The Cyprus Mail on 22nd May reported that the Turkish Board of Investigation on Financial Crimes (MASAK) has launched an investigation into money laundering of $5 billion in 13 casinos in the north and the 20 businesses involved in their operation. It also says that prosecutors ordered the confiscation of $100 million linked to suspects after an earlier investigation by MASAK discovered that the casinos in the breakaway regime were involved in the transfer of large amounts of foreign currency. The transfers were said to have been made through the accounts of 7 casino managers and the personal accounts of staff at 20 companies owned by the casinos.
EU Council Decision 2018/747/EU deals with N-(1-amino-3,3-dimethyl-1-oxobutan-2-yl)-1-(cyclohexylmethyl)-1H-indazole-3-carboxamide (ADB-CHMINACA).
EU Council Decision 2018/748/EU deals with 1-(4-cyanobutyl)-N-(2-phenylpropan-2-yl)-1H-indazole-3-carboxamide (CUMYL-4CN-BINACA).
ADB-CHMINACA and CUMYL-4CN-BINACA are synthetic cannabinoids with similar effects to those of THC, which is responsible for the major psychoactive effects of cannabis, but they have additional life-threatening toxicity. The Decisions follow a risk assessment report on each of the new psychoactive substances and require control measures to be put into effect across the EU, as provided for under their national legislation, in compliance with their obligations under the 1971 UN Convention on Psychotropic Substances, and by 23rd May 2019.
Norton Rose Fulbright on 21st May published a briefing which says in its introduction that, according to the International Labour Organisation (ILO), at any given time an estimated 40.3 million people globally are in modern slavery, which includes 24.9 million in forced labour. The global shipping industry has been identified as being particularly susceptible to the risk of modern slavery given seafarers are often from nations with human rights, labour rights and corruption challenges. The fragmentation of regulatory oversight among flag states, and practical limitations on effective enforcement of basic conditions on board vessels, exacerbate the problem. After looking at the Modern Slavery Act and its requirements in the UK, the briefing considers what are the modern slavery risks for shipping and what shipping companies can do to prepare themselves (and avoid being implicated). The article concludes that the burden of increased regulation may also create competitive advantage for compliant operators in some trades and markets. On the whole, it says, history suggests that the pace of change will be uneven and slow. Nevertheless, it is clear that the power of public scrutiny has already spurred the relatively rapid rise of modern slavery, as a business risk for the shipping industry.
On 21st May, law firm Volterra Fietta published a briefing providing an update in respect of the litigation and compliance risks in the rapidly-developing field of transnational human rights law, where parent companies may be held liable for alleged human rights impacts involving their subsidiaries overseas. It notes that governments have recently adopted innovative ways to address human rights, including legislation and a new ombudsperson’s office in Canada. The article goes on to provide a short update on legal and regulatory developments in the UK and Canada. It is notable that the cases cited, in both countries, mostly involve mining companies, though it reports that a Canadian case involving a retailer which indirectly sourced garments from factories in Rana Plaza in Bangladesh (where a factory collapsed in 2011 causing massive casualties) failed.
21st May 2018
FLORIDA MAN HEADED TO PRISON FOR SHIPPING GUNS IN WATER HEATERS
News 4 Jax reports 20th May on the case of a Florida man, Frederik Barbieri, 47, who faces up to 25-years in prison for conspiring to smuggle weapons to Brazil and violating US firearm export licensing laws. Arrested in February, he pleaded guilty to smuggling of hundreds of AR-15 and AK-47 assault rifles in water heaters to Rio de Janeiro. Described as one of Brazil’s biggest firearm dealers, Brazilian authorities say police found 30 guns, along with ammunition magazines, all hidden in 4 38-gallon water heaters.
LOSSES DUE TO BINARY OPTIONS, CRYPTOCURRENCY SCAMS GROW IN 2017, AUSTRALIAN CONSUMER BODY WARNS
Finance Feeds on 21st May reported that in Australia the average loss reported in binary options scams increased by 24% – from $32,744 to $43,085, which suggests that these scams became more effective at extracting large sums of money from victims. The Australian Competition and Consumer Commission (ACCC) has posted its annual report on scams activity in Australia for 2017. While binary options are not illegal in Australia, there are a number of very professional looking websites usually operated from overseas offering binary options investments that are outright scams. Between January and September 2017, about $100,000 was reported lost per month to scams which related to cryptocurrencies. However, in the month of December 2017, reported losses to Scamwatch exceeded $700,000 and the average reported loss had jumped from $1,885 in January to $13,205. The list of cryptocurrency scams in 2017 includes fake ‘initial coin offerings’ (ICO), and pyramid schemes. Analysis of investment scam reports did not reveal any particularly new techniques used by investment scammers suggesting the same tricks used in previous years remain effective.
BREAKING BAD TO THE PARADISE PAPERS: ALL YOU NEED TO KNOW ABOUT MONEY LAUNDERING
On 21st May, the Guardian published a briefing claiming to provide all you need to know about money laundering.
ALL ESSENTIAL INFORMATION YOU SHOULD KNOW ABOUT THE BENEFICIAL OWNER REGISTRATION IN THE CZECH REPUBLIC
On 15th May, Bird & Bird published a briefing on the new central Register of Beneficial Owners implementing obligations imposed on EU Member States under the 4th Anti-Money Laundering Directive. The Register is maintained by registration courts in the Czech Republic. Legal entities and trustees are also legally obliged to keep up-to-date records of beneficial owners, and details for verification of their identity, including the basis of beneficial ownership of such persons. Details for identification of beneficial owners must be kept as long as a person is a beneficial owner, and 10 years after termination of such relationship. Information about beneficial owners in the Register is not publicly available and data from the Register are not published in the online Commercial Register or otherwise.
BILL TRANSPOSING 4TH ML DIRECTIVE PUBLISHED IN IRELAND
On 18th May, Arthur Cox in Ireland published a briefing saying that the Ministry of Justice had published a Bill transposing most of the remaining requirements of the EU 4th Money laundering Directive into Irish law. Parts of Article 30 (dealing with the beneficial ownership of corporates) were already transposed into Irish law in November 2016. This Bill, together with the Criminal Justice (Corruption Offences) Bill, forms part of the Government’s white-collar crime package. The briefing summarises the key provisions of the Bill, which reflect the targeted risk-based approach to combating money laundering/terrorist financing.
BET365 EXPECTED TO KEEP MAIN HUB IN GIBRALTAR DESPITE MOVE TO MALTA?
Gambling 911 on 21st May reported that Bet365 says it will retain its strong presence in, and commitment to, Gibraltar despite confirming reports this weekend of a move to Malta. The company currently employs some 1,000 employees in Gibraltar.
AUSTRALIA PLANS TO BAN CASH PAYMENTS OVER $10,000
Truth in Media on 21st May reported that the government of Australia plans to make cash payments over A$10,000 (US$7,500) illegal starting on July 1st 2019. It says that, to enforce the ban, the government approved the creation of a $300 million Black Economy Standing Taskforce who is tasked with generating $3 billion of new tax revenue over the course of 4 years.
PASSENGER NAME RECORD DATA AND MISCELLANEOUS AMENDMENTS REGULATIONS 2018
These UK regulations (SI 2018/598) amend the existing UK passenger name records legislation to bring it into line with the provisions of EU Directive 2016/681 on the use of passenger name record (PNR) data for the prevention, detection, investigation and prosecution of terrorist offences and serious crime (aka the PNR Directive) which are not already provided for in existing legislation. PNR are the electronic information, collected by airlines, that countries use to strengthen national security and prevent serious crime and the UK has had an established regime for PNR since 2008. The UK Passenger Information Unit at the Home Office is designated as the authority competent for the prevention, detection, investigation and prosecution of terrorist offences and serious crime, and as able to process PNR data for those purposes.
DIAMOND LOOTING: ZIMBABWE PARLIAMENT SUMMONS MUGABE TO HEARING
News 24 on 21st May reported that a Zimbabwe parliament committee has summoned former president Robert Mugabe to give evidence on 23rd May about diamond corruption alleged to have cost billions of dollars during his rule. Lawmakers plan to question Mugabe over his 2016 claim that the country had lost $15 billion in revenue due to corruption and foreign exploitation in the diamond sector.
UK: UNIVERSAL JURISDICTION INFORMATION NOTE
On 21st May, the Ministry of Justice issued a news release publicising a note which summarises the UK’s approach to the investigation and prosecution of crimes of universal jurisdiction. The concept of universal jurisdiction (i.e. jurisdiction to try a crime irrespective of where it was committed and the nationality of the accused) has been adopted in the case of certain heinous crimes (such as war crimes) to accord with customary international law and to comply with the UK’s international obligations as set out in various treaties. Crimes of universal jurisdiction can be reported to the police in the same way as any other offence.
CRYPTOCURRENCY DEBIT CARD START-UP FOUNDERS INDICTED IN US
On 21st May, Robinson & Cole reported that the US Attorney’s Office in the Southern District of New York has announced that a federal grand jury has returned an indictment against 3 Florida men who co-founded cryptocurrency company Centra Tech, Inc. The indictment alleges that they defrauded investors $25 million through conspiracy and securities and wire fraud and that they lied to investors prior to the initial coin offering (ICO). The article claims that the FBI seized 91,000 units of Ether, which was from the investors who participated in the ICO and although the Ether was worth $25 million at the time of the ICO, it is now reported to be worth $60 million.
NEW US EXPORT RULES FOR FIREARMS AND AMMUNITION – OPENING THE DOOR FOR MORE COMMERCIAL SALES
On 21st May, Baker Donelson published an article on the changes being made to US export rules for firearms and ammunition, with the stated goals of reducing procedural burdens and costs of export compliance on the firearms industry, while allowing the Commerce and State Departments to more efficiently enforce their relevant export controls. It says that the items subject to change are mostly commercial items widely available in retail outlets in the US and described as having commercial and other non-military characteristics. Military-standard export controls will continue to apply to fully automatic firearms and their parts and components, including guns up to .50 calibre, as well as firearms that fire caseless ammunition, silencers, mufflers and sound suppressors. The proposal would create 17 new Export Control Classification Numbers (ECCN) to control the items proposed for removal from the military list.
TAIWAN TO INTRODUCE CRYPTOCURRENCY REGULATIONS TO CURB MONEY LAUNDERING
Customs Today on 21st May reported that Taiwan’s government is set to introduce a new regulatory framework for cryptocurrencies later this year, in a move to prevent money laundering. Its Justice Minister called for the regulations to be in place by November, before the Asia Pacific Group (APG) on AML visits Taiwan to evaluate its existing AML rules.
LAST YEAR’S RECORD OPIUM PRODUCTION IN AFGHANISTAN THREATENS SUSTAINABLE DEVELOPMENT, LATEST SURVEY REVEALS
UNODC on 21st May reported that in 2017, opium cultivation in Afghanistan was up 63% compared with 2016. This has led to unprecedented levels of potential heroin production. From the 2017 opium harvest, some 550-900 tons of heroin of export quality (purity between 50% and 70%) can be produced. The report highlights that the levels of opium poppy cultivation create multiple challenges for the country, its neighbours and the many other countries that are transit for or destination of Afghan opiates. The significant levels of opium poppy cultivation and illicit trafficking of opiates further fuel instability, insurgency and increase funding to terrorist groups in Afghanistan.
HONG KONG’S FRAUD AND MONEY LAUNDERING INTELLIGENCE TASKFORCE MARKS UNIT’S UNCERTAIN FUTURE
Baker McKenzie on 21st May reported that the task force which aims to bring Hong Kong’s fight against money laundering into the 21st Century has been given a 6-month extension to its year-long trial status. It was formed in response to global concern that current systems to identify, disrupt and seize the massive flow of dirty money through the international financial network are not fit for purpose, and was set up as the Fraud and Money Laundering Intelligence Taskforce (FMLIT) last May. It put in place a new system of intelligence-sharing and alerts allowing police, banks and the Hong Kong Monetary Authority to deal more quickly and effectively with suspected financial criminality.
AUSTRALIA: GUILTY PLEA IN RESERVE BANK BRIBERY CASE
On 21st May, Baker McKenzie reported that a former Reserve Bank company executive has pleaded guilty to criminal charges in one of Australia’s most protracted corruption prosecutions over a payment to a Malaysian arms dealer to grease the wheels of a business deal. Clifford Gerathy pleaded guilty a charge involving $79,502. Kayum is an arms broker with connections to some of Malaysia’s most powerful political figures and has previously been suspected of involvement in the nuclear weapons black market.
NCSC AND ICO PUBLISH CYBER SECURITY GUIDANCE ON GDPR
On 18th May, Tech UK reported that the UK’s National Cyber Security Centre (NCSC) and the Information Commissioner’s Office (ICO) had produced guidance on what the General Data Protection Regulation (GDPR) means for cyber security. This guidance provides an overview of what the GDPR says about security and describes a set of security related outcomes that all organisations processing personal data should seek to achieve. The approach is based on 4 top level aims: to manage security risk; protect personal data against cyber attack; detect security events; and minimise the impact.
‘ALARMING LEVELS’ OF METHAMPHETAMINE TRAFFICKING IN ASIA’S MEKONG, UN WARNS
UN News on 21st May reported that organised crime groups in Asia’s Mekong region have intensified the production and trafficking of highly-addictive methamphetamine, extending the illegal trade into countries such as Australia, Japan and New Zealand, senior drug policy leaders warned at a UN-backed regional conference.
ISLE OF MAN REGULATOR RESPONSE TO CONSULTATION ON “FIT AND PROPER”
On 21st May, the Financial Services Authority published its response to a consultation on changes to fitness and propriety assessments for all regulated entities, and its consultation on resulting amendments to the Financial Services Rule Book.
US TO IMPOSE ‘STRONGEST SANCTIONS IN HISTORY’ AGAINST IRAN
Rferl on 21st May reported that US Secretary of State Mike Pompeo says Washington will impose “the strongest sanctions in history [on Iran] once they come into full force” and that the “sting of sanctions will only grow more painful if the regime does not change its course”. He set 12 conditions for Iran to follow in order for the US to agree to a new nuclear deal with Tehran in a speech in Washington on May 21st at the Heritage Foundation think tank.
ILLICIT TRADE IN OIL & FUEL: AN EMERGING GLOBAL POLICY CHALLENGE
The Inter Press Service on 24th April carried an article claiming that every year, an estimated $133 billion of fuels are illegally stolen, adulterated, or defrauded from legitimate petroleum companies. Roughly 30% of Nigeria’s refined fuel products are smuggled into neighbouring states and pipeline fuel theft in Mexico is at record levels. This illegal activity creates an enormous drain on the global economy, crowds out billions from the legitimate economy and dislocates hundreds of thousands of jobs. Equally significant are associated fiscal losses from tax evasion and subsidy abuses that deprive governments of revenues for vital public services and force higher burdens on taxpayers—especially in developing countries where petroleum industry royalties and tax payments finance development. For example, Philippines loses $750 million annually in tax revenue from fuel adulteration and smuggling. Despite these severe negative effects, the global problem of oil and fuel theft so far has been largely unchecked and remains mostly hidden from international attention. The article argues that any long-term solution will be dependent on sustained collaboration between governments and the private sector.
PEOPLE SMUGGLERS IDENTIFIED DURING INTERPOL OPERATION IN SOUTH ASIA
The Illicit Trade website reported on 19th May that an Interpol-led operation has resulted in the identification of a number of suspected human traffickers in South Asia. Operation Mandala involved officials carrying out checks on travellers at 5 international airports and a land border point in Bangladesh, Bhutan, Myanmar, Nepal and Sri Lanka. Close to 500,000 people had their personal details checked against Interpol’s nominal and Stolen Lost Travel Document (SLTD) databases during the initiative, resulting in multiple positive “hits”. A number of individuals subject to Interpol Red and Blue Notices were identified during the checks, as were several travel documents registered on the SLTD database.
PRESSURE GROUP TARGETING BELGIAN BANKS FOR AIDING SOUTH AFRICA APARTHEID REGIME
On 19th April, the Daily Maverick website reported that Open Secrets and the Centre for Applied Legal Studies (CALS) will be submitting a complaint to authorities in 2 countries regarding the role of European banks in aiding and abetting the apartheid regime in South Africa. CALS argues that it was a Belgian bank, Kredietbank (KBC), and its subsidiary, Kredietbank Luxembourg (KBL), that were at the centre of an apartheid money laundering machine that kept the war machine running and helped state-owned arms company Armscor establish a global money laundering network of secret bank accounts and shell companies in order to bust the arms embargo – referred to as the “arms money machine”. This was said to involve machinery including over 800 secret bank accounts and over 100 front companies registered in Panama and Liberia, most of which were set up or held by the banks in question.
IRISH AUTHORITIES SEIZE €60,000 CASH AT CORK AIRPORT
The Irish revenue Commissioners’ website on 21st May reported that Revenue Officers seized €60,000 in cash when they stopped and searched a man in his fifties travelling to Gdansk in Poland, following routine profiling. The cash was found hidden in a suitcase with the assistance of Revenue Detector Dog Eva. Revenue Officers seized the cash suspecting it to be the proceeds of, or intended for use in, criminal activity. The authorities have been granted a 3-month detention period for the cash to allow for investigations.
ICE ABANDONS ‘EXTREME VETTING’ TECHNOLOGY
Homeland Security Today on 18th May reported that US federal immigration officials have abandoned their pursuit of a controversial machine-learning technology that was a pillar of the Trump administration’s “extreme vetting” of foreign visitors, dealing a reality check to the goal of using artificial intelligence to predict human behaviour. What had been wanted was a system for the “Extreme Vetting Initiative” that could automatically mine Facebook, Twitter and the broader Internet to determine whether a visitor might commit criminal or terrorist acts or was a “positively contributing member of society”. However, ICE has dropped the machine-learning requirement from its request in recent months, opting instead to hire a contractor that can provide training, management and human personnel who can do the job.
On 21st May, the US Treasury advised that President Trump has signed a new Executive Order which prohibits certain transactions with Venezuela. The transactions affected included dealings such as –
- the purchase of any debt owed to the Government of Venezuela (including accounts receivable);
- in any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order (including accounts receivable);
- in the sale, transfer, assignment or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government has a holding of 50% or more
Eurasia Review on 21st May reported that illegal wood trafficking is the most profitable crime against natural resources and the world’s third most important crime, according to a report titled “Transnational crime and the developing world,” published in March 2017 by Global Financial Integrity. The report estimates that, globally, this transnational crime generates $52 billion to $157 billion a year. The UN Environment Program (UNEP) estimates that 30% of the wood sold in the world has been illegally obtained. Latin American forests are the second most vulnerable in the world to illegal timber logging, after Asian forests. In late 2012, it says, INTERPOL confiscated over 50,000 m³ of illegally obtained timber with an estimated value of $8 million as a result of an operation named Project LEAF, in which law enforcement agencies from 12 Latin American countries worked together to crack down on illegal timber logging. Wood trafficking is linked to a series of crimes such as deforestation, labour exploitation, land invasions, tax evasion, document forgery, state corruption and even the murder of community leaders who are fighting to preserve forests. Another report published in January 2018, sheds light on the practice known as “timber washing,” meaning the sale of illegally obtained timber with fake permits. It also revealed that Peruvian timber — including timber that has been legally obtained — is exported to China, the Dominican Republic, the US, Mexico, France, Cuba, South Korea, Belgium, Puerto Rico, Australia, Taiwan, Spain, Chile, Ecuador, Uruguay, Canada, Israel and Japan.