Sanctions, proliferation, money laundering, export and trade control news etc
Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section
On 19 April, an article from White & Case says that governments worldwide are sharpening their focus on money laundering executed through international trade. Companies active in international trade, regardless of where they are located, should take notice as their supply chains continue to come under greater scrutiny, as international attention on trade-based money laundering continues to grow. The article also mentions a corollary process called Trade-based Terrorist Financing (TBTF), which uses the same processes as TBML to finance terrorism, but the value moved can come from both legitimate and illegitimate sources. It is important, it says, to note that the aim of TBML/TBTF is the movement of money, and the movement of goods is the mechanism for obscuring the true origins or purposes of the money. One of the article’s conclusions is that, while most such companies do not have specific obligations to address TBML/TBTF yet, the expectations on such companies continue to rise, as AML stakeholders understand the value such companies hold to understanding and combatting TBML/TBTF.
On 19 April, an article from the Center for Strategic and International Studies takes the form of a Q&A about the situation in Xinjiang. It points out that, among policymakers there is bipartisan support for legislative and executive action to sanction China and curb imports of products with forced labour in their supply chains. However, there is a practical conundrum. The US — and global — solar panel manufacturing industry is dependent on a supply of cheap critical components that are made in Xinjiang. It argues that the Biden administration and US Congress must navigate carefully to align measures against China’s human rights abuses with domestic support for the US solar industry and consumer market.
On 20 April, the Law Society of Scotland advised that the Legal Sector Affinity Group (LSAG), which includes the Society and all legal sector supervisors named in the AML regulations, has released further guidance for specialist areas of legal practice. A redraft of the main Part 1 guidance for the legal sector had been released in January. The new Part 2 AML guidance comes in 3 sections – Part 2a – for barristers/advocates; Part 2b – for legal professionals providing trust and corporate services; and Part 2c – for legal professionals providing notarial services.
On 20 April, ITV News reported that the risk of Jersey’s finance industry and non-profit organisations (NPO) being used to fund terrorism has been classed as medium to low. This is according to a report produced by the National Risk Assessment (NRA) Working Group produced in response to requirements of FATF.
The EU agency for criminal justice cooperation has published a report on 19 April which deals with experiences and challenges in judicial cooperation. It says that organised criminal networks operating in Europe benefit from open borders and take advantage of the complexity of the many different legal frameworks in the EU. This report looks at experiencesand challengesin judicial cooperation on the fight against drug trafficking. The methodologyused consisted of the identification and analysis of a selection of suitable cases, drawn from the practical experience gained through the agency’s support for drug trafficking casework between 2017 and 2020 (1,838 cases). It concludes that, inter alia, financial investigation in drug trafficking cases and particularly asset freezing, confiscation and recovery have been shown to be of the utmost importance, considering their impact on organised crime groups
EU Regulation 2021/638/EU imposed sanctions on 9 additional persons and 2 entities connected to the military junta. entities are owned by the Myanmar Armed Forces and provide it with revenue. The sanctions “target the economic interests of Myanmar’s military regime, which is responsible for the overthrow of Burma’s democratically elected government”.
Panama Covid-19 update – missed yesterday’s statistics, but it seems “only” 1 fatality but 244 new cases, with 4,043 active cases and 55 in ICU.
Today, reports say there has been again just 1 fatality, with 203 new cases for a total of 4,020 active cases. 311 people remain in hospital wards, with another 56 in ICU.
19 APRIL 2021
BREXIT MYTH BUSTERS
On 15 April, an article from Herrington Carmichael Solicitors says that between the UK and the EU coming into force on 1 January, there have been many Brexit myths and misconceptions that the firm has tried to clear up in the article. It addresses – EU law no longer has any applicability in the UK; you don’t need to make any changes to existing agreements as a result of Brexit; you now need to change my governing law and jurisdiction clauses given we are no longer in the EU; there are no import tariffs or other customs duties or quotas on the movement of goods between the EU and the UK; as a supplier, you are responsible for any increased costs of providing goods/services to my clients in the EU as a result of Brexit.
UK: LATEST SFO INVESTIGATION EVIDENCE OF GROWING COOPERATION BETWEEN ENFORCEMENT AGENCIES
On 15 April, a post from Burges Salmon says that the SFO has opened an investigation regarding suspected fraudulent activity in connection with the Raedax Consortium group of companies, which includes Buy2Let Cars, PayGo Cars, Raedex trading as Wheels4Sure and Rent2Own Cars. The SFO announcement acknowledged assistance the SFO has received with the matter from the National Economic Crime Centre (NECC) and FCA, and from the NCA and City of London Police.
BACK TO BASICS: INTERNATIONAL TRADE AND SUPPLY OF SERVICES
On 16 April, an article from Gowling WLG considers how the international trading rules apply to cross-border trade in services. It advises that businesses supplying services across borders should ensure that they are aware of any applicable conditions on the sector in which they operate, noting that the restrictions may vary depending on the mode through which the service is delivered.
CANADA: FINTRAC UPDATES GUIDANCE ON RECORD KEEPING, CLIENT IDENTIFICATION, BENEFICIAL OWNERSHIP AND CORRESPONDENT BANKING
On 14 April, McCarthy Tetrault published an article saying that FINTRAC updated its guidance in March which reflects the series of regulatory amendments made to the law over the past few years, the majority of which will come into force on 1 June. The firm has previously published summaries of the regulatory amendments and this latest article outlines some notable changes to the various guidance documents.
4 DRUGMAKERS ARE SLATED TO GO ON TRIAL IN CALIFORNIA OVER CLAIMS THEY FED THE OPIOID CRISIS IN THE US
On 18 April, the Wall Street Journal reported that the case is just the second to go to trial out of thousands of similar lawsuits accusing the drug industry of fuelling an opioid epidemic. 4 California communities allege that Johnson & Johnson , Teva Pharmaceutical Ltd. , Allergan and Endo International PLC ran misleading marketing campaigns that played down the risks of opioid addiction to boost sales of powerful prescription painkillers.
On 19 April, a blog post from OFSI says that the new UK autonomous sanctions framework in place since January brings important opportunities and changes. Among the updates contained in these new regulations, some of these specifically relate to licensing. The post provides an overview of the licensing process, explaining the new changes, OFSI process and some top tips on how to complete a licence application.
ITALY’S ’NDRANGHETA MAFIA CLAN SPREAD TENTACLES AND TOXIC WASTE INTO TUSCANY
On 19 April, an article from KYC 360 reported that prosecutors claim that Italy’s most dangerous mafia clan has moved into Tuscany, buying businesses, dumping toxic waste in streams and using it to lay the foundation for roads through one of Italy’s most verdant regions.
DANSKE BANK CEO RESIGNS AFTER BEING NAMED A SUSPECT IN DUTCH PROBE
On 19 April, Reuters reported that Chris Vogelzang, the CEO of Denmark’s Danske Bank resigned after Dutch authorities named him as a suspect in an investigation into violations of money laundering regulations at ABN Amro.
NETHERLANDS: ABN AMRO TO SETTLE MONEY LAUNDERING PROBE FOR €480 MILLION
On 19 April, Reuters reported that Dutch bank ABN Amro said it had reached a €480 million settlement with prosecutors in the Netherlands over money laundering allegations. The prosecution service said in a statement its investigation was ongoing and that 3 former board members, who it did not name, had been identified as suspects said to be “effectively responsible for violation” of AML laws. The investigation into ABN started a year after fellow Dutch bank ING paid a record fine of €775 million to settle a similar case.
SPANISH POLICE RAID FACTORY MAKING 3D-PRINTED WEAPONS
On 19 April, EU Observer reported that Spanish officers raided an illegal 3D-printing weapons workshop in Santa Cruz de Tenerife in Spain’s Canary Islands and arrested the owner, who has been charged with illegal possession of weapons and explosives.
On 19 April, the Department of Business, Energy and Industrial Strategy published information concerned with the inquiry into the scandal at the Post Office which saw subpostmasters accused of fraud and theft. The Inquiry is seeking accounts from those affected (including but not limited to postmasters) and information from the organisations: the Post Office Limited, Fujitsu, the Department of Business, Energy and Industrial Strategy, and UK Government Investments.
LITHUANIA: LARGE CONSIGNMENT OF SMUGGLED CIGARETTES FROM BELARUS SEIZED
On 19 April, Belsat reported that Lithuanian border guards had detained a large batch of smuggled cigarettes from Belarus – about 300 thousand packs of cigarettes “NZ Gold” and “Minsk Superslims” with an estimated value of more than €1 million.
HONG KONG: CUSTOMS SEIZE COUNTERFEIT SHOES AND HANDBAGS WORTH HK$2.7 MILLION
On 19 April, The Standard reported that Customs seized around 22,000 items of suspected counterfeit goods worth about HK$2.7 million, after officers inspected 2 40-foot containers arriving in Hong Kong from Mainland China. They found 2 batches of suspected counterfeit goods, including smart phone accessories, handbags, shoes and watches inside the containers; and initial investigation suggests that the counterfeit goods were intended for re-export to North American and Middle East countries.
ILLEGAL IMPORTED HARMFUL ANTS SEIZED BY CHINESE CUSTOMS
On 19 April, Global Times reported that Customs in Qingdao of East China’s Shandong Province seized a consignment of imported living ants which were identified as illegal imported harmful insects. A total of 38 ants were kept in test tubes concealed in a foam parcel box. Living insects from abroad are not allowed to enter China by post.
COURT OF APPEAL ALLOWS APPEAL BY COUNCIL OVER £270 CONFISCATION ORDER FOR UNLAWFUL FLATS CONVERSION WHEN IT CLAIMED FOR MORE THAN £455,000
On 19 April, Local Government Lawyer reported that the London Borough of Barnet has won an appeal after the Crown Court imposed a confiscation order of £270 when the council had contended for more than £455,000. The original case involved an alleged offence of failure to comply with an enforcement notice, and at some point the property involved had been converted from a 5-bedroom single dwelling into separate flats. The defendant had been fined £10,000.
UK: WOMAN JAILED FOR FRAUD FOR PROVIDING UNQUALIFIED IMMIGRATION ADVICE
On 19 April, Legal Futures reported that a woman has been jailed for fraud and providing unqualified immigration advice and services, with her husband sentenced to community service. The court heard that many of the complainants handed over large amounts of money and legal documents such as birth certificates and passports, and the defendants refused to hand them back or even to speak to the complainants leading to one contacting the Legal Ombudsman.
The RAND Corporation has published a report saying that the Iran Threat Network (ITN) is a formidable force made up of tens of thousands of fighters and spreads across the Middle East and South Asia and has ties to and influence in Africa and Latin America. It affords Iran the ability to have a presence and project power throughout the region, and to deter and harass its adversaries. The network consists of diverse and disparate groups, which is reflected in the nature and amount of support provided and the level of command and control exerted by Tehran over each group. These differences allow Iran to employ the ITN to achieve four buckets of political and military objectives. It argues that Iran’s further expansion of the ITN would increase its ability to use the network to undermine stability in the region, antagonise US allies and partners, undercut US influence, and pose a risk to US military personnel. In light of this expansion. The study explores Iran’s relationships with its nonstate network to better enable the US Government to counter Iranian subversion in the region via the ITN. It classifies the ITN under 4 headings – Targeters, Deterrers, Stabilizers, and Influencers.
UK REGTECH INDUSTRY BACKS FCA CALL FOR “PURPOSEFUL” AML POLICIES
On 19 April, a release on Mondo Visione reported that regtech industry experts have spoken out in support for the recent call for ‘purposeful’ AML controls and financial fraud action. The FCA Executive Director for Enforcement at the FCA had called for better systems and controls that are “purposeful, efficient and courageous in identifying suspicious activity”, and that system and controls currently in place are flawed. In response, a representative of the regtech sector is quoted as saying that existing money laundering and financial crime systems and controls in the UK are far from perfect, and the advent of Covid-19, remote working, and digital banking has made the war against financial crime all the more challenging.
THE BANK OF ENGLAND AND HM TREASURY HAVE ANNOUNCED THE JOINT CREATION OF A CENTRAL BANK DIGITAL CURRENCY (CBDC) TASKFORCE TO COORDINATE THE EXPLORATION OF A POTENTIAL UK CBDC
A release on Mondo Visione on 19 April announced that the Bank of England and HM Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits, rather than replacing them. The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore CBDC, in line with their statutory objectives, and to promote close coordination between them. The Bank of England has also announced it will establish a CBDC Unit. This new division of the Bank of England will lead its internal exploration around CBDC. It will also lead the Bank’s external engagement on CBDC, including with other UK and international authorities.
PHILIPPINES SEIZES ILLEGALLY HARVESTED GIANT CLAM SHELLS WORTH $25 MILLION
On 17 April, the Guardian reported that around 200 tonnes of illegally harvested giant clam shells worth nearly $25 million have been seized in one of the biggest known operations of its kind in the country. Conservationists have expressed alarm over the surging illicit trade in the endangered creatures, which are used as a substitute for ivory. The Philippines is home to most of the world’s giant tropical clam species.
MEDICINAL CANNABIS COMPANIES BEGIN TO LIST ON LONDON STOCK EXCHANGE
Law firm Bird & Bird has produced an update saying that a number of cannabis companies have been vying to be the first to list on the London Stock Exchange after the FCA gave the green light to certain specific cannabis-related businesses last year.
MOST CYPRUS PASSPORTS ISSUED IN INVESTMENT SCHEME WERE ‘ILLEGAL’
On 16 April, Al Jazeera reported that more than half the passports Cyprus issued to rich foreigners in an investment scheme were illegal, a government-appointed board of inquiry has found. More than 3,000 foreign investors paid up to €2 million for Cypriot passports between 2013 and 2019. The programme was terminated last year after a corruption scandal.
LEBANON-SYRIA: SMUGGLING AND SANCTIONS, THE NEW FRONT LINE
On 16 April, France 24 carried a report saying that, in order to dodge international sanctions on the Assad regime products such as food and petrol are being smuggled across the border into Syria on a massive scale. Reporters have investigated a phenomenon that costs the Lebanese economy several million euros a day and prevents the international community from coming to its aid.
BOOMS AND BUSTS IN MARITIME TRANSPORT COSTS AND THEIR DRIVERS
On 18 April, VOX at the Centre for Economic Policy Research says that, as the recent past has shown, maritime transport costs are subject to wide swings. The article analyses a large new dataset on dry bulk freight rates from 1850 to 2020, when maritime transport costs fell 79%. Turning to the drivers of booms and busts in the dry bulk shipping industry, it finds that shipping demand shocks dominate both fuel price and shipping supply shocks. Shipping demand shocks have increased in importance over time while shipping supply shocks have become less relevant.
On 19 April, SBC Americas reported that the American Gaming Association (AGA) has released a white paper underlining the dangers of unregulated, illegal gambling machines proliferating across the US. These illegal gambling machines, AGA says, are not subjected to meaningful testing, licensing or regulatory standards and are often tied to criminal activity, including money laundering, drug trafficking and violent crime. The report recommends that law enforcement and policymakers need to prioritise robust enforcement of laws to root out illegal and unregulated gaming machines.
BULGARIA: PROSECUTORS DISRUPT COMPUTER FRAUD AND MONEY LAUNDERING RING
On 19 April, the Bulgarian News Agency BTA reported that prosecutors claimed that, over a period of 2 years, the criminal operation withdrew or rechannelled $1.2 million and €200,000 by using computer fraud methods against companies in various countries, including one in Hong Kong. After hacking the victims’ bank accounts, the group transferred the money to front men. The financial flow sometimes went through several countries and the final destination was China.
On 19 April, the Jersey FSC released a recording of a recent webinar about the changes to the AML/CFT Handbooks. It says that the amendments are a direct result of aligning the regulatory regime with FATF Recommendations and industry consultation feedback.
FinCEN SEEKS COMMENT ON BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
On 19 April, a post from Crowell Moring advised that FinCEN was seeking public comment on 48 questions with respect to the implementation of the beneficial ownership reporting requirements in the Corporate Transparency Act (CTA) and the implementation of the related database maintenance use and disclosure provisions. The deadline for comment is 5 May.
On 19 April, OFAC advised that General License 2H, which authorises a 45-day wind-down period for certain transactions involving 9 sanctioned Belarusian state-owned entities, and entities in which they own a 50% or greater interest. It replaces previous General License 2G, which previously authorised such transactions.
K2 Integrity has produced a Policy Alert saying that on 15 April, the Biden Administration imposed new sanctions on Russia in response to its efforts to interfere in US and other countries’ elections; the Solar Winds hacks; and Russia’s continued occupation of the Crimea region of Ukraine. These new sanctions include broad authority under a newly-issued Executive Order to impose sanctions across any sector of the Russian economy, including asset freezes, additional targeted designations, and visa restrictions.
SETTLEMENT AGREEMENT BETWEEN OFAC AND ALLIANCE STEEL INC OVER IRAN SANCTIONS VIOLATIONS
A news release from OFAC on 19 April advised OFAC had agreed a settlement with Alliance Steel Inc, a designer and manufacturer of prefabricated steel structures headquartered in Oklahoma City, Oklahoma. It agreed to remit $435,003 to settle its potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations. It is said that on at least 61 occasions between October 2013 and October 2018, it knowingly imported engineering services from a third-party engineering company located in Iran. Multiple members of Alliance senior management were aware of these transactions and participated in the approval process, which, in each transaction, included reviewing a 2-page invoice containing the company’s permanent address in Tehran.
MARITIME PIRACY ON THE INCREASE IN THE GULF OF GUINEA AND AMERICAS
On 16 April, Homeland Security Today reported that the Gulf of Guinea accounted for 43% of all reported piracy incidents in the first 3 months of 2021, according to the latest figures from the International Chamber of Commerce’s International Maritime Bureau (IMB), although the overall number of incidents are down compared to 2020, and there was only one incident of reported piracy around Somalia. In the Americas, it mentions reported piracy incidents in Callao Anchorage, Peru and container vessels are the target of attacks while underway or at anchor in Colombian waters. It says that in these attacks, perpetrators have been known to open containers and steal cargoes even while vessels are under pilotage.
UK: NEW CRIMINAL, CIVIL AND INVESTIGATORY POWERS FOR THE PENSIONS REGULATOR
On 19 April, Bryan Cave Leighton Paisner produced an article saying that the Pension Schemes Act 2021 significantly augments the enforcement powers of the Pensions Regulator. The Act not only creates new criminal offences but also enables the regulator to make use of civil financial penalties and new powers of investigation. The article takes a look at the key changes industry which practitioners should note.
US: SENATE EYES NEW ROLE FOR CFIUS IN COMBATING ‘FOREIGN MALIGN INFLUENCE OR ESPIONAGE ACTIVITIES’ TARGETING ‘INSTITUTIONS OF HIGHER EDUCATION
On 19 April, an article from Arent Fox says that a potential expansion of the powers of the Committee on Foreign Investment in the United States (CFIUS) suggests broader congressional concern about attempts by Chinese entities to circumvent CFIUS reviews and access critical technologies.New legislation may soon expand the jurisdiction of CFIUS. The Strategic Competition Act, if enacted, would create a new role for CFIUS in preventing “foreign malign influence or espionage activities” directed towards “institutions of higher education” in the US – defined as, generally speaking, a nationally accredited public or private college or university that receives federal funding. This legislative provision is especially noteworthy because it would represent an expansion of CFIUS jurisdiction to include transactions that are not actually investments.
ITALIAN MAFIA HAS MASTERED COMPLEX ECONOMIC SCHEMES
On 19 April, an article from OCCRP reported that the Italian mafia is no longer just a violent gang running local rackets and smuggling drugs, but has mastered complex financial operations that can impact the country’s economy, experts have said following a massive bust of money laundering operations run by several Italian mafia groups.
US: CANTON WOMAN SENTENCED FOR ROLE IN BUSINESS EMAIL COMPROMISE (BEC) SCHEME
A news release from the US DoJ on 19 April announced that Bintu Toure, 26, was sentenced to 1 year and 1 day in prison, 3 years of supervised release, restitution and forfeiture. In January Toure had pleaded guilty to wire fraud and money laundering conspiracy. She conspired with others to open numerous bank accounts in Massachusetts in the name of sham companies, as part of a BEC scheme — a sophisticated scam often targeting businesses involved in wire transfer payments.
MORE IRISH-BRITISH TRADE DIVERTED VIA NORTHERN IRELAND POST-BREXIT
In its 20 April edition, Hellenic Shipping News reported that more companies are shipping goods between Ireland and Britain via Northern Ireland to avoid post-Brexit red tape and delays, the head of Dublin Port has said, describing it as a “worrying” and potentially permanent development. The introduction of checks on some goods since neighbouring UK left the EU has led to a sharp fall in trade between Ireland and the UK and a big increase in shipping routes from Ireland to mainland Europe. Dublin, Ireland’s largest port reported a 29% year-on-year drop in trade volumes between Ireland and Britain in the first quarter. It is also reported that Irish ro-ro volumes to and from France, Belgium and the Netherlands increased by 26% in the first quarter while lift-on/lift-off services between Dublin Port and mainland European ports were 18% higher.
On 19 April, a depressing article in Rferl reported that in 2015 city officials in Khujand and private Chinese investors had signed an agreement to build a massive residential and leisure complex called Chinatown in the neighbourhood, replacing its one-story houses with modern apartment blocks and recreational facilities. More than 30 houses were bulldozed in the picturesque area on the banks of the Syrdaryo River when the project officially kicked off in August 2015. The excited residents were promised new homes in Chinatown’s first buildings, which authorities said would be completed within a year. The project, which also included recreational and leisure facilities, was supposed to be finished in 2020. It seemed too good to be true – and it was. Khujand officials say the Chinese investors abandoned the project in 2018.
A release on Mondo Visione on 19 April reported that the SEC had charged Israeli-based Spot Tech House Ltd (formerly known as Spot Option Ltd, Malhaz Pinhas Patarkazishvili (aka Pini Peter) and Ran Amiran. The SEC alleges that Spot Option – under the control of Patarkazishvili, the company’s founder and former chief executive officer, and Amiran, the company’s former president – defrauded retail investors worldwide through a scheme involving the sale of online binary options.
This new standard, published on 13 April, specifies requirements and provides guidelines for establishing, developing, implementing, evaluating, maintaining and improving an effective compliance management system (CMS) within an organisation. It is said that the standard is applicable to all types of organizations regardless of the type, size and nature of the activity, as well as whether the organisation is from the public, private or non-profit sector. A CMS is a set of processes to make sure that an organisation operates in accordance with all applicable laws, regulations and codes of conduct. ISO 37301 and ISO 37001 (the standard for anti-bribery management systems) are both based on the ISO principles for management systems, such as the risk-based approach as well as the “Plan-Do-Check-Act” (PDCA) process cycle. Whereas ISO 37301 takes a holistic approach to compliance management, ISO 37001 focuses on anti-bribery management. Because both standards are based on the same principles, it is said that they can easily be implemented in an integrated way.
On 15 April, EurActiv published an article saying that worrying allegations of political interference in Slovenian law enforcement agencies tasked with investigating and prosecuting foreign bribery have been mounting in recent years. In particular focus has been the National Bureau of Investigation. The article reports on a report from the OECD on 18 March which details Slovenia’s achievements and challenges with respect to implementation and enforcement of the OECD Anti-Bribery Convention, as well as progress made since the Phase 3 evaluation in 2016.