountable institutions that respond effectively to cybercrime and to strengthen a country’s cyber resilience. Such projects take many forms – such as advising government teams that respond to national cybersecurity incidents, helping countries design and run public awareness campaigns about staying safe online and training police to investigate cybercrime. This report identifies 4 trends in cyber capacity-building and extrapolates their development to explore 4 potential scenarios that can inform capacity builders’ strategic decision making.
THE UK ECONOMIC CRIME LEVY: A FAIR CONTRIBUTION TOWARDS TACKLING ECONOMIC CRIME OR A FURTHER TAX ON THE OVERBURDENED REGULATED SECTOR?
An article from Field Fisher on 29 September asked this question about a programme the stated aim of which was to raise £100 million per year from those business that contribute to the risk of economic crime to fight such economic crime. The levy will be collected by HMRC, the FCA and the Gambling Commission and the first payments are to be made in 2023/24 (a year later than originally planned).
In the latest TRACE podcast, Hans Greimel and William Sposato, journalists and authors, join the podcast to discuss their new book: Collision Course: Carlos Ghosn and the Culture Wars That Upended an Auto Empire. They cover Ghosn’s rise to hero status in Japan, his ultimate fall—arrest, detention and escape from the country—and the many compliance challenges raised by this strange story.
NORTH KOREAN SANCTIONS EVASION: IDENTITY LAUNDERING FOR SHIPPING EXPLAINED
On 13 September, Windward published an article saying that identity laundering challenges standard compliance measures and regulations. This practice makes use of advanced tools to confound the ability to verify the true identity of a vessel. Perhaps one of the most unsettling characteristics of laundering is that the IMO, which has long been a single source of truth for establishing vessel identities, is defrauded to obtain a false registered identity. To understand just how tricky these schemes are, th article takes one through the case of the Kingsway. This vessel underwent a sophisticated identity laundering operation to avoid international sanctions for almost 3 years.
CHINA RELEASES “FACT SHEET” ON US INTERFERENCE IN HONG KONG
On 28 September, Crowell & Moring reported that on 24 September, the Chinese Ministry of Foreign Affairs released the “Fact Sheet: U.S. Interference in Hong Kong Affairs and Support for Anti-China, Destabilizing Forces” which sets out a comprehensive chronological list of events detailing the US “interference” in Hong Kong.
EU FIGHT AGAINST MIGRANT SMUGGLING AND EXPLOITATION
On 29 September, the EU said that, a year on from the adoption of the proposal for a New Pact on Migration and Asylum, the Commission is presenting a Report on Migration and Asylum. The Commission is also adopting a renewed EU action plan against migrant smuggling and a Communication on the application of the Employers Sanctions Directive – involving sanctions against employers who hire irregular migrant workers. One of the targets of the action is “state-sponsored” migrant smuggling where a State artificially creates and facilitates irregular migration, using migratory pressure as a tool for political purposes. The actions of Belarus using migratory pressure at the EU’s external borders are said to exemplify this. It is explained that, in the case of migrant smuggling, migrants willingly engage in the irregular migration process by paying for the services of a smuggler to cross an international border. On the other hand, trafficking in human beings refers to people being trafficked for exploitation purposes – and note that trafficking in human beings does not necessarily take place across borders. Migrant smuggling and trafficking in human beings are often linked, as smuggled persons can become victims of traffickers for labour, sexual or other exploitation purposes.
US-SWISS DUAL NATIONAL PLEADS GUILTY TO BANK FRAUD CHARGES IN CONNECTION WITH INVESTMENT FRAUD SCHEME
On 29 September, a news release from the US DoJ announced that Lawrence Paul Schmidt (aka Lawrence Schmid), 61, formerly of Washington DC, has pleaded guilty to bank fraud after being extradited from the UK in late 2020 in connection with federal charges related to an investment fraud scheme. From 2008, Schmidt created several investment entities and related corporations through which he solicited funds, and between June 2008 and April 2014, he raised over $22 million in funds, which he then comingled and transferred between the various entities and his personal accounts. He knew that by January 2014 the bank accounts for the various entities contained insufficient funds to meet the companies’ financial obligations and, by March 2014, the approximate combined balance of all the entities’ bank accounts was just $8,600.
SOUTH AFRICA: REPORT IMPLICATES FORMER HEALTH MINISTER AND OTHERS IN COVID CONTRACT SCANDAL
In its 30 September edition, Anadolu said that a new report investigating corruption in South Africa’s Health Ministry is said to have implicated former Health Minister Zweli Mkhize, who resigned last month for interfering in the awarding of a $10 million coronavirus communications contract.
NEW ZEALAND: FINANCIAL MARKETS AUTHORITY (FMA) HAS ESCALATED ITS ENFORCEMENT APPROACH TO NON-COMPLIANCE WITH AML/CFT RULES
On 29 September, a release from Mondo Visione advised that a new report covers the regulator’s monitoring of the country’s AML/CFT Act over the past 3 years (1 July 2018 – 30 June 2021). The FMA is one of 3 supervisors under the AML/CFT Act, along with the Reserve Bank of New Zealand (RBNZ) and Department of Internal Affairs (DIA). The FMA supervises around 750 reporting entities under the Act, two-thirds of which define themselves as financial advice providers. The report says that the most common areas of concern were inadequate and outdated AML/CFT programmes and entity self-risk assessments, as well as insufficient CDD by entities. It is said that the FMA intends to continue monitoring firms’ processes, with more in-depth assessments of how they add new customers, as well as their monitoring of accounts and transactions, and reporting of suspicious activity to the FIU.
UK: ECONOMIC CRIME LEVY TO APPLY TO ART MARKET PARTICIPANTS
On 29 September, law firm Mishcon de Reya contains key considerations for Art Market Participants (AMP). It warns that the basis used to calculate an entity’s levy liability may disproportionately impact AMP as businesses that provide both goods and services. It says that there is now a short technical consultation running until 15 October, at which point the legislation will be included in the 2021-22 Finance Bill.
HEAD OF MAJOR RUSSIAN CYBERSECURITY COMPANY DETAINED IN TREASON CASE
On 29 September, Rferl reported that Russian security agents have raided the Moscow offices of Group-IB, a leading Russian cybersecurity company known for its work in tracking down hackers and fighting theft and cyberfraud. The company’s founder and chief executive, Ilya Sachkov, was detained on charges of state treason. In addition to Moscow, the company now has headquarters in Singapore, London, New York, and Dubai.
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The FCA in the UK has published this Guide which provides practical assistance and information for firms of all sizes and across all FCA-supervised sectors on actions they can take to counter the risk that they might be used to further financial crime. Its contents are drawn primarily from FCA and FSA thematic reviews, with some additional material included to reflect other aspects of the FCA financial crime remit. It says that effective systems and controls can help firms to detect, prevent and deter financial crime, and this Guide provides guidance on financial crime systems and controls, both generally and in relation to specific risks, including money laundering, bribery and corruption and fraud.
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