This Week in Compliance

This Week In Compliance: SFO Issues Cooperation Guidance

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  • SFO Issues Cooperation Guidance: The UK’s Serious Fraud Office (SFO) issued long-awaited guidance this week on the steps companies should take if they decide to cooperate with the agency in an investigation. The SFO says in its guidance that cooperation entails providing assistance to the agency that goes “beyond what the law requires”. The elements of cooperation identified by the SFO include “identifying suspected wrongdoing and criminal conduct together with the people responsible, regardless of their seniority or position in the organization; reporting this to the SFO within a reasonable time of the suspicions coming to light; and preserving available evidence and providing it promptly in an evidentially sound format.” The guidance also asks companies to avoid prejudicing investigations by “tainting witnesses” by sharing information before the SFO can have a chance to speak to them. The guidance points out that cooperation does not guarantee leniency. READ MORE.

Business

  • Chinese billionaire indicted in U.S. for alleged USD 1.8 billion tariff evasion: Liu Zhongtai, the founder, chairman, and president of China Zhongwang Holdings Ltd, has been accused of evading USD 1.8 billion worth of tariffs for metal exports to the US. The scheme reportedly began in the beginning of 2008 and occurred using the help of partner forwarding companies that escaped tariffs by declaring the imported aluminum as a finished product, which are not subject to duties. According to the allegations, the imported metal was stored in Southern California and later sold to companies Liu controlled as a means to inflate Zhongwang’s financials and the price of the metal. An arrest warrant for Liu has been issued by the US. However, Liu is believed to be in China which does not have an extradition treaty with the US. Company representatives have dismissed the allegations calling them “misleading” and “without any factual basis.”
  • Danskse Bank to exit Russia after money-laundering scandal: After a money laundering scandal in which Danske Bank was accused of being involved in the laundering of USD 230 billion through its Estonian branch, the company announced plans to exit the Russian market. According to the plans, Danske Bank, which has been operating in the country for 22 years will exit the Russian market in the beginning of 2020. Former Danske Bank executive Horward Wilkinson blew the whistle on the bank in 2018, accusing the Estonian branch of being the center of the laundering of billions of dollars stemming from Russia, Ukraine, Moldova, and other post-Soviet states. Since then, internal and external investigations revealed that almost a fourth of the money that was being laundered came from Russia. Danske Bank, which was registered as ZAO “First Shipping Bank” in Russia from 1996-2005, had reportedly been a low-profile lender for the Russian banking system until recently. In 2005, the bank changed its name to ZAO “Profibank” and was relocated to St. Petersburg where it currently hosts most of its Russian operations.
  • UK SFO names four senior Petrofac managers in probe: In a court document filed this week, the Serious Fraud Office accused four senior managers at oil firm Petrofac of taking part in a multi-million dollar bribery scheme designed to land contracts. The SFO is alleging that the four senior managers acted together with David Lufkin, who pleaded guilty to bribery this year. However, no charges have been filed against the quartet. Petrofac responded saying that “[t]his is materially prejudicial to the rights and reputation of our people and the company, and also denies them any opportunity to answer the allegations.” David lufkin pleaded guilty to 11 counts of offering bribes between 2011 and 2016 in attempts to secure contracts worth GBP 2.7 billion in Saudi Arabia and contracts worth GBP 566 million in Iraq. Petrofac has been under investigation since 2017, but no charges have been brought against the company as of yet.
  • HSBC agrees to EUR 300 million settlement over Belgian tax fraud case: HSBC’s Swiss private banking arm will pay 300 million euros to settle a tax fraud case in Belgium. Since 2004, Swiss banks have been at the center of similar legal challenges after the Swiss government decided to apply a European Union tax on the savings income of its lenders’ EU clients. HSBC was charged for facilitating the use of tax havens in the Caribbean and encouraging tax avoidance via the creation of off-shore companies in Panama. Under the settlement, HSBC agreed to pay the said amount for tax revenue losses to the Belgian state since 2013. According to the indictment, more than a thousand Belgian citizens could have potentially used the bank’s illegal schemes for tax evasion. A spokesman from HSBC has declined to comment on the settlement.

Government

  • BMW sponsorship of Finnish European Council Presidency triggers probe: European Ombudsman Emily O’Reilly is launching a probe into BMW’s sponsorship of Finland’s six-month European Council Presidency. As part of the sponsorship BMW will be providing 100 vehicles for EU delegations in Helsinki. Corporate sponsorships of EU presidencies are not regulated by law currently. Romania’s Presidency was sponsored by Coca-Cola. Opposition to the deal was raised by the Finnish Green Party over concerns regarding conflicts of interest. In response, the Secretary of the Finnish Council Presidency, Anja Laisi said that no money is involved in the deal and BMW will not get specially arranged opportunities to meet with government ministers in Helsinki.
  • Son of Congo-Brazzaville president accused of siphoning off USD 50 million: Denis-Christel Sassou Nguesso, the Congolese MP and son of the president, has been accused of embezzling USD 50 million worth of public money. The money was reportedly channeled through a counterfeit contract scheme Congo-Brazzaville had with Asperbras, a Brazilian infrastructure company for public works at inflated prices. According to the allegations, Sassou routed the money through secrecy jurisdictions and shell companies in six different countries in the EU as well as in the British Virgin Islands and the American state of Delaware before reaching the final destination of Cyprus. It was found that the trail of money was used to conduct transactions in Poland, Switzerland, Portugal and Spain in 2013 and 2014. The Brazilian company Asperbras has denied all claims of overpricing and contract irregularities in the public procurement process, however, Jose Veiga, a Portuguese businessman intermediating the contracting between Congo and Asperbras is being investigated for corruption. Veiga was reportedly known as the ‘’Portuguese wizard’’ of the Congolese president and was already briefly arrested in one occasion in 2016 for a money laundering investigation.
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