IELR Blog

Official Blog of the International Enforcement Law Reporter

French Supreme Court Overturns Dismissal of Complicity for Crimes against Humanity against Lafarge in Syria

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On September 7, 2021, the French Supreme Court (Court of Cassation) overturned the decision of the Paris Court of Appeal, dismissing a charge of complicity in crimes against humanity against Lafarge, now part of Switzerland-listed Holcim.  After an internal investigation, Lafarge admitted that its Syrian subsidiary paid armed groups to protect its workers at its Syrian plant.

In 2019, a French appellate court dismissed the crimes against humanity charge.  It reasoned that Lafarge did not deliberately associate itself with those crimes.[1]

The French Supreme Court remanded the case so that magistrates can re-examine Lafarge’s request to dismiss the case.  Until now, French courts have not tried any French entity for crimes against humanity even though French courts have jurisdiction over such offenses.[2]   The  French  Criminal  Code  of  Procedure  (CCP) establishes  universal jurisdiction  over  specified  offenses  emanating  from  international  conventions ratified  by  France.[3]

Under  French  law,  crimes  against  humanity  are  generally  defined  according  to the  Rome  Statute, with some  difference.  For instance, the CCP  requires  that  a crime against  humanity  be  part  of  a concerted plan.[4]

The French prosecution accuses Lafarge of paying close to $15.3 million to jihadist groups, including the Islamic State (IS).[5]

In October 2016, the prosecution started after the French Ministry of Economy and Finance brought a complaint against Lafarge.

Thereafter, Lafarge started an internal investigation.  It learned that the Syrian subsidiary gave funds to third parties to arrange deals with various armed groups.[6]

In 2019, the Court of Appeal dismissed the crimes against humanity charge.  It reasoned that it accepted that the payments were not to help IS’s agenda of executions and torture.  Nevertheless, it ruled that the prosecutor could proceed on three other charges: financing terrorism, violating an EU embargo, and endangering the lives of others.[7]

In its decision the French Supreme Court explained “one can be complicit in crimes against humanity even if one doesn’t have the intention of being associated with the crimes committed.”

The Court reasoned that “Knowingly paying several million dollars to an organization whose sole purpose was exclusively criminal suffices to constitute complicity, regardless of whether the party concerned was acting to pursue a commercial activity.” [8]

Analysis

The significance of the Lafarge prosecution concerns two important issues: accountability of multinational enterprises operating in conflict zones for contributing financially to the perpetration of atrocities by terrorist groups or other entities;[9] and the responsibility of parent companies for the illegal activities of their subsidiaries abroad.[10]

In this regard, in 2017, France enacted the first “duty of vigilance” law in Europe.  It requires companies to prevent human rights abuses in their supply chains worldwide.  It obligates them to pay damages if they fail to do so.[11]

The case is also important for its illustration of how universal jurisdiction applies with respect to crimes against humanity.

Additional issues facing Lafarge are investigations in the United States.  The U.S. has imposed sanctions on Syria during the last ten years.  They include the regime of Syrian President Bashar a-Assad and terrorist groups, such as IS.   The internal investigation suggests the risks for U.S. sanctions are limited, partly since the improper payments were in cash and did not, to the company’s knowledge, enter the U.S. banking system.  Normally, multinational enterprises violating U.S. sanctions send U.S. dollars that are cleared in the U.S.[12]

The current issue of the IELR will have a more comprehensive discussion of the Lafarge case.

[1]    Sarah White, Court blocks Lafarge bid to scrap Syria crime against humanity charge, Reuters, Sept. 7, 2021.

[2]    Id.

[3]    Open Society Justice Initiative, Universal Jurisdiction  Law and Practice in France 4 (February, 2019), citing French Criminal Code,  Article 689.

[4]    Open Society Justice Initiative, supra, at 5.

[5]    AFP, French firm Lafarge loses bid to dismiss ‘crimes against humanity’ case in Syria, Sept. 7, 2021. www.france24.com.

[6]    AP, Lafarge charges of crime against humanity dropped on appeal but others remain, July 11, 2019, https://www.france24.om.

[7]    AFP, supra.

[8]    Id.

[9]    Madeline Young, Lafarge’s Case Cemented:  Holding Corporations Liable for Crimes against Humanity, Emory Int’l L. Review: Recent Developments, 1 (2021), citing Claire Tixeire et al, Holding Transnational Corporations Accountable for International Crimes in Syria:  Update on the developments in the Lafarge Case (Part II), Opinio Juris (July 27, 2020).

[10]   Young, supra.

[11]  Id., citing Tixeire et al, supra.

[12]  David Keohane and Ralph Atkins, Syrian operation: Lafarge faces probe over Isis payments, Financial Times, Mar. 7, 2018.

Illicit Enrichment Laws: Cutting Through the Terminology to Identify a Common Objective

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Andrew Dornbierer*, Asset Recovery Specialist, Basel Institute on Governance and author of the open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth.

Illicit enrichment laws are increasingly being recognised as a powerful tool to recover stolen assets. The subject of illicit enrichment, however, sparks more than its fair share of debate.

Even the most fundamental starting point of the subject – how to refer to it – creates discord. When Article 20 of the United Nations Convention Against Corruption (UNCAC) was in its drafting process, delegates struggled to agree on its title. While ‘Illicit Enrichment’ was the eventual winner, alternative names such as ‘Unlawful Enrichment,’ ‘Unexplained Wealth’ or the more dramatic-sounding option ‘Plunder’ were also thrown into the ring at different points.

This drafting process didn’t even cover all the possibilities. Today, depending on the jurisdiction, the concept of illicit enrichment may also be referred to as ‘illegal gains’ (e.g., Kuwait), the possession of ‘unexplained property’ (e.g., Botswana), the possession of ‘unaccounted property’ (e.g., Saint Lucia), ‘unjustified enrichment’ (e.g., Panama), ‘property deemed to be acquired illegally’ (e.g., Nepal) or even ‘liability for corrupt acquisitions’ (e.g., Seychelles).

Moving beyond the name, the actual definition of what can be regarded as ‘illicit enrichment’ (or the acquisition of unexplained wealth, etc.) leads to even further discord.

In theory, an obvious starting point to defining illicit enrichment would be the wording of the UNCAC, which describes illicit enrichment as:

‘…a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income’.

In reality, however, the description above does not accurately reflect how the concept of illicit enrichment has been interpreted, defined, and legislated .

For instance, while UNCAC requires legislation on the issue to target an ‘increase in assets’, many countries have viewed this interpretation as too narrow. Instead, legislators in these jurisdictions have interpreted illicit enrichment  changes in a person’s ‘standard of living’ (e.g., Bhutan), ‘train de vie’ (e.g., Senegal) or ‘modo de vida’ (e.g. São Tomé and Príncipe). This makes sense, as there are many more ways to enjoy an increase in wealth than just parking proceeds of crime in the form of assets.

The UNCAC article also only takes into account the enjoyment of wealth by ‘public officials,’ but legislators in many countries have also decided that this interpretation does not go far enough. For instance, in Rwanda, legislators felt that the offence should apply to ‘any person’ who has illicitly enriched themselves, not just public officials. Liability for illicit enrichment can even be extended to companies under the laws of Bolivia and Mali.

The UNCAC also requests that member states draft an illicit enrichment law in the form of a criminal offence, and this does not accurately reflect the different approaches that can be taken by countries to address and sanction someone for illicitly enriching themselves. While most countries have drafted an illicit enrichment offence, others such as Kenya have instead chosen to enact a civil mechanism through which illicitly acquired wealth can be seized and recovered. Fiji and Peru have even drafted concurrently existing illicit enrichment mechanisms that cover both civil and criminal avenues.

Consequently, in order to conduct a meaningful discussion on the topic and to identify global best practices regarding the investigation, prosecution, and adjudication of illicit enrichment and the drafting of illicit enrichment-focused laws, it is necessary to remember that individuals from different countries may have very different understandings of the concept based on their own domestic contexts.

It is equally important to cut through the varying terminology, the fluctuating scopes of application, and the differing legislative formats, and to just focus on the core objective of all illicit enrichment laws: to recover obviously disproportionate wealth that cannot be justified by reference to lawful income.

Regardless of whether a law refers to unexplained wealth, illicit enrichment, or even plunder, if the law allows a state to recover an amount of wealth from someone purely on the basis that it not been justified by reference their lawful income (and without the need to establish some sort of criminal activity) then any attempts to apply this law should be included in the broader discussion regarding methods to recover illicit enrichment.

Lawmakers and law enforcement officers seeking guidance on these laws – and how they have been drafted and applied differently throughout the world – can turn to the new book “Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth.” Published by the Basel Institute on Governance in June 2021, it is freely available online to read or download or at cost price for a printed copy.

*Andrew Dornbierer is an Asset Recovery Specialist with the Basel Institute on Governance’s International Centre for Asset Recovery. Andrew has worked with the Legal & Case Consultancy team within the Basel Institute’s International Centre for Asset Recovery (ICAR) since 2012. He has held positions in both Switzerland and Tanzania, where he was embedded for three years with Tanzania’s primary anti-corruption law enforcement agency, the Prevention and Combating of Corruption Bureau.

Andrew’s work with ICAR focuses on financial investigation strategies, illicit enrichment-focused case strategies, and international cooperation in corruption investigations.

Andrew was admitted as a lawyer of the Supreme Court of Western Australia in 2012.

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

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by Jamie Jang[1]

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

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

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

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

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

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

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

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

[1]              B.A., Rhodes College.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Corruption, Illicit Financial Activities, and Misuse of Shell Companies

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

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

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

Ransomware

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

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

Removing Forced Labor from Global Supply Chains

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

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

International Human Rights Concerns

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

Analysis

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

 

[1]   G7 Communique, paragr. 48.

[2]   G7 Communique, paragr. 51.

[3]    G7 Communique, paragr. 29.

Cryptocurrency Creates Potential Opportunity for both Ransomware Attacks and Agency Seizures

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By Austin Max Scherer[1]

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

Seizure of Ransom Payments

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

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

Biden Administration Responses

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

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

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

 

 

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

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

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

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

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

[11] Id.

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

[13] Id.

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

[15] Id.

[16] Nakashima, supra note 10.

[17] Benner and Perlroth, supra note 2.

[18] Id.

[19] Nakashima, supra note 10.

[20] Benner and Perlroth, supra note 2.

[21] Id.

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

[23] Id.

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

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Sara Kaufman[1]

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

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

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

 

Operation Trojan Shield

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

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

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

Results of the investigation

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

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

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

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

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

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

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

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

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

[4] Cheviron Aff. ¶ 9, supra.

[5] Cheviron Aff. ¶ 10, supra.

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

[7] Cheviron Aff. ¶ 13, supra.

[8] Id.

[9] Ben Westcott, supra.

[10] Cheviron Aff. ¶ 14, supra.

[11] Cheviron Aff. ¶ 19, supra.

[12] Cheviron Aff. ¶ 29, supra.

[13] Cheviron Aff. ¶ 14, supra.

[14] Ben Westcott, supra.

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

[16] Cheviron Aff. ¶ 20, supra.

FATF Starts New Project to Study and Mitigate the Unintended Consequences from Incorrect Implementation of Standards and Announces More Jurisdictions on its Black and Grey Lists

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On March 17, 2021, the Financial Action Task Force announced the start of a new project “to study and mitigate the unintended consequences resulting from the incorrect implementation of the FATF Standards.

Mitigation Project

The project started in February 2021 and will examine the following four areas

  • “De-risking, or the loss or limitation of access to financial services. This practice has affected non-profit organizations (NPOs), money value transfer service providers, and correspondent banking relationships, in particular;
  • Financial exclusion, a phenomenon whereby individuals are excluded from the formal financial system and denied access to basic financial services;
  • Suppression of NPOs or the NPO sector as a wholethrough non-implementation of the FATF’s risk-based approach;
  • Threats to fundamental human rightsstemming from the misuse of the FATF Standards or AML/CFT assessment processes to enact, justify, or implement laws, which may violate rights such as due process or the right to a fair trial.”

The FATF will conduct the project in two phases:

Phase One: research and engagement. The project will analyze these unintended consequences resulting from the misuse of the FATF’s Standards on preventing and combating money laundering and the financing of terrorism. This work will rely on the knowledge and experiences of members of the FATF’s Global Network of 205 jurisdictions, its observers, and outside stakeholders.

Phase Two: solutions. The second phase will develop options the FATF could consider to prevent and mitigate these unintended consequences.

According the announcement, the FATF welcomes input to inform this project, including scholarly research; industry and civil society perspectives; and documented instances of unintended consequences. Information may be sent to pscf@fatf-gafi.org.

The announcement states the project is an opportunity to study trends and propose solutions. Any information provided to the FATF Secretariat will be shared with the project team and the source will be identified.

New Lists of High-Risk Jurisdictions and Jurisdictions in Need of Increased Monitoring

On February 25, 2021, the FATF announced its list of High-Risk Jurisdictions (also commonly referred to as its “blacklist”) subject to a Call for Action (Iran and North Korea) and jurisdictions in need of increased monitoring (commonly referred to as its “grey list”).  The list has the following jurisdictions: Albania, Barbados, Botswana, Burkina Faso, Cambodia, Cayman Islands, Ghana, Jamaica, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Senegal, Syria, Uganda, Yemen, and Zimbabwe.

One of the problems with the list of high-risk jurisdictions is that they’ve been on the list now for many years and they are also on international and national sanctions list.  As a result, many banks and financial institutions will not process transactions, even ones that are for genuine humanitarian purposes due to the risk of large penalties.

Another practical problem is that jurisdictions on either list tend to also land on the European Union list of high-risk jurisdictions for money laundering (commonly referred to as its AML/CFT blacklist).

Although the FATF does not mandate the application of enhanced due diligence measures for jurisdictions under increased monitoring, it encourages member jurisdictions to take the listing into account when undertake their risk analysis. The measures to be applied will vary, but may result in: (a) a requirement to perform more comprehensive due diligence on the customer’s source of funds and source of wealth and/ or (b) increased internal controls on business acceptance and ongoing monitoring.

Practically speaking, regulators around the world take into account the listing as do the electronic databases used by financial institutions and intermediaries when they are on-boarding and reviewing clients for customer due diligence.  As a result, banks and financial institutions from the metropole tend to limit or terminate correspondent bank relationships (de-risking) and withdraw from having branches or subsidiaries in the jurisdictions, especially because the listed jurisdictions tend to be small jurisdictions.  The result is that persons and businesses in these jurisdictions increase higher costs to bank, especially internationally.  Ultimately, the listings lead to financial exclusion of the small jurisdictions and their inhabitants, even though many already experience a high degree of lack of access to formal financial markets.

The current issue of the IELR will have a more comprehensive discussion of the issues raised in this post.

ABA CJS Int’l Crim. Law Comite Speakers Will Discuss Developments in Int’l Law Enforcement, Esp. the Impact of COVID and US Sanctions on the ICC

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International Committee Mid-Year Double Header: (1) The Impact of COVID-19 on International Law Enforcement and (2) American Sanctions Relating to the International Criminal Court

At the CJS Committee on International Criminal Law Mid-Year meeting on Saturday, Feb. 20, 2021 from 3:45-515, there will be two short presentations.

Judith Friedman, a Senior Trial Attorney with the Criminal Division’s Office of International Affairs and winner of Norm Maleng Minister of Justice Award in 2020, will discuss Developments in International Law Enforcement, especially the impact of the Coronavirus”.

Kristin Smith, Esq., director of the Atrocity Crimes Initiative and Staff Attorney with ABA CJS, will discuss the US sanctions on the ICC and summarize the litigation (two cases: the OSJI v. Trump and the just filed Sadat v. Trump), as well as relevant ABA/ ICC Project activities and statements.

Below please find the ZOOM LINK for the International committee meeting: Saturday, February 20th  at 3:45 PM-5:15 PM Eastern Time.

Topic: International Committee Meeting (Please see attached for agenda)

Time: Feb 20, 2021 3:45 PM Eastern Time (US and Canada)

https://americanbar.zoom.us/j/98072937375?pwd=c2dTR2JudDF1OXNkS3FoV1NsUmF0UT09

Meeting ID: 980 7293 7375

Passcode: 422275

Also on the agenda are the following:

  1. Prior meeting – substantive presentation
  2. Committee Newsletter
  3. past issue
  4. new issue – call for contributions of articles and news
  5. Potential issues for programs
  6. international aspects of the Anti-Money Laundering Act of 2020
  7. decision of SDNY of Jan. 4 of US Dist. Court Judge Katherine Polk Failla, enjoining US sanctions against persons associated with the ICC
  8. Annual ABA Convention: potential program on extradition
  9. Other substantive developments and policy issues

The meeting is open to non-Committee members.

 

 

Congress Passes Anti-Money Laundering Act over President’s Veto

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On January 1, 2020, the Senate voted to override President Trump’s veto of the annual military policy bill (the National Defense Authorization Act – NDAA).  Division E of the Act is the Anti-Money Laundering Act of 2020 (the AMLA or Act), which contains a number of international enforcement elements.  This post discusses selected international enforcement aspects, except for the beneficial owner/entity transparency provisions that were discussed in the December 2020 issue of the International Enforcement Law Reporter.

Increased Authority to Issue and Enforce Correspondent Account Subpoenas

The Act increases the ability of the Department of Justice (DOJ) and Treasury’s authority to issue and enforce correspondent account subpoenas under 31 U.S.C. § 5318(k).  Before, the DOJ and Treasury could issue such subpoenas to any foreign bank with a correspondent account in the United States and could “request records related to such correspondent account.”[1]  The Act widens this authority to permit DOJ to request “any records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States,” if the records are the subject of an investigation concerned a violation of U.S. criminal laws, a violation of the Bank Secrecy Act (BSA), a civil forfeiture action, or a Section 5318A investigation.[2]

If a foreign financial institution does not comply, the Act authorizes the Attorney General to seek contempt sanctions from a court, and the Attorney General or Secretary of the Treasury may direct covered U.S. financial institutions to end their correspondent relationships with the non-compliant foreign financial and impose penalties on those institutions that fail to do so.[3]

Pilot Project to Share SAR Information Internationally

FinCEN has promulgated guidance allowing sharing of Suspicious Activity Reports (SARs) information internationally with foreign parent organizations or U.S. affiliates in other countries.[4]   The Act requires the Treasury within one year after the enactment of legislation to issue rules that establish a pilot program for financial institutions to share information related to SARS “with the institution’s foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks.”[5]

The Act allows the Secretary of the Treasury to prohibit sharing with certain jurisdictions, such as state sponsors of terrorism, states subject to sanctions imposed by the U.S. government, or those the Secretary has determined cannot reasonably protect the security and confidentiality of such  information.[6]

Provisions on Cryptocurrency and Antiquities Dealers, Advisors, and Consultants

The Act adds to the definition of financial institution and money transmitting businesses under the BSA, which are subject to anti-money laundering due diligence, businesses engaged in the exchange of transmission of “value that substitutes for currency.” [7]   The Act also expands the definition of financial institution to include antiquities dealers, advisors, and consultants.

The Act requires Treasury to prepare a study within one year that evaluates money laundering and terrorist financing through the art trade, including the markets that should be subject to regulation, the extent to which the regulations, if any, should target high-value trade in works of art, and “the need, if any, to identify persons who are dealers, advisors, consultants, or any other persons who engage as a business in the trade in works of art.”[8]

Foreign Financial Intelligence Unit Liaisons (FFIUL)

  • 6108 of the Act requires the appointment of not more than six FFIULs, co-located in a U.S. embassy, U.S., or a foreign government facility, among other things, to facilitate capacity building and outreach on AML/CFT regulatory and analytical frameworks; and coordinate with representatives of the DOJ at US Embassies.[9]

International Coordination

  • 6112 of the Act requires the Secretary of the Treasury to work with foreign counterparts, including bilateral contacts, the Financial Action Task Force, the IMF, the World Bank, the Egmont Group of FIUs, the OECD, the Basel Committee on Banking Supervision, and the UN, to promote stronger AML frameworks.

Financial Services De-Risking

  • 6213 of the Act states Congress supports effective measures to stop the flow of illicit funds and promote AML/CFT and sanctions goals, and AML/CFT and sanctions policies that do not unduly hinder or delay the efforts of legitimate humanitarian organizations to fulfill the needs of humanitarian crisis, prevent or alleviate human suffering. § 6213(c) requires the GAO to conduct a de-risking analysis and evaluate the effect of AML/CFT on individuals and entities, including charities, embassy accounts, money-service businesses, and correspondent banks that have been subject to categorical de-risking by financial institutions operating in the U.S. and or otherwise have difficulty accessing or maintaining certain financial services in the U.S. and evaluate the consequences of financial institutions de-risking entire categories of relations with individuals and entities mentioned above in this section. The GAO should propose changes to those requirements resulting in de-risking.

GAO Study on Fighting Illicit Networks and Detecting Human Trafficking and Drug Trafficking

  • 6504(c) of the Act requires the GAO to study how a range of payment systems and methods, including virtual currencies in online marketplaces, are employed to facilitate human trafficking and drug trafficking.

Treasury Study and Report on Trade-Based Money Laundering

  • 6505 of the Act requires Treasury to conduct a conduct a study, in consultation with appropriate private sector stakeholders, academic and other international trade experts, and Federal agencies, on trade-based money laundering and proposed strategies to combat trade-based money laundering.

Treasury Study and Strategy on Money Laundering by the PRC

  • 6506 of the Act requires the Treasury to conduct a study, relying substantially on information obtained through the trade-based money laundering analyses of the GAO, on, inter alia, the extent and effect of illicit finance risk relating to the PRC Government and Chinese firms, and a strategy to counter Chinese money laundering.

Treasury Study on Efforts of Authoritarian Regimes to Exploit the Financial System of the U.S.

  • 6507 of the Act requires the Treasury Secretary and Attorney General, in consultation with the heads of other relevant national security, intelligence, and law enforcement agencies, to conduct a study for Congress on how authoritarian regimes in foreign countries and their proxies use the financial system of the U.S., inter alia, to: “(1) conduct political influence operations; (2) sustain kleptocratic methods of maintaining power; (3) export corruption; (4) fund nongovernmental organizations, media organizations, or academic initiatives in the United States to advance the interests of these regimes; and (5) otherwise undermine democratic governance in the United States and the partners and allies of the United States.” The study should make recommendations for legislative or regulatory action, or regulatory action, or steps to be taken by U.S. financial institutions that would address exploitation of the financial system of the U.S. by foreign authoritarian regimes.

Kleptocracy Assets Recovery Reward Act

  • § 9701-03 of Division H of the NDAA establishes the Kleptocracy Asset Recovery Rewards Program in the Department of the Treasury, and authorizes appropriations for the purpose of paying rewards under the program.

Combating Russian Money Laundering

  • § 9711-9714 of Division H of the NDAA requires a report if the Secretary of the Treasury determines that certain institutions, transactions, or money laundering activities require domestic financial institutions or domestic financial agencies to take special measures described in 31 U.S.C. § 5318A(b), and permit implementation of such special measures.  These provisions would enable Treasury to impose special measures on transactions emanating from Russia, certain Russian financial institutions, and/or certain categories of transactions.

The current issue of the IELR will have a more comprehensive discussion of the AMLA and related provisions.

[1]    31 U.S.C. § 5318(k)(3)(A).

[2]    AMLA, § 6308 (31 U.S.C. § 5318(k)(3)(A)(i) as revised).

[3]    AMLA, § 6308 (31 U.S.C. §5318(k)(D), as revised).

[4]    FinCEN, FIN-2010-G006, Sharing Suspicious Activity Reports by Depository Institutions with Certain U.S. Affiliates (Nov. 23, 2010), https://www.fincen.gov/sites/default/files/shared/fin-2010-g006.pdf.  FinCEN, Interagency Guidance on Sharing Suspicious Activity Reports with Head Offices and Controlling Companies, January 20, 2006 https://www.fincen.gov/resources/statutes-regulations/guidance/interagency-guidance-sharing-suspicious-activity-reports.

[5]    AMLA, § 6212 (adding 31 U.S.C. § 5318(g)(8)(B)(i).

[6]    AMLA, §6212 (adding 31 U.S.C. § 5318(g)(8)(C).

[7]    AMLA, § 6102(d).

[8]    AMLA, § 6111(e).

[9]    AMLA, § 6108, adding  31 U.S.C. § 310(h).

Conference: Indigenous Rights and Extractive Industries in the Amazon

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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)

Disclaimer

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

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