Archives for May 2020

Canadian Court Finds Huawei CFO Extraditable to the U.S. on Fraud Charges

May 28, 2020 by Bruce Zagaris Leave a Comment

On May 28, 2020, in the case of United States v. Meng, 2020 BCSC 785, Associate Chief Justice Heather Holmes of the Supreme Court of British Columbia denied Wanzhou Meng’s request for an order discharging her from the extradition process on the basis that, as a matter of law, the “double criminality” requirement for extradition cannot be met.

Factual Background

The U.S. has requested her extradition for prosecution in the U.S. District Court in the Eastern District of New York for conduct that the Minister of Justice for Canada says corresponds to fraud in violation of section 380(1) of the Criminal Code of Canada.

The allegations concern the banking relationship between Huawei, a China-based telecommunications company, and HSBC, an international bank. Ms. Meng was and still is Huawei’s Chief Financial Officer, and the daughter of its founder, Ren Zhengfei. She alleged made false statements to HSBC in 2013, significantly understating Huawei’s relationship with Skycom Tech co. Ltd., a company based in Iran.

In August 2013, HSBC coordinated a syndicated loan to Huawei in an amount equivalent to US $1.5 billion, and was one of the main lenders. In April 2014, HSBC sent Huawei a signed letter describing negotiated provisions for a US $900 million credit facility. HSBC was one of the banks that loaned Huawei $1.5 billion in July 2015.

During this time U.S. Iran sanctions regulations required banks to obtain authorization from the U.S. Department of the Treasury’s Office of Foreign Assets control before providing financial or credit services through the U.S. to entities in Iran.

Before the incidents with Ms. Meng, HSBC had violated the sanctions and in December 2012 entered into a deferred prosecution agreement (DPA) with the U.S. Department of Justice, in which it agreed not to commit further sanctions violations, to undertake various remedial measures, and to undertake various remedial measures to pay forfeitures and penalties amount to well over a billion dollars.

In December 2012 and January 2013, Reuters published two articles associating Huawei with Skycom’s U.S.-related business dealings in Iran. The articles reported various connections between Huawei and Skycom, including that Ms. Meng served on Skycom’s board from February 2008 to April 2009, and that in 2007 she was company secretary for a Huawei holding subsidiary that, in turn, owned 100% of Skycom’s stock.

When HSBC inquired of Huawei about the reports in the Reuters articles, Ms. Meng gave an in-person meeting with a senior HSBC executive and showed a PowerPoint presentation. The U.S. indictment alleges that Meng made fraudulent statements to HSBC and that Huawei relied on the assurances provided by Ms. Meng at the August 2013 meeting in deciding to extend a proposed $900 million credit facility and subsequently participated with other international banks in a $1.5 billion syndicated loan to Huawei.

Legal Issues

Justice Holmes disagreed with Ms. Meng that the conduct cannot amount to fraud because essentially the proposed prosecution is to enforce U.S. sanctions laws against Iran, measures that are not part of Canadian law and which Canada has expressly rejected. Meng argues that it is an artificiality to characterize the case as one of fraud against a bank, because the U.S. can have no real interest in policing private dealings between a foreign bank and a private citizen.

Meng contends that for Canada to extradite for conduct that does not violate its own laws and standards would not meet the rule of law and principles of fundamental justice. This includes those that prevent punishment for conduct not clearly prohibited by law.

Justice Holmes disagreed with Ms. Meng that to refer to U.S. sanctions in order to understand the risk to HSBC is to allow the essence of the conduct to be defined by foreign law. Canada’s laws determine whether the alleged conduct, in its essence, amounts to fraud.

According to Justice Holmes, Ms. Meng’s approach to the double criminality analysis would serious impair Canada’s ability to meet its international obligations in the extradition context for fraud and other economic crimes. The offense of fraud has a large potential scope. It may include a very wide scope of conduct, a large expanse of time, and acts, people, and consequences in multiple places of jurisdictions. Justice Holmes explains that Ms. Meng’s approach to the double criminality principle would give fraud an artificially narrow scope in the extradition context. It would entirely eliminate, in many cases, consideration of the reason for the alleged false statements and how such statements caused the victim(s) loss or risk of loss.

With respect to Ms. Meng’s concern that extraditing her would indirectly help to enforce laws based on policy offensive to Canadian values. The opinion explains that economic sanctions laws as were in place in the U.S. at the time of the alleged offense are not part of Canadian law, but they are also not fundamentally contrary to Canadian values. The opinion also notes that in the final phase of the extradition process the Minister of Justice must refuse a surrender order for extradition if such an order would be “unjust or oppressive” under all the relevant circumstances. The Minister’s decision will necessarily take account of whether prosecution according to the foreign laws could lead to an unjust or oppressive result according to Canadian values.

Justice Holmes concluded that, as a matter of law, the double criminality requirement for extradition is capable of being met in this case. The effects of the U.S. sanctions may properly play a role in the double criminality analysis as part of the background or context against which the alleged conduct is examined.

Future Proceedings and Implications

It is not known if Meng’s lawyers plan to immediate appeal the extraditability decision or wait until a later stage of the extradition process.[1]

Meng and her lawyers are to appear in B.C. Supreme Court on June 3 for a case management conference, to schedule the next set of hearings.

Meng’s legal team plans to argue that her Charter rights were violated when she was arrested at YVR back in December 2018.[2]

After the ruling the Chinese Embassy in Ottawa characterized “the whole case” a “grave political incident.”[3]

Huawei expressed disappointment. It said it expects that “Canada’s judicial system will ultimately prove Ms. Meng’s innocence.”[4]

After the ruling Meng will have to continue living under house arrest in Vancouver, where she owns two homes. While under a curfew and required to wear a GPS tracking device, she can still travel freely around the city.

The decision undoubtedly will further strain relations between Canada and China, which have deteriorated significantly since Meng’s arrest in December 2018. Meng’s verdict occurs during increasing frustration in Canada over the continued detention of Michael Kovrig and Michael Spavor, two Canadians who were seized in China shortly after Meng’s arrest.[5]

A Chinese embassy spokesperson in Canada told the Canadian Broadcasting Company news: “The purpose of the United States is to bring down Huawei and other Chinese high-tech companies, and Canada has been acting in the process as an accomplice of the United States. The whole case is entirely a grave political incident.”[6]

The current issue of the IELR will discuss the decision and implications in more detail.

[1] David Molko and Kendra Mangione, B.C. judge rules against Huawei’s Meng Wanzhou, extradition process continues, May 27, 2020 https://bc.ctvnews.ca/b-c-judge-rules-against-huawei-s-meng-wanzhou-extradition-process-continues-1.4956755.

[2] Id.

[3] Amanda Coletta, Canadian court says extradition case can proceed, Wash. Post, May 28, 2020, at A18, col. 3.

[4] Id.

[5] Leyland Cecco, Canada court ruling allows US extradition case of Huawei executive to proceed, The Guardian, May 27, 2020.

[6] Id.

OU Launches Global Risks & Threats Leadership Forum June 6

May 21, 2020 by Bruce Zagaris Leave a Comment

Please see here for more information and to sign up.

The University of Oklahoma is launching a four-part OU Global Risks & Threats Series on Saturday, June 6, with leaders from the intelligence, finance, law enforcement, corporate and cyber sectors. The other three virtual events will occur in late June, July and August.

The subject of the first of the four forums is The Pandemic Threat: Risks and Impacts of COVID-19, and will focus on the latest threats, trends and strategies on how to address the most critical issues of the pandemic. The forum is scheduled 10 a.m. to 2 p.m. Central Time (USA). There will be a break halfway through.

Over the four sessions, attendees will gain knowledge of real-world solutions, with valuable insights from decision makers in the public and private sectors about their experience handling today’s most complex global challenges. Because of the pandemic, the series will take place as easily accessible virtual forums, presented online via Zoom. Questions for the speakers can be sent in before the forums.

Registration for the first event is US$30. Additional information, including a full agenda and presenter bios, is available online at price.ou.edu/GRTS, and the registration website is price.ou.edu/GRTSregistration.

Adriana Sanford, J.D., dual LL.M, the founding director of OU GRTS, Senior Fellow at the OU Center for Intelligence and National Security, and Assistant Director of Executive Education Programs at the Gene Rainbolt Graduate School of Business, will be the lead-off speaker at the events and preside throughout the series.

The lineup for the COVID-19 virtual event on Saturday, June 6, is:

Special Guest Speaker

Honorable Eduardo Aninat, Former Finance Minister of Chile, former Chairman of the Board of Governors and member of the Development Committee of the World Bank and the IMF

Keynotes and Featured Speakers

Adriana Sanford, J.D., dual LL.M., Former Fortune 500 Senior Counsel, Global Threats Expert, and International Television Commentator
Lou Bladel, former Chief of the FBI’s Counterespionage Section and current Managing Director of Assurance Services at Ernst & Young
Tom Finan, former FBI Assistant General Counsel and current Cyber Growth Leader at Willis Towers Watson
Cheemin Bo-Linn, ED.D., former Vice President of IBM and current Board of Director Member and Global Risk and Recovery Expert
Bruce Zagaris, global anti-corruption and anti-money laundering expert
Ross S. Delston, former FDIC regulator and global AML pundit
Scott B. MacDonald, global economist and former OCC International Economic Adviser
Jeff Schermerhorn, complex cyber risk expert at Willis Towers Watson

Future speakers include:

Spotify’s Head of Global Affairs and Chief Legal Officer and former Microsoft General Counsel and Corporate Vice President for Legal Affairs, Horacio Gutierrez
Chief Commercial Officer for Aon Intellectual Property Solutions, and former Chief Intellectual Property Officer at Philips and IBM Vice President of IP and Licensing, Brian Hinman
Former Drug Enforcement Administration Special Agent and CIA Operations Officer (Narco-Terrorism and Global Security Threats), Matt Addington
Group Chief Risk Officer for Coca-Cola HBC, Gerold Knight

OU GRTS is a collaborative effort between the Michael F. Price College of Business and the OU Center for Intelligence and National Security, consistent with the University’s initiative “to solve real-world problems in ways that both build human knowledge and improve the communities that we serve.”

“The OU Global Risks & Threats Series provides a unique opportunity to leverage the insights of a diverse, talented group of international experts to better understand the risks and opportunities created by the COVID-19 pandemic and other major global concerns,” said James L. Regens, Ph.D., Regents Professor and director of the Center for Intelligence and National Security – an Intelligence Community Center of Academic Excellence.

OU GRTS maintains a cross-industry speaker ecosystem of world-renowned experts, visionaries, strategic decision-makers, and industry leaders that provide guidance, direction and insights.

“We think it is important to share our work and our vision with the global community and to help shape the next generation of world leaders, decision-makers, senior executives and skilled students,” said Wayne Thomas, interim dean of the Price College of Business. “By bringing world experts together, we can better understand the threats that have political, economic and social implications on all of us, and we can advance real-world solutions and work together on a multilateral basis,” he added.

About the University of Oklahoma

Founded in 1890, the University of Oklahoma is a public research university located in Norman, Oklahoma. OU serves the educational, cultural, economic and health care needs of the state, region and nation. More information is online at www.ou.edu.

About the Michael F. Price College of Business

The Michael F. Price College of Business has experienced significant growth over the past five years in the number of faculty, staff and students and has become OU’s second-largest college, with more than 4,900 students. The College offers undergraduate, master’s, executive and doctoral programs across six academic divisions in Accounting, Entrepreneurship and Economic Development, Finance, Management and International Business, Management Information Systems, and Marketing and Supply Chain Management. The College’s Gene Rainbolt Graduate School of Business is a 27,000-square-foot facility located in the heart of Oklahoma City’s Innovation District and is home to the College’s full-time and professional MBA programs, as well as the Executive MBA in Aerospace and Defense and the Graduate Certificate in Aerospace and Defense.

The Price College of Business’s website is price.ou.edu and the Gene Rainbolt Graduate School of Business’s website is ou.edu/price/mba.

About the Center for Intelligence and National Security

As an Intelligence Community Center of Academic Excellence, the University of Oklahoma Center for Intelligence and National Security conducts interdisciplinary research on key intelligence and national security challenges. The Center also offers a robust academic program spanning science, technology, engineering and mathematics (STEM), the social and behavioral sciences, and critical languages. The academic program embraces experiential learning to build valuable foundational capacities in problem-solving, critical thinking and adaptability. Through its study abroad opportunities, OU CINS provides students pursuing undergraduate and graduate degrees a variety of cultural enrichment experiences.

The Center for Intelligence and National Security’s website is www.ou.edu/cins.

DOJ Rules Red Notices are Sufficient to Prevent Asylum and Withholding of Removal Claims

May 21, 2020 by Alexandra Haris Leave a Comment

On March 6, 2020, the United States Department of Justice (DOJ) Board of Immigration Appeals ruled that, on its own, a Red Notice may be sufficient to prevent an asylum claim or a withholding of removal claim from being heard.

Specifically, the DOJ said that “An Interpol Red Notice may constitute reliable evidence that indicates the serious nonpolitical crime bar for asylum and withholding of removal applies to an alien.”

Background

The DOJ made this ruling in response to an asylum case for a citizen of El Salvador who entered the U.S. in 2012. The Department of Homeland Security (DHS) placed him in removal proceedings and asserted that he was removeable under section 212(a)(6)(A)(i) of the Immigration and Nationality Act, 8 U.S.C. § 1182(a)(6)(A)(i) (2018), as an alien who is present in the United States without admission or parole.

According to the DOJ, “He conceded removability and applied for asylum and withholding of removal under sections 208(b)(1)(A) and 241(b)(3)(A) of the Act, 8 U.S.C. §§ 1158(b)(1)(A) and 1231(b)(3)(A) (2018), and for protection under the Convention Against Torture.”

On July 10, 2018, the DHS submitted an Interpol Red Notice, explaining that the Magistrates Court of San Salvador issued a warrant on March 31, 2016 for the respondent’s arrest regarding participation in an “illicit organization.” This alleged act is considered a violation of article 345 of the Salvadoran Penal Code.

The Red Notice indicates that, according to an investigation conducted in 2010, the respondent is a “hit man,” for the MS-13 gang. The Immigration Judge found that there are serious reasons to believe the respondent had committed a serious nonpolitical crime prior to his entry into the United States.

The respondent argued that the Red Notice does not have any probative value because the notice is insufficient to establish probable cause for an arrest in the U.S. under the Fourth Amendment and, as a result, does not have any probative value. However, the DOJ explains that a Red Notice “is the closest instrument to an international arrest warrant in use today.”

The Immigration Judge found the Red Notice to be reliable as a request by El Salvador to provisionally arrest the respondent pending extradition based on a valid national arrest warrant for a crime that is not political in nature. Additionally, the DOJ found that the DHS has met its burden to show that the serious nonpolitical crime bar may apply to the respondent pursuant to 8 C.F.R. §§ 1208.16(d)(2) and 1240.8(d).

The onus was placed on the respondent to prove by a preponderance of the evidence that the serious nonpolitical crime bar does not apply. The respondent then submitted a letter from an attorney in El Salvador that explain the charges stemming from this incident were dismissed in October 2018. However, the Immigration Judge found this letter was not enough to show that the criminal charges had been dismissed. In other words, the judge found that the respondent did not meet his burden to prove by a preponderance of evidence that the serious nonpolitical crime statutory bar does not apply to him.

In addition, the judge noted that the respondent did not submit official court documents regarding these criminal charges. As a result, the judge found that the Red Notice was still active and trustworthy.

In sum, given that an alien is barred from obtaining asylum and withholding of removal when “there are serious reasons for believing that the alien committed a serious nonpolitical crime” before arriving in the U.S., this Red Notice was ruled sufficient to prevent asylum from being granted.

Significance

The decision illustrates the importance of supplying court documents beyond lawyer statements to immigration officials in order to prove that a Red Notice was improperly issued or is invalid.

According to Michelle Estlund, a criminal defense attorney, “The court…held that an applicant has the burden of showing that the Red Notice is not the type of evidence referenced above, once the government has asserted it as such. In order to meet that burden, an applicant would do well to submit a court order substantiating his claim whenever possible. Obviously, it can be quite difficult to obtain court documents in some jurisdictions; when that is the case, the court must be informed of that fact.”

Estlund makes a notable point. In fact, if the respondent had been able to prove by a preponderance of evidence that the serious nonpolitical crime statutory bar does not apply to him, the ruling could have been different.

4th Circuit Court of Appeals Permits Emoluments Case against Trump to Continue

May 15, 2020 by Bruce Zagaris Leave a Comment

On May 14, 2020, the United States Court of Appeals, sitting en banc, by a 9-6 decision, overturned the decision of a smaller panel of the court, to allow the case to continue.

The District of Columbia and the State of Maryland (“Respondents”) filed the action in the District of Maryland against the President in his official capacity. They allege that the President is violating the Foreign and Domestic Emoluments Clauses of the U.S. Constitution by accepting prohibited “emoluments” from foreign and domestic governments. The Foreign Emoluments Clause provides:

“No Title of Nobility shall be granted by the United States: And no Person

holding any Office of Profit or Trust under them, shall, without the Consent

of the Congress, accept of any present, Emolument, Office, or Title, of any

kind whatever, from any King, Prince, or foreign State.”

U.S. Const. art. I, § 9, cl. 8. The Domestic Emoluments Clause provides:

“The President shall, at stated Times, receive for his Services, a

Compensation, which shall neither be encreased nor diminished during the

Period for which he shall have been elected, and he shall not receive within

that Period any other Emolument from the United States, or any of them.”

Id. art. II, § 1, cl. 7.

The district court granted the President’s motion to dismiss, except insofar as the complaint pertained to the Trump International Hotel three blocks from the White House.

The President moved for certification to take an interlocutory appeal pursuant to 28 U.S.C. § 1292(b), seeking appellate review of four questions: (1) the correct interpretation of the term “emolument”; (2) whether Respondents had an equitable cause of action to bring the suit; (3) whether Respondents had Article III standing; and (4) whether any court has the ability to issue equitable relief against the President in these circumstances.

The district court declined to certify an interlocutory appeal.

In response, the President petitioned this court for a writ of mandamus. He asked the appellate court either to direct the district court to certify an interlocutory appeal or to order the district court to dismiss the complaint with prejudice. A panel of this court granted the President’s petition for a writ of mandamus and found Respondents lacked standing and so “reverse[d] the district court’s orders” and “remand[ed] with instructions to dismiss the complaint with prejudice.” In re Trump, 928 F.3d 360, 364 (4th. Cir. 2019).

The entire Fourth Circuit subsequently agreed to hear the case en banc, vacating the panel opinion. In re Trump, 780 F. App’x 36 (4th Cir. 2019).

In her decision for the majority , Judge Diana Gribbon Motz explained that a petitioner seeking mandamus relief bears the burden of showing that he has satisfied three requirements. Judge Motz explained the Supreme Court gas repeatedly rejected contention that a naked error of law amounts to an abuse of discretion entitling a petitioner to mandamus relief. In this regard, Judge Motz said notwithstanding the President’s vigorous assertion that the court erred in its legal analysis, he does not contend that the district court denied certification for nonlegal reasons or in bad faith. As a result, he is not entitled to a writ of mandamus compelling the district court to certify its orders for interlocutory review under § 1292(b).

The court rejected the President’s secondary argument. The President contended that, even if the court “conclude that the district court’s certification discretion under § 1292(b) was sufficiently broad that a writ of mandamus directing certification is unwarranted,” it “nevertheless should grant mandamus directing the district court to dismiss [Respondents’] complaint.” Judge Motz ruled to obtain this relief, the President must establish that it is not merely likely, but “clear and indisputable,” that the entire action cannot lie. She found he has not done so.

Judge Motz did not agree with the President’s argument that “emoluments” indisputably include only “profit arising from office or employ” (that is, payment for services rendered in performance of a formal job) and explained courts have not ruled on whether emoluments include income from the President’s business (e.g., his lease on the D.C. hotel).

Judge Motz rejected the President’s argument that the court must issue a writ of mandamus because this suit subjects the Executive Branch to “intrusive discovery.” Judge Motz explained that the discovery in the instant case — business records as to hotel stays and restaurant expenses, sought from private third parties and low-level government employees — does not implicate Executive power. The court does not believe the requests pertaining to spending at a private restaurant and hotel threaten any Executive Branch prerogative.

Judge Motz disagreed with the President and dissenters over the fact that the separation of powers give the President discretion with respect to having to abide by the emoluments clause. Rather than vesting the President with any duty to execute the law. they foreign emoluments clause impose restraints on the President. The dissents disagree, arguing that this duty is not only an official executive duty, but also one that encompasses the discretionary function of determining the meaning of “emolument.”

In response to the dissenters, Judge Motz explained the idea that the President is vested with unreviewable power to both execute and interpret the law is foreign to our system of government. The Framers dispersed the authority to enforce the law and the authority to interpret it. Otherwise, the President alone has the ultimate authority to interpret what the Constitution means. Allowing the President to be the final arbiter of both the interpretation and enforcement of the law — as the dissents would — would gravely offend separation of powers.

The dissenting opinions are more than three times as long as the majority’s and characterize their colleagues in the majority as “partisan warriors.”

A Department of Justice spokesman confirmed that the President would appeal the case to the Supreme Court. If the Supreme Court accepts the case, the arguments may occur in the fall, at the height of the Presidential campaign.

In a separate case at the U.S. Court of Appeals for the D.C. Circuit, the court dismissed due to standing an action by the Democratic members of Congress. They have decided not to seek a rehearing by the full complement of judges. They have until July to decide whether to ask the Supreme Court to review the appellate court’s decision.

International Crackdown Leads to the Confiscation of 19,000 Artifacts and 101 Arrests

May 11, 2020 by Alexandra Haris Leave a Comment

On May 6, 2020, INTERPOL announced that more than 19,000 artifacts and other artworks (including a Colombian gold mask, a carved Romanian lion, and thousands of ancient coins) had been recovered during two operations. These operations, Athena II and Pandora IV, included INTERPOL, Europol, and the World Customs Organization (WCO) and spanned 103 countries to focus on the dismantlement of international criminal networks of art and antiquities traffickers.

In total, the joint initiatives, which ran in the fall of 2019, lead to 101 arrested suspects and 300 opened investigations. According to INTERPOL’s press release, “The criminal networks handled archaeological goods and artwork looted from war-stricken countries, as well as works stolen from museums and archaeological sites.” The trafficked goods ranged from objects unearthed in excavations, works stolen from museums, and looted paintings. Details of the Athena II and Pandora IV are only being released now due to operational reasons.

Much of the stolen artwork had been looted from Colombia but thousands of other objects were seized by Argentinian, Latvian, and Afghan officials—illustrating just how global and collaborative the operation was.

“Organized crime has many faces,” said Catherine de Bolle, the executive director of Europol, “The trafficking of cultural goods is one of them: it is not a glamorous business run by flamboyant gentlemen forgers, but by international criminal networks. You cannot look at it separately from combating trafficking in drugs and weapons: we know that the same groups are engaged, because it generates big money.”

Indeed, it’s often the case that stolen art can change “owners” and generate a great deal of profit for its illegitimate owners before being recovered by law enforcement. For example, at the height of their power, the Nazis notoriously stole countless art objects from victims of their persecution and auctioned them off afterwards; it’s taken decades for these artworks to be returned to the descendants of their rightful owners.

Similarly, the Ghent Altarpiece, perhaps the most frequently stolen and coveted artwork in world history, has been the target of no less than 13 crimes over the course of its 600-year history. This proves that when artwork is coveted, there is sometimes little that can be done to prevent theft from occurring. However, as evidenced by the success of the recent joint operation between Interpol, Europol and the WCO, sometimes all that’s necessary to achieve justice is a coordinated effort.

Details of the operations

During the operations, law enforcement paid specific attention to the monitoring of online marketplaces and sales sites since the internet is a prominent factor of illicit trade of cultural goods.

In fact, during “cyber patrol week,” the Italian Carabinieri led police and customs experts, Europol, INTERPOL, and WCO in the mapping of active targets in order to develop intelligence packages. This effort resulted in the seizure of 8,670 cultural objects for online sale, representing 28 percent of the total number of artifacts recovered during the international crackdown.

Another highlight occurred when police officers in Spain recovered several rare pre-Colombian objects at Madrid’s Barajas airport. These artifacts included a Tumaco gold mask, gold figurines, and pieces of ancient jewelry. All of the artifacts had been illegally acquired by looting in Colombia.

Nine traffickers were arrested in Spain and Colombian police carried out searches in Bogotá, resulting in the seizure of 242 more pre-Colmbian objects, the largest confiscation in the country’s history.

Additional highlights of the operations were listed in INTERPOL’s press release:

Afghan Customs seized 971 cultural objects at Kabul airport just as the objects were about to depart for Istanbul, Turkey.
The investigation of a single case of online sale led to the seizure of 2,500 ancient coins by the Argentinian Federal Police Force (Policia Federal Argentina), the largest seizure for this category of items, while the second largest seizure was made by Latvian State Police (Latvijas Valsts Policija) for a total of 1,375 coins.
Six European Police forces reported the seizure of 108 metal detectors, demonstrating that looting in Europe is still an ongoing business.

INTERPOL Secretary General Jürgen Stock said, “The number of arrests and objects show the scale and global reach of the illicit trade in cultural artefacts, where every country with a rich heritage is a potential target.” The INTERPOL Chief added, “If you then take the significant amounts of money involved and the secrecy of the transactions, this also presents opportunities for money laundering and fraud as well as financing organized crime networks.”

These operations were the second time that INTERPOL, Europol, and WCO have come together to tackle the illicit trade in cultural heritage. The three organizations also jointly ran a 24-hour Operational Coordination Unit (OCU) that carried out checks against various international and national databases.

EU Publishes AML/CFT Action Plan

May 8, 2020 by Bruce Zagaris Leave a Comment

On May 7, 2020, the European Commission issued an Action Plan to provide concrete measures over the next 12 months. It will strengthen its enforcement, supervision and coordination of the EU’s rules to combat money laundering and terrorist financing.

The Commission issued what it characterized as a more transparent, refined methodology to identify high-risk third countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. The methodology is meant to enhance its engagement with third countries and bring more cooperation with the Financial Action Task Force (FATF).

The Commission also issued a new list of third countries with strategic deficiencies in their AML/CFT frameworks.

The Action Plan has six pillars. Each is designed to improve the EU’s overall effort to combat ML and TF, and to strengthen the EU’s global role in this area. The six pillars are intended to better harmonize and make the EU regime more effective.

Six Pillars of the Action Plan

The six pillars are as follows:

Effective application of EU rules: The Commission will continue to monitor closely the implementation of EU rules by EU Members to ensure that national rules are consistent with the highest possible standards. The plan encourages the European Banking Authority (EBA) to use its new powers to combat money laundering and terrorist financing. The timeline is ongoing.
A single EU rulebook: The integration of the EU’s internal market and financial system should be matched by a single set of AML/CFT rules. Diverging interpretations of the rules cause loopholes in its systems. Criminals can exploit the loopholes. The Commission will propose rules in Q1 of 2021.
EU-level supervision: In the first quarter of 2021, the Commission will propose to establish an EU-level supervisor. At present, each EU Member individually supervises EU AML/CFT rules. The Commission will propose rules in Q1 of 2021.
A coordination and support mechanism for EU Member Financial Intelligence Units (FIUs): FIUs in EU Members play a critical role in identifying transactions and activities that could be linked to criminal activities. The Commission will propose rules in Q1 of 2021.
Enforcing EU-level criminal law provisions and information exchange: Rapid and trustworthy information-exchange is crucial. EU rules facilitate cooperation and exchanges of information between law enforcement authorities. The future Financial Crime Center of Europol will promote combating money laundering and terrorist financing. The Commission will issue guidance on the role of public-private partnerships to clarify and enhance data sharing. The Commission will issue guidance in Q1 of 2021.
The EU’s global role: The EU is determined to increase its efforts to that it is a single global actor in the AML/CFT area. The EU will adjust its approach to third countries with deficiencies in their regime concerning AML/CFT. Pending the application of its new methodology issued with its Action Plan, the updated EU list ensures better alignment with the latest FATF list.

The Commission initiated a public consultation when it issued its Action Plan. Authorities, stakeholders and citizens have until July 29 to provide their feedback.

Updated List

The EU Anti-Money Laundering Directive requires the Commission to identify high-risk third countries with strategic deficiencies in their regime regarding AML/CFT. The Commission issued a new list, The list is supposed to be better aligned with the lists published by the FATF.

Countries which have been listed are: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.

Countries which have been delisted are: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia.

Background

The Commission’s Anti-Money Laundering Package of July 2019 underscored various weaknesses in the EU AML/CFT framework. The Package motivated the Action Plan.

Analysis

The EU announcement underscores a major problem with blacklists. On subjects such as AML/CFT there are multiple sources of listing. They include informal groups, such as FATF, and even individual countries. In addition, significant overlap exists in the subject matter of the OECD’s Global Forum on Tax Transparency and Exchange of Tax Information. The OECD, FATF, the EU, the World Bank Group, and governments make small jurisdictions spend a disproportionate amount of time meeting their engagement and evaluation schemes.

Given the scandals and/other problems that have occurred recently with Danske Bank, Swedbank, Banca Privata d’Andorra, FBME in in Cyprus, conducting supervision at an EU-level makes sense.

The next (May) issue of the IELR will have a more comprehensive discussion of the Action Plan.

ABA Issues Opinion Confirming Obligations of Lawyers to Avoid Counseling or Assisting in a Crime or Fraud in Non-litigation Matters

May 2, 2020 by Bruce Zagaris 1 Comment

On April 29, 2020, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 491 on “Obligations Under Rule 1.2(d) to Avoid Counseling or Assisting in a Crime or Fraud in Non-Litigation Settings.”

Model 1.2(d) prohibits a lawyer from advising or assisting a client in conduct the lawyer “knows” is criminal or fraudulent. A lawyer or bar trying to discipline a lawyer will infer from the circumstances such knowledge, including a lawyer’s willful blindness to or conscious avoidance of facts. Hence, if facts known to the lawyer show a high probability that a client seeks to use the lawyer’s services for criminal or fraudulent activity, the lawyer has an obligation to make addition inquiring in order to avoid advising or assisting such activity.

Even if information obtained in the course of a preliminary interview or during a representation is not adequate to establish “knowledge” under Rule 1.2(d), other rules may require the lawyer to make more inquiries to help the client avoid crime or fraud, to avoid professional misconduct, and to advance the client’s legitimate interests. These include the duties of competence, diligence, communication, and honesty under Rules 1.1, 1.3, 1.4, 1.13, 1.16, and 8.4.

If the client or prospective client refuses to provide information necessary to determine the legality of the proposed transaction, the lawyer must ordinarily decline the representation or withdraw under Rule 1.16.

The issuance of the opinion comes in the content of media reports adverse to the reputation of lawyers, disciplinary proceedings for assisting clients in criminal activities, such as money laundering, criminal proceedings, and increased reports about the involvement of lawyers in efforts by foreign corrupt officials to launder money into the United States.

The opinion highlights the need of lawyers to meet their obligation to inquire when they have a client who may be seeking to use the lawyer’s services in a transaction to commit a crime or fraud. The opinion concedes that determining whether a client seeks to use the lawyer’s services for prohibited activities can be sensitive. Lawyers generally must believe their clients and investigating the client’s intention can be both expensive and time-consuming. The opinion discusses a lawyer’s obligation to inquire when faced with circumstances giving rise to suspicions about a prospective or existing clients activities is required by authority interpreting Rule 1.2(d) and in the rules on competence, diligence, communication, honesty, and withdrawal.

The opinion explains failure of a lawyer to make a reasonable inquiry is willful blindness punishable under the actual knowledge standard of the Rule. Whether the lawyer must inquire further depends on the circumstances. Rule 1.2(d) states that a lawyer “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent.” Even where Rule 1.2(d) does not require further inquiry, other Rules may.

These Rues include the duty of competence under Rule 1.1., the duty of diligence under Rule 1.3, the duty of communication under Rule 1.4, the duty to protection the best interests of an organizational client under Rule 1.13, the duties of honesty and integrity under Rules 8.4(b) and (c), and the duty to withdraw under Rule 1.16(a). Making further inquiry ensures that the lawyer will be able to give the informed advice and assistance to which the client is entitled, that the representation will not result in professional misconduct, and that the representation will not involve counseling or assisting a crime or fraud.

National Strategy for Combating Terrorist and Other Financing Highlights Gatekeeper Problems

In February 2020, the U.S. Government issued its National Strategy for Combating Terrorist and Other Illicit Financing (“2020 National Strategy”). It identifies and analyzes the threats and vulnerabilities to the U.S. anti-money laundering and counter-financial terrorism (AML/CFT) system. The 2020 Strategy discusses as a major illicit financing risk attorneys, who need not understand the nature or source of income of their clients or potential clients. Attorneys advise on structuring transactions to avoid tax or other implications. In this regard in 2016, the Department of Justice alleged in a civil forfeiture case that lawyer trust accounts held by two large law firms helped launder almost $600 million stolen from the Malaysian government into the U.S. financial system.

OECD Mandatory Disclosure Rules for Addressing CRS Arrangements and Offshore Structures

An area of potential risk to lawyers is inbound investment by investors from countries that participate in OECD automatic exchange of information, known as the Common Reporting Standard (CRS). The OECD has developed mandatory disclosure rules for addressing CRS Avoidance arrangements and offshore structures. Each participating member should have penal or dissuasive sanctions to sanction violations. The 2017 UK Criminal Finances Act illustrates a law implementing the mandatory disclosure rules and imposes criminal sanctions extraterritorially for intermediaries who help taxpayers plan or implement structures violating the Act.

Formal Opinion 491, in addition to heralding the likelihood of new disciplinary proceedings for lawyers failing to make sufficient inquiries for clients who engage in criminal activities, is likely to open the door to prosecutions against U.S. lawyers both by prosecutors in the U.S. and abroad.