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 22 October, FATF published a report saying that enhancing cross-border payments is a key priority of the G20. FATF had initiated an industry survey in consultation with the Basel Committee on Banking Supervision (BCBS) to identify areas where divergent AML/CFT rules or their implementation cause friction for cross-border payments. The survey results highlight, among others, that lack of risk-based approach and inconsistent implementation of the AML/CFT requirements increases cost, reduces speed, limits access and reduces transparency. Inconsistent national approaches also create obstacles in identifying and verifying customer and beneficial owners, effective screening for targeted financial sanctions, sharing of customer and transaction information where needed, and establishing and maintaining correspondent banking relationships.
On 22 October, a briefing paper from the EU Institute for Strategic Studies is concerned with the extraterritorial effects of US sanctions and why they pose a challenge to the EU. It outlines the responses that have been activated or are being contemplated to counter them, explaining why an effective remedy remains elusive. It concludes by indicating possible ways forward.
On 19 October, an article from Wolters Kluwer Asia Pacific was said to be the first in a series of 3 concerned with the potential impact of economic sanctions on arbitral and financial institutions. They will address critical issues faced by such institutions as a result of restrictions on transfers of funds under primary and secondary sanctions programmes. Subsequent entries Subsequent articles will focus on US secondary sanctions against Iran and against Russia. The first discusses the potential effects of asset freezes. It points out that, in general, sanctions regimes do not prohibit the submission to arbitration of disputes involving one or more targeted parties. However, sanctions imposing an asset freeze usually prohibit making available to designated persons, directly or indirectly, any assets or economic resources. Hence, it might be unlawful to transfer back the unused portion of an advance on costs, and it may need to be placed in a frozen account instead.
On 20 October, an article from Doughty Street Chambers starts by asserting that the increased use of virtual currency as a payment method brings greater exposure to sanctions risks, whether in respect of UN and trade sanctions or listed individuals and entities. Taking as a starting point recent OFAC advice, it says that although directed to liability in the US, the considerations involved will also inform good compliance practices under the UK autonomous sanctions regime. It says that the advice from OFAC highlights sanctions compliance best practices tailored for the crypto-asset sector applying the 5 essential components of OFAC’s preferred sanctions compliance programme.
Panama Covid-19 update – 205 new cases and 3 new fatalities; 2,316 active cases, with 38 in ICU and 163 in other wards.
21 OCTOBER 2021
16 ARMED ROBBERIES AGAINST VESSELS IN SINGAPORE STRAIT DURING OCTOBER
On 21 October, Seatrade Maritime News reported that the ReCAAP Information Sharing Centre has issued another alert on boarding of vessels in the eastbound lane of the Singapore Strait with 6 incidents this month.
HMRC FORFEITURE ORDERS OVER 5 BUILDING SOCIETY ACCOUNTS UNDER THE CONTROL OF A MAN IS SUSPECTED OF FRAUDULENTLY CLAIMING OVER £20 MILLION IN FURLOUGH FUNDS FOR MADE-UP EMPLOYEES ACROSS 4 COMPANIES
On 19 October, Stevens & Bolton reported that the 4 companies under the control of Rajanish Garibe. Garibe show very little evidence of trading activity and are all registered to a virtual mailbox service in London.
WHY IT MATTERS WHETHER SOFTWARE IS “GOODS” OR “SERVICES”
On 19 October, an article from Travers Smith LLP says that a recent judgment of the Court of Justice of the EU (CJEU) has significant consequences for software providers which conduct sales of software to their customers through agents, both in the EU and the UK. It also highlights a wider debate around whether software should be treated as goods or services and why this matters. While it says that, sStrictly speaking, the CJEU’s judgment only settles the question of whether software is goods in relation to the narrow issue of the EU Commercial Agents Directive, it highlights a wider debate as to the treatment of software, for example, in relation to consumer law.
TIEA: MUTUAL EXCHANGE AGREEMENTS IN THE OFFSHORE WORLD
On 20 October, an article from Collas Crill explained that, according to the OECD, there are currently 518 Tax Information Exchange Agreements (TIEA), which were entered into between 2000 and 2012. The article considers how courts have approached TIEA requests in 3 offshore jurisdictions – Jersey, Guernsey and the BVI. While highlighting common principles, the article notes that an authority will not be expected to investigate and make determinations on issues of foreign law, particularly where they are not raised. Neither will it be obliged to provide the TIEA request itself. Whilst some information must be provided, confidentiality is regarded as important.
SWEDEN: DANSKE BANK HAS DEFICIENCIES IN ITS AML WORK
On 20 October, the Swedish Financial Supervisory Authority released a news release saying that Danske Bank has not sufficiently assessed the risk of how the bank’s products and services in Sweden may be used for money laundering and terrorist financing. It must therefore rectify these deficiencies no later than 30 June 2022.
UK: GOVERNMENT TASKFORCE TO TACKLE SHARP RISE IN SCAMS DURING PANDEMIC
On 21 October, the Guardian reported that a government taskforce representing banks, telecoms companies and consumers is to meet the Minister for Security to discuss ways to tackle the sharp rise in scams that has hit the UK since the start of the pandemic. The relaunch of the government’s Joint Fraud Taskforce is accompanied by new charters committing the sectors used by criminals to actions to protect people’s money.
AUSTRALIA: REGULATOR ORDERS BLOCKING OF ANOTHER 5 OFFSHORE GAMBLING SITES
On 21 October, iGB reported that the Australian Communications and Media Authority (ACMA) has requested ISP in the country block access to another 5 offshore online gambling websites. It says that ACMA has successfully blocked a total of 324 websites it said were operating in Australia illegally.
NEW US EXPORT RULE WOULD LIMIT SALES OF HACKING TOOLS TO RUSSIA AND CHINA
On 20 October, the Wall Street Journal reported that the Commerce Department had unveiled export controls intended to curb the sale of hacking tools to countries including China and Russia. It will require companies to obtain a licence to sell hacking technology to certain countries and takes effect in 3 months’ time.
UK: LAW SOCIETY CRITICISES AML REGULATION FOR BEING ‘TICK BOX EXERCISE’
On 21 October, The Negotiator said that the Law Society for England and Wales has criticised the UK AML rules as a ‘tick box’ exercise that does not take a risk-based or proportionate approach to regulation. It says that many estate agents in more far-flung areas of the UK away from prime central areas feel the AML regulations they must follow by law are overly heavy-handed given the low risk of money laundering involved.
EU LEGISLATORS APPEAR TO BE APPROACHING COMMON GROUND ON SEVERAL KEY POINTS OF THE E-EVIDENCE CROSS-BORDER PROPOSAL
On 21 October, EurActiv reported that a legislative proposal is intended to facilitate law enforcement access to electronic evidence in another Member State. The proposal dates back to 2018 and has been the object of several discussions between the EU Parliament, Council, and Commission.
CUM-EX TAX FRAUD REVELATIONS FURTHER ‘BLOTCH’ ON IRELAND’S REPUTATION
On 21 October, the Irish Times reported that revelations that Ireland facilitated a financial fraud scheme that siphoned billions of euros from other European countries’ tax authorities have been described as a further “blotch” on the country’s record. Irish-based funds and banks were used by a group of hedge funds to carry out the scheme, which was based around claiming multiple refunds of dividend withholding tax.
CUM-EX LEAVES LUXEMBOURG TAXPAYERS €2.2 BILLION SHORT
On 21 October, the Luxembourg Times reported claims that the tax fraud scheme cost Luxembourg taxpayers €2.2 billion over the past 2 decades. The total loss of tax revenue in 12 countries – including Germany, France and Belgium – is now estimated to be €150 billion, almost 3 times the original amount.
SAUDI ARABIA ARRESTS 21, MAINLY PUBLIC OFFICIALS, FOR CORRUPTION
On 20 October, OCCRP reported that Saudi authorities said they have arrested 21 people accused of corruption and fraud. In the latest round of arrests, authorities have detained public officials who allegedly received bribes to issue permits that should not have been issued or fix other administrative problems. Among the accused are also managers of companies, bank employees, doctors and citizens who paid the bribes.
US CUSTOMS WITHHOLD RELEASE ORDER ON SUPERMAX CORPORATION AND ITS SUBSIDIARIES OVER RUBBER GLOVES
On 20 October, a news release from US Customs & Border Protection reported that officers at all US ports of entry will detain disposable gloves produced by Supermax Corporation Bhd.’s wholly-owned subsidiaries, Maxter Glove Manufacturing Sdn Bhd., Maxwell Glove Manufacturing Bhd., and Supermax Glove Manufacturing. This is based on information that reasonably indicates their use of forced labour in manufacturing operations.
THE FUTURE OF INTERNATIONAL COOPERATION AGAINST TRANSNATIONAL ORGANISED CRIME
On 20 October, a report from the Global Initiative Against Transnational Organised Crime says that success in addressing transnational organised crime hinges on multilateral cooperation. However, existing cooperation regimes are ineffective at countering the rapid changes in the organised crime landscape and countries increasingly tend to turn to national solutions. The report identifies 5 scenarios for the future of international criminal justice cooperation based on observed trends and raises thought-provoking questions about possible outcomes and impacts on transnational organised crime.
VTB CAPITAL ALSO AGREES TO SETTLEMENT WITH SEC FOR ROLE IN MISLEADING INVESTORS OVER MOZAMBIQUE BOND OFFERINGS
A news release from the SEC advised that VTB Capital had joined Credit Suisse in a settlement for fraudulently misleading investors and violating the Foreign Corrupt Practices Act (FCPA) in a scheme involving 2 bond offerings and a syndicated loan that raised funds on behalf of state-owned entities in Mozambique.
VENEZUELA’S CRUMBLING OIL INDUSTRY IS AN ENVIRONMENTAL TIME BOMB
On 21 October, Oil Price.com reported that the collapse of Venezuela’s oil industry could lead to significant environmental consequences, and that oil spills are likely to increase due to a lack of infrastructure investment and maintenance.
US CUSTOMS “WITHHOLD RELEASE ORDER” ON TOMATOES PRODUCED BY FARM IN MEXICO
On 21 October, KPMG reported another WRO from US Customs and Border Protection. This one relates to fresh tomatoes produced by a tomato farm in Mexico and its subsidiaries. It is said that information exists that “reasonably indicates” the use of forced labour involving the farm’s workers. From 21 October, officers at all US ports of entry will detain fresh tomatoes produced by the tomato farm and its subsidiaries. The WRO affects Agropecuarios Tom SA de CV, and Horticola SA de CV, and their subsidiaries.
On 21 October, FATF reported on the Plenary, a hybrid (i.e. part-virtual) event. It is reported that delegates finalised work in a number of important areas, including –
updated guidance for a risk-based approach to virtual assets and virtual asset service providers (VASP);
a final report on survey results on implementation of the FATF Standards on cross-border payments; and
a report for government officials that focuses on the digital transformation of AML/CFT for operational agencies.
The Plenary also –
issued a statement on the evolving situation in Afghanistan; and
issued another on the risks associated with the financing of ISIL, Al-Qaeda and Affiliates.
It also agreed (in the wake of the Pandora Papers, about which a statement was released) to release for consultation, the proposed revisions to FATF Recommendation 24 on beneficial ownership of legal persons to ensure greater transparency about the beneficial ownership of legal persons, and take action to mitigate the risks. A draft of a proposed amended Recommendation 24 and its Interpretative Note are available.
The Plenary agreed to add several indicative examples of environmental crimes to the FATF Glossary to clarify for countries the types of offences that could fall within this category, depending on their risk and context. This, it is said, will help authorities follow the money and stop the criminal networks behind illegal waste trafficking, logging, and other crimes.
Jordan, Mali and Turkey were added to the FATF Grey List (Jurisdictions under Increased Monitoring, while Botswana and Mauritius have been removed.
The list of “High Risk Jurisdictions” remains unchanged – North Korea and Iran.
On 21 October, Global Witness published a report saying that, through their backing of agribusiness, financial institutions have bankrolled and profited from the destruction. Banks and asset managers based in the EU, UK, US and China have made deals worth $157 billion with companies accused of destroying tropical forest in Brazil, Southeast Asia and Africa since the Paris Climate Agreement – and netted $1.74 billion in interest, dividends and fees from financing the parts of agribusinesses groups that carry the highest deforestation risk. JPMorgan has made deals worth an estimated $9.38 billion with companies accused of deforestation, making it the biggest deforestation lender in the US, EU, UK and China.
On 21 October, the West Australian reported that police have seized tens of thousands of dollars’ worth of Lego as part of a probe into an alleged money laundering operation. Detectives seized a large amount of property at the addresses, including more than $100,000 worth of Lego and electronics.
On 21 October, the Guardian reported that the Syrian government is siphoning off millions of dollars of foreign aid by forcing UN agencies to use a lower exchange rate, according to new research. The Central Bank of Syria has, in effect, made $60 million in 2020 by pocketing $0.51 of every aid dollar sent to Syria.