On 28 September, the Environmental Investigation Agency reported that Chinese national Yunhua Lin was the head of the ‘Lin-Zhang gang’, which had been operating out of Malawi for at least a decade. He was arrested in August 2019. He was sentenced to 14 years for dealing in rhino horn, and 6 years for money laundering – the sentences will run concurrently.
On 29 September, Front Page Africa reported that the FIU has uncovered that the risks of money laundering in the financial sector and among the ‘Designated Non-Financial Business Professionals (DNFBP) are high, and contained in the National Risks Assessment (NRA) report on ‘Money Laundering and Terrorist Financing in Liberia’. The NRA report, of which highlights are summarised in the article, is the first of its kind in Liberia, and is poised to provide stakeholders and the world on the risks Liberia faces when it comes to money laundering and terrorist financing. Now the FIU will launch an AML strategy and action plan on mitigating the risks relating to money laundering in Liberia. The report named corruption and bribery, illicit drug trafficking and tax evasion, among others, as the most committed predicate offences in Liberia. The FIU called for a tiered risk-based approach to be adopted in the financial sector.
Panama Covid-19 update – it has been reported that all of the 284,000 workers who were suspended last year, must have their contracts reactivated with effect from 1 November. However, it is also reported that of those workers who have already had their contracts of employment reactivated, between 3% and 6% have been laid off. In other news, the health ministry reported that a total of 2,248 schools are now open and that 92% of teachers are vaccinated.
28 September 2021
THE WAYS IN WHICH FRAUDSTERS WORK AND HOW TO SPOT THEM (PART 1)
On 24 September, DWF LLP published the first in a planned series of articles. The first is concerned with ‘Burner phones’, which are frequently used by criminals and wrongdoers to commit fraud. They are not registered to the user and are typically discarded once the fraud has been perpetrated. The problem which fraud victims face is how to prove who owned the phone? It highlights a recent case where the courts made an order requiring the mobile phone company to identify by triangulation the location of the user, and so help to link the alleged fraudster to the crime.
On 20 September, an article from Bright Line Law considers a recent Court of Appeal decision in the UK Post-Brexit, and says that the future of carousel fraud remains in the balance. The case involved a typical carousel (or MTIC) fraud, The fraud itself was a classic carousel fraud, in which mobile telephones were acquired from the EU, by a UK company, without payment of VAT; traded within the UK through a series of companies, with VAT being charged, before being re-exported, with fraudulent claims for VAT refunds involved in the purported trading were made. The importer, who would be liable for the VAT involved, in each case disappeared without accounting for VAT. It also notes that, worryingly, that while the number of missing traders peaked in 2006, there was an uptick in June this year, and that only time will tell whether carousel fraud is about to spiral out of control once more. It says there is (or was?) hope that fresh carousel frauds may be scuppered by Brexit, as such MTIC frauds traditionally exploited the cross-border EU VAT regime.
COGNIZANT IS PREPARING TO PAY $95 MILLION TO SETTLE A LAWSUIT THAT ACCUSED THE IT SERVICES COMPANY OF DEFRAUDING SHAREHOLDERS OVER BRIBERY IN INDIA
An article from Rahman Ravelli Solicitors in the UK on 23 September explained that the lawsuit was brought as a result of allegations that Cognizant had concealed bribes to officials in India; and that preliminary settlement of the proposed class action was submitted to the federal court in the US, and will require a judge’s approval.
HELICOPTER MAKER DEFRAUDED THE US MILITARY AND FACING AT LEAST $36 MILLION IN DAMAGES TO THE GOVERNMENT AND WHISTLEBLOWERS
On 27 September, the Wall Street Journal reported that Arizona helicopter maker backed by financier Lynn Tilton defrauded the US military, awarding $36 million in damages to the government and whistleblowers, an amount that could be tripled under a federal law. The case involved MD Helicopters Inc and its relationship with Colonel Norbert Vergez, an Army procurement officer involved in awarding contracts to the company in 2011 and 2012. After retiring from the Army, he went to work in 2013 for Tilton’s management firm Patriarch Partners LLC and later for MD Helicopters directly.
AUSTRALIA: ILLICIT TOBACCO TASKFORCE CALLS FOR REPORTS OF SUSPICIOUS ACTIVITY
On 27 September, a news release from AUSTRAC explained the role of the Illicit Tobacco Taskforce (ITTF), an Australian Border Force (ABF)-led multiagency taskforce established in 2018. The ITTF is focused on investigating, prosecuting, and dismantling international organised crime groups who use the proceeds of illicit tobacco to fund criminal activities. It says that collaboration between AUSTRAC’s Fintel Alliance and industry partners has improved the ITTF’s understanding of the illicit tobacco payment methods which criminals use. It has also assisted with identifying criminal associates, their assets, and confiscating the proceeds of crime. It asks that is someone identifies indicators of potential activity involving illicit tobacco, they should submit accurate and timely suspicious matter reports to AUSTRAC.
On 28 September, The Paypers carried an article which considers changes with regards to the EU 5th AML Directive on prepaid card transactions represent key information for the payments ecosystem, especially on the way it could impact the payment acceptance rate. It said that AMLD5 limits the possibilities for anonymous prepaid cards and gives FIU wider access to information through closer cooperation between Member States. Relations with high-risk third countries are subject to harmonised rules for enhanced CDD. It notes that, with regard to prepaid cards, AMLD5 lowers the €250 limit to €150. For cash redemption and withdrawals, the limit is lowered from €100 to €50, and the €50 limit now also applies to remote payment transactions where the amount paid exceeds €50 per transaction. The article concedes that the tightened controls may reduce fraud, but come at the cost of increased compliance burdens on obliged entities and less anonymity for customers.
UK WARSHIP SPOTS POTENTIAL VIOLATIONS OF NORTH KOREA SANCTIONS IN EAST CHINA SEA
On 27 September, NK News reported that the warship captured video and photographic evidence of vessels potentially violating U.N. sanctions against North Korea, the Ministry of Defence said. HMS Richmond, a Type 23 Royal Navy frigate from the UK Carrier Strike Group, was conducting an intelligence-gathering mission in the East China Sea.
DROPPING OF UK COURT ORDER DOES NOT MEAN PAKISTAN POLITICIAN ACQUITTED OF MONEY LAUNDERING CHARGES
On 28 September, BOL News reported that an adviser to Prime Minister Imran Khan has said that a recent order by a court in the UK quashing a order freezing assets did not mention PML-N President Shehbaz Sharif. Akbar and he had not been acquitted of money laundering charges. The NCA in the UK had said that it did not find evidence regarding “suspicious bank transactions”.
PARAGUAY AND US CAPTURE LEADER OF INTERNATIONAL MONEY LAUNDERING NETWORK
On 28 September, Diálogo reported that, in August, the Paraguayan and US governments carried out a coordinated action against the money laundering network of Kassem Mohamad Hijazi, a Brazilian citizen of Lebanese descent allegedly involved in funding Hezbollah terrorism. Forces raided his offices in Ciudad del Este, Paraguay, in the Tri-Border Area between Argentina and Brazil. A few hours after Hijazi’s arrest, OFAC imposed anti-corruption sanctions against Hijazi, as well as his first cousin Khalil Ahmad Hijazi and one of his associates, Paraguayan businessperson Liz Paola Doldán González.
DANISH GAMBLING OPERATORS REMINDED OF THEIR MONEY LAUNDERING ACT DUTIES
On 27 September, SBC News reported that Denmark’s gambling authority has reminded licensed incumbents of their duties to report suspicious AML activities to its FIU. The warning comes as FIU updates its list of AML indicators that must be reported on by Danish licensed-or-registered businesses working within high-risk compliance sectors such as banking, trading, insurance and gambling. In another notice the authority warned licence-holders of their obligations to ensure that employees are aware of the ‘anonymous whistle-blower scheme’ made available to report AML infringements.
OECD ASSESSMENT OF GREECE FOR BRIBERY OF PUBLIC OFFICIALS
On 28 September, Tovima reported that Greece is to undergo an evaluation by the OECD from 28 September over the implementation of the Convention for the Suppression of Corruption of Foreign Officials. 3 OECD officials, 2 assessors from Korea and 2 assessors from Lithuania (prosecutors and senior civil servants) will have working meetings with more than 80 representatives of the public and of the private sector.
A news release from Europol on 28 September advised that Spain, supported by Europol, coordinated an Europe-wide joint action days targeting facilitation of illegal immigration, drug trafficking and trafficking of firearms. The operation took place between 15 and 18 September and involved operational activities involving 27 countries (17 EU Member States and 10 non-EU countries) were also supported by Eurojust, Frontex, INTERPOL and other international organisations. The 330 arrests related to different crimes including drug trafficking, the facilitation of illegal immigration, document fraud and the trafficking of firearms.
UK: CORRUPT OLIGARCHS ESCAPE AS McMAFIA LAW LEFT UNUSED FOR 2 YEARS
On 28 September, the Evening Standard reported that campaigners fighting “dirty money” warn that Unexplained Wealth Orders introduced to target the illicit assets of the super-rich are turning into a damp squib.
RIO TINTO BEING INVESTIGATED BY FCA OVER CLAIMS IT MISLED MARKET ABOUT ITS SPRAWLING £5 BILLION COPPER MINE IN MONGOLIA
On 26 September, the Daily Mail reported that the minining company is being investigated by the Financial Conduct Authority over claims it misled the market about its sprawling £5 billion copper mine in Mongolia’s Gobi Desert. It is said to be questioning those previously linked to the project, and other authorities are also said to be looking into the allegations, including the SEC.
HOW ART DEALERS, REAL ESTATE AGENTS, AND HEDGE FUNDS ENABLE CORRUPTION
On 26 September, an article in Foreign Policy says that private investment companies such as hedge funds and private equity firms are only one sector among 10 types of white-collar professions whose loose rules pose grave dangers to US national security. Referring to new research by the author of the article, it says that others are real estate title insurers, company formation agents, art dealers, lawyers, accountants, covert public relations firms, real estate agents, luxury car sellers, and cryptocurrency businesses. Highly non-transparent and insufficiently regulated, these financial professions have a long record of being used by hostile regimes and their cronies to weaponise corruption, launder funds, or skirt sanctions.
A series of podcasts looks at the massive scandal that has hit the US Navy. The The corruption scandal involved bribery and a ship support contractor. The Washington Post called the scandal “perhaps the worst national-security breach of its kind to hit the Navy since the end of the Cold War”.
UK DELAYS DECISION ON EXTRADITION OF MIKE LYNCH TO US OVER AUTONOMY CASE
On 28 September, the Daily Telegraph reported that the Home Secretary has put back her verdict on whether to approve Lynch’s extradition until 29 November, following vocal campaigning from Tories ahead of the Conservative Party Conference. A court in July ruled that Lynch, founder of the former FTSE 100 company Autonomy, should be sent to the US to answer fraud charges over its £11 billion sale to Hewlett Packard in 2011.
An article in The Crime Report in the US on 22 September is concerned with the demise of the internally-regarded UK Forensic Science Service in 2012. It was replaced by a system of competitive tendering, and with the police services also determined to undertake certain basic scientific tasks themselves – by bringing these in house they thought that they could further save money and reduce the burden on their budgets. It is said that this new and cheaper approach has been in place for 9 years and has been subjected to comment by critics and supporters alike. The article considers the problems, including the collapse of one leading provider. It is said that, until now, There has never been a properly constituted academic analysis of what these changes have meant to UK forensic science provision and what the impact has been. Now, the article says, a new report does this.
SME360X – A TOOL FOR SME TO MEASURE THEIR IMPACT – BOTH POSITIVE AND NEGATIVE – ON NATURE AND THE ENVIRONMENT
On 28 September, the International Chamber of Commerce announced this new tool – a blockchain-based digital tool for small- and medium-sized companies to measure and value their impact on the environment. This innovative platform is designed to provide a sustainability score for SME to compare their performance based on a global sustainability benchmarking system. The soft launch of the platform took place during the SDG Business Forum. The ICC says that there are many external risks that threaten the survival of businesses everywhere – for example, a company’s factory location that was relatively risk-free when it was set up decades ago could now be facing extreme risks from stressed water resources and severe shifts in weather patterns; or a ban on single-use plastics could threaten the survival of a company; or community protests could lead to the shutdown of an industrial operation. ICC says that SME360X is designed to help its users identify the environmental risks that are most material to their business.
VENEZUELA’S ENDLESS CRISIS – A MAFIA STATE SLIDES TOWARD ANARCHY
On 28 September, Foreign Affairs carried this article which argues that the Venezuelan regime is not just a military dictatorship but also a criminal enterprise. It says that army generals run most of the rackets today; generals control everything from the well-stocked Caracas bodegones — high-end retailers where every kind of imported good is readily available for US dollars — to much murkier sectors, such as the blood-soaked trade in coltan, a rare earth element, from the jungles of the south. Then there is the involvement of Colombian criminals and rebels, such as FARC. It is said that Venezuela may seem stable from day to day, but it is inherently volatile.
US JUDGE CLEARS WAY FOR EXTRADITION OF FORMER PERUVIAN PRESIDENT TOLEDO
On 28 September, Reuters reported that a judge cleared the way for the former Peruvian President to be extradited to Peru on corruption charges, saying evidence of criminality presented in his case were “sufficient”. Peruvian authorities allege that Toledo, while serving as president between 2001 and 2006, negotiated bribes with Brazilian conglomerate Odebrecht SA.
US: 4 DEFENDANTS INDICTED FOR LAUNDERING TARGET GIFT CARDS PURCHASED BY FRAUD VICTIMS
A news release from US DoJ on 28 September announced that a grand jury had returned an indictment against 4 California-based defendants for their alleged roles laundering fraud proceeds stored on gift cards. They were charged with conspiring to launder proceeds of wire fraud that were stored on gift cards issued by retailer Target. Through purchases, returns and other transactions at multiple Target stores, the defendants and their co-conspirators sought to conceal the fact that the gift cards had been originally funded with fraudulent proceeds.
OFFSHORE FINANCIAL SERVICE EXECUTIVES AND A SWISS FINANCIAL SERVICES COMPANY CHARGED WITH CONSPIRACY TO HELP LARGE-VALUE US TAXPAYER-CLIENTS CONCEAL MORE THAN $60 MILLION
A news release from US DoJ on 28 September announced that from 2009 to 2014, 6 individuals, and Swiss-based Allied Finance Trust AG allegedly defrauded the IRS by concealing income and assets of certain US taxpayer clients with undeclared bank accounts located at Privatbank IHAG, a Swiss private bank in Zurich, Switzerland, and elsewhere. They are said to have used a scheme called the “Singapore Solution” to conceal the bank accounts of the clients, their assets, and their income from US authorities.
13 MEN ARRESTED – SUSPECTED OF TRAFFICKING ROMANIANS TO WORK AS BUILDERS IN THE UK
On 28 September, the Daily Mail reported that 13 men suspected of trafficking Romanians to work as builders in the UK have been arrested in London and Romania. A total of 54 men and a boy were found sleeping in ‘extremely cramped conditions’ and have now been taken into care. The alleged victims were found housed in multi-occupancy addresses with mattresses covering the floor.
INDONESIA DETAINS TANKER CREW IN ESCALATING DISPUTE WITH CAMBODIA OVER OIL CARGO
On 28 September, RFA reported that Indonesia, Cambodia, and a Bahamas-flagged oil tanker are embroiled in an escalating quarrel over nearly 300,000 barrels of crude oil that Cambodia alleges was stolen by the ship’s crew. An Indonesian court has sentenced the captain to 15 days in prison for anchoring his ship in local waters without permission’ then authorities detained the tanker’s 19 other crew members for questioning, in response to an Interpol red notice issued by Cambodia. The Singapore-based company that owns the ship said Cambodia’s claim that the oil cargo was transported illegally was “without foundation”. Cambodia has requested that the oil be returned, but the Indonesian navy said it would be up to the judiciary to decide what to do with the cargo.
HOWREMITTANCES HELD UP DURING THE COVID-19 PANDEMIC
On 18 September, a post on VOX from the Centre for Economic Policy Research says that, despite early predictions of a large collapse, remittance flows to developing countries have been surprisingly resilient during the COVID-19 pandemic. This post describes how migrants appear to have responded positively to rising COVID-19 infection rates in their home countries despite economic challenges in host countries. Fiscal stimulus in host countries played a role in keeping remittances buoyant. Travel restrictions, on the other hand, seem to have positively affected official remittance flows, suggesting such restrictions led migrants to use formal channels to send remittances instead of informal channels.
ISLE OF MAN REQUESTS DNFBP TO REPORT DEALINGS WITH MALTA
In its latest DNFBP Newsletter for September carried an article reminding registered persons that Malta has been removed from FATF List C (Equivalent jurisdiction list) and placed on List B (Jurisdictions that may pose a higher risk) due to FATF determining that it had not made sufficient progress on their action plan. If they have not done so already, any registered persons with business relationships or customers connected to Malta should provide the FSA with details of those business relationships, highlighting whether simplified measures have been used and, if so, explaining which measures.
HOW TO STRENGTHEN TRADE AND LABOUR COMPLIANCE WITH TECHNOLOGY AMID INCREASING CUSTOMS ENFORCEMENT
On 15 September, Global Trade Magazine published an article which says that as the world is slowly recovering from the pandemic and constraints in both materials and labour are creating unprecedented supply chain challenges, recent government actions are also generating often unexpected hurdles. For example, the US, Australia and Germany have recently proposed or enacted regulations or legislation aimed at ensuring companies take affirmative steps to prevent and eliminate forced labour in both their direct and indirect supply chains. As supply chains have grown more complex with additional tiers, the risk of exposure to potential human rights issues has grown as well. It says that developing or improving trade and labour compliance procedures often requires a multifaceted and customised approach, and that, for example, blockchain and digital token technology can provide immutable certification throughout the supply chain. It warns that without a way to ensure compliance, merchandise detained will not have sufficient documentation to rebut the presumption of a “reasonable indication” of the involvement of forced labour, which could lead to devastating losses of merchandise, exorbitant storage fees while admissibility is assessed, forced export or costly and protracted litigation.
On 27 September, the Basel Institute of Governance posed this question following publication of the latest Basel AML Index. This, it says, reveals that lawyers, accountants, real estate agents, casinos, precious metal dealers, and other so-called designated non-financial businesses and professions (DNFBP) are significantly less protected against money laundering and terrorism financing risks than financial institutions. They also do less to contribute to AML/CFT efforts. They should be considered a serious vulnerability in most jurisdictions’ AML/CFT framework. It says that it believes more supervision is urgently needed to close that gap. It then reproduces a relevant extract from the Index. Reviewing 2021 data on jurisdictions’ performance in respect of the relevant FATF Recommendation 28, which sets standards for the regulation and supervision of DNFBP, reveals that far too little has changed:
compliance with R.28 remains very lowat 45% on average;
15 jurisdictions still score a radical 0%for compliance with R.28; and
only 8 jurisdictions are fully compliantwith R.28.
Recorded Future, on 28 September, released a report which contained the results of analysed current data from its own sources, dark web, and open-source intelligence (OSINT) sources to review money laundering services within underground sourcing and the methodology and operations used by threat actors. This report expands upon findings addressed in an earlier report. The new report finds that –
Dark web money laundering services facilitate a multitude of combinations through which threat actors can clean their money and can transfer cryptocurrency into virtual currency, have funds sent to a bank account or payment cards, or exchange to physical fiat currency;
Money laundering services referenced within underground sources over the past year have consistently relied on money mules, cash-out requests, exchangers, or mixers to succeed;
Despite a high volume of arrests and takedowns of money laundering services or services that support laundering activity over the past year, underground actors generally appear disinclined to cease laundering operations they likely continue to deem profitable;
Cybercriminals are likely to adopt new technologies such as NFT and other laundering techniques in response to law enforcement action and growing private sector awareness of their activities; and
Ransomware operators likely use the multitude of dark web money laundering services operated by threat actors on well-known cybercrime forums such as Verified. Bitcoin is likely to continue to be the most widely used cryptocurrency in ransomware and laundering operations.
The earlier report, from February, set out to provide an overview of how cybercrime gets monetised. This describes 11 types of fraud methods and services currently used by threat actors to facilitate their campaigns. For each, it provides a brief overview of some notable recent developments, list some of the top vendors of these services on the criminal underground, and provide suggested mitigations for defenders to implement.
Following publication of the MER for Benin, FATF issued an updated consolidated schedule of assessments to date. It provides an up-to-date overview of the ratings that assessed countries obtained for effectiveness and technical compliance. These should be read in conjunction with the detailed mutual evaluation reports, which are available on the FATF website.
On 28 September, FATF released the mutual evaluation report dated May 2021 and prepared by the FATF-style regional body GIABA. This evaluation was based on the 2012 FATF Recommendations, and was prepared using the 2013 Methodology. The evaluation was based on information provided by the country, and information obtained by the evaluation team during its on-site visit to the country. The findings of this assessment have been reviewed and endorsed by the FATF.
Benin had previously undergone a GIABA Mutual Evaluation in 2009, conducted in accordance with the 2004 FATF Methodology. This evaluation and the 8 subsequent follow-up reports have been published and are available at the GIABA website. Following the adoption of that MER in May 2010, Benin was placed under the Expedited Regular Follow-up process and only exited from that process in November 2018.
On 28 September, the Global Initiative Against Transnational Organised Crime released this report, the result of a 2-year endeavour to evaluate levels of crime and resilience in all 193 UN member states. Through this data, the organisation says that it is hoped that the Index will help inform a truly global response to the pervasive threat of transnational organised crime. It also says that, as a snapshot of 2020, the Index also highlights the adaptability of organised crime to the pandemic. In addition, by providing a consolidated hub of data and baseline evidence of the phenomenon in countries across the world, the Index aims to be a catalyst for further debate on transnational organised crime.
On 27 September, the Basel Institute on Governance posed the question: as countries improve their capacity to recover assets derived from criminal activity, they are faced with a challenge: how should these assets be managed while the judicial process is underway? It says that there is no set model for the managing of assets in criminal or non-conviction based forfeiture cases. The implementation of a system for asset management will be determined by each state according to their own law. It provides links to conventions, treaties and sources of guidance.