June 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 24 Welcome to the June edition of the Financial Crime Digest, CORRUPTION IN PERU: AN INTERVIEW WITH JOSÉ UGAZ Aperio Intelligence’s monthly newsletter, an informative PRESS AND MEDIA 31 summary of the most recent developments relating to the MONEY LAUNDERING | FRAUD | TERRORIST FINANCING world of money laundering, fraud and terrorist financing, bribery PRESS AND MEDIA 48 and corruption, and sanctions. BRIBERY | CORRUPTION [email protected] PRESS AND MEDIA 61 SANCTIONS
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TECHNICAL UPDATES
Law Commission’s report on reforming the SARs regime
The UK Law Commission published • The establishment of an advisory board funds to be released by a Crown Court judge a report on anti-money laundering with oversight for the regime, with a remit when an application for an extension of the and the suspicious activity reporting to oversee the drafting of guidance, to moratorium period is made; regime (SARs) on 18 June, following measure the effectiveness of the regime an extensive consultation on the need and advise the Secretary of State on ways to • Maintaining the status quo for the reporting to reform the current SARs under the improve it; of “all crimes”; Proceeds of Crime Act 2002 and the Terrorism Act 2000. • Retaining the consent regime, subject to • Extending the circumstances in which a amendments to improve effectiveness; reporter may have a reasonable excuse not According to the UK’s National Crime to make a voluntary disclosure; and Agency (NCA), it continues to receive rising • Statutory guidance on legislative concepts numbers of authorised disclosure reports, underpinning the reporting regime, which • Further research into the utility of thematic which means that the regime in its present includes guidance on suspicion, appropriate reporting or geographical targeting orders, form is “unsustainable.” The report states consent and arrangements with prior which remove the discretion to assess that the high volume of low-quality SARs consent and what may amount to a suspicion. stems, amongst other things, from a fear of reasonable excuse; Amongst the proposed reforms to improve individual criminal liability, which results in the regime, the Law Commission has overreporting. • Prescribing the form in which suspicious activity is reported, including devising an also recommended that the government The Law Commission’s report puts forward online interactive form; consider the need for guidance in relation 19 recommendations, which includes a to transactions involving the legal cannabis proposal to provide statutory guidance to • An exemption to allow ringfencing of industry in Canada and elsewhere. assist in applying the provisions of the current suspected criminal property by a credit or regime. The NCA and the Financial Conduct financial institution, which according to Authority (FCA) have also expressed support the Law Commission provides for a more The press release can be found HERE. for the provision of more guidance. proportionate response to the reporting of suspected criminal property. Supplementary The SARs report can be found HERE. The main recommendations are: to this, the Law Commission recommends
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British Crown Dependencies announce action plan to establish registers of company beneficial ownership
The governments of Guernsey, Jersey • The final stage will see the public granted and the Isle of Man jointly announced access to the registers by 2023 following commitments to establish registers of the introduction of legislation permitting beneficial ownership of companies on such disclosure, aligned with the approach 19 June, which includes an action plan taken in 5MLD. on how they will develop international standards of accessibility and In addition to this, Guernsey published transparency in the coming years. a separate action plan in which it has committed to report to its parliament by 2023 The action plan sets out three stages ownership with those within the EU for on the effectiveness of such registers. within a set timeframe that are consistent access by law enforcement and Financial with Europe’s approach to transparency of Intelligence Units beginning in 2021; then beneficial ownership under the Fifth Money The joint statement can be found HERE. Laundering Directive (5MLD): • The second stage, beginning in 2022, will see access for financial services businesses • The first stage concerns the interconnection and other prescribed businesses for Guernsey’s action plan can be found HERE. of the islands’ registers of beneficial corporate due diligence purposes; then
Latvian parliament adopts new legislative package to strengthen laws to combat financial crime
The Latvian parliament (Saeima) six months ahead of the deadline. The authorities will no longer have to wait for EU adopted on 13 June a comprehensive government will complete the remaining mechanisms to transpose sanctions. The legislative package to overhaul financial measures in its overhaul of financial sector measures also take into account advisory sector regulation to strengthen the fight regulation by the end of 2019. directions from international bodies, including against financial crime. Latvia’s prime the European Central Bank, the OECD and the minister Krišjānis Kariņš commended The reforms strengthen the independence, Egmont Group. the parliament’s decisive vote to pass governance, and democratic accountability the landmark reforms to strengthen of the governance structure of the Latvian Other recent amendments have also been financial sector supervision. Financial and Capital Market Commission implemented to extend the scope of the (FCMC), as all members of the FCMC board register of company beneficial ownership. “These ambitious reforms are a big step – including the chairman – will be appointed forward in our fight against money laundering, by the Latvian parliament. These changes are Meanwhile, on 25 June, Latvia’s Cabinet of the financing of terrorism, and arms in line with international standards and are Ministers supported a report from the Ministry proliferation,” said Kariņš. “These measures in compliance with the Basel Committee’s of Justice, which calls for an audit to assess demonstrate our unbending political will to banking supervision principles, in that they the factors that may have a negative impact make further changes in the financial sector further improve the transparency of the on effective criminal proceedings relating to as quickly as possible, and to become a candidate selection process. economic and financial crime. leader in transparency and governance in EU.” The measures will also enable Latvia to impose sanctions approved by the United The reforms implement the EU’s Fifth The press release can be found HERE. Anti-Money Laundering Directive in Latvia Nations Security Council more rapidly. Latvian
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EBA to improve AML supervision in 2019, which includes a programme of reviews to assess the effectiveness of AML supervisory practices in each EU member state
The European Banking Authority (EBA) A priority for 2019 is • The revision of the existing risk-based published its 2018 Annual Report on understanding the supervision guidelines; and 29 May, which provides an overview of the work carried out by the EBA in the risks and opportunities • An assessment of the feasibility of twinning past year and the key areas of focus for arising from financial programmes for staff exchanges between the coming year. The EBA’s priorities AML supervisory authorities. for 2019 include improving anti-money innovation, which laundering and combating the financing includes taking forward The EBA will also continue to progress its of terrorism (AML/CFT) supervision. the actions in its report work on FinTech, focusing in particular on the adequacy of legislative provisions governing Alongside the European Securities and on crypto-assets virtual assets, and will carry out an analysis of Markets Authority (ESMA) and the European any obstacles in the AML/CFT legislation that Insurance and Occupational Pensions published in 2019, which will revise the are preventing cross-border business. Authority (EIOPA), the EBA will continue to existing risk factor guidelines published in enhance supervisory cooperation across A further priority for the EBA in 2019 is June 2017. The EBA will also complete its the EU by publishing final guidelines on understanding the risks and opportunities preliminary investigations into claims against supervisory cooperation and information arising from financial innovation, which several national authorities. A programme exchange. The three authorities will also includes taking forward the actions identified of staff-led AML/CFT reviews of national continue to explore links between AML/ in its report on crypto-assets. The EBA will approaches to AML/CFT supervision will also CFT and prudential supervision, with the work to support authorities in monitoring the be launched, which will focus on assessing intention of developing better cooperation crypto-asset activities of banks, investment the effectiveness of supervisory practices in between supervisors, which will include the firms, payment institutions and e-money each EU member state. development of a multilateral agreement institutions through the development of a on the modalities for the exchange of The EBA will also complete tasks assigned to common template and will assess advertising information between the ECB and all of the it in the Council’s action plan, which includes: and disclosure practices regarding crypto- AML/CFT competent authorities. asset products and services. • The development of guidance on how to A second joint opinion on ML/TF risks, as factor AML/CFT-related aspects into the The Annual Report can be found HERE. mandated under Article 6(5) of the Anti- prudential supervisory process; Money Laundering Directive, will also be
UK’s HM Treasury publishes post-Brexit guidance on the financial sanctions regime against Russia
The UK HM Treasury’s Office of be implemented through the Russia restrictions, prohibitions on loan and credit Financial Sanctions Implementation (Sanctions) (EU Exit) Regulations 2019. arrangements and restrictions on Crimea- (OFSI) published guidance on 6 June on related investments. the financial sanctions regime against The Regulations impose asset freezes on designated persons, payment processing Russia, which would apply if the UK The UK’s guidance can be found HERE. leaves the EU without a deal and would restrictions, financial services and investment
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TECHNICAL UPDATES
Joint Chiefs of Global Tax Enforcement involved in over 50 probes involving international enablers of tax evasion
The Joint Chiefs of Global Tax The agencies are also cooperating on cases tax evaders, international organised crime Enforcement (J5) met in Washington DC covering crimes from money laundering groups and those who help them,” said to mark the one-year anniversary of the and the smuggling of illicit commodities to Simon York, director of HMRC’s Fraud formation of the J5 and announce the personal tax frauds and evasion. Additionally, Investigation Service. “In just 12 months, that results from its first year. The five chiefs, there have already been hundreds of data net has tightened with eighteen suspected from the Australian Criminal Intelligence exchanges between J5 partner agencies with enablers in our sights and a further 50 cases Commission (ACIC) and Australian more data being exchanged in the past year in the pipeline. This builds on work that Taxation Office (ATO), the Canada than the previous 10 years combined. has seen HMRC secure more than £2.9bn Revenue Agency (CRA), the Dutch from offshore tax evaders since 2010. Our Fiscal Intelligence and Investigation J5 aims to increase collaboration in the message remains clear - no matter how safe Service (FIOD), Her Majesty’s Revenue & fight against international and transnational you think you are, the J5 are closing in.” Customs (HMRC), and Internal Revenue tax crime and money laundering, including Service Criminal Investigation (IRS-CI), concerns around cyber-crime and crypto- J5 has also focused on platforms that enable announced in their 5 June press release currency as well as enablers of global tax information sharing, such as the FCInet that J5 is involved in more than 50 evasion, whilst working to share intelligence platform, which is a decentralised virtual investigations involving sophisticated and data in near real-time. computer network that enables agencies to international enablers of tax evasion, analyse and exchange data anonymously. including a global financial institution “When we launched the J5 we were clear that we wanted to use our combined powers and its intermediaries who facilitate The press release can be found HERE. taxpayers to hide income and assets. and expertise to close the net on offshore
The Wolfsberg Group publishes guidance for financial institutions on customer tax evasion
The Wolfsberg Group published own activities and tax affairs, including employees) and by persons acting on the guidance on customer tax evasion failure to comply with requirements under institution’s behalf. This risk includes the on 14 May, which provides financial customer tax legislation/regulations, such impact of laws which create corporate institutions with an industry perspective as Foreign Account Tax Compliance Act criminal liability for the failure to prevent on how to develop, implement and provisions and the Common Reporting the facilitation of tax evasion. maintain an effective anti-tax evasion Standard developed by Organisation for compliance programme. Economic Co-operation and Development; The guidance does not recommend a mandatory approach to the establishment of The Wolfsberg Group states that it may • Failure to comply with money laundering an anti-tax evasion compliance programme, be worthwhile considering anti-money laws and regulations, given that tax evasion and acknowledges that each financial laundering (AML) controls and procedures is considered a predicate offence to money institution’s risk mitigation strategy must be in the context of anti-tax evasion, as AML laundering in most countries; tailored to its risk appetite. controls play an important role in the identification of tax evasion facilitation. • The introduction of tax amnesty The press release can be found HERE. According to the guidance, tax evasion risk programmes; or within a financial organisation can stem from the following: • Facilitation of tax evasion by a financial institution’s customers (as well as by The guidance can be found HERE. • Management of the financial institution’s non-customers, such as suppliers and
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IOSCO report Facebook unveils plans to launch on standards global cryptocurrency called Libra to address Facebook unveiled plans on 18 June to launch a new global digital cyber risk currency, called Libra, next year, which will be backed by assets and The Board of the International is supported by companies including Organization of Securities Visa and Mastercard. Commissions (IOSCO) issued a final report on 18 June on Facebook set out its plans in a white paper three internationally recognised in which it claims that 1.7 billion unbanked cyber standards and frameworks people around the world will be able to used by IOSCO members, which use the digital currency via their mobile consumers, and the economy,” said Waters. identifies potential gaps in the phones. Facebook states that know-your- “Regulators should see this as a wake-up application of these standards. customer information will be collected, and government-issued ID will be required to set call to get serious about the privacy and national security concerns, cybersecurity The IOSCO Cyber Task Force prepared up an account. Computer programs will also risks, and trading risks that are posed by the report, which is intended to be used to detect suspicious transactions. cryptocurrencies. Given the company’s serve as a resource for financial troubled past, I am requesting that Facebook market regulators and firms, raise The independent Libra Association – a agree to a moratorium on any movement awareness of existing international not-for-profit membership organisation forward on developing a cryptocurrency cyber standards and frameworks headquartered in Geneva – will govern until Congress and regulators have the and encourage the adoption of good the blockchain network on which the opportunity to examine these issues and practices to protect against cyber risk. Libra cryptocurrency is built and the Libra take action.” The report also sets out a series of Reserve will hold “low volatility assets” in questions that firms and regulators various cryptocurrencies to provide the The Bank for International Settlements (BIS) may use to promote awareness of Libra with its intrinsic value. The initial group published its annual economic report on 23 cyber good practices and review their of organisations that will work together on June in which it discusses the opportunities own practices. finalising the Libra Association’s charter and will become “Founding Members” include and risks presented by the entry of large technology firms (“big techs”) into financial The report examines how IOSCO Mastercard, PayPal, Stripe, Visa, eBay, services. The BIS report states that the entry member jurisdictions apply three Lyft, Spotify AB, Uber Technologies Inc, of big tech into finance holds the promise of internationally recognised cyber Vodafone Group, and Coinbase Inc. efficiency gains and can enhance financial standards: the CPMIIOSCO Guidance inclusion, but that regulators need to ensure on Cyber Resilience for Financial Regulators from around the world a level playing field between big techs Market Infrastructures; the National responded to the announcement, with and banks. Big techs’ entry presents new Institute of Standards and Technology the UK’s Financial Conduct Authority and complex trade-offs between financial Framework for improving Critical stating that the launch would require close stability, competition and data protection, Infrastructure Cybersecurity; and scrutiny and the G7 nations stating that states the BIS report. the International Organization for they would set up a forum to examine the Standardization 27000 series of risks posed. Maxine Waters, chair of the standards. US House Financial Services Committee, expressed concern over Facebook’s The Libra vision can be found HERE. continuing “unchecked” expansion. “The cryptocurrency market currently The report can be found HERE. lacks a clear regulatory framework to The BIS report can be found HERE. provide strong protections for investors,
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TECHNICAL UPDATES
EU Commission presents member EU agrees state specific recommendations negotiating on fighting money laundering and mandate on aggressive tax planning dual-use goods
The European Commission The Commission The Council of the EU announced its presented its 2019 country-specific singles out Denmark, intention to modernise the current recommendations (CSRs) on 5 June, EU regime for the control of exports, which included recommendations Estonia, Latvia, transfer, brokering, technical to support the fight against money Bulgaria, Malta, and assistance and transit of dual-use laundering in Denmark, Estonia, Sweden due to the items on 5 June. The aim of the Latvia, Bulgaria, Malta, and Sweden; to mandate is to strengthen domestic safeguard judicial independence and significant money controls to prevent the proliferation the rule of law in Cyprus and Hungary; laundering scandals of weapons of mass destruction and and to fight aggressive tax planning in their means of delivery. Cyprus, Hungary, Ireland, Luxembourg, that have involved Malta and the Netherlands. those member states The new rules will amend the EU export control system of dual-use items so The Commission singles out Denmark, that the system is better adjusted to Estonia, Latvia, Bulgaria, Malta, and Sweden tailored advice to individual member states the evolving political, economic and due to the significant money laundering on how to boost growth and investment, technological landscape. The proposed scandals that have involved those member while maintaining sound public finances. changes include: states. The recommendations that are tailored to each member state note the As an example, the EU’s specific • Further harmonising licensing recent developments that have been taken recommendations for Denmark recognise processes, through the introduction to strengthen anti-money laundering at that the Danish parliament has reached of new general export authorisations, national level, but point out the challenges political agreements for a new AML which are authorisations for exports that remain and the additional measures package, which includes a strategy to to certain countries available to all that need to be adopted. combat money laundering and terrorism exporters who respect the conditions; financing. However, challenges remain, Concerning aggressive tax planning, the states the EU, and the financial supervisor • Harmonisation of the control of European Commission has proposed for still needs to adopt additional measures supplying the technical assistance the first time a specific recommendation and guidelines on how to strengthen related to sensitive items; and to member states identified as a result supervision in certain areas. Attention of an examination of tax rules, economic should also be paid to the implementation • The addition of cyber surveillance indicators and country-specific analyses. of the measures, once adopted. items to the regime and enabling According to the Commission, there has competent authorities to control such been more progress in some countries, items using the current regulation. The announcement can be found HERE. particularly the Netherlands and Ireland, which are moving in the right direction, but The Council Presidency will now start further progress is still needed. negotiations with the Parliament. The specific reports can be found HERE.
The Commission’s country-specific recommendations, published every spring The EU’s fact sheet can be found HERE. The press release can be found HERE. as part of the European Semester, provide
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First EU-wide BoE speech on the need for AI and intellectual machine learning oversight property James Proudman, executive director suggests that boards should attach of UK deposit takers at the Bank of priority to the governance of data crime threat England (BoE) delivered a speech – what data should be used, how it on the governance of artificial should be modelled and tested, and assessment intelligence (AI) and machine whether the outcomes derived from learning (ML) at the Financial the data are correct; published Conduct Authority’s conference on governance in banking on 4 June, in 2. The introduction of AI/ML does not Europol and the European Union which he praised the progress being eliminate the role of human incentives Intellectual Property Office (EUIPO) made by technological innovation, in delivering good or bad outcomes, published the first EU-wide but highlighted the governance but transforms them, which implies intellectual property crime threat challenges, stating that bank board that boards should continue to focus assessment on 12 June, which has members should continue to focus on the oversight of human incentives found that most criminal activity attention on functions that are being and accountabilities within AI/ML- involving counterfeiting is carried automated, including those related to centric systems; and out by increasingly professionalised anti-money laundering (AML). organised crime networks, which 3. The acceleration of AI/ML will create can reap large profits while running In his speech, Proudman used the example increased execution risks during the relatively few risks. of AI and ML being used in the context of transition that need to be overseen. AML and fraud detection. “Until recently, Boards should reflect on the range The report highlights that although the most firms were using a rules-based of skill sets and controls that are majority of counterfeits in the EU market approach to AML monitoring. But this is required to mitigate these risks both are produced outside Europe, domestic changing and firms are introducing ML at senior level and throughout the manufacturing within Europe is an software that produces more accurate organisation. increasing trend. The threat assessment results, more efficiently, by bringing stresses that, as well as the traditional together customer data with publicly Separately, The Law Society of England categories of counterfeited clothes, available information on customers from and Wales published the results of a year- footwear and luxury products, there is a the internet to detect anomalous flows of long investigation into the use of AI in the growing trade in fake products which have funds,” said Proudman. “About two thirds of criminal justice system on 4 June, calling the potential to damage human health. banks and insurers are either already using for urgent oversight of complex algorithms AI in this process or actively experimenting in criminal justice. The report puts forward The threat assessment also looks at with it, according to a 2018 IIF survey. recommendations including that a legal illegal digital content, which continues to These firms are discovering more cases framework is established for the use of be distributed through BitTorrent portals while reducing the number of false alerts. complex algorithms in the justice system and peer-to-peer networks, and also This is crucial in an area where rates of and that a national register of algorithmic increasingly, via cyberlockers. The owners so-called ‘false-positives’ of 85 per cent or systems used by public bodies is created of these platforms are said to generate higher are common across the industry.” to provide transparency. profit through digital ads. In many cases, these websites are also used to target The three principles for governance consumers using phishing techniques or described by Proudman were: The BoE transcript can be found HERE. the dissemination of malware. 1. The introduction of AI/ML poses significant challenges around the The Society’s report can be found HERE. The assessment can be found HERE. proper use of data and as such
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Foreign Affairs Committee report expresses serious concern over the UK’s “fragmented” sanctions policy
The UK House of Commons Foreign • The listing of En+ on the London Stock The Committee calls Affairs Committee published a report Exchange in 2017 is an example of for a major review on 12 June entitled “Fragmented and the risks inherent in the government’s incoherent: the UK’s sanctions policy,” “fragmented” approach to sanctions of the government’s following an inquiry into the UK’s design and implementation. Although the approach to sanctions sanctions policy, which has found that involvement of an individual such as Oleg the UK government does not have a Deripaska may have raised red flags at the at every stage: overall clear strategy for sanctions in the light FCO and elsewhere, there was “evidently strategic goals, policy of the UK’s departure from the EU and no mechanism for those concerns to be planning and formation, that little thought has gone into the conveyed,” and no requirement for the UK’s priorities. The latest report picks Financial Conduct Authority (FCA) to implementation and up many of the themes explored in the consult national security experts. It would enforcement Committee’s 2018 report, “Moscow’s not be reasonable to expect a body such as Gold: Russian Corruption in the UK.” the FCA to recognise a potential national security threat on its own and act to block a • Sanctions will be more directly affected by Under the heading “lack of clear government listing, states the Committee; the UK’s departure from the EU than almost strategy,” the Committee recommendations any other foreign policy tool. As the UK and conclusions include that: • The listing and subsequent de-listing of En+ prepares to take responsibility for designing, Group by OFAC highlights several issues implementing and enforcing sanctions on • The government must agree on a clear legal that the UK must consider in redesigning its own, the Committee hoped to discover position regarding the UK’s ability to adopt and implementing future sanctions. The that the FCO and wider government had and implement Magnitsky sanctions while Committee states that it is not certain a strong sense of its goals and strategic still an EU member and during any possible that the outcome of the de-listing process priorities for the use of these tools. Instead, post-Brexit implementation period; takes sufficient account of the nature of the Committee have learned that the the relationship between oligarchs such as government has “spent the last two years • The Home Office has not provided a list of Deripaska and the Russian state as outlined running as fast as it can just to stay in the people who are prevented from entering the in the Committee’s report on Moscow’s same place”; UK as sanctioned individuals and as such Gold. Nor are the Committee convinced the Committee believes it would be effective that the UK’s definition of “control” over a • The Committee calls for a major review of to publish this list to demonstrate the UK’s company or legal entity can encompass the the government’s approach to sanctions at commitment to the rule of law; and informal relationship networks underpinning every stage: overall strategic goals, policy the Kremlin’s activities; and planning and formation, implementation and • The National Security Council (NSC) enforcement. Any sanctions strategy must must designate sanctions strategy as an • The Committee is disheartened that it be supported by coherent and coordinated urgent priority and must allocate time and has seen no evidence yet that the UK government structures, coupled with more resources accordingly. The NSC is called on government has been grappling with the effective engagement with the private sector to begin a review of UK sanctions strategy difficult problems in its efforts to develop bodies on the frontlines of compliance; and and to report its findings by the end of 2019. a clear and coherent strategy for sanctions policy after the UK leaves the EU. Such as • The UK must seize the opportunity to Under the heading “sanctions and stopping combating the activities of hostile regimes become a global leader in sanctions policy dirty money,” the recommendations and such as Russia, without compromising the and must aim to set the international conclusions include that: UK’s adherence to the rule of law. gold standard for strategy, design and implementation, concludes the Committee. • The UK’s Foreign & Commonwealth Office Under the heading “towards global (FCO) should acknowledge that it has a vital leadership on sanctions,” the Committee’s The Committee report can be found HERE. role in cracking down on money laundering; recommendations include that:
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Dominica OECD initiative uncovers EUR 4.9 removed trillion in offshore accounts from the EU’s More than 90 jurisdictions participating in the global list of non- transparency initiative under the Organisation for Economic Co- cooperative operation and Development’s (OECD) Common Reporting Standard (CRS) jurisdictions for have exchanged information on 47 million offshore accounts since 2018, with a total value of around EUR tax purposes 4.9 trillion, according to new data offshore funds that can now be effectively released on 7 June by the OECD. taxed by authorities worldwide,” said The Council of the European OECD secretary-general Angel Gurria, The Automatic Exchange of Information Union announced on 14 June unveiling the new data prior to the meeting (AEOI) initiative is the largest exchange that it has decided to remove of the G20 finance ministers in Japan. Dominica from the EU list of of tax information in history, and represents more than two decades non-cooperative jurisdictions Meanwhile, the OECD published its third of international efforts to counter tax for tax purposes, following annual progress report of the OECD/G20 evasion. According to the data, voluntary Dominica’s implementation of its Inclusive Framework on BEPS on 8 June, disclosure of offshore accounts, financial commitments to address the EU’s which describes the progress made from assets and income in the run-up to full concerns regarding the automatic July 2018 to May 2019. exchange of financial information. implementation of the AEOI initiative resulted in more than EUR 95 billion in According to the Council, Dominica additional revenue for the OECD and G20 has completed the steps to ratify countries over the 2009-2019 period. The press release can be found HERE. the Organisation for Economic Co-operation and Development “The transparency initiatives we have (OECD) multilateral convention on designed and implemented through The progress report can be found HERE. mutual administrative assistance, the G20 have uncovered a deep pool of which warrants Dominica’s removal from the EU’s list of non-cooperative jurisdictions.
Following the removal of Dominica, Communique on the G20 meeting eleven jurisdictions remain on the EU’s “blacklist” of non-cooperative The G20 published a communique Key takeaways include: that crypto- jurisdictions for tax purposes: on 10 June, detailing the key points assets do not pose a threat to financial American Samoa, Belize, Fiji, Guam, from the G20 finance ministers and stability at this point, but the G20 the Marshall Islands, Oman, Samoa, central bank governors meeting held remains vigilant to the risks; and that the Trinidad and Tobago, the United Arab in June, which includes the continued G20 will continue to step up efforts to Emirates, the US Virgin Islands and commitment by the G20 to applying enhance cyber resilience. Vanuatu. the recently amended Financial Action Task Force (FATF) Standards to virtual assets and related providers for anti- The press release can be found HERE. money laundering and countering the The communique can be found HERE. financing of terrorism.
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Senators introduce Illicit Cash Act to update AML regime
US Senate Banking Committee feedback to financial institutions on their members Mark Warner, Tom Cotton, suspicious activity reports; Doug Jones and Mike Rounds introduced The Improving Laundering • Prioritising the protection of personally Laws and Increasing Comprehensive identifying information while establishing a Information Tracking of Criminal clear path for financial institutions to share Activity in Shell Holdings (Illicit Cash) AML/CFT information for the purposes of Act on 10 June, which proposes identifying suspicious activity; changes to the Bank Secrecy Act (BSA) to strengthen the Treasury Department’s • Preventing foreign banks from obstructing tools to fight financial crime, optimise • Creating a team of FinCEN technology money laundering or terrorist financing the use of bank regulatory reports experts to further the development of new investigations by requiring these banks and mandate new disclosures by US technologies to combat money laundering; to produce records in a manner that businesses and other corporate entities. establishes their authenticity and reliability • Facilitating communications between for evidentiary purposes, and compelling The Illicit Cash Act aims to create a more Treasury and financial institutions by them to comply with subpoenas. This transparent corporate ownership system and establishing a Treasury financial institution legislation would also authorise contempt an updated AML/CFT regime by: liaison regarding AML/CFT rules, sanctions for banks that fail to comply; and regulations, and examinations; • Establishing federal reporting requirements • Ensuring the inclusion of current and future mandating that all beneficial ownership • Requiring the Department of Justice to payment systems in the AML/CFT regime information be maintained in a provide the Treasury Department with by updating the definition of “coins and comprehensive federal database, accessible metrics on the usefulness of AML/CFT data currency” to include digital currency. by federal and local law enforcement; from financial institutions, as well as data on trends identified in the AML/CFT landscape; • Creating a hub of financial expert investigators at FinCEN to investigate • Requiring law enforcement to coordinate The discussion draft can be found HERE. potential AML/CFT activity; with financial regulators to provide periodic
US issues final regulations on US tax base that close loopholes which allowed evasive tax practices
The United States Department of the low-taxed income included in the gross The Treasury also issued final regulations on Treasury and the Internal Revenue income of certain US shareholders of foreign tax credit aspects of the transition Service (IRS) issued final regulations foreign corporations as well as reporting tax and proposed regulations that address under the Tax Cuts and Jobs Act on requirements. The final regulations narrow the treatment of domestic partnerships for 14 June that provide guidance on the the anti-abuse provisions included in the purposes of determining amounts included treatment of global intangible low-taxed proposed regulations and revise the domestic in the gross income of their partners and income in order to close loopholes that partnership provisions by adopting an provide new rules regarding gross income allowed evasive tax practices, which aggregate approach for determining the that is subject to a high rate of foreign tax. included shifting US profits overseas. amount of global intangible low-taxed income included in the gross income of a partner with The regulations offer guidance for respect to controlled foreign corporations The press release can be found HERE. determining the amount of global intangible owned by a partnership.
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UK court EU to negotiate agreements on rules AML e-evidence in criminal matters whistleblowers The Council of the EU adopted two Both mandates aim mandates on 6 June authorising the could not rely on Commission to negotiate on behalf to facilitate access to of the EU an agreement with the US e-evidence, such as public interest facilitating access to e-evidence and emails or documents to participate in the negotiations on disclosure a second additional protocol to the on the Cloud, for use in Cybercrime Convention. criminal proceedings defence Both mandates aim to facilitate access to e-evidence, such as emails or documents targeted consultations as part of a study The UK High Court ruled on 20 June located on the Cloud, for use in criminal on possible solutions for retaining data. in a whistleblowing case involving two proceedings. An EU-US agreement to The Commission also submitted a UK private detectives that were hired speed up the access of law enforcement request to the Council of Europe to to investigate anti-money laundering authorities to e-evidence is of upmost become an observer in the Group of concerns at a bank that they could importance, according to the Council, but States against Corruption (GRECO). not rely on a public interest disclosure it must also protect citizens’ data, privacy GRECO is one of the few bodies of the defence because of the way in which and procedural rights. Council of Europe with which the EU they disclosed the information, has no dedicated legal framework of amongst other things. The Council also adopted conclusions on the retention of electronic cooperation. The two former police officers had been communications data for the purpose hired by the owners of FBME Bank to of fighting crime. The Council notes that The press release can be found HERE. investigate, following the Cyprus branch data retention is an essential tool for of the bank being taken under the investigating serious crime, but that use The conclusions can be found HERE. administration of the Central Bank of should be guided by the need to protect Cyprus in the wake of money laundering fundamental rights and freedoms. The concerns formally expressed in a notice Commission is tasked with organising The EU’s request can be found HERE. from the US regulator FinCEN. The two detectives were then sued for allegedly passing confidential information to Cyprus and the US authorities as well as media outlets following the termination of their Singapore consults on proposed investigation at the bank. AML/CFT notices for PSPs In re Saab & Anor v. Angate Consulting Ltd & Ors [2019] EWHC 1558 (Comm), the The Monetary Authority of Singapore is proposing to issue new notices to defendants were found to be in breach (MAS) published a consultation paper payment service providers on AML/ of their obligation of confidentiality when on 6 June on the proposed payment CFT. Annex A of the consultation they disclosed information relating to their services notices on the prevention of lists the questions that MAS would investigations at the bank to the Cyprus money laundering and countering the like respondents to answer. The and US authorities. financing of terrorism (AML/CFT). consultation closes on 5 July.
In order to achieve the objectives of The court ruling can be found HERE. The consultation can be found HERE. the Payment Services Act 2019, MAS
13 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
UK Financial Markets Law Committee Malta publishes a report on US sanctions publishes and the EU Blocking Regulation guidance
The UK Financial Markets Law The report provides on opening Committee (FMLC) published a report on 14 June on the uncertainty that has recommendations accounts for been caused by the recent imposition on the issues of legal of US sanctions with extra-territorial effect, mainly in relation to Iran, and the uncertainty FinTechs EU Blocking Regulation. Malta’s Financial Intelligence cannot be avoided entirely where there are Analysis Unit (FIAU) and The report examines the issues of legal two legal regimes with conflicting objectives. Financial Services Authority uncertainty which arise under English law as The report seeks to illustrate areas of risk published joint “Guidance for a result of the amendment to the Blocking identified as a result of the uncertainties. Credit Institutions, Payment Regulation to cover certain re-imposed Institutions and Electronic Money US sanctions on Iran. The report provides Institutions opening accounts for recommendations on the issues of legal The Committee report can be found HERE. FinTechs” on 18 June, which is uncertainty, but recognises that uncertainty intended to provide further clarity to institutions approached by operators in the FinTech space.
The guidelines are intended to European Commission considers provide institutions with a clearer picture on the operations of new methodology to identify high-risk FinTech companies, and how these companies combat money third countries pursuant to 5MLD laundering and terrorist financing (ML/FT) threats.
In order to improve transparency of the Following the rejection by the Council Meanwhile, Malta’s FIAU published process and engagement with third of the European Union of the draft list its annual report on 19 June, which countries concerned throughout, the of high-risk countries proposed by the provides details on Malta’s progress Commission is considering a staged European Commission in February in in regards to anti-money laundering approach whereby it would: accordance with Article 9 of Directive and combating terrorist financing. (EU) 2018/843 on the prevention of The report describes 2018 as “a • Consult them on preliminary findings; the use of the financial system for game changer for the Compliance the purposes of money laundering Section,” which has led changes in its or terrorist financing (5MLD), the • Draft country-specific benchmarks to address each country’s shortcomings; and supervisory strategy, risk assessment Commission presented to member methodology and governance state representatives a revised • Seek third countries’ commitments to framework. methodology to identify high-risk third implement specific corrective measures countries during a meeting on 5 June. before the listing is finalised. The Commission intends to consult with The guidance can be found HERE. The Commission intends to finalise the new member states on the preparation of the methodology and publish the revised list of revised methodology, and to engage with the high-risk third countries in Q3/Q4 2019. The report can be found HERE. Financial Action Task Force (FATF).
14 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
FCA review on money laundering risks in capital markets
The UK’s Financial Conduct Authority Firms should factor into their money (FCA) published on 10 June thematic laundering surveillance systems that other review TR19/4, which looks at money firms in the transaction chain may not have laundering risks in capital markets. The an AML surveillance system in place; FCA visited 19 market sector operators with the aim to, where possible, develop • Enhanced due diligence (EDD) and case studies to inform the industry. source of assets – firms should remain vigilant of movement of assets between The FCA finds that generally there is different accounts, before being sold. For insufficient understanding of firms’ exposure ongoing enhanced monitoring of high- to money laundering risks in capital markets risk customers, firms could assign this and outlines how criminals might exploit The FCA considers the capital market-specific responsibility to relationship managers; and “free of payment” bond transfers, mirror money laundering risks to be: trading, debt issuance, equity placement and • Ineffective transaction monitoring – there over-collateralised account funding, among • Inadequate customer due diligence (CDD) should be a combination of automated other activity. The FCA also observes that – CDD should focus on identifying the and manual monitoring. Trade surveillance the first line of defence needs to take greater customer by adequately identifying their systems should be calibrated to allow firms ownership of money laundering risks, rather intended trading strategies. In secondary to recognise the correlation between money than viewing it as the exclusive responsibility markets, there is often a long chain of laundering and market abuse risks. of the compliance function. transactions, with orders routed through different firms. In such case, the FCA The FCA expects firms to consider their The review finds that between April 2017 and expects all firms involved to cooperate with approaches to money laundering risks in light March 2018, capital markets firms filed 324 each other for CDD purposes; of this review. The FCA is also considering suspicious activity reports (SARs), attributing its supervisory approach in reaction to this this low amount to: companies perceiving • Insufficiently robust AML risk assessment review. According to the FCA, the National suspicious activity as indicative of market – firms should ensure that capital markets Crime Agency is currently considering the abuse rather than money laundering, an forms part of their AML risk assessments; publication of a SAR glossary code for capital insufficient understanding of how dirty money markets that can be used to tag activity can enter the markets, a lack of guidance • Lack of visibility of underlying customers potentially linked to money laundering. on criminal methodology and the belief that and ultimate beneficial owners – each firm filing reports was not necessary because the in the transaction chain has responsibility The thematic review can be found HERE. laundering occurred elsewhere in the market. to monitor and prevent money laundering.
UK Finance publishes principles for exiting a customer, including over a customer’s money laundering risk
UK Finance, a trade association for The principles, which have been developed approach that a bank should adopt when financial services, published on 4 June with input from the UK’s Financial Conduct communicating that decision to a customer. its principles for exiting a customer, Authority, are designed to improve how which may arise for different reasons, banks communicate with customers when including the customer’s money they cannot offer, or continue to provide, The principles can be found HERE. laundering or terrorist financing risk. banking facilities. The principles set out the
15 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
Canada allocates additional CAD 10 million to combat money laundering and terrorist financing
The Canadian government’s Ministers agreed to beneficial ownership information more Department of Finance announced transparent. Ministers also discussed the on 13 June new measures to combat cooperate on initiating challenges faced by law enforcement to financial crime in Canada, which consultations on investigate and prosecute complex financial includes providing up to an additional making beneficial crimes perpetrated by criminals that use CAD 10 million to the Royal Canadian increasingly intricate methods to conceal Mounted Police to help it invest in ownership information their crime and profits and agreed that information management and IT more transparent governments should intensify efforts to infrastructure and digital tools to investigate and prosecute financial criminals, pursue complex financial crimes. and recover proceeds of crime using criminal to address the inherent risks of money and civil processes. Other measures include: laundering and other illicit activity that may arise in the practice of law. The working In the context of ensuring that sectors • Making it easier to find out who owns group was due to hold its first meeting at vulnerable to money laundering, including what by improving beneficial ownership the end of June; and real estate, casinos, money services transparency. Participating provinces and businesses and the legal profession, territories will initiate consultations towards • Working cross-government on anti-money effectively manage these risks, ministers a beneficial ownership public registry. laundering best practices and reporting also agreed to have officials work together These consultations will examine the back to ministers by January 2020. on cross-government anti-money laundering benefits to a public registry in combatting best practices. financial crimes, and will prioritise Several of Canada’s federal, provincial, and businesses’ competitiveness, individuals’ territorial ministers of finance and ministers privacy and respect of jurisdictional responsible for anti-money laundering The announcement can be found HERE. responsibility; and beneficial ownership transparency issued a related joint statement on 14 • Creating a new working group with the June. The ministers agreed to cooperate The joint statement can be found HERE. Federation of Law Societies of Canada on initiating consultations on making
OECD updates money laundering and terrorist financing awareness handbook for tax examiners and auditors
The Organisation for Economic Co- tax authorities can use to help identify updated money laundering indicators. The operation and Development (OECD) signs of terrorist financing. handbook aims to raise the awareness of tax published an updated version of examiners, auditors, and investigators, of their its money laundering and terrorist First launched in 2009 as a practical tool to role in combatting illegal activities. financing awareness handbook for tax assist tax authorities in identifying money examiners and tax auditors on 13 June, laundering during the course of normal tax The updated report can be found HERE. which includes new information that audits, the revised handbook also includes
16 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
US House Financial Services Committee approves the Corporate Transparency Act
The US House Financial Services H.R. 2513, which was passed by a bipartisan bill was introduced by Rep. Carolyn Maloney, Committee approved the Corporate vote of 43 to 16, would require corporations chair of the Subcommittee on Investor Transparency Act on 12 June, which and Limited Liability Companies to disclose Protection, Entrepreneurship, and Capital would require companies to disclose their beneficial owners to the Financial Crimes Markets, and Rep. Peter King. the identity of their beneficial owners Enforcement Network, ending criminals’ in order to expose anonymous shell ability to use anonymous shell companies The House vote can be found HERE. companies and combat illicit finance. to hide their money and illicit activities. The
FATF issues interpretive note and guidance for virtual assets and virtual asset service providers
Outgoing Financial Action Task Force financial sanctions, just like other entities (FATF) president Marshall Billingslea subject to AML/CFT regulation. chaired the last plenary meeting under the US presidency in Orlando on The FATF will monitor implementation of the 19-21 June, which marked the 30th new requirements and conduct a 12-month anniversary of the FATF. The FATF review in June 2020. The FATF will also plenary saw new global standards establish a contact group to monitor industry agreed to protect virtual assets from efforts to enhance compliance with the FATF abuse by money launderers, terrorist Standards. financiers, and other illicit actors. The FATF also issued “Guidance for a The FATF adopted and issued an Interpretive countries will not be permitted to rely on Risk-Based Approach to Virtual Assets and Note to Recommendation 15 on New a self-regulatory body for supervision or Virtual Asset Service Providers” to help Technologies (INR. 15) that clarifies monitoring) — and implement sanctions and countries and virtual asset service providers the FATF’s previous amendments to the other enforcement measures when service understand their anti-money laundering and international standards relating to virtual providers fail to comply with their AML/CFT counter-terrorist financing obligations. assets and describes how countries and obligations. Some countries may decide to obliged entities must comply with the prohibit virtual asset activities based on their On 26 June, the FATF also published three relevant FATF Recommendations to prevent own assessment of the risks and regulatory separate guidance documents for a risk- the misuse of virtual assets for money context, or to support other policy goals. based approach for legal professionals; laundering and terrorist financing and the the accounting profession; and trust and financing of proliferation. INR. 15 also requires countries to ensure that company service providers. service providers assess and mitigate their The obligations require countries to assess money laundering and terrorist financing and mitigate their risks associated with risks and implement the measures under the The Interpretive Note can be found HERE. virtual asset activities and service providers; FATF Recommendations, including customer license or register service providers and due diligence, record-keeping, suspicious subject them to supervision or monitoring by transaction reporting, and screening all The FATF guidance can be found HERE. competent national authorities — (notably, transactions for compliance with targeted
17 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
FATF update on FATF continues to suspend counter- the financing of measures on Iran until October
ISIL, Al-Qaeda The Financial Action Task Force 6. Ratifying and implementing the (FATF) plenary on 19-21 June saw Palermo and TF Conventions and and affiliate monitoring actions announced to clarifying the capability to provide address deficiencies in Iran’s anti- mutual legal assistance; and groups money laundering and counter terrorism financing (AML/CFT) 7. Ensuring that financial institutions verify that wire transfers contain During its plenary meeting on 19-21 system. If by October, Iran does not complete originator and beneficiary June, the Financial Action Task Force enact the Palermo and Terrorist information. (FATF) adopted its tenth update on Financing Conventions in line with the the financing of ISIL, Al-Qaeda and FATF Standards, then the FATF will The FATF has decided to continue the affiliate groups. require the introduction of enhanced reporting mechanisms or systematic suspension of counter-measures, with the exception of calling on members FATF explains that ISIL has seen a reporting of financial transactions; and all jurisdictions to require increased significant decrease in its revenues, and increased external audit supervisory examination for branches and which has led to a fundamental shift in requirements for financial groups subsidiaries of financial institutions based the financial structure of ISIL and how the with respect to any branches and in Iran, in line with its February statement. core group remaining in Iraq and Syria is subsidiaries located in Iran. linked to its affiliates and branches around In addition to this, the FATF remains the world. ISIL continues to provide Despite progress made, including the concerned by the Democratic People’s financial support to its branches, but also passage of the Anti-Money Laundering Act, Republic of Korea’s (DPRK) failure to empowers them to raise their own funds the FATF expressed disappointment that address the significant deficiencies in its locally, and even relies on some branches Iran’s Action Plan remains outstanding. AML/CFT regime and the threat posed to distribute funds within their own region. Iran is directed to fully address: by the DPRK’s illicit activities related to ISIL continues to exploit the money or 1. Criminalising terrorist financing, the proliferation of weapons of mass value transfer services sector, states FATF, including by removing the exemption destruction (WMDs) and its financing. especially unregistered providers. for designated groups “attempting to The FATF also issued a statement on Despite its territorial defeat in Iraq and end foreign occupation, colonialism Brazil on the coming into force of Decree Syria, ISIL and its affiliate groups still and racism”; no.9.825 on 8 June, which aims to address possess stockpiled cash and other 2. Identifying and freezing terrorist shortcomings for identifying and freezing financial resources, and have made assets in line with the relevant United terrorist assets. The FATF stated that it will attempts to invest these illicit gains Nations Security Council resolutions; review the Decree, but it will continue to into legitimate business and other view this as a membership issue. investments, states FATF, citing evidence 3. Ensuring an adequate, enforceable that a new ISIL network within Central customer due diligence regime; In regards to jurisdictions subject to Africa may be attempting to establish monitoring due to strategic AML/CFT businesses to buy gold and sell it in 4. Clarifying that the submission of STRs deficiencies, FATF announced that Serbia foreign markets. for attempted TF-related transactions will no long be subject to monitoring and are covered by Iran’s legal framework; that Panama has been added to the list. The FATF continues to monitor the changes in TF risk posed by these and 5. Demonstrating how authorities other terrorist groups. The public statement can be found HERE. are identifying and sanctioning unlicensed money/value transfer The FATF update can be found HERE. service providers; Monitoring update can be found HERE.
18 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
TECHNICAL UPDATES
FATF plenary approves priorities under FATF finalises upcoming presidency of Xiangmin Liu guidance
The Financial Action Task Force financing risks of new technologies and at on terrorist (FATF) discussed and approved during the same time exploit opportunities to more June’s plenary meeting on 19-21 June effectively fight these risks. financing risk the priorities of the FATF under the incoming president Xiangmin Liu of Under the Chinese presidency, the FATF will assessment China, which will commence on 1 July. also prioritise work to promote and enable more effective supervision by national The Financial Action Task authorities. The main priority is the Strategic Review, Force (FATF) finalised guidance whilst other priorities agreed by the FATF on terrorist financing risk include the continuation of its work to The outcomes can be found HERE. assessment, during the plenary mitigate the money laundering and terrorist held in June, which will assist countries, in particular low capacity countries with limited terrorist financing expertise, in NHS fraud authority sets out priorities assessing their risk context. Concerning countering the financing The NHS Counter Fraud Authority of proliferation, the FATF agreed to (NHSCFA) published its 2019-20 priority pursue further work to strengthen areas on 10 June, which includes new the FATF Standards in this regard by commitments to detect GBP 22 million requiring jurisdictions and private of fraud, prevent GBP 100 million of sector entities to understand and fraud and recover GBP 5 million from mitigate their proliferation financing fraud losses. risks, as well as by enhancing requirements for domestic The NHSCFA’s strategic intelligence on GP capitation fees. NHSCFA will work cooperation and coordination on assessment, which is based on data for the with colleagues in NHS primary care to proliferation financing. 2017-18 financial year, forms the basis for increase confidence in its assessment of its priority areas for 2019-20, which are: the losses to fraud in this area and form a FATF has conducted extensive basis for fraud prevention activity; and analysis on a range of proposals • Pharmaceutical contractor fraud – concerning proliferation financing, NHSCFA will work in collaboration with • Improving fraud outcomes in the NHS – but has agreed to prioritise this the NHS Business Services Authority collaboration and engagement with those work moving forward. Other (NHSBSA) to identify key areas of loss who manage delivery and support counter options considered included new to fraud and identify potential fraud fraud provision in the NHS will be focused requirements to use criminal justice by contractors providing community on the effectiveness of this work in terms measures and financial intelligence, pharmacy services; of the financial impact of enforcement expanded targeted financial activity. There will be a drive to increase sanctions tools, and more effective • Procurement and commissioning fraud – the number of sanctions imposed. mechanisms to ensure international NHSCFA will work with NHS organisations information sharing. The FATF The NHSCFA will also investigate GPs to measure fraud risk vulnerability agreed to potentially consider these amid suspicions they are claiming for non- indicators in the area of procurement other options at a later date. fraud and update prevention guidance; existent patients.
• Fraud in relation to general practice The priorities can be found HERE. The outcomes can be found HERE. contractors – this priority area will focus
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TECHNICAL UPDATES
HKMA reports BoE, FCA and the MAS announce on feedback to collaboration on cybersecurity its AML/CFT The Bank of England (BoE) announced on 13 June alongside the Financial review Conduct Authority (FCA) and the Monetary Authority of Singapore Hong Kong’s Monetary Authority (MAS) that they will be working (HKMA) published on 14 June the together to strengthen cybersecurity, feedback it received to a thematic which will involve working towards review of how authorised institutions a Memorandum of Understanding to apply anti-money laundering and signify this enhanced collaboration. counter-terrorist financing (AML/ CFT) measures when onboarding The collaboration will involve MAS and the small and medium-sized enterprise UK financial authorities identifying ways to growing threat. That’s why I’m pleased (SME) customers. share information and exploring potential the Bank and the Prudential Regulation for staff exchanges. Authority are working with the MAS The review looked at institutions’ toward a Memorandum of Understanding understanding of the ML/TF risks related Mark Carney, Governor of the Bank on financial sector cyber security. This to SMEs, whether action taken mitigated of England, said “The average cost aligns with the work we are doing with the risks and the extent to which the of cybercrime for financial services a number of other countries to enhance approaches adopted were consistent companies globally has increased by more global collaboration on cyber risk.” with the principles of the risk-based than 40% over the past three years. Cyber approach. The review concluded that risk is not constrained by geographic in general authorised institutions have boundaries, making international The press release can be found HERE. applied a risk-based approach to AML/ cooperation essential to address this CFT measures, but there is also room for improvement concerning certain aspects of the onboarding process. The key observations and good practices US issues human trafficking report concerning the effectiveness and efficiency of onboarding SMEs, which warrant further attention by authorised The US State Department published The report commends countries that have institutions, are summarised in the annex. the 2019 Trafficking in Persons taken action to address human trafficking, The HKMA will follow up with firms Report on 20 June, which assesses such Senegal, Mongolia, the Philippines, where specific issues were identified what governments around the world and Tajikistan, and calls out those nations during the review. Authorised institutions are doing to combat this crime and deemed not to have done enough to are expected to improve their AML/CFT encourages governments to address combat the problem. The lowest possible controls by making reference to the key forms of human trafficking occurring designation – Tier 3 – have been given observations from the thematic review within their country’s borders. to China, Iran, North Korea, Russia, Syria, and implement enhancement measures Venezuela, and Cuba. The latest report has where appropriate for SME onboarding The report states that in the UK, gangs also downgraded Cambodia from Tier 2 to policies and procedures. force British children to carry drugs and the Tier 2 Watch List. according to the UK’s National Crime Agency data in 2017, the largest group of potential victims referred to the National The feedback can be found HERE. The report can be found HERE. Referral Mechanism was UK nationals.
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TECHNICAL UPDATES
Global Financial Innovation Network Europe’s new publishes first progress report Cybersecurity The Global Financial Innovation members to 35 member regulators and Act published Network’s (GFiN) published its “One seven observers from 21 jurisdictions. Year On” report on 25 June, which in the Official reflects on the GFiN’s achievements and The GFiN’s next steps include a focus on challenges since its inception, and its RegTech, which includes creating cross- ambitions for the future. jurisdictional tests and proofs of concept for Journal supervisory technologies or technologies The GFiN, a network of international that facilitate compliance for regulated firms. The EU Cybersecurity Act was regulators and related organisations published in the Official Journal of committed to supporting financial the EU on 7 June, and came into The progress report can be found HERE. innovation, has grown from 12 founding force on 27 June 2019.
An important part of the EU’s cybersecurity strategy, the Cybersecurity Act aims to strengthen cyber resilience The FSB’s report on crypto-assets in the EU. The Act sets out a framework for ICT products, services and processes to be granted EU-wide cybersecurity The Financial Stability Board (FSB) perimeter of regulators and payment system certification. The capabilities of ENISA, published a report on crypto-assets on oversight and that this may reflect the now known as the EU Agency for 31 May, which provides insight into the nature of crypto-assets, which may have Cybersecurity, have been reinforced by regulatory approaches and potential been designed to function outside such the Act, which includes being granted gaps relating to crypto-assets. frameworks. Assessing the significance of a permanent mandate. ENISA will now these potential gaps is challenging, states have more resources for supporting The report, which was delivered to G20 the report, given the rapidly evolving nature cybersecurity efforts across the EU. Finance Ministers and Central Bank of the crypto-asset ecosystem and related Governors during their meeting on 8 and 9 risks. The report recommends that the G20 June, states that the work being carried out keep regulatory approaches and potential The Act sets out a by international organisations on crypto- gaps, including whether more coordination is assets is focused on investor protection, needed, under review. framework for ICT market integrity, anti-money laundering, bank products, services exposures and financial stability monitoring. Separately, the FSB published a report on decentralised financial technologies on 6 and processes to be The international organisations, which June, which assesses the financial stability, granted cybersecurity includes the Committee on Payments and regulatory and governance implications certification Market Infrastructures, the International of the use of decentralised financial Organization of Securities Commissions, technologies such as those involving the Financial Action Task Force, and the distributed ledgers and online peer-to-peer, Certain provisions such as those relating Organisation for Economic Co-operation and or user-matching, platforms. This report was to penalties and those providing for Development, are analysing developments, also delivered to the G20 meeting. judicial remedies will be effective as of setting supervisory expectations for firms 28 June 2021. and clarifying how international standards The crypto report can be found HERE. apply to crypto-assets.
The report notes that gaps may arise in The tech report can be found HERE. The OJ entry can be found HERE. cases where such assets are outside the
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TECHNICAL UPDATES
GRECO’s annual report expresses Swiss Federal concern over slow progress Council adopts
The Council of Europe’s anti- GRECO welcomes that the Criminal amendments corruption body (GRECO) published Law Convention on Corruption has its annual report on 25 June, which been widely ratified but regrets that 14 to AML law and warns that public perceptions member states – Andorra, Denmark, of low levels of corruption in Germany, Iceland, Ireland, Liechtenstein, governance certain countries may lead to Luxembourg, Monaco, Portugal, Russia, underestimating the need for San Marino, Switzerland, the UK and measures to combat corrupt the US – have not yet ratified the Civil measures practices. The report also expresses Law Convention on Corruption despite its importance for the public, private concern about the overall slow The Federal Council of the Swiss and not-for-profit sectors in ensuring progress in implementing its government adopted amendments effective remedies in domestic law for recommendations and calls on states to the law on money laundering on people who have suffered damage as a to address them without delay. 26 June, which take into account result of acts of corruption. the recommendations issued by the The annual report reviews action Financial Action Task Force (FATF) in taken by its 49 member states against The report also contains a feature article its mutual evaluation report. corruption, with nearly all members on the opportunities and challenges of blockchain in the fight against having been evaluated under the The amendments aim to improve government corruption by Oxford fourth evaluation round, which focuses the Swiss anti-money laundering and Internet Institute experts Nikita Aggarwal on preventing corruption among terrorist financing system and include and Luciano Floridi. parliamentarians, judges and prosecutors. recommendations regarding due Overall, the implementation of GRECO diligence requirements for Swiss-based recommendations slowed in 2018: only associations active abroad, as well as 34 percent of recommendations had been The annual report can be found HERE. traders of precious metals and stones. fully implemented by the end of the year. The Federal Council also adopted various measures following the expert report on corporate governance of the Confederation. Following a number of UK and Dutch financial regulators events (the PostBus affair, the cyber attack on RUAG and data theft at agree to work more closely together Swisscom), the Federal Council decided in 2018 to conduct an external audit of the management of companies linked to the The UK’s Financial Conduct Authority institutions currently operating in the Confederation. The group of experts were (FCA) announced on 5 June that it UK and the Netherlands have applied generally positive about the government’s has signed an agreement with the for a licence to operate in the respective governance, however they did identify Dutch Authority for the Financial jurisdictions. Close cooperation and potential areas for improvement and Markets (AFM) to work more closely information sharing between the FCA and make various recommendations. together to protect and enhance the AFM is seen as vital to ensure effective integrity and stability of their financial oversight of these firms as well as capital systems. markets, which allows them both to more effectively fulfil their roles as regulators. The AML update can be found HERE. According to the FCA’s press release, since the UK announced its intention to The press release can be found HERE. The measures can be found HERE. withdraw from the EU, several financial
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SPECIAL FEATURE
Corruption in Peru: An overview of systemic corruption and an interview with former prosecutor José Ugaz
By Mario Levin Associate Head of Latin America Practice Aperio Intelligence
Like other countries in Latin America, Peru has suffered for decades from systemic corruption that has reached the highest tiers of its executive, judicial and legislative systems. Over the last couple of years, revelations in the Odebrecht scandal, otherwise known as the “Lava Jato” case have highlighted the sheer scale and scope of corruption in the country, with allegations levelled Photo: Cristo del Pacífico, Lima. A replica of Rio de Janeiro’s Christ the Redeemer, which was given as a gift by Odebrecht to against all living former presidents. former president Alan García, and is now called “the Odebrecht Christ” by Lima locals. It is therefore no wonder that current president Martín Vizcarra, who came to Peru is one of the countries that suffers America, uncovering a pervasive scheme in power in March 2018 after corruption from the worst levels of political corruption which Odebrecht used money to influence allegations forced his predecessor in Latin America. In Transparency elections and bribed politicians and public to resign, has described 2019 as the International’s 2018 Corruption Perceptions officials to win billions of dollars-worth of year of the fight against corruption. Index, Peru fell to 35/100, eight points lower public work contracts in a dozen countries in Vizcarra’s anti-corruption efforts, which than the global average of 43, two points Latin America. have faced keen resistance from an lower than its score in 2017. According opposition-dominated congress, include to the National Institute of Statistics and In 2016, Odebrecht admitted to paying political and constitutional reforms, Informatics of Peru, at the end of 2018, 6.6 nearly USD 800 million in bribes to officials as well as increased regulation of million of its citizens (representing 20.5 in several Latin American countries in companies operating in the country. percent of the general population) lived exchange for winning concessions and These themes were exemplified in the in poverty. These figures are even more public tenders across the region. In June International Congress of Compliance unsettling when the scope of the bribes paid 2019, Odebrecht filed for bankruptcy in a and Anti-Corruption in Peru, organised to Peruvian officials by Brazilian engineering Brazilian court. While investigations on who by the Lima Chamber of Commerce and construction conglomerate Odebrecht exactly was on the receiving end of these and the World Compliance Association, S.A. are considered. payments is still ongoing, Peru is one of the which was held in June 2019. This countries most affected by Lava Jato, which article provides a short overview of the The investigations by Brazilian authorities, caused a political earthquake in the country. history of corruption in Peru, as well which began in March 2014, were originally According to independent Brazilian journalist as the current administration’s efforts aimed at allegations of corruption at the association Jota, in 2017 and 2018, nine to solve the problem, which place into Brazilian state-owned Petróleo Brasileiro countries in Latin America sent a total of context an interview with anti-corruption S.A. (Petrobras). In June 2015 however, the 118 requests for cooperation to the Brazilian prosecutor José Ugaz, former Ad-Hoc arrest of former CEO, Marcelo Odebrecht, authorities. Peru alone was responsible for Attorney of Peru and the former chair of by the Brazilian authorities revealed one more than half of the requests, with a total of Transparency International. of the largest corruption cases in Latin 68 requests made.
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Alberto Fujimori: the cult of personality in prison for his role, among others, in killings On 9 December and kidnappings that were carried out by the Grupo Colina death squad. Grupo Colina, 2018, coinciding with which was created by Fujimori’s regime, was the United Nations’ a military anti-communist death squad that was active from 1990 until 1994, during International Anti- his government’s battle against Sendero Corruption Day, nearly Luminoso and other leftist guerrillas. 18 million Peruvian Fujimori’s long tenure had an important voters approved three political impact on the country, primarily Photo: Reuters constitutional reforms represented by Fujimorism, a political ideology based on his cult of personality. Peru’s most prominent case of corruption is Despite Fujimori’s crimes, Fujimorist parties, which Valentín Paniagua served as interim usually cited to be that of Alberto Fujimori, led by his children Keiko Fujimori and Kenji president of Peru (2000-2001), Toledo came who served as the country’s president from Fujimori, still benefit from widespread to power as the leader of Perú Posible, the 1990 to 2000. Fujimori came to power at a support in Peru. Keiko Fujimori ran for liberalist party that he had founded in 1994. time when Peru had been severely affected presidency several times while her father Like Fujimori, Toledo was supported by his by homegrown terrorist movements, namely was in prison, most recently in the 2016 close assistant César Almeyda, who served Maoist rebel group Sendero Luminoso. Peruvian general election, when in the as chief of the National Intelligence Service Throughout his tenure, Fujimori was second round she obtained 49.9 percent of Peru (2003), president of the National supported by his close adviser, Vladimiro of the vote. Fujimori’s children have also Institute for the Defence of Free Competition Montesinos. While never officially appointed attempted to gain him a pardon. In 2017 and the Protection of Intellectual Property to any office, Montesinos, who had strong he was granted release from prison by (2002-2003) and a member of the links to the American CIA, was in practice president Pedro Pablo Kuczynski, but the Investment Promotion Agency of Peru chief of the National Intelligence Service decision was overturned by the Supreme (2003-2004). Almeyda was incriminated by of Peru. On behalf of Fujimori, Montesinos Court and Fujimori was sent back to prison an audiotape in which he discussed bribing bribed opposition parliament members to in January 2019. judges with a corrupt military general and in join Fujimori’s party while covertly recording 2006 was sentenced to eight years in prison. Alejandro Toledo: awaiting extradition? the acts to extort them later. The same recordings were also used to incriminate Since stepping down from the president’s Montesinos himself and Fujimori. office in 2006, Toledo has resided most of the time in the US, where he had studied In May 2001, after evidence of Montesinos’ in his youth. Toledo attempted to rerun involvement in bribery had been revealed, for presidency in the 2016 elections, but Fujimori, who is of Japanese descent, fled his party Perú Posible failed to reach the to Tokyo. Fujimori eventually announced his 5 percent threshold to remain an official resignation from presidency in the Peruvian political party. In February 2017, Toledo’s embassy in Tokyo, and was in hiding in arrest was ordered by the Peruvian Japan until 2005, when he was arrested Photo: BBC authorities after he was implicated in Lava while on a trip to Chile. In 2007 he was Jato. According to the allegations, during extradited to Peru, and in 2009 Fujimori was his tenure as president, Toledo received convicted of bribery and abuse of power, as Fujimori’s successors were two of his most approximately USD 31 million in bribes from well as crimes against humanity and severe obstinate opponents, Alejandro Toledo Odebrecht in exchange for granting the violations of human rights. In a historic trial (2001-2006) and Alan García Pérez (2006- company a billion dollar contract to build in 2009, Fujimori was sentenced to 25 years 2011). After a short transition period, in the Interoceanic Highway between Brazil
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and Peru. In another case, known as the as one of Peru’s youngest presidents at argument that he had been the victim of Ecoteva case, Toledo and his wife Eliane the age of 35. García’s first tenure (1985- political persecution. In April 2019, after Karp were accused of money laundering 1990) is considered by many as disastrous officials from the national police and the through a Costa Rica registered company since his economic policies, including the prosecution arrived with an arrest warrant at named Ecoteva Consulting Group and nationalisation of the banking industry, García’s house in Lima, the former president founded by Karp’s mother, Eva Fernenbug. In brought the country to inflation of 7,500 shot himself and died shortly after. Though June 2019, based on testimony from Israeli percent, while his efforts against Sendero García’s supporters blame the authorities for businessman Yossi Maiman, who allegedly Luminoso proved to be ineffective. In 1992, a political witchhunt, many Peruvians have served as a mediator in the Odebrecht García fled to Paris where he remained in considered his suicide as a confession of bribery scheme, the Peruvian prosecution exile during most of Fujimori’s presidency. wrongdoing. Ironically, his legacy will also claimed that USD 18 million from Odebrecht In his second tenure (2006-2011), García be remembered by a giant replica of Rio de was transferred through Ecoteva’s bank encouraged foreign investment to the Janeiro’s Christ the Redeemer statue on the accounts in Costa Rica. country and oversaw a boom in Peru’s coast of Lima, which Odebrecht had given to mining sector and its economy in general. In him as a gift during his period in office, and Since February 2017, Toledo has not 2007, García signed a free trade agreement which is now called “the Odebrecht Christ” returned to Peru. The Peruvian government with the US, known as the US-Peru Trade by Lima locals. filed an extradition request to the US Promotion Agreement, which supported the authorities in February 2018, but the process country’s economic growth. However, signs Ollanta Humala: Venezuela’s choice could take between two and seven years. In of corruption in his administration appeared the meantime, in March 2019 Toledo was as early as October 2008, when García’s arrested for public drunkenness in California, prime minister Jorge del Castillo submitted in what current president Vizcarra has the resignation of his cabinet following the called a “regrettable incident that affects publication of an audiotape of an alleged the country’s image.” In June 2019, the conversation between a government official prosecution requested that Toledo and his and a lobbyist agreeing to help a petroleum wife be jailed for 16 years and 8 months for firm win contracts. their crimes.
In 2017, as investigations into the Lava Photo: Reuters Alan García: the ill-fated second tenure Jato case developed, former Odebrecht CEO Marcelo Odebrecht admitted paying nearly USD 30 million in bribes to García’s Ollanta Moisés Humala Tasso came to administration to win lucrative contracts, power in 2011, as the leader of the left- particularly the licence to build Metro wing nationalist party Partido Nacionalista line 1 in Lima. García was alleged by the Peruano which he had founded in 2005. prosecution to have taken approximately Former military general Humala had half of that amount for himself. In November relatively little political experience yet he 2018, the Peruvian Court of Anti-Corruption was openly backed by Venezuelan president Preparatory Investigation granted the Hugo Chávez. Humala’s tenure focused
Photo: The Evening Standard prosecutors an impediment order on García on social policies and foreign policies that banning him from leaving the country were based on Peru’s relations with other until the end of the investigations. García, American states. Less than three months In 2006, after Toledo had stepped down, who declared his innocence and denied after his election, Humala’s vice president, Alan García, who was leader of the left accepting bribes from Odebrecht, sought Omar Chechade, was implicated in a wing Peruvian Aprista party, came into asylum in the residence of the Uruguayan corruption case. In October 2011, Chehade power. This was García’s second tenure as ambassador in Lima, but Uruguayan was accused by the police of linking president, already having served in 1985 president Tabaré Vásquez rejected García’s government officials and his own family
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members that were associated with Grupo Kuczynski: the Wall Street banker the cabinet. In December 2017, as Kuczynski Wong, one of the most powerful companies became increasingly implicated in Lava Jato in the country. Chechade had allegedly during his tenure as minister of economy pushed for the evacuation of workers from and finance, the opposition-led congress a farm owned by Peruvian sugar company initiated an impeachment process against Andahuasi, to benefit Grupo Wong. In him, over claims of moral incapacity to serve January 2012, Chechade resigned from his as president given his lies about not having role as vice president. The following day, the any connections with Odebrecht. However, congress controversially voted to clear him the opposition did not obtain the minimum of the alleged unlawful acts. of two thirds of the vote to impeach him.
Although Humala was relatively unaffected Photo: Peru Reports According to the allegations, Kuczynski by Chechade’s corruption and resignation, received bribes from Odebrecht through allegations against the former president Pedro Pablo Kuczynski Godard became the company he founded in 1992, Westfield were raised as part of Lava Jato. In February president in July 2016, with the party Capital. Westfield Capital allegedly received 2016, the Brazilian police uncovered Peruanos Por el Kambio, which he had USD 787,207 from Odebrecht between 2004 substantial evidence that Humala had founded in 2014. A former Wall Street and 2007, while Kuczynski was minister received bribes from Odebrecht. While the banker, with degrees from Princeton and of economy and finance and then prime scope of his involvement was not clear at Oxford, Kuczynski, who took office at the minister. In that period, Odebrecht took over the beginning, it was known that during age of 77, had a different profile from that the concession to build the Interoceanic Humala’s administration Odebrecht won of his predecessors. Before joining politics, Highway between Brazil and Peru. He public contracts worth more than USD he worked in the World Bank and in various was also accused of using First Capital, a 200 million, not including a USD 7.3 billion US-based investments banks. In 2000, company established by his partner, Gerardo project to build the Peruvian Southern Gas Kuczynski joined Toledo’s presidential Sepúlveda, for the same purpose. Pipeline. In July 2017, Humala and his wife campaign, and under Toledo’s administration In March 2018, two days before Kuczynski’s Nadine Heredia were arrested and held he served as minister of economy and second impeachment vote was to be held in pre-trial detention for their involvement finance (2001-2002, 2004-2005) and as at congress, several videos known as the in Lava Jato. In January 2019, Peruvian prime minister (2005-2006). prosecutors claimed that they had evidence Kenjivideos were released. The videos that both the government of Venezuela and Kuczynski’s short tenure was characterised contained recordings of Kuczynski’s allies, Odebrecht had financed Humala’s political by the aggressive confrontation from including Keiko Fujimori’s brother and rival campaigns in 2006 and 2011. According the opposition-controlled congress led Kenji Fujimori, offering congress members to the allegations, Humala received at least by defeated rival Keiko Fujimori. Clashes the authority to appoint government officials, USD 3 million from Odebrecht alone. In June between Kuczynksi’s cabinet and Keiko expedite public works projects and other 2019, Peruvian investigative journalism Fujimori’s congress led the country to benefits in exchange for voting against association Convoca revealed that according what is considered a severe political crisis. Kuczynski’s impeachment. Following the to Odebrecht’s files, the company had paid In December 2016 the congress ousted release of the videos, Kuczynski announced USD 3 million in bribes to Humala in 2014 minister of education Jaime Saavedra his resignation from the presidency, to win the bid for the Southern Gas Pipeline because of alleged corruption in public making his vice president Martín Vizcarra construction contract. The probe against contracts on his watch. In September 2017, the country’s new president. At the time Humala is ongoing, but the prosecution have Kuczynski’s cabinet, led by prime minister of writing Kuczynski is under pre-trial already requested 20 years’ imprisonment Fernando Zavala, was also ousted by the arrest while prosecutors investigate his for Humala and his wife in May 2019. congress in a vote of no-confidence against involvement in Lava Jato.
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Vizcarra and the current administration’s as well as money laundering allegations 30424, which attributes corporate criminal efforts to combat corruption concerning at least USD 1 million from liability for violations relating to corruption, Odebrecht that allegedly went into her 2011 bribery and money laundering offences. The presidential campaign. law, which came into effect in January 2018, has been subject to several updates, namely On 9 December 2018, coinciding with the potential suspension and dissolution of the United Nations’ International Anti- companies involved in a violation of the law. Corruption Day, nearly 18 million Peruvian Corporate fines under the law range from voters approved three out of four of the two-to-six times the amount of the undue constitutional reforms. The first reform benefit received. concerns the autonomous constitutional
Photo: The Washington Post institution the National Board of Justice “Tackling the origins (JNJ), according to which its members of political funding, the would be selected by the ombudsman, the Considering the long history of corruption prosecutor of the nation, the president of internal democracy in the country, which reached its peak in the judicial branch and the president of the within political parties, the last several years, with the Lava Jato Constitutional Court, as part of a public the need to conform scandal and the ongoing political crisis and process based on meritocracy. The Board unrest in the country, it was inevitable that would also submit an annual report to the to new levels of current president Vizcarra would announce congress on its activities. discipline in the judicial that his administration would be focusing its efforts on anti-corruption. Indeed, since The second reform relates to the funding of system, the removal his inauguration in May 2018, Vizcarra has political campaigns, and would regulate the of parliamentary taken several unprecedented steps. In July financing of political organisations, through immunity – these are all 2018, Vizcarra called for a referendum on audit and control mechanisms, as well as proposed constitutional reforms, specifically limit as much as possible the financing of appropriate measures, on his proposals to prohibit private funding candidate campaigns by private entities. The but they are only part of for political campaigns and for a ban on the third reform relates to a prohibition on the re-election of lawmakers. immediate re-election of parliamentarians the problem” for a consecutive period. The fourth reform, In August 2018, Vizcarra officially presented which did not pass and Vizcarra himself his reform bill to congress, but has faced was opposed to, sought to change the The new law, which is part of a wider a battle with the congress, which is still legislature system to a bicameral one. While business-focused anti-corruption legislative dominated by the opposition party Fuerza the referendum was criticised by some process, requires Peruvian companies to Popular led by Keiko Fujimori. Keiko Peruvians for not including other important have compliance programs in place. This Fujimori’s party has repeatedly voted against issues such as same-sex marriage, the includes a prevention model that should Vizcarra’s referendum attempts in the results were considered as a vote of support be tailored to the legal entity’s nature, risks, congress. However, in September 2018, after for Vizcarra and as a form of punishment needs, and characteristics, and must consist Vizcarra’s prime minister César Villanueva from Peruvians on congress members. of satisfactory monitoring and control had sought a confidence motion to dissolve measures to prevent offences covered in the congress, the referendum bill finally Vizcarra’s anti-corruption efforts also include the law or significantly reduce the risk of passed. Separately, in October 2018 Keiko pushing through several pieces of legislation their likelihood. The measures include the Fujimori was subjected to 36-months in pre- aimed at increasing regulation on the appointment of a compliance officer as well trial detention over her alleged role as leader business sector. One of the most prominent as efforts to identify, evaluate, and mitigate of a criminal organisation within her party, steps was the introduction of Peruvian Law corruption related risks.
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An interview with anti-corruption prosecutor José Ugaz
José Ugaz, who is an advisory board member at Aperio Intelligence, previously served as Ad-Hoc Attorney of Peru working on the highest profile criminal cases in recent Peruvian history, including the investigation of former president Fujimori and his chief of intelligence, Montesinos. He also served as chairman of Transparency International from 2014-2017.
How do you think Fujimori’s trial has affected his successors?
Fujimori was the representation of the systemic corruption in the country. He did not just appear overnight as a politician to corrupt Peru, rather he was an expression of a structure and a system that are based on the logic of corruption. Of course, this reached its highest levels when Fujimori and Montesinos managed to organise their corruption through the National Intelligence Service of Peru and through the creation of a structure that was parallel to the state in order to steal the country’s resources. In truth it could have been any of the presidents that followed Fujimori, but Fujimori was the face of this well organised network that completely captured the Peruvian state. So I would say that while Fujimori and Montesinos are important in the history of corruption in Peru, they are a product of the system.
How has this systemic situation manifested itself?
The proof that the political corruption in Peru is systemic, is that shortly after Fujimori and Montesinos stepped down and were sent to prison, Alejandro Toledo came to power, and that was when Toledo’s adviser was caught in the act of corruption. And now Toledo himself is accused of receiving USD 31 million from Brazilian companies. And then came Alan García’s administration, in which the whole cabinet of Peru led by prime minister Jorge del Castillo Gálvez fell down due to corruption. They were caught having meetings in hotels with businesspeople representing Mexican interests in the cement and oil sectors. The whole cabinet had to resign because of an act of corruption. And now, Alan García is no longer alive, he took his own life because he was being investigated for corruption allegations related to the Brazilian construction company. And then came Humala. After two or three weeks in power, Humala’s vice president had to resign because of a corruption scandal, in which he met with a private company, Grupo Wong, in order to help them in a private litigation case. Humala himself then ended up in pre-trial detention, being investigated for receiving Brazilian funds to his political campaigns from illegal origins. And then came Kuczynski, the so- called “deluxe” president, a wealthy businessman who supposedly did not need to be involved in corruption, and he has ended up under house arrest, accused of conflicts of interest after having conducted business through his own private companies while serving as the country’s minister of economy and finance. So, I think what this sequence of events tells us is that we are facing a structural problem and not merely a problem with a specific political party or politician, which is why we need structural reform, and that is what the current administration is focused on doing.
What have president Vizcarra and his administration done so far in the fight against corruption and what are their greatest challenges?
I believe that Vizcarra’s government has done well to acknowledge that first of all, the main problem in this country is corruption, and secondly focusing on the type of corruption, one that is structural and needs deep reforms. The government has laid down reforms to the justice system, political reforms, and even a referendum. What happened in reaction to this is that the government has faced resistance from the political
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class, especially from the national congress, for carrying out these reforms, because this political class often represents corrupt interests and organised crime. This political class needs to radically change or disappear to allow for a reconstruction of politics. It is also true that, in Vizcarra’s case, I think his mission of restructuring the state is not as broad as it should be. He states that the process should start with some key reforms, and in that regard I think he has done well. Tackling the origins of political funding, the internal democracy within political parties, the need to conform to new levels of discipline in the judicial system, the removal of parliamentary immunity – these are all appropriate measures, but they are only part of the problem. Solving the problem of systemic corruption requires more integral reform, and this is where we are going to see whether or not in the short term Vizcarra’s policy has that integral vision.
When we discuss Peru’s legislature, isn’t there a conflict in hoping that congress members approve legislation that goes against their own interests, such as the removal of parliamentary immunity?
What the government has tried to do in this respect was precisely to say that ‘following the approval of this legislation, which we ask you to approve, it won’t be the congress which decides to remove immunity anymore but the judicial system.’ The government has also recently raised the possibility that it would be the Constitutional Court of Peru or the National Board of Justice (JNJ) that makes this decision. But what the government has essentially said is: you cannot investigate yourselves, and there is a need for an external, independent entity that will be in charge of deciding in which cases immunity should be removed. In those cases you need an external autonomous body that decides when the immunity of a congressman is lifted or not: the judiciary, the Constitutional Court or the National Board of Justice. It could also eventually be the Office of the Public Defender as well.
“These are problems of systemic and structural corruption that are a result of a colonial model that made Latin American countries poorly organised from the very beginning of their history, with a centralised clientelist administration, based on neo- patrimonialism, that did not differentiate between state funds and private businesses”
What are the roles of the Peruvian judiciary and legislature in the fight against corruption? What should be the division of labour?
The judiciary’s main role in combating corruption is to put an end to impunity and punish those responsible for it. It should know the truth and be sanctioned when setting precedents. I think prosecutors and anti-corruption judges have somehow fulfilled this role so far. The congress should have the fundamental role of ensuring a legal framework so that the country can, on one hand, benefit from sustained economic development and on the other hand have the tools necessary to stop corruption so that it cannot continue to affect us as it does.
Peru is a member of the UN and the Organization of American States (OAS), and its request to join the OECD is currently under consideration. What role, if any, does the international community or countries like the US have in supporting Peru’s efforts against corruption?
There are several international instruments like the Inter-American Convention Against Corruption, which is managed by the OAS. The convention has a follow-up mechanism, but to me it seems quite modest and has little impact. Then there is the UN Convention Against Corruption, which serves more as a global tool that has slightly improved the normative framework, but I would not call it a “game changer” either. The US government has worked to some extent, with its Foreign Corrupt Practices Act, to apply its anti-bribery law abroad, and the same could be said for the OECD. But what I think is more interesting, is to look at the extent to which the Inter-American Commission on Human Rights (IACHR) has been incorporating the issue of corruption as an element that impacts human rights. The Commission has already issued two resolutions, so I think in the short or medium term we may begin to see that the relationship between human rights and political corruption can open up a series of steps that would allow us to combat the problem of corruption from another perspective that may be more effective.
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In what ways have political corruption affected the Peruvian economy?
All cases of corruption have two types of impact. The first is a material impact, effectively the loss of money, which in the case of an underdeveloped country like Peru is manifested in an increase in poverty. For example, by halting the work on the gas pipeline in the south we have lost several billions of dollars. In 2017, it was estimated that 150,000 Peruvians were not able to get out of extreme poverty as a direct consequence of corrupt practices. So there is definitely an economic impact that ends up hitting the poorest in our society, who are the ones who end up paying the price for corruption. But the other very serious consequence of political corruption has to do with the institutional weakness that it generates through the loss of confidence. Here in Peru everybody suspects everybody, and nobody trusts the authorities. And the political crisis that we are living in at this moment is directly linked to this loss of trust. Therefore, there are material, economic consequences of corruption, and there are also immaterial consequences of corruption that have to do with the institutional crisis and the crisis of confidence in the country.
How do you think recent cases, namely the Odebrecht scandal, affect foreign investors looking to invest in Peru?
Evidently, in an environment that is contaminated by corruption, one who seeks to invest needs to conduct some kind of cost-benefit analysis and check the likelihood of their investment being involved in corruption. For example, how much would it cost an investor if they enter into a corruption scheme and what legal security does the country offer. Interestingly, the macroeconomic indicators have not changed significantly, which means that there is still a flow of investment coming into Peru from abroad because Peru is still an attractive country. However, evidently the impact on foreign investment caused by the extent to which the political crisis continues to grow and the outcome of cases of corruption that are yet to be resolved, is going to be negative. The good news is that the Peruvian justice system has responded well, and I would say that after the Brazilians, Peru has had the best reaction. Now we have all these powerful corrupt actors, politicians and businessmen, sitting on the bench accused and who must respond to the justice system. That is a good sign for investors, since it means that they can reach this country and know that justice will somehow protect them.
Do you think the corruption in Peru is different from other countries in Latin America?
In terms of corruption, I don’t think there is a big difference between Peru and the rest of Latin America, except very specific countries like Uruguay, Chile and recently Costa Rica as well. The region in general: South America, Central America and the Caribbean, has suffered greatly from this model of systemic corruption. These are problems of systemic and structural corruption that are a result of a colonial model that made Latin American countries poorly organised from the very beginning of their history, with a centralised clientelist administration, based on neo-patrimonialism, that did not differentiate between state funds and private businesses. All of this has caused the creation of systemic corruption, which in addition to Latin America we can also see in other parts of the world, like Asia, Africa and Eastern Europe, where the situation is not very different.
President Vizcarra’s efforts in fighting corruption and increasing regulation have so far gained positive results, namely his victory in approving his constitutional reforms in December 2018. However, he still has a long and challenging way to go in order to reach a Peru that is clean of corruption. Decades of corrupt leaders have caused many Peruvians a deep loss of faith in the political and judicial systems, and it is possible that at least the same amount of time will be required to restore it.
About the author: Maor (Mario) Levin is the head of the Latin America practice at Aperio Intelligence. Prior to joining Aperio, Mario worked in the UK and Mexico as a team leader in an international business intelligence company, specialising in asset tracing, contract compliance, and enhanced due diligence. Mario also has extensive experience in corporate finance and intelligence research, having previously worked as an economist and having served in the Israeli Military Intelligence. Mario holds a BA in Economics from the Ben-Gurion University in Israel and University Carlos III de Madrid (graduated with honours), and a MSc in International Relations from the London School of Economics and Political Science (LSE).
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
FCA fines Bank of Scotland over fraud scandal
The UK’s Financial Conduct Authority Bank of Scotland failed fraud might have occurred. It was not until (FCA) fined Bank of Scotland (BOS) properly to understand July 2009 that BOS provided the FSA with full GBP 45,5 million on 21 June for disclosure in relation to its suspicions. BOS failures to disclose information about the significance of the also did not report its suspicions to any other its suspicions that fraud may have information identified law enforcement agency. occurred at the Reading-based impaired assets (IAR) team of Halifax Bank of despite clear warning “If BOS had communicated its suspicions Scotland. signs that fraud might to the FSA in May 2007, as it should have occurred have done,” states the FCA, “the criminal The FCA found that BOS failed to be open misconduct could have been identified and cooperative and failed to disclose much earlier. The delay also risked information appropriately to the FCA’s least three years, according to the FCA press prejudice to the criminal investigation predecessor, the FSA. release. BOS knew by 3 May 2007 that the conducted by Thames Valley Police.” impact of these breaches would result in BOS identified suspicious conduct in the substantial losses to BOS. BOS agreed to resolve the matter and IAR team in early 2007. The director of the qualified for a 30 percent (stage 1) discount. impaired asset team at the Reading branch, Over the next two years, Bank of Scotland The FCA has also banned four individuals Lynden Scourfield, had been sanctioning failed properly to understand and appreciate from working in financial services due to limits and additional lending facilities beyond the significance of the information that it had their role in the fraud: Lynden Scourfield, the scope of his authority undetected for at identified despite clear warning signs that Mark Dobson, Alison Mills and David Mills.
Photo: The Financial Times
Executives of Canadian payment processor charged with fraud and money laundering
Four individuals have been charged with marketing and client services, and Kelly PacNet’s Vancouver headquarters, and engaging in a fraud scheme in which oversaw the compliance department. Davis, who oversaw PacNet’s office in their company processed payments Ireland, allegedly each earned CAD 15 million from victims of international mass-mail The indictment alleges that PacNet was from 2013 through to 2015. fraud campaigns, the US Department of the payment processor of choice for Justice announced on 20 June. companies that mailed large volumes of Davis, who identified himself as PacNet’s fraudulent notifications designed to mislead general counsel, allegedly opened post office Rosanne Day, Robert Paul Davis, Genevieve victims into falsely believing they would boxes in the UK to which certain PacNet Renee Frappier and Miles Kelly, have each receive a large amount of money, a prize, or mass-mail clients directed victim payments. been charged with one count of conspiracy specialised services upon payment of a fee. The indictment alleges that Davis, who was to commit mail and wire fraud, one count a pilot, at times flew to the UK to pick up the of conspiracy to commit money laundering, The defendants are alleged to have known mail and transport it to Ireland, where the and multiple counts of mail fraud and wire that multiple PacNet mass-mail clients payments were processed. The indictment fraud. Day and Davis were part-owners and obtained payments from victims through further alleges that on several occasions managers of PacNet Services Ltd, a payment fraudulent notifications and approved Davis flew to the Netherlands to pick up cash processing company based in Vancouver, depositing those payments into US bank from facilities that were receiving mail for Canada. Frappier was in charge of PacNet’s accounts. Day, who was in charge of certain PacNet mass-mail clients.
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PRESS & MEDIA | MONEY LAUNDERING | FRAUD | TERRORIST FINANCING
SEC charges Purported cryptocurrency company former Longfin Corp charged with fraud
Goldman Sachs The Securities and Exchange The complaint also Commission (SEC) filed a new alleges that Longfin banker for fraud action against Longfin Corp, a publicly traded company and Meenavalli insider trading purportedly engaged in sophisticated engaged in commodities trading and so-called “cryptocurrency” transactions, and accounting fraud its CEO on 5 June for falsifying the The US Securities and Exchange company’s revenue and fraudulently million in sham revenue, representing 90 Commission (SEC) charged securing the company’s listing on percent of Longfin’s total 2017 reported former Goldman Sachs Group Nasdaq together with a former revenue. Longfin voluntarily delisted from Inc investment banker, Woojae Longfin consultant. Nasdaq and shut down in 2018. “Steve” Jung, on 31 May with repeatedly using his access to The new charges follow previous SEC In a parallel action, the US Attorney’s highly confidential information to charges against the defendants and two Office for the District of New Jersey place illicit and profitable trades others, which resulted in a preliminary announced related criminal charges in advance of deals on which the injunction freezing more than USD against Meenavalli. bank was providing investment 27 million in “allegedly illegal trading banking advisory services. proceeds from unregistered distributions The SEC’s prior action alleged that of Longfin stock.” Longfin, Meenavalli, Altahawi, and According to the SEC, Jung, a vice two affiliated individuals, Dorababu president who worked in the bank’s San The latest action alleges that Longfin and Penumarthi and Suresh Tammineedi, Francisco and New York offices, used its CEO, Venkata S. Meenavalli, conducted illegally distributed and sold more than sensitive client information to trade in a fraudulent public offering of Longfin USD 33 million of Longfin stock in the securities of 12 different companies shares. The complaint states that Longfin unregistered transactions. prior to the announcement of market- and Meenavalli obtained qualification moving events. The SEC alleges that for a Regulation A+ offering by falsely Altahawi, Penumarthi, and Tammineedi between 2015 and 2017, Jung used an representing in SEC filings that the have agreed to settlements, subject account held in the name of a friend company was principally managed and to court approval, that would resolve living in South Korea to place illegal operated in the US when the company’s the SEC’s charges and have agreed to trades and generate profits of USD operations, assets and management surrender previously frozen funds. 140,000. By using his friend’s brokerage remained offshore. Longfin and account, Jung attempted to evade Meenavalli, as alleged, then engaged in Without admitting or denying the charges, detection by skirting his employer’s a fraudulent scheme by distributing over Altahawi has agreed to settle the fraud requirements that he pre-clear his 400,000 shares of Longfin to insiders and charges and the prior charges of trading trades and that he use an approved affiliates to meet certain Nasdaq listing in unregistered securities. The proposed brokerage firm that would have criteria, without obtaining payment for any settlement would require Altahawi to reported the trading to his employer, of these shares and, along with Longfin return USD 21 million of allegedly ill-gotten states the SEC’s complaint. consultant Andy Altahawi misrepresented gains, pay a USD 2.9 million penalty, and to Nasdaq the number of qualifying surrender his Longfin shares. Altahawi Jung is charged with violations of the shareholders and shares sold. also agreed to be barred from serving as Securities Exchange Act and Rules 10b- a public company officer or director for 5 and 14e-3. The complaint also names The complaint also alleges that Longfin five years. Penumarthi and Tammineedi, Jung’s friend, Sungrok Hwang, as a and Meenavalli engaged in accounting without admitting or denying the charges, relief defendant. fraud, recording more than USD 66 also agreed to settle all pending charges.
32 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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AUSTRAC orders external audit of Afterpay’s compliance with AML/CFT legislation
The Australian Transaction Reports regulatory action is required. The external AUSTRAC CEO, Nicole Rose, said the buy and Analysis Centre (AUSTRAC) auditor will examine Afterpay’s: now, pay later sector has experienced rapid announced on 13 June that it has growth in recent years and this appointment ordered the appointment of an external • Governance and oversight of decisions reminds new financial services businesses auditor to examine payments company related to its AML/CFT framework; that they have obligations under the AML/ Afterpay Pty Ltd’s compliance with the CFT Act and they must take these seriously. Anti-Money Laundering and Counter- • Identification and verification of customers; Terrorism Financing Act 2006 (the “The audit will help identify if Afterpay has • Suspicious matter reporting obligations; AML/CFT Act), as part of AUSTRAC’s developed and implemented the systems and ongoing engagement with the FinTech and controls it needs to ensure it complies company over its compliance concerns. with its obligations,” said Rose. • AML/CFT program, including the development of its money laundering and The audit will help determine the extent of A preliminary audit report must be provided terrorism financing risk assessment. any compliance issues and whether further to AUSTRAC within 60 days.
British Overseas Territories responsible for breakdown of the global corporate tax system claims new report
The UK and a handful of OECD countries listed in the index as having done the most to The Tax Justice have been identified as the jurisdictions proliferate corporate tax avoidance are: most responsible for the breakdown Network estimates of the global corporate tax system – 1. British Virgin Islands (British territory); that USD 500 billion “with the UK bearing the lion’s share in tax is avoided of responsibility through its controlled 2. Bermuda (British territory); network of satellite jurisdictions” – by multinational 3. Cayman Islands (British territory); according to the new Corporate Tax corporations annually Haven Index published by the Tax 4. Netherlands; Justice Network on 28 May. The Tax Justice Network estimates that USD 5. Switzerland; The Corporate Tax Haven Index ranks 500 billion in tax is avoided by multinational corporations annually. countries by their complicity in “global 6. Luxembourg; corporate tax havenry” and scores each The Tax Justice Network Africa released country’s tax system based on the degree 7. Jersey (British dependency); to which it enables corporate tax avoidance. a statement on 30 May highlighting the Each country’s corporate tax haven score is 8. Singapore; damage caused by corporate tax havens then combined with the scale of corporate on African countries, and specifically how activity in the country to determine the share 9. Bahamas; and the United Arab Emirates and Mauritius are of global corporate activity put at risk of tax among the “most corrosive corporate tax avoidance by the country. The countries 10. Hong Kong. havens against African countries.”
33 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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World Bank Fake Saudi prince sentenced to debars prison over USD 8 million fraud subsidiaries of The US Department of Justice a fraudulent investment company (DOJ) announced on 31 May that called Marden Williams International French water Anthony Gignac, a/k/a “Khaled LLC (“MWI”) and claimed that they had Al-Saud,” “Khalid Al-Saud,” “Khalid access to exclusive business ventures, treatment Bin Al-Saud,” “Khalid Bin Sultan Al- including a pharmaceutical company in Saud,” “Sultan Bin Khalid Al Saud,” Ireland, a casino in Malta and a jet-fuel has been sentenced to 224 months trading platform in the Middle East. company in prison for fraudulently assuming Gignac also offered investors the chance the identity of a member of the to purchase his alleged stake in Saudi The World Bank announced on 29 Saudi Royal family to conduct a Arabia’s state-owned oil company – May the two-year debarment of scheme to defraud investors. Saudi Aramco. French water engineering company OTV and the one-year debarment Beginning as early as May 2015, Gignac Investors from the US, the UK, Canada, of Brazilian water treatment claimed to be a Saudi Arabian Prince, Switzerland and Hong Kong allegedly technology company Veolia Water and allegedly used this persona to sent Gignac close to USD 8 million, which Technologies Brasil Ltda (VWT con investors by claiming that he had was used to finance his lavish lifestyle. Brasil) for “fraudulent and collusive access to lucrative business deals by practices” during a bidding virtue of his royal status. Gignac pleaded guilty to impersonating a process relating to the Río Bogotá foreign diplomat or government official, Environmental Recuperation and To further the scheme, Gignac and a co- aggravated identity theft, wire fraud, and Flood Control Project in Colombia. conspirator are alleged to have formed conspiracy to commit wire fraud.
According to the World Bank, OTV engaged in fraudulent practices by failing to disclose fees paid to commercial agents during the tender prequalification and bidding processes. Amnesty International Zimbabwe The agents allegedly assisted the company in obtaining confidential closes after alleged fraud by staff information. OTV and VWT Brasil also attempted to improperly influence the tender. The contract was awarded to Amnesty International Zimbabwe legal process of civil recovery to recoup another bidder, and neither OTV nor (AIZ) issued a statement on 30 May lost funds has been started. According VWT Brasil participated in the project. explaining that it has shut down its to media reports, AIZ’s country director Zimbabwe branch over alleged abuse has resigned and the chair and finance The debarments are part of settlement of millions of dollars of donor funds officer have been suspended. agreements under which the and fraud by staff. According to the companies acknowledge responsibility statement, an extensive forensic “Amnesty International’s board can give for the sanctionable practices and audit was conducted in late 2018 that an assurance that, since the allegations agree to meet compliance conditions as “uncovered evidence of fraud and first came to light, urgent financial a condition for release from debarment. serious financial mismanagement by risk management measures have The settlement agreements provide individuals in AIZ.” been put in place to ensure anti-fraud for reduced periods of sanction in light and corruption procedures have been of the companies’ cooperation and AIZ has notified the law enforcement, adhered to and that donor funds are voluntary remedial actions. further investigations have begun and the safe,” reads the statement.
34 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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CFTC acts against UK based crypto trading company
The US Commodity Futures Trading The misappropriation addresses under their control; and (2) by Commission (CFTC) announced on 18 illegally diverting customers’ Bitcoin deposits June the filing of a civil enforcement scheme is alleged to to make Ponzi scheme-like payments to action against UK based Control- have relied on creating customers who requested withdrawals. Finance Limited, a purported Bitcoin unique single-use wallet trading and investment company, and The defendants’ misappropriation scheme its principal, Benjamin Reynolds. The addresses to receive is alleged to have relied on creating complaint charges the defendants customers’ deposits unique single-use wallet addresses to with exploiting public enthusiasm for receive customers’ Bitcoin deposits. After Bitcoin by fraudulently obtaining and customers deposited Bitcoin into the single- misappropriating at least 22,858.822 allegedly marketed and concealed their use addresses, the defendants routed the Bitcoin (worth USD 147 million at the fraud through a pyramid scheme called the deposits to other, pooled wallet addresses time) from more than 1,000 customers. Control-Finance “Affiliate Program.” that they created at payment processors and exchanges throughout North America, It is alleged that since at least 1 May to According to the complaint, the defendants Europe, and Asia. The complaint alleges that 31 October 2017, the defendants used misappropriated customers’ Bitcoin deposits the defendants moved Bitcoin into these a website and social media accounts to in two ways: (1) by executing uneconomical pooled wallet addresses via transactions fraudulently solicit customers to purchase and confusing blockchain transactions to that lacked a valid business purpose and and transfer Bitcoin to them. The defendants move customers’ Bitcoin into other wallet were designed to conceal misappropriation.
Deutsche Bank identifies serious compliance failings
Deutsche Bank has notified nearly 1,000 Six “core deficiencies” were reportedly use of Swift’s interbank payment messaging of its corporate companies that it will discovered by auditors, include a “filtering protocol in 2014. According to the FT, the terminate their accounts within weeks gap” that affected its monitoring of cheques German supervisory authority’s (BaFin) if they do not send documents verifying written by corporate customers to foreign scale of AML violations deems F3 and F4 their identities, the Financial Times entities, sources told the FT. The deficiencies violations as “grave” and “extremely grave” reported on 11 June. The termination are said to be of such severity that the audit deficiencies that “significantly impairs or letters have been issued as part of the team has reportedly warned bank executives totally eliminates” compliance controls. bank’s efforts to strengthen its anti- that the institution could be deemed non- money laundering (AML) controls in compliant with the EU’s Fourth Anti-Money In addition to this, The New York Times the wake of revelations that serious Laundering Directive. reported on 19 June that US authorities compliance failings have been identified are investigating whether Deutsche Bank at the bank in an internal audit report. The compliance failures also include complied with laws to combat money shortcomings in customer screening in laundering and other crimes, according The Financial Times reported on 10 June Hong Kong, India and Singapore and poor to people familiar with the matter. The that Deutsche Bank had identified serious oversight of staff sending sensitive data over investigation reportedly includes a review failures in its screening of cheques and high- WhatsApp and personal email accounts. of Deutsche Bank’s handling of suspicious value e-payments for AML and sanctions activity reports, including those linked to compliance purposes. The bank has yet to Deutsche Bank is also reported to have president Trump’s son-in-law and senior determine the extent of the problem. identified two separate failings in its adviser, Jared Kushner and unnamed monitoring of high-value payments and its offshore entities.
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SEC fines two brokers over the Drug traffickers improper handling of ADRs convicted for
The US Securities and Exchange laundering The DOJ’s Antitrust Commission (SEC) announced on 14 June that Industrial and Commercial Division announced through sham Bank of China Financial Services LLC that ICBCFS has (ICBCFS), a wholly-owned subsidiary companies of Industrial and Commercial Bank pleaded guilty to of China Limited, will pay more than an antitrust charge USD 42 million to settle charges for relating to the bid- improper handling of “pre-released” American Depositary Receipts (ADRs). rigging of pre-released The settlement is the largest recovery ADRs by the same against a broker in the SEC’s ongoing investigation of ADR practices. securities lending desk
The SEC found that ICBCFS improperly The UK’s National Crime Agency obtained pre-released ADRs from depositary ICBCFS has pleaded guilty to an antitrust (NCA) announced on 12 June banks when it should have known that charge relating to the bid-rigging of pre- that a criminal organisation, neither the firm nor its customers owned released ADRs by the same securities which supplied class A drugs and the foreign shares needed to support those lending desk. laundered millions of pounds in ADRs, which inflated the total number illicit profits, has been dismantled of a foreign issuer’s tradeable securities Separately, the SEC announced on 18 following a joint investigation with and resulted in abusive practices such as June that Wedbush Securities Inc will the Metropolitan Police Organised inappropriate short selling and dividend pay more than USD 8.1 million to settle Crime Partnership. arbitrage. According to the SEC, in certain charges for the improper handling of countries, demand for ADR borrowing pre-released ADRs. The SEC found that Members of the criminal organisation, increased around dividend record dates, so Wedbush improperly obtained pre- led by Baljinder Kang and Sukhjinder that certain tax-advantaged borrowers could released ADRs from depositary banks Pooney, trafficked millions of pounds- – through a series of transactions – collect when Wedbush should have known that worth of illegal drugs across England, dividends without any corresponding tax neither the firm nor its customers owned with the proceeds deposited in cash withholding. Pre-released ADRs that were the foreign shares needed to support into front company bank accounts, improperly obtained by ICBCFS were used to those ADRs, which resulted in inflating before being transferred to a satisfy that demand. the total number of a foreign issuer’s destination account in Dubai. tradeable securities. The SEC’s order finds that ICBCFS violated Kingston Crown Court found Pooney the antifraud provisions of Section 17(a) Wedbush was charged with violating guilty of conspiracy to supply class A (3) of the Securities Act of 1933 and Section 17(a)(3) of the Securities Act drugs having previously pleaded guilty failed to supervise its securities lending of 1933 and failing to supervise its to money laundering offences. Cash desk personnel. Without admitting or securities lending desk personnel. courier, Kieran O’Kane, was found guilty denying the findings, ICBCFS agreed to be Without admitting or denying the of money laundering, and Webster censured, return nearly USD 24 million in findings, Wedbush agreed to be Kenton and Abid Rasul were convicted ill-gotten gains, and pay USD 4.4 million in censured and to pay disgorgement of of conspiracy to supply class B drugs. prejudgment interest and a USD 14.3 million over USD 4.8 million, more than USD penalty. The US Department of Justice’s 800,000 in prejudgment interest, and The NCA press release provides details Antitrust Division separately announced that more than USD 2.4 million in penalties. on the investigation and arrests.
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US reportedly World Bank debars state-owned investigating China Railway Construction Corp universities The World Bank announced on 5 According to the World Bank, during the June the nine-month debarment prequalification and bidding process suspected of China Railway Construction for a highway construction contract, the Corporation Ltd (CRCC), a Chinese companies engaged in fraudulent practices of receiving state-owned construction and by preparing and submitting information engineering company, and its that misrepresented the personnel and wholly-owned subsidiaries, equipment of CR23 and experience of foreign funds China Railway 23rd Bureau other entities in its group. Group Co Ltd (CR23) and China Railway Construction Corporation Following their nine-month debarment, (International) Limited (CRCC CRCC, CR23, CRCC International, and International), for misconduct their 730 controlled affiliates will be relating to the East-West Highway conditionally non-debarred for 24 months. Corridor Improvement Project. During that time, they will be eligible to participate in World Bank-financed projects The debarment also includes CRCC’s 730 as long as they comply with the agreed controlled affiliates, with the exception obligations. of China Railway 20th Bureau Group Co and its controlled affiliates, which The settlement provides for a reduced Two US universities are being were subject to a separate settlement period of debarment in light of the investigated by the US Department agreement in 2017. The debarment is part acknowledgement of responsibility, of Education on suspicion of of a settlement agreement with CRCC, voluntary remedial and corrective concealing foreign gifts, The CR23, and CRCC International related actions, and other mitigating factors. The Associated Press reported on 13 to misconduct during the procurement companies and their affiliates commit to June. Georgetown University and process for a construction contract. enhancing their compliance programs. Texas A&M University have been accused of receiving foreign funds from Gulf nations, including a Russian cybersecurity company, MAS imposes penalty for insider the Kaspersky Lab.
The Department of Education trading with assistance from FCA reportedly sent a letter to both universities ordering them to disclose The Monetary Authority of Singapore Exchange, while in possession of non- financial records and any links they (MAS) announced on 4 June that it public and price-sensitive information may have to Chinese firms Huawei and has imposed a civil penalty of SGD concerning the company. ZTE. The inquiries are part of broader 336,000 on Tham Wai Mun Raphael efforts to scrutinise foreign funding in for insider trading, following a Tham, who was the non-executive vice universities and to improve reporting, referral and assistance from the UK’s chairman of ACE, admitted to violating the according to a Trump administration Financial Conduct Authority. insider trading prohibition of the Securities official cited by The Associated Press. and Futures Act. The penalty represented According to MAS, Tham sold shares 2.5 times the losses Tham avoided from US colleges are required by law to in Auhua Clean Energy PLC (ACE), the sale of his shares. Tham will not report contracts and donations from a company listed on the Alternative act as a director or be involved in the foreign sources over USD 250,000. Investment Market of the London Stock management of a company for two years.
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IMF publishes assessment report Swedbank on the People’s Republic of China suspends CEO and CFO of The International Monetary Fund (IMF) China’s decentralised published a detailed assessment report on anti-money laundering and financial intelligence Estonian unit combating the financing of terrorism unit (FIU) results in in the People’s Republic of China on incomplete access amid probe 21 June, which finds that China has undertaken a number of initiatives since by all parts of the Swedbank AS announced on 17 2002 that have contributed positively FIU to all data June that the current chair of the to its understanding of ML/TF risk, management board and CEO of although some important gaps remain. Swedbank Estonia, Robert Kitt, and the current CFO and management China’s decentralised financial intelligence disseminations, and limits the board member, Vaiko Tammeväli, unit (FIU) arrangement consisting of the development of a holistic view. So, will both leave their positions as part China Anti-Money Laundering Monitoring major improvements are needed. and Analysis Center, the Anti-Money of the management board and have Laundering Bureau, and 36 People’s Bank The report provides a summary of the been suspended until further notice. of China provincial branches has the AML/CFT measures in place in China It was also announced that council potential to produce financial intelligence as of the date of the onsite visit from member Priit Perens will end his that supports the operational needs of 9-27 July 2018. The report analyses employment with the bank and has competent authorities states the IMF’s the level of compliance with the FATF left the council. report, but its current functioning results Recommendations and provides The decision is a consequence of the in incomplete access by all parts of the recommendations on how the system ongoing internal investigation, said FIU to all data, fragmented analysis and could be strengthened. Charlotte Elsnitz, head of Baltic banking, Swedbank, and chair of the council of Swedbank AS, Estonia. “Swedbank has initiated an in-depth internal investigation with the help of external Spanish police disrupt criminal resources to investigate historical AML compliance and Swedbank will organisation financing Al Qaeda continuously act upon the conclusions of the investigations,” said Elsnitz. “In addition, Swedbank is fully cooperating Europol announced on 19 June that laundering crimes through the use of with the authorities in Sweden, the the Spanish National Police (Policia false invoices obtained by an illegal U.S. and the Baltic countries in their Nacional) have disrupted a criminal business they had been running for respective investigations.” organisation which was financing Al years. The proceeds of the business Qaeda terrorist militias. were sent to Syria via the Hawala The council has elected Olavi Lepp, system, allowing the transfer of chief risk officer, as acting chairman The operation supported by Europol and money, to support Al Qaeda terrorist of the management board and acting carried out in Madrid, Valencia and Toledo, militias in the Syrian region of Idlib. CEO of Swedbank Estonia and Anna resulted in the arrest of 10 individuals. The organisation is said to be part of a Kõuts, head of treasury, as acting CFO According to Europol’s press release, the huge international clandestine structure, and acting member of the management leaders of the organisation form a family with the aim of attacking the Western board. These changes are subject to the clan which committed tax fraud and money economic system as a form of terrorism. approval of the competent authorities.
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World Bank SEC charges Ability Inc and execs debars Chinese with defrauding merger investors electrical The US Securities and Exchange proposal, the defendants allegedly lied to Commission (SEC) charged Ability SPAC shareholders about Ability’s business engineering Inc, an Israel-based intelligence prospects, including Ability’s purported communications company, its wholly- ownership of a new “game-changing” cellular company over owned subsidiary, and two of its interception product, ULIN, Ability’s so-called executives on 18 June with defrauding backlog of orders from its largest customer, fraudulent shareholders of a special purpose a police agency in Latin America, Ability’s acquisition company (SPAC) formed to lack of actual purchase orders backing its practices raise capital for a merger or acquisition backlog, and Ability’s pipeline of possible within a set timeframe. future orders from customers. Ability and the two executives profited from the merger with The SEC’s complaint alleges that Ability, CEO Ability receiving USD 19 million and Hurgin The World Bank announced on 12 Anatoly Hurgin, and chief technology officer and Aurovsky each receiving USD 9 million June the 15-month debarment of Alexander Vladimir Aurovsky defrauded plus USD 6 million each in options, while China-based Dongfang Electronics SPAC shareholders who voted in favour Cambridge shareholders lost USD 60 million. Co Ltd for being involved in of a merger between Ability and the SPAC, fraudulent practices while bidding Cambridge Capital Acquisition Corp, in The SEC’s complaint charges the defendants on a power project in Liberia. December 2015. Allegedly, if Cambridge had with violations of the antifraud and proxy not consummated a merger by December statement provisions of the federal According to the World Bank, during 2015, it would have been required, without an securities laws, and seeks permanent the bidding process for the project, extension of the SPAC term, to return all of injunctions, disgorgement with prejudgment Dongfang falsified two letters asserting the capital to its shareholders. To convince interest, and penalties. The complaint seeks that the manufacturer of a type of shareholders to vote in favour of the merger an officer-and-director bar against Hurgin. equipment had authorised Dongfang to supply and install that equipment, which is a fraudulent practice. Dongfang did not win the contract.
The debarment makes Dongfang, RUSI publishes paper on corruption which provides electrical engineering, manufacturing, and research and and fraud in four industry sectors development services, ineligible to participate in World Bank- financed projects. The company has The Royal United Services Institute The key findings of the paper include acknowledged responsibility for the (RUSI) published a paper on 17 June that in all sectors considered, apart from underlying sanctionable practices that discusses the forms that corruption construction, the risks of internal fraud and has agreed to meet compliance and fraud take in four sectors of the are less well understood than those of conditions as part of the settlement UK economy that handle significant external fraud. In part, this reflects the broad conditions for release from debarment. amounts of funds: the financial sector, consensus that external fraud has a greater construction, the National Health impact on organisations. The debarment qualifies for cross- Service (NHS), and local government. debarment by other multilateral The paper highlights issues related In the financial sector, the paper states that development banks under the to the understanding, prevention and the Financial Conduct Authority could play Agreement for Mutual Enforcement of investigation of fraud and corruption in a greater role in collecting data on internal Debarment Decisions. public and private organisations. fraud that affects financial institutions.
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SEC freezes assets in international Former manipulative trading scheme Barclays chief
The US Securities and Exchange involving these five seemingly acquitted in Commission (SEC) announced unrelated individuals – Kit Mun Chan, charges on 20 June against five Lau Kean Chong, Chong Poui Fan, Binji fraud case foreign traders for allegedly executing Lu, and Youn Chien Wong – from three illegal matched trades in the stock different countries accounted for 70 of Medico International Inc (MDDT). percent of the volume in MDDT over the The SEC also obtained an emergency period in which they traded. IP records court order freezing assets held in allegedly show that at least three of the brokerage accounts of the defendants, defendants’ brokerage accounts were including USD 144,000 that otherwise likely accessed by the same user or could have been wired offshore, and users while trading MDDT. The SEC has hundreds of thousands of shares of also suspended trading in MDDT. MDDT stock. The defendants are charged with According to the SEC’s complaint, the violating the antifraud provisions traders from China, Singapore, and of Section 17(a) of the Securities Photo: The BBC Malaysia attempted to manipulate the Act of 1933 and Section 10(b) of market for MDDT stock by entering the Exchange Act of 1934, and Rule matched orders to buy and sell MDDT 10b-5 thereunder, and the market at substantially the same times, sizes, manipulation provision of Section 9(a) John Varley, the former chief and prices. The SEC alleges that trades (1) of the Exchange Act. executive of Barclays, was cleared of fraud on 21 June, following a high- profile trial in London, concerning payments made by the UK bank to secure investment from Qatar during Court orders Baring Vostok to give the financial crisis. The Court of Appeal found that the UK’s up stake in Vostochny Bank Serious Fraud Office (SFO) had failed to provide sufficient evidence against him. The SFO accused Varley and three A court in Russia has ordered Baring Baring Vostok’s former colleagues of fraud by false Vostok to cede a 10 percent stake representation, alleging that Barclays had in Vostochny Bank to shareholder founder is under secretly paid fees to Qatar to gain backing Finvision, which is owned by house arrest on for a capital raising that helped the bank businessman Artem Avetisyan, over a charges relating to a avoid a state bailout in 2008. dispute that has seen Baring Vostok’s founder Michael Calvey arrested. battle with Avetisyan’s Separately, the founder of the marketing Finvision over control company that encouraged investors to Calvey is under house arrest in Russia buy into London Capital & Finance PLC on embezzlement charges relating to of the bank was arrested on 19 June as part of the a legal battle with Avetisyan’s Finvision investigation being carried out by the SFO. over control of the bank. Baring Vostok Paul Careless, the founder of Surge, was had refused to hand over the 10 percent with Avetisyan’s Uniastrum bank had questioned and later released without stake on the grounds that its merger weakened Vostochny’s credit profile. charge, his spokesman confirmed.
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Two operators fined by the Gambling Commission for allowing stolen funds to be gambled on their platforms
The Great British Gambling Commission During an investigation by the Commission, it announced on 13 June that online was revealed that the operator had failed to gambling operator Platinum Gaming will comply with money laundering regulations, pay GBP 1.6 million for failing to prevent including failing to establish the source of money laundering and identify gambling funds, and that despite customers displaying harm, following reports that a convicted behaviour that could indicate problem fraudster had spent GBP 629,420 of gambling the operator failed to act. stolen money with the operator. Gamesys has agreed to return GBP 460,472 The Commission’s investigations revealed of stolen money and will pay GBP 690,000 as that the operator breached AML regulations, a payment in lieu of a financial penalty. including a failure to make adequate enquiries about the source of the funds, In addition to this, the Gambling Commission and that the customer’s deposits were so for gambling operators on the valuable issued a decision on 21 May to revoke the high and losses so significant that Platinum learning points from the case. operating licence of Maxent Limited as it Gaming should have considered refusing was “not satisfied as to the source of funds service to the customer. Separately, the Commission announced used to acquire and support the Licensee on 12 June that online gambling operator at the time of, and following, the change of Platinum Gaming, as part of its settlement Gamesys (Gibraltar) Limited will pay GBP corporate control.” The Commission also with the Commission, has returned GBP 1.2 million for breaching money laundering identified concerns relating to the new 629,420 to the fraudster’s victims and regulations and failing to prevent gambling controller’s suitability, in that it appeared that will pay GBP 990,200 in lieu of a financial harm, following revelations that three he had provided conflicting information and penalty. The Commission’s press release on individuals had spent stolen money on the had failed to be full and frank in his dealings the settlement provides good practice advice gambling platform. with the Commission.
Trump companies accused of tax evasion in Panama
In a legal filing on 3 June in an ongoing and pay them to the government. Instead, foreign funding from an opaque offshore lawsuit in a New York federal court, it is alleged that the Trump companies kept vehicle since he entered the White House as private equity manager, Orestes the money, “intentionally evading taxes.” As a senior adviser. Fintiklis, and Ithaca Capital Partners, such, due to the financial mismanagement, which own a luxury Panama City hotel Fintiklis and the companies he represents According to the report, Cadre has seen formerly managed by US president were allegedly exposed “to millions of dollars investment come from overseas to the Donald Trump’s companies, claim that in liability.” company, while Kushner works as an the companies “intentionally” evaded international envoy for the US, according taxes in Panama. Separately, The Guardian reported on 10 to corporate filings and interviews cited by June that a real estate company part-owned The Guardian. The money is alleged to have The Trump entities were allegedly supposed by US president Trump’s son-in-law, Jared come through a vehicle run by Goldman to withhold fees from managing the hotel Kushner, has received USD 90 million in Sachs in the Cayman Islands.
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Leader of India reportedly identifies 22 audit international violations in fraud case money Reuters reported on 13 June that at least 22 alleged violations of auditing laundering standards by Deloitte Haskins & Sells and a KPMG affiliate have been organisation identified by India’s Serious Fraud Investigation Office (SFIO) during a pleads guilty probe at Leasing & Financial Services (IL&FS), which has led the SFIO to seek a five-year ban on the auditors, according to government legal filings and 2017/18, and by a KPMG affiliate, The United States Attorney’s seen by the media outlet. BSR & Associates, from 2017/18, states Office for the Southern District the Reuters report. of California announced on 18 The failures were detected as part June that Manuel Reynoso Garcia of a probe into alleged fraud and Meanwhile, local media reported in of Tijuana has pleaded guilty mismanagement at IL&FS, which early June that an anti-corruption probe in federal court to leading the defaulted on its debt obligations in 2018. into India’s state-run lender Jammu Tijuana- and San Diego-based Both auditors have denied wrongdoing. and Kashmir Bank Ltd has uncovered money laundering organisation that a sizable fraud. The Economic Times, moved more than USD 19 million After the government took over IL&FS, citing government sources, reported in cash from the United States to federal investigators began looking into that the Anti-Corruption Bureau’s bank accounts controlled by shell one of its key financial units, IFIN, which investigations had uncovered the likely companies in Mexico. was audited by Deloitte between 2008/09 diversion of loans worth INR 10 billion.
Reynoso admitted laundering drug trafficking proceeds on behalf of Mexican-based organisations, including the Sinaloa Cartel, through unlicensed RUSI paper on UK’s non-conviction money transmitting businesses. Between 2014 and 2017, the defendant based confiscation regime admitted that the conspiracy employed various laundering techniques. The Royal United Services Institute introduction of the UWO in 2017 – has (RUSI) published a paper on 10 June been matched by reality, with regards Through the use of funnel accounts, that looks at the origins of the UK’s to greater use of the powers available bulk cash deposits by paid third- non-conviction based confiscation under the Proceeds of Crime Act 2002 to parties, unlicensed money transmitting regime, including the Unexplained allow for the confiscation of unlawfully businesses, shell companies, and Wealth Order (UWO), and evaluates obtained assets in the absence of a various layers of transactions that the experience of other jurisdictions conviction. provided no legitimate business to consider whether the UK can learn purpose, nor provided any commercial from their deployment of the powers. The paper concludes that the original value, Reynoso was able to turn cash promise of such confiscation – to target located in various US cities into funds in The paper explores the extent to which those who insulate themselves from the Mexican financial institutions. the increasingly hardline rhetoric as reach of criminal law – has at best been regards the use of asset confiscation only marginally fulfilled and puts forward Sentencing is scheduled for 16 tools in the fight against serious 12 recommendations for policymakers to September. organised crime – particularly since the make full use of the tools.
42 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Former Pakistan president arrested Russia over money laundering allegations; proposes bill Pakistan MQM founder arrested to limit access Former Pakistani president Asif Ali Separately, the BBC reported on 11 to land registry, Zardari was arrested by Pakistan’s June that Altaf Hussain, the founder National Accountability Bureau of one of Pakistan’s biggest political reports OCCRP (NAB) on 10 June, with local media parties, the MQM party, has been reporting that the arrest relates to an arrested in the UK. Russia’s Economy Ministry has investigation into false bank accounts proposed a new bill that would and money laundering. The Metropolitan Police statement refers to “an individual associated make it more difficult for anti- corruption activists and journalists The Islamabad High Court reportedly with the Muttahida Qaumi Movement to access Russia’s Unified Land rejected a bail plea by Zardari, co-chairman in Pakistan,” arrested at an address in Registry, the Organized Crime of the opposition Pakistan Peoples’ Party, north-west London “on suspicion of and Corruption Reporting Project and his sister Faryal Talpur, who has also intentionally encouraging or assisting (OCCRP) reported on 31 May. been arrested. The NAB accuse Zardari and offences contrary to Section 44 of the Talpur of transferring PKR 150 million to Serious Crime Act 2007.” The proposed bill reportedly bans the their company through fake bank accounts. transfer of statements from the registry to third parties and introduces penalties for the public sharing of the information from the registry. The bill also proposes increasing the price to access Alleged cryptocurrency fraudster information in the registry. charged in investment scheme Russia’s Unified Land Registry records information regarding ownership rights of land plots and buildings in Russia, and The US Department of Justice Karlsson allegedly according to the OCCRP has often been announced on 19 June the unsealing used by journalists to track the assets of of a criminal complaint charging Roger directed his Russian oligarchs and wealthy elites. Nils-Jonas Karlsson and his company, victims to make Eastern Metal Securities (EMS), with In addition to this, the OCCRP reported securities fraud, wire fraud and money investments using on 20 June that the Russian government laundering in an alleged scheme to virtual currencies has removed the names of all Crimean defraud potential investors of more business owners from the public than USD 11 million. registry. The deletions are reported to include the names of all domestic and According to the complaint, since as Bitcoin, defrauding at least 3,575 foreign investors and business owners September 2006, Karlsson allegedly victims of more than USD 11 million. in the region, which Russia formally used websites to communicate false annexed in 2014 following its invasion representations to victims in a scheme Karlsson was arrested on 18 June in into Ukrainian sovereign territory. The to defraud potential investors. Karlsson Thailand and the US is seeking his removals reverse a decision to publish allegedly directed his victims to make extradition to stand trial in the Northern corporate ownership data following the investments using virtual currencies, such District of California. annexation, the OCCRP stated.
43 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Six arrests in Five arrests made over Patisserie UK and the Valerie fraud scandal
Netherlands The UK’s Serious Fraud Office (SFO) has confirmed that five people over EUR 24 were arrested on 18 June, in a joint operation with the police, over the million crypto- alleged accounting fraud at bakery chain Patisserie Valerie. currency theft “On Tuesday 18 June, as part of a joint operation with the Hertfordshire, The UK’s South West Regional Leicestershire and Metropolitan Police Services, the SFO arrested and Cyber Crime Unit in a joint Patisserie Valerie went into questioned five people in connection with operation with the Dutch police administration in January following the ongoing investigation into individuals (Politie), Europol, Eurojust and the discovery of a hole in the firm’s associated with Patisserie Holdings,” the the UK’s National Crime Agency accounts, eventually valued at GBP SFO statement said. (NCA) arrested six individuals on 94 million, amid accusations of 25 June after a 14-month long fraudulent activity. Following entering The SFO did not disclose the names of investigation into a EUR 24 million into administration, the company was those arrested or what they had been cryptocurrency theft. also found to have overstated its cash detained for, although it said it was position by GBP 30 million and that The theft, which targeted users’ Bitcoin conducting inquiries into the role of it had failed to disclose overdrafts of tokens, is believed to have affected individuals in the firm’s collapse into nearly GBP 10 million. at least 4,000 victims in 12 countries, administration. with the number of victims continuing to grow. The investigation relates to typosquatting, where a well-known online cryptocurrency exchange is Lloyds freezes 8,000 offshore “spoofed” – or recreated to imitate the genuine site – to gain access to victims’ Bitcoin wallets, stealing their Jersey accounts, reports the FT funds and login details. Lloyds Banking Group has frozen the activity, states the report. “Unfortunately, According to Europol’s press release, accounts of about 8,000 offshore where a customer has not provided us the five men and one woman were banking customers as part of a with this necessary information we have arrested at their homes in Charlcombe, crackdown on money laundering, had to freeze their account until we get the Lower Weston and Staverton (UK) after they failed to submit identifying information,” a Lloyds spokesperson told and Amsterdam and Rotterdam (the documents for three years, the the FT. “This is also to protect the customer, Netherlands). Financial Times reported on 23 June. as it prevents anybody else trying to use the account if the customer has stopped using The case was referred to the European The action taken by the bank was it or has moved address.” Cybercrime Centre (EC3) and the Joint reportedly prompted by repeated requests Cybercrime Action Taskforce (J-CAT) for certified identification records HSBC, Barclays and Royal Bank of Scotland hosted at Europol after the British and other documentation that went have also sent similar requests to check the authorities identified possible suspects unanswered for several years, rather than identities of customers in order to tighten living in the Netherlands. due to the identification ofsuspicious controls in Jersey, states the FT.
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FBI issues warning that Cuba is an UK’s Cifas unreliable shelter for illicit funds publishes its annual The FBI issued a press release on “The primary takeaway 24 June “No safe haven: Cuba is an unreliable shelter for illicit funds,” is that the Cuban fraudscape which states that Cuba’s recent seizure government may seize report of assets housed there by Orelvis assets linked to crimes” Olivera is an example of what can happen to property and bank accounts The UK’s fraud prevention service that criminals attempt to illegally Cifas published its annual shelter on the island. In April 2019 the Cuban government fraudscape report on 18 June, convicted Olivera in absentia and sentenced which provides analysis of the UK’s “Individuals who believe Cuba offers a safe him to 10 years in prison for money internal and external fraud trends. haven for ill-gotten financial gains should laundering, tax evasion, forgery of public understand the nation’s current government documents, and illicit enrichment, among The report’s key findings include: offers no such guarantee,” said acting FBI other crimes, based on his conviction in the legal attaché to Cuba Christopher Starrett. US and his investments in Cuba. The Cuban • A rise in fraudulent conduct – Cifas authorities seized four properties and two members record almost 324,000 Olivera was convicted in a US federal bank accounts Olivera had put in the names cases – a 6 percent increase court in 2014 for defrauding Medicare of relatives and associates in Cuba. compared to 2017; of nearly USD 8 million and sentenced to six years in prison and ordered to pay The FBI believes Olivera is not the only • A steep rise in money mule activity, more than USD 5.7 million in restitution individual who has had assets seized after with a 26 percent increase when to the US government. Much of Olivera’s a conviction in the United States. “The compared to 2017; and illegally acquired money, however, had primary takeaway,” said Starrett, “is that the been invested in properties and deposited Cuban government may seize assets linked • Identity fraud continued to rise by 8 in bank accounts in Cuba before he faced to crimes and no criminal should count on percent. Those aged 21 or under and criminal charges. reclaiming them once they are seized.” over 60 experienced the greatest rises.
Gambling Commission’s annual enforcement report sees a record GBP 19.6 million in penalties issued
The Great British Gambling Commission The Commission reiterates that gambling The Commission’s chief executive Neil published its annual enforcement report businesses and those who lead them need McArthur was quoted in the accompanying on 27 June, which shows that over to improve the support they offer consumers press release as stating: “I want gambling the last 12 months, the Commission who are at risk of harm and need to do consumers in Britain to be able to enjoy the has carried out more than 160 more to guard against money laundering. fairest and safest gambling in the world and investigations and operators have paid According to the figures, the total fines I want gambling operators to work with us GBP 19.6 million in penalty packages issued by the Commission in 2018/19 to put customer enjoyment and safety at the for failures to combat money laundering increased from GBP 18.4 million in 2017 and top of their corporate agenda.” and monitor problem gamblers. GBP 1.7 million in 2016.
45 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Merrill Lynch Commodities Inc enters resolution with the DOJ over deceptive trading practices
Merrill Lynch Commodities Inc (MLCI) metals futures market by placing fraudulent company, Bank of America Corporation has agreed to pay USD 25 million orders for precious metals futures contracts (BAC), have agreed to cooperate with the to resolve the US government’s that, at the time the traders placed the government’s ongoing investigation of investigation into a multi-year scheme orders, they intended to cancel before individuals and to report to the DOJ evidence by MLCI precious metals traders execution. In doing so, the traders intended or allegations of violations of the wire fraud to mislead the market for precious to “spoof” or manipulate the market by statute, securities and commodities fraud metals futures contracts traded on the creating the false impression of increased statute, and anti-spoofing provision of the Commodity Exchange Inc (COMEX), supply or demand and, in turn, to fraudulently Commodity Exchange Act in BAC’s Global announced the US Department of induce other market participants to buy and Markets’ Commodities Business, whose Justice (DOJ) on 25 June. to sell futures contracts at quantities, prices function is to conduct wholesale, principal and times that they otherwise likely would trading and sales of commodities. According to MLCI’s admissions, from 2008 not have done so. The traders are alleged to to 2014, precious metals traders employed have placed thousands of fraudulent orders. MLCI and BAC also agreed to enhance their by MLCI schemed to deceive other market compliance program and internal controls to participants by injecting materially false and MLCI entered into a non-prosecution ensure they are designed to detect and deter misleading information into the precious agreement under which MLCI and its parent manipulative conduct.
RUSI publishes paper on money laundering risk in the UK professional services sectors
The Royal United Services Institute find ways to pool intelligence resources, (RUSI) published a paper entitled which includes exploring the feasibility of a “Examining the unknowns: Money central assessment facility; laundering risk in the UK professional services sectors,” on 25 June, which • OPBAS should ensure that PBSs are has found that professional services requiring their regulated members to report providers are failing to share sufficient relevant financial crime risk data across all information on the risks posed by sectors and that this information is collated money launderers. • The National Crime Agency (NCA) should in more intelligence-focused products than either carry out, or commission, research currently; The RUSI paper reports on findings from into money laundering cases involving three workshops held in February and professional services providers who are • Policymakers, law enforcement and March on the gathering and sharing of regarded as not corrupt or witting; intelligence agencies, supervisors and intelligence related to money laundering. representatives of the professions should The aim was to identify shortcomings in: the • The Office for Professional Body Anti-Money explore ways of sharing intelligence in a understanding and identification of risk; the Laundering Supervision (OPBAS) should joint task force approach; and processes to identify potential clients and require Professional Body Supervisors their businesses; and the identification and (PBSs) to include case analysis in their • The Home Office, the NCA and the reporting of suspicious activity. sector risk assessments and should work to professional services sector supervisors, facilitate the sharing of information; including HMRC, and practitioners should The paper makes recommendations to formulate guidance on the reporting of address the challenges identified, including: • PBSs and OPBAS should work together to suspicious arrangements.
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US court Latvia’s AML reforms could result in refuses to the ousting of the chairman of the dismiss fraud financial regulator, reports the FT suit against The Financial Times reported on Meanwhile, the Council of Europe’s anti- 13 June that Latvia is allegedly corruption group (GRECO) published a Sotheby’s preparing to oust the chairman of report on corruption prevention in Latvia the financial regulator after passing in respect of members of parliament, anti-money laundering and counter judges and prosecutors, on 3 June, terrorism financing reforms. which expresses regret over the lack of measures concerning regulation According to the FT’s report, the new law on lobbying, parliamentary ethics and paves the way for the Latvian authorities conflicts of interest. to remove Peter Putnins from his role as chairman of the Financial and Capital In addition to this Latvia’s Ministry of Market Commission, following suspected Justice has added charges of money bribery linked to money laundering laundering to its ongoing bribery case accusations concerning ABLV. against ECB Governing Council member A federal judge in New York has Ilmars Rimsevics, Bloomberg reported rejected Sotheby’s bid to dismiss The new law amends the method for on 4 June. Prosecutors accused a USD 380 million lawsuit in appointing board members to the Rimsevics in 2018 of soliciting a bribe which Russian billionaire Dmitry regulator, which could mean that Putnins from PNB Banka that was alleged to Rybolovlev accuses the auction will have to reapply for his job. have violated money laundering laws. house of helping art dealer Yves Bouvier overcharge him for dozens of pieces of art.
The US district court judge found that Sotheby’s had failed to establish that the case did not belong in a US Ex-UBS compliance officer and court because Rybolovlev was already litigating in Switzerland, where much of friend convicted of insider trading the key evidence and many witnesses are located, and that principles of international comity justified dismissal. A former UBS Group AG compliance Southwark Crown Court found former officer and her friend were UBS employee Fabiana Abdel-Malek, and Rybolovlev, through his companies convicted of insider trading on 25 day trader Walid Choucair, guilty of insider Accent Delight International Ltd and June following a two-month trial in trading between June 2013 and June 2014. Xitrans Finance Ltd, accuses Bouvier of which prosecutors alleged that the overcharging him by more than USD 1 bank employee leaked confidential The FCA alleged that Abdel-Malek passed billion on 38 artworks, for which he paid information that allowed the trader to confidential tips on deals UBS was in excess of USD 2 billion between 2003 make more than GBP 1 million. The working on to Choucair, who would trade and 2015. According to the complaint, pair were sentenced to three years in using contracts-for-difference. While the Sotheby’s was involved in 14 of the prison on 27 June. prosecution did not claim Abdel-Malek transactions, and had been “the willing received any money for passing on inside auction house that knowingly and In the case brought by the UK’s Financial information, they said Choucair in return intentionally made the fraud possible.” Conduct Authority (FCA), the jury at gave her access to his luxurious lifestyle.
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TECHNICAL UPDATES Public outcry in Russia over the detention of an anti- corruption journalist results in his release
Hundreds of protesters were detained arrested in Moscow on suspicion of drug in Russia on 13 June, who were dealing on 6 June whilst on his way to meet demanding punishment for police who a source. The Guardian reported that Ivan detained anti-corruption journalist Kolpakov, the editor-in-chief of Latvia-based Ivan Golunov. Following mass public news website Meduza, where Golunov outcry over Golunov’s imprisonment, works, said the scale of the outcry over his which included three major Russian arrest was linked to increasing willingness of newspapers publishing almost identical Photo: Reuters Russians to stand up for their rights. front pages in support of the journalist, the drug trafficking charges against Russia’s interior minister Vladimir Kolokotsev Speaking to reporters on 11 June after him were dropped and he was freed reportedly stated that the police officers who being told that the charges against him had from house arrest. had taken part in Golunov’s detention would been dropped, Golunov stated that he would be suspended during an investigation. continue to investigate corruption to justify The march in Moscow, which was originally the trust of those that supported him during organised to demand Golunov’s release, Golunov, who had investigated state his detention. According to interior minister then became a call for those responsible corruption and illicit business practices, was Kolokotsev the charges against Golunov for his detention to be held accountable. reportedly beaten in custody after being were dropped due to a lack of evidence.
Insys Therapeutics agrees to enter USD 225 million global resolution of criminal investigations
The US Department of Justice and other unlawful marketing practices in subsidiary will plead guilty to five counts of announced on 5 June that Opioid connection with the marketing of Subsys, a mail fraud pursuant to the plea agreement manufacturer Insys Therapeutics has sublingual fentanyl spray. to be filed in the District of Massachusetts. agreed to a global resolution to settle In May, five former Insys executives were the US government’s criminal and According to the charging document, from convicted of racketeering conspiracy in civil investigations. In resolving the August 2012 to June 2015, Insys began connection with the case. criminal investigations, Insys will enter a using speaker programs to increase brand deferred prosecution agreement, Insys’s awareness of Subsys through educational Insys entered into an unprecedented 5-year operating subsidiary will plead guilty lunches and dinners. However, the programs Corporate Integrity Agreement (CIA) and to five counts of mail fraud, and the were actually used as a vehicle to pay bribes Conditional Exclusion Release with the company will pay a USD 2 million fine and kickbacks to practitioners in exchange Office of Inspector General (OIG), which due and USD 28 million in forfeiture. The for increased Subsys prescriptions and for to the cooperation provided by Insys in the civil resolution will see Insys pay USD increased dosage of those prescriptions. prosecution of culpable individuals and its 195 million to settle allegations that it agreement to enhanced CIA requirements, violated the False Claims Act. As part of the criminal resolution, Insys resulted in the OIG electing not to pursue agreed to a statement of facts outlining its exclusion of Insys at this time. On 10 June, Insys Therapeutics filed for criminal conduct with respect to the illegal Chapter 11 bankruptcy protection after marketing of Subsys. Insys will enter into a Meanwhile, the DOJ announced on 25 June reaching the settlement. Both investigations five-year deferred prosecution agreement that a doctor has been indicted for accepting concerned Insys’s payment of kickbacks with the government, while Insys’s operating kickbacks from Insys Therapeutics.
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Businessmen Walmart Inc and Brazil-based convicted for subsidiary agree to pay USD 282 FCPA offences million to resolve FCPA case in a scheme Walmart Inc agreed on 20 June to The internal control pay the US Department of Justice to bribe Haiti and the Securities and Exchange failures allowed the Commission USD 282 million to settle foreign subsidiaries in allegations that it violated the Foreign Mexico, India, Brazil and officials Corrupt Practices (FCPA) by paying an intermediary in Brazil for help to obtain China to open stores The US Department of Justice construction permits and having weak faster than they would anti-corruption internal controls in announced 20 June that a have with sufficient federal jury in Boston has found Brazil, China, India, and Mexico. In the chairman and CEO of an the criminal action, Walmart’s Brazil- internal controls investment firm and a member based subsidiary, WMT Brasilia S.a.r.l., of the investment firm’s board agreed to plead guilty to violating the of directors guilty for their FCPA’s accounting standards. The SEC’s order details several instances participation in a scheme to bribe when Walmart planned to implement officials of the Republic of Haiti in According to Walmart’s admissions, proper compliance and training only to put exchange for business advantages from 2000 until 2011, certain Walmart those plans on hold or otherwise allow for the investment firm. personnel responsible for implementing deficient internal accounting controls to and maintaining the company’s internal persist even in the face of red flags and Roger Richard Boncy and Joseph accounting controls related to anti- corruption allegations. Baptiste were found guilty of one corruption were aware of certain failures count of conspiracy to violate the involving those controls, including relating The controls failures allowed Walmart Foreign Corrupt Practices Act (FCPA) to potentially improper payments to foreign subsidiaries in Mexico, India, Brazil and the Travel Act. Baptiste was also government officials in certain Walmart and China to hire TPIs without establishing convicted of one count of violating the foreign subsidiaries, but failed to implement sufficient controls to prevent those TPIs Travel Act and one count of conspiracy sufficient controls that, among other things, from making improper payments to to commit money laundering. would have ensured: (a) that sufficient government officials in order to obtain store anti-corruption related due diligence was permits and licences. The internal control According to the evidence, Boncy conducted on all third-party intermediaries failures allowed the foreign subsidiaries and Baptiste solicited bribes from (TPIs) who interacted with foreign officials; in Mexico, India, Brazil and China to open undercover FBI agents posing as (b) that sufficient anti-corruption related stores faster than they would have with potential investors in connection with internal accounting controls concerning sufficient internal accounting controls a proposed project to develop a port payments to TPIs existed; (c) that proof related to anti-corruption. in the Mȏle St. Nicolas area of Haiti. was required that TPIs had performed The proposed project was expected to services before Walmart paid them; (d) that Walmart entered into a 3-year non- cost USD 84 million. During a recorded TPIs had written contracts that included prosecution agreement and agreed meeting, Boncy and Baptiste told the anti-corruption clauses; (e) that donations to retain an independent corporate agents that, in order to secure Haitian ostensibly made to foreign government compliance monitor for two years. Walmart government approval of the project, agencies were not converted to personal did not voluntarily disclose the conduct they would funnel the bribes to Haitian use by foreign officials; and (f) that policies in Mexico and only disclosed the conduct officials through a non-profit entity that covering gifts, travel and entertainment in Brazil, China and India after the US Baptiste controlled, which purported to sufficiently addressed giving things of value government had begun investigating its help impoverished residents of Haiti. to foreign officials and were implemented. conduct in Mexico.
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Sweden must urgently implement reforms to boost the fight against foreign bribery states OECD
Sweden’s legal provisions to hold enter into force on 1 January 2020. The OECD “Sweden has the companies liable for foreign bribery Working Group on Bribery has repeatedly do not fully meet the requirements of urged Sweden to reform its laws since 2012 opportunity to address the OECD Convention on Combating to ensure the investigation and prosecution the Working Group’s Bribery of Foreign Public Officials in of companies that bribe foreign public International Business Transactions officials to obtain advantages in international concerns with the (Anti-Bribery Convention), explains business. adoption of the a press release issued by the recommended reforms Organisation for Economic Co-operation “We appreciate the willingness of the Swedish and Development (OECD) on 12 June. authorities to meet with us and discuss our of Sweden’s corporate substantial concerns and we welcome the liability laws” A high-level mission of the OECD Working draft bill presented by Sweden to address Group on Bribery discussed these issues the recommendations,” said Drago Kos, chair in Stockholm with senior Swedish officials of the Working Group on Bribery. “Sweden before the issuance of the press release and has the opportunity to address the Working the Swedish authorities confirmed that new Group’s concerns with the adoption of the Sweden join the top enforcers of the Anti- legislation to implement the OECD Working recommended reforms of Sweden’s corporate Bribery Convention and ensure those who Group on Bribery’s key recommendations will liability laws in January 2020. We hope to see commit foreign bribery are held to account.”
Former company director pleads guilty to GBP 12 million bribery scheme following SFO investigation
The UK’s Serious Fraud Office (SFO) False invoices were created to justify the charged in connection with an ongoing announced on 30 May that Carole Ann cash transfers, recorded in ALCA Fasteners’ corruption investigation into Eurasian Hodson has pleaded guilty to bribery accounts as “sales commission payments” Natural Resources Corporation and related in relation to a scheme to secure GBP or other payments not related to genuine companies. Machkevitch is the director of 12 million worth of contracts for ALCA transactions, with Hodson lying to her London-based ALM Services UK Ltd and the Fasteners Ltd, a company she owned at company’s auditors to disguise the true Machkevitch Foundation. the time. nature of the payments. To maintain the value of her company prior to selling it in The SFO alleges that in January 2019 she According to the SFO, the scheme, which 2017, Hodson also lied to the purchasers failed to supply documents required by the operated between 2011 and 2016 whilst by claiming that the company had not SFO, contrary to Section 2 of the Criminal Hodson was managing director and majority been involved in any unlawful conduct. The Justice Act 1987. Failing to comply with a owner, saw nearly GBP 300,000 of bribes SFO began investigating the company in notice given by the SFO without reasonable paid to Terje Moe, a purchasing manager December 2017 following a referral by the excuse is a criminal offence. The SFO’s employed by the Würth Group of companies, company’s current owners and directors. ongoing investigation into ENRC is focused a customer of ALCA Fasteners. Moe on allegations of serious fraud, bribery and received 2.5 percent of every order made by Separately, the SFO announced on 14 corruption in relation to the acquisition and his company to ALCA Fasteners. June that Anna Machkevitch has been retention of substantial mineral assets.
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New UN report highlights endemic FH Bertling systems of bribery in North Korea Ltd fined GBP
People in the Democratic People’s The report, which is based on first-hand 850,000 for Republic of Korea (DPRK) are trapped accounts of escapees gathered by UN in a vicious cycle, in which the failure staff in South Korea in 2017 and 2018, Angolan bribery of the State to provide for life’s basic describes how the most fundamental necessities forces them to turn to rights of ordinary people in the DPRK are scheme rudimentary markets where they face widely violated because of economic human rights violations in an uncertain mismanagement and endemic legal environment, which includes corruption. The report proposes commonplace systems of bribery, recommendations on how to solve the according to a report published by the problems, which includes developing UN Human Rights Office on 28 May. stronger anti-corruption measures.
UK’s Charity Commission publishes Photo: Serious Fraud Office inquiry results on Viva Palestina The UK’s Serious Fraud Office (SFO) announced on 3 June that FH The UK’s Charity Commission or evaluation, assessment, or Bertling Ltd has been issued with published the results of its inquiry into management of risk in respect of any of a fine of GBP 850,000 for a bribery Viva Palestina, formerly a registered the charity’s activities. scheme created to secure contracts charity, on 6 June, which has found in Angola that saw the company that the trustees had not submitted During the course of the inquiry, the win and retain USD 20 million worth any financial information to the scope of the investigation was widened of freight forwarding services Commission since the charity was to examine media reports that a former contracts. registered in 2009 and concluded that volunteer of the charity was a member the trustees could not show that they of the Islamic State in the Levant (ISIL). According to the SFO, FH Bertling Ltd had met their legal responsibilities for However, the Commission found that paid bribes amounting to USD 350,000 ensuring that charitable funds were there was insufficient information for to an official working for Angola’s properly used, adequately protected, the inquiry to draw a conclusion one way state-owned oil company Sonangol, and not misused. or another about whether the person which has resulted in seven convictions concerned did volunteer for the charity. against FH Bertling Ltd and its The inquiry also found that the charity had employees. The four-year investigation received a number of donations through its The Commission concluded that by the SFO began in September 2014. online PayPal account for specific items, there was mismanagement and/or but found no evidence that those funds had misconduct in the management and The first charges were announced been spent on the items. Furthermore, the administration of the charity and that “it in July 2016 and involved two inquiry found that a number of significant was difficult for the inquiry to establish separate cases: the “Jasmine” and cash donations were received by the with any certainty whether any charitable “Angola” cases. Overall, 13 individuals charity via direct bank transfer but saw no activity had taken place, as it found were charged as part of the SFO’s evidence that the charity had attempted to little if any evidence that humanitarian investigation, with nine convicted of one identify the source. The inquiry found no aid was distributed to those in need in or more charges and the remaining four evidence of any due diligence, monitoring accordance with the charity’s objects.” individuals acquitted.
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PRESS & MEDIA | BRIBERY | CORRUPTION
Leaked messages raise questions Bribery case about Brazil’s justice minister Moro involving SNC-
Brazil’s justice minister, Sergio Moro, Lavalin will go has denied claims he conspired to keep former president Luiz Inácio to trial Lula da Silva out of the 2018 election, following revelations made on 9 June Canadian engineering company by The Intercept news websites that SNC-Lavalin published a has published what it claims are leaked statement on 29 May explaining messages sent by Moro while he was Photo: The BBC that it has been informed, presiding over the Operation Car Wash following the conclusion of the investigation. preliminary inquiry on federal charges laid by the Public The Intercept claims to have a large trove In a written statement cited by Reuters, Prosecution Service of Canada of leaked messages between Moro and Lula’s legal team have reportedly stated against SNC-Lavalin Group Inc, prosecutors on Telegram, an encrypted that the leaked messages prove what SNC-Lavalin International Inc messaging platform, that it has received they have argued in court, that Moro and and SNC-Lavalin Construction from an anonymous source, the contents federal prosecutors teamed up to ensure Inc, that the bribery charges will of which allegedly raise questions about that Lula would be quickly found guilty go to trial. the impartiality of Moro, a former judge and blocked from the 2018 election. who sent former president Lula to prison. Each entity has been charged with Moro, who became justice minister in one count of fraud under Section The messages published so far, reportedly January, and the prosecutors involved 380 of the Criminal Code of Canada appear to show Moro making suggestions have denied any illegal collaboration. and one count of corruption under to prosecutors about the focus and order Moro has also denied any improper Section 3(1)(b) of the Corruption of the Car Wash investigations. conduct on his part. of Foreign Public Officials Act. The allegations concern the period from 2001 to 2011 in which prosecutors say the company bribed officials in BBC airs investigation into alleged Moammar Gadhafi’s government and suspicious Senegal gas deal defrauded Libyan companies. SNC-Lavalin maintains that it will Senegal’s justice ministry has called for its stake in the two blocks, Cayar plead not guilty to the charges. for an inquiry into the country’s energy Offshore Profond and St. Louis Profond, “Given the threshold to be met by contracts after the BBC aired an and that a secret payment of USD 250,000 the prosecution at the stage of the investigation by BBC Panorama and was made by Timis to a company run by preliminary inquiry, this outcome was Africa Eye on 3 June, which makes the president’s brother Aliou Sall. expected,” said Neil Bruce, president allegations that president Macky Sall’s and CEO of SNC-Lavalin. “SNC- brother was involved in fraud related Aliou Sall resigned from his government Lavalin is a completely transformed to two offshore gas blocks being position with a body linked to the national company. These charges relate developed by BP. treasury on 24 June due to the controversy. to alleged wrongdoings that took Sall and Timis deny the allegations. place seven to 20 years ago by The BBC investigation alleges that BP had BP issued a statement rejecting any certain former employees who left agreed to pay Timis Corporation, a firm implication that it acted improperly, adding the company long ago. And we are run by Romanian-Australian tycoon Frank that it conducted extensive due diligence pursuing those who committed the Timis, USD 10 billion in royalty payments before acquiring the licence. wrongdoings.”
52 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Football: FIFA VP arrested, Swiss Three Puerto prosecutor ordered to step down Rico Senate
FIFA vice president and president officials of the Confederation of African Michael Lauber must Football (CAF), Ahmad Ahmad, has step down from an charged with been arrested in France, the football investigation into governing body confirmed on 6 June. corruption Media reports suggest that Ahmad’s corruption at FIFA due arrest relates to bribery allegations to “unusual” breaches Three Puerto Rico Senate related to CAF’s decision to change of protocol officials have been charged in its kit supplier from Puma to Tactical an 18-count indictment on 28 Steel in 2017. May with conspiracy to commit wire fraud, 10 substantive FIFA issued a statement explaining that it “has meetings with FIFA president Gianni counts of wire fraud, intentional taken note of the alleged events concerning Infantino, which did not follow official misapplication of property by Mr Ahmad Ahmad, who is being questioned legal procedure. A new prosecutor will an agent of an organisation by the French authorities in relation to now be appointed to the case. receiving federal funds, allegations related to his mandate while aggravated identity theft, and president of CAF.” Separately, former UEFA president money laundering, in a case Michel Platini was questioned by French involving a scheme to defraud Meanwhile, Switzerland’s Federal Criminal anti-corruption investigators on 18 June the legislature using “ghost Court ruled on 17 June that federal prosecutor over the awarding of the 2022 World employees.” Michael Lauber must step down from an Cup to Qatar and specifically whether investigation into corruption at FIFA due to he received bribers in exchange for his According to the allegations, from “unusual” breaches of protocol. The court vote for Qatar. Platini was later released around 2016 until June 2018, found that the explanations provided by from custody. French officials have been defendants Chrystal Robles-Báez, Lauber did not explain why his presence at investigating alleged corruption relating Isoel Sánchez-Santiago, and Ángel three unofficial meetings were indispensable to the award of the 2018 and 2022 World Figueroa-Cruz engaged in scheme to the proper conduct of investigations. Cups for two years. Prosecutors also to defraud money and property detained Sophie Dion, former sports from the government of Puerto The ruling follows leaks by the media, which adviser to former French president Rico by means of materially false includes revelations made by the Football Nicolas Sarkozy, and questioned Claude and fraudulent representations and Leaks website that Lauber had held private Guéant, an adviser to the president. promises. The defendants sought to accomplish their scheme to defraud by billing, approving and collecting for contractual professional services Jersey recovers USD 267 million work that was either not completed, or was performed in contravention to the linked to former Nigerian president explicit terms of the contracts.
The Bailiwick of Jersey announced son Mohammed before being “This is the first indictment charging on 3 June that it has recovered over transferred to accounts in Jersey. the use of “ghost employees” to USD 267 million linked to former defraud the people of Puerto Rico. The Nigerian president Sani Abacha. The The return of the money to Nigeria defendants’ reprehensible conduct funds, which purportedly derived from will be the subject of an asset sharing undermines the trust that the public corruption, were laundered through agreement, negotiated between Nigeria, places in our government,” said US the US banking system by Abacha’s the US and Jersey. attorney Rosa Emilia Rodríguez-Vélez.
53 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
TECHNICAL UPDATES GRECO report calls for better rules to manage revolving doors in US Congress
The Council of Europe’s Group of The GRECO report welcomes efforts to States against Corruption (GRECO) increase transparency in the legislative published a report on 29 May that takes process in Congress. For example, Congress aim at the so-called “revolving door has updated guidance to implement its problem” in the US Congress, calling Codes of Ethics for the Senate and the for the passage of congressional rules House, and it is promoting disclosure of to better manage revolving doors: conflicts of interest among members. when members of Congress enter Multiple legislative initiatives, including the employment negotiations to become Anti-Corruption and Public Integrity Act, are lobbyists after their time in office praised by GRECO, even though they have and “quarantine periods” applying to not yet been adopted. GRECO states that the former Congress members to carry out US has implemented satisfactorily half of 12 lobbying activities with representatives. recommendations issued in 2016.
GRECO report on Azerbaijan: measures still lacking
The Council of Europe anti-corruption the report notes that measures on asset measures to complete this reform and group (GRECO) published a report on disclosure are still lacking. implement the relevant recommendations. Azerbaijan on 18 June, which notes progress in the implementation of On asset disclosure, GRECO states that The report states that 13 out of 21 the recommendations on corruption it is “alarmed” by a persistent lack of will recommendations have been implemented prevention in respect of members of and of necessary measures to make the satisfactorily, five recommendations have parliament, judges and prosecutors. system operational. The report calls on the been partly implemented and three have not Despite the progress made however, authorities of Azerbaijan to take determined been implemented.
Kazakhstan’s new administration to target corruption
On 9 June, Kazakhstan’s former Senate Kazakhstan at No. 124 out of 180 countries On 13 June, he decreed the establishment speaker Kassym-Zhomart Tokayev, the and territories in its flagship Corruption of a standalone agency responsible for constitutional successor of Nursultan Perceptions Index. This represents a slight combating corruption, spun out of the Nazarbayev who ruled over Kazakhstan downgrade from 2017 when Kazakhstan National Anticorruption Bureau, previously a for almost 30 years before resigning in was ranked 122nd. In an interview with division of the now-former Agency for Civil March, was elected for his first five- Kazakh media in early April, Tokayev called Service and the Fight against Corruption. year term. In his inaugural address, he corruption “a terrible tragedy of the public singled out the fight against corruption conscience.” More recently, speaking on as one of the ten priorities of his the eve of his electoral victory, he declared: For more on Kazakhstan’s recent presidential administration. “If we don’t fight corruption, we lose transition and the challenges ahead, please momentum […] Corruption is a big problem read HERE ANALYSIS by the head of Aperio’s Transparency International currently ranks for us and a huge risk to our security.” Paris Office, George Voloshin.
54 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
Former head OSI Systems Protests in of Interpol Inc announces Haiti demand pleads guilty end to US removal of to taking USD bribery probe president Moise 2 million in instigated by over corruption bribes short seller allegations
OSI Systems Inc announced France 24 reported on 10 June on 5 June that US authorities that thousands of protestors have have closed foreign bribery filled the streets of Haiti’s capital investigations into the company Port-au-Prince demanding the following the dismissal of a removal of president Jovenel Photo: CNN shareholder lawsuit instigated by Moise for alleged corruption. Police allegations that OSI Systems had spokesperson Michel-Ange Jeunes The former head of Interpol Meng won a cargo-scanning contract in confirmed that the protests had left Hongwei pleaded guilty before the Albania by paying bribes made by two people dead and five injured. Tianjin No 1 Intermediate People’s short seller Muddy Waters LLC. Court on 20 June to taking USD 2 The protests follow a report, compiled million in bribes to help companies Foreign Corrupt Practices Act by judges of the High Court of Auditors, “make illegal gains.” investigations were being conducted by which alleges that Moise was involved the SEC and the Justice Department. in an embezzlement scam that had The alleged offences occurred from The report by Muddy Waters accusing drained funds from Venezuelan oil 2005 to 2017 when Meng held various OSI Systems of misleading investors shipments subsidised under the public security positions in China, about the Albania contract prompted Petrocaribe program. which included vice minister of China’s shareholder lawsuits. A federal judge national police. Meng resigned as the in California dismissed the shareholder Petrocaribe has been investigated head of Interpol in October 2018. claims in May, stating that OSI’s previously by the Haitian senate, over securities filings did not qualify as questions about whether the alliance’s Meng has yet to be sentenced. misstatements under US securities law. funds had been misspent.
Former president of Romanian Football Federation and his wife indicted over bribery allegations
Romania’s National Anticorruption over RON 700,000 to ensure that the of RON 724,000 from two individuals, Directorate (DNA) has reportedly federation hired a certain law firm. one being representative of a law firm,” indicted Mircea Sandu, the former reads the DNA statement. Romania’s president of the Romanian Football “On October 2, 2009, Sandu Mircea, prosecutor alleges that based on the Federation, and his wife Elisabeta as president of the Romanian Football relevant contracts, the law firm would over bribery allegations. Mircea Federation, benefiting from the help of have obtained RON 11.7 million from the Sandu is accused of having received his wife Sandu Elisabeta, received a bribe Football Federation.
55 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
PRESS & MEDIA | BRIBERY | CORRUPTION
Kenya to scrap 1,000 shillings note Algeria’s state to help combat financial crime TV reports on corruption The governor of Kenya’s Central Bank, Njoroge also Patrick Njoroge, stated on 3 June that Kenya urgently needs to stamp out the expressed concern related arrests increase of suspicious transactions over other larger in its financial sector, which includes banknotes being used including plans to invalidate the older version of its 1,000 shilling note by October to help for illicit financial flows former prime combat financial crime. minister Njoroge also expressed concern over banknote with its counterparts in the other larger banknotes being used for region. Njoroge added that the Central Reuters reported on 13 June illicit financial flows in Kenya and other Bank will defend itself in a suit filed by a that Algeria’s supreme court has countries in the region. Kenya’s central private citizen challenging its decision to reportedly remanded former bank will coordinate the move to scrap the demonetise the banknote. prime minister Abdelmalek Sellal in custody over graft allegations relating to the “dissipation of public funds, according to state Albania: calls to impeach president TV, in a crackdown on corruption and cronyism among associates of former president Abdelaziz as possible EU accession talks Bouteflika. spark financial crime reforms The court has also reportedly ordered the detention of former trade minister Albania’s governing Socialist Party Albania’s parliament has approved Amara Benyounes over his alleged called for the impeachment of president a package of draft laws aimed at involvement in corruption scandals, Ilir Meta on 10 June, a former party strengthening anti-money laundering according to reports by private channel member, over his decision to call off the as part of efforts to persuade the EU to Ennahar TV. country’s upcoming municipal elections. launch accession talks. Meta called off the vote scheduled for Reuters also reported the alleged arrest 30 June, stating that elections without The European Commission issued a of Mourad Eulmi, head of SOVAC, a opposition would not be democratic and staff working document on 29 May partner of Germany’s Volkswagen AG, would harm Albania’s path towards EU recommending the start of accession in connection with corruption. SOVAC membership. negotiations with Albania. The 2019 and Volkswagen entered a joint venture European Commission Progress Report in 2016 to assemble vehicles under the Albania’s opposition parties have accused the on Albania found that the country has Volkswagen, Volkswagen Commercial governing party of corruption and of doctoring made good progress to advance on the Vehicles, SEAT and Skoda brands. the results of the 2017 parliamentary European agenda, which includes the election, which has sparked widespread implementation of necessary justice In addition to this, the supreme court protests in the country. In addition to this, reforms. is said to have ordered the detention German newspaper BILD leaked wiretapped of another Algerian former prime conversations at the start of June reportedly Amongst other things, Albania’s new laws minister, Ahmed Ouyahia, for alleged showing collusion between Socialist Party require transactions by politicians to be involvement in corruption, including officials and a criminal organisation regarding monitored, and an agency to administer “awarding illegal privileges and coercing voters in the upcoming election. property seized by the state will be set up. dissipation of public funds.”
56 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Mexico US SEC Alleged pursues reportedly 1MDB co- allegations investigating conspirators concerning Siemens, GE convicted in the sale of a and Philips Abu Dhabi, fertilizer plant over bribery reports WSJ to Pemex scheme The Wall Street Journal reported on 16 June that two individuals accused of playing prominent roles Mexican president Lopez Obrador’s in the 1Malaysia Development administration has frozen the Reuters reported on 4 June that Bhd (1MDB) scandal have been assets of Emilio Lozoya, the former the US Securities and Exchange convicted of financial crimes in CEO of the state-owned oil and gas Commission (SEC) is investigating Abu Dhabi. According to the WSJ’s company Petroleos Mexicanos Siemens AG, Philips NV and sources the convictions were (Pemex), and Alonso Ancira, the General Electric Co for allegedly unrelated to the 1MDB scandal. CEO of Altos Hornos de Mexico using local middlemen to negotiate (AHMSA), over bribery allegations bribes with Chinese government The Abu Dhabi Criminal Court concerning AHMSA’s sale to Pemex and hospital officials to sell medical reportedly sentenced Khadem al of a fertilizer plant in 2014. equipment, according to sources Qubaisi, who previously headed the with knowledge of the matter. International Petroleum Investment Investigators in Mexico suspect that Company (IPIC), and Mohammed the price of the fertilizer plant, which The investigations into the companies’ Badawy al Husseiny, who ran a was sold for USD 475 million, was business in China, along with an existing subsidiary of the company, to 15 and severely inflated. Arrest warrants SEC probe into their sales in Brazil, are 10 years in prison. The pair must also were also issued against Ancira and part of new efforts by US regulators to jointly pay EUR 300 million, half of Lozoya. Ancira has been detained and crack down on alleged corruption in which will go to IPIC, which is referred is in Spain awaiting extradition, whilst sales of medical equipment worldwide, to in court documents as the “victim Lozoya remains at large. said the Reuters sources. company,” the WSJ reported.
Israel: Sara Netanyahu admits to misusing public funds and Benjamin Netanyahu calls new election
Local media reported in June that the USD 99,300 on outside catering while falsely polls, after coalition talks collapsed. wife of Israeli prime minister Benjamin declaring that there were no cooks available Netanyahu has admitted to the misuse at the prime minister’s residence. Netanyahu will be seeking re-election just a of state funds and will have to pay USD month before he is due to present an initial 15,000 as part of a plea deal. Meanwhile, Benjamin Netanyahu has called defence in October against allegations of for a new election on 17 September, less corruption, fraud and breach of trust that Sara Netanyahu was accused of spending than six months after Israelis went to the have cast a shadow over his premiership.
57 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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Banks face new challenges in Italian Head of ICBC diamond scandal, reports Reuters Shanghai
Reuters reported on 17 June that a employees when their investigation, investigated criminal probe into diamond sales by which has been running since 2016, Italian banks has uncovered further is concluded. Officials from UniCredit The South China Morning Post evidence of corruption by officials at and Banco BPM are also suspected of reported on 6 June that the head UniCredit and Banco BPM. corruption concerning investment by of the Industrial and Commercial Intermarket Diamond Business in the Bank of China’s (ICBC) Shanghai According to Reuters, the allegations banks’ shares, according to prosecutors. branch, Gu Guoming, has been relate to suspected crimes and do not Intesa Sanpaolo and Banca Monte dei placed under investigation for necessarily mean that prosecutors Paschi di Siena are also said to be under alleged serious violations of will charge the companies and their investigation. party discipline and infringement of criminal laws, according to the Communist Party’s anti- corruption watchdog.
The Central Commission for Former Ukrainian president charged Discipline Inspection reportedly issued a statement explaining that with corruption over residence it is investigating Gu, who is also the chairman of the Shanghai Payment and Clearing Association. The Ukrainian Prosecutor General’s prime minister Viktor Yanukovych. Office announced on 6 June that former Ukrainian president Viktor Yushchenko, who was president from Yushchenko has been charged 2005 to 2010, is suspected of assisting with suspected abuse of power Yanukovych to illegally privatise the Citgo execs and possession of state property Mezhyhirya residence, which is reportedly over the illegal privatisation of a worth UAH 540 million. Mezhyhirya was must stand trial residential complex near Kyiv that formerly a state property before it was allegedly served as a residence for privatised in 2007 by a businessman linked in Venezuela Yushchenko’s successor and former to Yanukovych. A Venezuelan court ruled on 7 June that six executives from US refiner Citgo should stand trial on charges of corruption, despite pressure from the US to release Peru votes in favour of Vizcarra’s the defendants.
anti-corruption reforms The executives – Jose Luis Zambrano, Alirio Zambrano, Jorge Peru’s Congress approved president financing, a removal of immunity for Toledo, Tomeu Vadell, Gustavo Martin Vizcarra’s anti-corruption lawmakers and a ban from office for those Cardenas and Jose Pereira – were reforms with a vote of confidence on 5 previously convicted of corruption. arrested in 2017 on suspicion of June, following threats to dissolve the crimes including embezzlement Peru’s government is now expected to legislative body if the reforms failed. relating to a proposed refinancing begin negotiations with the opposition to agreement involving state oil firm introduce the reforms. The reforms include changes to campaign PDVSA, which owns Citgo.
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Former Uzbek chief Former Hong French justice prosecutor Kong stock minister reportedly exchange joint investigated sacked over head of IPO over fees paid corruption vetting team by Renault- investigation arrested over
Nissan Local media reported on 21 June corruption that Uzbek president Shavkat Reuters reported on 4 June that Mirziyoyev has sacked prosecutor Hong Kong’s Securities and former French justice minister general Otabek Murodov after he Futures Commission and the Rachida Dati is being investigated was targeted in a corruption probe. Independent Commission Against over consulting fees she received Corruption (ICAC) announced from the Renault-Nissan strategic The Uzbek authorities have also in a joint statement on 26 June partnership, citing a statement reportedly announced that the that the former joint head of the issued by the French financial former head of state security, Ikhtiyor initial public offering vetting team prosecutor’s office. Abdullayev, is being investigated for alleged corruption. at Hong Kong’s stock exchange The preliminary investigation follows HKEX and two of his associates a complaint by an individual Renault It was also reported that former Uzbek have been arrested for suspected shareholder against Dati, Ghosn and prosecutor general Rashidjon Qodirov corruption and misconduct in Bauer for corruption and misuse of was sentenced to 10 years in prison public office “in relation to the company funds, according to the on corruption charges on 26 June by vetting of listing applications of the shareholder’s lawyer Jean-Paul Baduel. the Tashkent City Court. According to two listed companies.” Payments to consultants have come media reports Qodirov was found guilty The HKEX has stated that the ICAC is under scrutiny after its ousted chairman, of bribe-taking, extortion, financial fraud, not investigating the exchange itself or Carlos Ghosn, was charged in Japan for tax evasion, obstruction of justice, and any other employees. alleged financial misconduct. money laundering.
Switzerland to return CHF 130 million to Uzbekistan
The Office of the Attorney General of The seized assets are part of the criminal investigation and more than CHF 650 Switzerland (OAG) announced on 24 investigation opened by the OAG into million of assets remain frozen. June that CHF 130 million in assets allegations of forgery and money seized, as part of an investigation into laundering concerning Gulnara Karimova A new prosecutor has taken charge of the a bribery scheme involving companies and the Uzbek subsidiary of a Russian Swiss criminal investigation, but the OAG looking to enter or continue activities telecommunications company. states that at this stage it is unable to on the Uzbek market, will be returned provide any further information as to how to the country. At present, five suspects are still under the investigation may progress.
59 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
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TechnipFMC Plc and subsidiary agree to pay over USD 296 million to resolve foreign bribery case
The US Department of Justice (DOJ) one-count criminal information charging it business advantages for Technip, Technip announced on 25 June that TechnipFMC with conspiracy to violate the anti-bribery USA and Joint Venture. Technip also made plc (TFMC), a global provider of oil and provisions of the FCPA. more than USD 6 million in corrupt payments gas services headquartered in London, to the Workers’ Party in Brazil and Workers’ and its wholly-owned US subsidiary, In related proceedings, the company settled party officials in furtherance of the scheme. Technip USA Inc, have agreed to pay a with the Advogado-Geral da União (AGU), combined total criminal fine of more than the Controladoria-Geral da União (CGU) Also, from 2008 until at least 2013, FMC USD 296 million to resolve foreign bribery and the Ministério Público Federal (MPF) in conspired to violate the FCPA by paying charges with authorities in the United Brazil over bribes paid in Brazil. The US will bribes to at least seven government officials States and Brazil. credit the amount the company pays to the in Iraq through a Monaco-based intermediary Brazilian authorities under their respective company in order to secure improper TFMC is the product of a 2017 merger agreements, with TechnipFMC paying Brazil business advantages and to influence those between two companies, Technip S.A. and USD 214 million in penalties. foreign officials to obtain and retain business FMC Technologies Inc. The charges arose for FMC Technologies in Iraq. out of two bribery schemes: (1) a scheme by According to admissions and court Technip to pay bribes to Brazilian officials documents, from 2003 until at least 2013, TFMC received credit for its cooperation with and (2) a scheme by FMC to pay bribes to Technip conspired with others, including the investigation and for taking extensive officials in Iraq. Singapore-based Keppel Offshore & Marine remedial measures, which resulted in a Ltd (KOM) and their former consultant, 25 percent reduction off the applicable US TFMC has entered into a deferred to violate the FCPA by making more than Sentencing Guidelines fine. prosecution agreement with the DOJ in USD 69 million in corrupt payments to the connection with criminal information consultant, companies associated with the In related enforcement action, in December charging the company with two counts consultant and others, who passed along 2017, KOM and US subsidiary, Keppel of conspiracy to violate the anti-bribery portions of these payments as bribes to Offshore & Marine USA Inc, agreed to pay a provisions of the Foreign Corrupt Practices Brazilian government officials employed total criminal fine of over USD 422 million to Act (FCPA). In addition, Technip USA by Brazilian state-owned oil company, resolve charges with authorities in the US, pleaded guilty and was sentenced on a Petrobras, in order to secure improper Brazil and Singapore over related conduct.
Former IAAF president and five others to stand trial in France for corruption and money laundering
The former president of the conspiracy to conceal positive drug tests by bribes for his votes in several bidding International Association of Athletics Russian athletes in return for bribes, which contests for sports events. Federations (IAAF), Lamine Diack, was also involved Russian athletics chief and ordered to stand trial in June on charges IAAF treasurer Valentin Balakhnichev, former Balakhnichev, Melnikov, Cissé and Dollé will of corruption and money laundering. Russian coach Alexei Melnikov, Diack’s also face trial on the same charges, along The decision follows a investigation in former aide Habib Cissé and the IAAF’s with Diack’s son, Papa Massata Diack, the France into extortion and bribe-taking in former head of anti-doping, Gabriel Dollé. former IAAF marketing executive who was world athletics. banned for life from athletics in 2016. The French authorities have also been Diack is accused of being part of a investigating allegations Diack received All of the accused deny the charges.
60 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
PRESS & MEDIA | SANCTIONS
Iran sanctions: US issues new EO and designations, Iran announces measures to reduce JCPOA commitments
US president Donald Trump announced new sanctions on OFAC also designated PGPIC’s network of 39 subsidiary Iran on 24 June issuing a new Executive Order “Imposing petrochemical companies and foreign-based sales agents. PGPIC Sanctions with Respect to Iran” which imposes sanctions and its group of subsidiary petrochemical companies hold 40 on the Supreme Leader of the Islamic Republic of Iran, percent of Iran’s total petrochemical production capacity and are Ali Khamenei, as well as the Supreme Leader’s Office. responsible for 50 percent of Iran’s total petrochemical exports. The Executive Order is intended to deny Iran’s leadership The designations, which include UK-based NPC International, are access to financial resources and authorises the targeting pursuant to Executive Order 13382. PGPIC has been designated for of persons appointed to certain official or other positions providing financial support to sanctioned entity Khatam al-Anbiya. by the Supreme Leader or the Supreme Leader’s Office. The Executive Order includes secondary sanctions for any Meanwhile, Iran’s atomic energy agency (AEOI) announced on foreign financial institution that knowingly facilitates a 18 June measures to reduce their commitments under the Joint significant transaction for the designated entities. Comprehensive Plan of Action (JCPOA), stating that if it sees “concrete action” and “positive signs” from the EU concerning On the same day, the US Department of the Treasury’s Office compliance with JCPOA, Iran will return to full JCPOA compliance. of Foreign Assets Control (OFAC) designated eight senior The following measures to reduce Iran’s commitments under the commanders of Navy, Aerospace, and Ground Forces of the JCPOA were announced: the production of enriched uranium has Islamic Revolutionary Guards Corps (IRGC), pursuant to Executive been increased by four times, and as a result, Iran will exceed the Order 13224, for acting for or on behalf of the IRGC and for their 300kg uranium enrichment cap stipulated in the JCPOA by 27 June; part “in the Iranian regime’s provocative attacks orchestrated in heavy water production and supplies could exceed the 130-tonnes internationally recognized waters and airspace, as well as Iran’s limit in two and a half months if Iran is not given access to a new malign activities in Syria.” The commanders designated are: Ali market; and Iran may start the process of enriching uranium from 7 Reza Tangsiri; Amirali Hajizadeh; Mohammad Pakpour; Abbas July to up to 5 percent to meet the needs of the Bushehr power plant Gholamshahi; Ramezan Zirahi; Yadollah Badin; Mansur Ravankar; and up to 20 percent (military-grade) for a research reactor. and Ali Ozma’i. Any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial The EU External Affairs Sub-Committee held an evidence session services for any of the individuals designated could be subject to in the House of Lords 20 June on the future of the JCPOA US correspondent account or payable-through sanctions. following Iran’s announcement that it will stop complying with its commitments. The evidence presented during the meeting related US Treasury secretary Steven Mnuchin has stated that the United to the special purpose vehicle INSTEX, the role of other state actors States will shortly blacklist Iran’s foreign minister Mohammad in the nuclear deal, alternative ways to prevent further proliferation, Javad Zarif and block “billions” more in Iranian assets as part of and the recent explosions on oil tankers in the Gulf of Oman. expanded sanctions. Meanwhile, the US special representative for Iran, Brian Hook, has stated that the future purchase of Iranian oil Germany’s foreign minister, Heiko Mass, said at press conference by any state will prompt sanctions, which includes purchases of with Iranian president Hassan Rouhani and foreign minister oil by those governments that were issued with waivers on Iranian Mohammed Javad Zarif on 10 June that INSTEX will soon be oil imports. The US has also warned Hong Kong of sanctions in operational. A statement from E3 Ambassadors on 13 June response to their incoming shipment of Iranian petroleum. following expert meetings in Tehran explained “We understand the economic pressure the Iranian people are facing. We are committed In addition to this, OFAC took action against Iran’s largest and most to working with Iran to deliver INSTEX’s first transaction as quickly profitable petrochemical holding group on 7 June, Persian Gulf as possible. Expert exchanges of this nature are the best way to Petrochemical Industries Company (PGPIC), for providing financial move us closer towards delivering on our shared goal to facilitate support to Khatam al-Anbiya Construction Headquarters (Khatam legitimate trade and economic relations with Iran. In light of the al-Anbiya), the engineering conglomerate of the IRGC. above, both sides have agreed a roadmap to expedite progress.”
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US unseals indictments for violating EU threatens Iran sanctions and US export laws to impose
The US Department of Justice wired money to banks in the United sanctions on announced on 4 June the unsealing States as payment for these parts and of two indictments charging Peyman concealed from US sellers the ultimate Turkey over Amiri Larijani and a Turkish based end use and end users of the purchased company, Kral Havacilik IC VE DIS parts. Larijani and his co-conspirators illegal drilling Ticaret Sirketi, with conspiracy to then allegedly caused these parts to be acquire US origin aircraft parts and exported from the US to Turkey, before goods to supply to entities and end- shipping to airlines in Iran including in Cyprus users in Iran, to conceal from US Mahan Air, Sahand Air, and Kish Air. companies and the government that The EU has threatened to the US-origin goods were destined for A separate four-count indictment, impose sanctions on Turkey Iranian aviation business end users, to charges Larijani along with Mahan Air, if it continues “illegal drilling make financial profit for defendants Kral Aviation, Toufan Amiri Larijani, Javad activities” in waters near Cyprus and other conspirators, and to Rajabi, Mehdi Bahrami, and Ghodratollah in the eastern Mediterranean. evade the International Emergency Zarei with: conspiracy to export US goods European Commission president Economic Powers Act (IEEPA), the to Iran, specifically US origin commercial Jean-Claude Juncker stated at a Iranian Transactions and Sanctions aircraft engines, and provide services to European Council meeting on 21 Regulations (ITSR), and the Export Mahan Air, a SDN, and to defraud the US; June that Turkey’s actions were Administration Regulations (EAR). unlawful exports and attempted exports “totally unacceptable.” to embargoed country and the provision According to a 34-count indictment, of services to an SDN; wilful violation of The European Council expressed beginning around December 2010 to July a denial order; and conspiracy to commit serious concerns and underlined the 2012, Larijani was the operations manager money laundering for purchasing a US negative impact that such actions for Kral Aviation. Larijani and his co- origin aircraft engine to supply to Mahan have had across the range of EU- conspirators purchased US-origin aircraft Air in Iran without obtaining the necessary Turkey relations, calling on Turkey to parts and accessories from US companies, export licence. show restraint, respect the sovereign rights of Cyprus and refrain from any such further actions. The EU stated that it will monitor developments and stands ready to respond in full UK amends three general licences solidarity with Cyprus.
relating to military goods Juncker said: “We are in full solidarity with Cyprus. What Turkey is doing in The UK’s Export Control Joint shotguns, meaning these items now the territorial waters of Cyprus is totally Unit and the Department for require export authorisation; unacceptable. The Commission has International Trade has amended been charged to propose measures to three general licences relating to • Open general export licence (export after be taken as soon as possible when it military goods. exhibition or demonstration: military comes to this conflict and will do so, goods) has been amended to allow and these will not be soft measures.” The amendments concern: goods to be moved directly from one exhibition to another; and Separately, the US has threatened • Open general trade control licence Turkey with sanctions if Turkey’s (maritime anti-piracy), Schedule 1 • Open general licence (Iraq) has been president Recep Tayyip Erdogan goes (goods) has been amended to include amended to correct the category of ahead with a deal to buy S-400 air control entry PL9010 for non-military military goods to which the OGL applies. defence missiles from Russia.
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China’s plans to introduce an “Unreliable Entities List”
The Ministry of Commerce of China control the export of sensitive technology (MOFCOM) announced on 31 May that or rare earth metals used to produce such the Chinese government will introduce technologies. an “Unreliable Entities List” regime, which will include foreign entities Meanwhile, Japan’s Centre for Information and individuals that boycott or cut off on Security Trade Control has added Huawei supplies to Chinese companies for non- to their “Chaser” list, which includes entities commercial purposes, causing serious that pose concern to exporters, those damage to Chinese companies. subject to sanctions, or those suspected of contributing to the development of weapons The announcement follows the addition of mass destruction. of Huawei and its affiliates to the US Department of Commerce’s entity list for In addition to this, the White House Budget engaging in activities contrary to US national Separately, local media reported that China Office has asked Congress for more time security. The new regime is likely to be used will establish a mechanism to control to implement the law that bans companies by China as a countermeasure to export technology exports to the US to forestall dealing with Huawei from doing business control measures imposed by foreign and prevent national security risks. The with the US government. A two-year governments on Chinese companies. The new mechanism, which has reportedly postponement to the current July 2020 rules and the restrictive measures applicable been developed by the Chinese National deadline has been requested in order to help to the listed entities have yet to be published. Development and Reform Commission, will companies comply with the provisions.
RUSI publishes briefing on securing the global supply chain so it is not open to NK sanctions abuse
The Royal United Services Institute sanctions implementation beyond banks, ensure that goods do not originate from (RUSI) published a briefing on 24 May to include all supply chain actors who may North Korea. Others, like insurers, have a on ensuring that the global supply chain be exposed to North Korea sanctions risk. responsibility to prevent issuing insurance is not open to abuse by North Korea This also includes expanding awareness of cover to vessels engaged in activities on to evade international sanctions. The North Korea sanctions implementation to behalf of North Korea; and briefing concludes that the current local markets in regions such as Southeast response is failing, and that the Asia and Eastern and Southern Africa, • Finally, it is important that this approach is involvement of a far greater range of where North Korean trade and financial joined up across the supply chain. Others private sector actors is needed. networks are most active; involved in the supply chain – insurers, banks, vessel owners and managers, The briefing identifies the particular • Second, those actors must consider how terminal operators and storage facilities weaknesses and states that the action they might be exposed to North Korea’s – need to be linked up to and coordinated needed to combat the systemic problems illicit activities. For example, transport with the commitment, supported by are threefold: companies specialising in the movement guidance from governments. of seafood and agricultural products need • First, governments need to extend their to consider exposure to North Korea and outreach and guidance on North Korea put in place due diligence measures to
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EU revokes the sanctions framework OFAC against the Maldives changes The Council of the European Union Since the inauguration approach announced on 17 June that it has revoked the framework for sanctions of president Ibrahim to cross- against the Maldives that it adopted Mohamed Solih’s on 16 July 2018. administration in agency The EU’s decision has been taken in light November 2018, the of the Council’s objectives and of the political situation has penalties current situation in the Maldives. Since the inauguration of president Ibrahim Mohamed improved The US Department of the Solih’s administration in November 2018, the Treasury’s Office of Foreign Assets political situation has improved explained travel ban and an asset freeze on persons Control (OFAC) has indicted that the EU Council. The government has also and entities responsible for undermining it is changing how it calculates confirmed its commitment to consolidate the rule of law or obstructing an inclusive penalties in US sanctions democracy, ensure good governance, and political solution in the Maldives as well investigations involving multiple promote respect for human rights during as persons and entities responsible for enforcement agencies. On 14 the annual policy dialogue between the serious human rights violations. It was June, Andrea Gacki, the director Maldives and the EU. adopted following a deterioration of the of OFAC, explained during an political situation in the Maldives in the American Bar Association event The framework of restrictive measures first half of 2018. No persons or entities that two settlements in April provided for the possibility of imposing a were listed under this sanctions regime. involving Standard Chartered and UniCredit illustrate OFAC’s new approach to such penalties.
The Treasury will only give credit for penalties imposed by other federal OFAC designates IRGC-Qods Force agencies that relate to “the same pattern of conduct for the same period financial conduit of time” as the Department’s penalties, said Gacki, according to a copy of The US Department of the Treasury’s system to evade sanctions. According prepared remarks provided by the Office of Foreign Assets Control to the OFAC, the scheme also served to department to The Wall Street Journal. (OFAC) imposed sanctions on an Iraq- enrich previously sanctioned Abu Mahdi Previously, companies have paid based Islamic Revolutionary Guard al-Muhandis, an Iraqi advisor to IRGC-QF OFAC’s fines to other federal agencies Corps-Qods Force (IRGC-QF) financial commander Qasem Soleimani, who is in multi-agency settlements, which conduit, South Wealth Resources alleged to have run weapons smuggling were credited by the Treasury. Company (SWRC) on 12 June, which is networks and participated in bombings alleged to have trafficked hundreds of of Western embassies and attempted In the UniCredit case, three settlement millions of dollars’ worth of weapons assassinations in the region. agreements totalling USD 1.3 billion to IRGC-QF-backed Iraqi militias. were reached with multiple agencies. SWRC and the two individuals OFAC deducted USD 157.8 million paid SWRC and its two Iraqi associates, have been designated as Specially to the Federal Reserve for matching Makki Kazim ‘Abd Al Hamid Al Asadi and Designated Global Terrorists pursuant conduct that gave rise to the OFAC Muhammed Husayn Salih al-Hasani, who to Executive Order 13224, which targets penalty. However, OFAC issued a are also designated, covertly facilitated terrorists and those providing support to separate penalty for other violations the IRGC-QF’s access to the Iraqi financial terrorists or acts of terrorism. that had to be paid directly to OFAC.
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Nicaraguan government officials US senator designated by OFAC and Canada introduces
The US Department of the Treasury’s Nord Stream Office of Foreign Assets Control (OFAC) designated four Nicaraguan 2 sanctions government officials on 21 June – Gustavo Eduardo Porras Cortes, bill, the Orlando Jose Castillo Castillo, Sonia Castro Gonzalez, and Oscar Salvador Mojica Obregon – pursuant ESCAPE Act to Executive Order (EO) 13851. Sonia Castro Gonzalez and Gustavo Eduardo Porras Cortes have also been US senator John Barrasso designated pursuant to the Nicaragua introduced legislation on 13 June Human Rights and Anticorruption Act the Energy Security Cooperation of 2018 (NHRAA). with Allied Partners in Europe Act, On the same day the Canadian government or the “ESCAPE Act,” which aims The OFAC’s action targets Nicaraguan announced that it has imposed sanctions to enhance the energy security of government officials that are members on the same individuals as OFAC pursuant NATO members and mandates of Nicaraguan president Daniel Ortega’s to the Special Economic Measures Act, as sanctions on the Nord Stream 2 inner circle and who “persecute Nicaraguan well as five other Nicaraguan US-designated pipeline that would carry natural citizens exercising their fundamental officials: Rosario María Murillo Zambrana; gas from Russia to Germany, along freedoms, enact repressive laws, silence Fidel Antonio Moreno Briones; Francisco with other Russian energy export news media, and deny medical care to the Javier Diaz Madriz; Nestor Moncada Lau; pipelines. Nicaraguan people.” and Laureano Facundo Ortega Murillo. “President Trump was right when he recently said that Germany will be held hostage by Russia if they move forward with Russia’s Nord Stream II gas pipeline,” said Barrasso. “We already North Korea accused of violating know Russian President Vladimir Putin has a history of using Russia’s natural UN sanctions gas to extort and threaten our allies. The ESCAPE Act will take away this The US Mission to the UN submitted and China have objected to the request, geopolitical weapon by sanctioning the a report signed by 26 states accusing blocking the declaration. Nord Stream II pipeline and expanding North Korea of violating UN sanctions American natural gas exports. In the by breaching a cap on imports of Separately, the Canadian navy and air United States—especially in Wyoming— refined petroleum through illicit force will help enforce UN sanctions we’re blessed with an abundance of ship-to-ship transfers. The complaint against North Korea, Canada’s natural gas. It only makes sense that we requested that the UN Security Council Department of National Defence would use these resources to help our committee monitoring sanctions announced on 3 June, following a allies and loosen Putin’s economic and against North Korea rule that meeting between defence minister Harjit political grip on the region.” Pyongyang breached the cap and to Sajjan and Japanese counterpart, Takeshi demand that UN member states action Iwaya. The two-year mission is aimed at The ESCAPE bill, which is co-sponsored an immediate halt on deliveries. supporting sanctions intended to force by several Republican senators, is one the regime in Pyongyang to give up its of several bills before the Congress that It was reported on 19 June that Russia nuclear weapons program. target Russia’s influence in Europe.
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OFAC settlements with Expedia, Hotelbeds USA and Cubasphere over Cuba sanctions; proceedings filed against Trivago under Title III of the Helms-Burton Act
The US Department of the Treasury’s which has agreed to pay USD 222,705 to Office of Foreign Assets Control (OFAC) settle its potential civil liability for assisting announced on 13 June a USD 325,406 persons with unauthorised Cuba-related travel settlement with Expedia Group Inc, services in apparent violation of the CACR. on behalf of itself and its subsidiaries Specifically, between the December 2011 and and affiliates worldwide, to settle its June 2014, Hotelbeds USA provided Cuba- potential civil liability for providing related travel services to 703 non-US persons Cuba-related travel services in apparent in apparent violation of the CACR. violation of the Cuban Assets Control Regulations (CACR). The OFAC also announced on 13 June, a USD 40,320 settlement with an individual Meanwhile, US proceedings were filed on Between 2011 and 2014, Expedia allegedly and Cubasphere Inc. The individual, and 18 June against Trivago NV, a subsidiary of dealt in property or interests in property of Cubasphere, on whose behalf the individual Expedia Group Inc, under Title III of the Helms- Cuba or Cuban nationals by assisting 2,221 acted, have agreed to pay USD 40,320 to Burton Act for unlawful trafficking of a hotel persons — some of whom were Cuban settle potential civil liability for apparent in Cienfugos. Other Expedia subsidiaries, nationals — with travel or travel-related violations of the CACR. The individual and including Hotels.com L.P., Orbitz LLC and services for travel within Cuba or between Cubasphere allegedly dealt in property in Travelocity.com LP, have been notified of the Cuba and locations outside the US. which Cuba or Cuban nationals had an plaintiffs’ intention to add the companies to interest, by engaging in unauthorised Cuba the lawsuit. It is alleged that these companies Separately, the OFAC also announced a USD travel-related transactions, assisting 104 are also benefiting from the confiscated 222,705 settlement with Hotelbeds USA Inc, persons on four trips to and within Cuba. property in Cuba.
OFAC and BIS make changes to Cuba sanctions rules
The US government announced Certain other categories of travel continue to has amended License Exception Aircraft, changes to the Cuban Assets Control be authorised under other general licences. Vessels and Spacecraft (AVS) in the Export Regulations (CACR) on 4 June, Administration Regulations to remove the restricting group people-to-people The changes, which took effect on 5 June, are authorisation for the export or reexport educational travel and limiting the types a further step towards implementation of the to Cuba of most non-commercial aircraft of aircraft and vessels authorised to National Security Presidential Memorandum and passenger and recreational vessels on travel to Cuba on temporary sojourn. of June 2017 “Strengthening the Policy of temporary sojourn. BIS has also amended the United States Toward Cuba” and the the licensing policy for exports and reexports There is a limited “grandfathering” provision administration’s intent to restrict non-family to Cuba of such aircraft and vessels to to authorise certain group people-to-people travel to Cuba. establish a general policy of denial. Private educational travel that previously was and corporate aircraft, cruise ships, sailboats, authorised where the traveller has already The amendments also complement fishing boats, and other similar aircraft and completed at least one travel-related changes to the Department of Commerce’s vessels subject to US jurisdiction will from transaction (such as purchasing a flight or Bureau of Industry and Security (BIS) Export now on generally be prohibited from traveling reserving accommodation) prior to 5 June. Administration Regulations (EAR). The BIS to and from Cuba.
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OFAC amends Reporting, Procedures and Penalties Regulation and increases civil monetary penalties
The Department of the Treasury’s parties filing reports on blocked property, The amendments took effect on 21 June. Office of Foreign Assets Control (OFAC) unblocked property, or rejected transactions; announced on 20 June the amendment revises the licensing procedures section to Prior to this, OFAC announced on 13 June of the Reporting, Procedures and include information regarding the OFAC’s amendments to its regulations to implement Penalties Regulations, 31 CFR part electronic licence application procedures, for 2019 the Federal Civil Penalties Inflation 501 (RPPR). The RPPR sets out the and provide additional instructions regarding Adjustment Act of 1990, as amended by the standard reporting and recordkeeping applications for the release of blocked Debt Collection Improvement Act of 1996 requirements and licence application funds; and clarifies the rules governing the and the Federal Civil Penalties Inflation and other procedures relevant to availability of information under federal law, Adjustment Act Improvements Act of 2015. the economic sanctions programs including the Freedom of Information Act administered by the OFAC. (FOIA), for information that is submitted The amendment, which took effect on 14 to the OFAC in connection with blocking June, adjusts for inflation the maximum The amendments update the instructions or unblocking reports, reports on rejected amount of civil monetary penalties that may and incorporate new requirements for transactions, or licence applications. be assessed under OFAC regulations.
EU extends Crimea and Sevastopol sanctions; Ukraine threatens boycott after Russia allowed to rejoin PACE
On 20 June, the Council of the European • Tourism services in Crimea or Sevastopol, Minsk Agreements. The measures, which Union announced that it is prolonging in particular, European cruise ships cannot target Russia’s financial, energy and defence the restrictive measures introduced call at ports in the Crimean peninsula, industries, will be renewed on 31 July. in response to the illegal annexation except in case of emergency; and of Crimea and Sevastopol by Russia Meanwhile, Ukraine and Georgia have until 23 June 2020, pursuant to Council • Exports of certain goods and technologies challenged the credentials of the new Decision (CFSP) 2019/1018, which to Crimean companies or for use in Crimea Russian delegation to the Parliamentary amends Decision 2014/386/CFSP. in the transport, telecommunications Assembly of the Council of Europe (PACE) and energy sectors and related to the after the body voted to restore Russia’s The measures are limited to the territory prospection, exploration and production of voting rights on 24 June. Russia has been of Crimea and Sevastopol. The sanctions oil, gas and mineral resources. Technical barred from PACE for five years over its include prohibitions on: assistance, brokering, construction annexation of Crimea. The Ukrainian or engineering services related to delegation walked out of the assembly • Imports of products originating in Crimea infrastructure in these sectors must not be meeting and have threatened to boycott or Sevastopol into the EU; provided either. PACE in protest to the decision.
• Investment in Crimea or Sevastopol, Separately, EU spokesperson Preben It is the first time an international body has meaning that no Europeans or EU-based Aamann announced on Twitter that EU lifted punitive measures imposed on Russia companies can buy real estate or entities leaders have agreed to prolong sectoral for its 2014 annexation of Crimea and the in Crimea, finance Crimean companies or sanctions against Russia for six months subsequent invasion of eastern Ukraine. supply related services; due to the lack of implementation of the
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Calls for international sanctions on Developer jailed Sudan’s transitional authorities for buying fighter jet manuals Amnesty International called on the Department could issue an anti-money laundering advisory to banks around international community on 3 June According to court filings released the world to be on the lookout for illicit to consider all forms of peaceful on 19 June, Russian developer financial flows coming out of Sudan. pressure, including targeted sanctions, Oleg Tishchenko has been on the members of the Sudanese sentenced to one year in prison by In addition, The Guardian reported on 6 transitional authorities responsible for a US district court for purchasing June that Sudan has been suspended a violent attack on protestors. F-16 and F-35 fighter jet manuals from the African Union (AU) amid from eBay without an export Meanwhile, George Clooney and John growing fears that splits among the licence under the US Arms Export Prendergast, co-founders of The Sentry, ruling military regime could lead to civil Control Act. The manuals were on wrote an article for POLITICO, published on war. The decision by the AU increases the US Munitions List. 11 June, which explains how US Congress pressure on the country’s new military can help stop the killing in Sudan, including rulers, according to the report, raising Tishchenko claimed that he was through the use of sanctions to combat the prospect of diplomatic isolation using the manuals to design a flight corruption and human rights abuses. The and sanctions if they do not hand over simulator. He was employed as a opinion piece states that in addition to the power to a civilian-led authority. developer by Eagle Dynamics, which Global Magnitsky sanctions, the Treasury makes flight simulators and software. Alleged Russia temporarily allows import of loopholes in certain sanctioned Ukrainian goods UN sanctions Russia’s prime minister Dmitry handling capacity exceeding 10 000 Medvedev signed Resolution No. 787- kVA (HS code 8504 23 000 9); procedures 31 on 20 June, introducing changes to Governmental Decree No. 1716-83 • Up to 1 January 2020 - electric The Wall Street Journal reported that implemented an import ban with motors and generators of an output on 19 June that loopholes in respect to Ukrainian goods. exceeding 375 kW (HS code 8501 UN Security Council sanctions 34 000 0), alternators of an output procedures are allowing Resolution No. 787-31, which entered into not exceeding 75 kVA (HS code designated Al Qaeda and force on 21 June, temporarily lifts the import 8501 61), alternators of an output Islamic State terrorists and their ban concerning the following products: exceeding 750 kVA (HS code 8501 supporters to access funds in their 64 000 0), transformers with a liquid bank accounts despite an asset • Up to 1 July 2019 - transmission shafts dielectric, having a power handling freeze, according to documents (HS code 8483 10 950 0), transformers capacity exceeding 1600 kVA but seen by the media outlet. with a liquid dielectric, having a power not exceeding 10 000 kVA (HS code handling capacity exceeding 650 kVA 8504 22 900 0); and UN rules allow designated individuals but not exceeding 1600 kVA (HS code to request to take back a portion of 8504 22 100 0); • Up to 1 October 2021 - certain types their frozen funds for essential living of pipe products made of steel (HS expenses on the condition that their • Up to 1 October 2019 - transformers codes 7304 41 000, 7304 59). home countries oversee the transfers, with a liquid dielectric, having a power states the WSJ report.
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US State UK suspends new arms export Department licences to Saudi Arabia; US senate debars 23 passes series of resolutions individuals The UK Court of Appeal held on 20 The US senate passed June that the UK government should and entities for not have granted export licences a series of resolutions for the sale or transfer of arms or on 20 June aimed at military equipment to Saudi Arabia violating the that could be used in the conflict blocking 22 arms sales Arms Export in Yemen – R (on the application of to Saudi Arabia and the Campaign Against the Arms Trade) United Arab Emirates v. Secretary of State for International Control Act Trade [2019] EWCA 1020.
In response to the landmark ruling, the UK law. The ruling did not require all licences The US Department of State has suspended new export licences for to export arms to Saudi Arabia to be published a Federal Register arms that might be used by the Saudi- suspended, but that the UK government notice on 6 June of 23 individuals Arabia coalition in Yemen. The Secretary must reconsider its polices. and entities statutorily debarred of State’s arms export policy precludes for having been convicted of the grant of arms export licences where The Department of International trade violating, or conspiring to violate, there is a “clear risk” that the arms might announced that it would seek permission the Arms Export Control Act. be used to commit a serious violation of to appeal the ruling. international humanitarian law, pursuant The notice makes the public aware to the Export Control Act 2002, the Export Separately, the US senate passed a that these statutorily debarred persons Control Order 2008 and Council Common series of resolutions on 20 June aimed are prohibited from participating Position 2008/944/CFSP. at blocking 22 arms sales to Saudi directly or indirectly in activities Arabia and the United Arab Emirates, regulated by the International Traffic The Court found that the UK government worth more than USD 8 billion. The in Arms Regulations (ITAR), which had not concluded any assessments action follows the Trump administration’s includes any brokering activities and as to whether the Saudi-led coalition announcement that it is using emergency any export from or temporary import fighting in Yemen had committed historic powers to bypass Congress for the sale into the US of defence articles, related violations of international humanitarian of USD 8.1 billion of weapons. technical data, or defence services in any situation covered by the ITAR.
The individuals and entities are prohibited from participating directly EU amends statement of reasons or indirectly in any activities that are subject to the ITAR. Each individual for 17 Russia designations and entity on the list will remain debarred until the Department The Council of the EU published a statement of reasons. approves an application request for notice on 7 June that it is considering reinstatement. All persons engaged maintaining sanctions against 17 The designated persons and entities in activities subject to the ITAR Russians designated under Council were informed that they may submit are advised to be vigilant in their Regulation (EU) 269/2014 and a request to the Council to obtain the compliance and ensure their activities Council Decision 2014/145/CFSP intended statements of reasons for their do not involve debarred persons. for actions in Ukraine, with a new designation before 14 June.
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OFAC designates Syrian oligarch Russia and his business network proposes
The US Department of the Treasury’s “Samer Foz, his relatives, and his amendment Office of Foreign Assets Control business empire have leveraged the (OFAC) announced on 11 June atrocities of the Syrian conflict into a that would the designation of 16 individuals profit-generating enterprise. This Syrian and entities associated with an oligarch is directly supporting the criminalise the international network benefiting Syria’s murderous Assad regime and building Assad regime. The designations aim to luxury developments on land stolen from publication cut off critical supplies and financiers those fleeing his brutality,” said under- for the regime’s luxury reconstruction secretary for terrorism and financial of sanctions and investment efforts. intelligence Sigal Mandelker.
OFAC has designated Syrian businessman, All property and interests in property of information Samer Foz, relatives Husen Foz and Amer these individuals and entities that are in Foz, and 13 entities said to be controlled or the US or in the possession or control owned by Foz for their reconstruction and of US persons must be blocked and redevelopment work in Syria. reported to OFAC.
US designates Russian financial institution for supporting North Russia’s State Duma Committee Korea sanctions evasion on State Building and Legislation is considering Amendment No. The US Department of the Treasury’s to North Korea immediately upon 710099-7 to the Criminal Code Office of Foreign Assets Control attaining their non-banking credit of the Russian Federation that (OFAC) announced on 19 June the organisation licence. Russian Financial was introduced on 15 May, which designation of a Russian entity that Society provided bank accounts for would criminalise the publication has allegedly assisted North Korea Dandong Zhongsheng and to a North of information in the media in in evading sanctions to access Korean chief representative of Korea relation to sanctioned persons and the international financial system. Zinc Industrial Group, which was also information that could provoke Russian Financial Society has been designated. sanctions being imposed on designated pursuant to Executive Russia or Russian individuals. Order (EO) 13382 for having provided Since at least 2017 to 2018, Russian support to US designated Dandong Financial Society is alleged to have The purpose of the amendment, Zhongsheng Industry & Trade Co. Ltd, opened multiple bank accounts for according to the explanatory note, is an entity that is owned and controlled Dandong Zhongsheng, which enabled to prevent “the uncontrolled transfer of by US and UN designated Foreign North Korea to circumvent both US information to foreign counterparties.” Trade Bank (FTB), North Korea’s and UN sanctions to gain access to Penalties for breach of the proposed primary foreign exchange bank. the global financial system in order to amendment include a fine and a prison generate revenue for the Kim regime’s sentence of up to 5 years. Exceptions According to the OFAC, Russian Financial nuclear program. are included for those working in Society began to provide financial services sanctions-related fields.
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Bank Mellat settles with UK over Western Union sanctions damages claim Financial
The UK government has settled a the bank in 2009 were unlawful and that Services Inc claim brought by Iran’s Bank Mellat for the government had been “irrational” and GBP 1.25 billion in damages following “disproportionate.” settles with US a dispute over the UK’s imposition of nuclear-related sanctions, which were Meanwhile, the General Court of the EU over sanctions declared unlawful by the UK Supreme has dismissed a claim by Bank Saderat Court in 2013. Plc for damages relating to the Council of violations the European Union’s error in placing the Bank Mellat stated on 18 June that the UK unit of the bank on a sanctions list. The dispute was resolved for an undisclosed General Court ruled that the Council’s error The US Department of the sum on the first day of a trial, which was due was not a “flagrant” breach of EU law so it Treasury’s Office of Foreign Assets to last five weeks, to assess its damages was not liable for the EUR 88.9 million in Control (OFAC) announced on 7 at London’s High Court. The UK Supreme damages claimed by the bank. June a USD 401,697 settlement Court ruled that sanctions imposed on with Western Union Financial Services Inc, over its potential civil liability for 4,977 apparent violations of the Global Terrorism US government renews sanctions Sanctions Regulations (GTSR). Between December 2010 and March on Western Balkans and Belarus 2015, Western Union allegedly processed 4,977 transactions totalling USD 1.275 million, which were paid Framework Agreement of 2001 relating to The US government announced on 18 out to third-party, non-designated the former Republic of Macedonia, what June that it is continuing sanctions beneficiaries who chose to collect their is now the Republic of North Macedonia. on the Western Balkans for one year remittances at a Western Union Sub- by extending the national emergency Agent in The Gambia, Kairaba Shopping Separately the US announced on 13 pursuant to Executive Order (EO) Center (KSC), which was a designated June the continuation of the national 13219, as amended by EO 13304. entity pursuant to the GTSR. emergency in respect of Belarus pursuant to the International Emergency Economic According to the White House statement, OFAC determined that Western Union Powers Act due to actions and policies the threat constituted by the actions voluntarily self-disclosed the apparent of certain members of the government of of persons engaged in, or assisting, violations and that they constituted a Belarus and other persons that continue sponsoring, or supporting (i) extremist non-egregious case. violence in the former Republic of to pose an unusual and extraordinary Macedonia (what is now the Republic threat to the national security and of North Macedonia) and elsewhere in foreign policy of the United States. The Western Union allegedly the Western Balkans region, or (ii) acts measures adopted relating to the national processed 4,977 obstructing implementation of the Dayton emergency declared in Executive Order Accords in Bosnia or United Nations (EO) 13405 will continue for one year. transactions totalling Security Council Resolution 1244 of June USD 1.275 million, 1999, in Kosovo, has not been resolved. EO 13405 was adopted in June 2006 to deal with the threat of certain members which were paid out EO 13219 was amended by EO 13304 to of the government of Belarus and to third-party non- take additional steps with respect to acts other persons to undermine Belarus’s designated beneficiaries obstructing implementation of the Ohrid democratic processes or institutions.
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Chinese banks UN-appointed independent involved in investigator publishes findings on sanctions the murder of Jamal Khashoggi probe could Responsibility for the killing of The author of the report dissident Saudi journalist Jamal be cut off from Khashoggi lies with “high-level notes with concern that officials” of the monarchy, a UN- so few states reacted appointed independent investigator US financial said on 19 June, in a renewed to Khashoggi’s death system call for full accountability for “whether legal, political the crime. The UN report, which or diplomatic” was due to be presented to the The Washington Post reported Human Rights Council, discusses on 24 June that a US judge has the circumstances leading up to of the report UN special rapporteur found three large Chinese banks Khashoggi’s death and steps that on extrajudicial, summary, or arbitrary in contempt for refusing to comply might have prevented his murder. executions Agnès Callamard noted with subpoenas in an investigation In an appeal to the Human Rights with concern that so few states reacted into North Korea sanctions Council, the Security Council and the UN to Khashoggi’s death, “whether legal, violations. The order reportedly Secretary-General for an international political or diplomatic, although a number triggers for the first time a follow-up criminal investigation to of States had issued targeted sanctions provision that could result in one determine individual liability, the author against Saudi officials.” of China’s largest banks being cut off from the US financial system.
The three banks have not been identified, but the Washington Post states that the details in court rulings align with a 2017 civil forfeiture action OFAC amends three Venezuela- in which the Justice Department alleged that China’s state-owned Bank related general licences of Communications, China Merchants Bank and Shanghai Pudong The US Treasury Department’s Petróleos de Venezuela SA (PdVSA) as Development Bank worked with a Office of Foreign Assets Control a Specially Designated National (SDN) Hong Kong front company accused of (OFAC) amended three Venezuela- in January, pursuant to Executive Order laundering more than USD 100 million related general licences (re-issued (EO) 13850. for North Korea’s sanctioned, state-run as General Licence No. 7B, General In addition to this, OFAC also issued a Foreign Trade Bank. Licence No. 8A, and General Licence 13A) on 6 June to clarify that they do new FAQ 672 published on its website, Separately, the Financial Times not authorise US persons to engage which explains that the export of diluents reported on 26 June that China in transactions or dealings related is not permitted because they play a is allegedly buying Iranian oil in to the exportation or reexportation key role in the transport and export defiance of US sanctions. Despite of diluents, directly or indirectly, to of Venezuelan petroleum, a primary Beijing customs data showing crude Venezuela. source of revenue for the government of purchases from Iran are down month- Venezuela. FAQ 672 also threatens US on-month, China is still importing Iran The general licences (GLs) were originally secondary sanctions against parties that oil, states the FT report. issued concurrent with the designation of supply diluents to PdVSA.
72 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
PRESS & MEDIA | SANCTIONS
US House OFAC issues amended Venezuela- Committee on related GL and temporarily extends Foreign Affairs Ukraine-related GLs approves The US Department of the Treasury’s OFAC has also Office of Foreign Assets Control legislation (OFAC) announced on 26 June that extended the it has amended Venezuela-related expiration date of General Licence 13A, “Authorizing to impose Certain Activities Involving Nynas two general licences AB” to extend its expiration date to related to GAZ Group sanctions on 25 October 2019. the Burmese OFAC also extended the expiration date of two general licences related to GAZ military in Group by issuing General Licence No. of Operations or Existing Contracts with 13L “Authorizing Certain Transactions GAZ Group, or Certain Automotive Safety response to Necessary to Divest or Transfer Debt, Activities.” Equity, or Other Holdings in Certain genocide Blocked Persons,” and General Licence General Licence No. 15F also includes No. 15F “Authorizing Certain Activities a new authorisation for certain safety- Necessary to Maintenance or Wind Down related activity. The US House Committee on Foreign Affairs approved bipartisan legislation on 20 June that would impose sanctions on the Burmese military in response Russia issues decree to extend to the genocide of the Rohingya people. The Burma United through the embargo on food imports in Rigorous Military Accountability (BURMA) Act (H.R. 3190) will reaction to EU’s renewed sanctions now head to the full House of Representatives for consideration. Russia’s president Vladimir Putin issued a decree on 24 June The BURMA Act would prohibit extending an embargo on food expansion of American military imports from several states from 1 assistance to Burma until reforms January 2020 to 31 December 2020 take place; require reporting on crimes pursuant to Federal Law No. 281-03 against humanity, including war in reaction to Europe’s decision to crimes and genocide; impose visa renew sanctions targeting Russia’s and financial restrictions on those finance, energy and defence sectors. responsible for these crimes; support investigations for the prosecution of The states subject to the embargo on war criminals; and promote reforms food include the US, European Union to limit the Burmese military’s member states, Canada, Australia, stranglehold on Burma’s economy, Norway, Iceland, Albania, Montenegro, including the gemstone sector. Liechtenstein and Ukraine.
73 aperio-intelligence.com FINANCIAL CRIME DIGEST | JUNE 2019
COUNTRY UPDATES
Albania civil penalties have been imposed for the company’s fight against money laundering and terrorist financing. failure to adequately comply within a specified time Under the enhanced MoU, FINTRAC and IIROC will be The European Commission issued a staff working frame with certain requirements of the Proceeds able to share compliance-related information, including document on 29 May recommending the start of of Crime (Anti-Money Laundering & Anti-Terrorist the results of compliance examinations, in order accession negotiations with Albania. The 2019 Financing) Regulations 2008, and specifically the to strengthen the compliance of securities dealers European Commission Progress Report on Albania regulations relating to the application of customer due with the Proceeds of Crime (Money Laundering) and found that the country has made good progress diligence and enhanced due diligence, internal controls, Terrorist Financing Act. to advance on the EU agenda, which includes the and risk assessment. implementation of justice reforms.
Cyprus Bosnia and Herzegovina Armenia The Organized Crime and Corruption Reporting Hundreds of people protested in Sarajevo on 29 May Project (OCCRP) reported on 31 May that Cypriot Armenia’s Ministry of Justice unveiled the Unified after a video emerged purportedly showing the head of police have raided the premises of FBME Bank Electronic Platform for Whistleblowing on 21 May, Bosnia-Herzegovina’s top judicial body, Milan Tegeltija, in Nicosia and in Limassol, looking for evidence which aims to enhance the country’s fight against negotiating a bribe. Protesters are calling for the of money laundering, according to two sources. corruption. A speech from the deputy prime minister resignation of Tegeltija, who is currently the head of the According to the report, the investigation concerns was read at the launch: “The velvet revolution helped High Judicial and Prosecutorial Council. “many cases” of laundering of illegal proceeds from to eradicate systemic corruption, and today, the various activities, including drug smuggling and Government has set a new task, that is, to create terrorism financing. institutions and build awareness to the extent that they prevent any manifestation of corruption. Consequently, Canada the actions of the Government will be aimed at enhancing the results of the fight against corruption Canada’s Revenue Agency (CRA) published the results Czech Republic and the institutional system and providing the bodies of its annual real estate audit on 30 May, which has fighting against corruption with a proper toolkit.” found that since 2015 CRA has identified over CAD A leaked preliminary investigation by the European 1 billion in additional gross taxes related to the real Commission has found Czech prime minister, Andrej estate sector and that reviews of over 41,700 files in Babis, in breach of conflict of interest rules, according Ontario and British Columbia resulted in over CAD 100 to Czech media reports, sparking further protests in Australia million in penalties. In 2018, the CRA assessed CAD the country. Czech newspaper, Hospodarske Noviny, 171 million more in additional gross taxes related to reported on 31 May that the EU audit had found that The Australian Securities and Investments Commission real estate than in the year prior, with penalties totalling Babis had a conflict of interest because of continuing (ASIC) updated its Information Sheet 225 on 30 May, over CAD 57 million, more than double compared to the ties with the Agrofert conglomerate, which he founded. which sets out guidance for entities that are looking previous year. The Canadian government’s 2019 budget In addition to this, in April, Czech police recommended to raise funds through initial coin offerings (ICOs) or proposes to provide CAD 50 million over five years and charging Babis with fraud in relation to a separate are otherwise involved with crypto-assets. The ASIC CAD 10 million to create a Real Estate Task Force that investigation into the alleged misuse of an EU subsidy. has grouped crypto-asset participants into categories would focus initially on the Greater Toronto and Greater Babis rejects the allegations in both cases. and has set out the obligations that may apply to Vancouver areas, to deter tax non-compliance in the participants in each category. real estate market.
Octaviar’s former chief financial officer, David Mark The CRA announced on 12 June that it has executed Denmark Anderson, was charged with 26 counts of fraud 15 search warrants in Ottawa, the Greater Toronto Area, London, and Windsor, Ontario, and in Gatineau, on 3 June following an Australian Securities and The Danish Financial Supervisory Authority (FSA) Laval, and Montréal, to collect information relating to an Investments Commission investigation. Anderson is published on 25 June the results of its money investigation into CAD 8.3 million in evaded tax. accused of misappropriating AUD 4.6 million from the laundering inspection of Nokas Værdihåndtering investment group Octaviar, formerly known as the MFS A/S. The FSA considers that the company’s inherent Group, which collapsed owing AUD 2.5 billion. A court Ernst & Young, the court appointed monitor for risk of being abused for money laundering or terrorist ruled in 2016 that Anderson was one of four executives QuadrigaCX, released a report on 19 June, which financing is high when compared to the average who acted dishonestly by misappropriating AUD 143.5 explains that the Canadian cryptocurrency exchange’s financial company in Denmark, placing particular million of investors’ money. late founder spent most of his client’s funds on himself emphasis on the fact that currency exchange activities and his wife. Gerald Cotten, who died in 2018, allegedly are generally considered to have a high inherent risk of funnelled funds out of Quadriga into accounts he being used for money laundering or terrorist financing. controlled under assumed names. The FSA has instructed the company to ensure that Bermuda it identifies corporate customers and obtains identity The Financial Transactions and Reports Analysis information on real-estate owners, as well as checks The Bermuda Monetary Authority announced on Centre of Canada (FINTRAC) announced on 30 May on the information. In addition, the company is charged 14 June that it has imposed civil penalties totalling that its Memorandum of Understanding (MoU) with with not having recorded and retained the results of BMD 500,000 on Estera Services (Bermuda) Limited the Investment Industry Regulatory Organization of examinations of unusual or suspicious transactions pursuant to the provisions of sections 29A and 33B of Canada (IIROC) has been strengthened to allow for before December 2018. the Trusts (Regulation of Trust Business) Act 2001. The greater cooperation and information sharing in the
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Malawi’s president Peter Mutharika began his second Estonia Italy 5-year term with a tough stance against corruption and pledged to revive the economy, following accusations Estonian police have held three employees of Tallinna Italy ratified the Council of Europe Convention on of corruption and mismanagement, Reuters reported Aripank for questioning as part of an investigation into the Manipulation of Sports Competitions, during a on 31 May. Speaking at his inauguration, Mutharika suspected money laundering and bribery, according ceremony on 11 June involving deputy secretary warned that he would not spare anyone found abusing to a report by Reuters on 15 June. Police are reported general Gabriella Battaini-Dragoni and ambassador their positions. to have stated that the three bank employees were Michele Giacomelli, permanent representative of released after two days, in an investigation that began in Italy to the Council of Europe. The purpose of the the summer of 2018. Reuters states that the case is not Convention is to prevent, detect, punish and discipline linked to the Danske Bank probe. the manipulation of sports competitions, as well as to Moldova enhance the exchange of information and international cooperation between public authorities, sports Moldova’s newly appointed parliament and government Finland organisations and betting operators. The treaty has been ratified by Norway, Portugal, Republic of Moldova, have finally taken office this month, following a Switzerland and Ukraine. showdown with the former government, led by the Finnish police announced on 11 June that they would Democrat Party (PDM) and its leader, oligarch Vladimir not be pursuing an investigation into Nordea Bank Plahotniuc, who refused to step down. A new coalition PLC over allegations of money laundering made by Bill has been formed between the pro-Russian Party of Browder, stating that there was no reason to suspect Japan Socialists (PSRM) and the pro-European ACUM alliance. an offence had taken place. Browder had requested The parliament has already approved a new program an investigation into the transfers of USD 234 million to for the “de-oligarchisation” of the country, proposed Local media reported on 18 June that Japan Post Bank corporate accounts at Nordea from the Estonia branch by ACUM. The new Moldovan government has been Co will shortly limit cross-border remittances to improve of Danske Bank AS and Lithuania’s Ukio Bank. recognised by several EU member states, the US its anti-money laundering (AML) controls. It is reported and Russia. On 10 June, five EU countries – France, the bank plans to restrict payments to JPY 5 million The Council of Europe’s Group of Experts on Action Germany, Great Britain, Poland and Sweden – publicly ahead of a mutual evaluation by the Financial Action against Trafficking in Human Beings (GRETA) published supported the parliament and the new government of Task Force (FATF) in October. Mizuho Bank, MUFG its second evaluation report on Finland on 5 June, Moldova. They were joined by Switzerland, Romania, Bank and Sumitomo Mitsui Banking Corp have also which finds that progress has been made in a number Lithuania, Finland and others. implemented stronger customer due diligence controls of areas, such as developing the legislative framework on savings accounts, local media reported this month. for combating trafficking in human beings, conducting research, raising awareness and providing training to a range of professionals. However, the report states that The Netherlands there are several areas which require improvement. Hong Kong The Dutch Fiscal Information and Investigation Service (FIOD) announced on 14 June that it has carried out Reuters reported on 14 June that some Hong Kong searches at two companies over suspicions that three tycoons have started moving personal wealth offshore Germany men and their companies have been evading sales due to concern over a government plan to allow tax and making false sales tax returns and import extraditions of suspects to face trial in China, according In a new report published on 20 June, the Council of declarations to the tune of EUR 18.6 million. The three to financial advisers, bankers and lawyers familiar with Europe expert body on trafficking in human beings men are suspected of having made incorrect import such transactions. The extradition bill, which sparked (GRETA) has praised Germany for having significantly declarations and incorrect sales tax declarations for widespread protests in June that eventually led to the evolved its national legal framework against importers of e-commerce goods from China. indefinite suspension of the bill, was due to cover Hong human trafficking since the first evaluation of the Kong residents and foreign and Chinese nationals living implementation of the Convention on Action against The FIOD also carried out five arrests on 12 June on or travelling through the city. Trafficking in Human Beings in 2015. GRETA welcomes suspicion of money laundering. The FIOD seized four the introduction of the new offence of human trafficking buildings with a total value of EUR 1.3 million, three cars, and related amendments to the German Criminal Code. more than EUR 60,000 in cash, watches, antiques, and Kyrgyzstan bags with a combined value of EUR 100,000. Five bank In addition to this, the Council of Europe’s Group of accounts have also been frozen and various weapons States against Corruption (GRECO) published its transferred to the police. Second Addendum to the Second Compliance Report A new law, which enables former heads of state to of Third Evaluation Round on Germany on 4 June. be prosecuted came into force on 27 May. The law preserves immunity from prosecution for former presidents, but makes prosecution possible if they Norway lose their formal status as an ex-president. Parliament can strip former presidents of their status if they Guyana Norway’s Financial Supervisory Authority (FSA) are suspected of serious crimes by the Prosecutor announced on 25 June that it has fined a subsidiary General’s Office. Guyana’s State Assets Recovery Agency announced of Norwegian bank DNB for failing to comply with anti- on 29 May that it has launched an investigation into money laundering regulations. DNB Naeringsmegling whether corruption played a role in the previous was issued with a non-compliance fee of NOK 30,000 government’s decision to award two oil blocks to little- Malawi for failing to properly impose control routines and known companies – JHI Associates of Toronto and adequately train employees. Mid Atlantic Oil and Gas of Guyana – in 2015.
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Pakistan its drafting of policies and reforms relating to, amongst Switzerland other things, increased tax revenue and improving the role and contribution of the private sector. Rwanda will Local media reported on 10 June that Pakistan’s prime Switzerland’s House of Representatives rejected also further improve its governance structures and minister Imran Khan called on the country’s wealthy a government proposal on 3 June to strengthen enhance the enforcement of international standards to disclose previously hidden assets by the end of protections for whistleblowers. The proposal sought and regulations. the month as part of an amnesty scheme aimed at to provide clarity on how and to whom employees can combating tax evasion. contact regarding possible abuse or illegal actions by employers. South Africa Poland South Africa’s main opposition party, the Democratic Tanzania Alliance, called on 10 June for the graft watchdog Poland’s parliament approved the final version of to release a report into allegations president Cyril the amendments to the Criminal Code concerning Tanzania’s Central Bank published new regulations Ramaphosa misled parliament over a donation to his corruption and economic crime on 13 June. The to tighten its currency controls on foreign exchange 2017 election campaign for the leadership of the ruling changes being brought in by the amendment include bureaus on 24 June. The new rules following the African National Congress (ANC). The opposition an increase in the scope of liability for crimes involving government’s move to revoke the licences of 100 complained to the corruption watchdog in November corruption by both expanding the circle of responsible bureaus and temporarily shutdown a newspaper for regarding a ZAR 500,000 donation by Gavin Watson, persons and increasing penalties. The individuals using unofficial data on exchange rates. CEO of services company Bosasa, to Ramaphosa’s that can be punished for accepting benefits has been campaign to lead the ANC. extended to the senior management of entities, which includes companies with the government as the majority shareholder and domestic organisations. The United Arab Emirates law requires the president’s signature. Spain The United Arab Emirates (UAE) Financial Intelligence Unit (FIU) announced the launch of their new reporting Prosecutors in Madrid announced on 4 June that they platform goAML, on 23 June, developed by the United Romania have accused football player Diego Costa of income tax Nations Office on Drugs and Crime (UNODC), to fraud worth EUR 1 million for money made from image facilitate the receipt, analysis and dissemination of rights in 2014. It is alleged that Costa illicitly received The Romanian Senate rejected on 3 June the request suspicious transactions and activity reports to UAE’s income of EUR 1.4 million and failed to declare that filed by prosecutors of the National Anticorruption law enforcement authorities. Through this project, the income when he was hired by Chelsea football club. Directorate (DNA) to approve criminal prosecution UAE Central Bank and UNODC will also contribute to against senate president Calin Popescu Tăriceanu, the efforts of the international community towards over suspected bribe taking. Prosecutors allege that implementing the 2030 Agenda for Sustainable Tăriceanu indirectly received around USD 800,000 from Development, particularly Sustainable Development an Austrian company when he was prime minister. Sudan Goal 16 and its Target 16.4 (‘By 2030, significantly reduce illicit financial and arms flows, strengthen the Sudan’s former president Omar al-Bashir has been recovery and return of stolen assets and combat all charged with corruption-related offences, appearing forms of organised crime’). Russia in public for the first time since he was overthrown and detained in April, reported Reuters on 16 June. Prosecutor Alaa al-Din Abdallah was cited by Reuters Former Russian anti-corruption official, Dmitry as stating that Bashir has been charged with illicit Zakharchenko, was sentenced to 13 years in prison on US possession of foreign currency and accepting gifts in 10 June for bribery and obstruction of justice, according an unofficial manner. Bashir has also been charged to The Moscow Times. Zakharchenko was also fined The Illinois House of Representatives passed House Bill with involvement in the killing of protesters, and USD 1.8 million. Zakharchenko is reported to have 1438 on 31 May, which would see Illinois become the prosecutors also want him questioned over suspected previously been found guilty of receiving bribes from eleventh US state to allow its residents to use cannabis. money laundering and terrorism financing. businessman, Mehdi Douss, who gave Zakharchenko The Bill was sent to governor J.B. Pritzker on 6 June, a discount card that allowed him to save USD 46,000 at who is a vocal supporter of marijuana legalisation. Douss’ restaurant, La Maree, in exchange for protection, according to the media outlet. Sweden
Sweden’s Financial Supervisory Authority published Rwanda the latest version of its national risk assessment for money laundering and terrorist financing on 11 June, which has been drafted by 16 regulatory authorities. Rwanda was admitted as a member of the The assessment analyses the money laundering and Organization for Economic Co-operation and terrorist financing threats identified. Development (OECD) Development Centre on 20 May, becoming the first East African country to join the Development Centre. Through its membership, Rwanda will engage in policy dialogue that will enhance
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