December 2018 About Us
Founded in 2014, Aperio Intelligence is a specialist, independent corporate intelligence firm staffed by individuals who collectively have decades of experience in undertaking investigations and intelligence analysis.
Our team has worked in over 150 countries, on thousands of cases, for a wide range of leading global corporations, financial institutions and law firms.
We have both knowledge of and access to relevant public and proprietary data sources, as well as a longstanding network of reliable, informed local contacts in the regions where we operate, cultivated over decades, who support us regularly in undertaking local enquiries on a confidential and discreet basis.
As a specialist provider of corporate intelligence, we source our intelligence and conduct research to the highest legal and ethical We provide specialist investigation skills, together with local standards. jurisdictional knowledge, to enable you to identify and understand financial crime, integrity and reputational risks arising from a lack of We operate a “Client First” policy that ensures strict adherence to the knowledge of counterparties or local jurisdictions. We empower you core principles of quality control, confidentiality and respect for time to make better informed decisions, allowing you to achieve positive constraints, and provide cost-effective solutions, which allows our outcomes and realise the full benefits of your business activities. clients to obtain the highest quality standard of EDD at one of the best cost-to-benefit ratios in the marketplace. Our independence enables Our enhanced due diligence (EDD) services help clients comply with us to avoid many of the potential conflicts of interest that may affect anti-bribery and corruption, anti-money laundering and other relevant our larger competitors. financial crime legislation, such as sanctions compliance, or the evaluation of tax evasion risks. For banking and asset management Should you like to know more about our services or discuss how we clients, our services are designed to support on-boarding new may be able to help you, please do not hesitate to get in touch with our customers or third parties, reviewing existing relationships, or as part London or Paris offices. of a remediation process.
We support clients in assessing complex integrity and political risks in opaque and high-risk markets through local insight and contact networks. Critical to our intelligence-gathering capabilities are the Find out more about the Aperio Intelligence Team at: languages we speak in-house, including all major European languages, www.aperio-intelligence.com as well as Russian, Arabic, Farsi, Mandarin, Cantonese and Japanese.
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SPECIAL FEATURE 15 Welcome to the December edition of the Financial Crime THE UK GOVERNMENT’S MEASURES TO ADDRESS THE Digest, Aperio Intelligence’s monthly newsletter, an informative ABUSE OF SCOTTISH LIMITED PARTNERSHIPS EXPLAINED summary of the most recent developments relating to the PRESS AND MEDIA 17 world of money laundering, fraud and terrorist financing, bribery MONEY LAUNDERING | FRAUD | TERRORIST FINANCING and corruption, and sanctions. PRESS AND MEDIA 26 BRIBERY | CORRUPTION [email protected] PRESS AND MEDIA 34 SANCTIONS
COUNTRY UPDATES 40
TECHNICAL UPDATES
The UK addresses the abuse of Limited Partnerships
The UK government announced a new package of transparency and anti-corruption measures on 10 December to address the abuse of Scottish Limited Partnerships and Limited Partnerships (LPs), which has been linked to international money laundering scandals.
The measures include new filing requirements that aim to make LPs more transparent and prevent their abuse. The key proposals are:
• those registering LPs must demonstrate The reforms will apply to all LPs in the UK. In The Department of Business, Energy they are registered with an official AML addition to requirements that are in place for and Industrial Strategy published the supervised agent; Scotland, the reforms will also include new government’s response on 10 December reporting requirements for LPs in England, to the consultation launched in April on the • the LP must demonstrate an ongoing link Wales and Northern Ireland, which will reform of UK limited partnership law, which to the UK; confirm that the information placed on the sets out the government’s reflections on the register is up to date and correct. responses received and clarifies its proposals • all LPs must submit a confirmation on implementing legislative change. statement every 12 months to ensure The government’s press release explains that their information is up to date; and the new measures come ahead of a broader package of reforms to Companies House to The new measures can be found HERE. • Companies House will be given powers ensure it is fit for the future. The Department to strike off dissolved LPs and LPs that for Business, Energy and Industrial Strategy is The BEIS report can be found HERE. are not carrying on business. due to consult on reforms in the new year.
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MEPs call for inquiry into cum-ex tax fraud scandal and call for wider reforms to EU tax rules
Members of the European Parliament The resolution also urges the national MEPs are also calling (MEPs) called for an inquiry, rule authorities to “end white-collar impunity” by on the European changes and stronger tax authorities on opening criminal investigations, imposing 29 November as a result of the EUR 55 dissuasive penalties and bringing justice Commission to propose billion cum-ex tax fraud. to the “perpetrators and enablers, including an EU framework not only tax advisers but also lawyers, MEPs passed a resolution calling on the accountants and banks.” for cross-border tax European Securities and Markets Authority investigations and the European Banking Authority to MEPs have stated that changes to the conduct an inquiry into the schemes at Directive on mandatory exchange of tax the root of the fraud to assess potential information (DAC6) are needed to oblige tax authorities, and to provide adequate threats to financial markets, establish the the disclosure of schemes established for human resources to improve surveillance and actors involved, evaluate whether there were dividend arbitrage. The resolution also calls ensure better information sharing. MEPs are breaches of national or EU law, and examine on the European Commission to revise the also calling on the European Commission to the actions taken by national supervisors. Directive on the common system of taxation propose an EU framework for cross-border MEPs insist that the inquiry should also and to look into ways of limiting the use of tax investigations, the setting up of an EU FIU, identify the failings in “the coordination across structures like special purpose vehicles, which and an early warning mechanism. the member states which allowed these tax have been central to cum-ex trades. theft schemes to continue for years, despite having been identified” and that the inquiry The resolution calls on member states to The press release can be found HERE. should provide recommendations for reform. invest in and modernise the tools available to
EU proposes regulation to combat VAT fraud that would require payment service providers to share payment data
The European Commission (EC) debit providers and data held by these countries have already shown how such presented a proposal for a regulation companies can offer EU tax administrations cooperation can have a tangible boost in linked to the fight against VAT fraud a useful tool to control the VAT obligations tackling fraud in the e-commerce sector.” on 12 December, which aims to on cross-border sales of goods and services,” establish better cooperation between explains the EC’s press release. The proposed rules will now be submitted to tax authorities and payment service member states in the Council for agreement providers, such as credit card and direct The proposed rules would establish quarterly and to the Parliament for consultation. debit providers, to help identify both EU information sharing obligations for providers, which would enable anti-fraud specialists (the and non-EU online sellers that are not The Commission’s proposed regulation “Eurofisc” network) to exchange and analyse complying with their VAT obligations. can be found HERE. certain payment data on cross-border sales. “More than 90% of European customers’ According to the EC, “Similar provisions in online purchases involve a payment The press release can be found HERE. intermediary such as credit card and direct place in some Member States and other
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TECHNICAL UPDATES
EU Council adopts anti-money laundering action plan
The Council of the European Union • improve EU supervisory authorities’ capacity adopted conclusions on an action plan to make better use of existing powers. to better tackle money laundering and terrorist financing on 4 December, The action plan urges member states to which leads with the objective to complete implementation of the Fourth Anti- conduct a “post-mortem” review of Money Laundering Directive and invites them the recent alleged money laundering to transpose the Fifth Anti-Money Laundering cases involving EU banks. The action Directive ahead of the 2020 deadline. plan underlines the importance of rapid progress on strengthening the EU The Commission is invited to propose longer- legislative AML framework based on the term actions to further improve the prudential results of the post-mortem review. and AML frameworks identified as a result of this “thorough assessment,” in consultation The action plan sets out short-term non- with member states. The action plan states legislative actions to address eight objectives: prudential supervisory process; that this assessment should be presented to the Council, at the latest in Q3 2019. The • identify the factors that contributed to the • ensure effective cooperation between Commission is requested to report back recent money laundering cases in EU banks, prudential and money laundering supervisors; every six months on the progress made in the to better inform possible additional actions in implementation of the action plan. the medium and long-term; • clarify aspects related to the withdrawal of a bank’s authorisation; • map relevant money laundering and terrorist financing risks and the best prudential • improve supervision and exchange of The action plan can be found HERE. supervisory practices to address them; information between authorities;
• enhance supervisory convergence and • share best practices and find grounds for The press release can be found HERE. better take into account AML aspects in the convergence among national authorities; and
EU Committee approves new rules to improve access to financial information to investigate serious crimes
The EU Parliament’s Civil Liberties The rules agreed by the Committee would: enforcement authorities and the national Committee approved a draft report Financial Intelligence Unit (FIU); and on 3 December that would improve • facilitate competent law enforcement law enforcement authorities’ access authorities’ access to bank account • provide for deadlines on exchanging to financial information and the information on a case-by-case basis; information to improve the process. cross-border exchange of financial information between EU authorities • provide for better cooperation between The press release can be found HERE. when investigating serious crimes. member states and between law
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The ECB’s The ECB’s opinion on the proposal cyber resilience to extend the powers of the EBA oversight The European Central Bank (ECB) for money laundering and terrorism published its opinion on 7 December financing, to strengthen the Banking and expectations on the amended proposal on the Capital Market Unions. amendment of the three Regulations founding the European Supervisory The opinion also sets out observations The European Central Authorities (ESAs), which seek to concerning what information would need Bank (ECB) published its centralise the tasks relating to the to be reported to the EBA and how the EBA cyber resilience oversight prevention and combating of money would promote convergence of supervisory expectations for financial laundering and terrorist financing into processes and risk assessments on market infrastructures (FMIs) the European Banking Authority (EBA) competent authorities. The ECB also on 3 December, which outline and extend the supervisory powers of proposes drafting amendments to the text the primary risk management the EBA related to AML/CFT. proposed by the Commission. categories and the overarching components that should be The ECB fully supports the intention addressed across an FMI’s cyber behind the amended proposal – to resilience framework. reinforce the mandate of the EBA in The ECB’s opinion can be found HERE. preventing the use of the financial system The risk management categories are: (i) governance, (ii) identification; (iii) protection; (iv) detection; and (v) response and recovery. The overarching components are testing, UK reverses its decision to suspend situational awareness, and learning and evolving. Tier 1 investor visas Meanwhile, the Basel Committee on Banking Supervision published a report entitled, “Cyber-resilience: The UK Home Office reversed a Range of practices,” on 4 December, decision to suspend Tier 1 investor which identifies and compares the visas on 11 December less than a week range of observed bank, regulatory after announcing it was suspending the and supervisory cyber resilience scheme over concerns about money practices across jurisdictions. laundering. According to the Financial The report summaries the current Times, the reversal came after the challenges and initiatives to enhance department received a letter from cyber resilience and presents case immigration lawyers warning that the studies that focus on developments suspension was illegal and would lead in the jurisdictions covered. to a legal challenge.
The UK’s minister of state for immigration, The suspension was due to end after an audit Caroline Nokes, issued a statement of changes process was introduced and independent The ECB’s oversight expectations to the Immigration Rules, on 7 December, regulated auditors appointed to vet future can be found HERE. which announced the suspension of Tier 1 applicants’ investment and business interests. investor visas with immediate effect, following According to the government, new rules were The Basel Committee report can concerns that the route was being used as a then to be put in place at some point in 2019 be found HERE. mechanism for money laundering. for investors wanting to relocate to the UK.
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TECHNICAL UPDATES
EU agrees on new rules to fight EU agrees non-cash payment fraud on reformed criminal records The European Parliament and the The directive will Council reached an agreement on the directive on combating fraud and encompass traditional information counterfeiting non-cash means of non-cash payments payment on 11 December, which will and new ways of system update the existing rules to ensure that a clear, robust and technology-neutral making payment The European Parliament and the legal framework is in place. Council agreed on a reformed EU • assistance and support to ensure victims criminal records information system The directive is technology-neutral and will are sufficiently informed of their rights (ECRIS) on 11 December that will encompass traditional non-cash payments and citizens are advised on how to now include a centralised database such as bank cards or cheques and protect themselves from such frauds; with information on convictions of new ways of making payment that have third country nationals and stateless appeared in recent years, such as e-wallets, • clarification of the scope of jurisdiction to persons (so-called ECRIS-TCN). mobile payments and virtual currencies. The ensure cross-border fraud is tackled more compromise text includes provisions on: effectively; and The centralised system will include only information to identify the person; the • expanding the scope of the offences to • collection of statistics on, as a minimum, conviction information can still only be include, for example, transactions through the number of offences and the number obtained from the convicting member virtual currencies; of persons prosecuted and convicted. state. The regulation sets out the division • harmonising the definitions of some online of responsibilities between the member The provisional political agreement will now crime offences, such as hacking a victim’s states and the agency tasked with have to be confirmed by the Parliament and computer or phishing; developing and operating the system. the Council before being formally adopted.
• harmonised rules on penalties for natural The agreement foresees that dual persons: minimum penalties of from one The press release can be found HERE. EU/TCN nationals will be included in to five years depending on the offence; the database, which will avoid a dual national having the possibility of “hiding” information on convictions by being both in the centralised database and in the database of their EU member state. Sanctions Review Procedure (EU Fingerprints of those dual nationals will be included in the system to the extent Exit) Regulations 2018 adopted they have been collected in accordance with national law.
The UK government adopted the to enable people/entities to request The provisional agreement between the Sanctions Review Procedure (EU a review, variation or revocation of a Parliament and the Council will now have Exit) Regulations 2018 on 30 sanctions listing or ship specification. to be confirmed by the two institutions November, which come into force on before being formally adopted. 7 January 2019.
The Regulations make provision for the The legislation can be found HERE. The press release can be found HERE. procedures under the UK Sanctions Act
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TECHNICAL UPDATES
EU agrees on UK’s FCA publishes findings of stricter controls cyber multi-firm review on explosive The UK’s Financial Conduct Authority risks arising from the nature, scale and (FCA) published on 10 December the complexity of the firm’s activities and risk precursors findings of its cyber multi-firm review, profile. Where a firm relies on group- which assessed a sample of 20 level or other centralised arrangements, EU ambassadors agreed on stricter firms in the asset management and management committees and boards rules concerning the availability, wholesale banking sectors. should carefully assess whether these introduction, possession and use of are fully aligned with the firm’s risks and explosive precursors throughout the The aim of the review was to assess ensure they address any identified gaps; EU on 12 December. how wholesale banking and asset management firms oversee and manage • firms should take proactive steps to foster their cybersecurity, how far they identify and a security-centric culture which transforms The new rules will mitigate risk and their capability to respond cyber to an organisation-wide priority; and limit the availability of to and recover from incidents. The FCA found that there were different degrees of • incident management plans did not always explosive precursors understanding of the potential ways that appear to reflect the likely impacts of a and ensure the weak cybersecurity could affect business successful attack in a variety of ways. reporting of suspicious activities, which was particularly the case at board or management committee levels. The FCA also provides a set of questions transactions throughout that board and management committee the supply chain The FCA’s main observations include: members could ask themselves as they consider the cyber risks facing their firm. • many firms need to do more to ensure that board and management committee Explosives precursors are chemical cybersecurity decisions are based substances that can be misused for The FCA’s findings can be found HERE. on careful consideration of the cyber the manufacture of illegal explosives. The new rules will limit the availability of explosive precursors to the public and ensure the reporting of suspicious transactions throughout the supply chain. Jersey signs agreement to return The proposed regulation provides for two categories of explosive precursors: confiscated assets to Kenya “restricted” which cannot be made available to members of the general Jersey signed an asset sharing Corruption and Crime to Kenya (FRACCK). public above certain concentration levels; agreement on 11 December to return “The governments of the United Kingdom, and “regulated” for which suspicious confiscated assets to Kenya as part of Switzerland and Jersey have agreed with transactions should be reported by its work to tackle financial crime. the Government of Kenya to establish operators, including online marketplaces. the FRACCK, as a multilateral framework Minister for external relations, Senator agreement, the first of its kind, to return The agreement starts negotiations with Ian Gorst, signed two arrangements to confiscated assets to Kenya,” said Senator the Parliament on the regulation. promote greater cooperation between Gorst in the press release. Jersey and Kenya: a Memorandum of Understanding on Financial Cooperation The press release can be found HERE. with the Government of Kenya and the The press release can be found HERE. Framework for Return of Assets from
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TECHNICAL UPDATES
EU presents action plan against disinformation
The European Commission published disinformation; (ii) strengthening coordinated its action plan against disinformation and joint responses to disinformation; on 5 December, which sets out the EU’s (iii) mobilising the private sector to tackle efforts to counter disinformation in disinformation; and (iv) raising awareness and order to protect democratic systems improving societal resilience. and public debates and in view of the 2019 European elections as well as Separately, the EU Parliament’s Constitutional national and local elections that will be Affairs Committee backed a proposal on 6 held by member states. December that would introduce penalties for EU political parties that deliberately The action plan states that disinformation breach data protection laws to tamper campaigns, in particular by third countries, with EU elections. The new provisions are often part of hybrid warfare, involving aim to protect the electoral process from cyber attacks and hacking. “Disinformation online disinformation campaigns based on produced and/or spread by Russian the misuse of voters’ personal data. The sources has been reported in the context of Committee has also backed a draft law several elections and referenda in the EU. that would introduce financial sanctions on Disinformation campaigns related to the political parties or foundations that infringe The action plan can be found HERE. war in Syria, to the downing of the MH-17 data protection rules deliberately to influence aircraft in the East of Ukraine and to the use the outcome of EU elections. of chemical weapons in Salisbury attack have The Commission’s press release can been well documented,” states the plan. Meanwhile, the EU’s security commissioner be found HERE. Julian King has alleged that the Russian The coordinated response to disinformation government launched a year-long presented in the action plan is based on four disinformation campaign to soften up public The Committee’s press release can objectives: (i) improving the capabilities of opinion before its seizure of three Ukrainian be found HERE. EU institutions to detect, analyse and expose ships and their crews in the Sea of Azov.
EU Council adopts position on new rules to prevent dissemination of terrorist content online
The Council of the European Union establishment in a member state. These The Council Presidency will start agreed its negotiating position on 6 providers will have to remove terrorist negotiations on the proposed rules with the December on the proposed regulation content or disable access to it within one European Parliament once the Parliament on preventing the dissemination of hour from receiving a removal order from has adopted its position. terrorist content online. the relevant authorities. If a hosting service provider fails to comply with removal orders, The proposed rules apply to hosting service they may be liable for a penalty of up to providers offering services in Europe, a maximum of 4 percent of their global The press release can be found HERE. regardless of whether they have their main turnover for the previous year.
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UK announces Rental security scheme introduced provisional to prevent terrorist use of vehicles police funding UK Counter Terrorism Policing announced on 7 December that it has settlement for teamed up with the Department for Transport to introduce a voluntary 2019/20 vehicle security scheme to reduce the risk of rental vehicles being used as weapons in acts of terror. The UK’s Home Office published the provisional police funding settlement The Rental Vehicle Security Scheme for 2019-20 on 13 December, which (RVSS) is voluntary and is open to all UK sets out the total amount of money hire firms who offer rentals to consumers. going into policing next year, including The Financial Times, reported that the how much each individual Police and government ignored advice from the Crime Commissioner in England and UK’s vehicle rental industry to introduce includes a commitment to: lawfully Wales will receive. The government mandatory regulations, which may reduce share data and information with law is proposing a total settlement of up its effectiveness. Counter Terrorism enforcement; train staff to identify and to GBP 14 billion, an increase of up to Policing expect more than 1000 report suspicious behaviour; appoint a GBP 970 million compared to 2018/19. companies to sign up to the scheme in recognised security contact; and only partnership with British Vehicle Rental accept electronic payment for all or part As announced in the Budget 2018, funding and Leasing Association. of the transaction. for counter-terrorism policing will increase by GBP 59 million in 2019/20 to GBP 816 The RVSS requires participating million. The counter-terrorism funding companies to meet a set of requirements The press release can be found HERE. total includes GBP 24 million to boost the included in a Code of Practice, which number of firearms officers, known as the firearms uplift.
The Home Office is also providing additional funding for national programmes UK Investigatory Powers Act and priorities. In 2019/20, an extra GBP 89 million will be provided, taking the total safeguards enter into force to GBP 1 billion, excluding the firearms uplift. This funding includes, amongst other things, continuing existing top-ups Warrants permitting the use of the The role of the Investigatory Powers to support the National Crime Agency most intrusive investigatory powers, Commissioner has also been created. and Regional Organised Crime Units. The concerning the equipment interference The investigatory powers subject national priorities funding also includes provision by law enforcement agencies to judicial authorisation include: a GBP 90 million investment to build and wider public authorities, within the equipment interference; interception; the capabilities to tackle serious and organised UK’s Investigatory Powers Act 2016, examination of bulk personal datasets; crime at national, regional and local levels. require the approval of a judge. The and communications data acquisition. safeguard, which came into force on 28 November, requires judicial approval The press release can be found HERE. in addition to existing authorisations, The press release can be found HERE. before such powers can be used.
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FinCEN and US agencies issue joint New guidance statement encouraging innovative for financial approaches to AML compliance institutions on The US Financial Crimes Enforcement Secrecy Act/Anti-Money Laundering tackling modern Network (FinCEN), the Board of (BSA/AML) compliance programmes. Governors of the Federal Reserve The joint statement encourages banks slavery risks System, the Federal Deposit to consider and, where appropriate, Insurance Corporation, the National responsibly implement innovative Credit Union Administration, and approaches in this area. Practical guidance designed to the Office of the Comptroller of the support the private sector in the Currency issued a joint statement The joint statement also notes that the fight against modern slavery was on 3 December on innovative efforts agencies are open to engaging with published on 3 December by a group to combat money laundering and banks to discuss pilot programmes of development finance institutions terrorist financing. for innovative BSA/AML approaches. (DFIs). The guidance aims to The regulators also welcome industry help companies and investors in The joint statement recognises that feedback on how they can best support emerging markets by giving them private sector innovation, including new innovative efforts through supervisory the practical tools to identify and ways of using existing tools or adopting processes, regulations, and guidance. manage potential risks proactively. new technologies, can help banks identify and report money laundering, terrorist The guidance entitled, “Managing Risks financing, and other illicit financial activity The statement can be found HERE. Associated with Modern Slavery,” has by enhancing the effectiveness of Bank been produced by CDC Group plc, the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), alongside the UK’s Department for International EU Committee agrees on anti-fraud Development (DfID). security features for identity cards The guidance offers advice for a range of sectors where risks of modern slavery are high. These risks tend to be greater in The EU Parliament’s Civil Liberties • making a facial image stored on a chip in the supply chain and are associated with Committee approved a draft report the card mandatory for citizens ID cards, a number of unacceptable practices, on 3 December that would establish in addition, member states could include such as abusive and fraudulent common security features for EU two fingerprints on the chip; and recruitment, the withholding of wages, identity documents to reduce fraud. • phasing out old formats within eight and document retention. The guidance Currently the security features in ID cards, years, cards that are not machine- provides suggestions to strengthen as well as residence documents vary readable would be phased out sooner. investors’ environmental and social significantly across EU countries, which due diligence and improve companies’ increases the risk of documents being Only member states already issuing ID supply chain monitoring, as well as falsified and identity fraud. cards would be affected by the rules. an understanding of how to manage The new measures would not make it and address specific issues, and why The proposals to tackle this issue include: compulsory to own an ID card. cooperation with others is important.
• setting common minimum security features across the EU for ID cards set out by the The press release can be found HERE. The guidance can be found HERE. International Civil Aviation Organisation;
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TECHNICAL UPDATES
Australia passes controversial law that Committee allows access to encrypted messages approves new
The Australian Parliament passed on draft EU rules 6 December the Telecommunications and Other Legislation Amendment on collective (Assistance and Access) Bill 2018, which amongst other things, establishes redress frameworks for mandatory industry assistance to law enforcement and The first-ever EU-wide rules intelligence agencies in relation to allowing groups of consumers encryption technologies. harmed by illegal practices to launch collective actions The law is part of a wider push to force and seek compensation were technology companies to provide access to prohibits police from requesting companies approved by the European their messaging systems and technology to build or implement a systemic weakness Parliament’s Legal Affairs platforms, to help intelligence agencies and or vulnerability into authentication or end- Committee on 6 December. the police tackle serious crime and terrorism. to-end encryption services. Amendments to On the passing of the new law, Australia’s the law were included to ease the concerns The draft rules would allow group prime minister, Scott Morrison, told local of industry and civil rights groups, which action against trader violations with radio that encryption laws were necessary include a mandatory review of the law after a broad public impact in domestic to target Islamist terrorism, paedophile 18 months and the consideration of further and cross-border cases in different networks and organised crime. amendments in the new year. consumer areas, including data protection and financial services. Despite privacy and security concerns, the Australia government insists that the new The legislation can be found HERE. The new rules would: law does not undermine encryption as it • strengthen the right to access justice by allowing consumers to join forces across borders and Member states jeopardising rule of jointly request unlawful practices to be stopped or prevented, or to law could risk losing EU funds obtain compensation; and • strike a balance between citizens’ The European Parliament’s Budgetary proper investigation of fraud, tax fraud, access to justice and protecting Control Committee endorsed a draft corruption or other breaches affecting the businesses from abusive lawsuits. law on 13 December that would see implementation of the EU budget; effective EU governments that interfere with judicial review by independent courts; and Under the new draft rules, courts or that go easy on fraud and preventing and penalising tax evasion. representative action could only be corruption, stripped of EU funds. brought by eligible entities, such as Once the full House has voted, MEPs will consumer organisations and certain The draft law would enable the enter negotiations on the final wording of independent bodies designated by Commission to establish whether the rule the regulation with EU ministers, who have member states. of law is under threat in member states. not yet adopted their position. Areas that could be undermined include: the proper functioning of the member The press release can be found HERE. The press release can be found HERE. state implementing the EU budget; the
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TECHNICAL UPDATES
EU Council adopts position on proposed regulation on cross-border access to e-evidence
The Council of the European Union production order could have been issued; agreed its position on 7 December on a Pecuniary sanctions proposal for a regulation on European of up to 2 percent • a mandatory deadline of ten days for the production and preservation orders for of total worldwide execution of a production order. In the case e-evidence in criminal matters. of validly established emergency cases, the annual turnover of the deadline may be reduced to six hours; The proposed regulation would introduce an preceding financial alternative mechanism to the existing tools • service providers may be sanctioned if they of international cooperation and mutual year can be imposed do not comply with an order. Pecuniary legal assistance, which would address the sanctions of up to 2 percent of total problems stemming from the volatile nature worldwide annual turnover of the preceding content – with a threshold for the latter of e-evidence and the “loss of location” aspect financial year can be imposed; and by setting new procedures for efficient and two which can be requested only for effective cross-border access. crimes punishable in the issuing country • the creation of a notification system for by a maximum sentence of at least three content data in cases where the issuing The main features of the new rules are: years, or for specific cyber/terrorism authority believes the person whose data related crimes; are sought is not residing in its own territory. • the creation of European production and preservation orders that can be issued to • the requested data may not be used for Negotiations with the Parliament will now obtain or preserve e-evidence regardless of purposes other than those for which take place on the proposed regulation. the location of the data; they were obtained, except to prevent an immediate and serious threat to public • the orders can cover any category of data security of the issuing state or its essential The press release can be found HERE. – subscriber, access, transactional and interests, or for proceedings for which a
G20 leaders’ financial crime commitments
At their meeting in Buenos Aires on 30 stolen assets, consistent with international efforts in fighting terrorist and proliferation November and 1 December, G20 leaders obligations and domestic legal systems. financing, and money laundering. We urge adopted a declaration that includes the digital industry to work together to fight commitments to regulate crypto- The G20 welcomed the commencement exploitation of the internet and social media assets for anti-money laundering and of the automatic exchange of financial for terrorist purposes,” states the declaration. countering the financing of terrorism account information and acknowledged in line with Financial Action Task Force the strengthened criteria developed by the The FATF published its report to the G20 (FATF) standards, and a new action plan OECD to identify jurisdictions that have leaders’ summit on 3 December, which sets to combat corruption. not satisfactorily implemented the tax out the FATF’s ongoing work. transparency standards. The declaration states that the links between The declaration can be found HERE. corruption and other economic crimes and The declaration states that the G20 leaders ways to tackle them will be explored further, are committed to the full implementation of The Hamburg G20 Leaders Statement on including through cooperation on the return The FATF report can be found HERE. of persons sought for such offences and Countering Terrorism. “We will step up our
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TECHNICAL UPDATES
UK’s FCA introduces news rules on EBA releases handling complaints about APP fraud consultation on security The UK’s Financial Conduct Authority The FCA has now (FCA) published new rules on 14 December, which allow the victims of extended these risk, and authorised push payment (APP) fraud obligations to the to complain to the payment services annual report provider (PSP) receiving their payment. receiving PSP The European Banking Currently, the sending PSP, but not the Authority (EBA) launched a receiving PSP, must handle complaints they’re not satisfied with the outcome, consultation on 13 December relating to APP fraud in line with existing can refer their complaint to the Financial on its draft guidelines on ICT complaints handling rules in the FCA Ombudsman Service,” said Christopher and security risk management. Handbook. The FCA has now extended these Woolard, executive director of strategy and The guidelines establish obligations to the receiving PSP and victims competition at the FCA. requirements for credit can refer their complaints to the Financial institutions, investment Ombudsman Service if they are unhappy Separately, a steering group established firms and payment service with the outcome. The new rules will come by the Payment Systems Regulator is providers on the mitigation and into force on 31 January 2019. developing a voluntary industry code, to set management of their ICT risks. standards for PSPs to prevent APP fraud and “The FCA takes APP fraud and the harm it reimburse victims in certain circumstances. The guidelines aim to mitigate causes to consumers very seriously. Now all ICT and security risks, internal victims of APP fraud can make a complaint and external, for all financial The press release can be found HERE. to the PSP receiving their payment and if institutions. The guidelines outline expectations in relation to governance, risk assessment, information security, and ICT operational management. The Ireland’s new corporate crime agency consultation closes on 13 March.
Meanwhile, the EBA published its Ireland’s Department of Business, government said. The agency will be annual report on 14 December Enterprise and Innovation published the given new search and entry powers that on risks and vulnerabilities in the Companies (Corporate Enforcement are designed to better enable the body to EU banking sector, accompanied Authority) Bill 2018 on 4 December, collect evidence held electronically. by the results of its 2018 EU-wide which establishes the new Corporate transparency exercise. ICT-related Enforcement Authority. Business minister Heather Humphreys stated: “By establishing the ODCE as a stand- risks have been found to be one of The new agency, that replaces the Office alone agency, it will be better equipped to the main challenges for EU banks, of the Director of Corporate Enforcement investigate increasingly complex breaches with cyber risks and data security (ODCE), which operates within the Irish of company law. The new Corporate being the main drivers. At the government’s Department of Business, Enforcement Authority will have more same time, conduct and legal risks, Enterprise and Innovation, will be an autonomy, particularly in terms of the ability including breach of AML regulations, independent commission and will benefit to recruit specialist skills and expertise.” have been on the rise in 2018. from enhanced powers. The new powers will enable the Corporate Enforcement The consultation can be found Authority to “structure itself to meet The Bill can be found HERE. HERE and the report HERE. the differing demands of its remit,” the
14 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
SPECIAL FEATURE
The UK government’s new measures to address the abuse of Scottish Limited Partnerships explained
By Oliver Brind Head of Business Development Aperio Intelligence
On 10 December, the UK government announced a series of measures to address the abuse of Scottish Limited Partnerships (SLPs). The measures should lead to greater transparency, as, henceforth, annual filings will be required, while background checks will be undertaken on those establishing limited partnerships. The government hopes that these measures will prevent abuse, while ensuring these arrangements can still be used as intended by legitimate bone fide investors. These measures have been prompted following concerns that they are being abused by criminals in the wake of significant money laundering scandals. The government has pledged to introduce legislation when parliamentary time allows.
By way of background, Limited Partnerships or own property. In a Limited Partnership in a lawyer, or an overseas equivalent; are formed by at least two partners, one England and Wales or Northern Ireland, a of whom must be a general partner – who limited partnership cannot do so in its own • the Limited Partnership must demonstrate is liable for any debts incurred – and one name; its business has to be undertaken in an ongoing link to the UK, for example by limited partner – who has limited liability, the name of the partners. keeping its principal place of business in but cannot play a role in the day-to-day the UK; management of the partnership. The government’s main proposals are: • all Limited Partnerships must submit a SLPs, however, differ to Limited Partnerships • those registering Limited Partnerships confirmation statement at least every 12 elsewhere in the UK, as they have legal must demonstrate they are registered months to Companies House to ensure personality, which allows the partnership with an official anti-money laundering their information is accurate and up to itself to enter into contracts, take on debts supervised agent, such as an accountant or date; and
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SPECIAL FEATURE
continues from previous page
• Companies House will be given powers to The vast majority of led to an 80 percent reduction in the number strike off dissolved Limited Partnerships those consulted said of registered SLPs. and Limited Partnerships which are not carrying on business. that they could not offer These proposals conclude a consultation evidence which would process that began in April 2018, The proposed reforms will also apply to all which engaged with a wide range of Limited Partnerships in the UK. In addition to definitively link SLPs representative bodies and individual requirements that are in place for Scotland, to criminal activity. companies. The government received the reforms will also include new reporting Nonetheless, there was a total of 41 responses. Alongside the requirements for Limited Partnerships in formal consultation process, there have England, Wales and Northern Ireland to broad agreement that been extensive informal discussions with confirm that the information they have greater transparency relevant parties. The vast majority of those provided and placed on the register is up to consulted said that they could not offer date and correct. was desirable evidence which would definitively link SLPs to criminal activity. Nonetheless, there was These measures seek to improve standards broad agreement that greater transparency further, building on the introduction of laws beneficial owner and make their ownership was desirable, and respondents were very in 2017, which require SLPs to report their structure more transparent. This change has supportive of the proposed changes.
There was, however, a wish to avoid imposing unnecessary additional administrative burdens on those who use SLPs for a very specific purpose, such as SLPs governing agricultural landlord tenant relations, where it would not be feasible to belong to a recognised anti-money laundering supervised body. Perhaps the greatest concern centred on the need for SLPs’ principal place of business (PPOB) to remain in the UK, as this might have a detrimental effect on venture capital and private equity businesses, given they establish an LP in the UK and then move their PPOB elsewhere. SLPs can more easily attract a broader range of global investors, as they are familiar with and like their structure.
In July, in a separate but connected move, the government presented draft laws setting out that foreign companies and other legal entities owning UK properties will be required to reveal their ultimate owners on the world’s first public register of overseas entities’ beneficial ownership.
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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FATF’s mutual evaluation report gives the UK the highest rating it has ever been given for its AML/CTF regime
The Financial Action Task Force • the UK’s FIU needs a substantial increase it supervises rather than just focusing on a (FATF) published its 2018 mutual in both human and IT resources. This is core number of large, high-risk entities; and evaluation report of the UK’s anti- identified as a priority action point with money laundering and counter terrorist more sophisticated IT needed to fully • whilst the FCA has a good understanding financing (AML/CTF) regime on 7 realise the intelligence that can be gained of ML/TF risk at national and sector level it December, which has found that the UK from suspicious activity reports (SARs); did not demonstrate the ability to develop has a well-developed and robust regime an accurate picture at a firm-specific level. to effectively combat money laundering and terrorist financing, but that it needs Whilst the FCA has a HM Treasury issued a press release to strengthen its supervision, and good understanding of following the publication of the UK’s FATF report, in which it stated that the UK is increase the resources of its financial ML/TF risk at national intelligence unit (FIU). leading the world in the fight against illicit and sector level it did not finance. John Glen, economic secretary to Noting that the UK faces a significant risk demonstrate the ability the Treasury and city minister said, “There of money laundering and terrorist financing, is absolutely no place for dirty money or the due to large volumes of funds which flow to develop an accurate people that launder it in our country, so I am through the UK financial system, the key picture of risk at a firm- incredibly proud that today’s report confirms points from the report include: that the UK has one of the strongest regimes specific level in the world for deterring these criminals.” • that the UK has a well-developed and robust regime to combat ML and TF Anti-corruption campaigners greeted the with prosecutions and investigations • whilst there is a SARs regime in place a findings of the FATF’s report, which has aggressively pursued, including 7,900 policy decision has meant that the FIU’s awarded the UK the highest rating it has investigations, 2,000 prosecutions and role in strategically analysing such reports ever been given despite the government 1,400 convictions annually for standalone has been limited which calls into question admitting that hundreds of billions of money laundering, or where money whether the value of such reports is being pounds are laundered through London each laundering is the principal offence; fully realised. The report notes that the UK year, with “disbelief.” SARs regime needs to be reformed and “This gold star for the UK’s anti-corruption • a robust and well-established confiscation modernised in order to improve the quality efforts suggests the anti-corruption regime is in place and is pursued as of intelligence being provided to authorities; a matter of policy, with GBP 1 billion watchdog is asleep on the job,” said Ava recovered since 2014; • in regard to SARs it was noted that there Lee, anti-corruption campaigner at Global is significant under reporting by some Witness. “The Task Force should be • the UK is a leader at designating terrorists sectors including lawyers, accountants and insisting the UK walks its talk by properly at a UN and EU level and has taken steps company service providers; resourcing promising new policies to to improve the overall effectiveness of tackle financial crime. Hundreds of billions sanctions programmes within the UK; • supervision is inconsistent across of dirty pounds are washing through our regulated entities within the UK and banks and property market every year, as • the UK is a global frontrunner in corporate such supervision needs to be in line with the government openly admits. Giving it so transparency and beneficial ownership the risks identified in the UK’s national much credit before we’ve seen real change requirements, although some action is risk assessment. In was noted that the makes a mockery of the whole process.” needed to ensure that the information Financial Conduct Authority (FCA) should on the Persons with Significant Control consider how it can ensure an appropriate The FATF report can be found HERE. register remains up to date and accurate; level of supervision across all entities that
17 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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Israel becomes FCA penalises former CEO of member of FATF Sonali Bank Ltd for AML failings and mutual The UK’s Financial Conduct Authority effective AML systems and controls. (FCA) published a Decision Notice in According to the FCA, between June evaluation report respect of Mohammad Ataur Rahman 2012 and March 2014, Mr Prodhan Prodhan, the former chief executive failed to take reasonable steps published officer of Sonali Bank (UK) Limited to assess and mitigate the AML (SBUK), on 4 December, fining him risks arising from a culture of non- The Financial Action Task Force GBP 76,400 for acting without due compliance among SBUK’s staff. The (FATF) announced on 10 December skill, care and diligence and for being FCA considers that he failed to ensure that Israel has become a full member knowingly concerned in a breach by that sufficient focus was given to AML of the FATF with immediate effect, SBUK of its obligations to maintain systems and controls or that there was following the publication of its effective AML systems. a clear allocation of responsibilities mutual evaluation report. to oversee SBUK’s branches, and that Mr Prodhan was the senior manager he failed to appropriately oversee, at SBUK with responsibility for the manage and adequately resource Israel has not included establishment and maintenance of SBUK’s MLRO function. real estate agents, dealers in precious metals, and trust and company service SFO reaches GBP 1.4 million in providers in its AML/ confiscation orders in fraud case CFT system The UK’s Serious Fraud Office (SFO) announced on 7 December that The FATF and MONEYVAL jointly Stephen Dartnell has been ordered assessed Israel’s AML/CFT system, to pay more than GBP 450,000 in concluding that Israel is achieving good confiscation within three months or results in identifying and responding face a further four years in prison to its money laundering and terrorist for his part in a fibre optic fraud and financing risks, but needs to focus on bribery scheme targeted at KBC supervision and preventive measures. Lease (UK) Ltd and Barclays Bank. Through their two companies, H2O The report finds that financial Networks and Total Asset Finance institutions and their supervisors have Mr Dartnell’s confiscation order adds the men fabricated fibre optic a good understanding of the risks, to the GBP 950,000 already recovered infrastructure contracts with public but this understanding is weaker in from his co-conspirators, Simon Mundy, authorities to secure lump sum the money service business sector. George Alexander, and Carl Cumiskey. payments from the lenders. More than Financial supervisors generally have not 42 fraudulent contracts were drawn developed full risk-based supervision. The men were convicted in February up, claiming clients from local council Israel has not included real estate 2017 for defrauding two business authorities, universities, NHS Trusts agents, dealers in precious metals, and lenders, KBC Lease (UK) Ltd and and regional police and fire services trust and company service providers in Barclays Bank, paying bribes and were purchasing services from H2O its AML/CFT system, and lawyers and submitting falsified documents to Networks and Total Asset Finance, accountants are not required to report secure lucrative financing agreements when in reality they were either false or suspicious transactions. between 2007 and 2010. inflated in value by millions of pounds.
18 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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Four charged in relation to Panama Papers investigation for their role in a scheme to defraud the US
The US Department of Justice conspired with others to help US taxpayer Von Der Goltz was assisted in this scheme announced that four individuals have clients of Mossack Fonseca conceal assets by Mr Owens and Mr Gaffey. Mr Von Der been charged in an indictment unsealed and investments, and the income generated, Goltz, Mr Gaffey, and Mr Owens are alleged on 4 December, with wire fraud, tax from the IRS through fraudulent, deceitful, to have falsely claimed that Mr Von Der fraud, money laundering and other and dishonest means. To conceal their Goltz’s elderly mother was the sole beneficial offences in connection with their clients’ assets, Mr Owens and Mr Brauer owner of the shell companies and bank alleged roles in a criminal scheme allegedly established and managed opaque accounts because she was a Guatemalan perpetrated by Panama-based law firm, offshore trusts and undeclared bank citizen, and was not a US taxpayer. Mossack Fonseca & Co, and related accounts. Mr Owens and Mr Brauer also entities, which came to light as a result allegedly marketed, created, and serviced Mr Gaffey is also alleged to have worked of the leaked files from Mossack sham foundations and shell companies closely with Mr Owens to help another US Fonseca dubbed the “Panama Papers.” formed under the laws of countries such taxpayer client (referred to as “Client-1”) as Panama, Hong Kong, and the British of Mossack Fonseca defraud the IRS. Those charged are Ramses Owens, a lawyer Virgin Islands, to conceal the ownership of Client-1 allegedly maintained a series of who worked for Mossack Fonseca; Dirk accounts established at overseas banks, as offshore bank accounts, which Mossack Brauer, an investment manager who worked well as the income generated. Fonseca helped Client-1 conceal from the for a Mossack subsidiary; Richard Gaffey, a IRS for years. The indictment further alleges US-based accountant; and Harald Joachim Mr Von Der Goltz, one of Mossack Fonseca’s that, upon the advice of Mr Owens and Mr von der Goltz, a former US resident and US taxpayer clients, is alleged to have Gaffey, Client-1 covertly repatriated USD Mossack Fonseca client. evaded his tax reporting obligations by 3 million of offshore money to the US by setting up a series of shell companies and falsely stating on the federal tax return that According to the indictment, from at least bank accounts and hiding his beneficial the money represented proceeds from the 2000 to 2017, Mr Owens and Mr Brauer ownership. According to the indictment, Mr sale of a company. Photo: AFP
OCC risk perspective states that compliance risk remains high as banks seek to manage money laundering risks
The US Office of the Comptroller of of product and service solutions may OCC stem from issues related to customer the Currency (OCC) published its also be used to facilitate illicit activity, due diligence/enhanced due diligence, Semiannual Risk Perspective for Fall thereby increasing risk exposure. customer risk identification, and processes 2018 on 3 December, which highlights related to suspicious activity monitoring that compliance risk has been elevated The OCC states that it has identified and reporting,” states the report. as banks manage money laundering instances when banks have not adjusted risks and comply with amended or realigned Bank Secrecy Act (BSA)/AML The OCC report states that it is monitoring consumer protection requirements. The and OFAC risk assessments to reflect the risks as banks explore artificial OCC’s report states that the underlying changes in risk profiles resulting from intelligence, machine learning, and other technology that supports innovation in multiple factors. “The majority of BSA/ innovative technologies in the context of FinTech and RegTech and development AML-related deficiencies identified by the BSA/AML systems.
19 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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SEC charges UN launches new framework to two celebrities strengthen fight against terrorism with unlawfully UN secretary-general António the misuse of emerging technologies Guterres launched an new such as AI, drones and 3D printing, as promoting ICOs organisation-wide framework well as against the use of hate speech termed the UN Global Counter- and distortion of religious beliefs. The The US Securities and Exchange Terrorism Coordination Compact on Committee discussed strategic priorities Commission (SEC) announced on 6 December to better serve the needs for the next two years, based on the 29 November that it has settled of member states when it comes to Global Counter-Terrorism Strategy, charges against professional boxer tackling international terrorism. UN Counter-Terrorism Directorate Floyd Mayweather Jr and music assessments as well as member states producer Khaled Khaled, known Speaking at the first meeting of the requests for technical help. as DJ Khaled, for not disclosing Compact’s Coordination Committee, payments received to promote Mr Guterres highlighted the need to The UN Global Counter-Terrorism initial coin offerings (ICOs). ensure full respect for international Coordination Compact Task Force human rights standards and the rule of replaces the Counter-Terrorism According to the SEC, Mr Mayweather law in countering terrorism. Mr Guterres Implementation Task Force, which was did not disclose payments from three also urged greater vigilance against established in 2005. ICO issuers, including USD 100,000 from Centra Tech, and USD 200,000 from the other two. Mr Khaled was also said not to have disclosed a USD 50,000 payment from Centra Tech. Mr “Massive” money laundering Mayweather and Mr Khaled had both used social media to promote the ICOs. problem in German real estate
Mr Mayweather agreed to pay USD The German branch of Transparency 300,000 in disgorgement, a USD International published a report on 300,000 penalty, and USD 14,775 in 7 December on “Money laundering prejudgment interest. Mr Khaled agreed in real estate in Germany,” in which to pay USD 50,000 in disgorgement, a some EUR 30 billion of criminal USD 100,000 penalty, and USD 2,725 assets are said to have been in prejudgment interest. In addition, Mr laundered through Germany’s real Mayweather agreed not to promote any estate sector in 2017. securities, digital or otherwise, for three years, and Mr Khaled agreed to a similar The report highlights compliance failings ban for two years. Mr Mayweather also with Germany’s AML law passed in 2017 money through German real estate; agreed to continue to cooperate with which stipulates that real estate agents, the investigation. notaries and lawyers must observe the • 15 to 30 percent of criminal proceeds “know your customer” principle and report are invested in real estate, through The SEC filed a civil suit against Centra suspicious transactions. building and renovating, buying, selling Tech’s founders in April, alleging that and renting; and the ICO was fraudulent, and the US Other findings include: Attorney’s Office for the Southern • Of the 60,000 suspicious transactions District of New York filed parallel • criminal networks, particularly the Italian submitted to authorities in 2017, just criminal charges. Mafia, exploit legal loopholes to launder 20 came from real estate agents.
20 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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Deutsche Bank: Two US senators call for probe; internal probe reportedly reveals suspicious transactions
Two US senators called for the US reported to the German tax authorities expects that it will have to repay the Senate to open an investigation into suspicious transactions that may have amount claimed by its own staff. Deutsche Bank AG on 13 December allowed clients to claim dividend tax credit over its compliance with US anti-money on shares they did not own. According to Separately, Reuters reported on 10 laundering and bank secrecy laws. the report, Deutsche Bank’s internal review December that German prosecutors have found that more than 5 percent of its launched a probe against a former AML Senators Elizabeth Warren and Chris pre-release American Depositary Receipts official of Deutsche Bank on suspicion of Van Hollen said in a statement that transactions between 2010 and 2015 were money laundering, according to German they have written to the Senate Banking potentially open to abuse with regard to public broadcaster Hessischer Rundfunk. Committee with the request to launch German dividend tax credit. Reportedly, the public prosecutor is an investigation into the bank “with a accusing the former official of failing to focus on its correspondent banking Deutsche Bank estimates that the report suspicious transactions. operations and vulnerabilities to money potentially suspicious transactions laundering” in light of investigations by amounted to about EUR 25 million in In addition to this, the Financial Times EU authorities that called into question German withholding tax, including a sum reported on 6 December that Deutsche its compliance controls. which involved other units of Deutsche Bank is believed to have processed an Bank group as a counterparty. The review additional EUR 31 billion of questionable Meanwhile, the Financial Times reported did not assess if irregular claims were funds for Danske Bank A/S than on 9 December that Deutsche Bank has made but reportedly Deutsche Bank previously estimated.
Photo: Reuters
DOJ seeks to recover proceeds of bank fraud used to conceal involvement of Jho Taek Low
The Department of Justice (DOJ) Prakazrel (“Pras”) Michel and former conspiracy. According to admissions, in announced on 30 November the filing Justice Department employee George 2017 Mr Higginbotham helped facilitate the of a civil forfeiture action seeking to Higginbotham to receive tens of millions transfer of tens of millions of dollars from forfeit and recover more than USD of dollars in funds from overseas foreign bank accounts to accounts in the 73 million in funds associated with accounts controlled by Jho Low. In US to finance a campaign to resolve civil a conspiracy to defraud US financial opening these accounts, Mr Michel and and criminal matters related to the DOJ’s institutions and launder funds Mr Higginbotham allegedly made false investigation of 1MDB. In order to conceal controlled by Jho Taek Low, who is the and misleading statements about the the identity of the foreign principal behind subject of an indictment alleging that source of the funds and to obscure Jho the lobbying campaign, Mr Higginbotham he and others conspired to launder Low’s involvement. It is alleged that the admitted to conspiring to make false funds embezzled from 1Malaysia funds were intended to influence the statements concerning the source and Development Berhad (1MDB), and pay DOJ’s investigation of 1MDB. purpose of the funds. Mr Higginbotham bribes to foreign officials. also admitted to working on various fake The DOJ announced on the same day, loan and consulting documents to deceive It is alleged that multiple bank accounts the guilty plea of former employee banks and regulators about the source and were opened at US financial institutions by George Higginbotham for his role in the purpose of the funds.
21 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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Pay.UK launches new AML Mule Trump’s Insights Tactical Solution former lawyer
Pay.UK’s Faster Payments team disrupt fraud and money laundering sentenced to announced the official launch of the worth millions annually,” said Pay.UK. Mule Insights Tactical Solution (MITS) three years in on 11 December, which enables According to Pay.UK’s press release, suspicious payments to be tracked as during the pilot, based on a limited prison they move between bank accounts. number of suspicious transactions submitted for tracing to test MITS MITS, which has been developed by Vocalink, operational capability: US president Donald Trump’s creates a visual map of where and when former lawyer Michael Cohen was money has moved, providing data driven • thousands of UK accounts were sentenced to three years in prison insights and new intelligence for fraud teams. subject to further investigation due to on 12 December by a federal judge suspicious activity; for engaging in a “smorgasbord of “By bringing together payments data from fraudulent activity,” which included multiple banks and overlaying it with cutting- • multiple money laundering rings were lying to Congress and facilitating edge proprietary analytics and algorithms, uncovered – where money was being illegal payments to silence two MITS can accurately pinpoint individual moved between networks of accounts women. Mr Cohen was ordered to accounts (known as mule accounts) involved and institutions; and pay nearly USD 2 million in fines, in suspected illegal activities. MITS will forfeitures and restitution. help the UK’s financial institutions detect • hundreds of mule accounts previously and respond to criminal activity across the completely unknown to authorities Mr Cohen admitted in August that payments network, and has the potential to were identified. before the 2016 presidential election he made payments to Stormy Daniels and Karen McDougal, which were found to be in violation of campaign finance laws. President Trump directed Mr US files fraud charges against Cohen to make the illegal payments, prosecutors said in a court filing. Mr Autonomy founder Mike Lynch Cohen was also sentenced for tax and bank fraud crimes to which he pleaded The US Department of Justice (DOJ) guilty. Mr Cohen faced sentencing on filed criminal charges against Mike a charge of lying to Congress when Lynch on 29 November, over the he said that Trump’s plans to build a USD 11 billion sale of UK company tower in Moscow had been terminated Autonomy to Hewlett-Packard seven in January 2016, when in fact, the years ago. The charges, which carry project was still live after Trump was a maximum penalty of 20 years in Photo: The Guardian nominated for the presidency. prison, include 13 counts of fraud and In a parallel filing, special counsel one count of conspiracy. charged, inflated Autonomy’s financial performance from the beginning of 2009 Robert Mueller asked the judge to give The charges filed in federal court in San until October 2011, when the acquisition consideration to Mr Cohen’s work with Francisco follow a six year investigation was announced. The indictment lists 28 his team, which relate to Mr Mueller’s into allegations that Mr Lynch and instances in which the former Autonomy investigation into president Trump’s Stephen Chamberlain, a former Autonomy executives are alleged to have issued alleged campaign collusion with Russia finance executive, who has also been false statements. and the possible obstruction of justice.
22 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
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UK’s House of Former owner of Banco Peravia Lords amends sentenced for money laundering draft Counter- The US Department of Justice of conspiracy to commit money announced on 29 November that laundering. As part of his guilty plea, Terrorism and a former owner of Banco Peravia Mr Jimenez admitted that he conspired bank in the Dominican Republic, with Raul Gorrin Belisario, and others to Border Security Gabriel Arturo Jimenez Aray, has acquire Banco Peravia, through which been sentenced to three years he helped launder bribe money and Bill in response in prison for his role in a money scheme proceeds. Mr Jimenez and his laundering scheme involving co-conspirators used Banco Peravia to to concerns currency exchange. pay bribes to Venezuelan government officials in exchange for contracts to Mr Jimenez pleaded guilty under conduct currency exchange schemes seal on 20 March 2018 to one count and to launder the money obtained.
Operators and senior management sanctioned for AML failings
The Great British Gambling to put in place effective safeguards to Commission announced on 29 prevent money laundering and to protect November that online casino customers from gambling-related harm. The UK House of Lords made companies and their senior an amendment to the Counter- management have been subject The Commission also took action against Terrorism and Border Security Bill to widespread action as part of the individuals responsible. Three Personal on 3 December following concerns an ongoing investigation into the Licence (PML) holders surrendered their from charities that the new rules way the industry combats problem licenses, and four PML holders, including could have led to aid workers being gambling and money laundering. two individuals from Stride, have been imprisoned for delivering services. issued with a warning. Two PML holders The amendment to the bill exempts The statement includes the previously were issued with “Advice as to Conduct.” aid workers, journalists, and those announced action against Daub Alderney carrying out work for the United t/a Stride, which resulted in a financial The Commission statement confirmed Nations, with a legitimate reason penalty of GBP 7.1 million; Casumo that it is still investigating a further six to travel to areas where extremist Services Limited has been ordered to pay operators and three individuals. It was groups operate, from prosecution. a financial penalty of GBP 5.85 million also announced that CZ Holdings will no following a licence review; and Videoslots longer be able to provide gambling services Chief executives from charities Limited t/a www.videoslots.com has to consumers in Britain, following the including Oxfam, ActionAid UK and reached a regulatory settlement with the company’s decision to surrender its licence Islamic Relief Worldwide had expressed Commission without a licence review, after a licence review by the Commission. concern about the effect of the new which includes an agreement to pay GBP powers on charity workers. The bill 1 million in lieu of a financial penalty. Separately, the Gambling Commission gives the home secretary new powers highlighted to operators that the UK FIU’s to make it an offence for UK nationals Between the three companies, the latest edition of the SARs Reporter Booklet and residents to enter or remain in a penalties total GBP 14 million, and come December 2018, includes a gambling particular country or region. as result of the findings that they failed industry money laundering case study.
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Malaysia files criminal charges RUSI publishes against Goldman Sachs over papers on dealings with 1MDB fund combating The Malaysian attorney-general’s than the prevailing market rates. ML by cyber office issued a statement on 17 Prosecutors have also filed charges December confirming that criminal against Low Taek Jho, also known charges have been filed against as Jho Low, who is being sought by criminals Goldman Sachs and two of its authorities in connection with 1MDB, former bankers, Tim Leissner and and Jasmine Loo Ai, 1MDB’s former and how Roger Ng Chong Hwa, for “gross general counsel. violations” of securities laws in its the financial dealings with the country’s sovereign Former Malaysian prime minister Najib wealth fund 1Malaysia Development Razak was charged on 12 December sector can help Berhad (1MDB), and that it is with tampering with the final audit seeking fines of USD 3 billion. report of 1MDB, adding to a long list reduce modern of corruption allegations against him. The charges allege that Goldman Sachs Mr Najib and Arul Kanda Kandasamy, bankers bribed Malaysian officials to the former head of the 1MDB fund, slavery secure involvement in the auction of USD were charged with modifying the report 6.5 billion in bonds for 1MDB, and that before it was presented to the Public The Royal United Services Institute Goldman Sachs received USD 600 million Accounts Committee. The two men (RUSI) published an occasional in fees for its role, which was higher have been released on bail. paper entitled “From Money Mules to Chain-Hopping: Targeting the Finance of Cybercrime” on 29 November, which discusses the ways that cyber criminals manage the proceeds of their crimes, Gibraltar settles with Wave Crest from employing money mules to using services such as mixers to Holdings Ltd over AML failings obfuscate the proceeds’ origins.
The paper examines the money Gibraltar’s Financial Services individuals have agreed to voluntarily laundering techniques used by Commission announced on 10 step down from their positions and will cyber criminals and puts forward December that it has entered into not seek regulatory approval relating to a recommendations for policymakers, a regulatory settlement agreement financial services business for a period law enforcement professionals and with e-money institution, Wave Crest of two years. Wave Crest has accepted regulated entities to combat such Holdings Limited, (former CEO) Brent that in several respects its AML/ CFT activities. Almeida, (CEO) John Racine and systems and controls during at least (MLRO) Colin Piri for failings identified part of the period of January 2017 RUSI also published an occasional with Wave Crest’s anti-money to May 2018, fell below the standard paper entitled “Leaning In: Advancing laundering and counter terrorist expected. In February 2018, Wave Crest the Role of Finance Against Modern financing systems and controls. voluntarily agreed not to take on any Slavery,” on 11 December, which new business, and it has been agreed explores the role that the financial Wave Crest has agreed to pay a financial that this restriction is to remain in place sector can play in reducing human penalty of GBP 250,000 and all three until further notice by the Commission. trafficking and modern slavery.
24 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
UBS fined USD US Senate publishes reports on 15 million by Russian disinformation campaign FINRA, the SEC The US Senate published a report on and Facebook to the Senate Intelligence 17 December detailing the scope of Committee. The research details a and FinCEN Russia’s disinformation campaign campaign spearheaded by the Internet surrounding the 2016 US election Research Agency (IRA), a Russian for AML campaign, which claims that Russia company that has been described by used every major social media the US as a troll farm with ties to the deficiencies platform to try to influence the 2016 Russian government. US election. The US Financial Industry A second report, released by the Senate Regulatory Authority (FINRA) The report, commissioned by the Senate on the same day, by research firm New announced on 17 December that it and produced by the University of Oxford’s Knowledge, highlights Russia’s efforts has fined UBS Financial Services Computational Propaganda Project and to target African-Americans. The report Inc. (UBSFS) USD 4.5 million and the social network analysis firm Graphika, highlights details that could have led UBS Securities LLC (UBSS) USD is the first analysis of millions of social companies to detect interference earlier, 500,000 for failing to establish and media posts provided by Twitter, Google such as the use of the rouble to buy ads. implement anti-money laundering (AML) programmes reasonably designed to monitor certain high- risk transactions in customer accounts. According to FINRA, The EUBAM Libya to support the high-risk transactions included foreign currency wire transfers at disruption of criminal networks UBSFS, and transactions in low- priced equity securities or “penny stocks,” at UBSS. The Council of the European Union adopted a decision on 17 The Securities and Exchange December mandating the EU Commission (SEC) and the Financial integrated border management Crimes Enforcement Network assistance mission in Libya (FinCEN), a bureau of the United (EUBAM Libya) to actively States Department of the Treasury, support the Libyan authorities in also announced on 17 December that contributing to efforts to disrupt UBSFS has agreed to pay a USD 5 organised criminal networks million penalty to each of the agencies involved in smuggling migrants, in separate actions for AML violations. human trafficking and terrorism.
FINRA found that, from 2004 to 2017, In order to achieve its objectives among relevant Libyan authorities. The UBSFS processed foreign currency EUBAM Libya provides capacity-building mission will manage and coordinate wires without sufficient oversight. in the areas of border management, projects related to its mandate. UBSFS’s AML surveillance systems law enforcement and criminal justice. failed to reasonably monitor foreign The mission advises the Libyan The mission’s revised mandate will run currency wires through customer authorities on the development of a until 30 June 2020. The Council has accounts, including hundreds of national integrated border management allocated a budget of EUR 61.6 million millions of dollars to and from countries strategy and supports capacity building, for the period from 1 January 2019 to known to be at high-risk of ML. strategic planning and coordination 30 June 2020.
25 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
TECHNICAL UPDATES Annual cost of corruption across EU is EUR 904 billion
The Greens/European Free Alliance The report calls on the Meanwhile, to mark International Anti- (EFA) group published a report on Corruption Day on 9 December, the 7 December entitled “The cost of European Commission UNODC and UNDP developed a joint global corruption across the EU,” which to annually review anti- campaign, focusing on how corruption analyses the cost of corruption in each corruption practices in affects education, health, justice, democracy, EU member state. The report calculates prosperity and development. the annual cost of corruption across the member states EU to be EUR 904 billion. “Every year $1 trillion is paid in bribes while an estimated $2.6 trillion are stolen annually Amongst the report’s findings is that the The report calls on the Commission to through corruption – a sum equivalent to Czech Republic loses over EUR 26.7 billion annually review anti-corruption practices in more than 5 per cent of the global GDP. In to corruption each year, which is more than member states, and for increasing funding developing countries, according to the United 12 percent of the country’s GDP. The UK for anti-corruption activities, improving Nations Development Programme, funds lost is estimated to lose over EUR 41.2 billion the capacity of the EU’s anti-fraud body to corruption are estimated at 10 times the to corruption every year, which is around (OLAF), strengthening the European amount of official development assistance,” 2.3 percent of GDP. Whereas Germany is Public Prosecutor’s Office, protecting states the UN press release. estimated to be losing over EUR 104 billion whistleblowers, journalists and NGOs, and per year to corruption, which is around 4 ensuring greater transparency and control The report can be found HERE. percent of the country’s GDP. over how EU funds are allocated and spent.
OECD publishes report on foreign bribery enforcement
The Organisation for Economic Co- In only one fifth of the 55 concluded foreign operation and Development (OECD) bribery cases were formal sanctions published a report on 11 December imposed on one or more public officials, entitled “Foreign Bribery Enforcement: which the OECD believes is particularly What happens to the public officials striking because it is for cases in which both on the receiving end?” The report has sides of the bribe transaction – the briber found that public officials accepting and the public official on the receiving end – bribes from OECD-based companies run were subject to the jurisdiction of parties to little risk of being punished. the OECD Anti-Bribery Convention.
The report explores whether there is a “flip The report also finds that: side” to enforcement actions that ended in sanctions for the supply-side of a foreign • enforcement actions targeting public bribery transaction, particularly whether officials do take place, but the rate of international flow of information and the public officials in the demand-side sanctioning is not particularly high; as such the media were the dominant country were disciplined. The report looks reported source of detection on the at what happened to the public officials • international cooperation is not a major demand-side; and in 55 concluded cases between 2008 and source of detection for demand-side cases; 2013 where OECD-based companies were • enforcement capacity needs to be punished for bribing foreign public officials. • the media play a major role in the enhanced.
26 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Mozambique Former Bloomberg LP and Turner discovers Construction Executives charged in 30,000 “ghost bid-rigging and bribery conspiracy workers,” Manhattan District Attorney Cyrus R. According to court documents, 14 Vance Jr, announced on 11 December, individuals and three corporations are reports BBC the indictment of former Bloomberg charged in two New York supreme court LP executives Anthony Guzzone, head indictments with conspiracy, as well as of global construction, and Michael various counts of grand larceny, money Campana, construction manager, laundering, and commercial bribery, for conspiring with former Turner among other charges. Construction Company executives Ronald Olson, vice president, and It is alleged that the conspiracy centred Vito Nigro, project superintendent, on interior construction work for to steal from Bloomberg LP Bloomberg LP offices at 120 Park Avenue through inflated subcontractor bids, and 919 Third Avenue, in which inside fictitious work and change orders, information on contracts was passed to and misappropriation of unused subcontractors to help them secure bids subcontractor allowance funds. for interior construction jobs. As part of The BBC reported on 11 Various subcontracting company the conspiracy, the defendants are alleged December that Mozambique’s owners, executives, and vendors are to have filed falsified documents, as well government has discovered more charged with paying bribes, engaging as applications for status as a Women’s than 30,000 “ghost workers” on in bid-rigging, falsifying records, and Business Enterprise to help secure bids. the civil service payroll. According money laundering. The defendants are In exchange, subcontractors provided the to the report, the fraud has cost alleged to have stolen more than USD former Bloomberg and Turner executives the government around USD 250 15 million from Bloomberg LP. with cash bribes and incentives. million between 2015 and 2017.
Civil service minister, Carmelita Namashulua, said some of the “ghost workers” were paid for jobs they had MEPs vote to end “possible conflict not done, others were found to be dead or fictitious. According to the BBC’s Jose Tembe, the government of interest” concerning PM Babiš carried out proof-of-life tests, meaning that all civil service employees had to Members of the European Parliament out irregularly and explain what steps appear in person to prove that they (MEPs) voted on 13 December to it was taking to remedy any potential really existed. support action to end the potential conflict of interest. conflict of interest concerning Czech Ms Namashulua said the government prime minister Andrej Babiš. MEPs MEPs noted an opinion by the Commission’s recognised that state corruption was demanded the European Commission legal service that Mr Babiš received EUR 3.5 still a major problem in Mozambique publish all documents relating to Mr million during the first half of this year from and that other challenges included Babiš’s “possible conflict of interest” the Agrofert Group via his trust funds, at the favouritism, nepotism, illicit charges through his beneficial ownership same time as he served as chairman of the for admitting people to jobs in public of Agrofert, suspend funding to Czech national Council for the European administration and falsified licences. Agrofert, recover any money paid structural and investment funds.
27 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
UK publishes one-year update on anti-corruption strategy
The UK’s Home Office published its nation’s prosperity by raising standards will pursue a body of work on better one-year update on its anti-corruption for business integrity and improving the understanding the threat posed by strategy on 12 December, which service offering to UK businesses that wish economic crime, which will map the highlights the priorities to strengthen to conduct clean business in challenging current understanding of the corruption international cooperation and continue markets. This will include continued threat by bringing together the evidence in working with partners to bolster global development of the Business Integrity government, civil society and academia. efforts to tackle corruption as the UK Hub, finalising the approach to free trade There is related work to develop a plans its departure from the EU. agreements and harnessing the Prosperity common cross government working Fund Global Anti-Corruption programme. definition of “corruption” by focusing Among the achievements of the past 12 on sub-categories (e.g. bribery, fraud, months highlighted in the cross-government • Illicit finance and beneficial ownership – embezzlement), which will help address review of the strategy is the Criminal Finances Increased efforts to ensure that the UK’s under-reporting of corruption threats. Act – which saw the first use of new powers, financial sector is increasingly hostile to the new National Economic Crime Centre and illicit finance and to promote international • Insider threat – A focus on securing a government network to reduce the risks of action through beneficial ownership and a more strategic approach to tackling bribery and corruption. illicit finance campaigns. UK Overseas corruption in domestic public sectors. Territories and Crown Dependencies will be The priorities for 2019 include: supported in their efforts to do the same. • International partnership – Continue to work with international partners, including • Prosperity – Pressing the case that • Strengthening the evidence base for through the international fora, bilateral combating corruption is critical to the combating corruption – The government action, and Prosperity Fund initiatives.
Australia’s central bank acknowledges shortcomings in bribery case
Australia’s central bank, the Reserve The Reserve Bank of the companies and oversaw a strengthening Bank of Australia (RBA) disclosed on of governance arrangements and business 28 November that in late 2011 Note Australia accepts there practices in the two companies. In early 2013 Printing Australia (NPA) and Securency were shortcomings in the RBA sold its interest in Securency. pleaded guilty to charges of conspiracy to bribe foreign officials in connection its oversight of these NPA has paid fines totalling AUD 450,000 and with banknote-related business. companies a pecuniary penalty under the Proceeds of Crime Act 2002 of AUD 1,856,710. Securency Governor of the RBA, Philip Lowe, stated in paid fines totalling AUD 480,000 and a the press release, “The Reserve Bank strongly Charges linked to the scandal involved pecuniary penalty under the Proceeds of condemns corrupt and unethical behaviour. conspiracies to bribe officials in Malaysia, Crime Act of AUD 19,809,772. Four former The RBA has been unable to talk about this Indonesia, Nepal and Vietnam between employees of Securency have pleaded guilty matter publicly until today, although the guilty 1999 and 2004. The suppression orders to charges of conspiring to bribe and/or false pleas were entered in 2011. The RBA accepts were lifted when Christian Boillot, a accounting. Charges against four former there were shortcomings in its oversight of former NPA executive, pleaded guilty to employees of NPA were permanently stayed these companies, and changes to controls attempting to bribe foreign officials in on the basis that continued prosecution and governance have been made to ensure Malaysia. In 2011 the RBA commissioned of these individuals would bring the that a situation like this cannot happen again.” an external review of RBA oversight of administration of justice into disrepute.
28 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
DOJ to revise the Yates Memo SFO announces
Deputy US attorney general Rod Amongst the end to first DPA Rosenstein announced revisions revisions was the to the policies regarding individual with Standard accountability for corporate acknowledgement wrongdoing set forth in the 2015 Yates that investigations Bank PLC Memo in a speech delivered on 29 should not be delayed November at the conference on the Foreign Corrupt Practices Act. to collect information about individuals Amongst the revisions was the acknowledgement that investigations whose involvement should not be delayed to collect information was not substantial about individuals whose involvement was not substantial, and who are not likely to Photo: Sky News be prosecuted. Instead, the Department of In another revision to the Yates Memo, Justice (DOJ) will focus on the individuals which prohibited providing individuals The UK’s Serious Fraud Office who played “significant roles in setting a protection from criminal or civil liability (SFO) announced the end company on a course of criminal conduct.” “absent extraordinary circumstances,” of the UK’s first Deferred Under the revised policy, to qualify for the revised policy affords DOJ Prosecution Agreement (DPA) “cooperation credit” in criminal cases, attorneys the ability to “negotiate civil on 30 November, confirming that companies will have to work “in good releases for individuals who do not Standard Bank PLC (now known faith to identify individuals who were warrant additional investigation in as ICBC Standard Bank PLC) has substantially involved in or responsible for corporate civil settlement agreements,” fully complied with its terms. wrongdoing,” and disclose that to the DOJ. subject to routine supervisory approval. The DPA, agreed in November 2015, imposed a financial penalty of USD 26 million on Standard Bank for failure to prevent bribery, UK courts order extradition to India of two in contravention of Section 7 of men to face bribery and fraud trials the Bribery Act 2010, as well as a compensatory payment of USD 6 million to the government of The Financial Times reported on 5 Michel was involved in making illegal Tanzania. This DPA also marked December that British businessman payments to the Indian authorities for the first use of Section 7 of the Christian Michel has been extradited the purposes of influencing the deal in Bribery Act — failure of commercial to India to face prosecution for AgustaWestland’s favour. organisations to prevent bribery — by alleged bribery in connection any UK prosecutor. with New Delhi’s USD 720 million Meanwhile, the Westminster magistrates’ acquisition of 12 VIP helicopters in court ordered the extradition on 10 Under the DPA terms, Standard 2010 when the country’s previous December of Vijay Mallya to face a fraud Bank was required to commission Congress party was in power. trial. Mr Mallya has fought the Indian an external consultant to report government’s attempt to extradite him to on its anti-bribery and corruption Mr Michel is alleged to have acted as an face a number of criminal charges linked controls, policies and procedures, agent for AgustaWestland, which sold to the 2012 collapse of Kingfisher Airlines and to recommend improvements to the helicopters. India’s Central Bureau connected to the alleged diversion of strengthen its controls, with regular of Investigation has claimed that Mr funds from bank loans. reports issued to the SFO.
29 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
US strategy on Africa to counter the Watchdogs call actions of Russia and China for Indonesian
The Trump administration unveiled government the new Africa strategy on 13 December, which is focused on to investigate combating the “predatory” practices of China and Russia, ending Papua palm oil “unproductive, unsuccessful and unaccountable” UN peacekeeping project missions, and countering the threat from Radical Islamic Terrorism. Tempo, Malaysiakini, Mongabay National security advisor ambassador power, undermine peace and security, and Earthsight’s The Gecko Project John R. Bolton stated during the foreign and run counter to the best interests of published the results of a joint policy announcement that the first priority the African people,” added Mr Bolton. investigation entitled “The secret is to enhance US economic ties with deal to destroy paradise” published the region to safeguard the economic The second focus of the new strategy on 28 November, which looks into independence of African states. “Great is countering the proliferation of Radical the Tanah Merah project, a palm oil power competitors, namely China and Islamic Terrorism, and other forms of development in Indonesia, whose Russia, are rapidly expanding their financial violent conflict, across Africa. owners the report alleges remain and political influence across Africa. They shrouded in secrecy. are deliberately and aggressively targeting The third priority is ensuring that all their investments in the region to gain a US assistance dollars sent to Africa competitive advantage over the United are used effectively to advance peace, The report reveals States,” said Mr Bolton. stability, independence, and prosperity how the ownership of in the region. “As part of our new The US accuses China of using bribes, Africa strategy, the United States will the project has been opaque agreements, and the strategic use also reevaluate its support for U.N. concealed by shell of debt to hold states in Africa captive peacekeeping missions. We will only companies to China’s wishes. According to the US, back effective and efficient operations, China’s investment ventures are riddled that we will seek to streamline, with corruption. Such “predatory actions” reconfigure, or terminate missions that The watchdog groups are calling on are described as a sub-component of are unable to meet their own mandate Indonesian president Joko Widodo to broader Chinese initiatives, including “One or facilitate lasting peace. Our objective investigate the permits underpinning Belt, One Road,” with the ultimate goal of is to resolve conflicts, not freeze them in the project and are also calling on the advancing China’s global dominance. perpetuity,” said Mr Bolton. Indonesian authorities to implement a new regulation requiring companies to Russia is also accused of seeking to The US will not allow “taxpayer dollars disclose their beneficial owners. increase its influence in the region to fund corrupt autocrats,” which was through corrupt economic dealings. coupled with an example that the The report reveals how the ownership “Across the continent, Russia advances country is now reviewing its assistance of the project has been concealed by its political and economic relationships to South Sudan to ensure that aid does shell companies, front shareholders, with little regard for the rule of law or not prolong the conflict or facilitate fake addresses and offshore secrecy accountable and transparent governance. predatory behaviour. The administration jurisdictions, making it impossible to It continues to sell arms and energy is also developing a foreign assistance tell who will benefit from the project. in exchange for votes at the United strategy to improve the effectiveness of Nations—votes that keep strongmen in US foreign aid worldwide.
30 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Canadian regulator to fine Glencore Nigeria files controlled miner over Congo suit against operations, reports WSJ Royal Dutch Shell and Eni A Glencore-controlled mining Investigations have company, Katanga Mining Ltd, and some of its current and former included exploring The government of Nigeria filed executives have reportedly agreed Katanga Mining’s a lawsuit in a commercial court in London on 12 December suing to pay more than USD 22 million to ties with Israeli the Ontario Securities Commission Royal Dutch Shell Plc, Eni SpA to settle allegations that they hid businessman Dan and other companies for more the risks of doing business with an Gertler, the Wall Street than USD 1 billion over a 2011 Israeli businessman with links to oil deal it alleges was tainted Congolese president Joseph Kabila, Journal reported by corruption. The suit alleges the Wall Street Journal reported on that money the companies paid 16 December. to acquire an oil exploration licence in the Gulf of Guinea was The expected settlement is related to Investigations have included exploring diverted to bribes and kickbacks. the company’s business activities in the Katanga Mining’s ties with Israeli The transaction is the subject of Democratic Republic of Congo between businessman Dan Gertler, the Wall a separate criminal trial in Milan. 2014 and 2016, the Wall Street Journal Street Journal reported. The settlement Nigeria’s government claims that reported, citing an anonymous source. is also expected to allege that Katanga Shell and Eni are partly responsible The Canadian regulator is expected to overstated copper production, for the behaviour of corrupt Nigerian name several of Katanga’s current and understated mining costs and lacked officials who used the funds to former executives in the settlement. proper internal financial controls. acquire the oil block for personal enrichment. The complaint also includes Malabu Oil & Gas and Energy Venture Partners Ltd. Malabu FCA fines and bans Angela Burns was controlled by Nigeria’s former petroleum minister Dan Etete, who is from acting as non-exec director for alleged to have taken possession of the payment and used it to pay bribes failure to declare conflicts of interest and kickbacks. Nigeria has also filed a case against JPMorgan for its role in transferring government funds to The UK’s Financial Conduct authority • participated in discussions about Mr Etete, who has been convicted of (FCA) has banned Angela Burns from Vanguard Asset Management Ltd at the money laundering. acting as a non-executive director two mutual societies where she was a (NED) and fined her GBP 20,000 NED, but failed to disclose to the boards Separately, Italian judge Giusy for failing to act with integrity at that she was soliciting a NED position Barbara said in her written reasons two mutual societies, the regulator and consulting work from Vanguard; and on 17 December for the conviction of announced on 14 December. Nigerian Emeka Obi and Gianluca Di • solicited work from Vanguard by referring Nardo that Eni and Royal Dutch Shell According to the FCA press release, Ms to her NED positions, while providing the were fully aware that their purchase Burns breached Statement of Principle 1 mutual societies with what they believed of the oilfield would result in corrupt when she did the following: was impartial advice. payments to Nigerian officials.
31 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Audit finds Netanyahu and Businessman UN agency his wife should pleads guilty to mismanaged be charged obstruction in funds in with bribery, PDVSA case Uganda say police The US Department of Justice announced the guilty plea of The Office of Internal Oversight former procurement officer of Services conducted an audit of Venezuela’s state-owned energy the operations in Uganda for company, Petroleos de Venezuela the Office of the United Nations SA (PDVSA), Alfonso Eliezer High Commissioner for Refugees Gravina Munoz, on 10 December, (UNHCR), that was issued on 17 for his role in a scheme to obstruct October and has just been made Photo: Reuters an investigation relating to public, which has found that the bribes paid by the owner of US- UNHCR wasted tens of millions Israeli police and the Israel Securities based companies to Venezuelan of dollars in Uganda, overpaying Authority stated on 2 December government officials in exchange for goods and services, awarding that there is sufficient evidence for for securing business with PDVSA contracts improperly, and failing to bribery, fraud and breach-of-trust and payment priority on invoices. avoid fraud and corruption. charges to be brought against prime minister Benjamin Netanyahu and his Following his plea agreement in The UN’s internal audit provides detail wife Sara. It is alleged that regulatory December 2015, Mr Gravina agreed to on the UNHCR’s role in mismanagement favours were given to the Bezeq provide information regarding corruption and possible fraud affecting services in telecom firm in return for positive at PDVSA, but concealed facts about Uganda in 2017. The mismanagement media coverage of the couple. certain bribe payments to PDVSA identified includes the award of a USD officials from the government. Mr 7.9 million contract for road repairs The police also said there was sufficient Gravina also informed a co-conspirator to a contractor with no experience in evidence to indict Shaul Elovitch, the about the investigation and the passing road construction, and questionable majority shareholder of Bezeq, for paying of this information led to the destruction payments to trucking and bus bribes. The Israeli attorney general will now of evidence, and the co-conspirator companies worth USD 7.7 million. decide whether to bring charges. attempting to flee the country.
Former head of NGO convicted for bribery scheme
A federal jury in New York convicted for a Chinese oil and gas company. money laundering. According to evidence NGO head, Chi Ping Patrick Ho, presented at trial, Mr Ho was involved otherwise known as “Patrick C.P. Mr Ho was found guilty of one count of in two bribery schemes to pay officials Ho” or “He Zhiping,” on seven conspiring to violate the Foreign Corrupt in Chad and Uganda in exchange for counts for his participation in a Practices Act (FCPA), four counts of business advantages for CEFC China. multimillion-dollar scheme to violating the FCPA, one count of conspiring At the centre of both schemes was Mr bribe Chad and Uganda officials in to commit international money laundering Ho and the NGO, China Energy Fund exchange for business advantages and one count of committing international Committee, which he led.
32 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | BRIBERY | CORRUPTION
Odebrecht Peru agrees plea deal GRECO with authorities over bribery scandal publishes report on Italy Odebrecht’s Peruvian unit has The agreement signed a deal with Peruvian authorities to pay a multimillion reportedly allows dollar fine that will allow it to Odebrecht to continue operating in the country in continue operating in return for providing evidence about officials it bribed, Reuters reported Peru in exchange for on 8 December. its executives giving
According to Reuter’s sources the fine evidence against amounts to USD 182 million to be paid Peruvian officials and over 15 years and sees the company politicians admit that it paid bribes to win six contracts related to four infrastructure projects. Another source said Odebrecht allows Odebrecht to continue operating would pay a total of USD 200 million and in Peru in exchange for its executives the deal would include reference to a fifth giving evidence against Peruvian project for which it has already admitted officials and politicians who allegedly The Council of Europe’s Group paying bribes. The agreement reportedly received bribes over almost 20 years. of States against Corruption (GRECO) published its report on Italy on 13 December, in which it concludes that Italy has made progress to prevent Glencore and Vitol suspected of corruption in respect of the judiciary, but “significantly paying bribes to Petrobras; Brazil more” is still needed to comply with all its recommendations, charges ex-Trafigura executives in particular those concerning parliamentarians. Brazilian prosecutors announced on which were not named, are also being 5 December that commodity traders investigated for paying a similar amount GRECO stated in its press release Glencore, Trafigura and Vitol are under in bribes to Petrobras employees. that it regrets the delays in Italy in investigation on suspicion of paying implementing its recommendations bribes to employees of state-owned Brazilian prosecutors then charged concerning corruption prevention in oil company Petróleo Brasileiro SA two former executives of Trafigura, respect of members of parliament. (Petrobras) in exchange for contracts. Mariano Marcondes Ferraz and Marcio In the previous legislature, there were Pinto de Magalhães, with corruption positive steps taken which now await Brazil’s federal police stated that “there are on 14 December, over allegations that resumption by the new legislature suspicions” that between 2011 and 2014 the executives, paid bribes of USD 1.5 elected in 2018. the three companies paid more than USD million to employees of Petrobras, the 15.3 million related to over 160 operations state-owned oil company at the centre Italy must submit further information “of purchase and sale of oil products and of Brazil’s biggest corruption case, regarding the implementation of the rental of storage tanks.” Other companies, known as “Operation Car Wash.” recommendations by 30 June 2020.
33 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | SANCTIONS
US pressures Europe to sanction Iran over missile tests and latest UN report on the JCPOA
The United States is pressing the European Union to consider economic sanctions on Iran over its ballistic missiles, said Brian Hook, senior policy advisor to the US
Secretary of State and special representative for Iran, during Photo: UK government a special briefing on 3 December.
Mr Hook explained that the US has unveiled evidence of Iran’s The latest report on the JCPOA from the UN secretary-general, missile proliferation and that Iran has test-launched another published on 6 December, states that while there is “staunch medium-range ballistic missile. “[The US] would like to see the support” among member states for the Iran nuclear deal, that is European Union move sanctions that target Iran’s missile program,” tempered by concerns over some of its other activities, which said Mr Hook. Iran’s test of a ballistic missile has alarmed Europe, Iran “should carefully consider and address.” with France calling it a destabilising act, but the EU is focused on protecting the nuclear deal with Iran, known formally as the Joint Rosemary di Carlo, under-secretary-general for political affairs Comprehensive Plan of Action, or JCPOA, despite the reimposition told the UN Security Council on 12 December that, last month, of US-Iran sanctions. the International Atomic Energy Agency reported to the Council that Iran continues to abide by its commitments with regard When questioned about Europe’s plans for a ‘Special Purpose to ballistic missile tests reportedly carried out by Iran since Vehicle,’ Mr Hook explained “The United States still continues January 2018 – as well as the launch of several ballistic missiles to see no to little demand for a special-purpose vehicle by any launched at targets in Syria on 1 October. significant corporation. A special-purpose vehicle is like the reverse Field of Dreams; if you build it, they will not come. We just don’t see Ms di Carlo said that the UN has not been able to determine any evidence that significant corporations want to make use of a whether the missiles were transferred from Iran after 16 vehicle. We have seen only support by major European companies January 2016, the Implementation Day of the Security Council for our sanctions regime because if you are the CEO of a European Resolution endorsing the nuclear plan. The UN is also analysing company and you are given the choice between doing business in information on military equipment recovered in Yemen, which the United States market or the Iranian market, that is the fastest had “characteristics of Iranian manufacture.” decision you will ever make as CEO.”
US designates former president of The Gambia
The US Department of State designated Appropriations Act of 2018, for his also publicly designated Mr Jammeh’s on 10 December former president involvement in significant corruption. immediate family members, including Mr of The Gambia, Yahya Jammeh, Jammeh’s wife, Zineb Yahya Jammeh, his under Section 7031(c) of the Foreign In addition to the designation of Yahya daughter, Mariam Jammeh, and his son, Operations, and Related Programs Jammeh, the Department of State has Muhammad Yahya Jammeh.
34 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | SANCTIONS
Three executives at defence firms Designated charged with violating Iran sanctions businessman
The US Department of Justice money laundering. Abul Huda Farouki pleads guilty announced on 29 November the was the CEO of Anham FZCO, a defence unsealing of an indictment charging contractor based in the UAE. Mazen Farouki to money three former executives at defence was the president and founder of Unitrans contracting firms for their roles in International Incorporated, a logistics laundering a scheme to defraud US military company with close ties to Anham. Salah contracts in Afghanistan, engaging Maarouf operated a company that procured in illegal commerce in Iran and goods and services for Anham. conspiracy in international money laundering. The allegations relate to two multi-million- furtherance of Abul Huda Farouki, Mazen Farouki, and dollar contracts to provide supplies Salah Maarouf, were charged with two and logistical support to US troops in violations of counts of major fraud, one count of Afghanistan, which required the defendants conspiracy to violate the restrictions on to abide by US sanctions on Iran. However, US sanctions doing business with Iran, four counts of according to the indictment, the defendants substantive violations of those restrictions, conspired to cut costs by shipping The US Department of Justice and one count of conspiracy to commit materials to Afghanistan via Iran. announced on 6 December that Kassim Tajideen, the operator of a network of businesses in Lebanon and Africa whom the US designated as an important Huawei CFO arrested over alleged financial supporter to the Hezbollah terror organisation, Iran sanctions violations has pleaded guilty to charges associated with evading US sanctions imposed on him. A Canadian court granted HSBC and Standard bail to Meng Wanzhou, chief Chartered are said to According to his plea, after his financial officer (CFO) of Chinese designation, Mr Tajideen conspired telecommunications giant Huawei be among institutions with at least five other persons Technologies Co Ltd and daughter potentially misled by the to conduct over USD 50 million in of the company’s founder on 11 Chinese company transactions with US businesses that December, following her arrest on violated the prohibitions. In addition, 1 December at the United States’ Mr Tajideen and his co-conspirators request over allegations that the severe consequences unless Canada knowingly engaged in transactions company used a Hong Kong shell released Ms Meng. US president Donald outside of the US, which involved company to sell equipment to Iran Trump stated in an interview with Reuters transmissions of as much as USD 1 in violation of US sanctions. The on 11 December that he would consider billion through the US financial system US Department of State alleges intervening in the case if it would be in from places outside the US. that Ms Meng and Huawei misled the interest of US national security or help banks about the company’s forge a trade deal with Beijing. Mr Tajideen pleaded guilty to business dealings in Iran. conspiracy to launder monetary It has been widely reported that UK banks instruments, in furtherance of violating In apparent retaliation to the arrest HSBC and Standard Chartered are said to the International Emergency Economic China detained a former Canadian be among institutions potentially misled Powers Act (IEEPA). diplomat in Beijing and threatened by the Chinese company.
35 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | SANCTIONS
Dutch government wins support Switzerland to create new EU global human risks EU rights sanctions regime financial
The Dutch government won support sanctions over from EU ministers during the EU’s Foreign Affairs Council meeting on institutional 10 December to develop a blueprint for a new EU global human rights agreement, sanctions regime. The proposal under discussion would create a mechanism reports the FT similar to the Global Magnitsky Act which the EU could use to identify individuals responsible for human Photo: AFP Switzerland’s Federal Council rights abuses and impose targeted announced on 7 December sanctions on them. that it has decided to launch a Dutch foreign minister Stef Blok said in consultation on the proposed new Human Rights First, in partnership with an interview with Politico, “The existing institutional agreement between 89 human rights and anti-corruption sanctioning mechanisms are targeted Switzerland and the EU, rather organisations from around the world, wrote at specific regions. We are convinced it than formally agree the new a joint letter on 5 December in advance of would be very useful to have a specific framework, in a move that could the meeting calling on the EU to establish human rights sanction instrument, not see the country face the threat of a targeted, global sanctions programme to targeted at a region, but at any person or financial sanctions from the EU, hold individuals and entities accountable for organizations involved in human rights reports the Financial Times. serious human rights violations. violations — wherever in the world.” The Federal Council stated in a press release that it considers the current outcome of the negotiations to be Russia issues decrees to protect largely in Switzerland’s interests and in line with the negotiating mandate. “The financial institutions from disclosure Federal Council has however decided not to initial the institutional agreement requirements relating to sanctions for the time being, in particular in view of outstanding issues relating to the accompanying measures and the The Russian government issued three its shareholders and beneficial owners Citizens’ Rights Directive,” stated the Decrees on 23 November (No. 1403, only to the Central Bank of Russia and press release. No. 1404, No. 1405), which establish to provide motivated explanations. According to the Russian government, the right of Russian banks and credit A consultation on the draft agreement the measures are intended to safeguard institutions that fall under foreign will be launched, the goal of which will the interests of Russian banks and sanctions to not disclose certain be to reach a consolidated position in credit institutions that fall under information that is normally subject to order to seek further dialogue with the sanctions imposed by foreign states. mandatory disclosure requirements. EU if necessary. The Federal Council will consider the status of these The Decrees prescribe that such banks and The Decrees were expected to come consultations in spring 2019. credit institutions provide information on into force on 5 December.
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PRESS & MEDIA | SANCTIONS
OFAC designates NK officials for serious OFAC extends human rights abuses expiry date of The US Department of the Department, and the WPK Propaganda Treasury’s Office of Foreign Assets and Agitation Department. EN+, RUSAL Control (OFAC) designated three individuals on 10 December in The Department of State’s report highlights and GAZ response to the North Korean the role of three groups responsible regime’s ongoing and serious for implementing strict censorship and licences human rights abuses and restricting access to foreign media. The censorship. The designations have groups are composed of personnel from been announced in conjunction with the government of North Korea and the the Department of State’s “Report WPK, whose property and interests in on Serious Human Rights Abuses property were blocked in 2016. These and Censorship in North Korea,” in groups — which go by various numbered accordance with the North Korea identifications such as Group 109, Group Sanctions and Policy Enhancement 118, and Group 114 — reportedly conduct Act of 2016 (NKSPEA). warrantless searches for unapproved foreign media or content, inspect and Photo: Financial Tribune The OFAC’s designations are issued confiscate computer content, including pursuant to Executive Order 13687, which external storage devices, and even kidnap targets officials of the government of defectors or foreign citizens who support The US Department of the North Korea and the Workers’ Party of human rights in North Korea. Treasury’s Office of Foreign Korea (WPK), and are consistent with the Assets Control (OFAC) extended provisions of NKSPEA. The individuals Reuters reported on 16 December that further the expiration date designated, Jong Kyong Thaek, Choe North Korea has condemned the US of certain general licences Ryong Hae, and Pak Kwang Ho, are all for stepping up sanctions and pressure related to EN+ Group plc (EN+), senior officials of previously sanctioned on the country, warning that disarming United Company RUSAL Plc government bodies, including the Ministry Pyongyang could be blocked forever. (RUSAL), and GAZ Group (GAZ) of State Security, the Ministry of Public Reportedly the designations include a top on 7 December. These General Security, WPK Organization and Guidance aide to North Korean leader Kim Jong Un. Licenses 13H, 14D, 15C, and 16D amend their previous versions by extending the expiration date from 7 January 2019, to 21 EU designates nine people in relation to the January 2019, for transactions related to the companies and their “rebel elections” in Ukraine subsidiaries.
“EN+, RUSAL, and GAZ are proposing The Council of the EU added nine The EU considers these “elections” illegal substantial corporate governance people to the list of those subject to and illegitimate and does not recognise changes that could potentially result in restrictive measures over actions them. In a declaration on 10 November, significant changes in control of these undermining or threatening the the EU condemned the “elections,” stating sanctioned entities. In recognition that territorial integrity, sovereignty and that they were in breach of international the review of these complex proposals independence of Ukraine on 10 law, undermine the commitments taken is ongoing, OFAC is extending the December, due to their involvement in under the Minsk agreements and violate expiration date of related general the “rebel elections” in east Ukraine or Ukraine’s sovereignty. licenses until January 21,” stated a the “Donetsk People’s Republic” and Treasury spokesperson. “Luhansk People’s Republic.”
37 aperio-intelligence.com FINANCIAL CRIME DIGEST | DECEMBER 2018
PRESS & MEDIA | SANCTIONS
Yantai Jereh Oilfield Services Co The Council of Ltd settles with OFAC over Iran the EU extends sanctions violations the DRC
The US Department of the Treasury’s The company agreed sanctions for Office of Foreign Assets Control to pay USD 600,000 (OFAC) announced on 12 December one year a USD 2,774,972 settlement with to the Commerce Yantai Jereh Oilfield Services Group Department, along Co Ltd and its affiliated companies and subsidiaries worldwide with a suspended five- (collectively referred to as the “Jereh year ban on buying US Group”) relating to 11 violations components of the Iranian Transactions and Sanctions Regulations.
The alleged violations involved the disclose the apparent violations and they exportation or re-exportation, and constitute an egregious case. attempted exportation or re-exportation of US-origin goods ultimately intended The Jereh Group’s settlement with the for end-users in Iran by way of China. OFAC is concurrent with a settlement The Jereh Group also exported certain agreement between the Jereh Group US-origin items with knowledge or reason and the US Department of Commerce’s to know that the items were intended Bureau of Industry and Security. The The Council of the European for production of, for commingling with, company agreed to pay USD 600,000 to Union extended on 10 December or for incorporation into goods made in the Commerce Department, along with the restrictive measures currently China to be supplied, transshipped, or re- a suspended five-year ban on buying US in place against the Democratic exported to end-users in Iran. Two of the components. If the company violates the Republic of the Congo until 12 11 shipments were seized by US Customs probationary conditions, the Commerce December 2019. and Border Protection prior to exiting the Department can activate the ban, United States. The OFAC determined that ending the company’s ability to buy US In its decision, considering the the Jereh Group did not voluntarily self- components for its products. upcoming elections, the Council has reaffirmed the importance of holding credible and inclusive elections in line with the aspiration of the Congolese people to elect their representatives. Iraq to send delegation seeking The Council press release explains that it will further review the restrictive exemption to US sanctions on Iran measures in the light of and following the elections in the DRC and stands ready to adjust them accordingly. Iraq’s prime minister Adel Abdul Mahdi “The American side is cooperating with said on 11 December that the country Iraq to find solutions that would remove The sanctions comprise of an asset will send a delegation to the United pressure on Iraq because the [Iranian] freeze and a ban on entering the States seeking an exemption from gas is linked to a very sensitive issue European Union and are targeted at sanctions against Iran that would allow which is electricity,” Abdul Mahdi told a 14 individuals. it to keep importing Iranian gas. press conference.
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PRESS & MEDIA | SANCTIONS
OFAC issues OFAC designates individuals and continued entities over conflict in South Sudan extension The US Treasury Department’s in a major food procurement scandal and Office of Foreign Assets Control winning gas contracts from the South of Ukraine- (OFAC) announced on 14 December Sudanese military while still serving in it. that it has imposed sanctions on related three individuals, Israel Ziv and Israel Ziv has supplied the government Obac William Olawo, for being of South Sudan and the opposition General leaders of entities whose actions with weapons and ammunition. While have the purpose or effect of Mr Ziv maintained the loyalty of senior expanding or extending the conflict government of South Sudan officials Licenses in South Sudan, and Gregory Vasili, through bribery and promises of security for actions that have undermined support, he has also reportedly planned The US Department of the peace, stability, and security in to organise attacks on South Sudanese Treasury’s Office of Foreign South Sudan, pursuant to Executive oil fields and infrastructure, in an effort Assets Control (OFAC) Order 13664. The OFAC has also to create a problem only his company announced on 7 December, the designated six entities for being and affiliates could solve. The OFAC issuance of Ukraine-related owned or controlled by two of the designated three entities that are owned General Licenses (GL) 13H, aforementioned individuals. or controlled by Mr Ziv: Global N.T.M Ltd, 14D, 15C, and 16D, which Global Law Enforcement and Security Ltd, According to the OFAC, Gregory Vasili amend previous licences related and Global IZ Group Ltd. has facilitated the transportation of to permissible wind-down South Sudanese soldiers and tanks to Obac William Olawo has routinely transactions that otherwise and from locations in South Sudan, and imported standard and armoured vehicles would be prohibited by Ukraine- has been involved in brokering deals for the government of South Sudan, and Related Sanctions Regulations for the sale of military equipment to the as of mid-2018 was engaged in the trade with respect to the subject government of South Sudan. In addition, and shipment of arms and armaments to entities. The OFAC extended the while governor of Gogrial State in South South Sudan. The OFAC designated three expiration dates to 21 January. Sudan, according to the OFAC, Mr Vasili entities in South Sudan that are owned or oversaw an explosion of intra-clan ethnic GL 13H authorises, among other controlled by Mr Olawo: Golden Wings violence. Mr Vasili has also been involved things, activities “ordinarily incident Aviation, Crown Auto Trade, and Africana in illicit activities, including involvement and necessary” to (i) divest or General Trading Ltd. transfer debt, equity, or other holdings in the specified blocked entities to a non-US person; or (ii) facilitate the transfers of debt, equity, EU extends sanctions against Russia or other holdings in those entities by a non-US person to another non-US person. GL 14D relates to specific President of the European Council, The European Council also called for wind-down activities involving a Donald Tusk, announced after the immediate release of all detained sanctioned Russian aluminium the European Council meetings Ukrainian seamen. “Russia must not limit producer. GL 15C and GL 16D on 13 December that the EU has the freedom of navigation through the authorise permissible activities unanimously decided to prolong Kerch Strait. While the EU continues to relating to the maintenance or wind- economic sanctions against Russia follow developments in the Sea of Azov, down of operations, contracts, and “given that no progress has been we will provide additional assistance to agreements with designated entities made” relating to the implementation the affected regions,” stated Mr Tusk. and subsidiaries prior to 6 April. of Minsk agreements.
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COUNTRY UPDATES
Albania or individual provides assistance to a foreign body The Dutch Central Bank announced on 29 November or person. The aim of the Law is to simultaneously that it will explore further options for conducting Albania’s parliament passed at the end of November curb corruption and stem extra-territorial claims by supervision using electronically obtained and analysed legislation banning sports betting and other forms of foreign authorities, some of whom approach Chinese data in the year ahead. The Bank also said that it would gambling in a bid to combat match-fixing in sport and counterparts/contacts directly for evidence. continue to examine how financial institutions prevent gambling addiction. Prime minister Edi Rama accused involvement in organised crime. It has been widely some betting firm owners of having links to organised reported in local media that the Dutch Central Bank is crime and announced that a special task force would be also considering regulating cryptocurrency companies set up to shut down any online gambling sites operating Iran to combat money laundering and terrorist financing. in the country. The gambling ban will enter into force at the start of 2019. Iran’s parliament approved an amended draft law against funding terrorism on 5 December. Official news agency The Council of Europe’s anti-money laundering body IRNA said lawmakers had included amendments Romania MONEYVAL published its report on Albania on 17 requested by a powerful clerical body, which must vet December, which calls on the Albanian authorities to all legislation passed through parliament. Supporters The legal commission of Romania’s Chamber of step up their efforts in pursuing money launderers hope the legislation, once passed, will allow Iran to join an Deputies amended Law 241/2005 on preventing and and confiscating assets connected to significant international convention against the funding of terrorism combating tax evasion on 11 December. According proceeds-generating offences, and in tackling terrorist and comply with measures against money laundering set to the amendments, if a defendant charged with tax financing related risks. The report states that neither by the Financial Action Task Force. evasion pays the damages plus a 20 percent penalty the Bank of Albania nor the Financial Supervisory and the related interest, all the defendants involved Authority consistently apply a risk-based perspective in the respective tax evasion can escape criminal when reviewing applications for licences from financial prosecution. The parliament was due to vote on the institutions, or take a systematic approach to monitor Malaysia draft bill on 12 December. them in order to fully mitigate the risk of criminal infiltration. In a joint press release published on 6 December, the According to local media, the CEO of Romania-based Securities Commission Malaysia (SC) and Bank Negara Bitcoin exchange CoinFlux, Vlad Nistor, was detained Malaysia (BNM) have said that they want to provide in December on behalf of the US government and is clarity on the regulatory approach for the offering and awaiting extradition relating to allegations of fraud, Australia trading of digital assets, namely digital currencies and computer fraud, money laundering, and racketeering. tokens, in Malaysia. The SC will regulate issuances Australia’s federal parliament passed the Modern of digital assets via initial coin offerings (ICO) and the Slavery Act 2018 on 29 November, which establishes trading of digital assets at digital asset exchanges in a mandatory reporting regime, pursuant to which large Malaysia. According to the statement, regulations are Singapore businesses and certain commonwealth entities are currently being put in place to bring digital assets within required to report on the risks of modern slavery in their the remit of securities laws to promote fair and orderly Singapore’s Anti-Money Laundering (AML) and operations and supply chains, and the actions they have trading and ensure investor protection. ICO issuers Countering the Financing of Terrorism (CFT) Industry taken to address those risks. and digital asset exchanges which are involved in the Partnership (ACIP) published a paper on 29 November, issuance or dealing of digital assets with a payment which encourages greater adoption of data analytics function will need to comply with relevant laws and (DA) solutions by financial institutions. The paper brings regulations relating to payments and currency matters. together the experiences of major banks in using data Brazil In addition, ICO issuers and digital asset exchanges are analytics techniques to combat financial crime and subject to the Guidelines on the Prevention of Money highlights areas in AML/CFT analytics where closer Laundering and Terrorism Financing. According to local media sources, Brazil’s federal industry and private-public cooperation could yield police opened an investigation into incoming economy significant benefits. minister Paulo Guedes for alleged fraud tied to pension funds of state-run firms, Mr Guedes’ lawyers confirmed on 30 November. The investigation will focus on whether Netherlands Mr Guedes mismanaged public pension funds. Spain The Dutch Ministry of Finance and the Ministry of Justice and Security published a consultation paper on 11 Spanish prosecutors have charged pop star Shakira December on the draft Act to implement the Fifth Anti- with tax evasion, alleging she failed to pay more than China Money Laundering Directive (5AMLD). The explanatory EUR 14.5 million between 2012 and 2014. The charges notes to the Act explain the reasons for amending made public on 14 December allege that Shakira and further supplementing 4AMLD: the emergence The People’s Republic of China recently enacted the Law listed the Bahamas as her official residence for tax of technological services being increasingly used as on International Judicial Assistance in Criminal Matters, purposes but was in fact living in Spain with her partner, alternative financial systems, which were not captured which allows Chinese authorities to block requests Spanish football player Gerard Pique. Shakira said in by 4AMLD; the increased intertwining of organised for documents, testimony and assets requested in a statement that she was not a legal resident in Spain crime and terrorism, which poses a threat to the safety international criminal investigations. The Law introduces during the years in question and owed nothing to the of the EU; and the desire for better cooperation between new procedures governing how and when assistance Spanish tax authorities. competent authorities, both in and between member should be provided with approval from a “Chinese states. The consultation period ends on 15 January 2019. competent authority” required before a Chinese entity
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COUNTRY UPDATES
Switzerland
Switzerland’s Federal Council initiated a consultation on 7 December on the introduction of the automatic exchange of financial account information (AEOI) with 18 further states and territories. The implementation of the AEOI is planned for 1 January 2020, and the first exchange of data should take place in 2021. The expansion of Switzerland’s AEOI network takes current international developments into account. The consultation will last until 20 March 2019. The Federal Council plans to submit the dispatch on the introduction of the AEOI with these partner states to parliament in spring 2019.
During its meeting on 7 December, the Federal Council adopted a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector. The report shows that Switzerland’s legal framework is well suited to dealing with new technologies. The Federal Council noted the analysis of an interdepartmental working group on the money laundering and terrorist financing risks posed by cryptoassets.
On 18 December, Switzerland’s interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMF) published its report on the use of cash and the risks of misuse for money laundering and terrorist financing. The report analyses the potential risks of cash transactions and the measures taken by financial intermediaries and authorities to mitigate these risks. The current risks of misuse are classed as moderate.
US
The US Federal Trade Commission and the Department of Veterans Affairs (VA) signed an updated agreement on 14 December to continue efforts to stop fraudulent and deceptive practices targeted at US service members, veterans, and dependents who use military education benefits. The agreement sets forth a framework for cooperation between the FTC and the VA when investigating and taking action against institutions that target service members with unfair or deceptive advertising or enrolment practices. It also outlines the terms under which the VA can refer potential violations to the FTC.
The US Commodity Futures Trading Commission (CFTC) published a Request for input on 17 December, seeking public comment on questions to better inform the CFTC’s understanding of the technology, mechanics, and markets for virtual currencies. The request for comment seeks to understand similarities and distinctions between certain virtual currencies, including Ether and Bitcoin, as well as Ether-specific opportunities, challenges, and risks. The deadline for submitting comments is 15 February 2019.
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