20th March 2018
ISLE OF MAN AMENDS BELARUS EXPORT CONTROL SANCTIONS
A news release on 20th March advised that Island law had been amended to apply, with modifications, EU Regulation 2018/275/EU which amends Articles 1a and 1b of Regulation 765/2006/EC to allow, subject to authorisation by the Treasury a limited number of specific-use sporting rifles and sporting pistols, and the provision of technical assistance or brokering services, financing or financial services related to such goods.
21st March 2018
US TO RAMP UP DRONE EXPORTS DUE TO ISRAELI COMPETITION
Y Net in Israel reported on 20th March that the Trump administration expected to lift restrictions on sale of lethal drones to countries other than close allies; the changes coming on a backdrop of US drone manufacturers lobbying for rule changes due to cutthroat competition from Chinese and Israeli rivals.
IRANIAN ARRESTED FOR SCHEME TO EVADE US ECONOMIC SANCTIONS IN $115 MILLION DEAL
Lawfuel in the US on 20th March reported that an Iranian, Ali Sadr Hashemi Nejad had been arrested for his alleged involvement in a scheme to evade US economic sanctions against Iran, and to commit money laundering and bank fraud. He was charged with participating in a scheme in which more than $115 million in payments for a Venezuelan housing complex were illegally funnelled through the US financial system for the benefit of Iranian individuals and entities. It is said that for years, he allegedly funnelled more than $115 million of a nearly half-billion-dollar Venezuelan construction contract through the US banking system, using entities in Switzerland, Turkey, and the BVI to conceal Iran’s identity.
VIETNAM CRACKDOWN ON ILLEGAL ONLINE GAMBLING INDUSTRY AND MONEY LAUNDERING
The Tight Poker website on 21st March reported that Vietnam’s Ministry of Public Security (MoPS) has announced that the authorities had launched a crackdown on the illegal online gambling industry in the country and also targeted money laundering schemes that were taking place in the gambling industry. Officials revealed that they are currently going after the Rikvip Group, which has been running online gambling websites rikvip.com and rikvip.vn since 2015. Online gambling is banned and locals are prohibited from setting up or operating online gambling websites, although foreign bookmakers licensed offshore are able to offer their services in Vietnam, the government has blocked many betting and gambling websites to prevent locals from accessing them.
MAN JAILED FOR 45 MONTHS OVER £500,000 PIRATE DVD SCAM ORDERED TO REPAY JUST £5,000
The Eastern Daily Press in the UK on 20th March reported that a man who is serving a jail sentence for his part in a £500,000 pirate DVD scam has been ordered to repay £5,000 after a court heard he has no other available assets. Frankie Ansell, 29, had made benefit from his criminal offending of £224,000 but as he only had available assets of £5,719.
FEARS THE ‘BEAUTY’ OF BAHAMAS IBC WOULD BE LOST OVER EU BLACKLIST RESPONSE
Tribune 242 in the Bahamas on 20th March reported that the Deputy Prime Minister had warned that “all” International Business Companies may have to submit annual accounts if the Bahamas is to escape Europe’s “blacklist”. This is said to have raised immediate fears among financial services practitioners that the “beauty” of IBC may be lost, given that such reporting requirements would eliminate the advantages associated with using them. One executive, speaking on condition of anonymity, said such a move risked a repeat of the post-2000 ‘blacklisting’ by FATF, when the Bahamas went further than other international financial centres (IFC) by eliminating “bearer shares”. That resulted insignificant IBC-related business moving from the Bahamas to the BVI. Currently, Bahamas-domiciled IBCs only have to file registers of their officers and directors; give the name and address of their registered agent; and give notice of any mortgages and other charges over their assets. The financial accounting/reporting demanded by the EU will thus dramatically increase their regulatory burden.
NEW EU MANDATORY DISCLOSURE RULES FOR INTERMEDIARIES APPLYING TO CROSS-BORDER TAX ADVICE AND CIRCUMVENTION OF REPORTING OBLIGATIONS
Loyens & Loeff published an article on 13th March about political agreement having been reached on a EU Council Directive introducing mandatory disclosure rules for intermediaries such as lawyers, accountants and tax advisers. Intermediaries must report potentially aggressive tax planning arrangements with a cross-border dimension as well as arrangements designed to circumvent reporting requirements like CRS and beneficial ownership reporting. Member States’ tax authorities will exchange the information automatically within the EU through a centralised database. The reporting obligation applies to intermediaries with residency, incorporation, professional registration or a permanent establishment in a Member State and only related to cross-border arrangements concerning at least 1 other Member State. Member States must implement the Directive in their domestic laws ultimately on 31st December 2019 and apply it as from 1st July 2020.
CORRUPTION AND BRIBERY OFFENCES IN FRANCE
On 27th February, Reed Smith produced a structured guide.
OFFSHORE TAX HAVENS WITH A GRIP ON MULTI-MILLION POUND ISLINGTON PROPERTIES
Islington Now on 20th March carried a feature on offshore ownership of properties in Islington, London, including 83 owned by Isle of Man companies. A study shows 1,672 properties owned by 506 different companies registered in countries recognised by the IMF as offshore financial centres, of which 334 have been acquired in the past year.
AUCTION STARTS FOR SEIZED WESTERN SAHARA PHOSPHATE CARGO
On 20th March, Defence Web reported that a sealed bid auction has opened to buy 55,000 tonnes of phosphate aboard a ship seized by South African authorities last year over the Moroccan cargo from the disputed Western Sahara region. The starting bid for the cargo was $1 million. The Polisario Front, the political organisation representing Western Sahara, alleged the phosphate shipment en route to New Zealand was illegally taken from Western Sahara territory and went to court to have the cargo seized. The Marshall Island-flagged ship, NM Cherry Blossom, has been in Port Elizabeth since May after a South African court ruled the vessel should remain until the case goes to trial or security is posted. The court case is a test of Polisario’s new legal tactic in its long-running conflict with Morocco over Western Sahara, a disputed territory where the two sides fought a war until a 1991 ceasefire and where UN talks failed to reach an accord. A Panama court last year dismissed a similar case by the Polisario to block a phosphate cargo in Panama, saying there was no evidence it belonged to the group and court was not the venue to judge political matters.
US ARRESTS PILATUS BANK CHAIRMAN OVER ALLEGED IRAN SANCTIONS EVASION SCHEME
The Cyprus Business Mail on 21st March reported that Ali Sadr Hashemi Nejad, 38, an Iranian who chairs the Maltese bank has been arrested on US charges that he participated in a scheme to evade US sanctions and funnel more than $115 million paid under a Venezuelan construction contract through the US financial system. It also reports that Pilatus Bank was in litigation with the Maltese journalist, Daphne Caruana Galizia, who was murdered in October, over several articles she wrote that accused the bank and Ali Sadr of facilitating corrupt political activities and money laundering. The bank said the articles were false and defamatory. A former bank employee who was the main source for Caruana Galizia’s accusations has been arrested on a European arrest warrant issued by the Malta in response to a complaint of fraud by Pilatus Bank.
2 ISRAELI COMPANIES PROBED OVER AFRICA BRIBERY ALLEGATIONS
Haaretz on 21st March reports on 3 senior Israel Shipyards officials are suspected of bribing African officials to advance defence contracts worth tens of millions of dollars. It says that this follows the police raid of the offices of Housing & Construction and the arrest of several past and present senior executives on suspicion of paying bribes to government employees in Africa. The new case involves strikingly similar allegations, it says. Bribing a foreign official is a relatively new crime in Israel, added to the criminal code in 2008 as part of Israel’s accession to OECD and the UN Convention against Corruption. The change made bribing a foreign official the equivalent of bribing an Israeli one, carrying a prison sentence of up to 7 years.
GARDAÍ INVESTIGATE POTENTIAL ISLAMIC EXTREMIST LINK TO INVOICE FRAUD AGAINST DUBLIN ZOO
The Journal in Ireland on 21st March reported that Gardaí are investigating if a €500,000 invoice fraud carried out against Dublin Zoo was intended to benefit Islamic extremists in the UK.
IRELAND IS A LEADING MARKET FOR BRITISH RETAILERS, SAYS ROYAL MAIL
Postal technology on 20th March reported that a new study commissioned by Royal Mail has found that 81% of shoppers in Ireland buy goods from UK-based online retailers. The study, part of Royal Mail’s Delivery Matters series, asked over 1,500 online shoppers in Ireland about their shopping habits and preferences. On average, Irish online shoppers spend €85 (US$105) per month with 51% of purchases consisting of clothes, compared to 45% in the UK.
THE CHEMICAL WEAPONS CONVENTION
On 20th March, the House of Commons issued a briefing that looks at the Chemical Weapons Convention in the context of the attack in Salisbury in March 2018.
COCAINE FOUND IN NOODLE-MAKING MACHINES AS SOUTH AMERICAN AND EUROPEAN ARRESTED IN HONG KONG
On 20th March, Customs Today reported that customs officers in Hong Kong involved in raiding 3 flats discovered sachets of cocaine concealed in the metal shafts of noodle-making machines shipped from South America via mainland China. Similar discoveries had been made in previous raids in recent weeks.
HELPING THE AUTHORITIES IN MALI GO AFTER THE TERRORISTS’ MONEY
The UN Office for Drugs and Crime on 20th March reported that Mali is facing a unique combination of threats associated with various kinds of illicit trafficking and terrorism. Disrupting the flow of funding to terrorist groups through targeted financial sanctions is one way to reduce threats in the country, which will also benefit the region. To help law enforcement agencies better understand these threats and be able to work more effectively to reduce them, UNODC has developed a training course on advance financial disruption techniques. It also looks at how countries can better use Security Council sanctions on terrorist financing as set out in resolution 1267/1988 as part of a wider financial disruption plan. This training course was delivered in Mali in February. UNODC plans to deliver similar training courses to officials in Somalia, Afghanistan, the Middle East and North Africa region and Kazakhstan in the next 6 months.
WAR IN YEMEN: EUROPEAN DIVISIONS ON ARMS EXPORT CONTROLS
On 20th March, the International Institute for Strategic Studies reported that, as arms exports to parties in the war in Yemen such as Saudi Arabia and the UAE come under increasing criticism, some European countries are set to fully or partially halt such sales. This creates an increasing divergence in European arms export control policies, at a time when states are looking to deepen defence armament co-operation. The report analyses who supplied what to whom.
SPAIN TO BAN NARCO BOATS
On 21st March, the Gibraltar Chronicle reported that Spain is to follow Gibraltar’s lead and introduce legislation banning so-called “narco launches”, the powerful rigid-hulled inflatable boats favoured by smugglers to ferry clandestine shipments of drugs across the Strait of Gibraltar. In parallel, Spanish officials will work to strengthen cooperation mechanisms with Gibraltar and Morocco in order to make life harder for smugglers in the region.
URUGUAY’S CANNABIS LAW: PIONEERING A NEW PARADIGM
The Brookings Institute on 21st march published a study on the experience of Uruguay, the first country to legalise and regulate its domestic non-medical cannabis market. In light of this pioneering role, the choices and experiences of Uruguayan authorities hold important lessons for other jurisdictions that may consider whether and how to regulate cannabis. Uruguay’s breakthroughs and challenges related to banking, international treaties, access to the product, enforcement, medical cannabis, tourism, and research and evaluation in particular hold immense value to policymakers and analysts elsewhere. To this end, the study examines the conditions that led Uruguay’s government to pass its cannabis law in 2013, studies its progress so far, and identifies areas that policymakers should consider addressing in order to maximise the law’s potential benefits.
AIRFREIGHT E-DANGEROUS GOODS DECLARATION TRIALS
Loadstar on 21st March reported that the air freight industry has moved a step closer to digitalisation and data-sharing with the launch of the IATA-compliant e-Dangerous Goods Declaration (eDGD). It uses supply chain community platforms to enable collaboration between partners, traceability and reduce errors and delays, and implementing requires co-operation between all stakeholders, including shippers, forwarders, carriers and ground handling agents. The current “proof of concept” phase involves the 3 airlines behind the initiative, Lufthansa Cargo, Swiss World Cargo and AF-KLM.
RUSSIAN WHISTLE-BLOWER LINKED TO SLAIN MALTESE JOURNALIST TURNS HERSELF IN
Rferl on 21st March reported that Russian whistle-blower, Maria Yefimova. linked to slain Maltese journalist Daphne Caruana Galizia has handed herself in to the police in Greece, saying she feared for her life. Yefimova reportedly told Caruana Galizia that she had seen documents suggesting that €1 million from Azerbaijani President Ilham Aliyev’s family had found its way into an account held by Michelle Muscat, the wife of Malta’s prime minister. He and his wife have denied accusations that the money was transferred to Michelle Muscat from the Aliyev family through Egrant Inc, a secret offshore firm in Panama. Yefimova fled Malta last year, saying she feared for her life and family. Authorities in Malta and Cyprus have issued arrest warrants for her, but for different reasons – the Maltese warrant is based on an accusation by Malta-registered Pilatus Bank that she stole from the bank; the Cypriot arrest warrant is based on a similar embezzlement claim by Cyprus-based Fragrance Distribution, where she worked before moving to Malta.
DIGITAL TAXATION: COMMISSION PROPOSES NEW MEASURES TO ENSURE THAT ALL COMPANIES PAY FAIR TAX IN THE EU
On 21st March, the EU published a news release containing new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The measures are intended to make the EU a global leader in designing tax laws fit for the modern economy and the digital age.
Q&A on a Fair and Efficient Tax System in the EU for the Digital Single Market
LATVIA TO BAN SHELL COMPANIES IN MONEY LAUNDERING CLAMPDOWN
On 21st March, Reuters reported that Latvia is struggling to restore confidence in its financial institutions after US accusations that the euro zone state’s third biggest bank, ABLV, was serving as a conduit for illicit funds. The use of shell companies has been widespread in Latvia, with the country’s financial watchdog putting their number at over 26,000. It says that Latvia has more than 10 banks that deal primarily with non-resident deposits, many from customers in Russia and other ex-Soviet states who often use shell companies in their business dealings.
INVOKING LEGAL PRIVILEGE IS NO BLOCK TO SECURING DEFERRED PROSECUTION AGREEMENT
M Lex on 12th March reported on proceedings in London which mean that companies that invoke the right to keep certain documents out of the hands of UK bribery investigators can still reach deferred prosecution agreements (DPA). In a probe involving a company referred to only as “XYZ,” the SFO had agreed to sign a deferred prosecution agreement in July 2016, even though it did not get access to notes of interviews with employees conducted during an internal corruption probe, said to be protected by legal privilege. Several unnamed claimants are taking legal action against the SFO, in a bid to get hold of the documents that were kept out of the scope of the DPA. The SFO concluded at the time that the company had cooperated enough and therefore deserved a DPA. The court will hand down the judgment at a later date. The article says that what documents are covered by legal privilege is also the subject of a Court of Appeal case involving the Eurasian Resources Group, which is under investigation by the SFO for suspected corruption.
RUSSIAN CUSTOMS OFFICIAL IN FAR EAST ARRESTED ON SUSPICION OF CORRUPTION
RAPSI in Russia reported on 21st March that the First Deputy Director of the Federal Customs Service’s Far Eastern Directorate, Sergey Fedorov, has been arrested on suspicion of taking bribes.
EGYPT’S CRIMINAL COURT ANNULS ASSETS FREEZE OF MUBARAK-ERA MINISTER
Al-Ahram Online in Egypt reported on 21st March that the Criminal Court has annulled a 2011 decision to freeze the assets of the Mubarak-era Minister of Agriculture of 1982-2004, Youssef Wali and his family, accepting an appeal presented by the former minister. The former minister, who also served as deputy prime minister and deputy chairman of Hosni Mubarak’s now-dissolved National Democratic Party, has had several corruption cases against him dismissed, the latest being a case involving business tycoon and influential Mubarak regime figure, Hussien Salem, in 2017. Wali was sentenced to 10 years in jail in a corruption case in 2012, but the conviction was overturned in 2013.
7 CHARGED AFTER MELBOURNE MONEY-LAUNDERING RAIDS TARGETING COMANCHEROS MOTORCYCLE GANG
The News Daily in Australia on 21st March reported police raids on more than 40 Victorian properties including brothels and tattoo parlours have led to 7 people being charged after a major operation against the Commancheros motorcycle gang, targeting businesses used in money laundering activities. Men and women aged 22 to 76 face a range of charges including drug possession and weapons offences following 44 search warrants. Officers swooped on residential and commercial properties with alleged links to the gang, with gyms and accountancy businesses among those hit.
SWISS LAUNCH PROBE AFTER ITALY SEEKS HELP IN TAX CASE
On 21st March, Reuters reported that the Swiss attorney general’s office (OAG) has opened a criminal investigation in a tax case involving a former manager of luxury goods maker Kering after a request for help from Italian authorities.
EU LIFTS TRAVEL BANS FROM 1997 ON 3 PERSONS LINKED TO VIOLENCE IN MOSTAR
The European Sanctions Blog on 21st March reported on EU Council Decision 2018/458/CFSP which, w.e.f. 20th March, revoked the Common Position that had imposed EU-wide travel bans on 3 individuals – Ivan Hrkac, Zeljko Planinic, and Bozo Peric – who were identified as “persons having perpetrated violent acts during the incidents in Mostar on 10th February 1997.
GUATEMALAN GOVERNMENT REMOVES CORRUPTION INVESTIGATORS
OCCRP on 21st March reported that the Guatemalan government has removed 11 police investigators from the country’s anti-corruption body, which interpreted the move as an attempt to impede investigations implicating high-ranking politicians and their relatives. The International Commission Against Impunity for Corruption in Guatemala (CICIG) was formed in 2006 to investigate widespread high-level corruption that has implicated former president Otto Perez Molina, and is now investigating sitting president Jimmy Morales along with dozens of other ministers, politicians, and businessman.
LITHUANIA: IMPEACHMENT LAUNCHED AGAINST MP FOR CORRUPTION
OCCRP on 21st March reported that Lithuania’s parliament is launching an impeachment procedure against Artuas Skardzius , a lawmaker who was found to have financially benefited from a business he protected as a legislator. The move comes after the same parliament shocked the public by failing to expel another lawmaker, Mindaugas Bastys.
PODCAST: OFFSETS: COMPLIANCE RISKS?
In the latest TRACE podcast, Bill Steinman of Steinman & Rodgers provides a primer on offsets and the compliance challenges they present. Offsets, in this context, are involved in international defence equipment contracts, where the purchaser requires the seller to provide some compensation by buying, or arranging the buying, of goods or services. So, for example, for a $1 billion deal, the seller (or seller country) might have to agree to offset $250 million, perhaps by sourcing some of the necessary components from the buying country. One example in the past was where, to sell hawk jets to Finland, British Aerospace had to agree to take on and sell Finnish liquorice… hence the offset can be indirect financial, industrial or economic support.
ARRESTS OF SENIOR MILITARY OFFICERS INDICATE INCREASING LIKELIHOOD OF A COUP IN VENEZUELA
Janes.com on 21st March reports the arrest of several top-rank officers in the past 3 weeks, including a former head of the army and the founder and former head of the Bolivarian National Intelligence Service (SEBIN).
OFAC TAKES INITIAL STEPS TO DEAL WITH QUESTIONS ABOUT THE APPLICATION OF US SANCTIONS TO CRYPTOCURRENCY
A briefing from law firm, Brown Rudnick, on 21st March says that OFAC has begun to pull back the covers on its views toward cryptocurrencies (also known as “virtual currencies”) within the existing regulatory landscape of US sanctions. OFAC has published clarifications as part of its FAQ explaining its view that existing regulations will apply equally to all forms of digital currency, which includes sovereign cryptocurrency, virtual currency (non-fiat), and digital representations of fiat currency. This at the same time as it applies prohibitions in respect of the Venezuelan “Petro”. The briefing says that the US government’s goal is to deter attempts by malicious actors to circumscribe regulation of financial transactions through these semi-anonymous digital currencies. It recommends that the risks raised in the OFAC guidance should be managed through enhanced screening – in particular, clients operating in this high-risk area should confirm that they are not engaging in transactions with persons or entities on the official sanctions list. OFAC has indicated that it may publish the digital currency addresses corresponding to illicit transactions on the SDN and Blocked Persons List. A digital currency address is a unique identifier assigned to each potential destination of a currency transfer. The aim is to alert the public of specific digital currency identifiers associated with a blocked person.