Corruption Archives | Page 5 of 7

U.S. and Mexico issue Joint Statement on Proposed Dismissal of Charges against Mexican General

November 18, 2020 by Bruce Zagaris Leave a Comment

On November 17, 2020, the Attorney General of the United States William P. Barr and Fiscalía General of Mexico Alejandro Gertz Manero issued a joint statement. The statement announced that the U.S. government has decided to seek dismissal of the U.S. criminal charges against former Mexican Secretary of National Defense General Salvador Cienfuegos Zepeda.

Statement

The U.S. government arrested Cienfuegos on October 15, 2020 in Los Angeles, California, on U.S. charges of conspiracy to manufacture, import, and distribute narcotics into the U.S. and money laundering.

The rationale for seeking dismissal was that the U.S. Department of Justice (DOJ), recognizing the strong law enforcement collaboration with Mexico, decided to dismiss U.S. criminal charges, so that Mexico can investigate and, if appropriate, charge him under Mexican law.

The statement explains that the DOJ, at the Fiscalía’s request and pursuant to the Mutual Assistance in Criminal Matters Treaty, has furnished Mexico evidence in this case and commits to continued cooperation to support the investigation by Mexican authorities.

Implementation and Implications

Judge Carol B. Amon of the U.S. District Court in Brooklyn, the presiding judge, ordered the acting U.S. attorney Seth DuCharme to personally attend a hearing before her on November 18.

The DOJ explained in a filing with the court to dismiss the case that it decided that its relationship with Mexico and important foreign policy considerations were more important than prosecuting the case.1

As soon as Cienfuegos was arrested, Mexican officials expressed surprise and anger at the absence of disclosure by the U.S. government of its investigation and prosecution of Cienfuegos. Apparently, Mexico was upset of the lack of cooperation on the case, especially since Mexico has extradited most of persons requested by the U.S.2

The upshot was that Mexico gave the U.S. government an ultimatum: the failure to dismiss charges would lead to a termination of Mexican criminal cooperation with the U.S.3

The current issue of the IELR will discuss this matter in more detail.

Michael S. Schmidt and Natalie Kitroeff, U.S. to Repatriate Mexican Ex-Official, N.Y. Times, Nov. 18, 2020, at A19, col. 1.
Id.
Kevin Sief and May Beth Sheridan, U.S. agrees to return former Mexican official, Wash. Post, Nov. 18, 2020, at A19, col. 5.

Conference: Indigenous Rights and Extractive Industries in the Amazon

September 25, 2020 by Bruce Zagaris Leave a Comment

With funding from the United States Embassy in Suriname and the sponsorship of the Youth Education and Leadership Foundation and Global Americans, we are pleased to present “Indigenous Rights and Extractive Industries in the Amazon,” a two-day virtual conference on human rights and environmental issues in the Amazon.

The conference will be broken up into two panels and hosted through Zoom. Although the first webinar occurred on Sept. 23, it was recorded and is available on the website with GlobalAmericans https://theglobalamericans.org

Moderator: Guy Mentel, Executive Director, Global Americans

Extractive Industries in the Amazon
September 30, 10:00 AM to 11:00 AM EDT

Speakers:
– Mark Pieth, Professor at the Basel Institute of Governance, former Chair of both UN Illegal Drug Trafficking and OECD Anti-Bribery Working Groups

Prof. Pieth will focus on the problem of the gold trade in the Amazon. He has recently authored a book on Gold laundering: the dirty secrets of the gold trade and how to clean it up amazon.com/Gold-Laundering-dirty-secrets-trade/dp/3906195953
– Luz Nagle, Professor at Stetson University Law School and former Judge in Medellín

Prof Nagle will focus on human trafficking, organized crime, and corruption in the illegal mining industries in the Amazon

– Bruce Zagaris, Partner with Berliner Corcoran & Rowe LLP & Founder of the International Enforcement Law Reporter

Mr. Zagaris will focus on the illegal timber trade.
– Julia Marisa Sekula, Climate Security Program Coordinator at Instituto Igarapé
Ms. Sekula will focus on the problems in the Amazon in Brazil.

Moderator: Guy Mentel, Executive Director, Global Americans

To register, go to https://docs.google.com/forms/d/e/1FAIpQLSeVkK3Ilu7jEAGBy-X77uLL9e1KGTumte-PhbrSNBhlrFbfgg/viewform

Indigenous Rights in the Amazon
September 23, 10:00 AM to 11:00 AM EDT

Speakers:
– Luis Gilberto Murillo, Colombia’s former Minister of Environment and Sustainable Development
– Ine Apapoe, Lecturer at the Anton De Kom University of Suriname
– Magda Monteza, Strategic Planning Specialist, Panamanian Ministry of Government
– Jorge Andrés Forero Gonzáles, Director of Peacebuilding, Al Centro (Colombia)

U.S. Secretary of State Makes Historic Visit to Suriname and Guyana and Promises More Law Enforcement Assistance

September 18, 2020 by Bruce Zagaris Leave a Comment

On September 17-18, 2020, U.S. Secretary of State Michael Pompeo made the first visit to Suriname and Guyana. It coincided with promises that the U.S. would increase its technical assistance with respect to law enforcement and national security issues in both countries.

Suriname

With respect to Suriname Secretary Pompeo traveled there on September 17 and met with President Chandrikapersad “Chan” Santokhi , and key members of his cabinet. Santokhi was elected in July.

As part of his travel, the State Department issued a statement underscoring existing U.S. assistance to combat narcotics trafficking. The statement noted that Suriname participates in various programs funded by the State Department’s Bureau of International Narcotics and Law Enforcement (INL) in an effort to stop the use of Suriname as an intermediary jurisdiction for drugs and other contraband.

The State Department has engaged in training for Suriname’s Port Control Unit, which seized more than 3000 kg. of cocaine in 2019, including a 2,300 kg seizure, one of the largest in Suriname’s history.

In addition, the U.S. government has committed more than $600,000 towards an anti-money laundering risk assessment, which identifies vulnerabilities in Suriname’s anti-money laundering (AML) regime. The Financial Action Task Force requires a national risk assessment by each country because at both country and financial institution levels AML must be conducted on a risk-based assessment (RBA). The RBAs by financial institutions must depend on the national risk assessment. Although Suriname is comparatively small in population and economy, it has a large territory and multiple sources of risks of laundering, such as informal gold mining, narcotics and gold smuggling from Venezuela and other neighboring countries, human trafficking, and the use as casinos in Suriname as a vehicle to launder.

The State Department has congratulated the fact that Suriname voted in free and fair elections and has apparently shown it wants to take a new direction based on transparency, rule of law, and democracy. To support the new direction, the U.S., in addition to increasing trade and investment, is deepening its security relationship and supporting Suriname’s economic growth. The State Department says it is prepared to help Suriname and its engagement with the international Monetary Fund and other international financial institutions. In early February, it was revealed that $100 million in private citizens’ savings had disappeared from the Central Bank of Suriname (CBvS).[1]

The new Surinamese President is a former justice minister and police commissioner. The loser of the election, president Desiré “Desi” Bouterse took power through a coup. He has been convicted of narcotics trafficking in the Netherlands and is convicted in Suriname for ordering the execution of political opponents in 1982.[2]

The U.S. State Department has recognized that Suriname’s leaders and civil society must establish sustainable models to extract natural resources transparently and safely and use the resources to benefit the Surinamese people. According to the State Department’s press release, U.S. investment in Suriname’s gold sector offers a model. The State Department aims to work with Suriname to combat corruption.

In a brief press conference the two leaders fielded questions mainly concerning potential U.S. political and military pressure on Venezuela and the role of China in the region.

Guyana

On September 17, 2020, Secretary Pompeo also visited Guyana. After much controversy over the election of March 2 between incumbent David Granger, and Irfaan Ali, Granger challenged the results for months. Granger eventually relinquished his challenged after the U.S. imposed sanctions on members of Granger’s administration for undermining democracy.[3]

The State Department issued a statement for the Guyana visit. Pursuant to the Caribbean Basic Security Initiative, the U.S. provides technical assistance to Guyana on law enforcement professionalization, strengthening the rule of law, and combating transnational crime. In particular, the assistance has focused on increased training for crime scene investigators, forensic video analysis, trial advocacy, and the development of a curriculum for continuing education programs for magistrates. The program also focuses on training prosecutors and magistrates on implementing maritime security law. The training has resulted in more criminal prosecutions and convictions and faster adjudications.

The State Department has assisted in training Guyana’s Port Control Unit to combat the trafficking of cocaine and other illicit goods through Guyana. The U.S. Coast Guard provides training and mentoring to the Maritime Administration Department (MARAD) in order to improve port security. The U.S. military trains the Guyana Defense Forces personnel annually. The training includes a current student at the U.S. Coast Guard Academy.

After Secretary Pompeo’’s visit, a bilateral Shiprider Agreement will come into force, enabling joint maritime and airspace patrols to interdict narcotics. The U.S. government has recently given $200,000 in equipment and interceptor boat parts to strengthen Guyana’s ability to patrol its territorial waters.

The U.S. has helped the development of Guyana’s energy sector through technical partnership on best practices for energy sector policy, regulation, and revenue management. The U.S. Department of the Treasury’s Office of Technical Assistance supports training and development within the Guyana Revenue Authority’s Large Taxpayer Division. These recommendations will help Guyana.

Early in Ali’s administration racial tensions have arisen. On September 6, badly mutilated bodies of two cousins, Isiah and Joel Henry, both black teenagers, were discovered in a field. Thereafter, in an apparent reprisal killing a 17-year-old Indo-Guyanese boy was found chopped and beaten to death.[4]

Meanwhile, overhanging the visit are mounting tensions between Venezuela, the neighbor of Guyana and Suriname. Guyana and Venezuela have had a 120-year dispute over their boundary and now the matter is in the International Court of Justice (ICJ). Two years ago Venezuela seized Guyanese ships and disputes jurisdiction of the ICJ.[5] The disputed Essequibo area represents about two-thirds of Guyana’s 83,000 square miles.[6]

In the recent past U.S. initiatives towards the Caribbean have been in response to U.S. national security: in the 1980s the civil wars in Central America, the leftist administration of Maurice Bishop in Grenada, narcotics trafficking; more recently, counter-terrorism, money laundering, and human trafficking. The next issue of the IELR will discuss these developments in more detail.

[1] Dr. Scott MacDonald, Suriname and the Need for Good Governance March 10, 2020, CSIS, https://www.csis.org/analysis/suriname-and-need-good-governance.

[2] Jacqueline Charles, Pompeo makes history as first U.S. secretary of state to visit Suriname and Guyana, Miami Herald, Sept. 16, 2020. With Pompeo trip, oil boom raises focus on Guyana, Suriname, France24, Sept. 17, 2020.

[3] With Pompeo trip, oil boom raises focus on Guyana, Suriname, supra.

[4] Charles, supra.

[5] Molly Quell, Border Dispute Between Guyana, Venezuela Hits UN Court, Courthouse News Service, June 30, 2020.

[6] Charles, supra.

Suriname Arrest Warrant Made for Missing Former Finance Minister on Corruption Charges

September 7, 2020 by Bruce Zagaris Leave a Comment

On August 12, 2020, the police in Suriname issued an arrest warrant for Gillmore Hoefdraad, the former Finance Minister. The warrant suspects him of 11 criminal offenses, including violations of the banking and anti-corruption laws, fraud and embezzlement.[1]

At the end of July the Suriname Attorney General Roy Baidjnath Panday forbade Hoefdraad from leaving the country.[2]

The investigation against Hoefdraad, 58 years of age, concern the irregularities at the Central Bank of Suriname (CBvS). In February, Surinamese authorities arrested former CBvS Governor Robert van Trikt. Suriname authorities discharged von Trikt for irregularities and misappropriations at the Central Bank. The alleged wrongdoing included the purchase of a custom-made $300,000 luxury Land Rover in the U.K., an armored Lexus vehicle, and his approval for the BvS to acquire several properties.[3]

Surinamese authorities suspect Hoefdraad’s participation in the alleged real estate swindle. Investigators have discovered documents indicating that in June and September 2019, while Van Trikt was governor, Hoefdraad sold 17 buildings to CBvS for €105 million. Surinamese authorities have also arrested Van Trikt’s business partner Ashween Angnoe and Faranaaz Alibaks Hausil, manager Legal, Compliance & International Affairs at the Central Bank.[4] Prior to his appointment as Minister of Finance, Hoefdraad was the governor of the Central Bank of Suriname.

In May Attorney General Baidjnath-Panday asked the National Assembly’s permission to initiate a criminal prosecution against then Minister Hoefdraad. However, the National Assembly did not grant the request due to ministerial immunity.[5]

The Surinamese media has reported Hoefdraad has brought summary proceedings against the Surinamese government because he thinks he is unfairly being prosecuted. His counsel argue that, since the National Assembly’s permission was required and was not granted, the initiation of criminal charges constitutes double jeopardy. After elections on May 25, 2020, the government has changed.

Improving anti-corruption and governance is a priority of the new administration of Chan Santokhi, a former chief of police.[6]

According to the Caribbean Financial Action Task Force 11^th Report on the Mutual Evaluation Report of Suriname for the annual period on which it reported, Suriname made no extradition requests. However, if Hoefdraad entered Guyana improperly, Guyana can deport or surrender him to Suriname without the need to extradite. On August 9, 2020, Albert Ramchand Ramdin, the new Minister of Foreign Affairs in Suriname, held a joint press conference with his Guyanese counterpart Hugh Todd in Guyana. They promised to cooperate a broad range of topics. The two ministers are meeting in September to develop a strategic agenda for the next high-level meeting of the ministers, which is likely to be in Paramaribo. The current issue of the IELR will have additional discussion of this matter.

[1] Suriname issues arrest warrant for former Finance Minister on corruption charges, https://www.kaieteurnewsonline.com, Aug. 12, 2020.

[2] Id. Implicated ex-minister may be hiding in Guyana, The Daily Herald, July 28, 2020.

[3] Implicated ex-minister may be hiding in Guyana, supra.

[4] Id.

[5] Id.

[6] For additional background on anti-corruption and governance issues in Suriname, see Bruce Zagaris, Legal aspects of helping Suriname achieve better anti-corruption and governance, GlobalAmericans, September 2, 2020 https://theglobalamericans.org/2020/09/legal-aspects-of-helping-suriname-achieve-better-anti-corruption-and-governance/; see also Dr. Scott MacDonald, Suriname and the Need for Good Governance, March 10, 2020, CSIS, https://www.csis.org/analysis/suriname-and-need-good-governance.

Switzerland Freezes $900 Million from Former Head of Angolan Insurance Company

September 4, 2020 by Bruce Zagaris Leave a Comment

On July 9, 2020, a Swiss criminal appellate court in the Canton of Geneva froze $900 million held in the accounts of Carlos Manuel de São Vicente, an Angolan businessman, as a result of a money laundering investigation.[1]

In December 2018, prosecutors froze $1.25 billion in accounts connected to São Vicente, his family and companies after they received on November 29, 2018 suspicious activity reports made by Swiss banks on a transfer of $212.9 million.[2]

São Vicente is a Portuguese-Angolan citizen who is the former chairman and CEO of AAA Seguros. A 2001 presidential decree gave the company a monopoly to insure oil sector activity in Angola. It continued until 2016. In 2020, AAA Seguros was dissolved.[3]

Vicente is the spouse of Irene Alexandra da Silva Neto, a former member of parliament and vice-minister in the Jose Eduardo dos Santos administration. The latter was President of Angola from 1979 to 2017.

Prosecutors contend that part of AAA Seguros’ funds transferred to Vicente’s account belonged to Sonangol, Angola’s state-owned oil company. Sonangol owned 10% of AAA Seguros.[4]

Prosecutors became aware that Vicente was trying to transfer all of his personal account to Singapore. Vicente says he ordered the transfer because he was dissatisfied with the bank’s management of his account.[5]

Vicente explained to Swiss authorities that the transfer of $213 million from AAA Seguros to him was a partial reimbursement for loans.[6]

In 2016, a presidential decree revoked AAA’s insurance role over the oil industry. The decree explained AAA’s “allegedly non-transparent management.” Earlier this year the government revoked the company’s authorization to operate in Angola.[7]

In December 2018, Swiss public prosecutors froze seven accounts of Vicente and family members. The court has removed the freezing order on six of the accounts.[8]

The judgment illustrates the utility of suspicious transactions reports, since in this case it triggered action by the Swiss Financial Intelligence Unit and then the prosecutor. The Swiss financial and judicial systems have been increasingly proactive in finding and taking action on apparent proceeds of crime, especially where corruption may be involved.

The Angolan administration of João Lourenço has prioritized combatting corruption. On March 2020, the Swiss authorities received information and documentation in connection with the investigation.[9]

[1] Carlos Manuel de São Vicente v. Le Ministère Public, Swiss criminal appellate court in the Canton of Geneva, Judgment, P/23676/2018; ACPR/480/2020, July 9, 2020 https://www.icij.org/investigations/luanda-leaks/switzerland-freezes-angolan-tycoons-900-million-fortune/

[2] Id., paragr. b.e on p. 3. See also Will Fitzgibbon, Switzerland freezes Angolan tycoon’s $900 million fortune, ICIJ, Aug. 28, 2020.

3] Judgment, paragr. g.b. on p. 4 and Fitzgibbon, supra.

[4] Fitzgibbon, supra.

[5] Id. See Judgment, g.a on p. 4.

[6] Fitzgibbon, supra.

[7] Dmitry Zhdannikov and Noah Browning, Reuters, Switzerland Freezes $900M Belonging to Angolan Insurance Executive, https://www.insurancejournal.com/news/international/2020/09/03/581352.htm Sept. 3, 2020.

[8] Fitzgibbon, supra.

[9] Judgment, parag. l on pp. 6-7.

EU Funds Research Project on Interconnections between Tax Crimes and Corruption

June 29, 2020 by Bruce Zagaris Leave a Comment

VIRTEU (www.virteu.com), a project funded by the European Union under the HERCULE III Programme (Grant Agreement no: 878619), of which Professor Constantino, Assistant Professor of Law at Coventry University, serves as the Principal Investigator.

VIRTEU is a high-profile legal research project, which aims at exploring the interconnections between tax crimes and corruption so to unravel the intimate relationships that exist between fraudulent and corrupt practices in the area of taxation (https://lnkd.in/gW9V7ZM).

VIRTEU Research Team operates within and is supported by the Centre for Financial and Corporate Integrity (CFCI), which is directed by Prof. Panagiotis Andrikopoulos. The team includes two academics, Dr. Constantino Grasso (Principal Investigator) and Dr. Lorenzo Pasculli (Co-Investigator), who teach at the Law School of Coventry University directed by Prof Stephen Hardy. The team includes also two Research Assistants, ENGIN Erken and Mairi Laird, who are doctoral students at the CFCI.

If you would like to receive any further information on the project or evaluate the opportunity of cooperating with the Research Team, feel free to contact us through the VIRTEU official website (www.virteu.com).

Vat fraud: Interdisciplinary Research on Tax crimes in the European Union

Grant Agreement no: 878619

Project Coordinator: Dr. Costantino Grasso

VIRTEU is an eighteen-month (April 2020 – September 2021) high-profile legal research project, which includes both comparative and interdisciplinary studies, funded by the European Union under the HERCULE III programme.

Commentary

One common connection between corruption and tax crime is that bribery recipients commit tax crimes because they cannot legitimately declare properly their income. Bribery payors normally commit crimes when they pay bribes because they typically falsely declare on their books the payment (e.g., as a consultancy or marketing fee) and even sometimes try to obtain a deduction for the payment. In the extractive industry international organizations and civil society have tried to bring transparency to government records in order to enable citizens and interested persons to ascertain what payments are legitimate, as opposed to illegitimate (e.g., bribes). Other connected areas include money laundering, asset forfeiture, transnational organized crime, and fraud.

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.

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.

U.S. Returns $300 Million to Malaysia from U.S. Forfeitures in 1MDB Case

April 16, 2020 by Bruce Zagaris Leave a Comment

On April 14, 2020, the U.S. Department of Justice announced that it has returned to the Malaysian government approximately $300 million in additional funds misappropriated from 1 Malaysia Development Berhad (1MDB), Malaysia’s investment development fund. The funds were apparently misappropriated and laundered through financial institutions in several jurisdictions including the U.S., Switzerland, Singapore and Luxembourg.

Together with the funds that the DOJ returned to Malaysia in May 2019, the U.S. has returned or helped Malaysia in recovering over $600 million of funds misappropriated from 1MDB. The DOJ says its efforts to recover funds misappropriate from 1MDB.

The first tranche of returned funds included: $57,036,688.68 from Red Granite Pictures, and stems from a March 2018 settlement in California courts. This amount has been received by Malaysia. Subsequently the DOJ returned $139,000,000 from the February 2019 sale of Manhattan’s Park Lane Hotel.

In 2019, the U.S. District Court for the Central District of California entered judgments forfeiting more than $700 million in assets obtained by Low Taek Jho, aka Jho Low, and his family in the U.S., U.K., and Switzerland. At present, DOJ has recovered or helped in the recovery of more than $1 billion in assets associated with the 1MDB international money laundering and bribery scheme. This represents the largest recovery under the DOJ’s Kleptocracy Asset Recovery Initiative and the largest civil forfeiture ever concluded by the Justice Department.

The civil forfeiture complaints allege that, from 2009 through 2015, more than $4.5 billion in funds belonging to 1MDB were allegedly misappropriated by high-level officials of 1MDB and their associates, including Low, through a criminal conspiracy involving international money laundering and bribery. The government of Malaysia established 1MDB to promote economic development in Malaysia through global partnerships and foreign direct investment. The Malaysian government intended to use its funds to improve the well-being of the Malaysian people. The assets subject to the 2019 judgments included high-end real estate in Beverly Hills, New York and London; a luxury boutique hotel in Beverly Hills; and tens of millions of dollars in business investments that Low allegedly made with funds traceable to misappropriated 1MDB funds.

Under the terms of the 2019 settlement, Low, his family members, and FFP, a Cayman Islands entity serving as the trustees overseeing the assets at issue in these forfeiture actions, agreed to forfeit all assets subject to pending forfeiture complaints in which they have a potential interest. The trustees are also required to cooperate and assist the DOJ in the orderly transfer, management and disposition of the relevant assets. From the assets formerly managed by FFP, the United States will release $15 million to Low’s counsel to pay for legal fees and costs. Under the agreement, none of those fees may be returned to Low or his family members.

Low separately faces charges in the U.S. District Court for the Eastern District of New York for conspiring to launder billions of dollars embezzled from 1MDB and for conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to various Malaysian and Emirati officials, and in the U.S. District Court for the District of Columbia for conspiring to make and conceal foreign and conduit campaign contributions during the United States presidential election in 2012. Low is a fugitive and is believed to be in China.

The current issue of the IELR will have a more comprehensive discussion of the case, especially the AML issues for the U.S.

Trump Administration Indicts Venezuela’s Leader, Nicolás Maduro, on Narcoterrorism charges

March 27, 2020 by Alexandra Haris Leave a Comment

On Thursday, March 26, the Department of Justice (DOJ) announced that it indicted Nicolás Maduro and several of his aids on drug-trafficking and international cocaine trafficking conspiracy charges.

The DOJ accused the group of “conspiring with Colombian rebels to flood the United States with cocaine.” Additionally, the department estimated that the conspired routes carried between 200 and 250 tons of cocaine from Venezuela – an amount that equates to 30 million lethal doses.

Coinciding with the indictment, Secretary of State Mike Pompeo announced that under the Narcotics Rewards Program, the government would offer rewards up to $55 million (up to $15 million for Maduro and up to $10 million for each of the others) for any information. The Narcotics Rewards Program has been operating since 1986 and has paid more than $130 million to informants regarding around 75 drug traffickers.

Pompeo said in a statement, “While holding key positions in the Maduro regime, these individuals violated the public trust by facilitating shipments of narcotics from Venezuela, including control over planes that leave from a Venezuelan air base, as well as control of drug routes through the ports in Venezuela.”

The indictment has been making headlines as these actions against a head of state are very rare and an apparent effort from the Trump administration to pressure Maduro to leave office.

Maduro is currently the leader of Venezuela, but after his disputed re-election in 2018, the U.S. government recognized his opponent, Juan Guaidó, as the official president. However, Maduro has refused to step down and Guaidó has been unable to acquire power, leaving both men claiming to be president.

Attorney General William P. Barr spoke on the matter on Thursday and mentioned that he believes Maduro’s administration is “plagued by criminality and corruption,” and that the DOJ aimed to eliminate “the extensive corruption within the Venezuelan government.” He further said that this was not an unprecedented move as the DOJ was not indicting a head of state, since the U.S. does not recognize Maduro as such.

However, Maduro responded to the indictment with condemnation, accusing Trump of being a “racist cowboy” and accusing the U.S. and Colombia of trying to “fill Venezuela with violence.” He also responded that he is ready to fight by whatever means necessary should the U.S. invade.

The indictment comes after years of U.S. investigators collecting evidence against these Venezuelan offices. Barr began to listen to colleagues, such as Sen. Marco Rubio (R-FL), and further prioritized these investigations. By March 16, 2020, the indictment was ready to be unsealed and announced, but was delayed until the 26^th due to COVID-19.

The Impact

It remains unclear how the impact of the indictment will play out, but there is speculation of a few directions the repercussions could go.

On one hand, analysts say this could boost Trump’s chances of being re-elected in the fall as his support in Florida, a key swing state, may increase. Trump won Florida in 2016 by a thin margin and it is a state where many Venezuelans, Cubans, and Nicaraguans go when they flee their authoritarian regimes.

On another hand, the action could backfire on the Trump administration. Currently, much of the world supports the U.S. government in its recognition of Guaidó as Venezuela’s president. However, the indictment could fragment the coalition behind Trump if European and Latin American allies think his administration is overreaching. Heads of state normally enjoy immunity from U.S. prosecution, and even if the U.S. does not recognize Maduro as one, he is still the de facto president.

Another unclear matter is whether or not the U.S. will seek to extradite Maduro, who remains in Venezuela. When asked, Barr declined to comment. Barr also declined to say whether he directly notified Trump or if the State Department had spoken to Guaidó about the charges.

One thing is for sure, however; given this is a fresh matter with massive global speculation, there will be more information in the coming weeks.