Archives for May 2018

U.S. and Brazil Start Permanent Forum on Security

May 23, 2018 by Bruce Zagaris Leave a Comment

On May 22, 2018, the United States and Brazilian governments issued a joint statement following the start of the U.S.-Brazil Permanent Forum on Security.

The initiative arose during a meeting in Brasilia at which U.S. Deputy Secretary of State John J. Sullivan was accompanied by the Assistant Secretary for Economic and Business Affairs Manisha Singh and Acting Assistant Secretary for Western Hemisphere Affairs Francisco Palmieri.

The Acting Minister of Foreign Affairs, Secretary General Marcos Garvão hosted the U.S. delegation in a working lunch and a meeting where they discussed several aspects of the U.S.-Brazil partnership.

The start of the Permanent Forum on Security arises from “consistent cooperation between the United States and Brazil on fighting transnational crime, and based upon the strengthening of collaboration of law enforcement and security agencies in both countries.”[1]

The Brazilian Ministry of Foreign Affairs and the U.S. State Department will coordinate the Forum, which aims to facilitate interagency teamwork and design operating strategies in six pre-defined areas: drug trafficking, arms trafficking, cybercrime, money laundering and financial crimes, terrorism, and institutional cooperation.

The first working meeting of the Forum will occur later this year in Washington, D.C.

During the visit, the two sides also issues related to criminal cooperation, such as space cooperation and defense. They discussed the recent exchange of diplomatic notes completing the process for the U.S.-Brazil Open Skies Aviation Agreement and welcomed the resumption of negotiations on a Technology Safeguards Agreement. They exchanged ideas on regional issues, including the region’s response to the political, economic, and humanitarian crisis in Venezuela.

According to the remarks of Deputy Secretary Sullivan, the U.S.-Brazilian security cooperation has included the Summer Olympics in Rio de Janeiro.

A future IELR article will include a more comprehensive discussion of the Forum, its scope and some of the implications.

[1] State Department, Western Hemisphere: U.S.-Brazil Bilateral Cooperation, May 22, 2018

Treasury Department Imposes Sanctions on Iranian Bank Officials with Ties to Hezbollah

May 17, 2018 by Madeline Henshaw-Greene Leave a Comment

On May 15^th, the Treasury Department placed sanctions on an Iranian bank, three bank officials, and a key Hezbollah official, in the Trump administration’s first step towards re-imposing economic pressures on Iran since President Trump pulled out of the Iran deal earlier this month. The individuals were also designated as Specially Designated Global Terrorists, pursuant to Executive Order 13224, which President George W. Bush signed as a response to the 9/11 attacks. The Treasury Department accused the sanctioned bank officials of abusing the U.S. and regional financial systems in order to funnel millions of dollars to the Lebanese militia, Hezbollah, which the U.S. has designated as a terror group. Treasury Secretary Steven Mnuchin said that the United States would no longer “permit Iran’s increasingly brazen abuse of the international financial system” as a means to “provide financial support to its terrorist proxies”.

The Office of Foreign Assets Control (OFAC) designated Valiollah Seif, the governor of Iran’s Central Bank, as well as the bank’s assistant director of the international department, Ali Tarzali, and subjected them to sanctions that prohibit them from “opening or maintaining in the United States of a correspondent account…by a foreign financial institution” that is known to serve as a vessel for financial support “in connection with Iran’s support for international terrorism”. The department also singled out Aras Habib, the chief executive of Al-Bilad Islamic Bank, as well as the bank itself, and subjected them to similar sanctions. Finally, OFAC designated a key Hezbollah official, Muhammad Qasir, and subjected him to sanctions prohibiting him from using or opening a United States account for the purposes of facilitating transactions to Hezbollah or anyone connected with the group.

The sanctions have geopolitical consequences as well as economic ones. Iran gives money to Hezbollah so that the militia can act as its proxy in the Syria conflict and provide Iranian support to Bashar al-Assad. The Iranians have also supplied Hezbollah with missiles and other weapons in the past. The Trump administration will use these sanctions as a means to draw Iranian support out of the conflict, but it has yet to take military action against Iranian-backed militias in the region. These sanctions do not currently extend to the Central Bank of Iran, however Secretary Mnuchin noted that the Central Bank will once again be under sanctions for certain transactions, including “on the purchase or acquisition of U.S. dollars banknotes by the Government of Iran”. These sanctions, as well as additional sanctions on specific individuals, will be re-imposed later this year now that the United States will no longer participate in the Iran deal and is reverting to economic sanctions until President Trump can negotiate a better one.

For more on this:

Michael R. Gordon, U.S. Sanctions Iran’s Central Bank Governor, Alleges Hezbollah Ties, The Wall Street Journal, https://www.wsj.com/articles/u-s-sanctions-irans-central-bank-governor-alleges-hezbollah-ties-1526413596

DC Circuit Appeals Court Rules that U.S. Government Cannot Forcibly Transfer U.S. ISIS Suspect

May 11, 2018 by Zarine Kharazian Leave a Comment

On May 7, 2018, the United States Court of Appeals for the District of Columbia Circuit ruled that the United States cannot forcibly transfer an American ISIS suspect being held in Iraq to another country without first proving that he is an enemy combatant. The decision has significant implications for wartime presidential power, as well as for individual citizenship rights. The case is Doe v. Mattis.

The suspect, a “John Doe,” is a U.S. and Saudi Arabian dual citizen currently in the custody of the U.S. military in Iraq. The U.S. government argues that it has the authority to forcibly transfer Doe to another country and relies on two lines of reasoning to support that claim. In the first line of reasoning, the government marshals Supreme Court precedent from Munaf v. Green and Wilson v. Girard to suggest that, once a citizen leaves U.S. territory, the Executive can forcibly transfer him to any country that possesses a “legitimate sovereign interest” in him. In the second line of reasoning, the government notes that executive power generally expands during time of war, and thus the executive is afforded greater discretion in the war-time prosecution of enemy combatants.

While the D.C. Circuit acknowledges that the Executive is afforded broader deference in war-time prosecution, it notes that Doe’s status as an American citizen complicates matters. The D.C. Circuit’s opinion relies primarily on the Supreme Court ruling in Hamdi v. Rumsfeld (2004). In Hamdi, the Supreme Court ruled that, before the Executive can forcibly transfer a U.S. citizen as an enemy combatant, it must give him the opportunity to contest the government’s assertion that he is an enemy combatant before a neutral arbiter. “The Hamdi Court believed it ‘unlikely’ that its decision would have a “dire impact on the central functions of warmaking.” 542 U.S. at 534. At the same time, the Court thought it ‘vital’ that it ‘not give short shrift to the values that this country holds dear or to the privilege that is American citizenship,’” the D.C. circuit’s opinion reads. “We follow the Court’s guidance today.”

See the opinion below.

Unsealed_opinion_barring_transfer_5.9.18

UK Parliament Votes to Crack down On Anonymous Offshore Companies

May 2, 2018 by Zarine Kharazian Leave a Comment

On Tuesday, the British parliament voted to add an amendment to the UK Sanctions and Anti-Money Laundering Bill to require 14 overseas territories, among them the Cayman Islands and the British Virgin Islands, to implement public ownership registers by 2020.

The bipartisan amendment was introduced by the Labour Party’s Margaret Hodge and the Conservative Party’s Andrew Mitchell. The Hodge-Mitchell Amendment is an effort to fight corruption and money laundering in the U.K.’s offshore territories.

The amendment is part of a renewed push at both the E.U. and national levels to increase transparency of beneficial ownership information. On the E.U. level, the recently-adopted 5^th Anti-Money Laundering Directive requires that member states establish registers of beneficial ownership information and make that information accessible shortly after the entry into force of the directive.

Experts have speculated about how member states will transpose the 5^th AMLD into domestic law. With Brexit looming, the U.K. has been particularly subject to such scrutiny. The passage of the Hodge-Mitchell amendment suggests that the U.K. is committed to ensuring cross-border cooperation and harmonization of AML laws with its E.U. counterparts.

Transparency Int’l Critiques G20’s Unmet Promises on Ending Anonymous Companies

May 1, 2018 by Bruce Zagaris Leave a Comment

by Bruce Zagaris

On April 19, 2018, Transparency International issued a report G20 Leaders or Laggards? Review G20 promises on ending anonymous companies.

The TI report discusses how the major cross-border “grand corruption” scandals have tarnished the Group of 20 (G20) countries in recent years. It cites the fact that in 2017 Odebrecht the Brazilian engineering company, was assessed a US$2.6 billion fine for bribery after being charged with paying US$788 million in bribes. In the “Russian Laundromat” scandal, exposed in 2017, a group of individuals in G20 member Russia allegedly established 21 shell companies, which then moved and laundered illegal proceeds out of the country, making more than 26,000 payments to 96 different countries including every G20 country aside from Brazil. Increasingly, anonymous companies hide the identity of the person at the source of the funds either to launder and transfer stolen money, or to operationalize corrupt deals, using companies and offshore accounts to pay bribes or buy influence.

The report makes 5 major findings and then recommendations as follows:

G20 Countries are starting to tackle anonymous company ownership – but progress is slow. Some 3 years after the G20 adopted their High-Level Beneficial Ownership Principles at the Brisbane G20 Summit, the number of countries with weak or average frameworks has dropped from 15 to 11, but still major weaknesses exist across the principles.
The majority of countries still do not know who owns and controls companies in their territories and do not keep current information on them. The 20 Principles encouraged legal entities to require beneficial ownership information when recording information about their shareholders. Legal entities are now expected to understand their ownership and control structure and monitor individuals who have an interest in a company but are presented through nominee shareholders or other legal entities. However, the great majority of countries evaluated still do not require legal entities to maintain beneficial ownership information themselves. Central beneficial ownership registers improve collection of beneficial ownership information and access to law enforcement, supports domestic and international cooperation between authorities and permits them to do their job more quickly. Six assessed countries now have central beneficial ownership registers.
Verification of information is weak across the board. This undermines the ability of competent authorities to investigate suspicious cases, and the ability of banks and businesses to carry out proper due diligence. All 23 countries analyzed now require financial institutions to identify the beneficial ownership of customers. Unfortunately, in high-risk cases, only 8 G20 countries required financial institutions to use independent and reliable sources to verify the beneficial owner of their customers. Finally, no register authority in any G20 or guest country verifies information collection in company registers.
Rhetoric does not always translate into action. Government are frequently aware of the weaknesses in their system. However, in many cases they fail to implement key measures they know will help mitigate those problems.
Gatekeepers such as lawyers, accountants, real estate agents, and trusts and company service providers remain money laundering weak spots.

TI makes the following recommendations:

— Governments should establish a central register of beneficial ownership information and make it publicly available in open data format.

— Governments should resource and establish mechanisms to ensure that at least some verification of beneficial ownership information occurs, such as cross-checking the data against other government and tax databases, or conducting random inspections.

— Financial institutions or DNFBPs should not be permitted to proceed with transactions if the beneficial owner of their customer cannot be identified.

— Governments should undertake national money laundering risk assessments on a regular basis. These should include an analysis of the risks posed by domestic and foreign legal entities and arrangements. Key stakeholders, including obliged entities and civil society organizations should be consulted. The results of the assessment should be published online.

— Governments should consider prohibiting nominee shareholders. If they are permitted, they should be required to disclose their status upon the registration of the company and registered as nominees. Nominees should be licensed and subject to strict anti-money laundering obligations.

— Governments should require the registration of both domestic and foreign trusts operating in their country. Information on all parties to the trust (trustee, settlor and beneficiaries), and the real individuals behind them should be recorded.

The report illustrates how civil society plays an important role in shaping and implementing commitments by governments and international organizations to transparency and anti-corruption. They invest significant resources before the G20 meetings to develop precise commitments and then lobby the governments to support them. Thereafter, civil society continues to monitor the performance of the governments against the commitments and produce reports, exposing gaps. They also work with other organizations, such as the International Consortium for Investigative Journalists (ICIJ). The current issue of the IELR will have a more comprehensive discussion of the TI report.

U.S. and Brazil Start Permanent Forum on Security

Treasury Department Imposes Sanctions on Iranian Bank Officials with Ties to Hezbollah

DC Circuit Appeals Court Rules that U.S. Government Cannot Forcibly Transfer U.S. ISIS Suspect

UK Parliament Votes to Crack down On Anonymous Offshore Companies

Transparency Int’l Critiques G20’s Unmet Promises on Ending Anonymous Companies

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