International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, October 31, 2018

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Transfer Pricing and State Aid: The Unintended Consequences of Advance Pricing Agreements

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October 31, 2018 in Articles | Permalink | Comments (0)

Former Swiss Bank Executive Sentenced to Prison for Role in Billion-Dollar International Money Laundering Scheme Involving Funds Embezzled from Venezuelan State-Owned Oil Company

The former managing director and vice chairman of a Swiss bank was sentenced to 10 years in prison today, after previously pleading guilty for his role in a billion-dollar international scheme to launder funds embezzled from Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PDVSA).

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, and Special Agent in Charge Mark Selby of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Miami Field Office made the announcement.

Matthias Krull, 44, a German national and Panamanian resident, pleaded guilty to one count of conspiracy to commit money laundering, on Aug. 22.  U.S. District Judge Cecilia M. Altonaga of the Southern District of Florida sentenced Krull to serve 120 months in prison, to be followed by three years of supervised release.  Judge Altonaga also ordered Krull to pay a fine in the amount of $50,000 and a forfeiture money judgment of $600,000.

As part of his plea, Krull admitted that in his position with the Swiss bank, he attracted private clients, particularly clients from Venezuela, to the bank.  In this role, Krull’s clients included Francisco Convit Guruceaga, who was indicted on money laundering charges on Aug. 16.  Krull’s clients also included three unnamed conspirators described in the Aug. 16 indictment. 

Krull admitted that the conspiracy began in December 2014 with a currency exchange scheme that was designed to embezzle around $600 million from PDVSA, obtained through bribery and fraud and the conspirators’ efforts to launder a portion of the proceeds of that scheme.  By May 2015, the conspiracy had doubled in amount to $1.2 billion embezzled from PDVSA.  PDVSA is Venezuela’s primary source of income and foreign currency (namely, U.S. Dollars and Euros).  Krull joined the conspiracy in or around 2016, he admitted, when a co-conspirator contacted him to launder the proceeds of a PDVSA foreign-exchange embezzlement scheme. 

Ultimately, Krull joined the conspiracy to launder $1.2 billion worth of funds that were embezzled from PDVSA, he admitted.  Krull and members of the money laundering conspiracy used Miami, Florida real estate and sophisticated false-investment schemes to conceal that the $1.2 billion was in fact embezzled from PDVSA.  Krull also admitted that surrounding and supporting these false-investment laundering schemes are complicit money managers, brokerage firms, banks and real estate investment firms in the United States and elsewhere, operating as a network of professional money launderers. 

Krull’s co-conspirators indicted on Aug. 16 include former PDVSA officials, professional third-party money launderers and members of the Venezuelan elite, sometimes known as “boliburgués.”

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

This case is the result of ongoing efforts by the Organized Crime Drug Enforcement Task Force’s (OCDETF) “Operation Money Flight,” a partnership among federal, state and local law enforcement agencies.  The OCDETF mission is to identify, investigate and prosecute high-level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state and local law enforcement.

The investigation was conducted by HSI Miami, HSI London, HSI Rome and HSI Madrid.  This case is being prosecuted by Assistant Chief David Johnson and Trial Attorney Gwendolyn A. Stamper of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Michael Nadler of the Economic and Environmental Crimes Section of the Southern District of Florida. Assistant U.S. Attorney Nalina Sombuntham of the Southern District of Florida is handling the asset forfeiture.

The Criminal Division’s Office of International Affairs provided substantial assistance in this matter; the National Crime Agency of the United Kingdom; and Italian, Spanish and Maltese law enforcement authorities provided assistance. 

The Fraud Section is responsible for investigating and prosecuting all Foreign Corrupt Practices Act (FCPA) matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.      

October 31, 2018 in AML | Permalink | Comments (0)

Sunday, October 28, 2018

Three Traders Charged, and Two Agree to Plead Guilty, in Connection with over $60 Million Commodities Fraud and Spoofing Conspiracy

Three former commodities traders of a New York-based financial services firm (“Trading Firm A”) were charged yesterday for their alleged participation in an over $60 million commodities fraud and spoofing conspiracy that was perpetrated through the U.S. commodities markets.  Two of these traders have agreed to plead guilty for their respective roles in the criminal conspiracy.   

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Patrick of the Southern District of Texas and Special Agent in Charge Jeffrey S. Sallet of the FBI’s Chicago Field Office made the announcement.

Yuchun “Bruce” Mao, 39, a citizen of the People’s Republic of China, was indicted on one count of conspiracy to commit commodities fraud, two counts of commodities fraud and two counts of spoofing.  Kamaldeep Gandhi, 36, of Chicago, was charged by criminal information with two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing.  Krishna Mohan, 33, of New York, New York, was charged by criminal information with one count of conspiracy to engage in wire fraud, commodities fraud, and spoofing. 

“As alleged in today’s charges, these individuals engaged in a sophisticated scheme to distort the futures market for their own advantage by placing large ‘spoofed’ trading orders that they never intended to execute,” said Assistant Attorney General Benczkowski.  “Investor trust is the cornerstone of our trading markets, and the Criminal Division will aggressively investigate and prosecute those who undermine that trust by engaging in spoofing or any other illegal conduct.”

“The Southern District of Texas aggressively prosecutes white collar crime,” said U.S. Attorney Patrick. “Home to the second most Fortune 500 companies in the nation, our Houston division is uniquely suited to prosecute white collar fraud in whatever form it comes, and we enjoy terrific relationships with law enforcement partners around the country and from around the world.”

“These charges demonstrate the FBI’s firm commitment to hold accountable those who seek to deceive and defraud the public,” said Special Agent in Charge Sallet.  “Such schemes cannot be allowed to threaten confidence in the free market, which represents one of many strengths of our great nation.  We will continue to work together to aggressively pursue anyone who undermines the integrity of our financial markets and disregards the rule of law.”

The indictment alleges that Mao was co-head of a trading team that traded commodities on behalf of Trading Firm A, working in Chicago and New York.  The indictment alleges that from in or around March 2012 through in or around March 2014, Mao and others conspired to mislead the markets for E-Mini S&P 500 and E‑Mini NASDAQ 100 futures contracts traded on the Chicago Mercantile Exchange (CME), and E-Mini Dow futures contracts traded on the Chicago Board of Trade (CBOT).  The indictment further alleges that Mao and his co-conspirators deceived market participants and manipulated markets by placing thousands of orders that they did not intend to execute, or “spoof orders,” in order to create the false and misleading appearance of increased supply or demand.  Market participants that traded futures contracts in these three markets while the spoof orders distorted market prices incurred market losses of over $60 million.  Mao and his co-conspirators are alleged to have placed these spoof orders in order to benefit themselves Trading Firm A.

Count one of the criminal information alleges that Gandhi conspired, with Mao and others, to commit the underlying offenses while employed at Trading Firm A.  Count two of the criminal information alleges that, from in or around May 2014 through in or around October 2014, Gandhi, while employed at a second Chicago-based trading firm (identified in the information as “Trading Firm B”), conspired with others to mislead the markets for E-Mini S&P 500 futures contracts traded on the CME by agreeing to place, and himself placing, spoof orders for E-Mini S&P 500 futures contracts in order to create the false and misleading appearance of increased supply or demand.  Gandhi has agreed to plead guilty to the charges in the criminal information.

The charges against Mohan arise from his participation in the conspiracy alleged above while employed at Trading Firm A.  Mohan has agreed to plead guilty to the charge in the criminal information.

The FBI’s Chicago Field Office is investigating the case.  Trial Attorneys Mark Cipolletti, Jeffery Le Riche and Matthew Sullivan of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney John Lewis of the Southern District of Texas are prosecuting the case.  The CFTC’s Division of Enforcement provided substantial assistance in this case.

The charges in the indictment and the two criminal informations are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

October 28, 2018 in AML | Permalink | Comments (0)

Saturday, October 27, 2018

Written evidence from the Foreign and Commonwealth Office (OTS0103)

The Foreign Affairs holds evidence session on the future of the UK Overseas Territories.

Witnesses

Tuesday 16 October in the Wilson Room, Portcullis House

At 2.45 pm

  • George Fergusson, former Governor of Bermuda and (non-resident) Governor of Pitcairn
  • Susie Alegre, Director, Island Rights Initiative

At approx. 3.30 pm

  • Dr Peter Clegg, Associate Professor in Politics and International Relations, University of the West of England
  • Eric Bush, Director, Cayman Islands Government Office and Chair, UK Overseas Territories Association

Purpose of the session

The session will consist of two panels. The first will consider the health of the UK’s relationships with the Overseas Territories, the current OT governance model and whether and how it might be reformed. The second panel will focus on the Caribbean OTs and consider the particular set of challenges they are facing and the strains in their relations with the UK. 

Further information

1.       This note sets out the status of, and main issues affecting, the United Kingdom’s Overseas Territories (OTs). The OTs are valued parts of the British family and the UK is proud of its links to each of the fourteen OTs: Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, Cayman Islands, Sovereign Base Areas of

Akrotiri and Dhekelia in Cyprus, Falkland Islands, Gibraltar, Montserrat, Pitcairn

Islands, St Helena, Ascension and Tristan da Cuhna, South Georgia and the South Sandwich Islands, Turks and Caicos Islands, and British Virgin Islands. The OTs are a varied group of territories united in their place as part of the Realm. The UK’s role is to support and defend them, ensuring high standards of governance and helping them meet the challenges and opportunities of the future.  

 

2.      Many of the OTs have vibrant economies, great human and natural resources, flourishing communities, and deep and long-standing links to their regions and beyond.  Each enjoys significant practical, and in some cases financial, support from the UK. We should acknowledge, however, that the committee’s inquiry comes at a time of change for many of the OTs given the UK’s forthcoming departure from the European Union, changes to international financial regulation, the impact of climate change and questions raised in some territories about constitutional change. The Government believes that the future of the OTs is bright and that, working together with the UK, they can meet their challenges and prosper in the future.

 

3.      The current relationship between the UK and the OTs is rooted in a shared history and founded on mutual benefits and responsibilities. The UK Government takes extremely seriously its responsibilities to the OTs in the areas of defence; its role in building an appropriate constitutional relationship to empower resilient societies; and assisting the OTs (where necessary or appropriate) in building successful and resilient economies, improve standards of governance (including through expanding civil and political rights) and protecting vulnerable groups; and providing support to aid protection of the environment. The UK’s commitment to these will not waver. As economies and societies develop, some of the ways in which these commitments are delivered may vary in the future.

 

4.      The UK benefits from the talent and diversity of the people of the Territories, bringing creativity and skills to our universities and businesses. British Nationals from the OTs have a proud history of service in the UK’s armed forces. Many OTs offer unique and attractive tourism and trade opportunities, and the combined global footprint provides the UK with a permanent insight into many diverse regions across the world.

 

5.      The UK’s departure from the EU creates some uncertainty for some of the OTs. The Government is committed to fully involving them as we leave and to ensuring that their interests are properly taken into account in the exit negotiations. We are engaging directly and regularly with all the OT governments in relation to EU exit, including at the Joint Ministerial Councils (JMCs) between Overseas Territory leaders and UK Ministers, to help them prepare for exit day.

 

6.      Through the Global Britain Strategy the UK is committing additional resource, both in the UK and in the OTs, which reflects the value we place on building a successful and prosperous future in each OT.

 

SECURITY

 

7.       One of the UK Government’s most important responsibilities with regards to the OT is their defence. The OTs provide a set of strategic assets for the UK and its allies. The 2015 SDSR reaffirmed the importance of the OTs.  Situated in regions of geo-political importance, the Sovereign Base Areas (SBAs) on Cyprus and the Permanent Joint Operating Base in Gibraltar remain a high priority for the UK’s long-term national security interests. Each provides an adaptable and capable forward mounting base, enabling the positioning of personnel and equipment in support of global air and maritime operations.  Both provide excellent training locations for the Armed Forces. 

 

8.      As made clear in the 2012 White Paper, the MOD has a role to play in supporting our

OTs, particularly following natural disasters, such as in the Caribbean in 2017.  Over

2,100 personnel, strategic and tactical air transport, five support helicopters, HMS Ocean and RFA Mounts Bay deployed to the region to support the relief effort following Hurricanes Irma and Maria, and subsequently have developed detail contingency plans that provide a scalable response to future crises.  

 

9.      British Forces based on the Falkland Islands (BFSAI) deter aggression in the South Atlantic. BFSAI also provide humanitarian support to wider region if required, as recently demonstrated in the 2017 Argentine operation in search of the lost submarine, the ARA San Juan.

 

10.  The joint UK and US military base on the island of Diego Garcia in the British Indian Ocean Territory is a fundamental part of the UK’s defence relationship with the US.  The base is a key part of the US defence footprint and it contributes significantly towards global security, providing logistic support to operational forces forward deployed to the Indian Ocean and Arabian Gulf. The base has supported counternarcotics efforts, anti-human trafficking efforts, and efforts to counter illegal fishing.  Additionally, the base has provided a platform for response to environmental disasters such as the 2004 Indian Ocean earthquake and tsunami, 2011 earthquake and tsunami in Japan, and the 2013 response to the typhoon in the Philippines.  The base also supported the search and rescue missions in support of Malaysian Flight 370.

 

11.    UK Defence remains committed to the OTs and to fulfilling its obligations to them. As would be expected   in an uncertain world, the MOD will continue to review its global footprint and adjust as necessary.

 

12.   The UK and the OTs work together to tackle serious organised crime and international terrorism, including partnering with other countries and international agencies to protect the people of the OTs; and we continue to work cooperatively on ensuring OTs meet their international obligations on maritime and aviation security. 

 

ODA ASSISTANCE

 

13.   The Government is and will remain committed to meeting the reasonable assistance needs of OTs where financial self-sufficiency is not possible. DFID provides aid to three OTs eligible for Official Development Assistance (ODA): Montserrat, St Helena, including Tristan da Cunha, and Pitcairn. This ensures their governments can

provide effective public services. These islands face long term financial dependency on the UK due to their remote locations, weak economies, small or ageing populations and skill and labour shortages to fill critical roles. All three OTs are also vulnerable to financial instability and natural disasters.

 

14.   OECD Development Assistance Committee (DAC) members recognised in 2017 the vulnerabilities of countries hit by catastrophic humanitarian crises. The DAC agreed to work to create a new mechanism to allow countries to receive ODA when their income per person falls low enough, for example as a result of a catastrophic natural disaster or other crisis. They also agreed to work on a process which could allow previous aid recipients to receive short-term ODA support in the event of a catastrophic humanitarian crisis, even where their Gross National Income per capita would normally rule them out of receiving ODA.

 

15.   Looking ahead, we plan to review objectively the way in which the UK Government’s commitments to the OTs is most effectively discharged, taking account of the costs and benefits of the current arrangements. 

 

GOVERNANCE AND CONSTITUTIONAL ISSUES

 

16.   The OTs are largely self-governing territories under British sovereignty but are not constitutionally part of the UK. Most people living in the OTs are British nationals. By definition, the OTs are not sovereign so have no international legal personality separate from the UK.

 

17.   Inhabited OTs (except for the SBAs) have elected legislatures and elected leaders responsible for most aspects of government, including making territory laws, managing public finances and providing public services. Each territory has a Governor or similar official, appointed by HM the Queen on the advice of UK Ministers, who is Head of the OT Government. OT constitutions set out the detailed responsibilities of OT Ministers, the legislature and the Governor, and are established by Orders in Council. 

 

18.   The UK, as the sovereign power, has a fundamental interest and responsibility to ensure the security, defence and good governance of the OTs and their peoples. This stems from international law including the UN Charter, from our shared history and our political commitment to the wellbeing of all British nationals.

 

19.   The 2012 White Paper aimed to create the conditions for an ‘enduring partnership’. In the White Paper, the UK set out its vision for the OTs to be economically vibrant communities and to meet standards in good governance to ensure the wellbeing of their peoples. The UK expects high standards of public financial management in the OTs to ensure economic stability; high standards and transparency in public life to ensure freedom from corruption, that officials, whether elected or public officers, can be held to account and that institutions have public confidence; the OTs’ compliance with their international obligations, including in relation to protecting vulnerable groups and ensuring democracy; and that security and justice institutions uphold the rule of law. 

 

20. For most OTs the UK Government relies on elected OT Ministers and legislatures to deliver expected standards of governance in areas devolved to them. They have broad responsibilities including education, health, environment, immigration, economic development, sport and culture, social policy, and transport. The Governor’s powers vary between OTs, but in general include responsibility for external affairs, defence and internal security including the police, and the public service. 

 

21.   With their limited populations and/or geographic remoteness, OTs can face human resources challenges. Where there is a capacity risk that high standards of governance may not be met, the UK government offers support. The UK is spending £14.8m in FY 2018-19 through the Conflict, Stability and Security Fund (CSSF) to support justice, security and governance in the OTs (this figure does not include dedicated hurricane reconstruction funds). Examples of assistance include providing support to strengthen child protection across the OTs and boosting the resources of Anguilla’s Central Electoral Office to administer the 2020 elections.  

 

22.  The Governor and the UK Secretary of State have certain reserved powers in OT constitutions, which vary in accordance with the specific provisions of individual constitutions. The Westminster Parliament is able to make laws for the OTs and has done so in a number of areas, usually with the support of or at the request of OT Ministers. There are also separate powers to make Orders in Council for most of the OTs.  The powers to legislate for them without their consent are generally exercised only in exceptional circumstances. In extreme cases where governance breaks down, the UK Government has intervened to reset the situation, such as in the Turks and Caicos Islands where the Governor led an Interim Administration from 2009-2012. 

 

23.  In the event of an overwhelming natural disaster, the UK Government has crisis response systems in place ready to coordinate and support the response, and will step in with an appropriate scale of assistance for the crisis and recovery at the request, and in support, of the Territory Government. The Rapid Response Mechanism (RRM) enables a rapid cross-government response to crises, including in the

Overseas Territories. It allows up to £40m from the Conflict, Security and Stability

Fund (CSSF) to be quickly released. The RRM was used effectively during the crisis in 2017, with a combined commitment of £72 million to support the immediate needs and early recovery of the OTs affected by hurricanes Irma and Maria. RRM procedures were also reviewed and improved ahead of the current hurricane season. 

 

24.  The choice to remain a British OT involves responsibilities and benefits for the OTs. The UK Government believes the current constitutional balance of powers is broadly the right one.  As sovereign power, the UK must retain sufficient powers to enable us to discharge our constitutional and international responsibilities both to OT populations and in international fora. This position is set out in the 2012 White Paper and has been agreed in the communiqué at successive annual JMCs.

 

25.  The 2018 Sanctions and Anti Money Laundering Act (SAMLA) enables the UK to impose and implement sanctions regimes in order to comply with our obligations under the United Nations Charter and to support wider foreign policy and national security goals. Improving transparency of Beneficial Ownership information is a key part of the HMG Anti-Corruption Strategy. The aim of the international beneficial ownership campaign agreed by Ministers in the summer, is to improve transparency and raise international standards and norms. In response to parliamentary debate, it includes a provision requiring the Secretary of State to prepare a draft order in council by the end of 2020 requiring any OT Governments who have not yet done so to introduce public registers of company beneficial ownership. We acknowledge the ill-feeling created in the OTs as a result of this legislation. Many OT Governments felt that Parliament had interfered in an area of their devolved responsibility.

 

26.  Some OTs have put forward proposals for constitutional reform to address this concern. Ministers have asked OT Governments to submit detailed written proposals for consideration, while making clear our position that we believe the current balance of powers is broadly the right one. Our strategy – as set out in the White Paper – is to ensure that the constitutional arrangements work effectively to promote the best interests of the OTs and of the UK. The majority of the OT constitutions were updated between 2006 and 2011. 

 

27.  The UK appreciates the OTs as a valued, long-term part of the British family. The position of successive UK governments over many decades is that any decision to terminate British sovereignty through independence should be on the basis of the clear and constitutionally expressed wish of the people of the relevant OT. Were this to happen, and where independence is a viable option, the UK would help to achieve it.

 

28.  The UK Government is responsible for the external relations of the OTs, but we encourage OT Governments to play an active role in building productive links regionally and with the wider world and in some circumstances to conduct external relations on their own behalf. Many of the OTs are therefore, members or associate members of regional and other organisations e.g. CARICOM and UNESCO and have relationships with the EU. The OTs are part of the Commonwealth through their connection to the UK, but cannot represent themselves in Ministerial fora such as the meeting of Heads of Government. We take, however, steps to ensure that their voices are heard: they can be part of the UK delegation and represent themselves at the Commonwealth Small States meeting and the Commonwealth Games.

 

ECONOMIC STABILITY, SUSTAINABILITY AND DIVERSIFICATION

 

29.  Most Caribbean OTs, Bermuda and Gibraltar have developed successful financial, business and professional services and tourism industries.  The Southern Oceans Territories have generally developed successful fishing industries as well as agricultural activity and export their products around the world.

 

30.  However the OTs face structural challenges in creating sustainable economies due to factors such as their small populations, limited natural resources, high international competition, or (for some) remote geographies. Their economies are largely characterised by a high reliance on one or two industries, proportionately large public sectors, a highly mobile capital base, and a significant reliance on imports for food, raw materials and manufactured goods. This makes them more vulnerable to global economic shifts, changing regulatory standards and natural disasters. In turn, these vulnerabilities have a direct bearing on their fiscal sustainability and their subsequent ability to provide public services or invest in infrastructure.  

 

31.   The UK Government is committed to supporting OT Government-led initiatives to diversify into new markets or industries. Most recently, this has included visits by Lord Ahmad of Wimbledon, Minister of State for the OTs, to Montserrat and Anguilla with private sector representatives to encourage greater private sector participation in supporting these opportunities. Although some OTs are implementing ambitious economic development strategies, most are yet to develop these. EU Exit will also pose economic challenges. 

 

32.  The UK Government works with the OTs to ensure sound management of public finances through, amongst other means, Fiscal Framework arrangements with nonODA Caribbean OTs and the Falklands. These frameworks are embedded in domestic legislation and specify targets for levels of public debt, debt service and fiscal reserves as well as helping to foster best practice and deliver value for money. Implemented correctly, these frameworks help to improve OT Government credit ratings, build investor confidence, and ensure fiscal resilience in the face of crisis.

 

33.  The UK Government will continue to encourage the OTs to develop economic development plans. In the future a greater emphasis could be given to assisting OTs to access new markets by integrating the OTs into the Global Britain strategy, leveraging the UK’s significant diplomatic and trade presence overseas to encourage greater trade and investment and value added activity in the OTs, and assisting OTs to access financing for infrastructure development in order to support new industries. 

 

34.  The Organisation for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF) classify all of the Caribbean OTs, Bermuda and Gibraltar as “Offshore Financial Centres” (OFCs). As largely self-governing jurisdictions, the OTs are largely autonomous in the regulation of business and financial services. They are also responsible for setting their own rates of taxation, and the UK Government respects their right to compete in this area. At the same time, the UK Government expects and encourages OTs to implement and maintain high standards of regulation to tackle any potentially harmful use of their globally significant jurisdictions.

 

35.  OTs with OFCs have made commitments to implement global tax and financial transparency. They are members of Financial Action Task Force-style regional bodies where they have committed to implementing measures for Anti-Money Laundering and Combatting the Financing of Terrorism. A number of OTs are also engaged with the EU’s Code of Conduct Group (Business Taxation) to address harmful tax competition and have made commitments to amend domestic legislation. Separately, the UK Government concluded Exchanges of Notes with OTs with financial centres to collect and exchange information with UK law enforcement agencies on beneficial ownership for companies incorporated in those jurisdictions.

 

36.  Whilst OTs have made commitments to implementing global standards, they are at varying stages of progress, due to a lack of political prioritisation by some, and a lack of technical and financial resources to implement technical protocols. Combined these have the potential to cause the OTs to fall below global standards or be considered candidates for blacklisting. 

 

37.  The UK Government has worked with OT Governments to ensure that, where technical and financial resources are not available, we provide assistance. The UK Government is looking to expand its resourcing to help OT Governments speed up progress through assistance with legislative drafting and implementation of global standards. 

 

 

 

CIVIL AND POLITICAL RIGHTS 

 

38.  The UK and the OTs share a common agenda in promoting and protecting human rights and tackling discrimination. The UK Government expects the OTs to abide by the same basic standards of human rights as the UK, and is responsible in international law for ensuring that the OTs fulfil their obligations arising from relevant international human rights Conventions. OT Governments have a duty to ensure local law complies with the relevant Conventions and court judgements, and is non-discriminatory and we expect OTs to take action, including legislating where necessary, in any areas of disparity to reach full compliance.

 

39.  Almost all populated OTs have had the following Conventions extended to them: the

International Covenant on Civil and Political Rights; the International Covenant on

Economic, Social and Cultural Rights; the International Convention on the Elimination of all forms of Racial Discrimination; the Convention Against Torture and Other Cruel, Inhuman and Degrading Treatment or Punishment; the Convention on the Elimination of all Forms of Discrimination against Women; and the Convention on the Rights of the Child.

 

40. We have been working with the Government of Anguilla to have the Conventions on Civil and Political Rights and on Economic, Social and Cultural Rights extended to it and with Gibraltar to have the Convention on the Rights of the Child extended.  We continue to encourage all the OTs to plug the remaining gaps on Conventions.

 

41.   Each OT has its own legal system with its own local laws. In most the legislature consists predominantly of members elected by the territory’s voters. The UK Government has encouraged and funded observers to monitor elections as an important way to promote internationally accepted standards. The UK Commonwealth Parliamentary Association works with OT Parliamentarians and elections officials to improve understanding of electoral systems and build capacity.  

 

42.  The UK and OT leaders have reaffirmed the importance of promoting the right of self-determination of the peoples of the OTs. We are committed to helping Overseas Territories to maintain international support in countering hostile sovereignty claims. For those OTs with permanent populations who wish it, the UK will continue to support requests for the removal of the territory from the United Nations list of non-self-governing territories. 

 

43.  Immigration is a matter which is regulated by the legislatures of the OTs and each OT has its own immigration legislation. Most OTs have established a local status commonly known as ‘belonger status’ or ‘belongership’, which is held by persons on whom it is conferred by the Constitution or local legislation.  This is separate from nationality and in practice the main feature of “belonger” status is a right of abode in the territory. The Overseas Territory Act 2002 granted British citizenship to everyone who was a British overseas territories citizen (BOTC) on 21 May 2002 (except for BOTC of the Sovereign Base Areas). It also amended the British Nationality 1981 to prescribe how a BOTC can acquire British citizenship by registration and how a person can acquire British citizenship by virtue of a connection with a British overseas territory after this date.

 

44.  In some OTs, the size of the electorate is small compared with the overall population, with ‘belongership’ a constitutional prerequisite to qualify as an elector and to stand for election. The 2012 White Paper stated the UK Government’s belief that people who have made their permanent home in the OTs should be able to vote, but recognises the desire of island communities to maintain their cohesion and hence the need for a reasonable qualifying process. We hope for progress on this point in the future.

 

45.  Since same sex marriage legislation came into force in the UK in 2014, the British Antarctic Territory, the British Indian Ocean Territory, the Falklands Islands,

Gibraltar, the Pitcairn Islands, Saint Helena, Ascension, Tristan da Cunha, and South Georgia and the South Sandwich Islands have all recognised and enabled same sex marriage. Change in the Caribbean Territories is notably slower and rights to same sex marriage are being contested in the Bermuda and Cayman courts.   

 

46.  The UK Government has been clear that the OTs must fulfil their international obligations on the issue of LGBT equality. Encouraging legislative change continues to be a priority. 

 

CHILD SAFEGUARDING

 

47.  Responsibility for safeguarding children is devolved to OT Governments, where systems vary. Challenges include insufficient resources allocated in some OTs; the need to update child protection and criminal justice legislation; the need to build capacity in police and social work practice and to establish more effective multiagency working; and the need for the establishment and effective operation of overseeing bodies such as Safeguarding Children Boards.

 

48.  The Wass Inquiry into Allegations Surrounding Child Safeguarding on St Helena and Ascension Island reported in 2015. It concluded that while there was no evidence of cover up or widespread abuse there were systemic failings which needed to be addressed.  The recommendations of the Wass Inquiry have been implemented and those which have wider application have been recommended by the FCO to other OTs. 

 

49.  The fifth Pitcairn Child Safety Review was carried out by independent experts and finalised in May 2018. It found that the needs of the children on island were being met and that there was an atmosphere of collaboration and cooperation amongst the community and a commitment to moving forward from the abuses of the past into a more positive future. The Pitcairn and UK Governments remain committed to maintaining the high standards of child safeguarding on island.

 

50.  The FCO’s Child Safeguarding Unit coordinates UK Government support to OT authorities to strengthen systems, build capacity and to help them deliver on their international obligations and politicalcommitments.  These include commitments given at Joint Ministerial Council meetings by OT leaders to ensuring the highest possible standards of protection, and to a zero tolerance approach to abuse.  It provides a bespoke programme of support for OTs using CSSF funds, delivered utilising the expertise of UK partners, NGOs, and private sector legislative drafters. 

 

51.   Outputs from the programme include strengthened police and social work response and increased capability to deal with allegations of abuse and to protect children in those OTs where training, mentoring and support has taken place; the training of over 800 educators to recognise and respond abuse; and, draft legislation to strengthen the criminal and civil justice system response for children in need of protection. This assistance will continue, though we anticipate that a strengthened OT response and the reduction of vulnerabilities in child safeguarding systems will become the norm across the OTs in the future such that this enhanced support is no longer needed. 

 

THE ENVIRONMENT

 

52.  The natural environment of the OTs is globally significant and contains 94% of the UK’s biodiversity, supporting unique ecosystems and a large number of rare and threatened species, many of which are found nowhere else in the world. Ensuring environmental stability and conserving biodiversity is crucial in underpinning sustainable development.

 

53.  Primary responsibility for biodiversity conservation and wider environmental management rests with OT Governments who are responsible for developing appropriate and affordable environmental policies, legislation and standards.

 

54.  Extension of Multilateral Environment Agreements (MEAs) to the OTs demonstrate to the international community the value of OT environments and biodiversity and can help to boost sustainable tourism. The UK Government represents the needs and concerns of the OTs at multilateral meetings, and provides advice and support to help meet the requirements of multilateral agreements, such as the Convention on Biological Diversity and the International Maritime Organisation’s (IMO) Safety of Life at Sea (SOLAS) and International Convention for the Prevention of Pollution from Ships (MARPOL). 

 

55.  The key long-term threat faced by the OTs is climate change, with the impacts of this already being felt. The Intergovernmental Panel on Climate Change has identified that some of the OTs are amongst the “most vulnerable” and “virtually certain to experience the most severe impacts” of climate change. These impacts include sea level rise; changes in weather patterns including higher intensity of extreme weather events; coral bleaching; ocean acidification; and sea temperature changes. Other immediate threats include land use change; waste management; invasive species; threats to habitats from unsustainable development and maritime accidents. To help address these challenges the UK has increased support to the OTs on climate change collaboration and waste management and continues to provide support on energyrelated issues including renewable energy technologies. 

 

56.  Consistent with domestic priorities, the UK supports the OTs where necessary or appropriate in the development of economic activity, managed in a way that is consistent with the long-term sustainable use of the natural environment, avoiding over-exploitation and ensuring a renewable contribution to economic growth; protection and management of vulnerable or sensitive natural environments which are underpinned by scientific research; and ensuring the natural environment is understood and integrated within long-term economic prosperity policies and decision-making.

 

57.   The funding required to protect and conserve biodiversity ranges from small projects with a cost of a few thousand pounds to major programmes of work with a cost of several million pounds, due to the scale of the work required and the remoteness of some of the locations (e.g. eradication of non-native species from islands). Studies predict that the total cost of meeting high priority biodiversity conservation projects across the OTs will be between £16 and £48 million. 

 

58.  The “Darwin Plus Fund” was set up in 2012 to provide a single UK Government source of funding to support projects that deliver long-term strategic outcomes for the natural environment in the OTs, jointly funded by the Foreign & Commonwealth Office, the Department for Environment, Food and Rural Affairs and the Department for International Development.  From 2016, the total fund was increased from £2m to £3m per annum.  To date, UK Government has approved 83 Darwin Plus projects, with a total value of £13.6 million. 

 

59.  Other projects are funded through the CSSF. These aim to protect vast maritime areas of the OTs, ensure safety of communities, provide tools to make policy decisions on the long-term management of the OTs and quantify the natural capital resources within the OTs whilst improving the safety and sustainability of seaborne trade. These projects include: the Blue Belt of marine protection around the UK and OTs that will provide large-scale protective measures across 4 million square kilometres of ocean by 2020, supported by up to £20m; assisting OTs to ensure that they have in place effective maritime legislative frameworks; the Maritime and Coastguard Agency Search and Rescue Capability Review; the OTs Seabed Mapping

Programme; increased involvement with Regional Fisheries Management Organisations; and, increasing the biosecurity capacity of OTs so they are better placed in tackling the threats posed by invasive non-native species.

 

60. The BEST (Biodiversity and Ecosystem Services in Territories of European overseas territories) funding programme is the primary source of environment EU funding for OTs. The UK Government recognises that our departure from the EU will have an impact on OTs’ ability to access BEST therefore we are considering how environmental funding for OTs can best be provided following our departure.

 

THE UNINHABITED TERRITORIES

 

61.   South Georgia & the South Sandwich Islands (SGSSI), the British Antarctic Territory (BAT) and the British Indian Ocean Territory (BIOT) have no permanent inhabitants.

Their constitutional arrangements are established through Orders in Council.  The

FCO Director of the Overseas Territories is Commissioner of BIOT and BAT; and the Governor of the Falkland Islands is Commissioner of SGSSI.  The Commissioners are appointed by the Secretary of State and are able to make laws and establish courts, although powers to make laws for the peace, order and good government of the OTs are reserved to Her Majesty.

 

62.  SGSSI and BAT were discovered by British expeditions, and subsequently claimed by the UK.  Neither has ever had a resident population.  Both fall within the areas covered by the Antarctic Treaty and its Convention for the Conservation of Antarctic Marine Living Resources (CCAMLR). Under the Antarctic Treaty, territorial claims to

Antarctica are held in abeyance, and the Treaty, its Protocol on Environmental

Protection and CCAMLR are implemented through the UK’s Antarctic Acts 1994 and 2013, which cover all British nationals and activities south of 60 degrees South. BAT and SGSSI were administered as Falkland Island Dependencies until 1962 in the case of BAT and 1985 in the case of SGSSI. Both Territories support abundant marine wildlife and provide for globally significant scientific study.  The British Antarctic Survey provides the continuous British presence and the main activities are tourism and world leading sustainable fisheries.

 

63.  Discovered by the Portuguese in the sixteenth century, the Chagos Archipelago was ceded to the UK by France in 1814. The UK administered it as a Dependency of the colony of Mauritius until 1965 when it was detached to become BIOT. In 1966, the UK and US agreed by Exchange of Notes (EoN) to make the islands available for defence purposes and the plantation workers, known as Chagossians, were removed from the islands between 1967 and 1973. A joint UK/US military facility was established on Diego Garcia, which continues to contribute significantly to global security. In December 2016, the EoN was rolled over for a further 20 years, extending the US presence until 30 December 2036. The UK strongly refutes Mauritius’ claim to sovereignty over BIOT, but has undertaken to cede it to Mauritius when no longer needed for defence purposes. Between 3-6 September 2018, the International Court of Justice heard oral statements from the UK, Mauritius and others on the UNGA request for an advisory opinion regarding the lawfulness of the UK’s detachment of the Chagos Archipelago. The opinion is expected in Spring 2019. Successive UK Governments have expressed profound regret about the way Chagossians were removed from the islands. Following a comprehensive review, the UK Government announced in November 2016 its decision not to support Chagossian resettlement on BIOT, and announced a new support package for Chagossians in the UK, Mauritius and Seychelles.

 

64.  Established in 2010, the BIOT Marine Protected Area is considered a global leader for marine conservation in a heavily overfished ocean. Following a 2015 United Nations Convention on the Law of the Sea (UNCLOS) Arbitral Tribunal ruling, the UK is committed to bilateral talks regarding Mauritius’ interests in matters of marine conservation.

 

October 27, 2018 in Financial Centers | Permalink | Comments (0)

Friday, October 26, 2018

Global Forum publishes compliance ratings on tax transparency for further seven jurisdictions

The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published today seven peer review reports assessing compliance with the international standard on transparency and exchange of information on request (EOIR).

These reports assess jurisdictions against the updated standard which incorporates beneficial ownership information of all relevant legal entities and arrangements, in line with the definition used by the Financial Action Task Force Recommendations.

Two jurisdictions – Bahrain and Singapore – received an overall rating of “Compliant”. Five others – AustriaArubaBrazilSaint Kitts and Nevis and the United Kingdom were rated “Largely Compliant”. The jurisdictions have demonstrated their progress on many deficiencies identified in the first round of reviews including improving access to information, developing broader EOI agreement networks; and monitoring the handling of increasing incoming EOI requests as well as taking measures to implement the strengthened standard on the availability of beneficial ownership.

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the standard of transparency and exchange of information on request and the standard of automatic exchange of information. This objective is achieved through a robust monitoring and peer review process. The Global Forum also runs an extensive technical assistance programme to provide support to its members in implementing the standards and helping tax authorities to make the best use of cross-border information sharing channels.

The Global Forum also welcomed Oman as a new member. This takes its membership to 154 members who have come together to cooperate in the international fight against cross border tax evasion. 

For additional information on the Global Forum, its peer review process, and to read all reports to date, go to: http://www.oecd-ilibrary.org/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews_2219469x.

For further information, journalists should contact Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, (+33 6 2630 4923) or Monica Bhatia, Head of the Global Forum Secretariat (+ 33 1 4524 9746).


Watch this short cartoon video to know 

October 26, 2018 in BEPS | Permalink | Comments (0)

Thursday, October 25, 2018

OECD clamps down on CRS avoidance through residence and citizenship by investment schemes

Residence and citizenship by investment (CBI/RBI) schemes, often referred to as golden passports or visas, can create the potential for misuse as tools to hide assets held abroad from reporting under the OECD/G20 Common Reporting Standard (CRS).

In particular, Identity Cards, residence permits and other documentation obtained through CBI/RBI schemes can potentially be abused to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures.

Therefore, and as part of its work to preserve the integrity of the CRS, today, the OECD has published the results of its analysis of over 100 CBI/RBI schemes offered by CRS-committed jurisdictions, identifying those schemes that potentially pose a high-risk to the integrity of CRS.

Potentially high-risk CBI/RBI schemes are those that give access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme. Such schemes are currently operated by Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.

Together with the results of the analysis, the OECD is also publishing practical guidance (see Frequently Asked Questions section) that will enable financial institutions to identify and prevent cases of CRS avoidance through the use of such schemes. In particular, where there are doubts regarding the tax residence(s) of a CBI/RBI user, the OECD has recommended further questions that a financial institution may raise with the account holder.

Moreover, a number of jurisdictions have committed to spontaneously exchanging information regarding users of CBI/RBI schemes with all original jurisdiction(s) of tax residence, which reduces the attractiveness of CBI/RBI schemes as a vehicle for CRS avoidance.

Going forward, the OECD will work with CRS-committed jurisdictions, as well as financial institutions, to ensure that the guidance and other OECD measures remain effective in ensuring that foreign income is reported to the actual jurisdiction of residence.

 

Further to the press coverage following yesterday's publication of the guidance for financial institutions on residence by investment (RBI) and citizenship by investment (CBI) schemes, the OECD would like to reiterate that the sole objective of the high-risk RBI/CBI schemes included in this guidance is to provide Financial Institutions with the right tools to identify accountholders that may misuse RBI/CBI schemes to circumvent the Common Reporting Standard (CRS) and carry out enhanced CRS due diligence procedures, where appropriate. This guidance was issued as part of the OECD's ongoing efforts to address any risks to the integrity of the CRS, including those arising from the possible misuse of RBI/CBI schemes.  

Since the release of the guidance, Monaco has provided additional information with respect to its residence and migration requirements confirming that information on relevant applicants is exchanged with all existing jurisdictions of residence. On this basis, the residence and immigration requirements do not give rise to particular risks to the integrity of the CRS and the guidance will be updated accordingly.

Residence/Citizenship by investment schemes

While residence and citizenship by investment (CBI/RBI) schemes allow individuals to obtain citizenship or residence rights through local investments or against a flat fee for perfectly legitimate reasons, they can also be potentially misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS). In particular, Identity Cards and other documentation obtained through CBI/RBI schemes can potentially be misused abuse to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures.

Potentially high-risk CBI/RBI schemes are those that give access to a low personal income tax rate on offshore financial assets and do not require an individual to spend a significant amount of time in the location offering the scheme.

Financial Institutions are required to take the outcome of the OECD's analysis of high-risk CBI/RBI schemes into account when performing their CRS due diligence obligations. (Further detail is available in our Frequently Asked Questions section below).

The OECD has analysed over 100 CBI/RBI schemes, offered by CRS-committed jurisdictions, identifying the following schemes that potentially pose a high-risk to the integrity of CRS.

Last updated: 17 October 2018

Jurisdiction

Name of CBI/RBI scheme

Antigua and Barbuda

Antigua and Barbuda Citizenship by Investment

Antigua and Barbuda

Permanent Residence Certificate

Bahamas

Bahamas Economic Permanent Residency

Bahrain

Bahrain Residence by Investment

Barbados

Special Entry and Residence Permit

Colombia

Migrant (M) Visa – Category 6 or Category 10

Colombia

Residence Visa by Investment (R visa)

Cyprus

Citizenship by Investment: Scheme for Naturalisation of Investors in Cyprus by Exception

Cyprus

Residence by Investment

Dominica

Citizenship by Investment

Grenada

Grenada Citizenship by Investment

Malaysia

Malaysia My Second Home Programme

Malta

Malta Individual Investor Programme

Malta

Malta Residence and Visa Programme

Mauritius

Occupation Permit/Permanent Residence Permit

Montserrat

Economic Residency Programme of Montserrat

Panama

Friendly Nations Visa

Panama

Economic Solvency Visa

Panama

Reforestation Investor Visa

Qatar

Investor Residence Visa

Qatar

Residence Visa for Real Estate Owner

Saint Kitts and Nevis

Citizenship by Investment

Saint Kitts and Nevis

Residence by Investment

Saint Lucia

Citizenship by Investment Saint Lucia

Seychelles

Type 1 Investor Visa

Seychelles

Type 2 Investor Visa

Turks and Caicos Islands

Permanent Residence Certificate via Undertaking and Investment in a Home

Turks and Caicos Islands

Permanent Residence Certificate via Undertaking and Investment in a Business

Turks and Caicos Islands

Permanent Residence Certificate via Investment in a Designated Public Sector Project

Turks and Caicos Islands

Permanent Residence Certificate via Investment in a Home or Business

United Arab Emirates

UAE Residence by Investment

Vanuatu

Development Support Programme

Vanuatu

Self-Funded Visa

Vanuatu

Land-Owner Visa

Vanuatu

Investor Visa

The information in the table reflects the current state of the OECD’s analysis of CBI/RBI schemes and will be updated on an ongoing basis.

 
 

Frequently Asked Questions

This section will be updated on an ongoing basis.

What are CBI/RBI schemes?

"Citizenship by Investment" (CBI) and "Residence by Investment" (RBI) schemes are being offered by a substantial number of jurisdictions and allow foreign individuals to obtain citizenship or temporary or permanent residence rights on the basis of local investments or against a flat fee.

Individuals may be interested in these schemes for a number of legitimate reasons, including the wish to start a new business in the jurisdiction, greater mobility thanks to visa-free travel, better education and job opportunities for children, or the right to live in a country with political stability. At the same time, information released in the market place and obtained through the OECD's Common Reporting Standard (CRS) public disclosure facility, highlights the abuse of CBI/RBI schemes to circumvent reporting under the CRS.

Top

How can CBI/RBI schemes be misused to circumvent CRS reporting?

CBI/RBI schemes can be misused to undermine the CRS due diligence procedures. This may lead to inaccurate or incomplete reporting under the CRS, in particular when not all jurisdictions of tax residence are disclosed to the Financial Institution. Such a scenario could arise where an individual does not actually or not only reside in the CBI/RBI jurisdiction, but claims to be resident for tax purposes only in such jurisdiction and provides his Financial Institution with supporting documentation issued under the CBI/RBI scheme, for example a certificate of residence, ID card or passport.

Top

Which CBI/RBI schemes present a potentially high risk?

Not all RBI/CBI schemes present a high risk of being used to circumvent the CRS. Schemes that are potentially high-risk for these purposes are those that give a taxpayer access to a low personal income tax rate of less than 10% on offshore financial assets and do not require significant physical presence of at least 90 days in the jurisdiction offering the CBI/RBI scheme. This is based on the premise that most individuals seeking to circumvent the CRS via CBI/RBI schemes will wish to avoid income tax on their offshore financial assets in the CBI/RBI jurisdiction and would not be willing to fundamentally change their lifestyle by leaving their original jurisdiction of residence and relocating to the CBI/RBI jurisdiction.

Top

What should Financial Institutions do?

Under Section VII of the CRS, a Financial Institution may not rely on a self-certification or Documentary Evidence if the Financial Institution knows or has reason to know, that the self-certification or Documentary Evidence is incorrect or unreliable. The same applies with respect to Pre-existing High-Value Accounts where a relationship manager has actual knowledge that the self-certification or Documentary Evidence is incorrect or unreliable.

In making the determination whether a Financial Institution has reason to know that a self-certification or Documentary Evidence is incorrect or unreliable, it should take into account all relevant information available to the Financial Institution, including the results of the OECD's CBI/RBI risk analysis. As a result, where, taking into account all relevant information, the facts and circumstances would lead the Financial Institution to have doubts as to the tax residency(ies) of an Account Holder or Controlling Person, it should take appropriate measures to ascertain the tax residency(ies) of such persons.

To the extent that the doubt is related to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction offering a potentially high-risk CBI/RBI scheme, FIs may consider raising further questions, including:

  • Did you obtain residence rights under an CBI/RBI scheme?
  • Do you hold residence rights in any other jurisdiction(s)?
  • Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
  • In which jurisdiction(s) have you filed personal income tax returns during the previous year?

The responses to the above questions should assist Financial Institutions in ascertaining whether the provided self-certification or Documentary Evidence is incorrect or unreliable.

October 25, 2018 in GATCA | Permalink | Comments (0)

Wednesday, October 24, 2018

Tax Professors Invited to Present to United Nations' biennial UNICTAD World Investment Forum

Eden & Byrnes at NABEProf. William Byrnes (Texas A&M Law School) and Dr. Lorraine Eden (Texas A&M Mays Business School) are invited presenters this week for the United Nations' biennial UNCTAD World Investment Forum in Geneva Oct 22 - 26). 

With over 5,000 stakeholders attending, Byrnes and Eden will present their tax policy proposals regarding tax certainty, and lack thereof, and its impact on investment, expressed in their co-authored policy paper, accepted by UNCTAD as the lead article for its journal released for the World Investment Forum.

Download "Transfer Pricing and State Aid: The Unintended Consequences of Advance Pricing Agreements" from SSRN https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3244058

October 24, 2018 in Academia | Permalink | Comments (0)

Former State Street Executive Sentenced for Scheme to Defraud Clients through Secret Trading Commissions

A former executive vice president of State Street Corporation was sentenced today in federal court in Boston, Massachusetts, in connection with engaging in a scheme to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades. 

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Andrew E. Lelling for the District of Massachusetts, and Special Agent in Charge Harold H. Shaw of the FBI’s Boston Field Office, made the announcement.

Ross McLellan, 47, of Hingham, Massachusetts, was sentenced by U.S. District Court Judge Leo T. Sorokin to 18 months in prison and two years of supervised release. In June 2018, McLellan was convicted by a federal jury of one count of conspiring to commit securities fraud and wire fraud, two counts of securities fraud and two counts of wire fraud.

In April 2016, McLellan, a former executive vice president of State Street who served as global head of its Portfolio Solutions Group and president of its U.S. broker-dealer unit, and Edward Pennings, 47, of Surrey, England, a former senior managing director of State Street and the head of its Portfolio Solutions Group for Europe, the Middle East and Africa, were indicted. In June 2017, Pennings pleaded guilty and is scheduled to be sentenced on Nov. 6.  Also in June 2017, Richard Boomgaardt, 44, of Sevenoaks, England, a former managing director of State Street, was charged separately and pleaded guilty in July 2017 to one count of conspiracy to commit securities fraud and wire fraud.  Boomgaardt was sentenced in July 2018 to one year of probation.

According to the evidence presented at trial, between February 2010 and September 2011, McLellan, Pennings, and Boomgaardt conspired to add secret commissions to fixed income and equity trades performed for at least six clients of the bank’s “transition management” business, which helps institutional clients move their investments between and among asset managers or liquidate large investment portfolios.  The commissions were charged on top of fees that the clients had agreed to pay to the bank, and despite written instructions to the bank’s traders that generally reflected that the clients were not to be charged trading commissions.  McLellan, Pennings, and Boomgaardt took steps to hide the commissions from the clients and others within the bank, including by directing that the commissions not be broken out in post-trade reports.  For example, in a telephone call in March 2010, Pennings instructed Boomgaardt not to talk about the plans to charge hidden commissions on one transaction “with anyone . . . because it’s not going to help our story. Don’t even share it with the rest of the team, to be honest.” 

The evidence at trial demonstrated that in June 2010 McLellan and Boomgaardt requested that the bank’s traders provide them with the reported daily high and low prices of securities that the bank had traded for the client so that they could determine the amount of the commissions to be applied to each security without attracting the client’s attention.   In March 2011 McLellan instructed a U.S. fixed income trader to charge a commission of one basis point (0.01 percent) of yield to each trade conducted for another client – notwithstanding that the written trading instructions for the transaction said to charge zero commissions – and subsequently instructed the trader to delete any reference to the commissions from the trading results he sent to the transition manager assigned to the project.

The evidence at trial further showed that, in June 2011, when one of the affected clients inquired about whether it had, in fact, been charged commissions in breach of its agreement with the bank, Pennings initially denied that any commissions had been charged.  Later, at McLellan’s direction, Pennings acknowledged only that “inadvertent commissions” had been applied to securities traded in the United States, but did not disclose that they had, in fact, been intentionally charged in both the United States and in Europe.  McLellan and Pennings  sought to mislead the bank’s compliance staff into believing that the commissions had been charged in error and that the amount of the overcharges was limited to the commissions applied on U.S. securities.

The case was investigated by the FBI.  Valuable assistance was provided by the Securities & Exchange Commission and the Justice Department’s Office of International Affairs.

October 24, 2018 in AML | Permalink | Comments (0)

Tuesday, October 23, 2018

Global Forum publishes compliance ratings on tax transparency for further seven jurisdictions

The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published today seven peer review reports assessing compliance with the international standard on transparency and exchange of information on request (EOIR).

These reports assess jurisdictions against the updated standard which incorporates beneficial ownership information of all relevant legal entities and arrangements, in line with the definition used by the Financial Action Task Force Recommendations.

Two jurisdictions – Bahrain and Singapore – received an overall rating of “Compliant”. Five others – AustriaArubaBrazilSaint Kitts and Nevis and the United Kingdom were rated “Largely Compliant”. The jurisdictions have demonstrated their progress on many deficiencies identified in the first round of reviews including improving access to information, developing broader EOI agreement networks; and monitoring the handling of increasing incoming EOI requests as well as taking measures to implement the strengthened standard on the availability of beneficial ownership.

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the standard of transparency and exchange of information on request and the standard of automatic exchange of information. This objective is achieved through a robust monitoring and peer review process. The Global Forum also runs an extensive technical assistance programme to provide support to its members in implementing the standards and helping tax authorities to make the best use of cross-border information sharing channels.

The Global Forum also welcomed Oman as a new member. This takes its membership to 154 members who have come together to cooperate in the international fight against cross border tax evasion. 

For additional information on the Global Forum, its peer review process, and to read all reports to date, go to: http://www.oecd-ilibrary.org/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews_2219469x.

For further information, journalists should contact Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, (+33 6 2630 4923) or Monica Bhatia, Head of the Global Forum Secretariat (+ 33 1 4524 9746).


Watch this short cartoon video to know more about the work of the Global Forum

October 23, 2018 in BEPS | Permalink | Comments (0)

Monday, October 22, 2018

Four Men and Seven Companies Indicted for Billion-Dollar Telemedicine Fraud Conspiracy, Telemedicine Company and CEO Plead Guilty in Two Fraud Schemes

On October 12, 2018, the District Court for the Eastern District of Tennessee unsealed a 32-count indictment charging four individuals and seven companies in a $1 billion health care fraud scheme. The court also unsealed an additional two plea agreements and an information charging another individual and his company for their role in the scheme.

Andrew Assad, 33, of Palm Harbor, Florida, Peter Bolos, 41, of Lutz, Florida, and Michael Palso, 44, of Odessa, Florida, were indicted along with their compounding pharmacies, Synergy Pharmacy Services, located in Palm Harbor, and Precision Pharmacy Management, located in Clearwater. Co-conspirator Larry Everett Smith, 48, of Pinellas Park, Florida, also a pharmacy compounder, and his companies Tanith Enterprises, ULD Wholesale Group, Alpha-Omega Pharmacy, all located in Clearwater, Germaine Pharmacy located in Tampa, Florida, and Zoetic Pharmacy located in Houston, Texas, were all also named as defendants. All the defendants were charged with conspiracy to commit health care fraud, mail fraud, and introducing misbranded drugs into interstate commerce.

On September 26, 2018, HealthRight LLC, a telemedicine company with locations in Pennsylvania and Florida, and Scott Roix, 52, of Seminole, Florida, and the CEO of HealthRight, pleaded guilty to felony conspiracy for their roles in the telemedicine health care fraud scheme in a criminal information. Roix and HealthRight LLC, also pleaded guilty to conspiring to commit wire fraud in a separate scheme for fraudulently telemarketing dietary supplements, skin creams, and testosterone.

The indictment alleges that from June 1, 2015 through April 1, 2018, these individuals and companies, together with other persons and companies known to the grand jury, conspired to deceive tens of thousands of patients and more than 100 doctors located in the Eastern District of Tennessee and across the country for the purpose of defrauding private health care benefit programs such as Blue Cross Blue Shield of Tennessee out of approximately $174,000,000. The indictment further alleges that the defendants submitted not less than $931,000,000 in fraudulent claims for payment.    

According to the indictment, the defendants set up an elaborate telemedicine scheme in which HealthRight fraudulently solicited insurance coverage information and prescriptions from consumers across the country for prescription pain creams and other similar products. The indictment states that doctors approved the prescriptions without knowing that the defendants were massively marking up the prices of the invalidly prescribed drugs, which the defendants then billed to private insurance carriers.

Assad, Bolos, Palso, and Smith appeared in court on October 11, 2018 before U.S. Magistrate Judge Anthony E. Porcelli in the U.S. District Court for the Middle District of Florida. All four individual defendants were released on bond and are scheduled for an initial appearance and arraignment in the U.S. District Court in the Eastern District of Tennessee before U.S. Magistrate Judge Clifton Corker on October 25, 2018.

If convicted, Assad, Bolos, Palso, and Smith face a term of up to 20 years in prison as to each mail fraud charge, up to 10 years in prison for the conspiracy, and up to three years in prison for introducing misbranded drugs into interstate commerce. Additionally, they face fines of up to $250,000 and up to three years of supervised release as to each count. The companies face fines of up to twice the gross loss sustained as a result of the conspiracy. The indictment also seeks forfeiture of approximately $154,000,000.

In addition to their roles in the health care fraud conspiracy, the Information filed against Roix and HealthRight charged each of them with conspiring to commit wire fraud as part of a scheme to use HealthRight’s telemarketing facilities to fraudulently sell millions of dollars’ worth of products such as weight loss pills, skin creams, and testosterone supplements through concocted claims of efficacy and intentionally deficient customer service designed to stall consumer complaints. 

Roix and HealthRight pleaded guilty before U.S. District Judge J. Ronnie Greer of the Eastern District of Tennessee. Roix faces a statutory maximum sentence of 5 years of imprisonment for each conspiracy. The Court set sentencing for February 13, 2019.

The investigation was coordinated by Assistant U.S. Attorneys T.J. Harker, David Gunn, and Anne-Marie Svolto of the U.S. Attorney’s Office for the Eastern District of Tennessee, and Trial Attorney John Claud for the Department’s Consumer Protection Branch. Assistant U.S. Attorneys T.J. Harker and David Gunn will prosecute the telemedicine conspiracy for the U.S. Attorney's Office for the Eastern District of Tennessee. Trial Attorney John Claud will represent the Department's Consumer Protection Branch in court proceedings. 

The investigation was conducted by the Nashville, Tennessee office of the U.S. Department of Health & Human Services Office of Inspector General; the Nashville office of the Food and Drug Administration Office of Criminal Investigations; the Buffalo, New York, office of the U.S. Postal Inspection Service; the Knoxville and Johnson City, Tennessee, offices of the Federal Bureau of Investigation; the Atlanta, Georgia, Office of Personnel Management Office of the Inspector General; and the Tampa, Florida, office of Homeland Security Investigations. The U.S. Marshals Service also assisted in the investigation and the forfeiture of assets.

October 22, 2018 in AML | Permalink | Comments (0)

Sunday, October 21, 2018

Defendant Pleads Guilty in Multimillion Dollar Prize-Promotion Scam Affecting Elderly Victims

An individual who defied court orders by operating a multimillion mass-mailing fraud scheme pleaded guilty on October 12, 2018, in federal court on Long Island before a magistrate judge, the Department of Justice announced.

Tully Lovisa, 55, of Huntington Station, New York, pleaded guilty to conspiracy to commit mail fraud for sending prize-promotion mailings that led recipients, many of whom were elderly and vulnerable, to believe that they could claim a large cash prize in exchange for a modest fee.  This was false; victims who submitted fees, which in total exceeded $30 million, did not receive large sums of money.  Lovisa operated the prize-promotion mailing scheme in violation of court orders that resulted from a lawsuit against him by the Federal Trade Commission (FTC).

Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the FTC.  Specifically, as part of his resolution of the FTC lawsuit’s against him, Lovisa was ordered by a court to sell a home he owned in Las Vegas, Nevada, and to turn over the proceeds of the sale to the FTC.  Lovisa, however, failed to comply with this order by arranged a sham sale of the house in September 2012 for $155,500 (which he reported to the FTC), and then actually selling the house in April 2015 for $540,000 (which he did not report to the FTC).

“As the Attorney General has made clear, the Department of Justice is determined to bring to justice those who exploit elderly consumers in violation of federal law,” said Assistant Attorney General Joseph Hunt of the Department of Justice’s Civil Division.  “We will work with our law enforcement partners at the U.S. Postal Inspection Service to stop and punish schemes harming the elderly wherever we find them.”

When sentenced, Lovisa faces up to 20 years in prison on each charge, forfeiture, and a fine of up to $250,000 or twice the gross gain or gross loss from each offense.

Friday’s plea took place before Magistrate Judge Gary R. Brown, who recommended that it be accepted by the district judge. The United States Postal Inspection Service investigated the case. The case is being prosecuted by Trial Attorneys Daniel Zytnick and Timothy Finley of the Department of Justice’s Consumer Protection Branch and Assistant U.S. Attorney Charles P. Kelly of the Eastern District of New York.

October 21, 2018 in AML | Permalink | Comments (0)

Saturday, October 20, 2018

Attorney General Jeff Sessions Delivers Remarks Announcing the Creation of a Transnational Organized Crime Task Force

Thank you, Deputy Attorney General Rosenstein, for that introduction and thank you for your outstanding leadership at Main Justice. And thank you to Patrick and Adam for being here and for taking on this challenge.

There’s a lot of great federal law enforcement leadership in this room:

  • Jessie Liu, of course, our fabulous United States Attorney,
  • Thomas Chittum of ATF
  • Scott Hoernke of DEA
  • Matthew DeSarno of FBI, and
  • Patrick J. Lechleitner of HSI.


We are also honored to have a delegation of Mexican prosecutors here with us today.  Thank you to:

  • Ericka Ramirez Ortiz
  • Hugo Guevara Puertos
  • Lourdes Nava Garcia
  • Maria Cristina Guzman Gutierrez
  • Sonia Lopez Vivar, and
  • Uri Perez.


I want to thank all of the fabulous prosecutors in this office and our local partners.  You’re doing important work—and it’s especially important against criminal gangs like the cartels.

Almost one year ago, you obtained life sentences for the two hitmen with the Los Zetas cartel who murdered HSI Special Agent Jaime Zapata and attempted to murder HSI Special Agent Victor Avila.  These were vicious crimes against two outstanding law enforcement officers—and you have brought their attackers to justice.

And so I especially want to thank AUSA Michael DiLorenzo, AUSA Fernando Sanchez, Trial Attorneys David Karpel and Karen Seifert, as well as AUSA Jocelyn Ballantine and former Assistant Deputy Chief Andrea Goldbarg.  Great job.

And of course that case was investigated by our fabulous FBI agents with the assistance of ATF, DEA, the Marshals Service, CBP, and the State Department along with our allies in Mexico.  This is a perfect example of what law enforcement cooperation looks like. And we must have more of it.

Taking on transnational criminal groups like the cartels is a priority for this President and for his administration.  The same day I was sworn in as Attorney General, President Trump ordered me to disrupt and dismantle these groups.

We have embraced that goal—and we have been faithful to it every day.  That is true at Main Justice and it is true in this office.

For example, we have hammered the vicious MS-13, which is based in El Salvador.

With more than 10,000 members in the United States, this gang is the most violent gang in America today.

As the people in this room know well, MS-13 has put a special target on Washington, D.C. and the surrounding suburbs.

The people of this city remember the brutal killings of Christian Sosa Rivas and 15 year-old Damaris Reyes Rivas, from Fairfax County.  Sosa Rivas was just 21 years old when his mutilated body was found along the Potomac. 

And, according to testimony, Damaris Rivas was stabbed 13 times with knives and a wooden stake in the woods in Springfield.  We’re also told that it was all captured on video, to show the gang leaders who had given the order back in El Salvador.

The Washington area also remembers the brutal killing of Nelson Omar Trujillo.  Eight MS-13 members lured him to a park in Falls Church stabbed him to death with machetes and knives. 

In that very same park, Gerson Aguilar was beheaded and buried by MS-13. A total of 13 defendants were charged for this murder.

MS-13 member Jonathan Fuentes was sentenced to 10 years in prison for helping run a prostitution ring that specialized in selling underage girls.  At hotels in Washington, D.C., Maryland, and Northern Virginia, the girls were given drugs in an effort to make them dependent on their traffickers.

In Alexandria, MS-13 member Jose Juarez-Santamaria was sentenced to life in prison for trafficking a 12-year old girl. 

MS-13 members Alexander Rivas and Rances Amaya are also behind bars right now for trafficking underage girls in the Washington, D.C. area.

I could go on and on.  There are countless stories of MS-13’s disregard for human dignity—and the consequences for this community. We have such prosecutions all over the country.

Last October, I designated MS-13 as a priority for our Organized Crime Drug Enforcement Task Forces—or OCDETF.

As this group knows well, these task forces bring together a broad coalition of our federal prosecutors, DEA, FBI, ATF, ICE, HSI, the IRS, the Department of Labor Inspector General, the Postal Service Inspectors, the Secret Service, the Marshals Service, and the Coast Guard.

OCDETF brings together just about every federal law enforcement agency there is.  It’s the Swiss Army knife of law enforcement.  And with Adam Cohen in charge, they’re going to be more effective than ever. Adam, thank you for your willingness to serve.

These agencies have diverse capabilities and jurisdictions—but they all have one mission: to go after drug traffickers and criminal organizations at the highest levels.

MS-13 sells drugs, but they are not primarily a drug trafficking organization.  I have ordered OCDETF to prioritize MS-13 not because of their drug trafficking—but because OCDETF is such a powerful weapon.

OCDETF is able to hit MS-13 from all angles. 

That’s why I have ordered them to prosecute MS-13 members for any violation of law we can prove whatsoever: not just our drug laws, but everything from RICO to our tax laws to our firearms laws.  Just like we took Al Capone off the streets with our tax laws, I have told OCDETF to use whatever laws we have to get MS-13 off of our streets. 

Today I am announcing our next steps to carry out President Trump’s order to take MS-13 and other TCOs off of our streets.

I directed the FBI, DEA, OCDETF, and the Department’s Criminal Division to identify top transnational criminal organizations that threaten our safety and prosperity.

Based on the counsel that I have received from these experienced professionals, today I am designating the following criminal groups as our top transnational organized crime threats:

  • MS-13
  • Cartel de Jalisco Nueva Generacion, or CJNG,
  • the Sinaloa Cartel
  • Clan del Golfo, and
  • Lebanese Hezbollah.

Today I am announcing that we are creating a transnational organized crime Task Force of experienced prosecutors who will coordinate our efforts and develop a plan to take each of these groups off of our streets for good.

The new Task Force will be led by Deputy Attorney General Rosenstein. I want to thank Patrick Hovakimian in his office for stepping up and taking charge of this task. 

The new Task Force will be organized into one subcommittee for each of these target organizations. I am confident that he is going to be very effective in his new role.

The subcommittee on MS-13 will be led by Assistant U.S. Attorney John Durham of the U.S. Attorney’s Office for the Eastern District of New York.  AUSA Durham has played a significant role in the FBI’s Long Island Task Force, which has arrested hundreds of MS-13 members.

The subcommittee on Cartel Jalisco Nueva Generacion will be led by Trial Attorney Brett Reynolds of the Narcotic and Dangerous Drug Section of the Department of Justice’s Criminal Division.  Brett has led or co-led several investigations into the Cartel that have led to indictments of some of its highest ranking members.

The subcommittee on the Sinaloa Cartel will be led by Assistant U.S. Attorney Matthew Sutton of the United States Attorney’s Office for the Southern District of California. 

AUSA Sutton prosecuted several Sinaloa kingpins and led multiple international investigations targeting Sinaloa Cartel leaders, resulting in seizures of millions of dollars in drug proceeds and thousands of kilograms of illicit drugs.

The subcommittee on Clan del Golfo will be led by Assistant U.S. Attorney Robert Emery of the United States Attorney’s Office for the Southern District of Florida.  AUSA Emery has secured convictions against the top leadership of Clan del Golfo, including the kingpin Henry de Jesus Lopez Londoño, who commanded over 1,000 armed men for the cartel.

The subcommittee on Lebanese Hezbollah will be led by Assistant U.S. Attorney Ilan Graff of the United States Attorney’s Office for the Southern District of New York.  AUSA Graff is overseeing the prosecution of two alleged members of Hezbollah’s External Security Organization, the first such operatives to be charged with terrorism offenses in the United States.

This subcommittee will be led and staffed by members of the Hezbollah Financing and Narcoterrorism Team, which is a group I created in January. 

This team is composed of experienced international narcotics trafficking, terrorism, organized crime, and money laundering prosecutors who are tasked with investigating individuals and networks providing support to Hezbollah.

I have ordered each of these subcommittees to provide me with specific recommendations within 90 days on the best ways to prosecute these groups and ultimately take them off of our streets.

With the advice of these experienced professionals, the Department will be better able to follow the President’s order and dismantle transnational organized crime.

And so I want to encourage each of you to keep up the good work.  Keep hammering these groups. 

With this new task force in place, our efforts will be more targeted and more effective than ever.

October 20, 2018 in AML | Permalink | Comments (0)

Friday, October 19, 2018

OECD and IGF release first set of practice notes for developing countries on BEPS risks in mining

For many resource-rich developing countries, mineral resources present a significant economic opportunity to increase government revenue. Tax base erosion and profit shifting (BEPS), combined with gaps in the capabilities of tax authorities in developing countries, threaten this prospect. The OECD’s Centre for Tax Policy and Administration and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) are collaborating to address some of the challenges developing countries face in raising revenue from their mining sectors. Under this partnership, a series of practice notes and tools are being developed for governments.

Three practice notes have now been finalised. In addition, interested parties were invited to provide comments on prelimary versions of these reports and are now publishing the public comments submitted. The OECD and IGF appreciate all feedback received.

Limiting the Impact of Excessive Interest Deductions on Mining Revenue

Building on BEPS Action 4, this practice note guides government policy-makers on how to strengthen their defences against excessive interest deductions in the mining sector.

Tax Incentives in Mining: Minimising Risks to Revenue

Supplementing wider work undertaken by the Platform for Collaboration on Tax on tax incentives, this practice note focuses on the use of tax incentives in mining specifically, examining the tax base erosion risks they can pose.

Monitoring the Value of Mineral Exports: Policy Options for Governments

Ensuring appropriate pricing of minerals relies on high-quality, accurate testing facilities and controls. This practice note helps governments choose the appropriate policy option for monitoring the value of mineral exports, considering the type of mineral, the risk of undervaluation, existing government capacities, and available budget.


About the OECD/IGF co-operation

The IGF and OECD Centre for Tax Policy and Administration have formed a partnership, combining the IGF’s mining expertise with the OECD’s knowledge of taxation, to design sector specific guidance on some of the most pressing base erosion challenges facing resource-rich developing countries.

This guidance reflects a broad consensus between the OECD Centre for Tax Policy and Administration Secretariat and the IGF, but should not be regarded as the officially endorsed view of either organisation or of their member countries.

Further information on the work of both organisations is available at:

October 19, 2018 in BEPS, OECD | Permalink | Comments (0)

Two Former Deutsche Bank Traders Convicted for Role in Scheme to Manipulate a Critical Global Benchmark Interest Rate

A former supervisor of Deutsche Bank’s Pool Trading Desk and a former derivatives trader were convicted in New York for their participation in a scheme to manipulate the London Interbank Offered Rate (LIBOR), a critical global benchmark tied to trillions of dollars in derivatives, loans, mortgages, and other financial products.    

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division; Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division; and Special Agent in Charge Matthew J. DeSarno of the FBI’s Washington Field Office’s Criminal Division made the announcement. 

Following a month long jury trial before the Hon. Chief Judge Colleen McMahon of the U.S. District Court for the Southern District of New York, a jury convicted former Deutsche Bank supervisor Matthew Connolly, 53, of Basking Ridge, New Jersey, of one count of conspiracy and two counts of wire fraud and former derivatives trader Gavin Campbell Black, 48, of London, of one count of conspiracy and one count of wire fraud.  A sentencing date has not been set. 

“Matthew Connolly and Gavin Black undermined the integrity of our financial markets by manipulating LIBOR, which is widely considered to be the most important number in the financial world because of its impact on trillions of dollars in financial products,” said Assistant Attorney General Benczkowski.  “The Justice Department and its law enforcement partners will aggressively investigate and prosecute individuals and financial institutions who engage in this sort of misconduct.”

“Today’s convictions demonstrate our continuing commitment to prosecute those who fraudulently manipulated the financial markets for their own personal benefit and, in doing so, undermined free market competition,” said Assistant Attorney General Delrahim.  “Such conduct will not be tolerated by this administration, especially when it threatens to destabilize global markets and financial stability worldwide.  This case is a compelling example of effective coordination among law enforcement agencies — both at home and abroad.  The Antitrust Division will continue to work with its many partners to aggressively pursue other individuals involved in this or other illegal schemes that undermine free financial markets.”

“Today’s conviction should serve as a reminder of our commitment to hold individuals and institutions accountable for their involvement in complex fraud schemes,” said Special Agent in Charge DeSarno. “The FBI will continue to work with our global partners in bringing those who undermine our financial markets to justice.”

According to evidence presented at trial, LIBOR is an averaged interest rate, calculated based on submissions from lending banks around the world, reflecting the honest and unbiased rates those banks believed they would be charged if borrowing from other banks.  LIBOR was published by the British Bankers’ Association, a trade association based in London.  The published LIBOR “fix” for USD currency was the result of a calculation based upon submissions from a panel of 16 banks, including Deutsche Bank. 

Connolly was Deutsche Bank’s director of the Pool Trading Desk in New York, where he supervised traders who traded USD LIBOR-based derivative products.  Black was a director on Deutsche Bank’s Money Market and Derivatives Desk in London, who also traded USD LIBOR-based derivative products.  In order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR, Connolly directed his subordinates to reach out to Deutsche Bank’s LIBOR submitters to ask them to submit false and fraudulent LIBOR contributions consistent with his traders’ or the banks’ financial interests, rather than the honest and unbiased costs of borrowing, the evidence showed.  The jury also heard evidence that Black asked Deutsche Bank’s cash traders who were responsible for submitting the bank’s LIBOR rates to ask that they adjust their submissions to favor his derivative trading positions.  According to evidence at trial, several Deutsche Bank LIBOR submitters accommodated the defendants’ LIBOR manipulation requests.

In April 2015, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges and Deutsche Bank Group Services (UK) Limited pleaded guilty to one count of wire fraud, collectively agreeing to pay a $775 million fine, for the bank’s role in the scheme.  Two Deutsche Bank traders pleaded guilty to fraud charges related to the LIBOR manipulation scheme. 

Special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office are conducting the investigation.  Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorneys Michael Koenig and Christina Brown of the Justice Department’s Antitrust Division are prosecuting the case.  The department acknowledges the contributions of Clair Dobbin, of Three Raymond Buildings Barristers, and Alan Ward, of Stephenson Harwood LLP, for their advocacy on behalf of the United States in the British courts.    

October 19, 2018 in AML | Permalink | Comments (0)

Thursday, October 18, 2018

Federal Court Orders Trading Firm and CEO to Pay More than $2.5 Million for Fraudulent Bitcoin Ponzi Scheme

A New York federal court has ordered New York corporation Gelfman Blueprint, Inc. (GBI) and its Chief Executive Officer Nicholas Gelfman of Brooklyn, New York, to pay in total over $2.5 million in civil monetary penalties and restitution in what was the first anti-fraud enforcement action involving Bitcoin filed by the Commodity Futures Trading Commission (CFTC) (see CFTC Complaint and Press Release 7614-17). 

CFTC Director of Enforcement Comments

James McDonald, the CFTC’s Director of Enforcement, commented: “This case marks yet another victory for the Commission in the virtual currency enforcement arena.  As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.  I’m grateful to the members of Enforcement’s Virtual Currency Task Force for their tireless work on these matters.”

Together, the Order for Final Judgment by Default (Default Order), and the Consent Order for Final Judgment (Consent Order) (collectively, the Orders), entered respectively on October 2, 2018 and October 16, 2018, by Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York, resolve the charges of the CFTC Complaint against GBI and Gelfman filed on September 21, 2017.  

The Orders find that from approximately 2014 through approximately January 2016, Defendants Gelfman and GBI, by and through its officers and agents and employees, operated a Bitcoin Ponzi scheme in which they fraudulently solicited more than $600,000 from at least 80 customers.  As stated in the Orders, the customers’ funds supposedly were for placement in a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy executed by Defendants’ computer trading program called “Jigsaw.”  In fact, as the Orders indicate, the strategy was fake, the purported performance reports were false, and—as in all Ponzi schemes—payouts of supposed profits to GBI Customers in actuality consisted of other customers’ misappropriated funds. Also, the Consent Order finds that Gelfman was liable as a controlling person for GBI’s violations, and the Default Order finds that GBI was liable as a principal for the violations of Gelfman and its other officers, agents, and employees. 

The Orders find that, to conceal Defendants’ trading losses and misappropriation, Defendants made and provided false performance reports to pool participants, including statements that created the appearance of positive Bitcoin trading gains, when in truth Defendants’ Jigsaw trading account records reveal only infrequent and unprofitable trading.  The Orders also find that Gelfman, in order to conceal the scheme’s trading losses and misappropriation, staged a fake computer “hack” that supposedly caused the loss of nearly all customer funds. 

In addition to requiring GBI and Gelfman, respectively, to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, the Orders impose permanent trading and registration bans on GBI and Gelfman and permanently enjoin them from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.  The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the cooperation and assistance of the New York County District Attorney’s Office and the Finland Financial Supervision Authority.

This case was brought in connection with the Division of Enforcement’s Virtual Currency Task Force, and the CFTC Division of Enforcement staff members responsible for this case are Gates S. Hurand, Christopher Giglio, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.   

*      *

CFTC’s Customer Fraud Advisory on Virtual Currencies and Bitcoin 

For more virtual currency resources, visit the CFTC’s dedicated virtual currency web page,www.cftc.gov/bitcoin, which includes several customer advisories informing the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.  The CFTC also has issued several customer protection Fraud Advisories that provide the warning signs of fraud.  These include, for example, the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

October 18, 2018 in AML | Permalink | Comments (0)

Sunday, October 14, 2018

Leader of International Cyber Fraud Ring Returned to United States to Face Federal Racketeering Charges

A Romanian national was returned to the United States Friday to face federal charges that accuse him of being the leader of an international cyber fraud ring that used malware to steal in excess of four million dollars after taking people’s passwords, personal identifying information, and bank account information.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Justin E. Herdman of the Northern District of Ohio, Peter Elliot of the U.S. Marshals Service, Stephen D. Anthony of the FBI and Chief Kevin Bielozer of the Westlake Police Department made the announcement.

Romeo Vasile Chita, 38, was charged in a four-count indictment unsealed in U.S. District Court in Cleveland, Ohio. The charges include racketeering, wire fraud conspiracy, conspiracy to launder money and conspiracy to traffic in counterfeit services.

Eight other defendants were named in the indictment unsealed today.  Two defendants—Daniel Mihai Radu, 39; and Manuel Tudor, 37, —have already been extradited from Romania and are awaiting trial in Cleveland. The other five defendants remain at large.

“Romeo Vasile Chita allegedly led a multinational criminal enterprise that stole sensitive personal data through deceptive phishing emails and organized fraudulent online auctions, causing millions of dollars in losses to innocent victims,” said Assistant Attorney General Benczkowski.  “The Criminal Division will continue to work with our law enforcement partners, both domestic and international, to aggressively disrupt and dismantle international cyber criminal organizations that victimize our citizens and businesses.”

“This defendant led an international operation that used fraudulent emails and the internet to scam hard-working people out of their savings,” said U.S. Attorney Herdman.  “It is gratifying that this defendant will be forced to answer the charges filed against him.”

According to the indictment, Chita was based in Romania and led a racketeering enterprise that operated in the United States, Romania, Canada, Croatia, Latvia, Hungary, Bosnia, China, Jordan, Malaysia and elsewhere. The goal of the enterprise was to generate money through various criminal acts, including wire fraud, trafficking in counterfeit services, and money laundering.  It began operating as early as 2007.

Among other things, Chita’s group sent “phishing” emails purporting to be from the Better Business Bureau, the IRS, U.S. Tax Court, the National Payroll Records Center, and others. When a victim clicked on a link in a fraudulent email, specialized malware incorporating a “keylogger” was installed onto the victims’ computers, allowing members of the criminal enterprise to capture sensitive and confidential information, including the victims’ bank account information.

The conspirators, including Chita, then transmitted the sensitive information to each other and others for the purpose of fraudulently withdrawing funds from the victims’ bank accounts. The stolen funds were then transferred to specific accounts in the United States, where the money was withdrawn and transferred to other members of the conspiracy. The conspirators used their own network of accounts and “money mules” to transfer hundreds of thousands of dollars at a time to conceal the origin of the money.

The defendants also are alleged to have engaged in an extensive campaign of online auction fraud, placing ads for non-existent cars and other expensive items on eBay, Craigslist, Autotrader.com, and other websites.  According to the indictment, victims were tricked into wiring thousands of dollars to money mules to purchase these vehicles.  The money mules then transferred and laundered the proceeds for the benefit of the enterprise.    

Chita managed and facilitated the various schemes, as well as directing other conspirators to launder fraudulently obtained money.

This case was investigated by the U.S. Marshals Service, the FBI, the Westlake Police Department and the U.S. Secret Service. The case is being prosecuted by Senior Counsel Brian L. Levine of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Duncan Brown of the Northern District of Ohio.  Valuable assistance is being provided by the Justice Department’s Office of International Affairs.  The Justice Department thanks the government of Romania for its assistance in this matter.

The prosecution of Chita is timely, as it occurs during National Cyber Security Awareness Month (NCSAM).  NCSAM – observed every October – was created as a collaborative effort between government and industry to ensure all Americans have the resources they need to stay safer and more secure online.  The Department of Justice encourages citizens to take advantage of cybersecurity tips and information provided by law enforcement to ensure their personal information is secured.

October 14, 2018 in AML | Permalink | Comments (0)

Saturday, October 13, 2018

Dark Web Administrator Sentenced to 20 Years in Prison for Narcotics Trafficking and Money Laundering

A French national who was serving at times as an administrator and senior moderator on one of the largest dark web criminal marketplaces was sentenced to 20 years in prison, after previously pleading guilty to conspiracy to possess with the intent to distribute controlled substances and conspiracy to launder money.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida, Special Agent in Charge Adolphus P. Wright of the U.S. Drug Enforcement Administration (DEA) Miami Field Office, Special Agent in Charge Robert F. Lasky of FBI Miami Field Office, and Special Agent in Charge Michael J. De Palma of IRS Criminal Investigation (IRS-CI), made the announcement. 

Gal Vallerius, aka “Oxymonster,” 36, pleaded guilty before U.S. District Court Judge Robert N. Scola Jr. in the Southern District of Florida on Aug. 28.  Judge Scola sentenced Vallerius to serve 240 months in prison.  Vallierius forfeited 99.98947177 bitcoin and 121.94805811 bitcoin cash.

According to the court record, including the agreed upon factual proffer, beginning in or around November 2013 a criminal online marketplace known as Dream Market began operating on the Tor “dark web” network.  Dream Market was designed to promote and facilitate the anonymous sale of illegal items.  In time, the Dream Market website became one of the largest dark web criminal marketplaces.  All of the items and services on Dream Market were offered for sale in exchange for Bitcoin and other peer-to-peer crypto-currencies. 

According to the agreed upon factual proffer, Vallerius first participated in the conspiracy by becoming a vendor on Dream Market.  As a vendor, he sold Oxycodone and Ritalin under the moniker “Oxymonster.”  Shortly thereafter, Dream Market employed the defendant who acted at times as an administrator and senior moderator.  In these positions, he played a role supporting the daily illicit transactions between buyers and vendors on Dream Market, such as trafficking in narcotics, and the laundering of illicit proceeds using virtual currencies, Dream Market’s tumblers and the dark web. 

This investigation and prosecution was carried out by members of the South Florida High Intensity Drug Trafficking Area (HIDTA) Task Force.  The South Florida HIDTA, established in 1990, is made up of federal, state and local law enforcement agencies that, cooperatively, target the region’s drug trafficking and money laundering organizations.  The South Florida HIDTA is funded by the Office of National Drug Control Policy which sponsors a variety of initiatives focused on combatting the nation’s illicit drug trafficking threats.

The prosecution is a result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies.  The OCDETF mission is to identify, investigate, and prosecute high-level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state, and local law enforcement.  

The investigation was conducted by DEA Miami Field Office and Paris Country Office, FBI Miami’s Cyber Task Force, IRS-CI Miami Field Office, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Miami and Atlanta Field Offices, U.S. Customs and Border Protection’s Field Operations Atlanta, U.S. Postal Inspection Service’s Miami Field Office, the Department of Justice’s Office of International Affairs, Europol, Special Operations Division (SOD), Finnish National Police, Finnish International Judicial Administration of the Ministry of Justice, Dutch National Police, French Ministry of Justice and the Direction Interregionale de la Police Judiciaire as well as the U.S. Attorney’s Office for the Northern District of Georgia.  The case was prosecuted by Trial Attorney C. Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Juan A. Gonzalez and former Assistant U.S. Attorney Frank R. Maderal of the Southern District of Florida.

October 13, 2018 in AML | Permalink | Comments (0)

Friday, October 12, 2018

U.S. International Trade in Goods and Services, August 2018

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $53.2 billion in August, up $3.2 billion from $50.0 billion in July, revised.

Goods and Services Trade Deficit, August 2018

Exports, Imports, and Balance (exhibit 1)

August exports were $209.4 billion, $1.7 billion less than July exports. August imports were $262.7 billion, $1.5 billion more than July imports.

The August increase in the goods and services deficit reflected an increase in the goods deficit of $3.6 billion to $76.7 billion and an increase in the services surplus of $0.4 billion to $23.5 billion.

Year-to-date, the goods and services deficit increased $31.0 billion, or 8.6 percent, from the same period in 2017. Exports increased $129.6 billion or 8.4 percent. Imports increased $160.6 billion or 8.4 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit increased $3.6 billion to $49.7 billion for the three months ending in August.

  • Average exports decreased $1.7 billion to $211.2 billion in August.
  • Average imports increased $1.8 billion to $260.9 billion in August.

Year-over-year, the average goods and services deficit increased $5.3 billion from the three months ending in August 2017.

  • Average exports increased $16.1 billion from August 2017.
  • Average imports increased $21.3 billion from August 2017.

Exports (exhibits 3, 6, and 7)

Exports of goods decreased $1.9 billion to $138.9 billion in August.

    Exports of goods on a Census basis decreased $1.8 billion.

  • Industrial supplies and materials decreased $2.4 billion.
    • Crude oil decreased $0.9 billion.
    • Other petroleum products decreased $0.7 billion.
  • Foods, feeds, and beverages decreased $1.2 billion.
    • Soybeans decreased $1.0 billion.
  • Consumer goods increased $1.6 billion.
    • Artwork, antiques, stamps, and other collectibles increased $0.6 billion.
    • Pharmaceutical preparations increased $0.4 billion.

    Net balance of payments adjustments decreased $0.1 billion.

Exports of services increased $0.2 billion to $70.5 billion in August.

  • Financial services increased $0.1 billion.
  • Maintenance and repair services increased $0.1 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods increased $1.7 billion to $215.6 billion in August.

    Imports of goods on a Census basis increased $1.6 billion.

  • Automotive vehicles, parts, and engines increased $1.0 billion.
  • Passenger cars increased $0.6 billion.
  • Trucks, buses, and special purpose vehicles increased $0.4 billion.
  • Consumer goods increased $0.9 billion.
  • Cell phones and other household goods increased $0.9 billion.

    Net balance of payments adjustments increased less than $0.1 billion.

Imports of services decreased $0.1 billion to $47.0 billion in August.

  • Charges for the use of intellectual property decreased $0.2 billion. Charges for July included payments for the rights to broadcast the 2018 soccer World Cup.
  • Other business services, which includes research and development services; professional and management services; and technical, trade-related, and other services, increased $0.1 billion.

Real Goods in 2012 Dollars – Census Basis (exhibit 11)

The real goods deficit increased $3.8 billion to $86.3 billion in August.

  • Real exports of goods decreased $1.8 billion to $147.8 billion.
  • Real imports of goods increased $2.1 billion to $234.1 billion.

Revisions

Revisions to July exports

  • Exports of goods were revised up less than $0.1 billion.
  • Exports of services were revised up less than $0.1 billion.

Revisions to July imports

  • Imports of goods were revised up less than $0.1 billion.
  • Imports of services were revised down less than $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The August figures show surpluses, in billions of dollars, with South and Central America ($3.4), Hong Kong ($2.3), Singapore ($0.6), and Brazil ($0.5). Deficits were recorded, in billions of dollars, with China ($34.4), European Union ($14.9), Mexico ($8.7), Japan ($5.8), Germany ($5.3), Canada ($3.0), Italy ($2.7), India ($1.9), South Korea ($1.8), France ($1.3), Saudi Arabia ($1.1), OPEC ($1.0), Taiwan ($0.7), and United Kingdom ($0.1).

  • The deficit with Mexico increased $2.3 billion to $8.7 billion in August. Exports decreased $1.3 billion to $21.5 billion and imports increased $1.0 billion to $30.2 billion.
  • The deficit with Japan increased $0.9 billion to $5.8 billion in August. Exports decreased $0.5 billion to $6.1 billion and imports increased $0.4 billion to $11.9 billion.
  • The deficit with members of OPEC decreased $2.0 billion to $1.0 billion in August. Exports increased $0.9 billion to $5.2 billion and imports decreased $1.1 billion to $6.2 billion.

*             *             *

All statistics referenced are seasonally adjusted; statistics are on a balance of payments basis unless otherwise specified. Additional statistics, including not seasonally adjusted statistics and details for goods on a Census basis, are available in Exhibits 1-20b of this release. For information on data sources, definitions, and revision procedures, see the explanatory notes in this release. The full release can be found at www.census.gov/foreign-trade/Press-Release/current_press_release/index.html or www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services. The full schedule is available in the Census Bureau's Economic Briefing Room at www.census.gov/economic-indicators/ or on BEA's Web site at www.bea.gov/news/schedule.

*             *             *

Next release: November 2, 2018, at 8:30 A.M. EDT

October 12, 2018 in Economics | Permalink | Comments (0)

Thursday, October 11, 2018

Former Upstate New York Democratic Party Chair Pleads Guilty to Conspiracy to Cause Foreign Campaign Donation

A former Erie County, New York Democratic party chair pleaded guilty today to conspiring to illegally cause a $25,000 campaign donation from a foreign source to a New York state official running for reelection.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney James P. Kennedy Jr. for the Western District of New York made the announcement.

G. Steven Pigeon, 58, of Buffalo, New York, pleaded guilty before U.S. District Judge Richard J. Arcara to an information charging him with conspiracy to cause a foreign donation in a state election in violation of federal law.  Sentencing is set for Jan. 25, 2019.     

As part of his plea, Pigeon admitted that while working as a political consultant and lobbyist in Buffalo, New York, he represented a foreign client, Company A.  At the time, the CEO of Company A was Person A, a Canadian citizen.  In early 2014, despite knowing that it was illegal to make a foreign donation to a state political campaign, Pigeon solicited Person A to make a $25,000 donation to the reelection campaign of a New York state elected official, Public Official A.  The campaign rejected the donation from Person A because Person A was not a citizen or permanent legal resident of the United States.  Pigeon and Person A then agreed to cause the donation from Person A to be made through Person B, a permanent legal resident of the United States and an employee of Company A.  On or about Feb. 24, 2014, as directed by Person A, Person B made a $25,000 donation to Public Official A’s campaign.  Pigeon and Person A knew that Person A would pay for, or reimburse, the donation.  As a result of the $25,000 donation, Pigeon and Person A were granted entry to a fundraising event for Public Official A in New York City on Feb. 26, 2014. 

“Steven Pigeon undermined the transparency and integrity of the electoral process by funneling foreign money into a campaign,” said Assistant Attorney General Benczkowski.  “The Criminal Division and our law enforcement partners are committed to protecting our electoral process and we will aggressively pursue those who seek to circumvent our campaign finance laws.”

“Transparency in political activity, including the disclosure of the sources of political contributions, is a necessary check on the power of money and a necessary ingredient for a healthy democracy,” said U.S. Attorney Kennedy.  “Schemes such as this, which introduce obfuscation and secrecy into the political process, threaten our very democracy by endeavoring to use anonymity as a means of eliminating accountability.”

The plea is the result of an investigation by the FBI Buffalo Field Office, under the direction of Special Agent in Charge Gary Loeffert; the New York State Attorney General’s Office, under the direction of Barbara Underwood; and the New York State Police, under the direction of  Major Edward Kennedy.  The case is being prosecuted by Deputy Chief John Keller of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Paul E. Bonanno of the Western District of New York.

October 11, 2018 in AML | Permalink | Comments (0)

Wednesday, October 10, 2018

Saudi Arabia’s measures to fight money laundering and the financing of terrorism and proliferation

The Kingdom of Saudi Arabia is achieving good results in fighting terrorist financing, but needs to focus more on pursuing larger scale money launderers and confiscating their assets.

The FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF) jointly conducted an assessment of Saudi Arabia’s anti-money laundering and counter-terrorist financing (AML/CFT) system.  The assessment is a comprehensive review of the effectiveness of a country’s AML/CFT system and its level of compliance with the FATF Recommendations.

Saudi Arabia recently made fundamental changes to its AML/CFT regime to bring its legal and institutional framework in line with up-to-date FATF Recommendations.  Given the recent introduction of some of these measures, their effectiveness cannot yet be demonstrated. 

Two separate national risk assessments have provided the country with a solid understanding of the money laundering (ML) and terrorist financing (TF) risks it faces.   Financial institutions generally understand their ML/TF risks, and are applying preventive measures such as customer due diligence, record-keeping and verification of beneficial ownership. This is largely the result of an effective and proactive supervision of this sector. However, the lack of suspicious transaction reports, in particular on suspected cases of terrorist financing, is a concern. Money exchangers, real estate agents, accountants and other designated non-financial businesses and professions do not fully understand the ML/TF risks they are exposed to, with a correspondingly low level or number of suspicious transaction reports.

Saudi Arabia’s financial intelligence unit is not able to conduct sophisticated financial analysis, although it does provide a wide variety of information that is available to and used by competent authorities.  While money laundering investigations have increased in recent years, Saudi authorities are not investigating and prosecuting money laundering in a proactive fashion, particularly when it comes to complex money laundering schemes. They do not systematically pursue confiscation of proceeds.

Saudi Arabia faces a significant and dynamic risk of terrorist financing including the presence of cells of Al Qaeda, ISIS, affiliates and other groups, as well as a large number of foreign terrorist fighters.  Saudi Arabia demonstrated an ability and willingness to pursue terrorist financing which resulted in over 1700 investigations and convictions since 2013, although these efforts were largely focused on domestic terrorist financing.  Saudi Arabia has a sound mechanism to implement United Nations targeted financial sanctions on terrorism, but the measures to implement targeted financial sanctions for proliferation financing and prevent sanctions evasion are weak.

FATF adopted this report at its Plenary meeting in June 2018.

Download the report: 

Mutual Evaluation of the Kingdom of Saudi Arabia - 2018

Mutual Evaluation of the Kingdom of Saudi Arabia - Executive Summary

Earlier report on Saudi Arabia's measures to combat money laundering and terrorist financing

More information:  

FATF Recommendations

Methodology for assessing technical compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems

Consolidate assessment ratings - an overview of ratings that assessed countries obtained for effectiveness and technical compliance

October 10, 2018 in AML | Permalink | Comments (0)