March 2019 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 22 Welcome to the March edition of the Financial Crime Digest, AN INTERVIEW WITH RACHAEL HERBERT OF THE Aperio Intelligence’s monthly newsletter, an informative UK’S NATIONAL ECONOMIC CRIME CENTRE summary of the most recent developments relating to the PRESS AND MEDIA 24 world of money laundering, fraud and terrorist financing, bribery MONEY LAUNDERING | FRAUD | TERRORIST FINANCING and corruption, and sanctions. PRESS AND MEDIA 40 BRIBERY | CORRUPTION [email protected] PRESS AND MEDIA 50 SANCTIONS
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TECHNICAL UPDATES
HMRC to “relentlessly pursue” enablers of tax evasion
The UK’s HM Revenue & Customs investigations resulting from the Panama The guidance states that the form should (HMRC) published its “No Safe Havens Papers will yield over GBP 190 million. The only be used to report an organisation’s 2019” policy paper on 13 March, which policy paper sets out that HMRC’s strategy to failure to prevent the criminal facilitation outlines its strategy for offshore tax combat offshore non-compliance will focus of tax evasion, which “does not include the compliance, broadening its approach to on continuing to champion international accidental, ignorant or negligent facilitation include offshore non-compliance such tax transparency, helping taxpayers get of tax evasion.” The reporting regime is as the use of tax avoidance schemes. offshore tax right the first time, and taking a voluntary. HMRC’s guidance notes that According to the policy paper, HMRC proportionate approach to non-compliance. the fact a self-report has been made may received information last year about HMRC’s “proportionate approach” means that help an organisation show that reasonable 5.67 million offshore accounts held by a taxpayer who waits for HMRC to identify prevention procedures were in place and around 3 million UK residents. that they have paid less tax than they should that self-reporting will be relevant to whether will always be in a worse position than those a deferred prosecution agreement will be In 2017, HMRC received 1.63 million records who come forward voluntarily. offered and/or what penalty is imposed. under the Common Reporting Standard (CRS), relating to accounts held by 1.3 The policy paper confirms that “enablers” of According to a House of Commons million individuals, whilst in 2018 it received tax evasion and avoidance remain a target discussion that took place prior to the significantly more information as a result and that it will “relentlessly pursue” enablers issuance of the guidance, there are only of the increase in countries exchanging using the new penalty regime for anyone who five ongoing investigations by HMRC under information. HMRC states that the global designs, sells, or otherwise enables the use the “failure to prevent the facilitation of UK implementation of CRS is “shedding of a tax avoidance arrangement which HMRC tax evasion” corporate criminal offence unprecedented light” on the overseas later defeats. HMRC is using a new system introduced by the Criminal Finances Act 2017. arrangements of UK residents, with early that collates data on non-compliant enablers analysis of the information received indicating across sectors. that around one in 10 UK taxpayers have an HMRC’s policy paper can be found HERE. offshore financial interest. Meanwhile, HMRC published guidance on 21 February for authorised representatives The policy paper also states that HMRC to self-report a company or partnership that HMRC’s guidance can be found HERE. estimates that its current civil and criminal did not prevent the facilitation of tax evasion.
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HMRC launches money laundering crackdown on estate agents and fines Countrywide Estate Agents
The UK’s HM Revenue & Customs that have failed to comply, which can include (HMRC) announced on 4 March that fines and criminal proceedings. estate agents have been targeted with unannounced inspections as part of The details of the fine against Countrywide a week-long crackdown on money Estate Agents, which includes failing to laundering in the property industry. ensure policies, controls and procedures at The announcement came as HMRC group level and for failures in conducting due published the latest businesses fined diligence, is included in the HMRC’s list of for failing to comply with the Money businesses that have not complied with the Laundering Regulations, which includes 2017 Money Laundering Regulations. Countrywide Estate Agents receiving a GBP 215,000 fine. regulations. The estate agents visited were The press release can be found HERE. in London (35), Leicester (five), South Bucks The crackdown saw HMRC officers visit 50 and Berkshire (four), Greater Manchester estate agents across England after they were (three), Watford (one), Wakefield (one) and HMRC’s current list of non-compliant suspected of trading without being registered Wolverhampton (one). HMRC stated that it businesses can be found HERE. as required under money laundering will now take action against those businesses
OECD beneficial ownership toolkit to combat tax evasion
The Organisation for Economic Co- implementation options, the toolkit contains The toolkit was operation and Development (OECD) policy considerations that can be used released on 20 March the first to implement the legal and supervisory developed to support ever beneficial ownership toolkit frameworks to identify, collect and maintain Global Forum members in the context of the OECD’s Global beneficial ownership information. Integrity and Anti-Corruption Forum. and in particular It is intended to help governments The toolkit covers issues including: developing countries implement the standards on ensuring that law enforcement officials have • The concepts of beneficial owners and access to reliable information on the ownership, the criteria to identify them, the • Ways in which the principles on beneficial beneficial owners of a company or other importance of the matter for transparency in ownership can play out in practice in Global legal entity so that criminals can no financial and non-financial sectors; Forum EOIR peer reviews; and longer hide their illicit activities behind opaque legal structures. • Technical aspects of beneficial ownership • Why beneficial ownership information is requirements, distinguishing between legal also a crucial component of the automatic The toolkit was developed to support persons and legal arrangements (such exchange of information regimes being Global Forum members and in particular as trusts), and measures being taken adopted by jurisdictions around the world. developing countries because the current internationally to ensure the availability of beneficial ownership standard does not information on beneficial ownership, a set of provide a method for implementing it. To checklists that may be useful in pursuing a The press release can be found HERE. assist policymakers in assessing different specific beneficial ownership framework;
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EU adopts revised blacklist of countries for tax purposes
The Council of the European Union Trinidad and Tobago, and US Virgin Islands; to the EU by the agreed deadline. Annex II of adopted a revised EU blacklist of the conclusions, which covers jurisdictions non-cooperative jurisdictions for tax • Three countries were on the 2017 list and with pending commitments, lists the deadline purposes on 12 March, which in addition were then moved to the grey list, however the extensions granted to 11 jurisdictions to pass to the five jurisdictions already listed, commitments made have not been followed, the reforms to deliver on their commitments. now includes Aruba, Barbados, Belize, so those countries have been blacklisted Bermuda, Dominica, Fiji, Marshall again: Barbados, Marshall Islands and United The Council will continue to review and Islands, Oman, United Arab Emirates, Arab Emirates; and update the list in the coming years, taking and Vanuatu. The grey list has 34 into consideration the evolving deadlines for countries, which will continue to be • A further seven countries were moved from jurisdictions to deliver on their commitments monitored in 2019. the grey list to the blacklist for the same and the evolution of the listing criteria. The reason: Aruba, Belize, Bermuda, Dominica, Commission has published a questions Based on screening by the EU Commission, Fiji, Oman and Vanuatu. and answers factsheet to complement the the following countries have been blacklisted: Council’s conclusions. The list is intended to contribute to ongoing • Of the 15 countries now on the blacklist, efforts to prevent tax avoidance and promote five of those on the list have made no tax good governance worldwide. According The press release can be found HERE. commitments since the first blacklist in 2017, to the EU, the jurisdictions on the list did not which are American Samoa, Guam, Samoa, implement the commitments they had made
Oxfam report says EU to “whitewash” worst tax havens
Oxfam published a report on 7 March Oxfam also argues that weak assessment In response to the publication of the list on 12 before the adoption of the revised EU criteria set by the EU means that countries March, Rebecca Gowland, head of Oxfam’s list of non-cooperative jurisdictions for which allow profit shifting through some inequality campaign, said: “EU governments tax purposes by the Council, entitled harmful tax practices, and low or zero have let five of the world’s worst tax havens “Off the Hook,” in which it claimed that corporate tax rates, are slipping through the off the hook, a move which threatens the nine of the world’s worst tax havens net. Reforms introduced by some countries credibility of the entire blacklisting process. It were set to get a clean bill of health in to escape the list are also ineffective or is baffling that the UK Crown Dependencies the first annual review of the EU tax cause more harm. For example, the EU only have been removed, when they play a haven blacklist, despite the countries considers tax incentives to be harmful if they significant role in the murky world of global continuing to facilitate tax avoidance. give foreign companies or profits an unfair tax avoidance.” While it is encouraging that advantage over national companies or profits. Bermuda has been added to the blacklist, Ms Oxfam’s report reveals how during the first As a result, Hong Kong has escaped the list, Gowland added, overall the EU’s criteria for annual review of the EU’s blacklist and grey states the report, by extending its harmful tax identifying tax havens and the process for list of tax havens, it expected at least nine incentives to profits made in Hong Kong as screening countries are too weak.” tax havens to be de-listed, including the well as overseas. Cayman Islands and Panama. The report also highlights that Cyprus, Ireland, Luxembourg, The report also states that a key opportunity Malta and the Netherlands would appear on for the UK government to secure meaningful the list if EU member states were not given an reform on tax transparency was missed, Oxfam’s report can be found HERE. automatic exemption. Political interference when a debate on a cross-party amendment in the screening process also means that tax to the Financial Services Bill, requiring Crown havens such as Switzerland and the US are Dependencies to adopt public registers of Oxfam’s response to the new list is HERE. unlikely to feature on the list, states the report. company ownership, was cancelled in March.
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UK pulls amendment requiring Crown Dependencies to establish public registers of beneficial ownership
The UK government cancelled on respected constitutional position that the UK deferral of the debate on the amendment 4 March a debate on a cross-party does not legislate for the Crown Dependencies and said it provided an opportunity for amendment to the Financial Services on domestic matters without our consent,” “meaningful engagement” with UK ministers Bill, which would require Crown reads the statement. The amendment to and parliamentarians on public registers of Dependencies to establish public impose public registers of beneficial ownership beneficial ownership, in a way “that does not registers of beneficial ownership. The for all Crown Dependencies is “wholly contravene the well-established constitutional amendment put forward by MPs Andrew unnecessary in the context of our robust relationships between our Islands and the Mitchell and Margaret Hodge would existing approach to the retention and sharing Crown.” The statement stressed that they require Britain’s Crown Dependencies to of beneficial ownership information.” are “committed to exchanging adequate, introduce public beneficial ownership accurate and current information on beneficial registers by December 2020, which Mr Mitchell said the government had pulled ownership to combat tax evasion, money the three Crown Dependencies, Jersey, the bill “in face of certain defeat” and that the laundering and corruption.” Guernsey and the Isle of Man, believe is amendment would be put to a vote when it is “wholly unnecessary.” resubmitted. The implication from Downing Street was that the bill was pulled so that the The joint statement can be found HERE. The governments of Jersey, Guernsey and constitutional implications for the three Crown the Isle of Man issued a joint statement on 2 Dependencies could be studied. March in which they raised “strong objections” The initial statement can be found HERE. to the proposed amendments. “We are not A joint statement from Jersey, Guernsey and represented in the UK Parliament, and it is a the Isle of Man on 4 March welcomed the
MPs call for reform of the UK’s corporate liability regime
The co-chairs of the All-Party “There is no real legal 1. Introduce a corporate criminal offence Parliamentary Group on Fair Business for failing to prevent economic crimes Banking (APPG), Kevin Hollinrake mechanism for holding such as fraud and money laundering at and Norman Lamb, wrote a letter on 6 large institutions the earliest possible opportunity; and March to the prime minister calling for criminally to account for reforms to the UK’s corporate liability 2. Task the Law Commission to conduct regime, which includes the introduction wrongdoing, including a broader review of the UK’s corporate of a corporate criminal offence for for large-scale fraud or liability framework, over 12 months, failing to prevent economic crimes. and committing the government to for laundering of the implementing the recommendations The letter states that officials from the proceeds of corruption,” within six months of the final report. government, Law Commission and Serious states the letter Fraud Office have recognised the need Amongst the signatories are Dr Rupa Huq and for reform to the UK’s corporate liability Nigel Mills, who are co-chairs of the All-Party framework to enable law enforcement to Parliamentary Group on Anti-Corruption. prosecute large corporates for economic including for large-scale fraud or for crimes. “The truth is that there is no real legal laundering of the proceeds of corruption mechanism for holding large institutions and other crimes,” states the letter. The letter The letter can be found HERE. criminally to account for wrongdoing, urges the UK government to:
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UK Home Council rejects draft list of high-risk Office reforms third countries; Parliament criticises the Tier 1 the rejection calling for methodology investor visa to to combat diplomatic pressure better protect The Council of the European Union the criteria set out in the Directive. The unanimously decided on 7 March to Commission has also engaged with the the UK from reject a draft list put forward by the third countries concerned immediately after European Commission of 23 high-risk the College of Commissioners endorsed illegal funds third countries in the area of money the preliminary findings on 23 January laundering and terrorist financing. The 2019, in full respect of the third countries Commission’s draft list included Saudi right to be heard.” Arabia, Guam, the US Virgin Islands, American Samoa and Puerto Rico. Members of the European Parliament (MEPs) adopted a resolution on 14 March The Council stated that it cannot support expressing concern that “member states the current proposed list because it “was have scuppered the Commission’s plan not established in a transparent and resilient to place new countries on the EU money process that actively incentivises affected laundering blacklist.” The resolution countries to take decisive action while also recognises that the countries on the list exerted diplomatic pressure and lobbying, The UK’s Home Office announced respecting their right to be heard.” but states that such pressure should not on 7 March that it is bringing According to EU officials, the move to reject undermine the EU institutions’ ability to forward reforms to the Tier 1 the list of countries that the EU believes fight money laundering and to counter investor visa, to better protect the have weak money laundering and terrorist terrorist financing linked to the EU. As a UK from illegally obtained funds. financing controls was supported by 27 of result, MEPs consider that the screening and Applicants will be required to Europe’s 28 member states. With claims decision-making process should be carried prove that they have had control in the media that European governments out solely on the basis of the commonly of the required GBP 2 million for came under political pressure from Saudi agreed methodology. The MEPs resolution at least two years, rather than 90 Arabia and the US to reject the list. The Fifth also points a finger at Russia, which was days, or provide evidence of the Anti-Money Laundering Directive includes not included in the Commission’s proposed source of those funds. an obligation to identify third country list. It states that parliamentary committees jurisdictions that have strategic deficiencies Commenting on the changes, which have raised concerns about weaknesses in in their anti-money laundering and terrorist will take effect in April, immigration Russia’s anti-money laundering and counter- financing regimes that pose significant minister Caroline Nokes said, “what terrorist financing frameworks. threats to the financial system of the EU. we will not tolerate is those who seek The Commission will now need to present to abuse our system and that is why The Commission published a statement in another list. The Parliament and the Council I am bringing forward new measures which it expressed disappointment about will have one month to approve or oppose it. which will make sure that only genuine the Council’s decision to oppose the list. investors, who intend to support UK EU commissioner for justice, Věra Jourová, businesses, can benefit from our said “The Commission carried out a careful immigration system.” EU Council’s statement can be found HERE. assessment based on a solid methodology and consulted Member States experts. The press release can be found HERE. Member States were also consulted on Parliament’s resolution can be found HERE. the methodology itself, which follows
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OPBAS finds professional body UK Solicitors supervisors fear members might Regulation leave if they take enforcement action Authority to
The UK’s Office for Professional Body of supervision and 18 percent not having carry out AML Anti-Money Laundering Supervision identified who they need to supervise. (OPBAS) published its report “Anti- Over 90 percent had not fully developed a compliance Money Laundering Supervision by the risk-based approach and had not collected Legal and Accountancy Professional the data to form a view about their riskiest checks Body Supervisors: Themes from the members. In addition, the report found that 2018 OPBAS anti-money laundering there has not been enough enforcement, The UK Solicitors Regulation supervisory assessments,” on only 50 percent of professional bodies Authority (SRA) issued a statement 12 March, which has found that issued fines for AML failings in 2018. on 20 March putting law firms professional bodies representing the on notice of impending rigorous accountancy and legal sectors are not OPBAS saw some good examples of compliance checks to make sure sharing enough intelligence on money intelligence sharing arrangements in the they are meeting their anti-money laundering risks and nearly a quarter larger legal sector supervisors, but some laundering obligations. of those assessed undertook no form bodies had no resources for intelligence of supervision. Speaking at the launch sharing. There was also evidence that The SRA will shortly begin writing to an of the report at the Royal United suspicious activity reports had not been initial sample of 400 firms asking them Services Institute, Alison Barker, raised when they should have been. to demonstrate compliance with the director of specialist supervision, government’s 2017 Money Laundering stated that accountancy associations, OPBAS has issued action plans to each Regulations. There are around 7,000 in particular, are resisting taking supervisor to address the issues identified. SRA-regulated law firms who fall within enforcement action against members If the changes are not made OPBAS will the scope of the Regulations. for money laundering failings out of begin enforcement action. The aim is to achieve a high standard of supervision: fear that they might leave. Each case will be judged on its facts, but if there are serious issues or a lack The OPBAS report explains the findings • Risk-based supervision of the of willing to resolve issues, the SRA will of its review of 22 professional body professions i.e. focused on the riskiest take disciplinary action. The SRA also supervisors. The key issues are: first, that types of business or clients like tax, plans to carry out further compliance the accountancy sector and many smaller conveyancing, company formation; checks if there are sector-wide issues. bodies focus on representing their members • Supervision which is properly resourced; In the last five years, the SRA has taken rather than supervising standards. “Partly more than 60 cases – linked to potential because they don’t believe – or don’t want to • Leadership from the top; improper money movements – to the believe – that there is any money laundering Solicitors Disciplinary Tribunal. in their sector. Partly because they believe • Robust enforcement outcomes; and that their memberships will walk if they The SRA has been working to assess come under scrutiny,” said Alison Barker. • Recognition of the risk that members how well the sector is doing to tackle And second, due to the belief that there can be vulnerable to facilitating money the risks of money laundering, including isn’t any money laundering in their sector laundering and positive uptake in a review of firms providing trust and intelligence isn’t being shared enough. intelligence sharing. company services and is due to publish the results of that review later this year. In regard to supervision, the report found that some professional bodies did not fully understand their role as an AML The OPBAS report can be found HERE. The press release can be found HERE. supervisor, with 23 percent having no form
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UK publishes Committee report on the Bribery Act procurement recommends financial crime should policy notice on be subject to tougher bribery laws strengthening The UK House of Lords Select employees and agents, however this Committee on the Bribery Act 2010 goes beyond offences under the Bribery procedures on published its post-legislative scrutiny Act, so no recommendation is made; report on 14 March, concluding that the Act is exemplary and “an • The government must ensure that UK corruption international gold standard for anti- companies are provided with support on corruption issues in the countries The UK government published its bribery and corruption legislation.” to which they export. Even the smaller latest procurement policy notice The report recommends that financial UK embassies must have at least one on 22 February on strengthening crime such as fraud and money official who is expert in the local customs and supplementing procedures on laundering should be subject to the and cultures, or who can contact officials corruption, conflict of interest and tougher laws that apply to bribery. of foreign governments on behalf of whistleblowing. In the notice issued The Committee was strongly of the view companies facing problems; by the Cabinet Office, government that deferred prosecution agreements agencies are reminded of their (DPAs) should not be an alternative to, or • In relation to the “failure to prevent obligations to exclude bidders who discourage, the prosecution of culpable bribery,” the Ministry of Justice should, have committed serious offences and individuals and that the cooperation of a in consultation with representatives of manage conflicts of interest. company must include the provision of all the business community expand the guidance to give more examples and to According to the note, public bodies must available evidence which might implicate suggest procedures which are likely to request and verify up-to-date evidence individuals, however senior, suspected of provide a good defence; from the winning bidder before the award involvement in the offence. of the contract. If a supplier fails to provide The recommendations deal mainly with • The report states that the government the required evidence within a set time implementation and enforcement of the should delay no more in reaching a period or is found to meet requirements Act, including that: conclusion on whether to extend the for mandatory exclusion, including criminal “failure to prevent” offence to other acts such as bribery, money laundering, • The director of the Serious Fraud Office economic crimes; human trafficking and modern slavery, and the director of Public Prosecutions the contract should not be awarded. should publish plans outlining how they • The Sentencing Guidelines for Fraud, Mandatory exclusion should be applied if it will speed up bribery investigations and Bribery and Money Laundering should has been verified that the bidder has been improve the level of communication with make clear that they apply not just to convicted of certain offences. those placed under investigation; sentences for those crimes, but also to the calculation of financial penalties in Government agencies also have a • A lack of awareness and training on the the case of DPAs; and responsibility to take measures to avoid a Bribery Act may contribute to the lack of conflict of interest. Suppliers bidding for prosecutions, as such the government • In negotiations for a DPA, the cooperation contracts can be excluded where conflicts should provide resources for the City expected of a company must include of interest arise that cannot be remedied. of London Police’s Economic Crime provision of all evidence which might Any measures taken to remedy a conflict Academy to expand its training; implicate any individuals, however senior, of interest should be documented. suspected of involvement in bribery. • There are arguments for amending the law to make corporations vicariously The policy notice can be found HERE. The press release can be found HERE. liable for offences committed by their
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Treasury Committee issues report on economic crime
The UK House of Commons Treasury In regard to Brexit, the report states that the Concerns were Select Committee published a report increase in trade with non-EU counties will raised that HMRC on 8 March on economic crime – anti- increase the likelihood that UK businesses money laundering (AML) supervision will come into contact with markets with treats its supervisory and sanctions implementations, lower AML standards. When conducting responsibilities as a which puts forward a number of trade negotiations, the government must bolt-on to its revenue recommendations including that HMRC not compromise “by shifting to a more should ensure all estate agents are buccaneering role in an effort to secure trade raising activities registered with them for AML purposes, deals,” states the report. that Companies House needs powers to combat economic crime, and that the The recommendations include: to improve the enforcement of corporate corporate criminal liability framework liability for economic crime; and for economic crime should be reformed. • That the government should retain, or replicate, arrangements with the EU to • The Economic Secretary has suggested that there should be a power for the The Committee has found that the AML maintain the flow of information to law government to block a listing on national supervision system in the UK is “highly enforcement agencies post-Brexit; security grounds. If the government wishes fragmented.” The UK has 22 accountancy to pursue this reform, it needs to set out and legal professional body AML supervisors • That the government should institute a more clearly when such a power would be used, (regulated by OPBAS) and three statutory frequent system of public review of the UK’s what effect it might have on UK listings AML supervisors (HMRC, the FCA and the AML supervision, and law enforcement, and financial services, and why it would be Gambling Commission). “It is unclear why that will ensure a constant stimulus to needed, especially post-Brexit. OPBAS only supervises the professional body improvement and reform – which may be a AML supervisors and not the statutory ones,” role for the Economic Crime Strategic Board; The report also looks at the effectiveness states the report. “To ensure consistency • If it is to retain its AML supervisory of the Office of Financial Sanctions across all AML supervisors, the Government responsibilities, HMRC should include Implementation (OFSI). The OFSI has should create a supervisor of supervisors, and within its departmental objectives a single indicated that there are a number of potential there is a strong case for this to be OPBAS,” stand-alone objective related to its AML sanctions breaches under investigation, and as such public examples of enforcement are Concerns were raised that HMRC treats supervisory work and keep a clear reporting necessary if the OFSI is to be recognised as its supervisory responsibilities as a bolt-on line between its AML supervisory work an effective deterrent, states the report. A to its revenue raising activities. Therefore, and its work investigating tax crime and review of OFSI in 2019 is also recommended. if HMRC is to retain its AML supervisory associated money laundering offences; responsibilities, it should have an objective • That the government should set out a relating to this work, states the report. The press release can be found HERE. timetable for bringing forward legislation
FCA and PRA agree MoU with EBA on info-sharing
The UK’s Financial Conduct Authority for supervisory cooperation and intend to move swiftly to sign bilateral MoUs, (FCA), the Prudential Regulation information-sharing arrangements which will allow uninterrupted information- Authority (PRA), and European Banking between UK and EU/EEA national sharing and supervisory cooperation in the Authority (EBA) announced on 20 authorities. event of a no-deal Brexit scenario. March that they have agreed a template Memorandum of Understanding Following agreement on the template, the UK The press release can be found HERE. (MoU), setting out the expectations authorities and EU/EEA national authorities
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MEPs approve EU reaches agreement on new rules database for to protect whistleblowers exchange of The European Parliament announced on 12 March that a provisional non-EU national agreement has been reached between European Parliament and criminal records European Council negotiators on the first EU-wide rules on protecting Members of the European Parliament whistleblowers when they report on (MEPs) approved a new EU database breaches of EU law in a wide range on 12 March, which aims to enable of areas including tax fraud, money EU countries to exchange criminal laundering and public procurement. records of non-EU citizens’ quickly. The agreed text explicitly prohibits reprisals and introduces safeguards ambassadors and the Legal Affairs MEPs have agreed to create a new against a whistleblower being suspended, Committee before being put to a final database on the past convictions of demoted, intimidated and other vote by the full House and Council. The third country nationals (ECRIS-TCN), forms of retaliation. Those assisting directive will enter into force twenty to complement the existing European whistleblowers, such as colleagues, days after being published in the Official Criminal Records Information System relatives and investigative journalists are Journal of the European Union. (ECRIS) used to exchange information on also protected. the convictions of EU citizens.
The provisional agreement now needs The new centralised database will The press release can be found HERE. to be confirmed by member states’ improve the exchange of information concerning criminal records of non-EU nationals, throughout the EU, contributing to the EU’s fight against cross-border crime and terrorism. The new ECRIS Third European member states called on Country National (ECRIS-TCN) system will: (1) enable national authorities to to address corruption and torture quickly establish whether any EU member state holds criminal records on a non- In a joint statement issued on 25 are advised to take action to implement EU citizen; and (2) include data on dual February at the United Nations Human the recommendations of the CPT and nationals, who possess the nationality of Rights Council, Mykola Gnatovskyy, GRECO to combat threats to democracy, a third country and of an EU country to president of the European Committee human rights and the rule of law. ensure that individuals cannot hide past for the Prevention of Torture and convictions by having two passports. Inhuman or Degrading Treatment or GRECO is evaluating the action taken Punishment (CPT), and Marin Mrčela, by member states to prevent corruption Europol, Eurojust and the EU Public president of the Group of States and promote integrity in law enforcement Prosecutor’s Office will also have access against Corruption (GRECO), called agencies, protect whistleblowers and to ECRIS and the Third Country National on member states to take action to bring perpetrators to justice, which system, in addition to judges and address corruption and torture. includes a focus on corruption risks within prosecutors in EU countries. The rules still law enforcement agencies. require the formal approval of the Council. The joint statement highlights the links between corruption and torture, and The press release can be found HERE. appeals to member states to increase The press release can be found HERE. efforts to fight corruption. Member states
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EU reaches political agreement on a stronger supervisory framework for EU financial institutions, including on AML
The Council of the European Union on a set of proposals to review the assessments and facilitating cooperation announced on 21 March that the EU functioning of the current European with non-EU countries on cross-border cases. will soon have in place an improved System of Financial Supervision (ESFS). supervisory framework for EU financial Pending technical finalisation of the text, the institutions, including strengthened The agreed text strengthens the role and provisional agreement will now be submitted supervisory powers for the European powers of the EBA in regards to AML for endorsement to EU Ambassadors. The Banking Authority (EBA) in the area of supervision. In particular, the EBA is given the Parliament and Council will be called on to anti-money laundering and terrorist tasks of collecting information from national adopt the proposed regulation at first reading. financing. The Romanian Presidency competent authorities, enhancing the quality of the Council and the Parliament of supervision through the development The press release can be found HERE. have reached a provisional agreement of common standards, performing risk
EU Council agrees its position on the rules to appoint legal representatives for the gathering of evidence
The Council of the European Union of the legal representatives remain as • On sanctions, the text remains as proposed reached its position on 8 March on the in the Commission’s proposal. Legal by the Commission and provides that directive on the appointment of legal representatives shall be in one of the sanctions shall be effective, proportionate representatives for the gathering of member states in which the service provider and dissuasive; evidence in criminal proceedings. The is established or offers services; new rules aim to improve cross-border • A full list of legal representatives shall be access to e-evidence by creating a • Service providers and legal representatives made publicly available to ensure easy legal framework that will enable judicial may be held jointly and severally liable for access by law enforcement authorities; and orders to be addressed directly to non-compliance; service providers operating in the EU. • The Council has provided for a transposition • Legal representatives may be used deadline of 18 months to make sure that The Council’s position sets out the rules for for gathering types of evidence other the legal representatives are up and running the appointment of service providers’ legal than e-evidence, and for receiving other once the regulation on e-evidence enters representatives, whose role is to receive and requests related to law enforcement such into force six months later. respond to EU production and preservation as European investigation orders, without orders for electronic evidence in criminal prejudice to the specific procedures The Council is now ready to start trilogue matters. The creation of legal representatives provided for in other legal instruments for negotiations on the whole e-evidence was necessary because of the lack of a judicial cooperation in criminal matters; package as soon as the Parliament has general legal requirement for non-EU service adopted its position, which is not expected to providers to be physically present in the EU • Specific arrangements to limit the burden on be before the European elections. when providing services within the Union. SMEs have been added. These include the possibility for SMEs to share the same legal The main elements of the position include: representative and that individual sanctions against a service provider should take into The press release can be found HERE. • The criteria for defining the location account its financial capacity;
12 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
MEPs call for EU Magnitsky Act to MEPs deplore sanction human rights abusers human rights
Members of the European Parliament breaches in Iran, (MEPs) backed a resolution on 14 March calling for new EU human Kazakhstan and rights sanctions to punish state and non-state actors responsible for Guatemala gross violations of human rights. The resolution calls for a new sanctions Members of the European regime to be established at EU Parliament (MEPs) deplored level to impose asset freezes and human rights violations and all visa bans on individuals involved in months, there have also been cases in forms of political repression in Iran, grave human rights violations. The which EU companies and countries have Kazakhstan and Guatemala on 14 list should include state and non- violated EU sanctions. March, adopting three resolutions state actors who have contributed, that take stock of the human rights The new sanctions regime would physically, financially or through acts situation in the countries. of systemic corruption, to such abuse strengthen the EU’s role as a global and crimes, worldwide. human rights actor and should Amongst other things, MEPs are calling symbolically carry the name of Sergei on the Iranian authorities to immediately MEPs state that the decision to list and Magnitsky, MEPs said. Mr Magnitsky release all human rights defenders and delist individuals should be based on was a Russian tax accountant journalists detained and sentenced clear, transparent and specific criteria, investigating corruption who died in a for exercising their right to freedom of directly linked with the crime committed, Moscow prison in 2009, having endured expression and peaceful assembly. They in order to guarantee a thorough judicial inhumane conditions and torture. recall that many have been systematically review and redress rights. They also targeted by the authorities through urge EU countries to come up with a criminal investigations, asset freezes, mechanism to enforce sanctions and The press release can be found HERE. arbitrary arrest and surveillance. have EU oversight, since over the past The Parliament calls on the Kazakhstan authorities to put an end to all forms of political repression. MEPs also call on Suspension of Turkey’s accession the government of Kazakhstan to repeal Criminal Code provisions on prohibiting negotiations recommended “spreading information that is known to be false,” as such provisions are being The EU Parliament recommended on suspend the talks on EU integration,” said used to imprison activists and journalists. 13 March suspending EU accession rapporteur Kati Piri. “Our repeated calls to negotiations with Turkey following respect fundamental rights have fallen on In relation to Guatemala, MEPs expressed “severe political and democratic deaf ears in Ankara. On top of the severe deep concern about the increased backsliding.” The Parliament cites human rights violations, the dismantling number of killings, acts of violence, and serious concerns about Turkey’s poor of the rule of law and the fact that Turkey the lack of security for all citizens in record in upholding human rights, the holds the world record for the number of Guatemala, in particular human rights rule of law, media freedom and the fight journalists in jail, the recently amended defenders and journalists. MEPs also against corruption, as well as its all- constitution consolidates Erdoğan’s expressed concern about the current powerful presidential system. authoritarianism.” situation that the CICIG faces.
“If the EU takes its own values seriously, no The press release can be found HERE. The press release can be found HERE. other conclusion is possible than to formally
13 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
South Africa EU should be ready to adopt further establishes sanctions on Russia say MEPs
Members of the European Parliament laundered through the EU every year, new body to (MEPs) agreed a resolution on 12 which poses a threat to EU security and March that the EU should remain stability. The report underlines that EU investigate open to imposing further sanctions countries concerned must end all “golden if Russia continues to violate visa/passport” programmes, which corruption international law. benefit Russian oligarchs.
South Africa’s president Cyril MEPs noted that new areas of tension The resolution also states that the EU Ramaphosa signed a proclamation on between the EU and Russia have should review its current Partnership 20 March that officially establishes arisen since 2015, including Russia’s and Cooperation Agreement (PCA) with an Investigating Directorate in the intervention in Syria, interference in Russia and limit cooperation to areas Office of the National Director of countries such as Libya and the Central of common interest. Global challenges, Public Prosecutions to investigate African Republic, and continuous such as climate change, energy security, high-profile corruptionand state aggressive action in Ukraine. They also and the fight against terrorism call for capture cases including the Zondo highlighted Russia’s support for anti-EU selective engagement, MEPs say. Closer Commission inquiry. parties and far-right movements, and that relations will only be possible if Russia it keeps meddling in political elections fully implements the Minsk agreements The new Directorate will investigate and violating human rights. to end the war in eastern Ukraine and common law offences including fraud, starts respecting international law. forgery, theft and any offence involving Taking stock of these violations of dishonesty. The Directorate has been international law, MEPs stressed that the MEPs reiterated concerns that the Nord created according to Section 7(1) of the EU should stand ready to adopt further Stream-2 project could reinforce the EU’s National Prosecuting Authority Act, 1998 sanctions against Russia, especially dependence on Russian gas supplies (Act No.32 of 1998), which followed those targeting individuals. Sanctions and threaten the EU internal market. a recommendation from the Minister should be proportionate to the threats MEPs are also concerned about Russia’s of Justice and Correctional Services, posed by Russia, they added. support for authoritarian regimes and the Minister of Police and the National countries such as North Korea, Iran, MEPs also condemned the illegal Director of Public Prosecutions. Venezuela and Syria. financial activities and money laundering by Russia, potentially amounting to The Directorate will investigate any The press release can be found HERE. unlawful activities relating to serious, high- hundreds of billions of euros being profile or complex corruption including but not limited to offences arising from the following inquiries: the Zondo Commission inquiry into allegations of state capture, UK’s JMLSG publishes consultation corruption and fraud in the public sector; and the Mpati Commission inquiry into The UK’s Joint Money Laundering to funds, seek to describe in more allegations of impropriety regarding the Steering Group (JMLSG) published current terms how to assess the risks Public Investment Corporation; and any proposed revisions on 18 March to two in the sectors and how to identify who other serious, high-profile or complex of the sectors in Part II of its Guidance customers are. The consultation is open corruption case referred to the new on the prevention of money laundering for comments until 18 April. Directorate by the National Director. and the financing of terrorism for the UK financial services industry.
The press release can be found HERE. The proposed revisions, to sector 4: credit The press release can be found HERE. unions, and sector 20: brokerage services
14 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
New UK voluntary code of practice UK’s Crime published to protect against APP fraud (Overseas
The UK’s Authorised Push Payment protection for customers considered to be Production (APP) Scams Steering Group published vulnerable to this type of fraud; and on 28 February a new voluntary code Orders) Act of good practice which aims to better • Preventing accounts from being used to protect customers and reduce the launder the proceeds of APP fraud, including 2019 receives occurrence of APP fraud. The new code procedures to prevent and detect the receipt will become effective on 28 May 2019. of funds from this type of fraud. Royal Assent The Steering Group has published the text The Steering Group has concluded that in The UK’s Crime (Overseas of the voluntary code and its response to the cases where both the consumer and Production Orders) Act 2019 the feedback received to its consultation on PSPs involved in a transaction have met received Royal Assent on 12 the draft code. The code sets out the agreed their expected level of care, the consumer February, which gives powers principles for greater protection of consumers will be reimbursed. The PSPs, supported to law enforcement to apply for and the circumstances in which they will be by the Payments Systems Regulator, have an Overseas Production Order reimbursed. Under the code any customer of committed to work together to introduce a (OPO) to obtain electronic a bank or PSP signed up to the code who falls funding mechanism by January 2020. data directly from service victim to an APP scam will be reimbursed if providers based outside their bank failed to meet the standards set From 1 July 2019, the operation and the UK for the purposes of out in the code, providing the customer did governance of the voluntary code will be criminal investigations and everything expected of them. carried out by the Lending Standards Board (LSB). In the meantime, the Steering Group prosecutions for serious crime. PSPs signed up to the code commit to: will work with the LSB to design the future The Act marks a departure for governance and review arrangements. law enforcement cooperation • Protecting their customers, including concerning the current mutual procedures to detect, prevent and respond The new code can be found HERE. legal assistance (MLA) regime to APP fraud, with a greater level of in relation to gathering electronic evidence from overseas and has been described as a way of overcoming MLA procedures that are cumbersome and time SWIFT publishes new cybersecurity consuming. The Act depends on international agreements being counterparty risk guidelines secured. Negotiations with the US are ongoing. The Society for Worldwide Interbank Though relevant to all financial institutions, Following concerns raised during Financial Telecommunication (SWIFT) the guidelines are primarily intended for use the legislative process, a provision published guidelines on 15 February for by small and medium sized organisations was added to the new law that assessing cybersecurity counterparty with relatively few counterparties, requires the Secretary of State to risk for financial institutions, which and correspondent banks that act as seek assurances that information follows the incident in 2016 when intermediaries between originating payers provided will not be used in fraudulent transfer requests were and end beneficiaries. The guidelines are connection with proceedings for a issued via the SWIFT network from non-binding on member institutions. death penalty offence. Bangladesh Bank to the Federal Reserve Bank of New York, resulting in the theft of USD 81 million. The press release can be found HERE. The Act can be found HERE.
15 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
MEPs adopt Cybersecurity Act and UK’s FCA issue call to counter threat from China publishes Members of the European Parliament The press release explains that MEPs industry (MEPs) adopted on 12 March the EU expressed “deep concern” about allegations Cybersecurity Act, which will introduce that 5G equipment may have embedded the first EU-wide cybersecurity backdoors that would allow Chinese insights on certification scheme to ensure that manufacturers and authorities to have certified products, processes and unauthorised access to private and personal cybersecurity services sold in EU countries meet data and telecommunications in the EU. The UK’s Financial Conduct cybersecurity standards. In addition MEPs, amongst other things, call on the Authority (FCA) published a to this, the Parliament also adopted a Commission to mandate the EU Cybersecurity document on 8 March which resolution calling for action at EU level Agency, ENISA, to work on a certification brings together industry on the security threats linked to China’s scheme ensuring that the rollout of 5G in the insights on cyber resilience, growing technology presence in the EU. EU meets the highest security standards. gathered from the FCA The EU Cybersecurity Act underlines the The Council must now formally approve the Cyber Coordination Groups importance of certifying critical infrastructure, Cybersecurity Act, which will enter into force discussions with industry. including banking systems in addition to 20 days after it is published. The resolution on The FCA has collated the examples products, processes and services. By 2023, China’s IT presence in the EU will be sent to shared by firms taking part in the the Commission is due to assess whether the Commission and to member states. Cyber Coordination Groups and has any of the new voluntary schemes should be set out those the FCA considers to made mandatory. The Cybersecurity Act also be beneficial for a wider audience. provides for a permanent mandate and more The press release can be found HERE. Over the past year, the Groups resources for ENISA. have been discussing and sharing practices in the following areas: governance, identification, protection, detection, situational awareness, FCA publishes crypto-asset reports response and recovery, and testing. The FCA hopes that the practices The UK’s Financial Conduct Authority attitudes in the UK,” carried out by Kantar and experience of the Groups helps (FCA) published two pieces of research TNS, looks at awareness, understanding those firms not already involved on 7 March examining UK consumer and purchasing habits. when considering where to prioritise attitudes to crypto-assets and how their efforts in increasing cyber consumers interact with crypto-assets, The FCA reiterates that, as many crypto- resilience. which has found, amongst other assets fall outside its regulatory remit, things, that crypto-assets are not well consumers are unlikely to be able to make Meanwhile, the UK government understood by many consumers, with complaints to the Financial Ombudsman published its Cyber Governance many respondents viewing them as a Service or seek protection from the Health Check 2018 report on fast track to wealth. Financial Services Compensation Scheme. 5 March, which has found that The FCA will publish a consultation on Boards at some of the UK’s The first report, entitled “How and why a proposed ban of certain crypto-asset biggest companies still do not fully consumers buy cryptoassets,” seeks to derivatives to retail investors later in 2019. understand the potential impact of a understand the trends and behaviours of cyber-attack. The health check looks consumers in the crypto-assets sector. The at the approach the UK’s FTSE 350 research, conducted by Revealing Reality, The first report can be foundHERE. companies take to cybersecurity. evaluates the potential for risk, harm and vulnerability among consumers. The second The second report can be found HERE. The research can be found HERE. report, “Crytpoassets ownership and
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
CFTC issues UK and US update advisory notice advisory and regarding high-risk jurisdictions signals intention The UK’s HM Treasury published an counter measures and EDD measures in updated advisory notice regarding accordance with the risks; to investigate the risks posed by unsatisfactory money laundering and terrorist • Consider Iran as high-risk and apply EDD foreign bribery financing controls in a number measures according to the risks; and of jurisdictions on 26 February, following the Financial Action Task • Take appropriate actions to minimise associated risks, which may include EDD The US Commodity Futures Trading Force (FATF) plenary which identified measures, concerning the Bahamas, Commission’s (CFTC) Division of additional jurisdictions with strategic Botswana, Cambodia, Ethiopia, Ghana, Enforcement published on 6 March deficiencies in their anti-money Pakistan, Serbia, Sri Lanka, Syria, Trinidad an advisory on self-reporting and laundering/counter terrorist financing and Tobago, Tunisia and Yemen. cooperation for violations of the (AML/CTF) regimes. Commodity Exchange Act (CEA) that The advisory notice sets out the The US Financial Crime Enforcement involve foreign corrupt practices. The Network (FinCEN) issued its updated advisory signals for the first time the requirement to apply enhanced due diligence for higher risk jurisdictions and advisory on the FATF-identified jurisdictions CFTC’s intention to investigate CEA with AML/CTF deficiencies on 8 March. and CFTC rule violations related to annexes the statements issued by FATF on foreign corrupt practices. 22 February identifying jurisdictions with strategic AML/CTF deficiencies. The CFTC’s enforcement director, James The UK advisory can be found HERE. McDonald, announced the new policy Firms are advised to do the following: during a speech to the ABA’s National • Consider the Democratic Peoples’ Institute on White Collar Crime, in which FinCEN’s advisory can be found HERE. Republic of Korea as high-risk and apply he said that the CFTC already has open investigations into alleged foreign bribery. McDonald also said that the CFTC may investigate bribes to win business trading OFAC introduces CAPTA List of swaps and derivatives contracts, for example, and cases where bribes are used sanctioned financial institutions to manipulate benchmark interest rates. The US Department of the Treasury’s Support Act of 2014, as amended by The advisory applies to companies and Office of Foreign Assets Control the Countering America’s Adversaries individuals who are not registered with the (OFAC) announced on 14 March that Through Sanctions Act; the North Korea CFTC, who voluntarily disclose violations it is replacing the List of Foreign Sanctions Regulations; the Iran Freedom involving foreign corrupt practices and Financial Institutions Subject to Part and Counter-Proliferation Act of 2012; the fully cooperate. If a firm or individual 561 (the “Part 561 List”) with the Iranian Financial Sanctions Regulations; meets these criteria, the Enforcement List of Foreign Financial Institutions the Hizballah Financial Sanctions Division will recommend to the CFTC a Subject to Correspondent Account or Regulations; and Executive Order 13846. resolution without a civil monetary penalty, Payable-Through Account Sanctions The CAPTA List specifies the prohibition as long as there are no aggravating (the “CAPTA List”). or strict conditions to which the foreign circumstances concerning the violation. financial institutions are subject. The CAPTA List includes foreign financial institutions subject to correspondent The press release can be found HERE. or payable-through account sanctions The update can be found HERE. pursuant to the Ukraine Freedom
17 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
UK publishes sanctions regulations that UK Counter- will come into effect in event of no-deal Terrorism
The UK government made on 5 March and the South Sudan (Sanctions) (EU Exit) (International the Iran (Nuclear) (Sanctions) (EU Exit) Regulations 2019, (SI 2019/438). The Regulations 2019, (SI 2019/461), the government has also made the Belarus Sanctions) ISIL (Da’esh) and Al-Qaida (Sanctions) (Sanctions) (EU Exit) Regulations 2019, (SI (EU Exit) Regulations 2019, (SI 2019/600) and the Zimbabwe (Sanctions) (EU (EU Exit) 2019/466), Democratic Republic of Exit) Regulations 2019 (SI 2019/604). Korea (Sanctions) (Exit) Regulations 2019, (SI 2019/411), under the Meanwhile, the UK’s Sanctions (Amendment) Regulations Sanctions and Anti-Money Laundering (EU Exit) (No 2) Regulations 2019 (SI Act 2018. The Regulations, which are 2019/380) was laid before parliament on 1 The UK government made also complemented by guidance, are set March, which is set to come into force on the the Counter-Terrorism to come into force in the event of a no- day the UK leaves the EU. The Regulations (International Sanctions) (EU deal on the day the UK leaves the EU. amend EU sanctions relating to Afghanistan, Exit) Regulations 2019 on 14 the Central African Republic, Somalia and March, which following the On 13 March the government made the Sudan and financial sanctions relating UK’s withdrawal from the EU Republic of Guinea-Bissau (Sanctions) to Afghanistan, Burundi, Central African will replace two EU sanctions (EU Exit) Regulations 2019, (SI 2019/554), Republic, Egypt, Republic of Guinea, Iraq, regimes relating to terrorism. which was followed on 14 March with the Lebanon, Maldives, Mali, Somalia, Sudan, Counter-Terrorism (Sanctions) (EU Exit) Syria, Tunisia, Ukraine and Yemen. One of the EU regimes that will be Regulations 2019, (SI 2019/577). In addition, replaced is the regime adopted on 4 March the UK government made the on the basis of Common Position 2001/931/CFSP and implemented Democratic Republic of Congo (Sanctions) The new regulations can be found HERE. (EU Exit) Regulations 2019, (SI 2019/433) by Regulation (EC) No 2580/2001, which was implemented in the UK through the Terrorist Asset- Freezing Act 2010 (TAFA). TAFA also implemented the UK’s obligations OECD adopts new Recommendation under Resolution 1373. The other regime to be replaced by the new statutory instrument is the EU’s on Bribery and Export Credits autonomous regime in respect of ISIL and Al-Qaida which was The Organisation for Economic Co- and that “Agreement by all ECAs is a implemented by Council Regulation operation and Development (OECD) positive outcome for UKEF, who worked (EU) Regulation 2016/1686. adopted a new Recommendation of closely with like-minded ECAs to promote the Council on Bribery and Officially higher standards of anti-bribery due In addition to this, the UK Treasury Supported Export Credits on 13 March, diligence, particularly in relation to published guidance on 20 March on which aims to strengthen anti-bribery enhanced due diligence on agents and the Counter-Terrorism (Sanctions) and corruption policies and procedures agent’s commission.” (EU Exit) Regulations 2019. The across adherent Export Credit Agencies Regulations will implement the UK’s (ECAs) to deter bribery in international obligations under UN Resolution business transactions. 1373 if, post-Brexit, the Terrorist The recommendation can be found HERE. Asset Freezing Act 2010 is repealed. UK Export Finance (UKEF) published a statement on 14 March that it has adopted The UK statement can be found HERE. The regulation can be found HERE. the new OECD Council Recommendation
18 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
MAS publishes Canada’s Budget 2019 includes enforcement proposal to create an AML taskforce report The Canadian federal government unveiled the 2019 Budget on 19 The Monetary Authority of Singapore March, ahead of the federal election, (MAS) published its inaugural which includes proposals to create a enforcement report on 20 March, new anti-money laundering taskforce which outlines the enforcement to crack down on real estate, casino priorities and provides greater and trade-based money laundering, transparency into the action taken. especially in high-risk areas such as Vancouver, Toronto and Montreal. The report sets out the enforcement action taken by MAS for the reporting The government is proposing to period from July 2017 to December 2018, strengthen Canada’s anti-money which includes the issuance of SGD 17 laundering and counter terrorism financing million in financial penalties in the 18 regime by amongst other things: month period. It provides information on Budget 2019 proposes to invest CAD the time taken to complete investigations • Strengthening federal police operational 28.6 million over four years with CAD and key enforcement outcomes during and investigative capacity by providing 10.5 million per year ongoing to create this period. In addition, the report outlines up to CAD 68.9 million over five years, the Trade Fraud and Trade-Based Money the types of misconduct MAS is currently beginning in 2019-20, and CAD 20 million Laundering Centre of Expertise; investigating and the key initiatives MAS per year ongoing, to the Royal Canadian has undertaken to uphold Singapore’s Mounted Police; • Strengthen operational capacity at reputation as a trusted financial center. FINTRAC to: improve oversight of • The creation of an Anti-Money modern financial practices related The report explains that MAS will focus its Laundering Action, Coordination and to virtual currencies, foreign money enforcement efforts to strengthen: Enforcement (ACE) Team, which will service businesses, prepaid products bring together dedicated experts from and customer identification, increase • Timely and adequate disclosure across intelligence and law enforcement outreach and examinations in the real of corporate information by listed agencies to strengthen inter-agency estate and casino sectors with a focus companies; coordination and cooperation and on the province of British Columbia; and identify and address significant money • Business conduct of financial advisers laundering and financial crime threats. • Budget 2019 proposes to make and their representatives; Budget 2019 proposes to invest CAD 24 legislative amendments, which includes million over five years for Public Safety adding an alternative requirement of • Financial institutions’ compliance with Canada to implement the ACE Team as a recklessness to the offence of money anti-money laundering/combatting the pilot initiative; laundering in the Criminal Code, which financing of terrorism requirements; would criminalise the activity of moving • Create a multi-disciplinary Trade Fraud money on behalf of another person or • Brokerage houses’ internal controls to and Trade-Based Money Laundering organisation while being aware that detect and deter market abuse; and Centre of Expertise, which will there is a risk that this activity could be money laundering but continuing with • Surveillance and investigations into complement the efforts of the ACE that activity in spite of the risk. suspected insider trading. Team. This initiative will strengthen capacity at the Canada Border Services Agency and the Financial Transactions The report can be found HERE. and Reports Analysis Centre of Canada The Budget can be found HERE. (FINTRAC) to target growing threats.
19 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
Basel Committee statement on crypto- Switzerland assets and the need for due diligence launches
The Basel Committee on Banking The Basel Committee expects that if a bank is blockchain Supervision published on 13 March to acquire crypto-asset exposures or provide a statement on crypto-assets, which services, the following should be adopted: and DLT recommends that banks should carry out due diligence before acquiring • Due diligence: Before acquiring exposures to consultation exposures to crypto-assets or crypto-assets or providing related services, a bank should conduct comprehensive providing related services, and that The Swiss Federal Council analysis of the risks; banks should have a clear and robust announced on 22 March that it risk management framework that is has launched a consultation on • Governance and risk management: A bank appropriate for the risks of its crypto- the adaptation of federal law should have a robust risk management asset exposures and related services. to developments in distributed framework appropriate for the risks of its ledger technology (DLT) crypto-asset exposures and related services; The statement explains “given the anonymity and blockchain. The Federal and limited regulatory oversight of many • Disclosure: A bank should publicly disclose Council wants to increase legal crypto-assets, a bank’s risk management certainty, remove hurdles for framework for crypto-assets should be fully any material crypto-asset exposures or related services as part of its regular DLT-based applications and integrated into the overall risk management limit risks of misuse. processes, including those related to disclosures and specify the accounting treatment for such exposures; and anti-money laundering and combating the In the area of combatting money financing of terrorism and the evasion of • Supervisory dialogue: The bank should laundering, the Federal Council sees sanctions, and heightened fraud monitoring.” inform its supervisory authority of crypto- a need for more precise definitions of current practice. However, these In recognition that crypto-assets do not asset exposure or activity in a timely manner amendments at ordinance level are reliably provide the standard functions of and provide assurance that it has fully not part of this consultation, rather money and are unsafe to rely on as a medium assessed the permissibility of the activity they are to be integrated into the of exchange or store of value, the Basel and how it has mitigated the risks. planned amendment of the Anti- Committee’s statement sets out its prudential Money Laundering Ordinance as expectations related to banks’ exposures to The press release can be found HERE. part of the ongoing revision of the crypto-assets and related services. Anti-Money Laundering Act.
The Federal Council has asked for clarification as to whether legislation in the area of the prevention of Central bank digital currencies report money laundering and terrorist financing should be adapted with A key takeaway from the report is that a The Markets Committee and regard to crowd-donating and central bank introducing a CBDC would Committee on Payments and crowd-supporting platforms. The have to ensure the fulfilment of anti-money Market Infrastructures of the Bank Federal Council is of the opinion laundering and counter terrorism financing for International Settlements (BIS that it would be disproportionate at requirements, as well as satisfy the public committees) published on 13 March a present to subject such platforms to policy requirements of other supervisory report on central bank digital currencies the Anti-Money Laundering Act. The and tax regimes. (CBDCs), which follows analysis of the consultation is open for comments potential implications of CBDCs for until the end of June. payment systems, monetary policy as well as for the structure and stability of The report can be found HERE. the financial system. The consultation can be found HERE.
20 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
TECHNICAL UPDATES
Latvia poses EU Parliament adopts roadmap on amendments tackling financial crimes to overhaul The European Parliament adopted • Seven EU countries (Belgium, Cyprus, a roadmap towards more effective Hungary, Ireland, Luxembourg, Malta and AML system taxation and tackling financial crimes The Netherlands) display traits of a tax on 26 March. The recommendations, haven; prepared by the Special Committee Latvia’s finance minister Jānis Reirs on Financial Crimes, Tax Evasion • Golden visas and passports should be announced on 26 March amendments and Tax Avoidance (TAX3), include phased out, with those offered by Malta to the Law On the Financial and overhauling the system to deal with and Cyprus singled out for their weak Capital Market Commission (FCMC) financial crimes, tax evasion and due diligence; and the Credit Institutions Law, tax avoidance, and setting up an EU following prime minister Krišjānis financial police force, an EU FIU and • EU banks have been involved in the Kariņš decision on 20 February to an EU AML watchdog. “Troika Laundromat,” including Danske implement substantial financial Bank, Swedbank AB, Nordea Bank sector control reforms relating to anti- The recommendations and conclusions Abp, ING Groep NV, Credit Agricole money laundering. The Ministers for set out in the roadmap include: SA, Deutsche Bank AG, KBC Group NV, Finance, Justice and the Interior were Raiffeisen Bank International AG, ABN tasked with drawing up a legislative • The Commission should start work on a Amro Group NV, Cooperatieve Rabobank package to be put to the Cabinet proposal for an EU financial police force UA and the Dutch unit of Turkiye Garanti of Ministers, which introduces and an EU financial intelligence unit; Bankasi AS; and significant changes in the institutions supervising the financial sector. • An EU AML watchdog should be set up; • The cum-ex fraud scheme clearly shows that multilateral, not bilateral, tax treaties Legislative recommendations for • A global tax body should be established are the way forward. improving the tracking of where deposits within the UN; originate from, by stipulating that a person must prove the legal origin of their • A lack of political will in member states financial means, have been stipulated. to tackle tax evasion/avoidance and The press release can be found HERE. Amendments have been incorporated financial crime has been found; in the draft law to conceptually change the procedure of suspicious transaction reporting, as well as to abandon the concept of an unusual transaction. Cayman Islands issues regulatory Prime minister Kariņš also asked the Ministry of Justice and the Ministry of the measures on sources of wealth Interior to find a solution for unburdening the prosecutor’s office, the police, and The Cayman Islands Monetary entities to verify the legitimacy of the court to ensure that they have the Authority published a notice an applicant’s source of wealth and resources to address the investigation announcing new regulatory measures source of funds, and the new regulatory and adjudication of serious crimes, on 13 March, which includes a measure provides a form for such a particularly in the field of combatting “Declaration of Source of Wealth & submission to the authority. money laundering and terrorism financing. Source of Funds” that was published in the Official Gazette on 4 March.
The press release can be found HERE. The Cayman Islands Monetary Authority The form can be found HERE. has a regulatory requirement for regulated
21 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
SPECIAL FEATURE
An interview with threat lead for asset denial at the UK’s National Economic Crime Centre, Rachael Herbert
The UK’s new National Economic Crime to map the instances where we suspect Centre (NECC), which sits within the the involvement of “enablers” in order to National Crime Agency (NCA), is tasked document what enables an enabler to with coordinating the UK’s response to facilitate ML and/or linked matters. economic crime, harnessing intelligence and capabilities from across the public Finally, the National Assessments Centre and private sectors to tackle economic continues to work with academic institutions crime in the most effective way. With to develop its understanding of the threat several months of operation under its sector entities wish to raise any concerns; and the role of enablers. For example, belt following its launch on 31 October and secondly, to identify current corruption UCL has commissioned research into the 2018, the Financial Crime Digest spoke threats and risk areas to better inform and facilitation of criminality by professional to Rachael Herbert, threat lead for asset develop prevention strategies in conjunction enablers in fraud and money laundering. denial at the National Economic Crime with the NCA International Liaison Office While not corruption centric, the level of Centre, about the NECC’s plans to tackle network and the International Anti-Corruption cross-over between criminality types is illicit finance in partnership with the Co-ordination Centre. expected to increase the understanding of NCA, particularly using new powers, their role more generally. such as Unexplained Wealth Orders and “To date, we have Account Freezing Orders. Are there any learning points the NCA can considered more than adopt from the use of Unexplained Wealth Orders by other countries, or from your own The NCA has previously said that some 100 cases where the professional firms have been enablers of experience to date in the UK? corruption – whether complicity, negligently use of an Unexplained or unwittingly; and that the pathways to Wealth Order (UWO) Tackling the flow of illicit finance into serious and organised crime for these the UK is a top priority for the NCA and offenders are not well understood. What may be the appropriate we are bringing all the capabilities of UK steps is the NECC and the NCA taking to course of action” law enforcement to bear against serious improve its understanding of why these firms criminals and corrupt elites. become involved in corrupt activity? We have radically stepped up our activity The NCA and the NECC have taken a The NECC has established a number of against illicit finance entering our country number of steps to understanding the Expert Working Groups attended by the and have a number of ongoing investigations threat of corruption, the role of professional banking sector and civil society. This allows into corrupt elites who seek to launder and enablers and how firms become involved in the sharing of strategic information to invest the proceeds of crime in the UK from corrupt activity. develop a public-private understanding of the around the world. These investigations are threat, identify risk areas and commission complex and often take time, but we are The International Corruption Unit has a strategic intelligence products and guidance expecting charges to be brought against a dedicated outreach function. An officer pieces to mitigate the threats identified. number of politically exposed individuals in regularly attends conferences attended by the coming months. private sector representatives. This officer We are increasingly drawing upon data has also been designated as the Law sources which are publicly available to Unexplained Wealth Orders (UWOs) are just Enforcement SPoC for SME’s participating proactively identify corruption risks and one of the asset denial tools we are using to in DFID’s Business Integrity Initiative. This those professional enablers operating in combat serious criminals and corrupt elites. outreach has a twofold purpose: First to the sectors/areas identified. This informs To date, we have considered more than 100 raise awareness of corruption risks and intelligence collection requirements. In cases where the use of an UWO may be the provide a law enforcement contact if private addition, the NECC is driving a project appropriate course of action and we are
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SPECIAL FEATURE
continues from previous page
working to apply for further UWOs as our investigations continue.
What role does the private sector have in tackling serious crime alongside the NCA and how could this be improved?
Economic crime is a complex and evolving threat that impacts on the public, private businesses and the UK economy and our response must evolve to combat the threat. The private sector has a key role to play in tackling serious crime alongside the NCA and wider LE community. and delivery of a shared response across example Unexplained Wealth Orders and As part of NECC’s active partnerships, the public and private sectors; and Account Freezing Orders, across all agencies the Joint Money Laundering Intelligence to tackle illicit finance across all threat types. Taskforce (JMLIT) is a collaboration • Working with partners to use all the tools between law enforcement agencies and and powers available to lead a pursue, The NECC will ensure that criminals financial and insurance sectors to exchange prevent, protect and prepare (4P) response defrauding British citizens, attacking UK and analyse information and intelligence to tackle the threat of SOEC to the UK. industry and abusing UK financial services to detect, prevent and disrupt Serious are effectively pursued; that the UK’s Organised Economic Crime (SOEC) and Could you outline the role of the National industries and government agencies know other threats against the UK. Economic Crime Centre, and how you how to prevent economic crime; and that the see this will improve the understanding UK’s citizens are better protected. Through the NECC we are looking to deepen of economic crime threats and the our partnership, building on the success of identification of high priority targets? How important is international cooperation JMLIT, by establishing relationships with in the fight against financial crime? Are you accountancy supervisors, insurance and The NECC is part of a whole system satisfied with the level of cooperation from wealth management sectors. The NECC is response – involving an uplift in NCA’s overseas agencies and governments, or are strategically focused on the development intelligence and investigation capabilities there ways this could be improved? of public/private partnerships to fulfil to investigate high-end, complex economic its ambition of a shared response to its crimes. It also includes investment in fraud International cooperation is a key element immediate priorities and functions. investigation capabilities at local, regional in the UK’s fight against all types of and national level – work led by colleagues international crime, not just financial crime. The NECC’s collaborative, threat-focused in the City of London Police. The NCA works with international partners approach maximises the capabilities and to develop this joint approach which may expertise of both the public and private This response will bring together existing include initiatives such as the reciprocal sectors to tackle SOEC through: and future capabilities in data, and produce exchange of knowledge, training and never-seen-before, centralised data experience, as well as information sharing. • Being the collective voice on economic exploitation for all of UK law enforcement. crime in the UK, informing operational While the NECC will jointly identify and We have positive levels of cooperation with priorities and strategic decision-making; prioritise the most appropriate type of many overseas partners and in areas where investigations – whether criminal, civil or this can be and needs to be improved we • Enhancing the collective understanding of regulatory to ensure maximum impact – it are actively working towards establishing the threat of SOEC through coordination will seek to maximise new powers, for relationships of mutual benefit.
23 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Corruption Watch report finds that the UK lags behind the US in policing corporate financial crime
Corruption Watch published a report on The US was found to cases, and for money laundering. Following 6 March entitled “The Corporate Crime have imposed penalties analysis, the US was also found to have Gap: How the UK Lags Behind the US brought in GBP 22 billion more in penalties in Policing Corporate Financial Crime,” ten times those for financial crime committed by banks and which analyses how the UK and US imposed by the UK on financial institutions than the UK, nearly half compare on tackling financial corporate of which came from UK financial institutions. crime and calls for urgent reforms to New York and London the UK’s corporate liability regime and a based banks for The report argues that the primary reason review of regulatory penalties. for this shortfall is that the UK’s corporate financial wrongdoing liability laws for economic crime are According to the report, the UK has a serious “antiquated and ineffective,” and that the problem holding companies to account. If UK’s regulators do not impose sufficient you are a big multinational company and you penalties to deter economic crime. The are caught engaging in serious economic Corruption Watch analysed the enforcement Corruption Watch report calls on the UK crime such as financial fraud or money of major financial crime and money government to introduce new legislation laundering in the UK, there is a very good laundering cases in New York and London that would make companies criminally liable chance that you will not be found criminally over the past decade. The US was found where they fail to prevent economic crime liable, explains the report. However, a to have imposed penalties ten times those such as fraud and money laundering, and company committing an economic crime imposed by the UK on New York and London to ensure that the Law Commission carries in the US is far more likely to be hit with based banks for financial wrongdoing such out a full independent review of corporate criminal, civil and regulatory penalties. as exchange rigging in the Libor and Forex liability laws in the UK.
GBP 100 billion of UK property is owned by anonymous companies registered in tax havens, report reveals
stolen cash. This analysis reveals the Global Witness announced on 17 March • 10,000 in Westminster; that analysis has revealed that over alarming scale of the UK’s secret property 87,000 properties in England and Wales scandal,” said Ava Lee, senior anti-corruption • 5,729 in Kensington and Chelsea; are owned by anonymous companies campaigner at Global Witness. registered in tax havens. The value • 2,320 in Camden; and of these properties is at least GBP 56 Forty percent of the anonymously owned billion according to Land Registry data, properties identified are in London. Cadogan • 1,930 in Tower Hamlets. and is likely to be in excess of GBP 100 Square in Knightsbridge hosts at least 134 billion when accounting for inflation and secretly owned properties and Buckingham Global Witness gave evidence to a missing price data. Palace Road is also home to a large number, parliamentary committee on 18 March, as it states the press release. As of March considers proposals to introduce a register “It’s increasingly clear that UK property is 2019, the areas with the highest number of of the real owners of UK properties and one of the favourite tools of the criminal anonymously owned properties, according to hears evidence on the impact of property and corrupt for stashing and laundering the Global Witness report, are: ownership by anonymous companies.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
UK’s FCA fines UK’s SFO opens investigation into UBS AG for London Capital & Finance Plc failings relating The UK’s Serious Fraud Office The SFO encourages members of announced on 18 March that, the public who have invested in this to transaction working in conjunction with the scheme over the period 2016 to 2018 Financial Conduct Authority (FCA), to contact the SFO through the secure reports it has opened an investigation into reporting form. individuals associated with London The company went into administration The UK’s Financial Conduct Capital & Finance Plc, which at the end of January, after the FCA Authority (FCA) announced on collapsed with GBP 236 million of raised concerns over the company’s 19 March that it has fined UBS investors’ money, after it emerged marketing and ordered it to stop AG GBP 27,599,400 for failings that its fixed-rate ISA was a high- promoting the product. relating to transaction reports risk mini-bond scheme. between 2007 and 2017. The SFO’s press release states that on Meanwhile, the chair of the Treasury Select Committee, Nicky Morgan, According to the FCA, UBS failed 4 March, four individuals were arrested has written to both the Treasury and to ensure it provided complete and and have been released pending the FCA requesting that a statutory accurate information in relation to further investigation. The operation investigation be carried out into approximately 86.67 million reportable was coordinated with the assistance the regulatory failure, which would transactions and erroneously reported of the National Crime Agency, City of examine any missteps by the FCA and 49.1 million transactions to the FCA. London Police, Kent Police, Sussex whether the rules around the products Altogether, over a period of nine and Police and the South East Regional concerned are clear enough. a half years, UBS made 135.8 million Organised Crime Unit (SEROCU). errors in its transaction reporting, breaching FCA rules.
The FCA also found that UBS failed Italy tells ING Bank to stop serving to take reasonable care to organise and control its affairs responsibly and new customers due to AML failings effectively with respect to transaction reporting. These failings related to aspects of UBS’s change management Italy’s central bank announced and 18 January 2019, which revealed processes, its maintenance of the on 16 March that it has issued a shortcomings in compliance with the reference data used in its reporting measure requesting the Italian AML legislation. and how it tested whether all the branch of ING Bank to refrain from According to a press release from the transactions it reported to the FCA were engaging in transactions with new Bank of Italy, ING Bank has said that it accurate and complete. customers, due to shortcomings in its compliance with anti-money is already fully engaged in enhancing The FCA’s market oversight relies on laundering (AML) legislation. its overall AML control environment. the timely reporting of transactions and, The commitment to rapidly enforce in particular, transaction reports help The Bank of Italy has adopted the a remediation plan to address the the FCA identify potential instances of measure, pursuant to Article 7(2) of shortcomings will allow the Bank of Italy market abuse and help combat financial Legislative Decree 231/07 and Article to verify that the AML problems have crime. UBS agreed to resolve the 79(4) of the Consolidated Law on been solved in order to lift the ban. case and so qualified for a 30 percent Banking, following an on-site inspection Existing customers are not affected. discount in the penalty. conducted between 1 October 2018
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
UK authorities target bank accounts of Chinese students suspected of being used for money laundering
The UK’s National Crime Agency (NCA) The methodologies associated with money • The funds sent to the accounts, were used announced on 28 February that a day of laundering identified across the frozen to buy goods which were exported to China action coordinated by the newly formed accounts, where funds were received other without any connection between the party National Economic Crime Centre than from recognised sources, include: ordering the goods and the source of the (NECC) would seek to freeze 95 bank funds into the account. accounts containing an estimated GBP • Cash payments directly into accounts from 3.6 million, suspected to be either the Automated Service Devices (ASD); The authorities obtained account freezing proceeds of crime or intended to be orders using powers under the Criminal used for criminal purposes. • Cash payments directly into the account, Finances Act 2017. The orders were granted either by ASD or otherwise, which show by courts across England and Wales, According to the NCA’s press release, the a pattern of characteristics known to including the City of London magistrates’ accounts are held mainly by overseas be associated with money laundering court and courts in Birmingham, Cardiff, students studying in the UK who may be techniques. For example, small and frequent Crawley, Kent, Leeds, Lincoln, Mansfield, unaware that operating a bank account in cash deposits to avoid scrutiny by the North Somerset and Teesside. If such a manner is potentially illegal. The bank and law enforcement which would investigations can prove that the funds are accounts were identified by a bank as part of otherwise be described as “smurfing”; the proceeds of crime or were intended to their anti-money laundering processes and be used in unlawful conduct, they will be officers from the NECC have assessed that • In this operation, international transfers from forfeited. The NCA states that in many cases the students are likely to have been targeted China were declared as financial support the students involved “may not have full by organised crime groups, specifically to to an overseas student but then used by knowledge of the scale and seriousness” of launder the proceeds of crime. criminals for other activities; and the alleged criminal activity.
NCA make arrest over suspect UK passport applications
The UK’s National Crime Agency (NCA) people smuggling, human trafficking, child announced on 19 March that a woman abuse, kidnapping and serious violence. Officers believe the believed to have helped Albanian The woman, who is alleged to have network provided organised crime groups obtain 500 built a business on a false identity and services to criminals UK passports has been arrested. countersigned hundreds of UK passport The Albanian woman from Ilford was applications, has since been released under apprehended during a multi-agency investigation. day of action, targeting a criminal network suspected of facilitating The operation against the wider criminal London and the South of England, including British citizenship and passports, false network included the execution of warrants restaurants, bars and car washes, believed to accounting and money laundering. involving Her Majesty’s Passport Office be associated with the criminal network. Nine (HMPO), Border Force, and Immigration individuals were arrested and detained for Officers believe the network provided services Compliance and Enforcement (ICE). ICE immigration offences, while six businesses to criminals involved in drug trafficking, officials also visited ten businesses across were issued with a civil penalty referral notice.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
OECD tax First criminal investigations into the transparency “failure to prevent” tax evasion compliance The UK’s HM Revenue and Customs prevent the facilitation of tax evasion. (HMRC) has launched its first criminal However, companies have a defence if, ratings investigations under the corporate when the tax evasion facilitation offence criminal offence of failure to prevent was committed: the company had in for seven the facilitation of UK tax evasion, place such prevention procedures as introduced by the Criminal Finances it was reasonable to expect; or it was jurisdictions Act 2017 (CFA), following a freedom not reasonable in all the circumstances of information request (FOI) made to expect the company to have any The Organisation for Economic public on 10 March by City A.M. prevention procedures in place. Co-operation and Development’s (OECD), Global Forum on The response to the FOI request by law “We know HMRC are keen on pursuing Transparency and Exchange of firm Greenberg Traurig said: “HMRC an increasing number of criminal Information for Tax Purposes, currently has less than five criminal investigations, as stated in their 2018 published on 18 March seven investigations into behaviours occurring business plan. The plan included a target peer review reports assessing since 30 September 2017 for an offence of 100 investigations a year by the end of compliance with the international under Article 45. These investigations parliament,” said Barry Vitou, a partner at standard on transparency and have been commenced since November Greenberg Traurig, who is quoted in the exchange of information on 2018 and are the first in a pipeline of media report. HMRC has been criticised request (EOIR). cases HMRC has under development that for being slow to use its new powers. may have Article 45 implications.” The reports are part of the second A separate FOI made by Eversheds round of reviews which assess The CFA introduced a corporate Sutherland saw the Home Office jurisdictions against the updated criminal offence of failing to prevent disclose this month that there have been standard which incorporates beneficial the facilitation of UK tax evasion. The no prosecutions under the UK’s Money ownership information of all relevant new offence places an obligation on Laundering Regulations over a year since legal entities and arrangements, in line companies to implement procedures to its transposition into UK law. with the definition used by the Financial Action Task Force.
The seven jurisdictions reviewed – Hong Kong, Liechtenstein, Luxembourg, the UK Finance finds businesses lost Netherlands, North Macedonia, Spain and the Turks and Caicos Islands – GBP 93 million to invoice fraud were rated “Largely Compliant.” These jurisdictions have demonstrated UK Finance published new figures over four in ten (43 percent) businesses progress on deficiencies identified in on invoice scams on 25 March, were unaware of the existence of invoice the first reviews, including improving which has found that over four in ten fraud. The survey of 1,500 firms across access to information, developing businesses in the UK are unaware the UK found amongst other things broader EOI agreement networks, and of the risks posed by invoice fraud, that only one in seven (14 percent) sole monitoring the handling of increasing despite these scams costing firms traders have taken steps to protect EOI requests. The reports also provide almost GBP 93 million in 2018. themselves from these kinds of scams, recommendations, in particular on compared to around half (47 percent) improving measures related to the Separate research from UK Finance’s of small businesses and two thirds (63 availability of beneficial ownership of all Business Payments Survey has found that percent) of large companies. relevant entities and arrangements.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Troika Laundromat revelations: EU banks, a charity and elite UK schools implicated
The Troika Laundromat revelations is alleged to have handled EUR 700 million The Guardian published a further report on published on 4 March by the Organized in suspicious transactions between 2005 5 March in which it named boarding school Crime and Corruption Reporting Project and 2017. The report, which cited the leaked Charterhouse as one of 50 British education (OCCRP) and various media outlets, documents, said the money originated from providers to have received fees via tax citing leaked banking documents shell companies registered in the British haven companies. British schools, colleges relating to 1.5 million transactions, Virgin Islands, Panama or Belize. The leaked and education consultants received more have made wide-ranging allegations documents focus on transfers from defunct than GBP 3 million from account holders about the involvement of banks in Lithuanian banks ŪKIO and Snoras. featured in the leak, according to analysis by the Nordics and Baltics in handling Transparency International UK. suspicious transactions relating to funds originating from shell companies Among the implicated EU The Globe and Mail reported on 7 March that registered in tax havens. The reports banks are Danske Bank, the leaked documents show that Bombardier from the OCCRP in cooperation with 22 Swedbank AB, Nordea Inc was paid tens of millions of dollars partner organisations and Lithuanian by a shell company linked to the Troika website 15min.lt have also revealed Bank Abp, ING Groep Laundromat. According to the report, the Troika Laundromat links to the British NV, Credit Agricole SA, records from ŪKIO reveal that Bombardier was paid USD 42.5 million by Flashback Royal Family, illegal arms dealers, and Deutsche Bank AG, KBC the use of migrant Armenian workers Services Ltd, a BVI registered company. as proxies. Among the implicated EU Group NV, Raiffeisen banks are Danske Bank, Swedbank AB, Bank International AG, Prosecutors in the Netherlands said on 6 Nordea Bank Abp, ING Groep NV, Credit March that they are evaluating possible Agricole SA, Deutsche Bank AG, KBC ABN Amro Group NV, Dutch involvement in the money laundering Group NV, Raiffeisen Bank International Cooperatieve Rabobank scandal after Dutch magazine de Groene Amsterdammer, part of the OCCRP group, AG, ABN Amro Group NV, Cooperatieve UA and a unit of Turkiye Rabobank UA and the Dutch unit of alleged that ING, ABN Amro and Rabobank Turkiye Garanti Bankasi AS. Garanti Bankasi AS handled hundreds of millions of euros in improper payments. Spain’s anti-corruption The Troika Laundromat scandal revolves body is also said to be investigating the around the Russian investment bank, purchase of Costa Brava properties by close Troika Dialog, which orchestrated a The Guardian reported on 4 March that allies of Russian president Vladimir Putin, scheme between 2006 and 2012, using a charity of which Prince Charles is a who are believed to have laundered money three companies registered in the British patron allegedly received donations from through the Troika Laundromat. Virgin Islands to set up 70 offshore shell an offshore company implicated in the The Danish Financial Supervisory Authority companies which held accounts at the now scandal. Money flowing through the network (DFSA) published a statement on 6 March defunct Lithuanian bank ŪKIO bankas. USD included funds linked to three major in reaction to the allegations of money 4.6 billion is believed to have been laundered frauds committed during Vladimir Putin’s laundering at Nordea Bank’s Vesterport through the EU and US via the Troika presidency. According to the report, there branch, in which it stressed that the DFSA Laundromat. The scheme is connected was no suggestion that end recipients of the reported Nordea Bank to the police in June to companies involved in the Magnitsky funds were aware of the original source of 2016, for a lack of sufficient procedures for Affair, the Russian Laundromat and the the money. However, the documents indicate assessing money laundering and terrorist Sheremetyevo fuel fraud. that criminal and legitimate money may have been mixed together, making it impossible financing risk. Denmark’s State Prosecutor According to a report from Finnish to trace the source, before passing through for Serious Economic and International broadcaster Yle on 4 March, Nordea Bank screen companies into the banking system. Crime is still investigating the case.
28 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Swedbank publishes initial report Sweden leads on money laundering allegations Nordic and
Swedbank published on 22 March the Swedbank announced alongside Baltics to better preliminary report by Forensic Risk publication of the preliminary report, that Alliance (FRA) on its investigation a specialised Financial Crime Intelligence combat money into the allegations that Swedbank Unit will be established to focus on processed over USD 10 billion in criminal behaviour. laundering suspicious transactions linked to a purported Russian money laundering Sweden’s financial supervisory authority, Sweden’s Financial Supervisory network reported by Swedish state Finansinspektionen, confirmed on Authority (FSA) issued a broadcaster SVT. Swedbank confirmed 22 March that it has received a copy statement on 6 March that it is that the FRA, which was commissioned of Swedbank’s external report and strengthening its international to investigate the allegations, has now that the report will be included in the supervisory collaboration to delivered its preliminary report to CEO, investigation being carried out by combat money laundering, Birgitte Bonnesen, and the bank’s Board. supervisory authorities in Sweden, in agreement with the other Estonia, Latvia and Lithuania. supervisory authorities in the The preliminary report into the alleged money Nordic and Baltic countries. The In a statement on 15 March, Swedbank flows is heavily redacted, making it difficult news follows questions about said that following the allegations to understand how extensive the alleged the FSA’s work to prevent money concerning Danske Bank in 2018, money laundering at Swedbank was. The laundering after media reports Swedbank conducted analysis of analysis by FRA focused on 50 entities named accused Swedish banks’ Baltic payments between customers in Danske by SVT. The preliminary report also states subsidiaries of involvement in Bank and Swedbank made during that the FRA had no access to prior internal suspicious transactions. investigations by the bank. 2007-2015. Swedbank then proceeded with indepth analysis of approximately The FSA has committed to: Swedbank chair, Lars Idermark, stated in 2,000 customers throughout the Baltic the press release, “After reviewing the FRA countries, out of the 3.3 million private • Initiate an investigation together [preliminary report], the Board confirms and 300,000 corporate customers with the authorities in Estonia, Latvia its continued confidence in the CEO and Swedbank has in the Baltics. “In many and Lithuania into Swedish banks’ her ability to lead and manage the Bank’s cases, there was no need to act further, handling of money laundering, which work in the fight against money laundering. but in some cases we proceeded with, includes determining the firms that Swedbank takes its anti-money laundering among other things, reports to the will be investigated; responsibilities very seriously, and focuses on finance police,” reads the statement. the continuous improvements of its ability to • Arrange a meeting with its fight financial crime. [...] Therefore, the Board The publication of the report follows counterparts in the Nordic and Baltic has decided to conduct a deeper review in revised allegations that the suspicious countries to create closer strategic cooperation with the relevant authorities.” flows that Swedbank handled, amounted and operational collaboration on how to USD 10.2 billion, rather than the USD they can enhance AML efforts within On 28 March however, following media 5.8 billion initially reported. Among those the financial sector through more reports that US regulators have now tied to the alleged money laundering coordinated supervision; and launched inquiries into the money laundering at Swedbank are Viktor Yanukovych, allegations, it was announced by Swedbank’s Ukraine’s disgraced former president • Redistribute its own resources to Board that it has dismissed Bonnesen and and Russian businessman Iskander immediately strengthen its money appointed CFO Anders Karlsson as acting Makhmudov. According to SVT, USD 26 laundering supervision. The FSA has president and CEO, due to developments million of the suspicious transactions also requested an additional SEK over the past few days that have created purportedly stemmed from the Russian 10 million per year to strengthen “enormous pressure for the bank.” tax fraud identified by Sergei Magnitsky. supervision from 2020.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
US Committee The Danish FSA publishes AML propose bills to inspection reports for three banks reform AML and The Danish Financial Supervisory Sjælland-Fyn A/S on 7 March, in which Authority (DFSA) published a number of areas relating to money CTF laws the results on 13 March of its laundering gave rise to supervisory inspection of the Danish branch directions. The DFSA found that the The US House Financial Services of SEB Kort Bank AB relating to bank’s risk assessment did not contain Committee published three anti-money laundering, which saw an adequately documented analysis proposed bills on 8 March that supervisory directions issued. of the bank’s risk factors and did not codify suggested reforms to the adequately address the risk of abuse Bank Secrecy Act (BSA) and anti- Based on the inspection carried out in for terrorism financing. The bank must money laundering and counter March 2018, a number of areas were revise its money laundering policy so terrorist financing laws. The bills subject to supervisory direction, including that it clearly identifies and delimits the are a discussion draft entitled the requirement that the branch obtains risks and must ensure that adequate “To make reforms to the Federal additional information about customers customer knowledge procedures are Bank Secrecy Act and anti- considered to be at high-risk of money implemented for all customers, including money laundering laws, and for laundering or terrorist financing. The obtaining information on beneficial other purposes,” the “Corporate branch has also been ordered to ensure owners for all corporate customers. The Transparency Act of 2019,” and that transaction monitoring is adapted to bank has also been instructed to ensure the “Kleptocracy Asset Recovery the knowledge of the customer, including that there is the necessary independence Awards Act.” the customer’s risk profile and expected between its compliance function and the volume of business. The branch has also money laundering officer. The discussion draft “To make reforms been ordered to ensure that controls are to the Federal Bank Secrecy Act and in place in its operating units concerning Separately, the DFSA published on 8 anti-money laundering laws, and for compliance with the requirements of the March the report on its inspection of other purposes,” seeks to reform the Money Laundering Act. Ria Financial Services, Denmark ApS BSA and AML laws by strengthening carried out in November 2018. The DFSA the Treasury, improving oversight and In addition to this, the DFSA published the did not find it necessary to provide any modernising the AML system. report on its inspection of Sparekassen directions relating to money laundering.
The “Corporate Transparency Act of 2019” intends to crack down on the illicit use of anonymous shell companies by requiring corporations and LLCs to disclose beneficial owners RUSI publishes report on money to FinCEN. The database would only be available to law enforcement agencies, laundering in capital markets and financial institutions, with customer consent, for the purposes of KYC. The Royal United Services Institute The commentary explains the reasons The “Kleptocracy Asset Recovery published commentary on 4 March, why money laundering in capital markets Rewards Act,” would establish a on “Securing Securities: Money is a difficult problem to tackle and looks rewards programme to incentivise Laundering in Capital Markets,” forward to the FCA’s report on the outcome individuals to notify the government which discusses the difficulties of its diagnostic investigations into money of assets in US financial institutions facing the FCA in addressing capital laundering in capital markets that is expected that are linked to foreign corruption, markets’ vulnerability to high-end to be published in June 2019. allowing authorities to recover assets. money laundering.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Billions of unknown funds found to UK companies flow through Toronto real estate allegedly
Transparency International Canada, involved in Canadians for Tax Fairness, and Publish What You Pay Canada published a fraudulent art report on 21 March on how billions in unknown funds flow through Toronto investment real estate, entitled “Opacity – Why Criminals Love Canadian Real Estate scheme closed (And How to Fix It),” which has found that secret companies are being used to The UK government’s Insolvency launder money into the economy. Service announced on 13 March that two companies – Halifax The report explains how the real estate purchases accounting for less than 4 Mannin Ltd and Hey Design industry is vulnerable to money laundering by percent of total transactions. Services Ltd – allegedly involved in analysing more than 1.4 million residential a fraudulent art investment scheme property transactions in the Greater Toronto The recommended reforms include: have been shut down after abusing Area (GTA) dating back to 2008. The report USD 1.4 million of investors’ money. states that in Canada, individuals can • Require beneficial owners of real estate to identify themselves to land title own a property and hide the fact from law The companies came to the attention of authorities, and require that disclosure enforcement, tax authorities, and private the Insolvency Service after complaints of beneficial ownership should be a sector entities with AML obligations. Canada’s were received but following confidential prerequisite for any property transfer; property registers allow beneficial owners enquiries, investigators were unable to use companies, trusts, or nominees to to determine the exact nature of the • Require all companies and trusts hold title to property and remain anonymous, trading activities of both Halifax Mannin registered or transacting in Canada to which facilitates money laundering, or as it is and Hey Design Services or where identify their beneficial owners, and known in Canada, “snow-washing.” their business activities were being publish that information in a central conducted from. The report’s key findings include: publicly available registry; Investigators were able to establish • Corporate entities have acquired CAD • Amend the Proceeds of Crime (Money that the art investment scheme that the 28.4 billion in GTA housing since 2008. Laundering) and Terrorist Financing companies were involved with appears The vast majority of those companies are Act to include other real estate related to have been operated by a separate privately owned, with no information on their businesses such as unregulated business in Spain, Asset Consulting beneficial owners; mortgage lenders, mortgage brokers, Services, which had been subject to land registries, title and mortgage a previous public warning from the • CAD 9.8 billion in GTA housing was acquired insurers, promoters and redevelopers; Financial Conduct Authority. by companies through cash purchases, much of it bypassing AML checks on source • Require all designated non-financial The courts wound-up the two of funds and beneficial owners; and businesses and professions to verify companies on the grounds they traded beneficial owners, and conduct due with a lack of commercial probity, • More than CAD 25.4 billion in residential diligence on PEPs and heads of having been incorporated or used mortgages in the GTA were provided by international organisations; and as vehicles for fraud, with their sole unregulated lenders with no AML reporting purpose being to receive monies from obligations. Nearly 50 percent of those • Develop Canadian versions of investors who were misled or bullied unregulated mortgages were issued Geographic Targeting Orders and into making an investment. to corporate buyers, despite corporate Unexplained Wealth Orders.
31 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
US coordinates Mizrahi-Tefahot Bank fined USD elder fraud 195 million for aiding tax evasion sweep and The US Department of Justice (DOJ) Mizrahi-Tefahot announced on 12 March that Mizrahi- releases report Tefahot Bank Ltd and its subsidiaries, admitted that the United Mizrahi Bank (Switzerland) actions of its bankers, The US Department of Justice Ltd (UMBS) and Mizrahi Tefahot relationship managers, (DOJ) announced on 7 March that Trust Company Ltd (Mizrahi Trust multiple law enforcement agencies Company), have entered into a deferred and other employees have coordinated the largest prosecution agreement (DPA) in which defrauded the US with sweep of elder fraud cases in US it has agreed to pay USD 195 million for history, involving more than 260 assisting tax evading Americans. respect to taxes defendants from around the globe who victimised more than two Mizrahi-Tefahot admitted that from 2002 million elderly Americans. until 2012 the actions of its bankers, statements and other account-related mail relationship managers, and other employees in their offices in Israel and Switzerland, The sweep included a novel approach defrauded the US with respect to taxes by and by doing so enabling documents in which the DOJ and its partners took conspiring with US taxpayer-customers and reflecting the existence of the offshore action against the money mule network others. According to the DPA, employees accounts to remain outside the US; and that facilitates foreign-based elder took steps to assist US customers in fraud. The FBI and the Postal Inspection concealing their ownership and control of • Until 2008, periodically sending “Roving Service targeted over 600 alleged assets and funds held at Mizrahi-Tefahot, Representatives,” to the US to solicit money mules nationwide by conducting Mizrahi Trust Company and UMBS, which new customers and meet with existing interviews, issuing warning letters, and enabled those customers to evade their US customers for the purposes of opening bringing civil and criminal cases. Secret tax obligations, including: accounts and surreptitiously reviewing and Service agents aided these efforts by managing customers’ offshore accounts. seizing and forfeiting proceeds in transit. • Assisting and referring US customers to professionals to open and maintain Mizrahi-Tefahot will ensure that all of its The US Consumer Financial Protection accounts at Mizrahi-Tefahot and UMBS in overseas branches and other companies Bureau (CFPB) released a report on the names of pseudonyms, code names, under its control that provide financial 27 February identifying trends in elder Mizrahi Trust, and foreign nominee entities services to customers covered by the financial exploitation and abuse, based in offshore locations, such as St Kitts and Foreign Account Tax Compliance Act on analysis of 180,000 Suspicious Nevis, Liberia, Turks & Caicos, and the (FATCA) will continue to implement and Activity Reports (SARs) filed with FinCEN British Virgin Islands, and thereby enabling maintain an effective programme of internal by banks, credit unions, and other those US taxpayers to conceal their controls with respect to compliance with financial services providers between beneficial ownership in the accounts and FATCA in their affiliates and subsidiaries. 2013 and 2017. maintain undeclared accounts; Prosecution will be deferred for two years to allow compliance with the terms. Some of the key findings in the report • Opening customer accounts at Mizrahi- include: SAR filings on elder financial Tefahot and UMBS for known US The USD 195 million payment consists of exploitation have quadrupled from 2013 customers using non-US forms of restitution of USD 53 million, representing to 2017; financial institutions reported identification, and failing to maintain copies the approximate unpaid pecuniary loss to the a total of USD 1.7 billion in suspicious of the required documents; US as a result of the conduct; disgorgement activities in 2017; and nearly 80 percent of USD 24 million, representing the gross of elder financial exploitation SARs • Entering into “hold mail” agreements fees paid to the bank by US taxpayers with involved a monetary loss and/or the with US customers whereby Mizrahi- undeclared accounts at the bank from 2002 financial institutions filing the SARs. Tefahot and UMBS employees held bank through 2012; and a fine of USD 118 million.
32 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Volkswagen and ex-CEO charged Pakistan by SEC with defrauding investors brings in new requirement to The US Securities and Exchange Commission charged Volkswagen AG, two of its subsidiaries, and its vet remittances former CEO, Martin Winterkorn, on 14 March, for defrauding US with links to investors, and raising billions of dollars through the corporate bond militant groups and fixed income markets while states that by concealing the emissions making a series of deceptive claims scheme, Volkswagen reaped hundreds The Financial Times reported on about the environmental impact of the of millions of dollars in benefits by 6 March that Pakistan’s banks company’s “clean diesel” fleet. issuing the securities at more attractive have been ordered to restrict rates for the company. international remittances to According to the SEC’s complaint, from relatives of suspected militants as April 2014 to May 2015, Volkswagen issued The SEC’s complaint, filed in the US Islamabad launched a crackdown more than USD 13 billion in bonds and District Court for the Northern District following a terrorist attack in India. asset-backed securities in the US markets of California, charges Volkswagen According to the report, a new at a time when senior executives knew AG, its subsidiaries Volkswagen requirement has been brought in that more than 500,000 vehicles grossly Group of America Finance LLC and for banks to vet remittances of less exceeded legal vehicle emissions limits, VW Credit Inc, and Mr Winterkorn than USD 10,000 to beneficiaries exposing the company to massive financial with violating the antifraud provisions related to militant groups. and reputational harm. The complaint of federal securities laws. The SEC alleges that Volkswagen made false complaint seeks permanent injunctions, The government and misleading statements to investors disgorgement of ill-gotten gains with and underwriters about vehicle quality, prejudgment interest, and civil penalties. has also banned environmental compliance, and VW’s The complaint also seeks an officer and two Islamic charities financial standing. The SEC’s press release director bar against Winterkorn. linked to founder of Lashkar-e-Taiba Suleiman Kerimov placed under Pakistan security forces are said to have investigation for tax fraud in France detained at least 60 members of militant groups, following international calls for Islamabad to disband radical Islamist A French judge has placed Russian Polyus, deceived the tax authorities groups. Among those arrested were businessman and senator Suleiman over the price of villas purchased on the close relatives of Masood Azhar, founder Kerimov under formal investigation on Riviera to avoid paying taxes in France. of the Jaish-e-Mohammad (Army of suspicion of complicity in aggravated Kerimov denies the allegations and has Mohammad), which was blamed for the tax fraud, a prosecutor in the southern paid bail of EUR 20 million. attack that killed 40 Indian paramilitary city of Nice, Jean-Michel Prêtre, personnel in February. The government announced on 20 March. A French appeals court dropped all has also banned two Islamic charities charges against Kerimov in June 2018 linked to Hafiz Saeed, founder of Lashkar- It is alleged that Mr Kerimov, whose family relating to money laundering and tax e-Taiba, which was responsible for terror controls Russia’s largest gold producer evasion allegations. outrages in Mumbai in 2008.
33 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Lumber Liquidators enters DPA to Modi arrested resolve securities fraud charges in London The US Department of Justice (DOJ) the company will be deferred for three over fraud announced on 12 March that Lumber years to allow Lumber Liquidators to Liquidators Holdings Inc has agreed to demonstrate good conduct. pay a total penalty of USD 33 million for allegations filing a materially false and misleading The SEC announced a separate statement to investors regarding settlement with Lumber Liquidators in The Metropolitan Police confirmed the sale of its laminate flooring from connection with related proceedings. in a statement that Nirav Modi was China to its customers in the US. Under the terms of its resolution, arrested in London on behalf of Lumber Liquidators has entered into a Lumber Liquidators agreed to a total the Indian authorities on 19 March, deferred prosecution agreement (DPA) of USD 6,097,298.42. The DOJ agreed over accusations that the jeweller in connection with charges that the to credit the amount paid to the SEC in was a beneficiary of a USD 2 company committed securities fraud. disgorgement as part of its agreement. billion fraud at state-owned Punjab National Bank (PNB). Pursuant to its DPA, Lumber Liquidators Among other remedial efforts, Lumber agreed to pay a total penalty of USD 33 Liquidators suspended the sale of all Companies associated with Mr Modi million, including a criminal fine of USD 19 laminate flooring from China in May are alleged to have improperly received million, and USD 14 million in forfeiture. 2015 and implemented new policies nearly USD 2 billion worth of cash This amount represents the company’s net and procedures regarding compliance advances from other Indian banks’ profits from the sale of its Chinese laminate with CARB emission standards, financial overseas branches, acting on requests from January through to May 2015. Lumber reporting and internal controls. The from PNB’s Brady House branch. New Liquidators also agreed to implement employees involved in wrongdoing Delhi seeks Mr Modi’s extradition. The internal controls and cooperate fully with either were terminated or resigned, and judge at Westminster Magistrates Court the ongoing investigation, including its the company replaced its executive refused to grant bail and remanded Modi investigation of individuals. Prosecution of management team. in custody until 29 March.
Lithuanian man pleads guilty to the theft of USD 100 million via business email compromise scheme
The United States Attorney’s Office the companies, including a multinational regularly conducted multimillion-dollar for the Southern District of New York technology company and a multinational transactions with Company-1, directing announced on 20 March that Evaldas online social media company, into wiring that money the victim companies owed Rimasauskas, a Lithuanian citizen, has funds to bank accounts controlled by Company-1 for legitimate goods and pleaded guilty to wire fraud arising out him. Specifically, Rimasauskas registered services be sent to Company-2’s bank of his orchestration of a fraudulent and incorporated a company in Latvia accounts in Latvia and Cyprus, controlled business email compromise scheme (Company-2) that bore the same name by Rimasauskas. These emails purported that induced two US-based internet as an Asian-based computer hardware to be from employees and agents of companies to wire over USD 100 million manufacturer (Company-1), and opened, Company-1 and were sent from email to bank accounts he controlled. maintained, and controlled various accounts accounts that were designed to create the at banks located in Latvia and Cyprus in the false appearance that they were sent by According to the indictment, from 2013 name of Company-2. Thereafter, fraudulent employees and agents of Company-1. through 2015, Rimasauskas orchestrated phishing emails were sent to employees a fraudulent scheme designed to deceive and agents of the victim companies, which Rimasauskas is to be sentenced on 24 July.
34 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
UK’s annual Hong Kong’s SFC fines several report on global banks over China IPOs modern slavery The Hong Kong Securities and Futures Commission (SFC) and human announced on 14 March that it has fined UBS AG and UBS Securities trafficking Hong Kong Limited, Morgan Stanley Asia Limited, Merrill Lynch Far East Limited and Standard Chartered The UK’s National Crime Agency Securities (Hong Kong) Limited a (NCA) announced on 19 March that total of HKD 786.7 million for failing the number of potential victims to discharge their due diligence of trafficking and modern slavery obligations as sponsors for Chinese reported to the authorities has risen initial public offerings (IPO). by more than 80 percent in two years, according to new figures. The SFC’s enforcement action states that UBS Securities has also seen the the banks did not carry out adequate due suspension for one year of its Hong The National Referral Mechanism end diligence on Tianhe Chemicals Group Kong licence to advise on corporate of year summary published by the NCA Ltd relating to its IPO in 2014, which finance. The SFC’s fine against UBS shows that in 2018 6,993 potential was delisted for fraudulent accounting relates to three listing applications, victims were referred into the system, up activities. UBS was fined HKD 375 million, China Forestry Holdings Company from 5,142 in 2017, and 3,804 in 2016. Standard Chartered HKD 59.7 million, Limited, Tianhe Chemicals Group Potential victims from 130 different Morgan Stanley HKD 224 million and Limited, and another unnamed listing countries were identified, and for the Merrill Lynch HKD 128 million. application. second consecutive year British citizens made up the largest nationality (1,625), with Albanians (947) and Vietnamese (702) second and third. INTERPOL Trigger V operation in The number of British citizens reported was almost double the number from the Americas leads to 560 arrests 2017, while the numbers of minors referred increased by 48 percent. Both INTERPOL announced on 11 March for numerous firearms and drugs offences; increases were driven by the numbers that a coordinated operation, 47 individuals in El Salvador, 18 of whom referred for labour exploitation, which codenamed Trigger V, targeting were linked to organised crime gangs such includes those exploited for criminal illegal firearms has led to 560 arrests as the Barrio18 and MS13; and suspected purposes by ‘County Lines’ gangs. across Latin America, including the members of Colombian organised crime target of an INTERPOL Blue Notice groups including Galeria and Los Shibly. The National Referral Mechanism is known as “Zeus o Mono” suspected a framework for identifying victims of of heading a transnational arms The week-long operation was undertaken modern slavery or human trafficking and trafficking ring responsible for in eight countries and involved officers ensuring they receive the appropriate supplying weapons to the National from the police, customs, immigration and support. It is also the mechanism Liberation Army (ELN) in Colombia. military, as well as ballistics laboratories. through which data is collected about The participating countries were Belize, victims, helping to build a clearer picture Other notable arrests include a Honduran Colombia, Costa Rica, El Salvador, about the scope of the threat. citizen subject to an INTERPOL Red Notice Guatemala, Honduras, Mexico and Panama.
35 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Europol estimates cyber-telecom Purple Notice fraud at EUR 29 billion per year issued after
Europol’s European Cybercrime Centre • One (ring) and cut or Wangiri - Israeli police and Trend Micro published the joint Japanese for “one ring and drop the Cyber-Telecom Crime Report 2019 call”: A scam where criminals trick operation on 21 March, which provides an victims into calling premium rate overview of how telecom fraud works numbers. Users often get a missed and serves as a technical guide for call and call the premium rate number stakeholders in the telecoms industry. back; and
The report highlights that telecom fraud is • International Revenue Sharing Fraud, becoming a low-risk alternative to traditional which has been the most damaging financial crime and that the reduced cost to date: It involves transferring and increased availability of hacking monetary value from one carrier to equipment means it is on the rise. The cost another, based on the inter-carrier trust An INTERPOL Purple Notice has of telecommunications fraud is estimated to between telecom operators. been issued to all 194-member be EUR 29 billion per year. countries in connection with the The report is written to serve as a Telegrass online drugs network, The most common methods include: guide of sorts to help stakeholders outlining its modus operandi navigate the telecom threat landscape. and methods for detection. The • Vishing calls: A phone scam in which The report includes case studies publication of the Notice on 18 fraudsters trick victims into divulging their of noteworthy telecom frauds to March follows an international personal, financial or security information demonstrate how these attacks play out Israeli police operation, which or into transferring money to them; in real-world situations. has led to the arrest of 42 people suspected of running the drug distribution network. Proposal to expand FinCEN powers The arrests were made in Germany, Israel, the United States and Ukraine, including the alleged leader of the crime to help combat financial crime ring who was arrested in Ukraine. In addition to selling drugs, those arrested US Congressman Denver Riggleman FinCEN would be are suspected of running an international and Congresswoman Jennifer organised crime ring, also involving Wexton introduced the bipartisan allowed to target all money laundering and tax offences. FinCEN Improvement Act of 2019 forms of terrorism on 27 February, which would amend According to investigators, the Telegrass the duties of the Financial Crimes drugs ring is run like a business. Each Enforcement Network (FinCEN) to suspected drug dealer reportedly better execute its mission to safeguard of terrorism, and FinCEN’s authority chooses the pattern of the delivery and the US financial system from financial to combat money laundering and payments, with specific units handling crime abuses, particularly terrorist terrorist financing would be clarified to illicit activities and specific drugs, with financing and money laundering. include “matters involving emerging payments made in cash, bitcoin or with technologies or value that substitutes drugs, while disguising the source of the Under the proposed bill, the mission for currency, and similar efforts.” The money. Methods of delivery included statement of FinCEN would be amended bill would also put tribal territories under door-to-door delivery, with carriers to allow the bureau to target all forms FinCEN jurisdiction. sometimes disguised as Pizza couriers.
36 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
Manafort Bankrate’s successor agrees to sentenced in resolve fraud charges in the US two federal The US Department of Justice to boost earnings. In addition, Bankrate announced on 6 March that Baton admitted that former executives trials and faces Holdings LLC, as the successor misrepresented certain expenses as in interest to Bankrate Inc, has “deal costs” to artificially inflate publicly new fraud entered into a non-prosecution reported adjusted earnings metrics, and agreement and agreed to pay also made materially false statements charges USD 28 million to resolve the to Bankrate’s independent auditors to government’s investigation into a conceal improper accounting entries. complex accounting and securities fraud scheme carried out by former As a result of the scheme, Bankrate executives of Bankrate. admitted that the fraudulent conduct caused Bankrate’s shareholders to Bankrate admitted that former executives suffer at least USD 25 million in losses. engaged in a scheme to artificially Red Ventures Holdco LP, which acquired inflate Bankrate’s earnings through Bankrate in 2017 after the fraud took Photo: EPA so-called “cookie jar” or “cushion” place, also agreed to certain terms accounting, whereby millions of dollars and obligations under the agreement in unsupported expense accruals were despite having no involvement in the US president Donald Trump’s purposefully left on Bankrate’s books and criminal conduct. former campaign chief Paul then selectively reversed in later quarters Manafort was sentenced to 47 months in prison by a federal court judge on 7 March for evading taxes and committing bank fraud, in the first round of sentencing in two cases stemming from his lobbying UK Finance figures show fraud activities relating to Trump’s 2016 presidential election campaign. losses of GBP 1.2 billion in 2018
Following further sentencing on 13 Trade body UK Finance published March, which saw Paul Manafort There was an its Fraud the Facts 2019 report on sentenced to 43 additional months in 21 March, which has found that increase in traditional prison for two crimes related to his fraud against British households and unauthorised frauds political consulting work in Ukraine, US companies increased 16 percent last prosecutors announced new criminal and “authorised” scams year, as banks struggled to fight the charges against him. impact of data breaches. According The Manhattan district attorney’s to the figures fraudsters stole GBP office has accused Mr Manafort of 1.2 billion in 2018, up from GBP 967 There was however an increase in traditional committing mortgage fraud when he million in 2017. unauthorised frauds, where criminals applied to obtain millions of dollars The advanced security systems and access customer accounts or cards, and in loans. The indictment charges Mr innovations in which the finance “authorised” scams, where customers are Manafort with 16 counts, including industry invests to protect customers tricked into transferring money. Authorised residential mortgage fraud and stopped more than GBP 1.6 billion of push payment frauds have increased 50 falsifying business records. unauthorised fraud, states the report. percent year on year to GBP 354 million.
37 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
US files further charges against US gives Angola Mike Lynch as London trial begins USD 2 million
The US has lodged new criminal to fight money charges against Autonomy founder Mike Lynch, which includes new laundering counts of securities fraud, just as the USD 5 billion civil fraud suit brought by Hewlett-Packard was due to begin The US Government has pledged in the High Court in London on 25 to grant Angola approximately March. Hewlett-Packard claims it USD 2 million in assistance to was misled over its acquisition of Photo: Business Insider combat money laundering and Autonomy in 2011. terrorist financing. The pledge was announced on 18 March by The new US indictment, filed in federal US deputy secretary of state John court in San Francisco, includes a count of Sullivan during a press conference conspiracy to commit wire fraud, as well investigators, and using “hush money” with Angola’s minister of foreign as one count of securities fraud and one of and other benefits to silence potential affairs, Manuel Augusto. conspiracy to commit securities fraud. witnesses. According to the charges, Lynch and The US intends to send advisors from Stephen Chamberlain, Autonomy’s former In November, the US government the Treasury Department to assist vice president of finance, are alleged to filed criminal charges against Lynch, Angolan officials in combatting money have tried to cover up the crime, by stealing including 14 counts of conspiracy and laundering and terrorist financing. or destroying HP documents, misleading fraud, over the Autonomy sale. Additionally, other US government bodies such as the Federal Bureau of Investigation and the Justice Department will collaborate with Angolan authorities to assist in the Individuals named in alleged repatriation of public assets illegally Steinhoff International scandal transferred to private interests abroad. Sullivan said that he expects the US to meet with Angolan authorities to resume According to a report by Reuters outsiders, who reportedly worked correspondent banking between the on 19 March, an independent closely with Jooste and la Grange. two countries. This would be achieved report carried out by PwC into the through guarantees from Angola to Steinhoff International accounting Since August 2017, Steinhoff tackle money laundering and corruption. scandal has found that the company International has been at the centre No US banks currently operate in overstated profits over several years, of a scandal regarding allegations of Angola or have direct correspondent in a fraud that involved a group of accounting irregularities and fraud by relationships with banks in Angola. senior executives and outsiders. senior executives. Various criminal South African lawmakers instructed and regulatory probes are ongoing in Meanwhile, Bloomberg reported on 23 Steinhoff International’s current CEO, Germany and South Africa. In December March that Angola’s sovereign wealth Louis du Preez, to reveal the identity of 2017, Steinhoff International announced fund has recovered USD 3.35 billion of individuals involved, which reportedly it had commissioned PwC to conduct assets that were under the management includes former CEO Markus Jooste an independent investigation into of Quantum Global Investment and former CFO Ben la Grange, as well the allegations and that Jooste had Management AG, relating to an alleged as six other individuals, including four resigned with immediate effect. corruption scandal.
38 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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Kazakh bank files suit over alleged US university laundering of stolen funds agrees to
Kazakhstan’s BTA Bank JSC filed a The complaint also settle over lawsuit on 25 March in a Manhattan federal court, alleging that Kazakh alleges that some of fraudulent businessman Ilyas Khrapunov worked the funds were used with real estate developer and former by Khrapunov’s sister data scandal associate of US president Donald Trump, Felix Sater, to launder a portion to buy condominium The US Department of Justice of the USD 4 billion purportedly stolen units at the Trump (DOJ) announced on 25 March from the bank a decade ago by former SoHo tower in that Duke University has agreed chairman and Khrapunov’s father-in- to pay the government USD 112.5 law, Mukhtar Ablyazov. The filing of the Manhattan million to resolve allegations that complaint is the latest effort by BTA it violated the False Claims Act Bank to recover assets and bring its by submitting applications and in the complaint, though it does not former chairman to justice. progress reports that contained allege that he had any knowledge that falsified research on federal In its filings, BTA Bank alleges that beginning laundered funds were allegedly being grants to the National Institutes of in 2011 Sater helped Ablyazov and used to purchase units. Felix Sater was Health and to the Environmental Khrapunov launder USD 40 million through scheduled to testify before the US House Protection Agency. a number of US business transactions. The Judiciary Committee on 27 March. complaint also alleges that some of the The allegations were originally brought funds were used by Khrapunov’s sister to buy Read our article on president in a lawsuit filed by a former Duke condominium units at the Trump SoHo tower Nazarbayev’s resignation HERE. employee, under the whistleblower in Manhattan. Trump’s name also appears provisions of the False Claims Act.
US attorney Michael Avenatti charged with attempting to extort USD 20 million from Nike Inc
US attorney, Michael Avenatti, was The fraud charges relating to the case in arrested on 25 March and charged with California allege that Avenatti misused a attempting to extort more than USD 20 client’s money to pay his debts and those million from Nike Inc, as well as bank of his coffee business and law firm. Federal fraud in a separate case in California. prosecutors in California said he also Federal prosecutors in Manhattan have defrauded a Mississippi bank by using false charged Avenatti with extortion and tax returns to obtain loans. conspiracy, over allegations that he told lawyers for Nike that he and an Avenatti’s best-known client was Stormy unnamed co-conspirator would release Daniels, a central figure in the scandal that damaging information concerning resulted in president Donald Trump’s former Photo: Fox News misconduct if they did not pay them to attorney, Michael Cohen, being charged with conduct an internal investigation. campaign finance violations.
39 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
TECHNICAL UPDATES ECB to supervise PNB Banka directly due to corruption allegations filed against head of Latvian central bank
Latvian bank, PNB Banka, announced PNB Banka has Rimsevics, the Head of Latvia’s Central Bank on 12 March that the European Central who was arrested on corruption charges last Bank (ECB) has agreed to a request brought a request for year, must be excluded from any regulatory from Latvia’s Financial and Capital international arbitration decisions that involve PNB Banka.” Market Commission (FCMC) to assume direct supervision of PNB Banka in against Latvia, in which PNB Banka has brought a request for light of the case filed by PNB Banka Mr Rimsevics is accused international arbitration against Latvia, in against Latvia at the International of seeking bribes which Mr Rimsevics is accused of seeking Centre for Settlement of Investment bribes from the bank and of using the FCMC’s Disputes (ICSID), relating to allegations decisions as a means to extort money. Mr of corruption and improper coercion wishes to avoid any misunderstanding and Rimsevics was suspended from his position by senior persons within Latvia’s possible reproaches in regulation. This is in 2018 on allegations of corruption in a regulatory apparatus. The ECB will a key issue. Our fight in the courtrooms separate case. The EU Court of Justice ruled supervise three Latvian banks – has been about unfair, inequitable and illicit in February 2019 that Latvia broke EU law by Swedbank, SEB and PNB Banka – behaviour, and we hope this intervention barring Mr Rimsevics from office, saying there within the European Banking Union by the ECB helps to reduce such problems. was no evidence to prove the allegations, Single Supervisory Mechanism. We remain optimistic that PNB Banka will which has seen him reinstated to his post. not be penalised for the transgressions of Chairman of the Board of PNB Banka, Oliver Latvia’s officials in the past. We are seeking The ECB will assume its direct supervision of Bramwell, said “Latvia’s FCMC has said it assurances from the ECB that Ilmars PNB Banka on 4 April 2019.
50 arrests in US university admission bribery scheme
The US Department of Justice unrelated operation. Among the 32 parents announced on 12 March that dozens charged are Gordon Caplan, co-chairman of wealthy individuals – including of Willkie Farr & Gallagher; Douglas Hodge, prominent law and business figures former chief executive of Pimco; and actors and two actresses – have been arrested Felicity Huffman and Lori Loughlin. The and charged in a federal court in Boston authorities have also charged coaches at for their alleged involvement in a universities including Stanford, USC, UCLA, nationwide conspiracy that facilitated and Wake Forest university. cheating on college entrance exams and bribery to secure the admission of The mastermind behind the scheme, students to elite universities. William “Rick” Singer, has pleaded guilty to entrance tests to allow a child’s wrong racketeering charges. Prosecutors in the US answers to be corrected or for someone The allegations include cheating on entrance attorney’s office in Boston allege that his else to take the test. Singer also arranged for exams and bribing college officials to say company, Edge College & Career Network, parents to bribe university coaches to attest certain students were athletic candidates made USD 25 million since embarking on to a child being athletically gifted. Parents when those students were not athletes, the fraud in 2011, offering what he promised then made tax-deductible payments to a officials said. The scheme was discovered was a guarantee of admission. The scheme purported charity run by Singer, called Key accidentally by the FBI while working on an involved bribing the administrators of college Worldwide Foundation.
40 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
Former Ukrainian court strikes down the Hong Kong provisions on illicit enrichment official jailed The Constitutional Court of Ukraine officials for corruption and that it struck down Article 368-2 of the would be submitted to parliament as a in the US for Criminal Code, the provision on priority. Meanwhile, Mr Poroshenko’s illicit enrichment, on 26 February, opponent, Yulia Tymoshenko, has called bribing African raising concerns about a weakening for his impeachment following a media of the country’s fight against investigation into alleged embezzlement officials corruption. According to the National involving the military. Mr Poroshenko Anticorruption Bureau of Ukraine, the announced on 4 March the sacking of Oleg Hong Kong’s former home ruling means that all relevant criminal Gladkovsky, deputy head of the national secretary, Patrick Ho, was proceedings will have to be closed, security council, over allegations that he sentenced to three years in prison including those relating to illegal profited from the sale of smuggled Russian and ordered to pay a USD 400,000 enrichment investigations into judges military parts to state defence companies. fine on 25 March for bribing and public officials. Investigators also detained the head of a African officials on behalf of a state defence company on suspicion of Chinese energy company. The Constitutional Court decision found embezzlement concerning a contract with that the law was unconstitutional because the Indian defence ministry. According to the evidence presented it violated the presumption-of-innocence at trial, Ho orchestrated and executed principle by obliging suspected officials to The G7 nations and the World Bank issued two bribery schemes to pay top prove their assets were legitimate, rather a joint statement on 4 March denouncing officials of Chad and Uganda in than obliging prosecutors to show assets Ukraine’s annulment of the anti-graft law exchange for business advantages were obtained through corrupt practices. as “a serious setback” in the fight against for CEFC China, a Shanghai-based The striking down of the law, introduced corruption. Transparency International conglomerate that operates in 2015 to meet the demands of the published a statement on 1 March stating internationally in multiple sectors, International Monetary Fund, has raised that the decision undermines up to 65 open including oil, gas, and banking. questions about Ukraine’s ability to secure investigations and has a direct impact on During the course of the schemes, more aid from the IMF going forward. four cases against high-ranking officials Ho served as the secretary general that were already before the courts. of a non-governmental organisation Ukrainian president Petro Poroshenko based in Hong Kong and Virginia, and said he would instruct his government to Poroshenko and Tymoshenko are running registered as a charitable entity in the formulate a new draft law on punishing for office in the presidential election. US, the China Energy Fund Committee, which held “Special Consultative Status” with the United Nations Economic and Social Council. UK secures GBP 1.5 million forfeiture
Ho was convicted in December on seven counts -- one count of The UK’s Serious Fraud Office (SFO) The forfeited money came from the sale of conspiring to violate the Foreign announced on 15 March that it has two properties in Birmingham, which Afzal Corrupt Practices Act (FCPA), four secured the forfeiture of over GBP 1.5 originally bought with the funds from a counts of violating the FCPA, one million from convicted fraudster Nisar series of long firm frauds. count of conspiring to commit Afzal. The development is believed to international money laundering, and be one of the largest seizures in the Afzal, who fled Britain for Pakistan in the one count of committing international UK and is the SFO’s first use of this mid-2000s, was also implicated in a series money laundering. The jury acquitted enforcement tool, brought in under the of mortgage frauds, for which his brother, Ho on one money laundering count. Criminal Finances Act 2017. Saghir, was jailed for 13 years in 2011.
41 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
Former Mozambique officials and London-based investment bankers indicted in “tuna bonds” scandal
The US Department of Justice one count of conspiracy to commit companies controlled by the Mozambican announced on 7 March the unsealing of money laundering in connection with government: Proindicus S.A., Empresa a four-count indictment charging two his negotiation and receipt of bribe Moçambicana de Atum, S.A. (EMATUM) executives of a shipbuilding company, payments relating to the loans. and Mozambique Asset Management three former senior Mozambican (MAM). The money was purportedly to be government officials, and three former used to fund three maritime projects for London-based investment bankers for The government of which Privinvest would provide equipment their roles in a USD 2 billion fraud and Mozambique and services. Proindicus was to perform money laundering scheme. coastal surveillance, EMATUM was to filed a case on 27 engage in tuna fishing, and MAM was to Jean Boustani, who worked for the Privinvest February at the High build and maintain shipyards. Chang, as Group, is charged with conspiracy to Court in London against minister of finance, signed guarantees on commit one count of wire fraud, one count behalf of Mozambique for all three loans. of securities fraud, and one count of money Credit Suisse and Singh signed the agreements on behalf of laundering in connection with USD 200 million ten former employees the investment bank for the two loans on in bribe and kickback payments he helped which the bank acted as primary arranger. organise relating to three loans totalling more than USD 2 billion that were marketed and The co-conspirators allegedly facilitated sold to US investors. Alongside Boustani, Three investment bankers, Andrew Privinvest’s criminal diversion of more than Privinvest’s chief financial officer Najib Allam Pearse, Surjan Singh and Detelina USD 200 million in loan proceeds, including was charged with the same counts. Allam is Subeva, have also been charged with more than USD 150 million in bribe alleged to have worked with Boustani to make conspiracy to commit wire fraud, payments to Chang and other Mozambican the bribe and kickback payments. conspiracy to commit securities government officials that Privinvest paid fraud, and conspiracy to commit to ensure that Mozambique would enter Manuel Chang, the former Mozambican money laundering. In addition, each into the loan arrangements. The alleged minister of finance, is charged with the same banker is charged with conspiracy to fraud also included USD 50 million in counts as Boustani. Chang was arrested violate the anti-bribery and internal kickback payments to Pearse, Singh, and at the request of the US by South African controls provisions of the Foreign Subeva, who assisted the conspirators to authorities in December and the US is seeking Corrupt Practices Act in connection obtain financing for the loans through their Chang’s extradition. with their roles in facilitating bribe investment bank and a second foreign payments to government officials in investment bank. Pearse, Singh, and Antonio do Rosario, an official with Mozambique and for circumventing Subeva, along with the other members of Mozambique’s State Information and Security the internal accounting controls of a the conspiracy, subsequently sold the loans Service and a director and officer of each of foreign investment bank that arranged to investors worldwide. The participants in the three Mozambican entities that obtained two of the loans. At the time, Pearse the scheme allegedly conspired to defraud the maritime loans, is charged with one count and Singh were managing directors investors by misrepresenting how the loan of conspiracy to commit wire fraud, one count of Credit Suisse, and Subeva was a proceeds would be used, the amount and of conspiracy to commit securities fraud, and vice president. The US is seeking their maturity dates of other loans and debt one count of conspiracy to commit money extradition from the UK. Mozambique was obligated to pay, and the laundering in connection with his receipt of ability of Mozambique or its state-owned bribe payments relating to the loans. The indictment alleges that between entities to repay the loans. 2013 and 2016, the co-conspirators Teofilo Nhangumele, who acted on organised for more than USD 2 Separately, the government of Mozambique behalf of the office of the president of billion in three loans to be arranged filed a case on 27 February at the High Mozambique, is charged with one count by an investment bank and another Court in London against Credit Suisse and of conspiracy to commit wire fraud and foreign bank. The loans were made to ten former employees.
42 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
Israel AG confirms intention to indict Mueller delivers Netanyahu in three corruption cases report into
Israel’s attorney general, Avichai Trump’s alleged Mandelblit, announced on 28 February his intention to indict the country’s collusion with prime minister, Benjamin Netanyahu, in three corruption cases, in which he Russia has been accused of bribery, fraud and breach of trust. Robert Mueller, the US justice department special counsel, has Case 1,000 involves allegations of receiving Photo: Reuters concluded that Donald Trump and gifts from international billionaires in his presidential campaign did not exchange for favours. In Case 2,000, collude with Russia in an attempt Netanyahu is accused of colluding with Under Israeli law, Netanyahu can defend to influence the 2016 election newspaper — Yedioth Ahronoth — to damage himself in a pre-trial hearing before the result. In a letter to Congress dated its competition in exchange for favourable charges are formally filed in court. The 24 March US attorney general coverage. Case 4,000, involves allegations threatened indictments are likely to William Barr said Mr Mueller “did that Netanyahu offered incentives to Bezeq upend national elections on 9 April, with not find that the Trump campaign in exchange for positive stories via an online Israelis set to vote before Mr Mandelblit or anyone associated with it website it owns called Walla. makes a final decision. conspired or co-ordinated with Russia in its efforts to influence the 2016 US presidential election.” Criminal complaint filed against two William Barr’s summary of the report however is inconclusive as to whether MPs over Azerbaijani Laundromat president Trump obstructed justice. The outcome of the Mueller investigation — which involved 19 lawyers, 40 Transparency International Germany fund and money laundering scheme to, investigators and 2,800 subpoenas announced on 14 March that it has among other things, bribe politicians to — marks a victory for Trump, who has filed a criminal complaint against water down human rights resolutions castigated the 22-month investigation two politicians, Karin Strenz and and election observation reports. At as a“witch hunt” that he claimed was Eduard Lintner, in an alleged bribery the centre of the scheme was the orchestrated by Democrats. case orchestrated by the Azerbaijani Parliamentary Assembly of the Council of government. The watchdog has Europe (PACE), where Strenz and Lintner Mr Barr concluded his letter by asked Berlin’s Public Prosecutor’s were delegates. The investigation set up saying further extracts from the Office to determine whether they in the wake of the scandal determined report will be released but notes that violated the German Criminal Code that Lintner lobbied in favour of the some of the material is subject to relating to bribery and corruption of Azerbaijani government, while Strenz’s justice department restrictions. The elected officials. involvement in PACE’s work on Azerbaijan Democratic heads of six committees was tainted by a conflict of interest. in the House of Representatives have The complaint stems from the leaked They were both banned for life from the written to Barr demanding that a copy bank records from 2012 to 2014 that were Council of Europe and the premises of of the full Mueller report should be analysed by the Organized Crime and the Assembly. PACE had asked national provided by 2 April. They have also Corruption Reporting Project. Investigative authorities of all offending delegates to asked for the underlying documents journalists revealed that the Azerbaijani follow up on the allegations of corruption that were used to compile the report on ruling elite operated a USD 3 million slush and report back by the end of the 2018. the investigation.
43 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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GRECO makes first ever declaration Leissner and of non-compliance: against Belarus Ng banned
The Council of Europe’s Group of from banking States against Corruption (GRECO), in an unprecedented move, declared industry over Belarus non-compliant with its anti- corruption standards on 19 March. 1MDB scandal
Continuous non-compliance with the The US Federal Reserve Board rules casts a “dark shadow” over the announced on 12 March that it commitment of Belarusian authorities to is prohibiting two former senior preventing and combatting corruption. “It investment bankers employed has led to this first ever Declaration made by foreign subsidiaries of the by GRECO in respect of one of its members Goldman Sachs Group Inc, Tim Belarus and has warned member states about its non-compliance with the Council Leissner and Ng Chong Hwa, to take this situation into account in their of Europe’s standards,” said Marin Mrčela, also known as Roger Ng, from future contacts with Belarus. the president of GRECO. the banking industry for their participation in a scheme to Since 2012, 20 recommendations have According to GRECO, the large majority illegally divert billions of dollars remained outstanding; and GRECO has of the recommendations issued to from a Malaysian sovereign repeatedly concluded that the level of Belarus relate to fundamental anti- wealth fund. Leissner was also compliance with its recommendations corruption requirements, such as fined USD 1.42 million and is very low and “globally unsatisfactory.” strengthening the independence of the consented to the permanent ban. Belarus has never authorised publication of judiciary and of the prosecution office, any of its evaluation or compliance reports. as well as increasing the operational autonomy of law enforcement and The Federal GRECO expresses strong concern in respect limiting immunity protection of certain of the continuous non-compliance by categories of persons. Reserve explains that Leissner and Ng coordinated Democrats request investigations bond offerings arranged by into Li “Cindy” Yang ties to Trump Goldman for 1MDB
US lawmakers, Adam Schiff, Jerry The letter lists allegations that Ms Yang’s Nadler, Mark Warner, and Dianne massage parlours are suspected of Feinstein sent a letter on 15 March to involvement in prostitution and human The Federal Reserve’s press release the FBI, national intelligence agencies, trafficking. The authors of the letter explains that Leissner and Ng and Secret Service requesting requested that the FBI conduct criminal coordinated bond offerings arranged criminal and counterintelligence and counterintelligence investigations into by Goldman Sachs for 1Malaysia investigations into Li “Cindy” Yang, credible allegations of human trafficking Development Berhad (1MDB) in over allegations that Ms Yang’s and unlawful foreign lobbying, campaign 2012 and 2013. The funds diverted business GY US China may be selling finance violations and other activities, as from 1MDB were then used for the access to US president Donald Trump well as assessing any risks or concerns conspirators’ personal benefit and to and members of his family to clients associated with any interactions between bribe certain government officials in in China. president Trump and Ms Yang. Malaysia and Abu Dhabi.
44 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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Mobile TeleSystems PJSC to pay Hempel USD 850 million to resolve charges A/S fined and Gulnara Karimova indicted by Danish The US Department of Justice (DOJ) agreed to pay on behalf of Kolorit. MTS and German announced on 7 March that Mobile also agreed to the imposition of an TeleSystems PJSC (MTS), and its independent compliance monitor for a regulators for wholly owned Uzbek subsidiary, term of three years and to implement Kolorit Dizayn Ink LLC, have entered internal controls and cooperate fully with into resolutions with the DOJ and the ongoing investigation, including its systematic Securities and Exchange Commission investigation of individuals. (SEC) and agreed to pay a combined bribery In related proceedings, MTS reached a penalty of USD 850 million to resolve The Danish State Prosecutor settlement with the SEC, under which charges arising out of a scheme to for Serious Economic and it agreed to pay a USD 100 million civil pay bribes in Uzbekistan. Charges International Crime (SØIK) penalty. Consistent with Coordination were also unsealed against former announced on 4 March that of Corporate Resolution Penalties in Uzbek official Gulnara Karimova Hempel A/S has been fined DKK Parallel and/or Joint Investigations and who is the daughter of the former 197.5 million for systematic Proceedings Arising from the Same president of Uzbekistan and against bribery in the Group’s subsidiaries Misconduct (Justice Manual 1-12.100), Bekhzod Akhmedov, the former CEO and several countries primarily the DOJ agreed to credit the civil penalty of Uzdunrobita LLC, another MTS in Asia. Hempel A/S announced paid to the SEC as part of its agreement subsidiary, for their participation in a on the same day that Hempel with MTS. Thus, the combined total bribery and money laundering scheme A/S and Hempel (Germany) amount of penalties paid to US involving more than USD 865 million in GmbH have also been fined by authorities is USD 850 million. bribes from MTS, VimpelCom Limited the Prosecution Authority in Kiel, (now VEON) and Telia Company AB. According to the companies’ Germany, with the settlement to be paid to SØIK and the German According to the indictment, in or around admissions, MTS and Kolorit, through Prosecution Authority totalling the early 2000s, Karimova and Akhmedov managers and employees within MTS, DKK 220 million for the illegal agreed that Akhmedov would solicit and MTS’s Uzbek subsidiaries Uzdunrobita practices. facilitate corrupt bribe payments from LLC and Kolorit, and other affiliated entities, paid USD 420 million in bribes telecommunications companies seeking The biggest fine in SØIK’s history, to Karimova, who had influence over to enter the Uzbek market. In exchange, the amount reflects the gravity of the Uzbek governmental body that Karimova used her influence over Uzbek the crime, since the bribery was regulated the telecoms industry. The authorities to help the telcos obtain and systematic, intentional and carried companies admittedly structured and retain business opportunities. In total, out over a number of years, explains concealed the bribes through payments Akhmedov conspired with the telcos and SØIK’s press release. The bribes, to shell companies that members of others to pay Karimova more than USD among other things, saw customers MTS’s and Uzdunrobita’s management 865 million in bribes, and Akhmedov and systematically receiving gifts, money knew were owned by Karimova. MTS Karimova conspired with others to launder or other benefits to select Hempel’s and Uzdunrobita also acquired Kolorit, and conceal those funds. products and services. The bribes knowing that the price paid was inflated, totalled approximately DKK 95 million. Pursuant to the deferred prosecution to bribe Karimova in exchange for Uzdunrobita’s continuing to operate agreement, MTS agreed to pay a total In April 2017, Hempel self-reported in Uzbekistan. Uzdunrobita made criminal penalty of USD 850 million, illegal sales practices being carried payments to charities and sponsorship including a USD 500,000 criminal fine and out in Germany, other countries in to entities related to Karimova. USD 40 million in criminal forfeiture that it Europe and in Asia to SØIK.
45 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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TECHNICAL UPDATES US Judiciary Committee plan to investigate alleged corruption by president Trump and his associates
The US House Judiciary Committee chairman of the Committee Jerrold Nadler. proceedings, as well as the alleged cover-up announced on 4 March an investigation “Investigating these threats to the rule of of violations of the law; into the alleged obstruction of justice, law is an obligation of Congress and a core public corruption, and other abuses function of the House Judiciary Committee. • Public corruption, including potential of power by president Donald Trump, We have seen the damage done to our violations of the emoluments clauses of his associates, and members of his democratic institutions in the two years that the US Constitution, conspiracy to violate administration. The Committee has the Congress refused to conduct responsible federal campaign and financial reporting served document requests to 81 oversight. Congress must provide a check on laws, and other criminal misuses of official agencies, entities, and individuals abuses of power.” positions for personal gain; and believed to have information relevant to • Abuses of power, including attacks on the the investigation. The Committee’s investigation will cover: press, the judiciary, and law enforcement “Over the last several years, President • Obstruction of justice, including the agencies; misuse of the pardon power and Trump has evaded accountability for his possibility of interference by the other presidential authorities; and alleged near-daily attacks on our basic legal, ethical, president and others in a number of attempts to misuse the power of the Office and constitutional rules and norms,” said criminal investigations and other official of the Presidency.
Canadian ministers resign over SNC-Lavalin corruption scandal and OECD expresses concern
Jane Philpott, president of the treasury foreign officials. Mr Trudeau was part of the board in Canadian prime minister Justin “inappropriate” intervention, according to Trudeau’s government, resigned at Ms Wilson-Raybould, and asked her to “find the start of March, over allegations of a solution” that would avoid the company political interference in a corruption having to cut jobs or move from Montreal. case involving SNC-Lavalin. Ms Philpott
said she had “serious concerns” As a result of the resignations, Mr Trudeau Photo: Daily Express over allegations that Jody Wilson- has been forced to reshuffle his cabinet, Raybould, the former attorney general, only eight months before federal elections. had been pressured by politicians to Andrew Scheer, the Conservative leader, engineering and construction group is the settle corruption charges against the has called for Mr Trudeau’s resignation and subject of an ongoing prosecution into engineering company. asked the Royal Canadian Mounted Police to allegations of the bribery of Libyan officials. launch a criminal investigation into the affair. Ms Philpott is the second cabinet minister to The OECD’s press release states that as resign in recent weeks. Ms Wilson-Raybould The Organisation for Economic Co- a party to the Anti-Bribery Convention, stepped down in early February after being operation and Development (OECD) issued Canada is committed to prosecutorial demoted. Ms Wilson-Raybould told a House a statement on 11 March that the Working independence in foreign bribery cases. In of Commons committee that she had faced Group on Bribery is concerned by allegations addition, political factors such as a country’s “consistent and sustained” efforts by several of interference in the prosecution of SNC- national economic interest and the identity people in Mr Trudeau’s government to secure Lavalin that are subject to proceedings in the of the alleged perpetrators must not a deferred prosecution agreement with SNC- House of Commons Standing Committee influence foreign bribery investigations and Lavalin, over allegations its executives bribed on Justice and Human Rights. The Canadian prosecutions.
46 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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TECHNICAL UPDATES US obtains forfeited funds as part of effort to combat corruption in government contracting in Afghanistan
The US Department of Justice As part of the global settlement, several announced on 5 March that it has companies owned and controlled by reached a settlement of its civil Shadman, including HSLSC, entered into forfeiture case against assets owned a separate agreement to resolve False by Hikmatullah Shadman that he Claims Act allegations arising from wrongfully acquired as a government kickbacks paid from November 2010 contractor in Afghanistan. Under the to May 2012 to obtain subcontracts to terms of the settlement, USD 25 million transport military supplies needed by the will be forfeited to the US. The civil US military in Afghanistan. settlement is part of a global settlement involving the resolution of a criminal In addition to the civil forfeiture and case and False Claims Act allegations. False Claims Act resolutions, Shadman’s primary company, HSLSC, was criminally Hikmatullah Shadman, operated several delivering supplies to US service members. prosecuted for paying gratuities to two companies including Hikmat Shadman The civil forfeiture case, initially filed in 2012, US service members in Afghanistan, Logistics Services Company (HSLSC), which targeted, among other things, Shadman’s and one count of conspiracy to do the served as subcontractors delivering supplies fraudulent receipt of a disproportionate same, in order to influence the award to US service members in Afghanistan. From number of subcontracts for the transport of of subcontracts to HSLSC and to November 2010 to March 2012, Shadman military supplies in Afghanistan, as well as ensure favourable treatment during the charged more than USD 77 million for inflated prices. contracting process.
Global Witness identifies EU companies that could be importing illegal Congo timber
A new briefing from Global Witness 2 million on the European market, to refrain belonging to Cotrefor, a notorious logging published on 14 March reveals how from buying from IFCO while they investigate company accused of a series of illegal EU traders are importing timber from these apparent legal breaches. The briefing activities. According to Global Witness, Industrie Forestière du Congo (IFCO), also calls on authorities in France, Italy, Spain, Cotrefor was also the subject of alleged a logging company in the Democratic Poland, Portugal and Belgium to properly links to a Lebanese conglomerate that is Republic of Congo accused of flouting enforce EU timber laws. sanctions-listed by the US Treasury as a forest and labour laws. According to financial supporter of Hezbollah. Global Witness, IFCO’s EU clients are The briefing outlines how IFCO, the second named as: Exott in Belgium, TimTrade in biggest timber exporter in the DRC, has In addition, significant shipments of IFCO Italy, JAF Polska in Poland, Interarrod in illegally logged outside of permitted timber to the port of Valencia took place Portugal, and from France: Timbearth, boundaries. During 2018 the company also in August 2018. These appear to have Carbon Market Timber, Edwood, Angot carried out logging while its operations were been facilitated by a Spanish timber agent. Bois and France Noyer. suspended by authorities for breaches of When contacted by Global Witness, the DRC’s labour and environmental laws. agent strongly denied being the importer Global Witness is calling on these European of this timber. Global Witness is contacting companies, who reportedly have collectively IFCO is a recently created company that authorities in Spain, requesting them to placed illegal or high-risk timber worth EUR has inherited logging rights and operations conduct an investigation.
47 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
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FIFA bans SAP reportedly NAB former Togolese FA accused of chief of staff official for life “improper charged over for bribery conduct” over alleged AUD 40 The adjudicatory chamber of FIFA’s Africa contracts million fraud independent Ethics Committee announced on 20 March that it has Rosemary Rogers, the former chief found Kokou Hougnimon Fagla, Bloomberg reported on 28 February of staff to National Australia Bank a referee and football official that SAP SE has been accused of (NAB) CEO Andrew Thorburn, was affiliated with the Togolese Football “improper conduct” linked to state charged on 5 March in relation to Association, guilty of having contracts in Kenya and Tanzania. AUD 40 million fraud against the accepted bribes to manipulate The corruption allegations, bank. Rogers has been charged an international friendly match in which are being investigated by with 56 counts of corruptly violation of the FIFA Code of Ethics. US authorities, reportedly relate receiving a benefit and dishonestly to deals in 2014 and 2015, the obtaining financial advantage The formal proceedings against Mr company said in a statement. by deception relating to inflated Fagla were initiated on 27 March 2018 contracts charged to the bank. and stemmed from an investigation into SAP and Twenty Third Century Systems international matches that Wilson Raj (TTCS), a partner across Africa and New South Wales police allege that Perumal attempted to manipulate for the Middle East, have since made Rogers received bribes in the form of betting purposes. The investigation was management changes and strengthened paid personal expenses worth more conducted by FIFA over several years compliance, SAP said. than AUD 5.4 million from a contractor through its Integrity Department. to maintain the contract and approve The new allegations were first reported overstated invoices. The Human by South African website TechCentral, In its decision, the adjudicatory chamber Group director Helen Rosamond has which said TTCS bribed officials at the found that Mr Fagla had breached Article also been charged with 56 bribery Tanzania Ports Authority to win a USD 11 (Bribery) of the 2009 edition of the offences. Rosamond allegedly paid 6.6 million contract. The claims were FIFA Code of Ethics and banned him for bribes to Rogers to ensure that her made by a whistleblower and lodged in life from all football-related activities, as training company kept the NAB contract the US, according to TechCentral. well as imposing a fine of CHF 3,000. between 2013 and 2017.
Royal Dutch Shell to face prosecution for Nigerian deal
Royal Dutch Shell plc announced negotiator for the sale of an Atlantic oil field Current and former managers of both on 1 March that the Dutch Public known as OPL 245. The government passed companies — including Claudio Descalzi, Prosecutor’s Office is preparing to on USD 1.1 billion to the previous owner, Eni’s CEO, and Malcolm Brinded, Shell’s prosecute the company for criminal Malabu Oil and Gas Ltd, a shell company in former head of exploration and production charges “directly or indirectly” which former oil minister Dan Etete held a — are facing charges of corruption in Italy, connected to a Nigerian oil deal. substantial stake. Prosecutors in Italy believe accused of knowing that the payments that Etete paid tens of millions of dollars would be pocketed by individuals rather In 2011, Shell and Eni, paid USD 1.3 billion in bribes to middlemen including Nigerian than the Nigerian government. to the Nigerian government acted as a government officials.
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OECD “seriously concerned” about El Salvador Turkey’s foreign bribery enforcement approves extradition of The Organisation for Economic Co- The Working Group remains seriously operation and Development (OECD) concerned about Turkey’s low level of announced on 14 March that in foreign bribery enforcement. Despite ex-president view of Turkey’s continued failure the size of the country’s economy to implement key aspects of the and its geopolitical importance, there Funes over OECD Anti-Bribery Convention and to has not been one foreign bribery enforce its foreign bribery laws, the conviction in the 16 years since the corruption Working Group on Bribery will send a entry into force of the Convention in high-level mission to Ankara in 2020, Turkey. In addition, the Working Group charges unless Turkey takes concrete action is concerned that foreign bribery by October 2019. investigations and prosecutions may be influenced by considerations Turkey’s corporate liability framework of national economic interest, the does not clearly cover state-owned potential effect upon relations with and state-controlled enterprises, and another state or the identity of the the prosecution or conviction of a natural or legal persons involved. natural person is a necessary basis for sanctioning a legal person. Furthermore, Turkey is invited to report back in Photo: Reuters sanctions for legal persons are not October 2019 regarding concrete sufficiently effective, explains the OECD. action to address the OECD’s concerns. El Salvador’s Supreme Court approved a request on 21 March by the attorney general that former president Mauricio Funes be extradited from Nicaragua to face Former Brazilian president Michel corruption charges.
Temer arrested over corruption According to a statement from the Supreme Court, 15 magistrates Former Brazilian president Michel a significant number of Brazil’s political unanimously approved the extradition Temer was arrested in São Paulo and business establishment. request. Funes, who governed El on 21 March as part of the ongoing Brazilian prosecutors said the Salvador from 2009 and 2014, is “Operation Car Wash” corruption investigation was related to “crimes accused of embezzlement and money investigation. of corruption, embezzlement and laundering involving USD 351 million. money laundering [. . .] as well as Prosecutors allege that Funes used Temer, who was replaced as president by possible diversions of resources from public money to pay for credit cards, Jair Bolsonaro on 1 January and had until Eletronuclear.” Temer is also believed to trips, home refurbishments, vehicles then been protected by official immunity, have operated a “counter-intelligence” and hospital bills. is the second former Brazilian leader to scheme to hamper the investigation be arrested as part of the investigation, by forging documents to mislead Funes has argued that the extradition following the conviction of Luiz Inácio Lula authorities and investigators. would violate his right to defence da Silva. and that Nicaragua could choose to Local media reports suggest that this deny it. He has lived since 2016 in the The Car Wash taskforce probe, which began particular investigation is related to neighbouring country, where he has in 2014, into bribery and kickbacks at the alleged graft during the construction of political asylum that would protect him state oil producer Petrobras has implicated the country’s Angra 3 nuclear plant. from extradition.
49 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
Venezuela: sanctions threatened against non-US banks, Russian bank designated, former VP of Venezuela and minister charged, and security officials designated
US National Security advisor John Bolton issued a Lopez Bello. According to the indictment, El Aissami and Lopez Bello statement on 6 March threatening sanctions against paid for flights using cash that was delivered through intermediaries non-US banks for facilitating illegitimate transactions in Venezuela. The cash was then funnelled through US companies, with certain Venezuelan individuals and entities. The including American Charter Services LLC and SVMI Solution LLC, statement puts “foreign financial institutions on notice prosecutors said. that they will face sanctions for being involved in facilitating illegitimate transactions that benefit Nicolas In addition to this, the OFAC designated six Venezuelan government Maduro and his corrupt network.” officialson 1 March who are allegedly aligned with Maduro and associated with the obstruction of humanitarian aid deliveries into On 22 March, the US Department of the Treasury’s Office of Foreign Venezuela on 23 February. The designations, taken pursuant to EO Assets Control (OFAC) designated Banco de Desarrollo Economico 13692, target six security officials who control many of the groups y Social de Venezuela, or BANDES, pursuant to Executive Order that prevented humanitarian aid from entering Venezuela. The (EO) 13850, for operating in the financial sector of the Venezuelan following six individuals have been designated: Richard Jesus Lopez economy, as well as four additional financial institutions that Vargas; Jesus Maria Mantilla Oliveros; Alberto Mirtiliano Bermudez BANDES owns or controls. The designations follow a determination Valderrey; Jose Leonardo Norono Torres; Jose Miguel Dominguez by secretary of the treasury, Steven Mnuchin, that persons operating Ramirez; and Cristhiam Abelardo Morales Zambrano. in Venezuela’s financial sector may be subject to sanctions. The following entities have been designated: state-owned bank, BANDES; Meanwhile, the OFAC extended on 14 March the expiration date of Banco Bandes Uruguay SA; Banco Bicentenario del Pueblo, de la a General License related to PDV Holding, Inc (PDVH), and CITGO Clase Obrera, Mujer y Comunias, Banco Universal CA; Banco de Holding, Inc. General License 7A provides an 18-month authorisation Venezuela, SA Banco Universal; and Banco Prodem SA. that renews automatically on a monthly basis, which will enable CITGO to maintain operations in markets that are based on long-term Separately, the OFAC designated Evrofinance Mosnarbankon 11 planning and contractual commitments. March, jointly owned by Russian and Venezuelan state-owned companies, for attempting to circumvent the US sanctions on On 19 March, the OFAC designated CVG Compania General de Venezuela. According to the press release, as the Treasury has Mineria de Venezuela CA, or Minerven, the state-run ferrous metals “continued to escalate the use of sanctions against the regime of mining company, and its president, Adrian Antonio Perdomo Mata, former president Nicolas Maduro,” the net assets of Evrofinance pursuant to EO 13850 that targets illicit gold operations. Mosnarbank bank grew over 50 percent during 2018. The OFAC also issued General License 3D, “Authorizing Transactions Following an investigation by the US Immigration and Customs Related to, Provisions of Financing for, and Other Dealings in Certain Enforcement’s (ICE) Homeland Security Investigations (HSI) El Bonds,” and General License 9C, “Authorizing Transactions Related to Dorado Task Force, the former Venezuelan vice president Tareck Dealings in Certain Securities,” on 8 March. The OFAC has extended Zaidan El Aissami Maddah and businessman Samark Jose Lopez the expiration date of provisions relating to the winding-down of Bello were charged on 7 March with criminal violations of the certain financial contracts or other agreements involving, or linked Foreign Narcotics Kingpin Designation Act. In February 2017, Mr El to, the bonds listed on the Annex to General License 3D or to certain Aissami and his business partner Lopez Bello were designated as Petroleos de Venezuela SA securities. Additionally, the OFAC has Specially Designated Narcotics Traffickers under the Kingpin Act. updated FAQs 661 and 662. They have been charged with evading US sanctions by “employing US companies to provide international transport via private jet” to Reuters reported on 14 March that according to a senior official, set up meetings in Russia and Turkey. Seven others have also been the US is considering imposing financial sanctions that could charged with violating the Kingpin Act and US sanctions by providing prohibit Visa Inc, Mastercard Inc and other financial institutions from travel services to and engaging in transactions with El Aissami and processing transactions in Venezuela.
50 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
Trump administration allows lawsuits Venezuela against entities on Cuba restricted list orders
US secretary of state Mike Pompeo German notified Congress on 4 March that as of 19 March the Trump administration ambassador will allow for the enforcement of Title III of the Helms-Burton Act by to leave the US citizens against Cuban entities or sub-entities identified by the State Department on its List of Restricted country Entities and Sub-entities Associated with Cuba, but will maintain, for now, Venezuela’s government has a ban against suing foreign firms declared the German ambassador, doing business in Cuba. Daniel Kriener, persona non grata and ordered him to leave Pompeo announced to Congress that the Helms-Burton Act codifies US sanctions the country within 48 hours on Trump administration would suspend the against Cuba and grants US nationals 6 March. The decision to expel right to sue foreign firms for an additional with claims to property confiscated by the Mr Kriener was announced on 30 days, until 17 April, while it assesses the Cuban government the right to file suit in Twitter by Venezuela’s foreign impact of the suspension on the situation US courts against persons found to be minister, Jorge Arreaza, who said in Cuba. The suspension does not apply, trafficking in such property. that the decision was based on however, to Cuban entities or sub-entities Daniel Kriener’s “repeated acts identified by the State Department on the During hearings on corruption and the of interference in the country’s Cuba restricted list. Therefore, the Trump humanitarian crisis in Venezuela held on internal affairs.” administration will enforce Title III to a 1 March, senior official of the Bureau of In a statement, Maduro’s limited extent beginning on 19 March, Democracy, Human Rights, and Labor, administration accused Kriener and exposing Cuban entities and sub-entities, Michael G. Kozak, stated that “Cuba has, the German government – which was that “traffic” in property which was with Nicolas Maduro’s consent, become among those to recognise Maduro’s “confiscated” by the Cuban government a government within a government. They rival Juan Guaidó as Venezuela’s on or after 1 January 1959, to the threat of are repressing the military and destroying legitimate leader – of unlawful lawsuits in US courts. the economy. They keep their inner circle well-fed, rich, and safe. What’s needed is a meddling in Venezuelan affairs. It is the first US administration to take government that is truly accountable and The Council of the European Union the step of not waiving Title III. The puts the well-being of the people first.” published a declaration on the latest events in Venezuela on 7 March, in which the EU firmly condemned China blocks UN blacklisting the decision to expel the German ambassador, expressing full solidarity China prevented a United Nations The attack killed at least 40 paramilitary with Germany. Security Council committee on 13 police. The US, UK and France asked March from blacklisting Masood the Security Council’s Islamic State and Meanwhile, local media reported on Azhar, the head of Pakistan- al Qaeda sanctions committee on 27 22 March that Maduro’s regime has based militant group Jaish-e- February to subject JeM founder Masood arrested Roberto Marrero, a top aide Mohammad (JeM), which claimed Azhar to an arms embargo, travel ban and to opposition leader Juan Guaido on responsibility for the attack on asset freeze. China previously prevented allegations of leading a “terrorist cell” an Indian paramilitary convoy in the committee from sanctioning Masood intent on attacking the Venezuelan disputed Kashmir in February. Azhar in 2016 and 2017. government’s leadership.
51 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
US, EU, Canada and Australia impose Deripaska sues sanctions on Russia over Ukraine US Treasury The US Department of the Treasury’s to the Russian military. The OFAC also Office of Foreign Assets Control designated two additional entities, due to over sanctions (OFAC) designated on 15 March six their activities in Crimea, LLC SK Consol- Russian individuals and eight entities Stroi LTD and LLC Novye Proekty. The founder of En+ and Rusal, in response to Russia’s continued Oleg Deripaska, has brought and ongoing aggression in Ukraine. The OFAC’s action also targets two proceedings against the US The OFAC’s action complements Ukrainian separatists from the Central Treasury and the Office of Foreign sanctions imposed by the EU, Canada, Election Commission of the so-called Assets Control (OFAC), asking to and Australia for Russia’s continued Donetsk People’s Republic (DPR): Aleksey be de-listed from US sanctions, aggression against Ukraine, five years Alekseevich Naydenko, deputy chair, and which the complaint states after its illegal annexation of Crimea. Vladimir Yurievich Vysotsky, secretary. are “unlawful,” are based on a These individuals were allegedly involved “series of allegations completely The OFAC’s press release explains that the in the organisation of the November 2018 untethered from the legal criteria action targets individuals and entities playing illegitimate elections in the so-called DPR. of [the] executive orders” and a role in Russia’s “unjustified attacks on that have caused “the wholesale Ukrainian naval vessels in the Kerch Strait, In coordinated action, the Council of the devastation of Deripaska’s the purported annexation of Crimea, and European Union also added eight Russian wealth, reputation, and economic backing of illegitimate separatist government officials on 15 March to the list of those livelihood,” causing his net worth elections in eastern Ukraine.” subject to restrictive measures in respect to fall by more than USD 7.5 of actions undermining or threatening billion and forcing him out of his The designations include four Russian the territorial integrity, sovereignty and controlling interests in his largest officials who were involved in the Kerch independence of Ukraine. In addition to businesses. Strait attack, Gennadiy Medvedev, the this, the EU also extended the validity of deputy director of the Border Guard Service these restrictive measures for a further six The complaint dated 15 March, of Russia’s Federal Security Service; months, until 15 September. Deripaska v. Mnuchin, 19-cv-727, Sergey Stankevich, the head of the Border and filed in the US District Court Directorate of Russia’s Federal Security Canada announced new sanctions against for the District of Columbia, states Service; Andrey Shein, the deputy head Russia on 15 March in coordination with that the OFAC’s actions are arbitrary of the Border Directorate and head of the EU and the US, in response to Russia’s and capricious and violated the the Coast Guard Unit of Russia’s Federal aggressive actions in the Black Sea Administrative Procedures Act. In Security Service; and Ruslan Romashkin, and Kerch Strait and Russia’s continued addition to this, the complaint states the head of the Service Command Point of illegal annexation of Crimea. Canada also that Deripaska has faced a US the Federal Security Service of the Russian sanctioned a number of individuals and government that biased against him Federation for the Republic of Crimea and entities responsible for the illegal invasion and that he has been the subject of Sevastopol. Medvedev, Stankevich, Shein, and ongoing occupation of Crimea and the persistent vitriolic attacks by the US. and Romashkin are designated pursuant to destabilisation of eastern Ukraine. Executive Order (EO) 13661. The complaint states that Deripaska Australia announced on 18 March has not just been severed from his The OFAC’s action also targets six Russian sanctions against seven Russian global financial and business networks defence firms with operations in Crimea individuals for their role in the seizure due to the sanctions, but also from (Yaroslavsky Shipbuilding Plant; Zelenodolsk of Ukrainian vessels attempting to pass basic and necessary services. For Shipyard Plant; AO Kontsern Okeanpribor; through the Kerch Strait. Australia also example, in a recent action before an PAO Zvezda; AO Zavod Fiolent; and GUP imposed sanctions against three “leaders” English court, Deripaska was unable to RK KTB Sudokompozit) several of which from separatist-controlled parts of the retain legal counsel in time to prevent are alleged to have misappropriated Donetsk and Luhansk regions of Ukraine. the imposition of a Worldwide Freezing Ukrainian state assets to provide services Order against him.
52 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
OFAC sanctions Congolese officials US continues for undermining DRC elections Ukraine-related
The US Department of the Treasury’s Officials are alleged to sanctions Office of Foreign Assets Control (OFAC) sanctioned three senior have embezzled and for one year Democratic Republic of the Congo misappropriated CENI (DRC) officials within the National Independent Electoral Commission operational funds and and extends (CENI) on 21 March pursuant to undertaken actions licences Executive Order (EO) 13413, as that slowed voter amended, which authorises sanctions in light of actions or policies that registration, facilitating The US announced on 4 March undermine democratic processes or election delays that it is continuing its sanctions institutions in the DRC. on persons contributing to the situation in Ukraine for one year by Specifically, the OFAC has designated registration. According to the OFAC’s press extending the national emergency three senior CENI officials: Corneille release, in his capacity as CENI president, declared in Executive Order (EO) Yobeluo Nangaa, CENI president; Norbert Nangaa (and other CENI officials under 13660 (as amended). These Basengezi Katintima, CENI vice president; his direction) is alleged to have embezzled sanctions impose asset freezes on and Katintima’s son, Marcellin Basengezi and misappropriated CENI operational persons responsible for amongst Mukolo, a high-level CENI advisor. funds and undertaken actions that slowed other things actions or policies voter registration, facilitating election that undermine democratic CENI is tasked with executing elections in delays. CENI officials are also believed to processes or institutions in the DRC, and under Nangaa’s leadership, have used shell companies to embezzle Ukraine and the misappropriation elections originally scheduled for December CENI operational funds for their own of state assets of Ukraine. 2016 were postponed to December 2018. personal and political gain and enriched In postponing the 2016 elections, CENI themselves through the purchase and sale EO 13660 declared a national cited a lack of funding and delays in voter of gasoline at the expense of CENI. emergency pursuant to the International Emergency Economic Powers Act to deal with the threat constituted by the actions and policies of persons that undermine democratic processes and US extends Zimbabwe sanctions for a year institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to pursuant to the International Emergency The US announced on 4 March that the misappropriation of its assets. it is continuing its sanctions on Economic Powers Act, to deal with the Zimbabwe for one year by extending threat caused by the actions and policies The OFAC announced on 6 March the the national emergency as declared of certain members of the government issuance of Ukraine-related General in Executive Order (EO) 13288. The of Zimbabwe and other persons to Licenses 13K and 15E, which extend individuals designated under this undermine Zimbabwe’s democratic the expiry date of previous Ukraine- Order, amended by Executive Order processes or institutions. According to the based General Licenses to 6 July 2019 13391 and Executive Order 13469, US government, these actions and policies for wind-down transactions for certain will continue to be subject to asset contributed to the deliberate breakdown in companies that otherwise would be freezing measures. the rule of law in Zimbabwe, to politically prohibited by Ukraine-Related Sanctions motivated violence and intimidation in that Regulations. General License 13K EO 13288 declared a national emergency country, and to political and economic supersedes 13J. General License 15E and blocked the property of certain persons, instability in the southern African region. supersedes 15D.
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PRESS & MEDIA | SANCTIONS
Two entities designated relating to US updates North Korea sanctions, but Trump advisory on oil tweet causes confusion shipments to The US Department of the Treasury’s “It was announced Syria Office of Foreign Assets Control today [...] that additional (OFAC) announced on 21 March the designation of two shipping [...]Sanctions would companies based in China, Dalian be added [...] on North Haibo International Freight Co Ltd and Liaoning Danxing International Korea. I have today Forwarding Co Ltd, for helping North ordered the withdrawal Korea evade sanctions. It was also of those additional announced that the OFAC, along with the US Department of State and the US Sanctions!” Coast Guard, had updated the North Korea shipping advisory and added The US Department of the Treasury’s dozens of vessels that are believed to Dalian Haibo shipped cargo from Dalian, Office of Foreign Assets Control have engaged in ship-to-ship (STS) China to Paeksol in Nampo, North Korea, (OFAC) updated its advisory to transfers with North Korean tankers or aboard DPRK-flagged vessels. the maritime petroleum shipping exported North Korean coal. However, community to highlight risks US president Donald Trump then said The OFAC also designated Liaoning associated with shipments to Syria on Twitter: “It was announced today Danxing International Forwarding Co on 25 March. by the U.S. Treasury that additional Ltd pursuant to EO 13810 for operating large scale Sanctions would be added in the transportation industry in North This updates the Treasury’s 20 November to those already existing Sanctions Korea. According to the OFAC Liaoning 2018 advisory to include additional on North Korea. I have today ordered Danxing routinely used deceptive practices guidelines and risks associated with the withdrawal of those additional that enabled EU-based North Korean facilitating the shipment of petroleum Sanctions!” It is not clear whether procurement officials to operate and destined for Syrian government-owned president Trump was referring to the purchase goods for the DPRK regime. and -operated ports, to include petroleum shipping company sanctions or a new of Iranian origin. It adds dozens of new set of sanctions that had not yet been The associated update to the shipping vessels involved in illicit oil shipments, announced. advisory includes new information about including 16 shipping to Syria and more North Korea’s deceptive shipping practices, than 30 engaging in ship-to-ship transfers, According to the OFAC’s press release, additional guidance on how to mitigate and highlights concerns with shipments of Dalian Haibo International Freight Co Ltd the risk of involvement in these practices, petroleum from Iran. has been designated pursuant to Executive a new graphic depicting certain ports of Order (EO) 13722 for providing goods call, and three new annexes. As detailed The new iteration of the advisory includes and services to or in support of the US- in the advisory, North Korea employs significant updates to the annex, which designated Paeksol Trading Corporation. deceptive shipping practices such as lists vessels that have delivered petroleum Paeksol is also subject to the UN- and U.S.- disabling or manipulating automated to Syria since 2016. The annex also designated Reconnaissance General Bureau identification systems, physically altering includes vessels that have engaged in (RGB). The OFAC previously designated vessels, conducting STS transfers, and ship-to-ship (STS) transfers of petroleum Paeksol for having sold, supplied, falsifying cargo documentation. Since initial likely destined for Syria, as well as vessels transferred, or purchased metal or coal from publication in February 2018, North Korea which have exported Syrian petroleum. North Korea, where the revenue may have has altered the geographic location of STS Many of the names of the vessels have benefited the government of North Korea or transfers and has resumed exports of coal also been updated to reflect any relevant the Workers’ Party of Korea. In early 2018, in the Gulf of Tonkin. name changes.
54 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
US senators UN Panel of Experts investigating reintroduce possible North Korea sanctions North Korea violations in 20 countries sanctions bill The 2018/2019 annual report by the United Nations Panel of Experts US senators Pat Toomey and on North Korea published on 5 Chris Van Hollen reintroduced March, reveals that an investigation the bipartisan Otto Warmbier is being carried out into possible Banking Restrictions Involving violations of North Korea sanctions North Korea (BRINK) Act on 5 in 20 countries. March, which would impose In regard to possible financial and trade DPRK and Syria, Sudan, Libya, Yemen, sanctions on the foreign banks sanctions violations, the report notes Egypt and Iran; and that violations of and companies that facilitate diplomats’ role in circumventing asset the arms embargo may have occurred illicit financial transactions for freezes by holding accounts in the name through sales of weapons and military the Democratic People’s Republic of family members and front companies equipment from DPRK to armed groups of Korea (DPRK). and by establishing accounts in multiple in Libya and Yemen via arms brokers based in Syria. The reintroduction of the bill follows jurisdictions; cyber-attacks carried out the break down of talks between the by DPRK to acquire foreign currency and North Korea has also been using cyber- US and the DPRK during a summit evade financial sanctions; and the illicit attacks on banks and cryptocurrency at the end of February between US import of luxury goods. exchanges to steal money and evade president Donald Trump and North The report notes that military sanctions financial sanctions, notes the report. Korean leader Kim Jong Un after violations may have occurred, including Hacking to force the transfer of funds has they failed to reach a deal on how far reports of “clandestine procurement for become an important tool in the evasion North Korea was willing to limit its nuclear programmes” in China. The panel of sanctions for North Korea and has nuclear programme and the easing is continuing to survey manufacturers of grown in sophistication and scale since of US sanctions. President Trump’s key nuclear procurement items, including 2016, according to the report. The report national security adviser, John Bolton, designated companies Namchogang recommends that this cyber activity be said following the failed summit on 5 Trading Corp and Namhung Trading taken into account when the UN Security March that the United States would Corp. The report also notes that there are Council drafts future financial measures look at ramping up sanctions on North reports of military cooperation between against North Korea. Korea if Pyongyang did not scrap its nuclear weapons programme.
According to the press release, the legislation is modelled on the Iran EU prolongs sanctions concerning secondary sanctions laws passed by Congress in 2010 and 2012 that misappropriation of Ukrainian funds helped to bring Iran to the negotiating table over its nuclear programme. The Council of the European Union funds, until 6 March 2020. announced on 4 March the extension A key feature of the bill is that it of asset freezes directed against 12 Restrictive measures against one person imposes secondary sanctions on persons identified as responsible for were not extended. The restrictive financial entities that do business with the misappropriation of Ukrainian measures regime has been in place since North Korea, and those who evade state funds or for abuse of office 5 March 2014 and has been extended on a sanctions to assist the regime. causing a loss to Ukrainian public yearly basis since then.
55 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
US disrupts network transferring US continues funds to IRGC and Iran ministry Iran sanctions for one year The US Department of the Treasury’s As part of this scheme, it is alleged that Ansar Bank used its Iran-based Office of Foreign Assets Control The US announced on 12 March foreign currency arm, Ansar Exchange (OFAC) took action on 26 March that it is extending the basis for and its network, to convert Iranian rials against 25 individuals and entities, its sanctions on Iran for a year by to hundreds of millions of dollars and including a network of Iran, UAE, continuing the national emergency euros. To provide this funding to Ansar and Turkey-based front companies, declared in Executive Order (EO) Bank, MODAFL, and the IRGC, Ansar that are alleged to have transferred 12957 (as amended). over a billion dollars and euros to Exchange relied upon a network of front the Islamic Revolutionary Guard companies and agents in Turkey and the EO 12957 declared a national Corps (IRGC) and Iran’s Ministry of UAE. In just the last year-and-a-half, four emergency with respect to Iran to Defense and Armed Forces Logistics front companies — UAE-based Sakan deal with the threat to the national (MODAFL), in addition to procuring General Trading, Lebra Moon General security, foreign policy, and economy millions of dollars’ worth of vehicles Trading, and Naria General Trading, as of the US constituted by the actions for MODAFL. The OFAC has also well as Iran-based Hital Exchange, all and policies of the government of Iran. designated Iran’s MODAFL pursuant designated on 26 March — provided the On 6 May 1995, the president issued to Executive Order (EO) 13224 for equivalent of USD 800 million in funds to Executive Order 12959, imposing its role in assisting the IRGC-Qods Ansar Exchange. Additionally, Turkey- more comprehensive sanctions Force (IRGC-QF), as well as an Iran- based Atlas Doviz acted as a secondary on Iran to further respond to this based bank for providing banking foreign currency provider. threat. US sanctions on Iran were services to the IRGC-QF. reimposed in August 2018 pursuant Those designated: MODAFL, Ansar Bank to Executive Order (EO) 13846 According to the press release, through and Ayatollah Ebrahimi, Ansar Exchange, following US withdrawal from the Joint IRGC-controlled Ansar Bank, the Iranian Alireza Atabaki, Zagros Pardis Kish, Comprehensive Plan of Action (JCPOA). regime established a layered network of Sakan General Trading and Reza Sakan, front companies based in Iran, Turkey, Hital Exchange and Seyyed Mohammad Meanwhile, Iran’s president Hassan and the UAE to bypass sanctions, gain Reza Ale Ali, Atlas Exchange and Rouhani announced in a live TV access to the international financial Mohammad Vakili, Asadollah Seifi, broadcast on 18 March that the system, and exchange devalued Iranian Golden Commodities General Trading, government will file a legal case in Iran rials for dollars and euros. Ansar Bank and The Best Leader General Trading, against US officials that have imposed also used international free zones to Suleyman Sakan and Atlas Doviz Ticaret sanctions on the country as a precursor establish front companies. A.S., and Ali Shams Mulavi. to action in international courts.
Rusfincorp reportedly to take on PDVSA accounts
According to a report by Reuters on (Rusfincorp), which is sanctioned by the confirming an earlier report by the RIA 6 March, the Russian accounts of US, a source has told Reuters. news agency. Russian authorities made the Venezuelan companies, including decision to move the Venezuelan accounts state-owned PDVSA, will be moved to The decision has been agreed with the after consultations with their counterparts the Russian Financial Corporation Bank Russian government, the source said, and businesses in Venezuela, sources said.
56 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
PRESS & MEDIA | SANCTIONS
US designates Harakat al-Nujaba US passes a
The US Department of State that he would follow any order, including series of bills designated Iranian proxy group overthrowing the Iraqi government or Harakat al-Nujaba (HAN) and its fighting alongside the Houthis in Yemen, targeting Russia leader, Akram ‘Abbas al-Kabi, on 5 if Ayatollah Khamenei declared it to be a March, as Specially Designated Global religious duty. Al-Kabi has also claimed The US House of Representatives Terrorists, pursuant to Executive Order that Iran supports HAN both militarily and passed a series of bills on 12 (EO) 13224. logistically, and stressed HAN’s close March that target the Russian ties with IRGC-QF Commander Qassem government, demanding According to the press release, HAN is an Soleimani and Hizballah Secretary- accountability for corruption, Iran-backed Iraqi militia funded by but not General Hassan Nasrallah, both SDGTs. human rights abuses and under the control of the Iraqi government aggression. The bills include and has openly pledged its loyalties to Iran The Treasury designated al-Kabi in 2008 the call for accountability and and Iranian Supreme Leader Ayatollah for planning and conducting multiple justice for the assassination of Khamenei. Al-Kabi has publicly claimed attacks against Coalition forces. Boris Nemtsov and the Crimea Annexation Non-Recognition Act.
One of the bills introduced, by EU sanctions on Syria and Egypt chairman of the House Foreign Affairs Committee, Eliot Engel, demands The Council of the European Union Meanwhile, the EU announced on 22 sanctions be imposed for the killing of added on 4 March seven ministers March the extension of sanctions on Boris Nemtsov. The others call for an of the government of Syria to the Egypt for one year until 22 March 2020. investigation into president Vladimir list of persons and entities subject These measures continue to impose Putin’s finances and the assessment to restrictive measures against the asset freezes and travel bans on of Russian influence campaigns. Syrian regime and its supporters. The individuals. Additionally, the EU renewed additions are due to governmental its Bosnia and Herzegovina sanctions for changes in Syria. one year until 31 March 2020. UN removes entities from Iraq UN adds Hamza bin Laden to ISIL sanctions list (Da’esh) and Al-Qaida sanctions list The UN approved on 13 March the removal of four entities from The United Nations Security Council under the name of, on behalf of, or its Iraq sanctions list: General added Hamza Usama Muhammad bin in support of and recruiting for, and Establishment for Main Out Pall Laden, son of Osama bin Laden, to its otherwise supporting acts or activities Drain, National Tobacco State ISIL (Da’esh) and Al-Qaida sanctions or indicating association with Al-Qaida.” Company, State Enterprise for list on 28 February. As a result, he Petrochemical Industries, and is now subject to a UN asset freeze, The EU Commission implemented this State Enterprise for Pulp and travel ban and arms embargo. UN listing on 5 March, via Implementing Paper Industries. Regulation (EU) 2019/353. Separately, The UN has listed Hamza bin Laden for the US is offering a reward of up to USD The entities have been removed from “participating in the financing, planning, 1 million for information about Hamza the UN’s List of Individuals and Entities facilitating, preparing, or perpetrating of Bin Laden, as officials are concerned he subject to the assets freeze set out in acts or activities by, in conjunction with, is emerging as a leader of Al-Qaida. Resolution 1483 (2003).
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PRESS & MEDIA | SANCTIONS
Ukraine Individuals and entities linked to Iran sanctions nuclear development designated
Russian The US Department of the Mehdipur, Akbar Motallebizadeh, Jalal Treasury’s Office of Foreign Assets Emami Gharah Hajjlu and Sa’id Borji. construction Control (OFAC), together with the The OFAC has also designated Shahid US Department of State, designated Chamran Group and managing expert industry on 22 March, 14 individuals and Sayyed Asghar Hashemitabar. SPND 17 entities in connection with subordinate group Shahid Fakhar Iran’s Organization of Defensive Moghaddam Group has also been Innovation and Research (SPND), designated along with Ruhollah Ghaderi which according to the US has Barmi and Mohammad Javad Safari. provided support to designated Iranian defence entities and whose Also designated are an additional 10 key personnel played a central role entities whose research and activities in the Iranian regime’s past nuclear benefit SPND: Sheikh Baha’i Science and weapons effort. Technology Research Center, Shahid Ukraine’s president Petro Avini Group, Shahid Baba’i Group, Shahid Poroshenko announced new SPND was sanctioned on 29 August Movahhed Danesh Group, Abu Reihan sanctions on 20 March which 2014 pursuant to Executive Order (EO) Group, Shahid Kazemi Group, Shahid target Russian companies 13382 for engaging in or attempting to Shokri Science and Technology Research and individuals involved in engage in activities that have materially Group, Heidar Karar Research Group, construction and related contributed to, or posed a risk of Shahid Zeinoddin Group, Bu Ali Group, and activities in Crimea, pursuant to materially contributing to, the proliferation Sadra Research Center. Decree 82/2019. of WMD or their means of delivery. The OFAC has also designated three key SPND front and cover companies, and The sanctions target those connected The OFAC has designated Shahid four of their senior officials. The entities with the construction of the bridge Karimi Group, an SPND subordinate are: Pulse Niru, Kimiya Pakhsh Shargh and from Russia to Crimea, individuals group and four associated individuals. Paradise Medical Pioneers Company. who assisted in staging local The individuals are: Mohammad Reza elections in eastern Ukraine and in the seizure of Ukrainian vessels in the Kerch Strait and Sea of Azov. France sanctions the head of JeM “You saw that today I issued a Decree on a significant expansion A joint statement from the French resulted in 40 deaths. JeM has been of the package of sanctions against government’s Ministry of Europe proscribed as a terrorist organisation by Russian individuals and legal entities. and Foreign Affairs, the Ministry the UN since 2001, and France will propose In particular, the ‘Azov-Black Sea of Economy and Finance and that Mr Azhar be included in the EU’s asset package’ of sanctions was added. the Ministry of the Interior on 15 freezing measures. For all those involved in the act of March imposed an asset freeze on aggression against Ukraine in the Masood Azhar, the head of Jaish-e- The joint statement reads that “France Kerch Strait and the Azov-Black Mohammed, pursuant to Articles L. has always been and always will be by Sea basin were included in the 565-2 under the French Monetary India’s side in the fight against terrorism,” package of sanctions, which was and Financial Code. and as such the government has decided synchronized with a package of to sanction Masood Azhar at the national sanctions of the EU and the US,” said JeM claimed responsibility for an attack level by freezing his assets in application president Poroshenko. in Pulwama, India in February 2019 which of the Monetary and Financial Code.
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COUNTRY UPDATES
Argentina money laundering. The new law stipulates that those evidence that Cotton had 14 other user accounts who register companies will be required to provide the that may have been used to trade on the QuadrigaCX Authorities in Bolivia have arrested one of Argentina’s Companies and Intellectual Property Authority (CIPA) exchange. Auditor Ernst & Young is now trying to most sought-after drug traffickers dubbed the “El with beneficial ownership information pursuant to gather information via these other accounts to see if it Chapo Guzmán” of South America. In coordination Section 21 and 345 of the Companies (Amendment) can trace the missing assets. with Argentina’s National Gendarmerie, Bolivian police Act 2018, and in line with the Financial Intelligence arrested José Miguel Farfán on 13 February in Santa Agency (FIA) Act. The CIPA has been assigned the Meanwhile, the Canadian Securities Administrators Cruz on drug trafficking charges. Farfán reportedly responsibility to establish and maintain a register of (CSA) and the Investment Industry Regulatory has a history of bribing federal judges to facilitate his beneficial ownership for companies. Organization of Canada (IIROC) published a criminal activities and buy his freedom. consultation on 14 March on a proposed framework for crypto-asset trading platforms, which includes questions on the custody and verification of assets, Brazil and the surveillance of trading activities. The Australia consultation is open until 15 May. Brazil’s Supreme Court ruled on 14 March that AUSTRAC issued a joint statement with the Australian corruption cases involving illegal campaign donations should be handled by electoral courts, a Federal Police on 8 March that it has suspended Cape Verde the registration of two digital currency exchange ruling which some prosecutors have warned could businesses that are associated with a man arrested damage the fight against graft. Six justices voted on suspicion of being involved in an organised crime in favour of sending to electoral courts all cases Police in Cape Verde announced on 1 February that syndicate. The man, who has been charged with involving politicians who use money gained through they have seized nearly 10 tons of cocaine and arrested importing, trafficking and possessing illegal drugs, is corruption or money laundering for campaigns, rather 11 Russian sailors aboard a vessel docked in the accused of playing a key role in directing the operations than having them heard by federal criminal courts. capital, which represents the largest single drug haul in of a criminal syndicate, which used dark net sites, Prominent federal prosecutors warned it could reverse the country’s history. Police officials said the cocaine bitcoin accounts and legitimate business for sourcing, the work carried out during Operation Car Wash. was seized during the night after the ship docked at payment and distribution of illicit drugs. the port of Praia following the death of a crew member. The vessel had been traveling to Morocco from South Separately, on 12 March, Royal Assent was given to the America. Authorities said they were alerted by the Treasury Laws Amendment (Enhancing Whistleblower Bulgaria Lisbon-based Maritime Analysis and Operation Center, Protections) Bill 2018, which amends several pieces a body funded by seven EU countries that coordinates of legislation, notably the Corporations Act 2001 (Cth). The Bulgarian Prosecutor General’s Office issued a anti-drug-trafficking activities. The Russian-crewed The amendments come into force on 1 July and are statement on 22 March that Bulgaria’s anti-corruption vessel was registered in Panama, police said. intended to harmonise the protections and remedies commission is to investigate allegations of crimes available to whistleblowers, as well as introduce a regarding the acquisition of luxury apartments below requirement for certain companies to implement market value by politicians from the country’s ruling whistleblower policies. majority. The politicians to be investigated are GERB Denmark parliamentary leader Tsvetan Tsvetanov, justice minister Tsetska Tsacheva, deputy minister of sport Vanya Denmark’s Public Prosecutor for Special Economic and Koleva and Vezhdi Rashidov, head of the committee on International Crime (SØIK) announced on 20 March Bahrain culture and a former culture minister. The Prosecutor that a woman suspected of laundering NOK 105 million General’s Office has asked the anti-corruption has been detained and charged with a new section in commission to investigate various aspects, including The Central Bank of Bahrain (CBB) published final the Penal Code, which strengthens efforts to combat looking into the origin of funds for the purchase. The rules on 25 February for the regulation and licensing of money laundering. The charges relate to transactions investigation will also look into allegations of influence- dealing, advisory, and portfolio management services sent through a number of companies with fictitious trading and conflict of interest in the adoption of in accepted crypto-assets and as a crypto-asset foreign customers. legislative amendments by the National Assembly. The exchange. The rules incorporate licensing, governance company involved in the sale will also be investigated. and minimum capital requirements; risk management rules; anti-money laundering and terrorist financing provisions; standards of business conduct; conflict Estonia of interest rules; reporting requirements; and cyber Canada security requirements. The rules set out the need for Estonia’s Anti-Money Laundering Government enhanced due diligence by firms when signing up new Committee announced on 18 March that it will clients; and information requirements for clients. Efforts to recover CAD 180 million in cryptocurrency establish a centre for strategic analysis that will operate from the digital wallets of Gerald Cotton (also given under the Financial Intelligence Unit. According to the as Cotten), the founder of cryptocurrency exchange Committee, analytical capability is key to the successful QuadrigaCX, who died without revealing the prevention of money laundering, international Botswana passwords to access them, have discovered that the cooperation and information exchange. The centre wallets are empty, according to the discovery report will be granted access to the databases and registers published by investigators on 1 March. The funds At the end of February Botswana enforced the of various institutions and will aid the development of represent the virtual currency holdings of 115,000 Beneficial Ownership Information Act with immediate smart IT solutions. QuadrigaCX customers. The investigation has found effect, to address the escalating cases of international
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COUNTRY UPDATES
Ethiopia Hungary Malta
According to local media reports at the start The Council of Europe’s Group of States against Malta’s Financial Services Authority published on 25 of March, Ethiopia’s Ministry of Revenue has Corruption (GRECO) issued a statement on 1 March, February the finalised version of Chapter 3 of the Virtual officially charged 65 and taken measures against following a visit to Budapest, calling on Hungary Financial Assets Rulebook: Virtual Financial Assets 135 companies in relation to tax fraud and tax to make reports public and to implement fully its Rules for VFA Services Providers, which finalises Malta’s evasion. The organisations accused are involved recommendations. The visit, carried out as part of legal framework regulating cryptocurrency services and in the manufacture, import and export, distribution, GRECO’s ongoing non-compliance procedure in respect service providers. wholesale and construction sectors. Businesses of Hungary, focused on the prevention of corruption engaged in cosmetics, electronics, garments and with respect to members of parliament, judges and leather products, mobile technology, as well as hotel prosecutors. Since June 2017, Hungary has been operators are also accused. subject to GRECO’s special non-compliance procedure, Mexico because of insufficient measures taken to prevent corruption. GRECO has requested that the Hungarian The Financial Intelligence Unit of Mexico’s treasury has authorities report back at the end of this year. frozen USD 156 million of the Autonomous University of France Hidalgo’s funds while it investigates suspected money Separately, Associated Press reported on 17 March laundering, announced treasury secretary Santiago French judges have dropped preliminary charges that opposition lawmaker Akos Hadhazy has gathered Nieto on 1 March. According to the official statement, against LafargeHolcim’s former chief executive more than 470,000 signatures to pressure prime Mexico’s financial system alerted the authorities to Eric Olsen, reported Reuters on 5 March, which minister Viktor Orban’s government into joining the “unusual” transactions that saw the university receive were part of a wider investigation into whether the European Public Prosecutor’s Office. The new EU funds through Switzerland from accounts in 22 company helped finance Islamic State in Syria. The agency will begin investigations into the use of EU funds countries. Prior to the announcement, the Financial French authorities are investigating whether Lafarge, starting in 2020. The EU allocated Hungary EUR 25 Intelligence Unit had said that it was investigating a which was taken over by Swiss rival Holcim in 2015, billion in the 2014-2020 budget period, but critics allege state university, which had received transfers from paid the Islamic State in 2013 and 2014 to keep its that those funds have often been spent on overpriced countries including Switzerland, Spain and the UK. factories running in areas held by the terrorist group. or unnecessary projects that benefit Orban’s allies. Investigating magistrates decided to exclude Olsen Meanwhile, according to a report by Reuters on 22 from the process as they considered that he was March, Mexico is developing rules that would cap the not involved in alleged activities that may constitute amount of cash that can be used to buy real estate, terrorism financing, Olsen’s lawyer Pierre Cornut- Iceland finance minister Carlos Urzua has said, as part of a Gentille reportedly told Reuters. push to reduce the use of physical currency in a country The Council of Europe’s Group of Experts on Action rife with money laundering and corruption. against Trafficking in Human Beings (GRETA) published its second evaluation report on Iceland on Germany 15 March, which found that Iceland has made some progress in tackling human trafficking in recent years, Montenegro German foreign minister Heiko Maas announced but the problem requires more political attention and on 6 March that Germany’s unilateral halt on arms better coordination in order to help detect victims of Associated Press reported on 27 February that shipments to Saudi Arabia, imposed due to concerns trafficking, carry out successful investigations and Montenegro has issued an INTERPOL arrest warrant about its role in Yemen’s war and the killing of prosecute offenders. The report notes that victims of for Dusko Knezevic, a fugitive banker and former close journalist Jamal Khashoggi, would be extended trafficking who are issued with residence permits in ally of president Milo Djukanovic. Knezevic is believed until the end of March. Germany is facing pressure Iceland can now also receive work permits, and the to be in London after fleeing Montenegro to avoid from the UK and France to lift the ban following the recovery and reflection period for victims has been detention on suspicion of money laundering and fraud. coalition government’s decision to ban arms sales extended to nine months. Knezevic has accused president Djukanovic and his to Saudi Arabia in November after journalist Jamal Democratic Party of corruption. Khashoggi was murdered by Saudi agents. India Norway Guatemala Reuters reported on 5 March that the Reserve Bank of India has fined at least 19 lenders, including ICICI According to a Reuters report on 22 March, several Guatemalan judge Victor Cruz ordered the arrest of Bank and State Bank of India, for failing to comply with banks operating in Norway made insufficient anti- former attorney general and presidential candidate its guidelines on the use of global payments network money laundering risk assessments in 2018, the Thelma Aldana on 19 March on charges including SWIFT. The Reserve Bank of India imposed the fines country’s Financial Supervisory Authority (FSA) said in embezzlement and tax fraud. Ms Aldana had worked at the start of March, according to stock exchange its annual report,. While the FSA listed the banks that with the UN-backed anti-corruption commission, filings by the banks. According to Reuters the penalties had been inspected, its report did not say which were the International Commission Against Impunity in totalled more than INR 400 million and ranged from INR found to have shortcomings, stated the Reuters report. Guatemala (CICIG), and in investigating top politicians, 10 million to INR 40 million per bank. including current president Jimmy Morales and former president Otto Perez Molina, which led to his impeachment.
60 aperio-intelligence.com FINANCIAL CRIME DIGEST | MARCH 2019
COUNTRY UPDATES
Peru Court in 2018 following a challenge by opposition US politicians, concerned that its resources risked being misappropriated and its board appointment process The Financial Action Task Force (FATF) published on The US Federal Bureau of Investigation (FBI) politicised. 13 March the mutual evaluation report for Peru, which announced on 5 March the creation of a dedicated provides a summary of the anti-money laundering/ international corruption squad based in its Miami combating the financing of terrorism (AML/CFT) Field Office. The FBI has made the decision to measures in place in Peru as at the date of the onsite expand the programme to the Miami Field Office visit (21 May to 1 June 2018). It analyses the level of Slovakia after the success of the FBI’s international corruption compliance with the FATF recommendations and the squads operating in New York, Los Angeles, and level of effectiveness of Peru’s AML/CFT system, and Slovak lawyer Zuzana Čaputová, won the largest share Washington DC. According to Associated Press, provides recommendations on how the system could of votes in Slovakia’s presidential ballot on 16 March, which interviewed Leslie Backschies, the chief of be strengthened. with a campaign focused on tackling corruption. the FBI’s international corruption unit, the squad will With 40.6 percent of the votes, Čaputová is now the not only focus its efforts on Miami but also in South front-runner in the second round ahead of European America. Commission vice president Maroš Šefčovič, who Portugal gained 18.7 percent of the vote. The second-round The US Securities and Exchange Commission run-off was due to be held on 30 March. Local media announced on 22 March that Merrill Lynch, Pierce, reports state that voters’ support for Čaputová reflects Fenner & Smith Incorporated will pay over USD Portugal’s new Law no. 17/2019 entered into the frustration with Slovakia’s ruling Smer party, which 8 million to settle charges of improper handling force on 15 February, approving the Regime of has been the target of anti-government protests of “pre-released” American Depositary Receipts Communication of Financial Information, and following the murders of journalist Ján Kuciak and his (ADRs). The SEC found that Merrill Lynch improperly amending Decree-law no. 64/2016 of 11 October, and girlfriend Martina Kusnirova. borrowed pre-released ADRs from other brokers Decree-Law no. 61/2013, related to the automatic when Merrill Lynch should have known that those exchange of information on tax matters and the brokers – middlemen who obtained pre-released obligation to comply with communication and due ADRs from depositories – did not own the foreign diligence obligations. According to the Law, financial Spain shares needed to support those ADRs. Such institutions must communicate to the tax authorities practices resulted in inflating the total number of a the bank accounts held by beneficiaries residing in foreign issuer’s tradeable securities, which resulted in Portugal that exceed EUR 50,000. Spanish National Court magistrate, José de la Mata, abusive practices like inappropriate short selling and issued a statement on 6 March, which proposes that dividend arbitrage. former president of state-owned company Defex, José Ignacio Encinas Charro, and eight other people Romania including board members of the company be put on trial for corruption, citing evidence that they engaged in corruption in the supply of military equipment to Saudi Local media reported on 20 March that Romania’s Arabia, implicating Saudi Arabian government officials. High Court has scrapped the four-year corruption Magistrate de la Mata’s statement alleges that there are sentence issued in November 2016 against the “irregularities” in eleven contracts signed between 2005 former head of the Directorate for Investigating and 2014 for more than EUR 48 million. Organized Crime and Terrorism (DIICOT) Alina Bica and set the first term for a retrial, Ziarul Financiar reported. Bica had the sentence overturned via a Constitutional Court ruling that the formation of five- judge panels at the High Court does not respect the Sri Lanka legislation. Sri Lankan president Maithripala Sirisena launched Separately, it was reported on 22 March that the National Action Plan for the eradication of bribery Romania’s National Anticorruption Directorate (DNA) and corruption on 18 March. President Sirisena said has sent Romanian MEP Laurentiu Rebega to court that the main theme in his election manifesto was the on several corruption charges related to EU funds elimination of bribery and corruption as expected by the fraud. Rebega, who is a member of Pro Romania, people who voted for him on 8 January 2015. The five- is accused, among other things, of incitement and year plan includes new rules and regulations to more complicity to use false documents to obtain EU effectively combat bribery and corruption. The need to funds, the unjust change of destination of EU funds, reduce bribery and corruption, develop value systems and money laundering. The case targets the period for all government institutions, and amend the penalties when Rebega was vice president of Prahova County and legal policies, are the most important reforms Council. Six other people will stand trial in this case, that form the base of the plan following 40 rounds of including company managers and an expert from the discussion, organised by the bribery and corruption Agency for Rural Investment Financing. commission.
Meanwhile, Romania’s finance ministry published on 8 March a revised draft bill for the establishment of a sovereign wealth fund, despite concerns from critics that see the fund as a potential avenue for corruption. The fund was blocked by the Constitutional
61 Aperio Intelligence Limited Aperio Intelligence Limited (France) Aperio Intelligence Romania SRL 16 Dufferin Street 91 rue du Faubourg Saint-Honoré, Str. Ioan Budai Deleanu, nr1A, London EC1Y 8PD 75008 Paris Cluj-Napoca, 400474, Romania T +44 (0)20 3146 8900 T +33 (0) 6 43 07 80 29 T +40 (0)371 780 734 [email protected] [email protected] [email protected]