IELR Blog

Official Blog of the International Enforcement Law Reporter

Archives for June 2021

Bolivia signs MoU to strengthen compliance/transparency in the fishing industry

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            On June 29, 2021, the Bolivian government signed a Memo of Understanding (MoU) with the Fisheries Transparency Initiative (FiTI). The collaborative effort is aimed at increasing transparency, compliance, and knowledge in the fishing industry.

 

The MoU

 

The joint agreement supports Bolivia’s fishing industry by helping the country develop knowledge on international transparency requirements, identifying responsibilities, and offering recommendations to increase transparency in managing Bolivia’s vessel registry.

 

Bolivia’s signing the MoU demonstrates its commitment to ocean sustainability and environmental sustainability as a whole. The FiTI press release noted that the oceans are at an increased risk as they face climate change, pollution, and overfishing. “These challenges are not only a major concern for coastal countries, but for humanity as a whole,” the press release continued.

 

“The collaboration with the Bolivian government is clearly unique, due to the country’s status as a landlocked state. Yet, in its capacity as a flag State, which includes a registry of international fishing vessels, Bolivia assumes important rights as well as obligations towards the sustainable management of fisheries,” the FiTI state in their press release.

 

In the MoU signing ceremony, the Minister of Justice and Institutional Transparency, Dr. Ivan Lima Magne, said that he is grateful to start the joint effort with FiTI and noted that “Bolivia is committed to the use of its flag under principles of transparency to support sustainable fisheries,” FiTI director also said that Bolivia is the first landlocked and Latin American country to form a partnership with FiTI. Bolivia is also the third country to sign the agreement. The other two countries are Cabo Verde and Senegal.

 

FiTI

 

FiTI was founded in 2017 to create greater sustainability in the world’s fisheries by increasing governmental transparency through multi-stakeholder collaboration. The FiTI also lays out a ‘FiTI Standards,’ a framework of expectations for countries to follow regarding transparency for fishery management. The organization was developed with several entities, including civil society and intergovernmental organizations, as well as government representatives from fishing nations, industrial and artisanal fishing entities.

 

The July issue of the IELR will have a more comprehensive discussion of this topic.

Former Liberian Warlord Convicted in Landmark Swiss Judgment

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By Teddy David[1]

On June 18, 2021, the Swiss Federal Criminal Court convicted Liberian warlord Alieu Kosiah, 46, of crimes against humanity committed during the country’s first civil war, fought from 1989 to 1996. The decision has raised issues of a lack of accountability in Liberia itself and the use of universal jurisdiction to prosecute war crimes outside of the jurisdiction in which they were committed.

The Crimes of Kosiah

Swiss authorities arrested Kosiah, then a Swiss resident, in 2014 after seven Liberian victims filed criminal complaints against him, later becoming plaintiffs in the prosecution. Swiss prosecutors then conducted an arduous, five-year investigation that culminated in a March 2019 indictment. Originally slated to begin in April 2020 but delayed due to the COVID-19 pandemic, the trial proceeded in two stages, the first in December 2020 and the second from February to March 2021.

The 25 charges concerned crimes committed between 1993 and 1995 in the northwestern Lofa County of Liberia, where Kosiah was then a leader of the United Liberation Movement of Liberia for Democracy (ULIMO). Witnesses graphically testified to summary executions, brutal torture, the displacement of civilians, and forced marches. In the most gruesome charge, witnesses told of an accomplice of Kosiah, called Ugly Boy, who, along with Kosiah and others, cut out and ate the heart of a schoolteacher.

The court found Kosiah guilty on 21 out of 25 charges, including the summary execution of more than a dozen civilians and unarmed soldiers, numerous other murders, rape, pillage, and cannibalism. He was sentenced to 20 years in prison, the most allowed under Swiss law for cases prosecuted under the doctrine of universal jurisdiction, and his long pretrial detention of over six years will be deducted from his sentence. Kosiah will also be expelled from Switzerland for 15 years after his eventual release.

Civil Law and Universal Jurisdiction in Switzerland

The arrest and trial was largely made possible by the direct initiative of several of Kosiah’s Liberian victims, aided by nongovernmental human rights groups. Civil law systems, like that of Switzerland, allow victims to be private plaintiffs in criminal prosecutions, having counsel and attempting to overrule prosecutors when they do not act to effectively protect the victims. Systems of common law – employed in the United States, United Kingdom, and British Commonwealth – do not allow for the same flexibility and thus are less conducive to cases like the one against Kosiah.

The main doctrine that allowed this trial to proceed, though, is that of universal jurisdiction. This principle of international law allows any nation’s courts to prosecute a range of crimes against humanity. These offenses are held to be so egregious that the accused are not just criminals within the jurisdiction in which the crimes were committed, but rather are hostis humani generis – enemies of all humankind. Most countries, including the United States, acknowledge some forms of universal jurisdiction, but the principle is applied especially expansively in many European legal systems.

However, in recent years, Switzerland has not been known as a leader in war crimes prosecutions, despite its notoriety as the birthplace of the Geneva Conventions. Since the nation’s 2011 adoption of a universal jurisdiction statute, human rights organizations have criticized Swiss authorities for providing minimal resources to the extremely resource-intensive investigations of war crimes. In such cases, witnesses almost all live overseas, and the alleged crimes were often committed years, even decades before – as in the case of Kosiah – making fact-finding efforts much more demanding and costly than a typical, domestic investigation.

According to Philip Grant, director of the Swiss-based human rights group TRIAL International, Switzerland lags far behind other European countries known for employing universal jurisdiction. “Without the nongovernment, civil society organizations, these cases would be nowhere,” Grant told the New York Times.

During the trial stage, human rights groups also criticized the Swiss court for the strictly limited transparency of the trial, especially since it was one of the only prosecutions of Liberian war criminals in the twenty-five years since the widespread atrocities were committed. The proceedings were not streamed via video, and U.S.-based Human Rights Watch reported that it was denied access to the second phase of the trial.

Future Accountability

Despite criticism of Swiss authorities, the conviction has still been hailed by human rights leaders as a landmark in accountability for the decades-old atrocities of Liberia’s two civil wars. Alain Werner, director of the Geneva-based legal group Civitas Maxima, described the verdict to the New York Times as “a beautiful victory for [the witnesses’] courage, their resilience, and their quest for justice.”

Related war crimes cases are also underway in Finland – against rebel leader Gibril Massaquoi – and in France – against Kunti Kumara, another former leader of ULIMO. This piecemeal, international approach, however, has only intensified the pressure on Liberia itself to hold its own citizens accountable for their offenses. After decades of inaction in Liberia, President George Weah has made only vague statements of his willingness to systematically pursue war crimes prosecutions within his country. Moving forward, if Liberia itself remains inactive, pressure may mount to initiate more thorough prosecutions in the International Criminal Court or to establish ad hoc war crimes tribunals to bring justice for decades-old crimes.

[1]    Teddy is currently a rising senior at Vassar College majoring in history and minoring in French and Francophone Studies.

U.S. and EU Progress on Several International Enforcement issues at Justice & Home Affairs Ministerial Meeting in Lisbon

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On June 22, 2021, the Portuguese Presidency of the Council of the European Union hosted the EU-U.S. Ministerial Meeting on Justice and Home Affairs in Lisbon and made progress on count-terrorism, violent extremism, Passenger Name Record (PNR) data exchange.  They also discussed developing bilateral and multilateral instruments to combat cybercrime, using artificial intelligence,  and developing well-managed and humane migration policies.

Overview

They underscored the need to cooperate against terrorism, including prevention, permanent vigilance, adaptation, and resilience from all relevant actors.

The U.S. and EU underscored their strong concern with the rise of violent extremism.  They cited crimes inspired by hate speech, racism and xenophobia both in Europe and the U.S.  Violent extremism constitutes a direct threat to democratic societies.  It requires renewed attention by law enforcement, judicial authorities, the private sector and civil society.  The U.S. and EU pledged to expand their information exchanges on violent extremist groups, especially those with transnational linkages.

The U.S. and EU underscored the importance of the Passenger Name Record (PNR) data exchange to prevent, detect, investigate and prosecute terrorism, combat serious crime, including child exploitation, and protect the safety of citizens.

Digital Aspects and Cybercrimes

The U.S. and EU discussed the need to cooperate to shape a digital future based on their shared democratic values.  They acknowledged the potential benefits and risks of suing Artificial Intelligence technologies for law enforcement and the judiciary.  They discussed the need to develop and use such technologies in a trustworthy way in conformity with human rights obligations.

They discussed current and upcoming EU efforts on combating illegal content online, including  the need to improve the cooperation between the authorities and online platforms to detect ongoing criminal activity.  The U.S. and  EU pledged to continue cooperating to most effectively exercise their lawful authorities to combat  serious crime both online and offline.

The two sides will focus on combating ransomware, including through law enforcement action, raising public awareness on how to protect networks, the risks of paying criminals responsible, and encouraging those states that have not cooperated to arrest and extradite or effectively prosecute criminals on their territory.

Concerning bilateral and multilateral instruments to combat cybercrime, the U.S. and EU reinforced their commitment to negotiate as soon as possible an Eu-U.S. agreement facilitating access to e-evidence to cooperate in criminal matters.  They welcomed the recent approval by the Committee of State Parties to the Budapest Convention of the draft text of the Second Additional Protocol of the Budapest Convention, which is the main instrument for international cooperation on cybercrime.   They observed the framework of negotiations on a possible future United Nations international legal instrument on cybercrime and committed to continue to closely coordinate their respective positions.

Migration and Travel

The two sides underscored the importance of well-managed and humane migration and discussed their respective efforts to develop comprehensive and enduring migration and asylum policies.  Humanitarian protection should be available to qualifying persons.  Unmeritorious claims must be detected quickly, including through information sharing and modern identity management techniques.  Unmeritorious claims must be prevented from overwhelming migration systems or public confidence in them.

The agenda requires cooperation with third countries of origin, transit and destination.  These jurisdiction also have a responsibility to discourage people from enlisting smugglers and traffickers and endangering  the lives of migrants who take dangerous, irregular journeys.  Both sides reaffirmed their interest in expanding the transatlantic dialogue on migration and mobility, focusing on sharing lessons learned, exploring complementary pathways to migration, addressing the root causes of migration, improving the return and readmission of irregular migrants and enhancing cooperation in and combatting migrant smuggling.

The U.S. and EU continued to endorse safe and secure mobility and the exchange of information on their respective measures towards the gradual resumption of non-essential international travel.  Both sides pledged to restart secure travel between the U.S. and EU as soon as possible, based on the principles of mutual cooperation, efficient operation of the international travel system and scientific evidence.

Analysis

The initial meeting of the Justice and Home Affairs Ministers of the two sides during the Biden Administration went quite well.  Clearly, the priority of the Biden Administration for bilateral and multilateral cooperation contrasted with the America 1st unilateral approach of the Trump Administration.  The visit of President to the NATO meeting and the EU itself as well as his removal of tariffs and support for the minimum global taxation and other initiatives of the OECD and EU were well received.

The threats of terrorism, organized crime, extremist and hate groups, cybercrime, and illegal migration are common to both sides.

The current issue of the IELR will have a more in depth discussion of the implications of the meeting.

 

 

INTERPOL Claims Immunity, Escapes Judicial Review of Lack of Due Process

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by Yuriy L. Nemets[1]

 

For many years, repressive political regimes have used INTERPOL as a powerful tool in politically motivated and otherwise corrupt prosecutions. INTERPOL has established a redress mechanism for victims of such abuse. The mechanism, however, lacks due process and is full of loopholes that allow the abuse to continue. Despite numerous calls over the years from advocacy organizations, human rights activists and politicians to carry out all the necessary reforms, INTERPOL has given no indication that it is willing to do so. After all, as a recent decision by a U.S. federal court shows, what incentive does INTERPOL have to fight non-democratic countries if democratic countries are willing to protect it from their own courts?

The El Omari Decision

On May 13 of this year, the District Court for the Eastern District of New York dismissed a lawsuit filed by Oussama El Omari against INTERPOL due to the immunity that the latter enjoys under the International Organizations Immunities Act (IOIA). The plaintiff, a U.S. citizen, argued that INTERPOL’s issuance and refusal to delete from its databases a Red Notice, a request to locate and provisionally arrest him for the purposes of his extradition, constituted negligent infliction of emotional distress and violated his due process rights under the New York State Constitution. INTERPOL issued the Red Notice at the request of the United Arab Emirates where the plaintiff had been convicted for embezzlement and abuse of power. Prior to filing the lawsuit, El Omari submitted a complaint to INTERPOL requesting that the Red Notice be deleted and a hearing at which he intended to appear with his counsel and an expert witness be scheduled. INTERPOL denied both of El Omari’s requests as well as his subsequent request to reconsider.

IOIA guarantees international organizations “immunity from suit and every form of judicial process as is enjoyed by foreign governments.” It defines an “international organization” as a “public international organization in which the United States participates pursuant to any treaty or under the authority of any Act of Congress authorizing such participation or making an appropriation for such participation, and which shall have been designated by the President through appropriate Executive order as being entitled to enjoy the privileges, exemptions, and immunities provided in this subchapter.” The District Court concluded that INTERPOL falls under this definition.

In 1983, President Reagan, by executive order, granted INTERPOL the privileges, exemptions and immunities recognized under IOIA with the exception of inviolability of archives and immunity from search and confiscation of property and assets, customs duties, certain federal taxes and social security payments. In 1995, President Clinton partially reversed that order and granted INTERPOL immunity from customs duties and federal importation taxes. In 2009, President Obama removed the remaining limitations imposed by President Reagan.

The District Court in El Omari v. INTERPOL explained that it “lacks subject matter jurisdiction and must dismiss a claim where defendant organization is immune from suit.” IOIA guarantees international organizations immunity from lawsuits and courts unless expressly waived “for the purpose of any proceedings or by the terms of any contract.” No such waiver existed in this case, the District Court concluded.

Implications of the Decision and Inability of Applicants to Obtain Hearing at INTERPOL

It is no surprise that INTERPOL denied El Omari’s complaint without holding a hearing.  Under INTERPOL’s rules, it adjudicates complaints based on the parties’ written submissions; a hearing is held only if INTERPOL considers it necessary. To this day, more than a decade since the rule was adopted, there seems to be no known case in which INTERPOL held a hearing. Individuals who challenge government abuse of INTERPOL’s channels through its redress mechanism also lack both the right to examine evidence produced against them and the right to appeal INTERPOL’s decisions denying them relief. Moreover, by INTERPOL’s own admission, there have been cases in which governments already found to be in violation of its Red Notice rules were able to use its resources against the same individuals, either by disseminating new requests to seek their arrest or by issuing false alerts that these individuals’ travel documents were lost or stolen. Thus, not only does INTERPOL fail to guarantee individuals due process when it considers their complaints, it also lacks comprehensive enforcement of its own decisions against governments that abuse its channels.

INTERPOL does not seem to be willing to punish governments that violate its rules either. The best known case is Turkey. In 2017, the government of President Erdoğan reportedly tried to put 60,000 individuals it accused of affiliation with the Fethullah Gülen opposition movement on the INTERPOL wanted list, an unprecedented and brazen attempt to abuse the organization’s channels for political purposes. INTERPOL denied reports that it sanctioned Turkey for its conduct. Moreover, this November, Turkey will host INTERPOL’s 89th General Assembly, the “supreme governing body” for the organization.  This General Assembly will elect new members of the Commission for the Control of INTERPOL’s Files, which has exclusive jurisdiction to adjudicate complaints against government abuse of the organization’s channels. Members of the Commission are elected for a term of five years and can be reelected for an additional three years.

In the meantime, the number of Red Notices and other government requests disseminated via INTERPOL continues to grow while victims of INTERPOL abuse are trapped in a vicious circle – autocracies grow ever more confident that they can abuse the organization with impunity, the latter refuses to reform itself, and democratic governments not only fail to exert any real pressure on INTERPOL but instead shield it from liability, thereby denying victims any recourse.

[1]    Managing Member at NEMETS, Washington, D.C.  Founder of Red Notice Abuse Report – RedNoticeAbuse.com @rednoticeabuse.

The Gupta Brothers’ Corruption Scandal Invokes the Ratification of a New Mutual Legal Assistance and Extradition Treaty Between South Africa and the United Arab Emirates

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by Jamie Jang[1]

In 2018, the economic and political stability of South Africa was upended when the Gupta brothers – Ajay, Atul, and Rajesh Gupta – and government officials were caught conspiring together.[2] The Gupta brothers, Indian-born South African businessmen, owned a tectonic empire across South Africa and wielded a great degree of political power.[3] After a government official testified against the Guptas, it was revealed that they had been involved in a longstanding scheme with members of the South African government, including President Jacob Zuma, to siphon millions of dollars from state-owned firms and the national treasury.[4] President Zuma was forced to resign and the Gupta brothers fled to Dubai, leaving their enterprises in South Africa bankrupt.[5] This scandal “offers a case study in a new, systematic form of graft known as ‘state capture.’ [. . .] It demonstrates how an entire country can fall to foreign influences without a single shot being fired”.[6]

The Gupta brothers have yet to face the charges brought against them for fraud and money laundering as they remain hidden in the United Arab Emirates.[7] For over three years, South Africa has requested full cooperation from the United Arab Emirates to extradite the Gupta brothers so they may be prosecuted in the country where they committed their crimes.[8]

UAE and S. Africa Ratify a New MLAT and Extradition Treaty

In response to the scandal, a new mutual legal assistance and extradition agreement between South Africa and the United Arab Emirates was ratified by both countries.[9] A statement issued by United Arab Emirates ambassador to South Africa, Mahash Alhameli reads, “These agreements have been and remain key to the UAE in promoting judicial and legal cooperation with South Africa and strengthening bilateral relations between law enforcement institutions and partners on both sides”.[10] While the treaty agreement was intended to mend the relationship between both countries, it appears that South Africa remains unsatisfied with the United Arab Emirates’ efforts.[11] National Director of Public Prosecutions (NDPP) Shamila Batohi states, “As I expressed to the ambassador yesterday, we will only accept that there is full cooperation when we receive the necessary information that we have been requesting now for over three years without success”.[12]

S. Africa Expresses Frustration over Inability to Obtain Custody of the Guptas and Request Interpol Red Notice

The NDPP is not the only one expressing frustration over the inability to obtain cooperation from the United Arab Emirates.[13] Civil society organizations, namely the Ahmed Kathrada Foundation and the Defend Our Democracy movement protested outside the United Arab Emirates embassy.[14] A statement from the Ahmed Kathrada Foundation reads, “The Guptas must be brought from the UAE, where they currently reside, to SA to account for the litany of allegations of state capture and corruption that they face”.[15]

The National Prosecuting Authority’s (NPA) Investigating Directorate (ID) head, Hermione Cronje has asked Interpol to circulate an international red notice to have the Gupta brothers deported back to South Africa.[16] The ID intends to try the Guptas for the R25 million spent on a feasibility study to determine the viability of the failed Estina dairy farm in South Africa.[17] The ID asserts that “the department paid Nulane the R25 million for the feasibility study. However, after receiving the money, Nulane appointed and paid Deloitte Consulting R1.5 million to conduct the study. The rest of the money was allegedly laundered through a series of accounts, ending in Gateway Limited, a Gupta-owned company in the UAE”.[18] After three years of unsuccessful efforts to extradite the Gupta brothers, help from Interpol for an international arrest warrant appears to be another mechanism for South Africa to try to gain custody of the Guptas. .

The case demonstrates how difficult it can be sometimes for prosecutors to obtain effective international enforcement cooperation.

[1]              B.A., Rhodes College.

[2]                 “State Capture”: How the Gupta Brothers Hijacked South Africa Using Bribes Instead of Bullets. Vanity Fair. March, 2019.

[3]                 “State Capture”: How the Gupta Brothers Hijacked South Africa Using Bribes Instead of Bullets. Vanity Fair. March, 2019.

[4]                 “State Capture”: How the Gupta Brothers Hijacked South Africa Using Bribes Instead of Bullets. Vanity Fair. March, 2019.

[5]                 “State Capture”: How the Gupta Brothers Hijacked South Africa Using Bribes Instead of Bullets. Vanity Fair. March, 2019.

[6]                 “State Capture”: How the Gupta Brothers Hijacked South Africa Using Bribes Instead of Bullets. Vanity Fair. March, 2019.

[7]                 Masondo, Sipho. “NPA asks Interpol to help arrest, deport Guptas to SA”. June 3, 2021.

[8]                 Chabalala, Jeanette. “Gupta extradition: SA has been requesting information from UAE for over three years without success”. June 11,          2021.

[9]                 Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

[10]                Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

[11]                Chabalala, Jeanette. “Gupta extradition: SA has been requesting information from UAE for over three years without success”. June 11, 2021.

[12]                Chabalala, Jeanette. “Gupta extradition: SA has been requesting information from UAE for over three years without success”. June 11, 2021.

[13]                Chabalala, Jeanette. “Gupta extradition: SA has been requesting information from UAE for over three years without success”. June 11, 2021.

[14]                Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

[15]                Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

[16]                Chabalala, Jeanette. “Gupta extradition: SA has been requesting information from UAE for over three years without success”. June 11, 2021.

[17]                Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

[18]                Chabalala, Jeanette. “Gupta extradition: UAE confirms signing agreement on mutual legal assistance”. June 9, 2021.

G7 Vows to Act on Corruption, Ransomware, Forced Labor, and Illicit Financing

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On June 13, 2021, at the conclusion of its meeting the G7 announced in its Communiqué joint action against several criminal and international enforcement matters.

Corruption, Illicit Financial Activities, and Misuse of Shell Companies

The Communique recognizes “the need action on corruption, including by sharing information on illicit financial activities, tacking the misuse of shell companies, and curtailing the ability of illicit actors to hide wealth.”

As part of its G7 Fact Sheet the Biden Administration underscored how on June 3, 2021 President Biden declared efforts to combat corruption a “core U.S. National interest,” and issued a National Security Student Memorandum on the Fight Against Corruption to elevate this effort.

The G7 Fact Sheet states the U.S. will tackle “the misuse of shell companies, limiting the ability of bad actors to launder dirty money in real estate purchases, improving corruption-related information sharing, and reforming foreign assistance to focus on anticorruption as a cross-cutting priority.” [1] The Fact Sheet says the U.S. welcomes the G7 commitment to take collection action in combatting corruption.

Ransomware

The Communique states the G7 reiterates its interest in stable and predictable relations with Russia.  In that regard, it states that it will “identify, disrupt, and hold to account those within its borders who conduct ransomware attacks, abuse virtual currency to launder ransoms, and other cybercrimes.”[2]   The Biden Administration’s G7 Fact Sheet states the transnational criminal enterprises committing ransomware leverage infrastructure, virtual currency, and money laundering networks.  They target victims worldwide, often operating “from geographic locations that offer a permissive environment for carrying out such malicious cyber activities.”

The G7 Fact Sheet states the international community –both governments and private sector actors – must cooperate to ensure that “malicious cyber activity is investigated and prosecuted, that we bolster our collective cyber defenses, and that States address the criminal activity taking place within their borders.”

Removing Forced Labor from Global Supply Chains

The Communique expresses concern about the use of all forms of forced labor in global supply chains, including state-sponsored forced labor of vulnerable groups and minorities and supply chains of the agricultural, solar, and garment sectors – the main supply chains of concern in Xinjiang, China.

G7 leaders agreed to uphold human rights and international labor standards, and protecting individuals from forced labor.  Hence, they commit to ensuring all global supply chains are free from the use of forced labor.  They propose to identify areas for increased cooperation and collective efforts to eradicate the use of all forms of forced labor in global supply chains, in accordance with international and national law.[3]

International Human Rights Concerns

The Communique mentions concerns about international human rights violations in Russia, Belarus, Myanmar, and Ethiopia’s Tigray region.

Analysis

The commitments in the G7 Communique to stronger international enforcement initiative are importance for setting and reinforcing international enforcement cooperation.  The nature of the G7 meetings and communiques limit the commitments to broad policy statements.  The follow up comes from action by international organizations, such as the EU, the OECD, the World Bank Group, and national governments. The limits of the Communiques are inability to implement the broad policy decisions, including when governments and policies change from time to time.

 

[1]   G7 Communique, paragr. 48.

[2]   G7 Communique, paragr. 51.

[3]    G7 Communique, paragr. 29.

Cryptocurrency Creates Potential Opportunity for both Ransomware Attacks and Agency Seizures

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By Austin Max Scherer[1]

On June 7, the Justice Department seized much of the ransom that a major U.S. pipeline operator had paid last month to a Russian hacking collective.[2]  This resulted from investigators tracing more than 75 Bitcoins worth as the money moved through a “maze” of at least 23 different electronic accounts belonging to DarkSide, the hacking group.[3]  DarkSide operated by providing ransomware to affiliates.  Iin exchange, DarkSide reaped a cut of the affiliates’ profits.[4]  DarkSide began as an affiliate for another Russian hacking group called REvil, the group that recently used ransomware to try to extort money from JBS, one of the world’s largest meat processors.[5]  Law enforcers viewed this seizure as a warning to cybercriminals that the United States would go after the hackers’ profits, which typically derive from cryptocurrencies.[6]  In addition, law enforcement now hope this recent action will encourage victims of ransomware attacks to notify the authorities to help recover ransoms.[7]  The Federal Bureau of Investigation (FBI) actively discourages ransom payments; however, ransom payments are still legal and they are even tax deductible![8]

Seizure of Ransom Payments

Law enforcement  has found a breakthrough due to the fact that, “bitcoin transactions are available on a publicly distributed ledger, in many cases law enforcement can trace bitcoin payments and track stolen funds.”[9]  Furthermore, the FBI was able to obtain the private key for the hackers’ accounts, the key essentially serves as a password which enabled the FBI to move bitcoin out of the wallet.[10]  The seizure itself yielded $2.3 million worth of bitcoin.[11]  The Special Prosecutions Section and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Northern District of California  is handling the seizure, with significant assistance from the Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section and Computer Crime and Intellectual Property Section.[12]  The task force stated they would prioritize the disruption, investigation, and prosecution of ransomware and digital extortion.[13]  Conversely, the ransomware attacks are generally unsophisticated.[14]  “Hackers often use phishing and send employees emails containing suspicious links or attachments.”[15]

This coincided with President Biden’s first foreign trip, as he is expected to discuss the issue with Russian President Vladimir Putin.[16]  Senior Biden administration officials deemed ransomware, as a national threat.  Secretary of State, Antony Blinken stated the following, “states cannot be in the business of harboring those who are engaged in these kinds of attacks.”[17]  FBI Director Christopher Wray further emphasized this complaint by stating, “if the Russian government wants to show that it’s serious about the issue, there’s a lot of room for them to demonstrate some real progress that we’re not seeing.”[18] Antony Blinken and Christopher Wray’s concerns are supported by the fact that, according to Chainalysis, a firm that tracks cryptocurrency payments, victims paid at least $412 million in cyber ransom attacks last year.[19]

Biden Administration Responses

In response to the series of ransomware incidents, the Biden administration, “announced that it would require pipeline companies to report significant cyberattacks that the government would create 24 hour emergency centers to handle serious hackings.”[20]  However, even these efforts may not be enough as the FBI emphasized that all government agencies, private sectors, and, “even the average American.”[21]  It would be quite the optimistic approach for the government to believe that all players in the cryptocurrency world will partake in dismantling these ransomware attacks, so a wait and see approach is best suited for now.

Several government officials have called for action against the ransomware attackers and the foreign states that harbor these attackers.  Senator Mark Warner stated the following, “We must make clear to Russia-and any other adversaries-that they will face consequences for this and any other malicious cyberactivity.”[22]  In addition, Microsoft reported, “the goal of the hackers was not to go after the aid agency itself, instead, its motivation appeared to be to use emails purporting to be from the U.S. government to get inside groups that have revealed Russian disinformation campaigns, anti-corruption groups and those who have protested the poisoning, conviction and jailing of Russia’s best-known opposition leader, Alexie A. Navalny.”[23]  Furthermore,  government officials have taken the position that the U.S. response to SolarWinds, a software supply, should have been harsher.   The question then becomes, how does the U.S. implement a harsher response, and with sanctions applied to Russia already substantial, how much of a role can sanction play?  One answer is that to be effective, sanctions must be multilateral and well-coordinated.  The last four years the U.S. has not coordinated its sanctions. President Biden’s trip to Europe should provide some insight to these inquiries.  Another response to ransomware attacks and cybercrimes has been prosecution of the perpetrators.

The current issue of the IELR will have a more comprehensive discussion of the ransomware attacks, the seizure, and implications.

 

 

[1] Rising third year law student, Washington College of Law, American University; M.S., Finance, American Univ; B.A., George Washington Univ.

[2] Katie Benner and Nicole Perlroth, Seizing Money, U.S. Retaliates For Cybercrime, N.Y. Times, Jun. 8, 2021, at A1.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Sadie Gurman, David Uberti, and Dustin Volz, Pipeline Ransom Money Seized By U.S., Wall St. J., Jun. 6, 2021, at A1.

[10] Ellen Nakashima, Authorities recover about $2 million paid in ransom to pipeline hackers, Wash. Post, Jun. 8, 2021, at A18.

[11] Id.

[12] For Immediate Release: Department of Justice Seizes $2.3 Million in Cryptocurrency Paid to the Ransomware Extortionists Darkside, Dept. of Justice, Jun. 7, 2021, https://www.justice.gov/opa/pr/department-justice-seizes-23-million-cryptocurrency-paid-ransomware-extortionists-darkside (last visited Jun. 10, 2021).

[13] Id.

[14] Rachel Lerman, Meat supplier JBS paid $11 million in ransom after hackers targeted plants, Wash. Post, Jun. 10, 2021, at A22.

[15] Id.

[16] Nakashima, supra note 10.

[17] Benner and Perlroth, supra note 2.

[18] Id.

[19] Nakashima, supra note 10.

[20] Benner and Perlroth, supra note 2.

[21] Id.

[22] Nicole Perlroth and David E. Sanger, Calls for Action Against Russia for Cyberattack, N.Y. Times, May. 29, 2021, at A1.

[23] Id.

ANOM: A global covert investigation conducted through an encrypted app trap

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Sara Kaufman[1]

On June 8, 2021, the Federal Bureau of Investigation (FBI) and Australia’s Federal Police (AFP) publicly announced the arrests of more than 800 individuals utilizing a FBI-controlled encrypted platform to facilitate their criminal activities.[2]  ANOM, a highly popular encryption platform amongst criminals worldwide, was secretly used as a surveillance tool in an investigation known as “Operation Trojan Shield” in order to discreetly observe and curtail the criminal activities in Australia and beyond.[3]

As technology has grown over the years, criminals have utilized hardened encrypted devices as a tool to obstruct any federal investigations against them.  Encrypted devices are tools that both send and retrieve encrypted electronic communications, allowing criminals to openly discuss their activities with confidence that their contents will remain secure.[4]  For many years, contents in encrypted devices did in fact remain secure; communication was often limited to a self-selected group of individuals using the same encryption platform.  Law enforcement agents therefore would be unable to collect evidence regarding the conversations that criminals were having on their encrypted devices.

Companies that provided these encrypted devices were generally aware that their target audience is utilizing their products for criminal activity; in March 2018, the CEO of Phantom Secure, Vincent Ramos, and four other principals of the company were indicted for aiding and abetting the distribution of cocaine.  During his plea hearing in October 2018, Ramos admitted that Phantom Secure laundered drug trafficking proceeds, as well as aided and abetted the importation, exportation, and distribution of illegal substances across international borders.[5]  Phantom Secure was not the first, nor would it be the last, of the many encrypted devices to appear on the black market to plan and executive criminal activity.

 

Operation Trojan Shield

While the FBI previously dismantled hardened encryption companies utilized amongst criminals to communicate – such as Phantom Secure – new platforms would emerge as substitutes for their predecessors.  In “Operation Trojan Shield,” various European law enforcement agencies, the FBI and AFP collaborated with a confidential source to construct, market, and upkeep the next encrypted communication platform to arise on the black market.[6]

The devices themselves were encrypted but the FBI, AFP, and the confidential source collaborated to build a master key into the existing encryption system.[7]  This allowed law enforcement to decrypt and store messages as they were transmitted.  For devices located outside of the U.S., an encrypted “BCC” of each sent message is routed to an “iBot” server located outside of the U.S.  The message is then decrypted with the master key and then immediately re-encrypted with the FBI encryption code.  The newly encrypted message is then passed to a second FBI-owned iBot server to be decrypted for viewing within the U.S.[8]  Given the high level of technical care and expertise needed to set up this master key process, the collaboration between the FBI, AFP, confidant, and other European law enforcement agencies was needed to ensure that ANOM could be launched effectively and discreetly within criminal networks.

ANOM could only be used on devices sold within the black market and were stripped of the ability to make calls or send emails.  In order to get a hold of an ANOM-encrypted device, each criminal had to be green-lighted by another criminal who was already using the software.[9]  Each ANOM user was identified by a Jabber Identification – similar to a smartphone PIN – was chosen by each user to identify themselves as opposed to using their real names.[10]  The high level of exclusivity and security behind ANOM increased the confidence that users that their communications would remain private.

Results of the investigation

As high-profile criminals such as Hakan Ayik praised ANOM and encouraged its use to their associates, thousands of criminals worldwide began utilizing ANOM devices to openly discuss their activities.  Between October 2019 and May 2021, a total of 11,800 ANOM devices were registered in over 90 countries, with the highest number of users based in Germany, the Netherlands, Spain, Australia, and Serbia.[11]

Considering the strong reputation that ANOM had amongst criminals, plans to import, export, or distribute drugs were sent between encrypted devices without the use of coded language.[12]  Text messages shown in a search warrant affidavit filed May 18, 2021, display open conversation regarding cocaine hidden in French diplomatic packages or underneath layers of bananas in shipping trucks.[13]

Through the surveillance of ANOM users, law enforcement agencies from the U.S., Australia, and the European Union were able to seize numerous tons of drugs and millions of dollars in cash.[14]  Australian police officers also claim to have acted on 20 “threats to kill,” thereby protecting many innocent civilians who may have otherwise lost their lives.[15]

Although the criminals that utilized ANOM encrypted devices strongly advocated for their high level of security, this could not be further from the truth.  The review of messages sent on ANOM devices has opened numerous high-level public corruption cases internationally, as well as investigations of distributors for money laundering, international drug trafficking, and obstruction of justice.[16]

While new encrypted platforms used to emerge once their predecessors were taken down by the FBI, Operation Trojan Shield severely damages the trusted foundation of encrypted devices for communications amongst criminal actors.  Though the use of new technology such as encryption devices has allowed discreet criminal activity to go undetected, law enforcement across the globe has proven that, with joint efforts, they can utilize the same tools for their benefit.

The current issue of the IELR will have a more comprehensive discussion of the law enforcement initiative and its implications.

[1] Legal assistant, Berliner Corcoran & Rowe LLP; B.A., Amherst College.

[2] Rachel Pannett and Michael Birnbaum, FBI-controlled ANOM app ensnares scores of alleged criminals in global police sting, The Washington Post, June 7, 2021, https://www.washingtonpost.com/world/2021/06/08/fbi-app-arrests-australia-crime.

[3] Cheviron Aff. ¶ 14, May 18, 2021. https://www.justice.gov/usao-sdca/press-release/file/1402426/download.

[4] Cheviron Aff. ¶ 9, supra.

[5] Cheviron Aff. ¶ 10, supra.

[6] Ben Westcott, For years, the underworld thought its phones were safe. They fell for an encrypted app trap, CNN, June 9, 2021, https://www.cnn.com/2021/06/08/australia/afp-fbi-ANOM-app-operation-ironside/index.html.

[7] Cheviron Aff. ¶ 13, supra.

[8] Id.

[9] Ben Westcott, supra.

[10] Cheviron Aff. ¶ 14, supra.

[11] Cheviron Aff. ¶ 19, supra.

[12] Cheviron Aff. ¶ 29, supra.

[13] Cheviron Aff. ¶ 14, supra.

[14] Ben Westcott, supra.

[15] ANOM: Hundreds arrested in massive global crime sting using messaging app, BBC.COM, June 8, 2021, https://www.bbc.com/news/world-57394831.

[16] Cheviron Aff. ¶ 20, supra.

Biden Administration Declares Anti-Corruption a “Core U.S. National Security Interest”

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On June 3, 2021, the Biden Administration released a memorandum establishing combating corruption as a core United States national security interest, thereby stimulating several international anti-corruption initiatives.

The memorandum promises to make the fight against corruption a core U.S. national security interest.  The Biden Administration promises to “lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”

The memorandum directs Assistant to the President and National Security Advisor, in coordination with the Assistant to the President for Economic Policy and the Assistant to the President for Domestic Policy, to conduct an interagency review process.  The interagency review process will include the Office of the Vice President and fourteen agencies.

Strategy Components

The above-mentioned persons and agencies are directed to develop a Presidential strategy.  The strategy is to modernize, increase, coordinate, resource and improve the ability of key agencies to promote good governance and prevent and combat corruption, including, as required, by proposing relevant legislation to the Congress.

Another component of the strategy is to combat all forms of illicit finance in the U.S. and international financial systems, including by robustly implementing Federal law requiring U.S. companies to report their beneficial owner or owners to the Treasury Department; reducing offshore financial secrecy; improving information sharing; and, as necessary, identifying the need for new reforms.

The strategy will hold accountable corrupt individuals, transnational criminal organizations, and their facilitators, including by identifying, freezing, and recovering stolen assets through increased information sharing and intelligence collection and analysis, criminal or civil enforcement actions, advisories, and sanctions or other authorities , and where possible and appropriate, returning recovered assets for the benefit of the citizens harmed by corruption.

According to the memorandum, the strategy participants must strengthen the capacity of domestic and international institutions and multilateral bodies focused on establishing global anti-corruption norms, asset recovery, promoting financial transparency, encouraging open government, strengthening financial institutions’ frameworks to prevent corruption in development finance projects, and combating money laundering, illicit finance, and bribery, including, where possible, addressing the demand side of bribery.

A goal is to support and enhance the capacity of civil society, media, and other oversight and accountability actors to conduct research and analysis on corruption trends, advocate for preventative measures, investigate and uncover corruption, hold leaders accountable, and inform and support government accountability and reform efforts, and provide those actors a safe and open operating environment domestically and internationally.

The strategy will work with international partners to counteract strategic corruption by foreign leaders, foreign state-owned or affiliated enterprises, transnational criminal organizations, and other foreign actors and their domestic collaborators, including, by closing loopholes exploited by these actors to interfere with democratic processes in the U.S. and abroad.

Increasing efforts to quickly and flexibly enhance U.S. and partner resources of investigative, financial, technical, political, and other assistance to foreign countries that indicate the will to reduce corruption are part of the strategy.

The strategy will help and enhance the capacity of domestic, including State and local, authorities and institutions, as well as partner and other foreign governments at all levels, to implement transparency, oversight, and accountability measures, which will counter corruption and provide their citizens with accessible and usable information concerning government programs, policies, and spending.

A goal is to promote partnerships with the private sector and civil society to advocate for anti-corruption measures and act to prevent corruption.

A final priority is to develop best practices and enforcement mechanisms such that foreign assistance and security cooperation activities have built-in corruption prevention measures.

Analysis

The Memorandum states that, by effectively preventing and combating corruption and showing the advantages of transparent and accountable governance, the U.S. government can obtain a critical advantage for the U.S. and other democracies.   In his recent speeches President Biden has set as a challenge for the U.S. its battle with autocracies and dictatorships.

The Memorandum mentions the possibility of the inter-agency group supporting new legislation when appropriate.  In this regard, on February 4, 2021, U.S. Senators Ben Cardin (D-MD) and Roger Wicker (R-MS) introduced legislation to create a global anti-corruption action fund at the State Department to strengthen  the rule of law abroad and counter transnational corruption. The Countering Russian and Other Overseas Kleptocracy (CROOK) Act (S.158) – would fund programs by utilizing large  fines imposed under the Foreign Corrupt Practices Act against U.S. and foreign companies caught bribing foreign officials. In January 2021, Representatives Bill Keating (D-MA) and Brian Fitzpatrick (R-PA) introduced a companion draft (H.R.402) in the House.

The Memorandum prioritizes combating all forms of illicit finance in the U.S. and implementing Federal law requiring U.S. companies to report their beneficial ownership to the Treasury Department.  In this regard, the Corporate Transparency Act, enacted as part of the Anti-Money Laundering Act of 2020, requires the reporting of beneficial ownership information to Treasury’s FinCEN.  Although FinCEN has issued an Advance Notice of Proposed Rule-making, it may be 2023-24 before the regulations become effective.

The current issue of the IELR will have a more comprehensive discussion of the implications of the Memorandum.

Disclaimer

Nothing in this blog constitutes or is intended to constitute legal advice. Neither transmission nor receipt of such materials creates an attorney-client relationship. Blog readers and subscribers should consult with an attorney. This blog may be considered attorney advertising under the rules of some states. The hiring of an attorney is an important decision that should not be based solely upon advertisements. Prior results do not guarantee similar outcomes.

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