Adriana Sanford will be addressing the International Committee of the Senior Lawyers Division of the American Bar Association.
U.S. Treasury Publishes Final Rule on Reporting Beneficial Ownership Information
On September 29, 2022, the Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) reporting provisions.
Rule Brings U.S. Closer to Comply with the International Rules on Entity Transparency
In 2006 and 2016, the Financial Action Task Force Mutual Evaluations found the U.S. non-compliant with entity transparency standards.
The final rule will help bring the U.S. closer to complying with the international rules on entity transparency. However, the rules do not take effect until January 1, 2024. Reporting companies created or registered before January 1, 2024 will have one year (until January 1, 2025) to file their initial reports. The rules do not take effect until January 1, 2024. Reporting companies created or registered before January 1, 2024 must submit an initial report within one year of the effective date, the same as in the proposed rule. The rules do not take effect until January 1, 2024. Reporting companies created or registered after January 1, 2024, will have 30 days after receiving notice of their creation or registration to file their initial reports. The proposed rule required filing the initial report within 14 days of their creation or registration.
By then the international standards will have moved further. For instance, unlike the U.S., the EU and many countries include in their entity transparency standards reporting on common law trusts. In any addition, the EU and the international standard is to have public registries, allowing a broad segment of the public to view the BOI so that they can verify it and/or report discrepancies.
Access to the Beneficial Ownership Information and FinCEN Resource Issues
In the U.S. even proposed regulations on access to beneficial ownership information is not yet available. It is likely that the information on beneficial owners is kept by FinCEN and only can be accessed by financial regulators and law enforcement from federal, state, Indian tribes, and foreign governments and banks to verify Customer Due Diligence. All will likely have to request access and then await processing by FinCEN. FinCEN is already behind on releasing the other regulations on access and a revised CDD rule. FinCEN is seriously underresourced, especially in view of all the new regulatory projects. The OECD in 2018 downgraded the U.S. for timeliness in responding to requests for information and in the qualify of the information exchanged. The penalties for any misuse of the information are so harsh that banks receiving information will have to restrict it, so that they can protect themselves from any penalties.
Concessions to Formation Agents and the Business Community
The final rule has made concessions to the business community and formation agents. The rule defines a company applicant to be only two persons: the individual who directly files the document that creates the entity, or in the case of a foreign reporting company, the document that first registers the entity to do business in the United States; and the individual who is primarily responsible for directing or controlling the filing of the relevant document by another. The proposed rule stated that anyone in the chain of working on formation was considered a company applicant.
The rule, however, does not require reporting companies existing or registered at the time of the effective date of the rule to identify and report on their company applicants, as the proposed rule did. In addition, reporting companies formed or registered after the effective date of the rule also do not need to update company applicant information, as the proposed rule did.
As I stated in my remarks on Sept. 22 at the STEP/LATAMCaribbean conference in Panama in a talk on Will the U.S. Remain the Jurisdiction of Choice for Latin Americans in the aftermath of the Enactment of the CTA, the U.S. will remain the jurisdiction of choice for both legitimate and illegitimate investors.
The current (October) issue of the IELR will have a more comprehensive discussion of the CTA BOI final rules.
OECD Announces Public Consultation on Tax Transparency for Crypto-Assets
On March 22, 2022, the OECD issued a public consultation document involving a new world tax transparency framework to furnish the reporting and exchange of information with regard to crypto-assets and proposed amendments to the Common Reporting Standard (CRS) for the automatic exchange of financial account information between countries. The consultation has the goal to inform the decisions of policy makers on the potential adoption of any such framework and its related components.
A challenge to tax and financial regulators is that a person can transfer and hold crypto-assets without intervention of traditional financial intermediaries and without any central administrator being able to watch either the transactions or the crypto-asset holdings. In addition, the Crypto-Asset market has resulted in a new set of intermediaries, such as Crypto-Asset exchanges and wallet providers, which may currently only be subject to limited regulatory oversight. Crypto-Asset exchanges typically facilitate the purchase, sale, and exchange of Crypto-Assets for other Crypto-Assets or fiat currencies. As a result, individuals can exploit crypto-assets to evade international tax transparency initiatives, such as the CRS.
Crypto-Asset Reporting Framework (CARF)
As a result of the potential to circumvent tax transparency initiatives, the G20 has asked the OECD to develop a framework for the automatic exchange of information on crypto-assets (Crypto-Asset Reporting Framework or CARF). The new framework establishes mechanisms for the collection and exchange of tax-relevant information between tax administrations, with respect to persons engaging in certain transactions in crypto-assets. The framework includes crypto-assets that a person can hold and transfer in a decentralized way, without the intervention of traditional financial intermediaries, as well as asset classes utilizing similar technology that may exist in the future. The framework requires businesses that furnish services to exchange crypto-assets against other crypto-assets or fiat currencies.
Proposed CRS Amendments
In addition to the CARF, the OECD has developed proposals, as part of the first comprehensive review of the CRS, to improve the operation of the CRS, based on the experience of governments and businesses since its adoption in July 2014. The proposal broadens the scope of the CRS to cover electronic money products and the Central Bank Digital Currencies. As a result of the development of the CARF, the proposals also embrace changes to cover indirect investments in crypto-assets through Investment Entities and derivatives. Simultaneously, the proposal has new provisions to achieve an efficient interaction between the CRS and the CARF, including ways to avoid duplicative reporting. The amended CRS endeavors to strengthen the due diligence procedures and reporting outcomes in order to improve the usability of CRS information for tax administrations and limiting burdens on financial institutions.
The OECD is requesting public comments on its proposals. Interested persons should send their comments no later than April 29, 2022 by email (in Word format) to firstname.lastname@example.org. Additional information on the CARF, the amended CRS, or to comment on the public consultation draft should view the public consultation document. All written comments received will be made publicly available on the OECD website. Comments submitted in response to this invitation will be posted on the OECD website.
The OECD will hold a public consultation meeting at the end of May 2022. Speakers and other participants at the upcoming public consultation meeting will be selected from among those providing timely written comments.
Once it receives and digests the input received through the public consultation, the OECD will make final the rules and commentary to the CARF and the amended CRS. The OECD will also develop the exchange instruments and technical solutions needed to support reporting and exchanges pursuant to the CARF and the amended CRS. The OECD intends to report on the CARF and the amended CRS under the Indonesian Presidency of the G20 for its October 2022 meeting.
The public consultation documents explains that the CARF and amended CRS responds to dynamics of the Crypto-Asset market, including both the Crypto-Assets offered, as well as the intermediaries involved. These developments pose a significant risk that recent gains in global tax transparency will be gradually eroded.
Clearly, the Crypto-Asset market and the intermediaries involved are different from the usual information providers in third-party tax reporting regimes, such as the Common Reporting Standard (CRS), to a new set of intermediaries, which only recently became subject to financial regulation and are frequently not subject to tax reporting requirements with respect to their clients. Perhaps, more importantly, the public consultation responds to the ability of individuals to hold Crypto-Assets in wallets unaffiliated with any service provider and transfer such Crypto-Assets across jurisdictions. The ability of persons to hold and transfer Crypto-Assets pose a risk that Crypto-Assets will be used for illicit activities or to evade tax obligations. The potential for persons to possess and transfer Crypto-Assets unaffiliated with any service provider has reduced tax administrations’ visibility on tax-relevant activities carried out within the sector, increasing the difficulty of verifying whether associated tax liabilities are appropriately reported and assessed.
The OECD public consultation complements the work of the J5 countries. On March 25, 2021, the Joint Chiefs of Global Tax Enforcement (J5) assembled investigators, cryptocurrency experts and data scientists in a coordinated push to track down individuals and organizations perpetrating tax crimes around the world. Without having in place an effective framework and reporting mechanisms, the J5 and other tax authorities are limited in their compliance and enforcement abilities.
The public consultation follows closely the U.S. Department of Justice announcement of its first director of National Cryptocurrency Enforcement and President Biden signing an Executive Order (titled “Ensuring Responsible Development of Digital Assets” and issued with an accompanying Fact Sheet) regarding the U.S. government’s strategy for digital assets. The Executive Order orders federal agencies to issue various reports that will set forth future U.S. policy toward digital assets, including the potential launch of a federally issue digital dollar.
Hence, the international and national compliance and enforcement framework for Crypto-assets are changing dynamically.
The current issue of the IELR will discuss in more detail the public consultation and its implications.
U.S. Justice Department Starts Task Force to Enforce Russian Sanctions against Russian Oligarchs
On March 2, 2022, U.S. Attorney General Merrick B. Garland announced the start of Task Force KleptoCapture to enforce sanctions, export restrictions, and economic countermeausres the U.S. has issued, in coordination with U.S. allies, in response to Russia’s military invasion of Ukraine. Task Force KleptoCapture will aim to enforce these actions that are designed to isolate Russia from global markets. In particular, the U.S. restrictions target the crimes of Russian officials, government-aligned elites, and persons who help or conceal their unlawful conduct.
Andrew C. Adams, co-chief of the Money Laundering and Transnational Criminal Enterprise Unit in the Office of the U.S. Attorney for the Central District of New York, will manage the Task Force. The Task force leadership will include Deputy Directors from both the National Security and Criminal Divisions, and more than a dozen attorneys from these divisions, as well as the Tax Division, Civil Division, and U.S. Attorneys’ Offices across the country. It will be staffed with prosecutors, agents, analysts, and professional staff across the Department of Justice who are experts in sanctions and export control enforcement, anti-corruption, asset forfeiture, anti-money laundering, tax enforcement, national security investigations, and foreign evidence collection. The Task force will strengthen DOJ’s abilities and authorities against efforts to evade or undermine the restrictions the U.S. government has imposed in response to Russian military aggression.
The Task Force’s mission will include the following: investigating and prosecuting violations of new and future sanctions imposed in response to the Ukraine invasion, and sanctions imposed for prior instances of Russian aggression and corruption; combating unlawful efforts to subvert restrictions imposed on Russian financial institutions, including the prosecution of persons who attempt to evade know-your-customer and anti-money laundering measures; targeting efforts to use cryptocurrency to evade U.S. sanctions, launder proceeds of foreign corruption, or evade U.S. response to Russian military aggression; and using civil and criminal asset forfeiture authorities to seize assets belonging to sanctioned individuals or assets identified as the proceeds of unlawful conduct.
The Task Force will be able to use the most cutting-edge investigative techniques, including data analytics, cryptocurrency tracing, foreign intelligence sources, and information from financial regulators and private sector partners, to identify sanctions evasion and related criminal misconduct.
In addition to arrests and prosecution, the Task Force will employ asset seizures and civil forfeitures of unlawful proceeds, including personal real estate, financial, and commercial assets to deny resources that enable Russian aggression. When appropriate, the Task Force will share information obtained in its investigations with interagency and foreign partners to help the identification of assets that are covered by the sanctions and new economic countermeasures.
The Task Force KleptoCapture will complement the work of the transatlantic task force under President Biden and leaders of the European Commission, France, Germany, Italy, the United Kingdom, and Canada on February 26. The transatlantic task force has a mission to identify and seize the assets of sanctioned individuals and companies around the world.
The Task Force will involve agents and analysts from various law enforcement agencies, including the FBI; U.S. Marshal Service; U.S. Secret Service; Department of Homeland Security; IRS-Criminal Investigation; and the U.S. Postal Inspection Service.
Meanwhile, on March 2 the Independent Commission for the Reform of International Corporate Taxation (ICRICT) issued a statement in support of the call by Italian Prime Minister Mario Draghi’s for an international public register of wealth for Russian oligarchs with more than €10 million in assets.
If the US Task Force and the law enforcement authorities of its allies cooperate in terms of intelligence, evidence gathering, and extradition, they will exert pressure on the oligarchs. President Biden announced the creation of the Task Force in his state of the union speech on March 1. The initial one-third of the address dealt with the response by the U.S. and its allies to the Russian invasion. President Biden said:
“Tonight, I say to the Russian oligarchs and the corrupt leaders who’ve bilked billions of dollars off this violent regime: No more.
The United States — I mean it. The United States Department of Justice is assembling a dedicated task force to go after the crimes of the Russian oligarchs.
We’re joining with European Allies to find and seize their yachts, their luxury apartments, their private jets. We’re coming for your ill-begotten gains.”
To some extent the Biden speech and the Garland announcement mix persons who violate past, current and future sanctions against Russia with persons who have or are laundering proceeds of foreign corruption or U.S. responses to Russian military moves, such as export control and other restrictions. In particular, the announcement of the Task Force mentions false statements to a financial institution, bank fraud, tax offenses, and money laundering. In addition, as demonstrated by the non-compliant assessment in FATF’s 2006 and 2016 evaluation of the U.S. and the recent comments to the proposed CTA regulations, U.S. gatekeepers do not meet international standards and remain opposed to complying with the new regulations. As a result, notwithstanding the Task Force KleptoCapture, U.S. law and culture prevent proactive law enforcement cooperation.
Whether the Russian oligarchs will have any influence on Vladimir Putin remains to be seen. However, the sanctions and the emphasis on enforcement follow a recent trend of the U.S. since the Obama Administration: the emphasis on criminal and quasi-criminal enforcement of U.S. sanctions. The rest of world is following this trend. Actual close collaboration among law enforcement authorities and international organizations, informal groups (i.e., G7), and non-governmental organizations will help make sanctions enforcement more effective.
On March 1, Putin signed a decree that prohibits taking more than $10,000 worth of foreign currency in cash and “monetary instruments” out of Russia. The move responds to the sanctions imposed on Russia over its invasion of Ukraine.
As the U.S. is trying to adopt regulations to make its Corporate Transparency Act operational, increasingly the European legislative and executive branches are debating making their corporate and trust registries more publicly accessible without cost and broadening the registries to include not only beneficial ownership of companies and trusts, but diverse assets, such as art, real property, crypto assets, and linking the registries, so that regulators and law enforcement have easy access. One gap is that, since the U.S. has not yet implemented the Corporate Transparency Act, does not fully reciprocate on information exchange pursuant to FATCA Intergovernmental Agreements and does not participate in the Common Reporting Standard, wealth structures have moved to the U.S. both for anonymity and to take advantage of the lucrative U.S. economic market.
 Katie Banner, Justice Department Announces Task Force to Go After Russian Oligarchs, N.Y. Times, Mar. 3, 2022.
 DOJ, Attorney General Merrick B. Garland Announces Launch of Task Force KleptoCapture, Press Rel. 22-179, Mar. 2, 2022.
France’s Conseil d’Etat Upholds €100 Million Fine Against Google for Advertising Cookie-Related Data Protection Violations
By Jonathan J. Rusch
Even so, in 2020 the French Data Protection Authority (CNIL) imposed a total of €100 million on fines on a world-leading technology company, Google, for failure to comply with the obligation to obtain users’ consent before it installed advertising cookies or other tracking devices. The CNIL did so pursuant to Article 82 of the French Data Protection Act, which transposes the E-privacy Directive. Google then appealed to the French Conseil d’État, the highest French court for cases involving public administration, in an effort to annul the fines.
On February 1, the Conseil d’État rejected Google’s position and affirmed the CNIL fines. In its decision, the Conseil d’Etat confirmed that the CNIL had the power to intervene as it did. It also found that Google had failed to provide users with clear and complete information or to obtain their prior consent to cookie placement, and had a defective cookie refusal procedure. The Conseil took note of the fact that an audit that the CNIL conducted in March 2020 disclosed “that seven cookies were automatically installed on users’ computers as soon as they visited the site, four of which were only used for advertising purposes.” During that audit procedure, Google “modified its practices in August 2020, but continued not to inform the user directly and explicitly about the purposes of its cookies and the means of objecting to them.”
The Conseil further noted that the amount of the fines that the CNIL imposed did not exceed the limit set by the French Data Protection Act, and that the fines were not disproportionate in view of the significant profits generated by the data collected through advertising cookies, and of Google’s dominant market share in France (more than 90 percent, which equates to approximately 47 million users).
Google reportedly is already looking ahead to replacing its advertising cookies with “a new system called Topics, in which advertisers will place ads via a limited number of topics determined by users’ browser activity.” At other firms doing business in the EU, however, Chief Privacy Officers and Chief Compliance Officers should take note of the Conseil d’État decision and compare the Conseil’s findings against their own cookie policies and practices. Although certain aspects of data-protection law can be exceptionally complex, providing clear guidance to internet users about prior consent to or refusal of cookies should not be.
 Jonathan J. Rusch is Adjunct Professor and Co-Director of the U.S. and International Anti-Corruption Law Program at American University Washington College of Law and Adjunct Professor at Georgetown University Law Center.
DIPLOMATIC DIALOGUE – ‘The Role of the Caribbean Financial Action Task Force in Anti-Money Laundering/Countering the Financing of Terrorism/Countering Proliferation Financing Compliance’
DIPLOMATIC DIALOGUE – ‘The Role of the Caribbean Financial Action Task Force in Anti-Money Laundering/Countering the Financing of Terrorism/Countering Proliferation Financing Compliance’
Thursday 10th February, 2022 | 1:00 – 3:00 p.m. Atlantic Standard Time
Jessica Byron-Reid Jessica.Byron-Reid@sta.uwi.edu
Welcome Remarks Professor Jessica Byron Director, Institute of International Relations (IIR)
Introduction of Guest Speaker Dr. Dave Seerattan Lecturer, IIR
Feature Presentation Ms. Dawne Spicer Director, Caribbean Financial Action Task Force (CFATF)
Commentary Ms. Alicia Nicholls Junior Research Fellow (Trade), Shridath Ramphal Centre, The UWI, Cavehill
Question and Answer Session
Vote of Thanks Ms. Zaynab Nakhid Postgraduate Diploma Student, IIR
2021 Holiday Retrospective
We at the IELR send you the best wishes for a warm and joyous holiday season. 2021 was momentous for the international enforcement community, and we are grateful to have had you following along with our coverage during our 37th year of discussing international enforcement developments.
We are grateful for the continuing long partnership with Professor Michael Plachta and for contributions from practitioners and professors, including Dr. Ted Bromund, Frederick T. Davis, Michele Estlund, Dr. Scott MacDonald, Dennis Boyle, Konstantinos Magliveras, Yuriy Nemets, Spencer A. Hill, Peter D. Hardy, Kateryna Boguslavska, Matteo Formaggi, and Linda Friedman Ramirez. Miranda Bannister finished her tenure as assistant editor in February. Marwah Adhoob, who specialized in criminology as an undergrad, energetically replaced her. Our legal assistants Sara Kaufman and Emma Byrne ably contributed articles. Our interns, Mitchell Beebe, Elena Botts, Kayla DeAlto, Austin Max Scherer, Teddy David, Jamie Jang, Kenneth Boggess, and Julia V. Brock, contributed some great pieces.
The following is a highlight of some of the articles we covered.
International Criminal Court
The International Criminal Court was prominent in our coverage. Plachta discussed the territorial jurisdiction of the ICC in the Palestine/Israel Case as well as the ICC Prosecutor closing a preliminary examination in Colombia and concluding an agreement with the Colombian government. K. DeAlto discussed the Central African Republic’s surrender of Said Abdel Kani to the ICC. M. Beebe and Zagaris wrote articles about the U.S. District Courts’ blocking President Trump’s executive order, sanctioning ICC officials. Zagaris discussed President Biden’s revocation of the Trump executive order.
War Crimes and Crimes against Humanity
On war crimes and crimes against humanity, Brock discussed the reversal by the South Korean court of the 2018 on “comfort women” and ordered Japan to pay reparations to the families of 12 women forced to work as sex slaves. Plachta discussed the ECHR’s decision on German responsibility for an air strike in Afghanistan. David and Kaufman respectively discussed German courts’ convictions of a former Syrian secret police officer and a Syrian military doctor for crimes against humanity and Adhoob discussed a German court’s conviction of a woman for crimes against humanity in the death of a Yazdi girl in Syria. Likewise, Adhoob detailed the enforcement actions of the UN with regards to genocide, such as UN’s opening of an inquiry into Sri Lanka’s alleged war crimes during its civil war as well as the UN investigation team’s conclusion that ISIL’s crimes against Yazidis constitute genocide. Adhoob discussed a report by a U.S. law firm, finding France responsible for the Rwandan genocide. Zagaris and Adhoob wrote about the UN Human Rights Council’s adoption of a resolution to start a Commission of Inquiry on the latest Israel-Palestine conduct. Jang discussed the African Union’s starting of a Commission of Inquiry on the war in Ethiopia. David wrote about the conviction in a Swiss court of a Liberian warlord, putting the spotlight on universal jurisdiction and Liberian accountability. Zagaris covered the French Supreme Court’s overturning of the dismissal of complicity for crimes against humanity against multinational enterprise Lafarge for its conduct in Syria. Boggess discussed the UN Human Rights Council’s Independent Fact-Finding Mission renewing its mandate as a UN report warns of war crimes and crimes against humanity. Ramirez wrote about a judgment of the Inter-American Court of Human Rights, finding Colombia responsible for a journalist’s abduction twenty years before.
Tax transparency and Enforcement
With respect to tax transparency and enforcement, Zagaris wrote about the EU Parliament’s adoption of a resolution to toughen the tax haven blacklist, the OECD’s call for action to disrupt, prevent, and prosecute criminal conduct by professional enablers, the OECD’s new edition of fight tax crime, and the many cases against tax enablers, including the cum-ex dividend fraud cases, as well as a federal court’s approval of a John Doe Summons for a Panamanian law firm dealing with U.S. clients. Scherer also wrote about how charges against professionals illustrate the shifting legal landscape for professional enablers. Zagaris also discussed the U.S. Tax Court decision against a constitutional challenge to passport denial for delinquent taxpayers and about a founder of a Russian bank pleading guilty to tax fraud, including falsifying his expatriation statement. Zagaris discussed the Nigerian government’s start of voluntary offshore assets London declaration facilities and its application to foreign enablers. Zagaris wrote about a CJEU decision mandating enforcement of tax information request even without the taxpayer’s specific name and identity.
Money Laundering, Bank Secrecy and Transparency
On money laundering, bank secrecy and transparency, Boguslavska discussed how the 10th Basel AML index highlights four worrying gaps in global AML efforts. Zagaris wrote several articles on the Anti-Money Laundering Act of 2020, as well as FinCEN’s proposed regulations on beneficial ownership and the ANPRM on beneficial information on real estate purchases. MacDonald wrote about Suriname’s corruption and money laundering challenges. Adhoob and Zagaris wrote about the FinCEN notice informing financial institutions of money laundering dangers from illicit art and antiquities trade. Plachta discussed the Council of Europe’s adoption of a resolution and recommendation on strengthening FIUs. Zagaris discussed the Cayman AML regulator’s crack down after the FATF greylisting. Scherer discussed how the Xizhi Li conviction showed an application of money laundering techniques for laundering drug proceeds on behalf of foreign drug-trafficking organizations. Zagaris discussed the implications of the Pandora Papers and the proposed new enforcement actions of the European Parliament in the wake of the Pandora Papers.
Counter-terrorism, Economic Sanctions and Human Rights
Counter-terrorism, economic sanctions and human rights were continuing topics. Plachta discussed the adoption by the European Commission of a new counter-terrorism agenda and a proposal for amending Europol regulation. Adhoob discussed the ACLU’s suit on alleged discrimination by the U.S. “no-fly list” against Arabs and Muslims. Zagaris covered China’s adoption of blocking legislation and counter-sanctions. Bannister covered the Biden Administration’s countering the Trump Administration’s sanctions against the Houthi rebels in Yemen. Zagaris discussed the ruling of the EU Advocate General that a German telecom cannot cancel a contract with an Iranian bank without showing the cancellation was not due to U.S. sanctions.
On counter-terrorism financing, Adhoob discussed U.S. prosecution of a woman extradited by the Dutch for terrorist financing through a charity. Zagaris wrote about a French donor’s financial contributions to the U.S. alt-right before the capitol assault and the need to apply counter-terrorism financial enforcement tools as well as a meeting between G7 and EU Security ministers on cooperation on countering racially and ethnically motivated extremism.
Transnational Corruption and Asset Forfeiture
With respect to transnational corruption and asset forfeiture, Zagaris discussed the Justice Department’s civil forfeiture suit against two alleged Ukrainian kleptocrats, a settlement by Deutsche bank of an FCPA and commodities case. Bannister and Adhoob covered in separate articles the fishrot scandal in Namibia, where Icelandic Samherji employees allegedly paid bribes to Namibian government officials for rights to fish for horse-maskerel. Boyle discussed the Biden Administration’s policy toward Central America and the challenges posed by corruption. Zagaris contributed a piece on U.S.-N. Triangle Enhanced Engagement Act setting the stage for new U.S. policy. Zagaris discussed the British Commission on Inquiry’s investigation of alleged corruption in the BVI as well as the Biden memorandum declaring anti-corruption a core U.S. national security interest. Zagaris wrote about the Dutch court’s agreement with a report calling the Santos-linked Angolan energy deal corrupt. Zagaris discussed the Amec Foster Wheeler’s global corruption settlement with the U.S., U.K., and Brazil. Zagaris discussed the return by the U.S. government of an additional $452 million in forfeited 1MDB funds to Malaysia as well as the DOJ’s return of over $32m in forfeited funds to FIFA victims.
Illegal Production and Use of Weapons
With respect to the illegal production and use of weapons, Zagaris discussed a suit by the Mexican government against U.S. arms manufacturers for illicit trafficking in arms as well as the guilty plea in the U.S. in the first successful prosecution of exportation and manufacturing of firearms to the Mexican Cartels. Adhoob discussed the U.K. and U.S. sanctions on seven Russian agents and entities over the Alexi Navalny poisoning. Zagaris discussed a ECtHR’s decision finding Russia responsible for the assassination of Litvinenko and Britain naming a third Russian suspect in the poisoning of Skripal.
Extraterritorial jurisdiction remained controversial. Fred Davis discussed the Second Circuit’s decision, opening the door a bit to non-citizen defendants challenging a court’s jurisdiction in criminal cases and also the partial clarification by the Second Circuit of the procedures applicable to prosecution of foreign sovereign owned enterprises. Zagaris discussed Bahrain’s return of a U.S. citizen to the U.S. to face charges of murdering his mother in Bahrain as well as an Italian court’s ordering four Egyptians to stand trial in the kidnapping and killing of an Italian student in Egypt. Zagaris wrote about a Spanish court’s ordering Banco de Chile to set aside $103 million for its role in money laundering from the Pinochet expropriations and about the EU Commission proposals for major revisions in its AML/CFT laws.
Recovery and Return of Cultural Property
On the recovery and return of cultural property, Zagaris discussed the German-Nigeria agreement on the return of Benin bronzes as well as the DOJ forfeiture action for 10th century statute looted from Cambodia, and the return by U.S. Homeland Security of hundreds of looted artifacts to Mali. Adhoob covered the U.S. return of looted artifacts to Iraq stolen after the U.S. invasion as well as the discussion between Met officials and U.S. investigators of returning to Cambodia artifacts stolen from ancient sites.
Transnational Organized Crime
On transnational organized crime, Plachta discussed the consequences and prospects for the UN (Palermo) Convention against Transnational Organized Crime on its 20th anniversary. Adhoob discussed the arrest by Italian police of suspected Black Axe members for fraud and other serious crimes. Boggess covered the international dark web bust operation DarkHunTOR following the dark market seizure by U.S. and EU law enforcement.
On international narcotics enforcement, transnational organized crime and corruption, Zagaris wrote about Mexico exonerating its ex-defense chief and enacting a law pausing enforcement cooperation with the U.S. Bannister wrote about the UN Commission on Narcotic Drugs’ vote to remove cannabis from the list of Schedule IV narcotics. Zagaris wrote about the U.S. detention of the wife of “El Chapo” and the guilty plea to violating the Kingpin Act by the daughter of the head of the Cartel Jalisco Nueva Generación. Hill and Hardy discussed a UN report targeting corruption and illicit cross-border finance. Kaufman covered ANOM, a global covert investigation conducted by law enforcement worldwide through an encrypted App, yielding 800 arrests. Zagaris wrote about Mexico’s suit in U.S. court in Florida to recover assets from former security chief linked to the Sinaloa cartel. Adhoob discussed the Italian police’s dismantlement of an international drug trafficking ring operated by the ‘Ndrangheta mafia clan.
International Environmental Enforcement
With respect to international environmental enforcement, Zagaris covered Kenya’s extradition of its citizen for trafficking rhino horns, elephant ivory, and heroin. Byrne discussed illicit ivory trafficking from Angola to Vietnam. Adhoob wrote about the S. African arrest of a hunter for illegal possession of rhino horns. Zagaris discussed how U.S. prosecutions of three wildlife trafficking violations show the rising incidence of these crimes.
Migration enforcement received significant focus. Byrne discussed the INTERPOL operation targeting human trafficking and migrant smuggling in approximately 24 countries. Adhoob covered the U.S. State Department’s 2021 trafficking in persons report and the impact of misinformation and Covid-19 on human trafficking. Adhoob also discussed a State Department’s lawyer’s resignation due to a Biden Administration policy on asylum Kaufman discussed the 5th Circuit’s decision rejecting the Biden Administration’s efforts to end Migration Protections Protocols. Plachta wrote about the EU’s responses to human smuggling in the Belarus border crisis.
International human rights and enforcement,
With respect to international human rights and enforcement, Plachta discussed the EU adoption of Magnitsky-type global human rights sanctions regime. Magliveras discussed the first application of sanctions under the EU’S Magnitsky Act on Russia. Zagaris wrote about Turkey’s arrest of an Iranian dissident’s coinciding with Freedom House’s transnational repression report as well as about the signing by 58 nations of a declaration against arbitrary detention of foreign and dual nationals. Botts wrote about OFAC’s naming three Bulgarians under the Global Magnitsky Act for corruption. Kaufman discussed how events in Haiti and C.A.R. show the threats posed by mercenaries to international peacekeeping. Adhoob covered ECOWAS’ demanding answers in the alleged detention of Mali’s former interim leaders as well as Qatar’s imprisoning a Kenyan for blogging about low-income Kenyan migrants work conditions in Qatar.
Extradition and Extradition Alternatives
Developments on extradition and extradition alternatives remained critical. Ramirez and Boggess wrote articles about the extradition of Venezuelan diplomat Alex Saab to the U.S., notwithstanding his claims of diplomatic immunity. Zagaris wrote several articles about the Assange extradition decisions by U.K. courts and the U.S. extradition of the father and son for helping Carlos Ghosn escape from Japan. Zagaris covered the S. African court’s overruling the Justice Minister in ruling the former Mozambique Finance Minister will be extradited to the U.S. rather than Mozambique.
Nemets discussed how the U.S. Immigration court’s handling of INTERPOL Red Notices and diffusions suggests a uniform approach. Estlund and Bromund summarized and assessed the 2019 changes in INTERPOL’s rules on the processing of data. Zagaris discussed the CJEU decision against detention for INTERPOL Red Notice due to ne bis in idem (dual criminality).
International Evidence Gathering
With respect to international evidence gathering, Jang discussed how the Gupta brothers’ corruption scandal invoked the ratification of a new mutual legal assistance and extradition treaty between S. Africa and the UAE. Adhoob covered the Netherlands’ funding the Iraq UNITAD witness protection program to promote accountability for crimes committed by ISIL.
Economic Integration and International Enforcement
Plachta contributed many articles on economic integration and international enforcement, including the European Parliament’s call for improvement of implement and application of the European Arrest Warrant (EAW), and the EU Court of Justice’s rejection of “automatic refusal” of EAWs issued by Polish authorities. Zagaris discussed the Eurojust’s new funding initiative for joint investigation teams. Scherer discussed the EU whistleblower protection directive the Jonathan Taylor extradition. Plachta covered the adoption by the Council of Europe of a resolution on political responsibility for corruption as well as the European Commission releases of three proposals to strengthen and enhance police cooperation across the EU.
On maritime piracy, Scherer discussed the shipping industry task force initiative against maritime piracy in the Gulf of Guinea. Adhoob discussed the Nigerian high court’s sentencing of 10 pirates for the hijack of a Chinese vessel.
With respect to international tribunals, Zagaris discussed the affirmation by the Appeals Chamber of the International Residual Mechanism for Criminal Tribunals of the conviction of Ratko Mladić’ for genocide, crimes against humanity and war crimes, as well as the closure of the Special Tribunal for Lebanon and how the closure raises questions about international tribunals.
International Sex Trafficking
Mr. Zagaris contributed articles on international sex trafficking, especially the U.S. and Canadian charges against the Canadian fashion tycoon Peter J. Nygard.
Online Child Sex Exploitation Abuse
With respect to online child sex exploitation abuse, Zagaris covered U.S. indictments and INTERPOL’s pursuit of international enterprises and individuals involved in online sexual exploitation. He wrote about the EU Justice & Home Affairs Council initiatives on the digital dimension of child sexual abuse.
Cybercrime continued to grow exponentially. Zagaris discussed cooperation between the EU and eight countries in taking down dangerous the malware EMOTET, the DOJ’s participation in global disruption of NetWalker ransomware, and Australia’s extradition of two defendants in an auto-subscribing cyber fraud scheme. Zagaris discussed the U.S. indictment against three N. Korean military hackers. Adhoob discussed the imposition by the Biden Administration of sanctions against Russia for alleged election interference and SolarWinds cyber hacks as well as the guilty plea of a crypto expert to assisting N. Korea evade sanctions. Zagaris covered U.S. sanctions against a Russian-owned crypto-exchange for ransomware activities as well as the U.S. indictment and sanctions against Iranians for cyber-enabled disinformation regarding the 2020 Presidential Campaign. Scherer wrote about cases involving the seizing illicit proceeds of and combating ransomware attacks. Zagaris covered the guilty plea by the director and promoter of BitConnect for its participative in a massive fraud conspiracy. Formaggi discussed China’s declaration of all cryptocurrency transactions illegal while the U.S. and EU prepared further crypto regulation. Zagaris discussed the arrests and seizures by 17 countries of alleged ransomware extortionists. Plachta covered the adoption by the Council of Europe of the Second Protocol to the Cybercrime (“Budapest”) Convention.
International Anti-trust Enforcement Cooperation
On international anti-trust enforcement cooperation, Zagaris discussed the DOJ’s Antitrust Division summary of its 2020 international achievements.
Export Control and Economic Sanctions
With respect to export control and economic sanctions, Boggess discussed the CEO quitting after the U.S. Commerce Department blacklisted Israeli spyware firm NSO Group. Zagaris wrote about the Mashreqbank settlement with OFAC, the Federal Reserve and NYDFS for violating the Sudan sanctions.
Illegal, Unregulated, and Unreported Fishing
With respect to illegal, unregulated, and unreported fishing, Adhoob wrote about Bolivia’s signing an MOU to strengthen compliance/transparency in the fishing industry.
Frank Vogl’s Book on Enablers Underscores the Link between Corruption and Democracy
The Enablers: How the West Supports Kleptocrats and Corruption – Endangering Our Democracy (Roman & Littlefield, 2021, ISBN-13: 978-1538162828, ISBN-10: 1538162822)
Frank Vogl, the co-founder and former vice-chairman of the leading global organization fighting corruption, Transparency International, and the chairman of another, the Partnership for Transparency Fund, discusses the role of enablers in facilitating corruption, especially cross-border corruption. He discusses the key roles the enablers play in serving kleptocrats in many countries, including Russia, China, Iran, Egypt, Hungary, and Nigeria. He describes the enormous sums of government funds that have been stolen and laundered on a rapidly rising scale into investments in the wealthiest Western nations with the help of firms like Goldman Sachs, Deutsche Bank, BNP-Paribas, and HSBC, alongside leading law firms, auditors, real estate brokers based in the world’s major financial centers.
Vogl, who served for 20 years as the international communications advisor to the Institute of International Finance (IIF), the leading association of the world’s largest banks, and who also served as the communications advisor to the Group of 30 (the association of former finance ministers and central bank governors), uses first-hand experiences to tell the stories that demonstrate that the leaders of our financial system are failing to work in the public interest – too many of their activities add wealth, and inevitably power, to Putin and his cronies in Russia, and to other leaders who work to undermine Western democracy and challenge its security. According to Vogl, greed and short-term profit maximization dominate banking culture today with dangerous consequences.
Vogl develops examples from across the world to call for far-reaching reforms: from reforming banking and the sovereign bond markets, to enacting new anti-corruption laws, and, most importantly, substantially increasing law enforcement. He argues that the chairmen and CEOs of major banks that are caught laundering billions of dollars should be held accountable. According to Vogl, EU authorities should step up financial regulation. He underscores the need to expose and counteract the excessive influence of the City of London’s leaders on preventing serious investigations and prosecutions of their entanglements with foreign kleptocratic clients.
Vogl argues that, if President Biden is to be credible in his strategy to strengthen democracy and contain authoritarianism, then he must not only increase U.S. leadership in fighting corruption abroad, but he must also act urgently to contain the enablers at home. This book explains why and how several reforms can obtain powerful bi-partisan political support.
Vogl calls for the need for political leadership and multilateral action in the G20 and other international networks and formal international organizations.
On November 15, 2021, Global Financial Integrity hosted a webinar was held on the book. Participating were: Frank Vogl; Tom Cardamone President and CEO, Global Financial Integrity, moderator; Raymond Baker Founder, Global Financial Integrity; Zoë Reiter Director of Civic Engagement, Project on Government Oversight; and Alexandra Gillies Advisor, Natural Resource Governance Institute. One of the themes of the webinar was the need to underscore and reform the erosion of transparency plaguing the United States government.
Vogl in his book and during the webinar underscore the potential importance of the Summit on Democracy. On December 9-10, 2021, President Biden will host the first of two Summits for Democracy, which will bring together leaders from government, civil society, and the private sector to set forth an affirmative agenda for democratic renewal and to tackle the greatest threats faced by democracies today through collective action.
They underscored the need for a transnational approach and discussed the interplay of corruption, financial regulation, and climate control. Global witness has issued several blog posts on the role of finance and climate control. See, e.g., https://www.globalwitness.org/en/blog/our-verdict-cop26-compromise-catastrophe.
For persons interested in the contemporary links in the United States and internationally between corruption and reform efforts, especially related to the financial aspects, this book provides some incisive perspectives and solutions.
International Dark Web Bust Operation DarkHunTOR Sees 150 Arrests in Follow-up to DarkMarket Seizure
On October 26, 2021, agencies in the U.S. and European Union (EU) announced the seizure of cash, virtual currencies, and goods, in addition to the arrests of 150 alleged suspects in a follow-up operation to the earlier takedown of dark web marketplace DarkMarket.
The operation, entitled Operation DarkHunTOR, came from a series of coordinated actions from government and law enforcement agencies in Australia, Bulgaria, France, Germany, Italy, the Netherlands, Switzerland, the U.K., and the U.S. The operation was carried out in the framework of the EU’s security initiative EMPACT, the European Multidisciplinary Platform Against Criminal Threats.
Operation DarkHunTOR and DarkMarket
Operation DarkHunTOR seized over €26.7 million in currencies, 45 firearms, and 234 kg of drugs, including amphetamine, opioids, and ecstasy pills. The operation builds upon previous efforts in recent years to dismantle DarkMarket — the world’s then-largest illegal online marketplace — which was taken down in a coordinated attack by Europol and government agencies based in Germany, Australia, Denmark, Moldova, Ukraine, the U.K., and the U.S. A press release from January 12, 2021, revealed that DarkMarket boasted nearly 500,000 users corresponding to, at the time of release’s currency rate, over €140 million. Out of these users, over 2,400 were sellers who managed over 320,000 transactions.
The initial operation against DarkMarket saw the arrest of an Australian citizen, the alleged operator of DarkMarket, near the German-Danish border. Subsequently, the investigation seized more than 20 servers in Moldova and Ukraine under the lead of two German agencies, the Koblenz Public Prosecutor’s Office and the German Federal Criminal Police. These servers provided crucial evidence for investigators and aided them in identifying the 150 alleged suspects arrested during Operation DarkHunTOR.
The initial seizure of DarkMarket and Operation DarkHunTOR mark an extensive coordination effort between countries on multiple continents and international law enforcement organizations. The two operations collectively spanned Europe, North America, and Australia in investigations across twelve countries. The resulting arrests of alleged suspects took place in eight countries, with the U.S. yielding the most suspects at 65 arrests.
Additionally, Italian law enforcement agents, acting separately from DarkHunTOR but in support of the operation, shut down the DeepSea and Berlusconi, two dark web marketplaces that yielded €3.6 million in cryptocurrencies when U.S. and Italian agents struck and arrested four alleged administrators.
Following the takedown of DarkMarket, Europol created a dedicated Dark Web Team in its European Cybercrime Centre (EC3). The EC3 later played a key role in facilitating information exchange under the Joint Cybercrime Action Taskforce at Europol’s headquarters in The Hague, the Netherlands. This information facilitation included making use of the evidence from criminal infrastructure seized in the original attack on DarkMarket.
Europol’s Deputy Executive Director of Operations, Jean-Philippe Lecouffe, noted in a comment on Operation DarkHunTOR that the point of the operation is “to put criminals operating on the dark web on notice: the law enforcement community has the means and global partnerships to unmask them and hold them accountable.” Though DarkHunTOR and the takedown of DarkMarket certainly have made a dent in dark web activities, both operations are also meant to play a significant role in deterring illicit activities on the dark web.
The efficacy of these kinds of operations is clear, but the persistence of dark web activity suggests that sellers on the dark web are able to use networks for short-term profit, abandoning them and changing tactics when law enforcement officials move against them. The obligatory usage of physical servers and traceable data, however, still leaves even the most secretive dark web marketplace vulnerable to penetration — that is, if law enforcement officials can track down where in the world the infrastructure is and who manages it.
Crypto Expert Plead Guilty to Assisting N. Korea Evade Sanctions
On September 27, 2021, the U.S. District Court in Manhattan announced that a U.S. citizen pled guilty to conspiring to aid Democratic People’s Republic of Korea (North Korea) evade economic sanctions through the use of financial technology to hide illegal transactions.
Crypto expert, Virgil Griffith, 38, pled guilty to conspiracy to violate the International Emergency Economic Powers Act and Executive Order 13466, a law that prohibits U.S. citizens from “exporting any goods, services, or technology to the DPRK without a license from the Department of the Treasury, Office of Foreign Assets Control (“OFAC”).” Griffith allegedly violated that law by engaging with North Korean officials, advising them on how to evade sanctions.
Virgil Griffith’s Aid to North Korea
Griffith alleged interactions with North Korea dates back to 2018 when he developed and funded cryptocurrency channels. He allegedly was aware that these platforms could financially help North Korea by dodging U.S. sanctions and funding illegal activities such as nuclear weapon development programs.
Then in April 2019, Griffith traveled to North Korea, even though the State Department did not give him permission to do, to give a presentation on blockchain and cryptocurrency at the “Pyongyang Blockchain and Cryptocurrency Conference” (the “DPRK Cryptocurrency Conference”). The presentation focused on how to use these services to evade sanctions and launder money. He mainly focused on “how blockchain technology such as ‘smart contracts’ could be used to benefit the DPRK, including in nuclear weapons negotiations with the United States.” Griffith and his co-conspirator allegedly answered questions and gave advice on the subject matter.
Even after the conference, Griffith continued to engage with North Korea. He aided in a cryptocurrency exchange between North Korea and South Korea – with full knowledge that such actions would violate the sanctions against South Korea. His actions were not authorized under the OFAC requirements.
The authorities caught up with Griffith in November 2019 and arrested him in Singapore.
Griffith’s sentencing hearing is set for January 2022; his charge carries a maximum of 20 years in prison.
Audrey Strauss, the United States Attorney for the Southern District of New York, praised the work of the Federal Bureau of Investigation and its New York Field Office, Counterintelligence Division, and thanked the U.S. Department of State’s Diplomatic Security Service, the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, the Department of Justice’s Office of International Affairs, and the Singapore Police Force for their assistance.”
The use of crypto assets has been one of the main mechanisms by which North Korea has tried to circumvent the United Nations and U.S. sanctions. Griffith’s actions in speaking at a conference and then helping the North Korean government in a crypto currency exchange platform clearly were prohibited without a license, for which Griffith did not apply. The plea and the facts indicate how difficult it is to implement effectively and enforce sanctions.
On September 21, 2021, the U.S. Department of Treasury sanctioned SUEX, a crypto currency exchange owned by a Russian and incorporated in the Czech Republic, which was allegedly processing ransomware payments. The U.S. and G7 governments have identified crypto exchange exchanges as one of the elements of the ecosystem of ransomware operatives, so prosecuting a person who has helped the North Korean government use crypto assets and crypto currency exchanges fits within that strategy.
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