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The IMB aware of the escalating level of this criminal activity, wanted to provide a free service to the seafarer and established the 24 hour IMB Piracy Reporting Centre (PRC) in Kuala Lumpur, Malaysia.
A newsletter about fraud and global asset recovery from the office of International Chamber of Commerce's FraudNet. To read about key asset recovery cases and global compliance with anti-fraud and money-laundering laws, please click in the link above for the Newsletter PDF.
CCS offers a flexible membership arrangement based on the selection of predetermined membership packages. A prospective member can elect to join one or more Bureaux according to their requirements.
Losses due to official misconduct account for a great many maritime trade incidents. Each incident can be complex and wide-ranging in nature. It is therefore unlikely that any one company will have the knowledge and resources to be able to investigate it thoroughly.
Counterfeiting and piracy are a drain on our businesses and on the global economy. It has resulted in the widespread loss of lawful employment and a massive reduction of tax revenues.
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douglas.milne@morton-fraser.com www.morton-fraser.com |
Address
Quartermile Two
2 Lister Square Edinburgh, EH3 9GL, Scotland |
Telephone
+131 247 3181
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Languages
English
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Not All Tax Havens Are Sunny While people only half paying attention to the debate over legal tax avoidance and illegal tax evasion likely link both practices to the tropical islands of the Caribbean, sun, sand and palm trees are not necessary for stashing legitimate or illicit assets. Not all tax havens are sunny or world financial centres like London, Hong Kong and the like. Scotland is proof of this.
An article in The Herald (Scotland) recently pointed this out, noting several examples of how police and government agencies in Scotland have mounted mass money-laundering investigations tied to Eastern Europe. |
Under intense scrutiny now, thanks to these investigations and the Panama Papers leak, are Scottish Limited Partnerships. These structures allow individuals or corporations to set up shop in Scotland without registering for tax or requiring financial reporting if they conduct business abroad. This makes Scottish Limited Partnerships attractive to many legitimate enterprises, as well as criminals. Additionally, as The Herald reports, these structures need not necessarily disclose their true owners, and many use the same business address, which has no business ties what so ever. This permissible secrecy is, of course, at the heart of the problem. Unless there is robust regulation, requiring registration and disclosure of the ultimate beneficial owner of a company and the company’s assets, money laundering will continue. It is easier to hide stolen monies in this secret environment, and it makes life more difficult for victims seeking a recovery. The Scottish government has said that it will consider closing this “loophole”, and it appears steps are being taken in Scotland and across the whole of the U.K. to counter the secrecy from which money launderers can benefit. One positive step is the introduction of the Register of Persons with Significant Control, which we hope the government will commit to apply to Scottish Limited Partnerships as well. We also expect transparency to be bolstered across the EU when the Fourth Money Laundering Directive comes fully into force. Through these steps, it should be more difficult to hide the true ownership of the proceeds of crime. This will hopefully and inevitably stop Scottish Limited Partnerships from being “sold” abroad as the article alleges. In our shrinking world, weaknesses in one country will inevitably be exploited globally. That leads to a cloudy forecast for us all. Douglas Milne leads the team at Morton Fraser, which serves as the market leader in Scotland for fraud and asset recovery. Milne, the former Deputy Head of the Scottish Ministers’ Civil Recovery Unit, and the partners and associates of his firm specialise in advising clients and others about the United Kingdom’s Proceeds of Crime Act. The firm acts on behalf of government departments, such as the Civil Recovery Unit and the National Crime Agency, to recover stolen assets and helps victims of fraud. The firm also advises about compliance with European and United Kingdom money-laundering regulations. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
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caylorl@bennettjones.com www.bennett jones.com |
Address
3400 One First Canadian Place
P.O. Box 130 Toronto, Ontario M5X 1A4 Canada |
Telephone
+1 (416) 777 6121
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Languages
English
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Foreign States Now Liable in Canada for Terrorism and Improper Commercial Conduct As the boundaries between state action and commercial markets continue to blur, Canadian statutes and courts are keeping with the times. Recently, in Tracy v. Iran, the Ontario Superior Court issued a ground breaking decision ordering that Iran’s non-diplomatic assets located within Canada be paid to victims of terrorist groups sponsored by the Iranian government. The decision marks the first time that payment has been ordered under Canada’s Justice for Victims of Terrorism Act (JVTA), implemented in 2012.
Justice for Victims of Terrorism Act The JVTA allows victims of terrorism to sue the perpetrators and supporters of terrorism. Such supporters can include foreign states, provided that the Canadian government has formally listed the state as a supporter of terrorism. This provision of the JVTA provides an exception to Canada’s State Immunity Act, which provides that “a foreign state is immune from the jurisdiction of any court in Canada.” Until the JVTA, the immunity provided by the State Immunity Act covered all formal state actions, including the sponsoring of terrorism. |
Soon after the JVTA was passed, Canada placed Iran on its list of state sponsors of terrorism. The Canadian embassy in Tehran was closed and Canada expelled all Iranian diplomats in Canada. The listing also opened the door for claims against Iran in Canada pursuant to the JVTA. Applying the JVTA So, just months after the passage of the JVTA, various actions were commenced in Canada by victims of Hamas and Hezbollah terrorist acts or their families, who had been previously awarded damages against Iran by various U.S. courts. The decisions of the U.S. courts – some of which dated back to 2000 and which collectively had awarded millions of dollars in damages – found that Iran had provided persistent support to Hamas and Hezbollah. Issues arose, however, when attempts were made to satisfy the U.S. damages awards by seizing Iranian assets in the U.S. While the various claimants brought separate actions in Canada seeking to enforce their U.S. judgments and recover against Iran’s non-diplomatic assets in Canada, the actions were ultimately heard together by Ontario’s Superior Court in Tracy. Only such non-diplomatic assets were available for recovery in accordance with the Vienna Convention on Diplomatic Relations and International Law. Iran’s available Canadian assets had an estimated value of $7 million to $8 million and included certain non-diplomatic properties and the contents of various bank accounts. ‘An Unprecedented Victory’ for Victims of Terrorism When the Ontario Superior Court found in favour of the Tracy claimants on June 9, it ordered that Iran’s non-diplomatic assets be handed over to the claimants, effectively holding Iran financially responsible for the actions of terrorist groups it had sponsored. All of Iran’s arguments – which focused on procedural and legal technicalities – were dismissed, with the Court noting that Iran was “attempting to gain a procedural advantage” and was “gaming the system.” The Tracy decision marks an unprecedented victory for the claimants and opens the door for similar actions in Canada going forward. ‘No Immunity’ for Foreign State Commercial Misconduct The Court’s decision in Tracy also confirms that the JVTA brings liability for state-sponsored terrorism in line with the Canadian approach to commercial actions seeking compensation for foreign state misconduct. Canada’s State Immunity Act provides an express carve-out from the immunity typically enjoyed by foreign states when it comes to commercial activity: “A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.” While Canadian legal rules regarding jurisdiction and forum remain in play, the above-referenced exception to state immunity for improper commercial activity makes possible Canadian claims directly against foreign states under various circumstances. Foreign court and arbitral awards will also generally be enforced by Canadian courts, provided the Canadian assets against which enforcement is sought are non-diplomatic in nature. With respect to increasingly common foreign arbitral awards, Canadian provinces have adopted the United Nations’ Model Law on International Commercial Arbitration. As a result, under most circumstances, foreign arbitral awards, irrespective of the country in which they were handed down, are recognized as binding and are enforced in Canada. Testing State Immunity in Commercial Misconduct The outer limits of the commercial exception to foreign state immunity in Canada are being actively tested before the Ontario Superior Court. In August, the Court will hear arguments in three separate actions, all of which seek to enforce foreign arbitral awards against the Kyrgyz Republic. At issue in these cases is whether the claimants may enforce their arbitral awards against the Republic by seizing certain shares of Centerra Gold Inc., a publicly-traded Canadian mining company whose shares are traded on the Toronto Stock Exchange. The shares in question are nominally held by Kyrgyzaltyn JSC, an enterprise wholly-owned by the Republic. The Superior Court will decide whether the Centerra shares technically held by Kyrgyzaltyn can be treated as owned by the Republic and part of the Republic’s commercial activity, such that the claimants can enforce their foreign arbitral awards against those shares. The Court’s decision is expected to have important implications for the limits of foreign state immunity for commercial activity in Canada. Recovering Foreign State Assets in Canada Recent and upcoming decisions by Canadian courts will continue to define the boundaries of the recovery options open to Canadian and international citizens, as well as commercial interests, with claims against foreign states. International actors are well-advised to consider whether foreign state assets for compensating claims may be located in Canada and to seek guidance on their options for recovering those assets as compensation for foreign state misconduct. Lincoln Caylor of Bennett Jones is recognized as a “leading counsel and commentator in the asset recovery field,” by Chambers Canada 2016, and is listed as a Most Highly Regarded Individual in North America by Who’s Who Legal: Asset Recovery 2015. The sole Toronto member of ICC FraudNet, he is internationally recognized for leading state-of-the-art asset tracing investigations and pursuing asset recovery litigation and enforcement actions in prominent, high-value international financial frauds and other economic crimes The author would like to thank his colleague Nathan Shaheen, of Bennett Jones for coauthoring this article. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
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vanderplas@hocker.nl www.hocker.nl |
Address
Van Eeghenstraat 98
Amsterdam 1071 GL Netherlands |
Telephone
+31 20 577 7700
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Languages
English, Dutch, German, French
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What to do When Fraud Is Discovered in Your Company If fraud is discovered within your company, you want to be sure you’ll be able to get back the diverted assets. Therefore, it’s crucial that you tell as few people as possible about the fraud. After all, you’re not sure yet who may have been involved in the fraud. The fraudster must be prevented from learning about your discovery and then destroying evidence and/or further diverting the property.
Act Quickly Time is of the essence. Get a lawyer and an external investigator on board as soon as possible. In light of the lawyer-client privilege, it may be useful to have the lawyer furnish the engagement to the investigator. Based on the available information, the investigator will provide as good an overview as possible of the fraud. Make Discovery Request Insofar as information, such as transaction data from bank accounts, from third parties is necessary and not provided voluntarily, your lawyer may file an application with the court to inspect the information, preceded, if appropriate, by a seizure of evidence. If the assets turn out to have been diverted out of the country – a frequent occurrence – information from other jurisdictions will generally be needed, too. Gathering information in different jurisdictions requires good coordination and collaboration, because, in jurisdictions like the Netherlands, a discovery request is not made ex parte and the fraudster may unintentionally become aware of what’s going on. For the same reason, it’s sometimes better to hold off on taking seizure measures. Recover the Assets Initiating criminal proceedings in addition to civil recovery (or other) proceedings may have added value. As a rule, the company, as the aggrieved party, will gain access to critical information from the criminal file, which may be used for a liability claim or settlement to be reached, and may be the beneficiary of confiscation orders demanded by public prosecutors. We recommend having the civil and criminal lawyer concerned coordinate this properly. |
Conduct an Internal Evaluation
Besides an investigation into the fraud that has been committed, the company will have to find out how it was possible for the fraud to occur. Hence, aspects of the administrative organisation and internal control will need to be examined within the context of the internal governance investigation. “Lessons learned,” which may serve as a basis for implementing points for improvement, may emerge from the report. Develop External Messaging Depending on the nature and scope of the fraud and the market’s awareness of this, external statements may be made that the company is “on top of the matter,” has initiated an internal or external investigation, and is awaiting the results of this investigation. The idea is to be cautious about making announcements about people possibly involved in the fraud, as this can cause unnecessary damage. Take Liability Action After the facts have been set out carefully, and the people who were part of the investigation have been given the opportunity to state their positions through a process in which both sides are heard, a liability action against the perpetrators of the fraud may be expedient. The elements of such an action will partly depend on whether or not the property spirited away has been successfully tracked down and recovered. This may take the form of civil proceedings to obtain compensation for the damage, a settlement to be reached (with the insurer’s assistance) or a well considered choice not to take further legal measures. The action that best serves the company’s and its stakeholders’ interests, in these circumstances, will become apparent through an informed decision-making process, best coordinated by the general counsel. Translated from an article published in Dutch by the General Counsel Netherlands. A special thanks to Yvette Borrius, a partner at Höcker Advocaten, for co-authoring this article. Cathalijne van der Plas is an associate partner at Höcker Advocaten employed in the company law division. Cathalijne’s practice is international in nature, consisting in large part of civil fraud and asset recovery matters. She is often called on by other lawyers to provide advice on complex private international law issues and represents parties in international commercial disputes, including in arbitration. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
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Will Increased Regulation in U.S. Curb Tax Evasion? With an economic recovery that has seemingly left behind middle-class Americans, high-profile fraud and corruption cases, news reports about wealthy individuals and corporations avoiding taxes, and the release of the “Panama Papers,” President Barack Obama and Congress have come under increased pressure to pass legislation to combat tax evasion and corruption.
President Obama, with advice from the U.S. Department of Treasury, recently proposed regulations that would require companies to disclose their owners to the Internal Revenue Service and allow law enforcement agencies to access that information. This rule is called the customer due diligence rule. A second rule would close a loophole that currently allows a narrow class of foreign-owned companies to avoid reporting to the IRS. These proposed regulations have been met with resistance in Congress, much to the chagrin of industry experts. |
The President has encouraged Congress to fix the problems. Recently, he addressed his concerns at a press conference, stating “Only Congress can fully close the loopholes that wealthy individuals and powerful corporations all too often take advantage of, often at the expense of the middle-class families. If they’re getting out of paying their fair share of taxes, that means the rest of us have to shoulder that burden.” To be sure, Obama’s proposed regulations are an important first step in addressing the tax evasion that occurs both domestically and abroad. But, whenever you attempt to curtail the advantages of exceedingly wealthy individuals and large corporations, progress will always move slowly. Indeed, the proposed legislation is not without its critics. Many industry experts on corruption and tax evasion have stated that the proposed regulations are “watered down” or “quite weak.” And when the head of the American Bankers Association, a lobbying group, speaks favorably of the proposed rules, it does call into question whether the new regulations have taken a big enough first step. But President Obama and the Treasury Department have also urged the Senate to ratify eight tax treaties that would improve law enforcement’s ability to pursue tax dodgers hiding assets abroad by enabling cooperation with foreign governments. As one might expect, these proposals have also been met with resistance. Laws and regulations addressing tax evasion and the disclosure of beneficial owners of corporations are of critical importance from a tax revenue and law enforcement standpoint, but they are also important from an optics standpoint. These are high-profile issues that fuel the fears of middle-class workers, who suspect that corporations and wealthy individuals are taking advantage of the system to the detriment of most others. It’s an issue that we in asset tracing and asset recovery see every day. Individuals and corporations are evading taxes and sheltering their assets with the justification that the actions being taken are not illegal. Recently, at the “Offshore Alert Conference” in Miami, a lawyer from Switzerland, who represents companies who take advantage of the current U.S. and foreign law to shelter assets and evade taxes, made an exceedingly simple yet cogent comment in response to the outcry against them, “If you don’t like what is going on, change the law!” Perhaps Congress can finally agree to do just that. Joseph J. Wielebinski, a shareholder at Munsch Hardt Kopf & Harr, P.C., in Dallas, is part of the firm’s Fraud and Asset Recovery group and Executive Director Emeritus of ICC-FraudNet. He has represented numerous victims in matters involving complex financial fraud, cybersecurity and offshore asset recovery. Joe has served as a Federal District Court receiver at the request of the SEC in cases involving national and cross-border fraud schemes. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
Contact
Contact
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