Transnat'l Corruption, Money Laundering & Asset Forfeiture Archives | Page 5 of 9

EU Publishes AML/CFT Action Plan

May 8, 2020 by Bruce Zagaris Leave a Comment

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

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

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

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

Six Pillars of the Action Plan

The six pillars are as follows:

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

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

Updated List

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

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

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

Background

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

Analysis

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

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

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

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

April 16, 2020 by Bruce Zagaris Leave a Comment

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

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

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

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

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

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

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

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

U.S. Appropriations Bill Carries More Sanctions and Asset Recovery on the Maduro Regime

December 17, 2019 by Bruce Zagaris Leave a Comment

By Bruce Zagaris and Dale Eppler

The House-Senate Appropriations bill, which is expected to pass this week, has several provisions on Venezuela (at around page 1270 in the 1783 page text), including a new requirements on asset recovery and coordination of economic sanctions with other countries. In April, Senator Robert Menendez (D-N.J.) introduced the “Venezuela Emergency Relief, Democracy Assistance, and Development (VERDAD) Act of 2019 with broad bipartisan support. It directs a new strategy for Venezuela in coordination with Congress, and earmarks substantial funds to support it. We understand there also were very high level meetings in the Executive branch during the past week on Venezuela but, thus far, no word from the White House on any change in the direction of U.S. policy.

The language in the bill is as follows:

Subtitle E—Supporting the 8 Reconstruction of Venezuela

SEC. 151. RECOVERING ASSETS STOLEN FROM THE VENEZUELAN PEOPLE.

(a) RECOVERING ASSETS. —The President, acting through the Secretary of State and in consultation with the Secretary of the Treasury, shall advance a coordinated international effort—

(1) to work with foreign governments—

(A) to share financial investigations intelligence, as appropriate;

(B) to block the assets identified pursuant to paragraph (2); and

(C) to provide technical assistance to help governments establish the necessary legal framework to carry out asset forfeitures; and

(2) to carry out special financial investigations to identify and track assets taken from the people and institutions of Venezuela through theft, corruption, money laundering, or other illicit means.

(b) STRATEGY REQUIREMENT.—

(1) IN GENERAL.—Not later than 180 days after the date of the enactment of this Act, the President, acting through the Secretary of State and in consultation with the Secretary of the Treasury, shall submit a strategy for carrying out the activities described in subsection (a) to Congress.

(2) ADDITIONAL ELEMENTS.—The strategy required under paragraph (1) shall—

(A) assess whether the United States or another member of the international community should establish a managed fund to hold the assets identified pursuant to subsection (a)(2) that could be returned to a future democratic government in Venezuela; and

(B) include such recommendations as the President and the Secretary of State consider appropriate for legislative or administrative action in the United States that would be needed to establish and manage the fund described in subparagraph (A).

Subtitle F—Restoring the Rule of Law in Venezuela

SEC. 161. DEVELOPING AND IMPLEMENTING A COORDINATED SANCTIONS STRATEGY WITH PARTNERS IN THE WESTERN HEMISPHERE AND THE EUROPEAN UNION.

(a) STRENGTHENING SANCTIONS CAPACITY IN LATIN AMERICA AND THE CARIBBEAN.—The Secretary of State, in consultation with the Secretary of the Treasury, shall offer to provide technical assistance to partner governments in Latin America and the Caribbean to assist such governments in establishing the legislative and regulatory frameworks needed to impose targeted sanctions on officials of the Maduro regime who—

(1) are responsible for human rights abuses;

(2) have engaged in public corruption; or

(3) are undermining democratic institutions and 18 processes in Venezuela.

(b) COORDINATING INTERNATIONAL SANCTIONS.

— The Secretary of State, in consultation with the Secretary of the Treasury, shall engage in diplomatic efforts with partner governments, including the Government of Canada, governments in the European Union, and governments in Latin America and the Caribbean, to impose targeted sanctions on the Maduro regime officials described in subsection (a).

(c) STRATEGY REQUIREMENT.—Not later than 90 days after the date of the enactment of this Act, the Secretary of State, in consultation with the Secretary of the Treasury, shall submit a strategy for carrying out the activities described in subsection (a) to: (1) the Committee on Foreign Relations of the Senate; (2) the Committee on Appropriations of the Senate; (3) the Committee on Banking, Housing, and Urban Affairs of the Senate; (4) the Committee on Foreign Affairs of the House of Representatives; (5) the Committee on Appropriations of the House of Representatives; and (6) the Committee on Financial Services of the House of Representatives.

It is not clear yet how the executive branch, working with Congress, will implement the proposed sanctions and asset recovery program. We expect Treasury and State will lead the coordination with other governments. Presumably, the U.S. and its partners will furnish technical assistance to smaller jurisdictions in the region that are willing to help them find, freeze, and even forfeit assets that are the proceeds of crime. Until now, one potential challenge is that some small jurisdictions, especially those that have maintained friendly relations with Chavez and Maduro, and that benefited from PetroCaribe, do not want to take steps inimical to the Maduro regime. Another problem is that governments are much better at freezing accounts than they are at identifying and tracking the proceeds of corruption.

The next issue of the IELR will have a more comprehensive discussion of the provisions.

Professor of Latin American Narcotics and Money Laundering Indicted for Money Laundering

November 19, 2019 by Bruce Zagaris Leave a Comment

On November 18, 2019, the U.S. Attorney for the Southern District of New York announced the arrest of Professor Bruce Bagley of the University of Miami on charges of conspiracy to commit money laundering and money laundering. The indictment alleges that Bagley participated in a conspiracy to launder the proceeds of graft and corruption in connection with public works projects in Venezuela.

In particular, the indictment alleges that in November 2016, Bagley on behalf of Bagley Consultants, Inc, a company Bagley and his wife incorporated in 2005, opened a bank account. Between November 2016 and November 2017, the account had minimal activity. In November 2017, the account started receiving monthly deposits of hundreds of thousands of dollars from bank accounts located in Switzerland and the United Arab Emirates. Each month, Bagley would receive a deposit of approximately $200,000 from one of the overseas accounts into his corporate account. Thereafter, he would withdraw approximately 90 percent of the funds in the form of a cashier’s check, payable to an account held by another individual, an unnamed Colombian individual who helped him to move the money.

Between November 2017 and October 2018, his corporate account received approximately $2.5 million from the two overseas accounts. The Colombian individual to whom the overseas accounts belonged discussed the fact that they were moving another individual’s funds and that the funds represented the proceeds of foreign bribery and embezzlement stolen from the Venezuelan people. In addition to continuing to receive the money, Bagley entered into sham contracts purporting to justify the transfer of the funds belonging to an apparent Venezuelan person into the Colombian’s account.

In October 2018, a bank closed the account of Bagley Consultants, Inc. for suspicious activity. On December 2018, Bagley provided the Colombian individual with information for a new bank account in order to transfer additional money belong to the Venezuelan person. On two occasions, Bagley received funds into the new account after the Colombian individual allegedly told Bagley that the funds represented the proceeds of bribery and public corruption. Bagley transferred most of the funds to the Colombian individual and retained approximately 10 percent as a commission for his services.

Bagley, 73, is a professor of international studies with publication credits, including the book Drug Trafficking, Organized Crime, and Violence in the Americas Today.

The case shows the utility of the unnamed bank, making a suspicious activity report, which apparently led to the investigation and indictment. The case also illustrates the desperate efforts of people in Venezuela to move money, especially alleged proceeds of corruption.

The current issue of the IELR will have a more comprehensive article on this matter.

U.S. and U.K. Sign Cross-Border Data Access Agreement for Cross-Border Enforcement and Warn Facebook on Proposed Encryption

October 4, 2019 by Bruce Zagaris Leave a Comment

On October 3, 2019, the United States and United Kingdom concluded the first ever CLOUD Act Agreement. It will permit U.S. and British law enforcement agencies, with appropriate authorization, to demand electronic data concerning serious crime, including terrorism, child sexual abuse, and cybercrime, directly from tech companies based in the other country, without legal barriers. Simultaneously, both governments and Australia’s Minister for Home Affairs published an open letter to Facebook, asking it to stop plans to implement end-to-end encryption across its messaging services

The CLOUD Act Agreement

The agreement will broadly remove restrictions for a wide category of investigations, not targeting residents of the other country, and assure providers that disclosures through the Agreement are compatible with data protection laws. Each signatory commits to obtain permission from the other before using data gained through the agreement in prosecutions concerning a Party’s essential interest – specifically, death penalty prosecutions by the U.S. and U.K. cases implicating freedom of speech.

The agreement will accelerate investigations by removing legal barriers to timely and effective collection of electronic evidence. The Agreement allows law enforcement, when armed with appropriate court authorization, to directly compel tech companies based in the other country to give access to their electronic data, rather than going through governments, which can take many months and even years.

The agreement will accelerate dozens of complete investigations into suspected terrorists and pedophiles.

The U.S. will have reciprocal access, under a U.S. court order, to data from U.K. communication service providers. All requests for access to data will be subject to independent judicial authorization or oversight.

In March 2018, Congress passed the CLOUD Act, authorizing the U.S. to conclude bilateral executive agreements with rights-respecting partners that remove each party’s legal barriers to the other party’s access to electronic data for certain criminal investigations. The enactment in the U.K. of the Crime (Overseas Production Orders) Act 2019, which received Royal Assent in February of this year, authorized the U.K. to conclude the agreement

U.K. and U.S. Ask Facebook to Stop Plans to Encrypt Messaging Services

The U.K. Home Secretary Priti Patel, U.S. Attorney General William P. Barr, Acting U.S. Homeland Security Secretary Kevin McAleenan, and Australia’s Minister for Home Affairs Peter Dutton sent an open letter to Facebook, expressing serious concerns with Facebook’s plans to implement end-to-end encryption across its messaging services.

The letter asks Facebook to stop the proposals, unless the company can give assurances that no reduction will occur in Facebook’s ability to keep its users safe and enable law enforcement access to content in exceptional circumstances in order to protect the public.

Analysis

The U.K.-U.S. CLOUD Act Agreement opens the door for the U.S. and the European Union to conclude a CLOUD Act Agreement. The two parties are currently negotiating such an agreement.

The current issue of the IELR will have more information on the U.S.-UK Agreement and the open letter to Facebook.

8 Senators Introduce ILLICIT CASH Act to Improve Corporate Transparency and International Aspects of AML and CFT

September 27, 2019 by Bruce Zagaris Leave a Comment

On September 26, 2019, Senate Banking Committee members, U.S. Sens. Mark R. Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL), Mike Rounds (R-SD), Bob Menendez (D-NJ), and John Kennedy (R-LA), Catherine Cortez Masto (D-NV), and Jerry Moran (R-KS) today introduced bipartisan legislation to improve corporate transparency, strengthen national security, and help law enforcement combat illicit financial activity being carried out by terrorists, drug and human traffickers, and other criminals.

This post highlights the major provisions in the bill and then the international provisions.

The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act (S.2563) would, for the first time, require shell companies to disclose their true owners to the U.S. Department of Treasury. It would also update decades-old anti-money laundering (AML) and combating the financing of terrorism (CFT) policies. The bill provides Treasury and law enforcement new tools they need to fight criminal networks. This includes improving overall communication between law enforcement, financial institutions, and regulators, and facilitating the adoption of critical 21st century technologies.

Salient Provisions

Specifically, this legislation would:

Establish federal reporting requirements mandating that all beneficial ownership information be maintained in a comprehensive federal database, with strict privacy protections, accessible by federal and local law enforcement. (Sec. 401) and expand FinCEN geographic targeting order authority to commercial real estate (Sec. 402).

Help recruit and retain top talent at the Financial Crimes Enforcement Network (FinCEN) by putting employees on a pay scale comparable to that of federal financial regulators. (Sec. 102)

Create a hub of financial expert investigators at FinCEN to investigate potential AML-CFT activity in collaboration with federal government agencies. (Sec. 103).

Facilitate communications between the Treasury and financial institutions by establishing a Treasury financial institution liaison to seek and receive comments regarding AML-CFT rules, regulations, and examinations. (Sec. 104)

Require the Department of Justice (DOJ) to provide the Treasury Department with metrics on the usefulness of AML-CFT data from financial institutions for law enforcement purposes, as well as data on the past and current trends identified by DOJ in the AML-CFT landscape. (Sec. 201)

Require law enforcement to coordinate with financial regulators to provide periodic feedback to financial institutions on their suspicious activity reports. (Sec. 202)

Prioritize the protection of personally identifying information while establishing a clear path for financial institutions to share AML-CFT information for the purposes of identifying suspicious activity. (Sec. 303)

Ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of “coins and currency” to include digital currency. (Sec. 308)

International Provisions

Some of the provisions are designed to strengthen the international aspects of AML/CFT laws:

Prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce records in a manner that establishes their authenticity and reliability for evidentiary purposes, and compelling them to comply with subpoenas. This legislation would also authorize contempt sanctions for banks that fail to comply and increase penalties on repeat BSA violators. (Sec. 306);

Start a pilot program for information sharing between a financial institution and its foreign branches and affiliates that are located in OECD jurisdictions (Sec. 305).

Require the Treasury to work with foreign counterparts, including through the Financial Action Task Force, the International Monetary Fund, the World Bank, and the United Nations, to promote stronger AML frameworks and enforcement of AML laws.

Require the Treasury Department to carry out a study on the extent and effect of illicit finance risk relating to the Government of the People’s Republic of China and to develop a strategy to combat money laundering through Chinese firms.

Require the Treasury Department to conduct a study and submit to Congress a report that considers how authoritarian regimes in foreign countries and their proxies use the financial system of the U.S. and to conduct political influence operations, sustain kleptocratic regimes, export corruption, and otherwise undermine democratic governance in the U.S.

A section-by-section analysis of this bill is available here. A one-pager is available here.

A press release from Senator Warner’s office is available.

EIA’s Reports on Ghana’s Illicit Rosewood Trade Triggers Action from Ghana Government

September 4, 2019 by Bruce Zagaris Leave a Comment

On September 4, 2019, the Environmental Investigation Agency welcomed two investigations recently started in Chana with respect to the illegal rosewood trade from Ghana to China.

The EIA announced plans to release data every month showing the value and volume of rosewood declared as imported to China from Ghana.

Ghanaian Government Investigations

On August 26, 2019, the Ghanaian Minister for Lands and Natural Resources announced the establishment of the “Committee to investigate Allegation of Corruption in Rosewood Trade in Ghana.” The Committee will thoroughly investigate the rosewood sector and propose remedial actions.

EIA also welcomed the decision of the Office of the Special Prosecutor to investigate ongoing corruption and collusion in the rosewood sector in Ghana. EIA said it can provide video, audio, and photographic evidence to the Special Prosecutor to aid the investigation.

EIA said it is willing to help the Committee and Special Prosecutor to examine what appears to be large scale and systemic misdeclaration of timber exported by Ghana. In this regard, in 2017, the United Nations Comtrade Database shows China reports the import of 146,122 cubic meters of timber for a value of US$91.3 million from Chana, while Ghana reported the export of only 14,627 cubic meters of timber for a value of US14.6 million to China.

EIA Report on the Illegal Rosewood Trade in Ghana

The decision by the Ghanaian government to start investigations results from the publication on July 30 by EIA of BAN-BOOZLED: How Corruption and Collusion Fuel Illegal Rosewood Trade in Ghana. The report finds powerful Chinese and Ghanaian traffickers, with the help of ruling party members and complicity at all levels of the government, have established an institutionalized scheme, fueled by bribes, to conceal the illegal harvest, transport, export, and CITES-licensing of the timber.

The EIA report concludes fraudulent use of “salvage permits,” misdeclaration of timber species, use of “escorts” to deal with control points, forging of official documents, and retrospective issuance of CITES permits, are among the mechanisms used to conduct the illegal timber harvesting and trade.

According to the EIA report, Ghana is about to become the first African country and the second in the world, to issue Forest Law Enforcement Governance and Trade (FLEGT) timber licenses under its Voluntary Partnership Agreement (VPA) with the European Union (EU). This will enable timber with a FLEGT license to automatically be considered compliant with the EU Timber Regulation (EUTR) and allowed into the EU market without the due diligence usually required from importers.

Although Ghana has imposed a ban on the harvest of rosewood, intermittent suspensions of the ban have occurred allegedly to permit a few companies to “salvage” abandoned, already logged rosewood. In practice, the suspensions have allowed the illegal harvest and export to continue unabated.

EIA has used undercover investigators who have talked to traders, loggers and agents. EIA learned that the bribes paid to government officials enable the illegal transporting of rosewood through the issuance by local Forestry Commission offices of “conveyance certificates.”

According to the EIA report, Ghana is about to receive up to $50 million in payments for verified emission reductions, following the recent conclusion of an Emission Reductions Payment Agreement (ERPA) with the World Bank under the Forest Carbon Partnership Facility (FCPF).

EIA Recommendations

EIA recommends:

“1. A thorough investigation into corruption and collusion in the government, the Forest Commission and customs administration, and dismantling of the institutionalized illegal logging and trade networks;

Deployment of strict enforcement cooperation between Chinese and Ghanaian authorities to implement the export ban and the CITES regulations, with the direct involvement of the CITES Secretariat;
Regional adoption of a zero export quota for Pterocarpus erinaceus by West African range States until the CITES Appendix II requirements for legal and sustainable trade are met and publicly available;
Immediate inclusion of effective public transparency mechanisms in the timber sector with the participation of Ghanaian civil society and monitoring by a body fully independent of the Forestry Commission.

The report also calls into question whether the EU and World Bank have sufficient accountability and compliance mechanisms to ensure Ghana meets the standards for which the EU is providing access to its market and for which the World Bank is about to provide financing and positive recognition to Ghana for supposedly conforming to reducing emissions from deforestation and forest degradation, forest carbon stock conservation, the sustainable management of forests, and the enhancement of forest carbon stocks in developing countries (activities commonly referred to as REDD+).

The current issue of the IELR will have a more comprehensive article on developments in Ghana.

FinCEN Starts Global Investigations Division

August 29, 2019 by Bruce Zagaris Leave a Comment

On August 28, 2019, the Financial Crimes Enforcement Network (FinCEN) announced the start of its Global Investigations Division (GID), which will have responsibility to implement targeted investigation strategies based on FinCEN’s unique authorities under the Bank Secrecy Act (BSA) to combat illicit finance threats and related crimes, both domestically and internationally.[

FinCEN Director Kenneth A. Blanco announced that Matthew Stiglitz, a former Principal Deputy Chief in the United States Department of Justice’s Criminal Division with 24 years as a state and Federal prosecutor, will head GID.

According to the press release, GID will leverage FinCEN’s BSA authorities, including Section 311 of the USA PATRIOT Act, to investigate and target terrorist finance and money laundering threats. GID will work more closely with foreign counterparts to coordinate actions against such threats when appropriate.

Before the creation of GID, the former Office of Special Measures (OSM), which was previously a part of FinCEN’s Enforcement Division, provided the investigative resources. In recent years FinCEN’s strategic use of its Section 311 authority as well as its other information collection authorities, such as the geographic targeting order and foreign financial agency regulation authorities, have significantly grown in recent years. Now FinCEN will have one division that concentrates on achieving these goals.

GID will use FinCEN’s authorities to detect and deter a broad range of potential threats to the United States national security and financial system, including ones that are connected to the proliferation of weapons of mass destruction, rogue state actors, transnational organized crime, international narcotics trafficking, and terrorism.

Just at the end of August, FinCEN and OFAC have focused on Dominican Republic narcotics kingpins and Chinese importers of fentanyl. In addition, FinCEN has issued an advisory to financial institutions on illicit financial schemes and methods related to the trafficking of fentanyl and other synthetic opioids.

FinCEN is focused on stopping the proliferation of weapons of mass destruction, especially as North Korea and Iran.

Until now, FinCEN has utilized its power to designate foreign financial institutions as being “of primary money laundering concern” judiciously. However, when banks and financial institutions in the European Union countries of Latvia, Cyprus, and Andorra, have been involved in illicit finance threat activities, FinCEN has investigated and subjected them to Sec. 311 while the EU has not had the capacity to act.

The increase of FinCEN international authority comes at a time when the OECD has downgraded the U.S. on exchange of information, transparency of entity, and regulation of gatekeepers. The downgrades have diminished the capacity of the U.S. Department of Justice and Treasury to respond to foreign requests. In addition, the increased capacity of FinCEN’s international authority occurs at a time of disengagement by the United States government with the United Nations, the G7 and G20. However, since the press release states GID “will work more closely with foreign counterparts to coordinate actions against such threats when appropriate,” foreign law enforcement authorities and international organizations will certainly welcome such an outreach, although some may wonder and test the condition of “when appropriate”.

OECD and IBA Issue Report on Proper Roles of Lawyers and International Commercial Structures

June 26, 2019 by Bruce Zagaris Leave a Comment

On May 31, 2019, the International Bar Association and the Secretariat of the Organization for Economic Co-operation and Development published a Report of the Task Force on the Role of Lawyers and International Commercial Structures.

The Report observes that lawyers’ professional obligations and clients’ rights are regulated by domestic laws and regulations, and/or ethical and deontological codes. The Task Force states that there are certain key principles that should apply in this context in order to balance between the rights of, and duties to, the client on the one hand and a lawyer’s other professional or legal duties on the other. The Report sets forth seven principles without prejudice to the rule of law and related legal conventions, a lawyer’s duty of confidence and laws relating to privilege.

The Task Force recommends the Statement of Principles to national bar associations and law societies with a view to encouraging them to adopt the principles and engage with their governments to explain the role of the principles in ensuring the proper administration of justice and in upholding the rule of law. The sponsors also published an executive summary of the report

The Task Force advocates that, where the Principles are adopted and become part of domestic law and/or professional regulations, their disregard should result in the application of proportionate disciplinary measures, including, where appropriate, disbarment, recognized also in foreign jurisdictions.

Principle 1: Non-facilitation of illegal conduct – Although a lawyer may be unwittingly associated with illegal conduct, including financial crimes, a lawyer should not facilitate illegal conduct, and should undertake the necessary due diligence to avoid doing so inadvertently.

Principle 2: Misuse of the duty of confidence and privilege. Notwithstanding the lawyer’s duty of confidence to a client and the concept of legal professional privilege, a lawyer should not use the confidential nature of the lawyer-client relationship or the principles of legal professional privilege to shield wrongdoers. A lawyer should give due and proper consideration to refraining from acting for a client if the lawyer is aware of, or has reasonable grounds to believe, that the primary purpose of the retainer is to permit the client to be able to rely on the confidential nature of the lawyer-client relationship or privileged communication) so as to permit or encourage the client to engage in illegal conduct.

Principle 3: Client due diligence. A lawyer should undertake and document all reasonable and proportionate inquiries in order to identify and verify a client, as well as identify any ultimate beneficiary of the conduct or transaction, the origin of the funds for the transaction (consistent with applicable anti-money laundering or counterterrorism financing legislation), the substantive nature of the conduct or transaction (including expected revenue and taxation consequence of the transaction) and, subject to Principle 5, be satisfied that the conduct and/or transaction is legal in the lawyer’s jurisdictions.

Principle 4: Action where client conduct is may be or becomes illegal. When the conduct of a client is, may be, or becomes illegal, even if it was originally legal and the lawyer continues to be retained by the client, a lawyer should advise the client of the consequences of the conduct and recommend that the client pursues alternative solutions. If the client persists in the conduct, the lawyer should give due and proper consideration to ceasing to act, and terminate the retainer.

Principle 5: Multijurisdictional risk. Where a transaction involves conduct by a client, agents or representatives of a client in more than jurisdiction and the lawyer has reasonable grounds to believe that the conduct may be or may become illegal in a jurisdiction(s), a lawyer should verify that expert advice is or has been obtained by the client from a lawyer experienced in the conduct or transaction in that jurisdiction. If such advice has not been obtained and the client wants to proceed with the transaction, the lawyer should recommend that such advice be obtained (at the cost of the client). If the client declines to obtain such advice and persists in the conduct, then the lawyer should give due and proper consideration to ceasing to act and terminate the retainer.

Principle 6: Use of illegal obtained information. Lawyers should strongly discourage a client from paying private parties or public officials to obtain illegally obtained evince, which of itself may constitute a criminal offense in many jurisdictions. To facilitate this, legal frameworks should be consistent across jurisdictions as much as possible, since it is often through cross-border conduct that confidential or secret information in country A is accessed (without the consent of the owner of the information) and then disclosed to a person in country B. An independent court should, where necessary, resolve the question as to what use can be made of such information, based on the applicable domestic framework.

Principle 7: Disclosure of beneficial ownership. A lawyer should obtain and maintain up-to-date beneficial ownership information and take reasonable measures to verify its accuracy in relation to the lawyer’s clients. Domestic laws should provide for the disclosure of ultimate beneficial ownership of any corporation, trustor other legal entity formed within that country’s jurisdiction. Beneficial ownership information should be available to state regulators, investigators and enforcement agencies. Governments must address whether it needs to be publicly available.

Principle 8: Advertising by lawyers on international commercial structures. Any advertising by lawyers should be transparent, accurate, and truthful. Domestic regulation, bar associations, and law societies should ensure the lawyer advertising is accurate and truthful.

The Report does not seek to duplicate existing international or other national guides for the legal profession in terms how a lawyer should act or not act in certain circumstance. The Report does not seek to cover the many anti-money laundering and counterterrorism financing laws, obligations and disclosure duties that exist in many countries. Instead, it focuses on high-level issues of principle that should assist governments in policy formulation and in guiding lawyers as to how they should conduct themselves, consistent with a lawyer’s underlying domestic legal and ethical obligations.

The Report also sets form the minimum good practice required when a lawyer proposes to accept instructions in a cross-border commercial matter, especially, but not exclusively, from a new client or a client with whom the lawyer has not worked for at least 12 months.

The Report provides detailed guidance for the eight above-mentioned principles with citations to guide legal professionals.

Annex B contains existing guidance concerning the role of lawyers with regard to international commercial structures.

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

U.S. Attorney General Announces Continued U.S. Funding of Law Enforcement Efforts at 3rd Ministerial of Northern Triangle Attorneys General, as Guatemala Prepares to Abolish Anti-Corruption Prosecutor

May 19, 2019 by Bruce Zagaris Leave a Comment

On May 16, 2019, U.S. Attorney General William P. Barr, during the 3^rd Ministerial of the Northern Triangle Attorneys General announced that, as part of a coordinated law enforcement action known as Operation Regional Shield,President Trump has approved continued funding for law enforcement efforts between the U.S. and the Northern Triangle countries (El Salvador, Guatemala, and Honduras).

In particular Barr said the U.S. will continue fund law enforcement efforts, through the ongoing work of the project’s law enforcement efforts, through the continuing work of the U.S. Office of Overseas Prosecutorial Development Assistance and Training (OPDAT) Resident Legal Advisors in each of the three countries, through the FBI’s Transnational Anti-Gang teams, through the Drug Enforcement Administration’s Sensitive Investigative Units, and through Homeland Security’s (HSI) work to counter human smuggling and trafficking.

Barr said the meeting has reaffirmed his belief that the safety of the citizens of the U.S. and Northern Triangle is interdependent and together they will not only confront but will defeat the criminal gangs.

Inconsistency of U.S. Enforcement Policy with Northern Triangle Countries

In recent months the Trump Administration’s policy in terms of cooperation with the Northern Triangle has not been consistent. For instance, on March 28, 2019, then Secretary of Homeland Security Kirstjen M. Nielsen signed, on behalf of the United States, a Memorandum of Cooperation (MOC) on border security cooperation in Central America. Almost simultaneously, U.S. President Donald Trump said that he was planning on cutting U.S. assistance to the three countries and has threatened to close the border with Mexico.

The initiatives of the U.S. and other governments against transnational organized crime in Central America can be classified in eight areas: whole-of-government solutions; interdiction of criminal flows; targeting of transnational criminal organization leaders; use of the military in a domestic law enforcement; institutional reform within law enforcement; targeting the financial flows and resources of organized criminal groups; prison control and reform; and binational and multinational cooperation against organized crime. (See R. Evan Ellis, Transnational Organized Crime in Latin America and the Caribbean 103-4 (2018).

During his trip Barr highlighted DOJ priorities, including interdicting illegal narcotics, dismantling MS-13, the 18th Street Gang and other transnational criminal organizations, and combatting illegal migration and human trafficking. While in El Salvador, the Attorney General visited the International Law Enforcement Academy.

Effort of Guatemalan Morales Administration to End the Work of the International Commission against Impunty (CICIG)

One setback for the fight against anti-corruption is the effort by the current Guatemala Administration of Jimmy Morales to terminate the work of the International Commission against Impunty (CICIG), which the United Nations established to strength the efforts against organized crime and corruption after Guatemala’s 36-year civil war. See Elisabeth Malkin, Latin America Risks Losing Potential Weapon Against Corruption, N.Y. Times, May 19, 2009, at 10, col. 1.

On May 15, the Guatemala high court rejected the appeal of Thelma Aldana, a crusading former prosecutor, to participate in Guatemala’s presidential election. As a result, at least two of the top three candidates, according to polls, will not be able to run in the election. The decision on Aldana seemed to arise from fears over her zealous prosecutions of corruption in politics and business. Aldana has been denied the right to participate in the election because she lacked a document accrediting that she did not have any outstanding accounts after she was responsible for public funds during her serving as from her time as a former prosecutor.

The Trump Administration has not supported the CICIG, as prior U.S. Administrations have. As a result Morales’ announcement to not renew the CICIG’s two-year mandate in September 2019 and his denial of Ivan Velázquez, the Colombian head of the Commission, in September 2018, mean that, notwithstanding its strong record of prosecuting corruption and transnational organized crime, the lack of independent prosecutors in the Guatemalan government, and the importance of strong and independent prosecutors to better stabilize the security situation in Guatemala, the CICIG may well expire in September. Indeed the enormous security problems due to the proliferation of gangs, gun violence, and corruption fuel migration from Guatemala.

« Previous Page
1
…
3
4
5
6
7
…
9
Next Page »