This Week in Compliance: UK to adopt EU laws on money laundering and combatting terrorism

Laura Sayer
Laura Sayer

Here’s what’s been going on in the compliance world this week: 


  • Two Chinese construction firms debarred by World Bank: Two big construction firms were debarred for misrepresenting progress on a project so they would be paid early. China Nuclear Industry Fifth Construction Co., Ltd. (CNF) was debarred for two years and China Machinery Industry Construction Group Inc. was debarred for four years. Both firms were working on a project in Shandong province to expand energy output. Another 30 smaller firms affiliated with the two companies have also been debarred. CNF and China Machinery falsified documents that certified stages of the project had been completed in order to receive payment. The debarments were shortened because the firms took remedial action and cooperated with the bank. The action also qualifies for cross-debarment from a number of other development banks including the Asian Development Bank.
  • Chinese firm involved in vaccination scandal reportedly involved in multiple bribery investigations: Changchun Changsheng Biotechnology Co and its parent company, Changsheng Biotech have been mentioned in at a minimum 10 different bribery cases over the past decade. The company is currently under fire for providing over 250,000 ineffective DPT (diphtheria, whooping cough, and tetanus) vaccines to infants and young children. China’s regulator has accused the firm of falsifying test results and has taken the products in question of the market. The judgments in the criminal cases show a pattern of the company’s employees paying bribes to government officials and doctors in order to win contracts for their vaccines. In one recent case, a sales representative of Changsheng was found to have bribed an official in Changling county over a period of five years.


  • UK to adopt European Union laws on money laundering and combatting terrorism: The fifth EU anti-money laundering directive will be adopted by the UK, the UK government confirmed this week. The new rules were drafted in the wake of escalating terrorist violence in Europe and the revelations in the Panama Papers which showed the widespread use of opaque tax structures in order to evade taxes as well as laundering money made from bribes and corruption. The new rules call for a register that will publicly log the beneficial owners of corporations. However, overseas territories, including the British Virgin Isles (BVI) which is a popular place to register holding companies, are not obliged to implement the legislation.
  • Malta’s Prime Minister and wife cleared in corruption inquiry: Murdered Maltese journalist Daphne Caruana Galizia had made claims only six months before she was murdered that Maltese Prime Minister Joseph Muscat’s wife Michelle had a secret offshore bank account that was being used to launder money for Azerbijan’s ruling family. An inquiry into the charges by a Maltese magistrate has now concluded that there is no evidence to link the Prime Minister or his wife to Egrant, a shell company revealed in The Panama Papers in 2016. Ms. Galizia had claimed that Egrant was used to launder in excess of USD 1 million for Azerbijan’s ruling family. Ms. Galizia’s family has stated that they are not satisfied with the findings, as there is no conclusive evidence that Mr. Muscat and his family did not have ties to Egrant. It remains unclear who was behind the murder of Ms. Galizia.


  • Civil penalties for corporations drop by as much as 94% under Trump: A study conducted by consumer rights organization Public Citizen found that the penalties leveled under the Trump administration by 11 out of 12 agencies surveyed had decreased. The most dramatic drop was seen at the Environmental Protection Agency (EPA); penalties declined from USD 23.87 billion in Obama’s last year in office to USD 1.86 billion during Trump’s first year in office. Further dramatic decreases were observed at the Department of Justice where penalty amounts declined by 90% and the Securities and Exchange Commission where penalties fell by 68%. While the amount of penalties leveled may vary from year to year, the report noted an unmistakable downward trend.

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