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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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Investment Fraud: Look Beyond Adviser Websites Before Investing Investors who bought at least $5.6 million in two unregistered investment funds must have been shocked last week when the U.S. Securities and Exchange Commission (SEC) announced that it was charging a Florida man, an unregistered investment adviser, with defrauding his clients by manipulating search results on the internet and creating a false identity. The story is a cautionary tale for potential investors across the globe. As the world relies more and more on the internet for research, fraudsters are using the information super highway to take potential investors to the cleaners.
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According to the SEC, Steven Zoernack, 53, hired a company to create an elaborate history of career successes and charity work in order to attract investors, while using search results to hide a criminal past. Between May 2010 and March 2014, Zoernack, and his company Equity Star, offered and sold the funds, defrauding more than 40 investors in 20 states and abroad. He then illegally withdrew more than $1 million in fund assets. Given the reality of schemes like Zoernack’s, what should investors do to protect themselves? Follow these steps before investing: . Verify the investment adviser’s identity, client references, qualifications, track-record, registration and compliance requirements. . According to the SEC, you should ask your state securities regulator or the Financial Industry Regulatory Authority (FINRA) to provide you with information about the broker or investment advisor from the Central Registration Depository (CRD). The CRD is a computerized database containing information about most brokers, their associates, and firms. CRD can tell you if brokers are properly licensed in your state, if there are complaints against them by investors or if they have had disciplinary problems from regulatory authorities. You can also find accurate information about where they worked and received their educations. Contact information for your state securities regulator is located on the website of the North American Securities Administrators Association. To contact FINRA, visit FINRA’s BrokerCheck website or call FINRA’s toll-free BrokerCheck hotline at (800) 289-9999. What if you’ve already been defrauded by an investment firm? . Cease contact with the firm and its representatives . Gather all documentation from the transaction(s) and file with the authorities to initiate or collaborate with the corresponding investigation. Victims hold valuable information about the modus operandi of the scheme, such as addresses (physical and electronic), personal communications, telephone numbers, calendars, service standards, and other references. This information may serve to support the tracing of funds defrauded and aid in seeking potential restitution. . To recover your stolen assets, particularly if the fraudster may have hidden the funds in other countries, quickly contact an attorney who specializes in asset tracing and asset recovery. The longer you wait, the harder the funds will be to recover. To find a reputable attorney in your area, consult Chambers Global, which provides extensive information about leading lawyers and their practices and covers 190 countries across the world. Rodrigo Callejas, partner with Carrillo y Asociados focuses on Insolvency, Fraud, Asset Tracing and Asset Recovery. He has actively participated in complex white-collar crime investigations in Central and South America, United States, the Caribbean and Europe. The author gratefully acknowledges the assistance of Emanuel Callejas in preparing 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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kangy@junhe.com www.junhe.com |
Address
25th Floor
China Resources Building 8 Jiangguomenbei Avenue Beijing 100005, P. R. China |
Telephone
+86 10 8519 2161
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Languages
Mandarin, English, French
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The People’s Money $£¥ FraudNet members talk about working for victims in the world of complex fraud, asset tracing and asset recovery. The biggest misconception people have about complex fraud is:When complex fraud cases arise, people may think that criminal proceedings are the only way to investigate the case, arrest fraudsters, and trace and recover the fraud-related assets/funds for the victims. However, the threshold for Chinese police and prosecutor departments to initiate an economic crime case, including fraud, is relatively high. Generally, the Chinese police department is hesitant to take swift measures unless a fraud case has caused extensive and serious effects and even instability to the society as a whole. Even in this case, the priority and major focus of the Chinese police department is still to maintain the stability of the society and arrest the fraudsters rather than taking immediate measures to trace the fraudster’s assets. The criminal investigation and proceedings may take some time, sometimes years. When the criminal proceedings enter the final stage, the assets of the fraudsters may become much harder to be traced and recovered. |
Therefore, in some cases, it may be more effective for victims to take measures immediately, i.e. file civil litigation and apply for preservative measures to freeze the fraudsters’ assets, rather than merely rely on the outcome of criminal proceedings. The biggest misconception government officials have about complex fraud is: As discussed above, while arresting and interrogating the fraudsters is crucial in investigating a complex fraud case, it is recommended, for not only the victim but also for the police and prosecutor department, to take immediate actions to trace and control the assets and funds of fraudsters, relevant suspects and their relatives or affiliates. In this regard, it yields greater and more effective results when Chinese government departments work in close cooperation with the law enforcement departments in other jurisdictions involving assets transfer, even with private law practitioners in China and overseas, at the very beginning stage of the investigation of large, complex and cross-border fraud cases. The greatest challenges in asset tracing and recovery in my part of the world are: The difficulty obtaining assets information and to trace fraudsters’ assets transfer status. Usually the fraudster started the transfer/concealment of assets and money laundering from the very beginning of their conduct of the fraud or Ponzi scheme. So the hardest part in investigating complex fraud cases is actually to trace and recover the fraud-related assets and funds. In this regard, it is important and recommended to conduct professional investigations and obtain judicial support from Chinese courts and other law enforcement departments in the relevant jurisdictions. The greatest challenges worldwide are: Closer and faster international cooperation needs to be strengthened in investigating large, complex and cross-border fraud cases and recovering the fraud-related assets and funds. In recent years, the large and complex fraud cases are usually cross-border cases. Fraudsters are frequently using international channels and tools to conceal huge amounts of fraud-related funds. We are happy to see that the Chinese government has been endeavoring to build a worldwide network by cooperating more frequently with various foreign and international law enforcement departments in arresting fraudsters and investigating large cross-border fraud cases. What I tell victims of fraud about the process of asset tracing and recovery is: Facing the very crafty fraudsters who are using more subtle and hi-tech methods to cheat the victim and to transfer/conceal their assets/funds, it is crucial for the victims to seek professional advice to strategize the plan in tracing and recovering their assets and funds. In particular for the cross-border fraud cases, it would be very hard for individual victims to recover their funds without the assistance of law practitioners of relevant jurisdictions. The most challenging day I’ve faced on a case was: When we applied for interim measures with the court with evidence that might not be sufficient enough for granting such measures given the strict standards. Meanwhile the client/victim could lose huge amount of funds if such measures were not taken in a timely manner. The best day I’ve ever had working on a fraud case was: When we successfully persuaded the judge to adopt preservative measures on the assets of affiliates of a company which conducted a complex and organized fraud. The evidence revealed afterwards proved that the company transferred its assets together with illegal proceeds to those affiliates. The victims finally recovered those transferred assets. And when our strategy of tracing and preserving fraudster’s assets in multiple jurisdictions worked well and imposed great pressure on the fraudster, which resulted in a settlement in favor of our clients. I, became a member of FraudNet, because: With fraudsters increasingly transferring/concealing assets and illegal proceeds in multiple jurisdictions, international cooperation among practitioners and experts in the area of assets tracing and recovery is crucial to helping victims to trace assets and realize the goal of assets recovery. ICC FraudNet calls together the top lawyers and practitioners in the field of assets tracing and recovery from the world’s major economies and jurisdictions, as well as leading offshore wealth havens, and constitute an excellent international cooperation network to help victims on asset tracing and recovery. Asset tracing and recovery is a chosen part of my work, because: The victims of complex fraud cases suffer huge losses and it is very difficult for them to recover their assets and funds without professional assistance. Law practitioners, professional investigators and anti-fraud experts are in a good position to use their expertise and experience to help victims of large, complex and cross-border fraud cases to trace and recover their assets and funds to the best possible extent. Christine Yi Kang is a partner of Jun He Law Offices (“JunHe”). She has significant experience in international commercial dispute resolution, including international commercial arbitration and litigation, both in China and abroad for over 15 years. She also practices extensively in corporate compliance and ant-commercial bribery investigation. She joined JunHe in 2011 after practicing with international law firms and with China International Economic and Trade Arbitration Commission (CIETAC) for over ten years. Established in 1989, JunHe is one of the first private partnership law firms in China and has grown to be one of the largest and most recognized Chinese law firms. JunHe has nine offices around the world and a team comprised of more than 600 professionals, including over 180 partners and legal counsel, as well as over 420 associates and legal translators. JunHe provides first-class full services on Chinese Law, as well as legal services on local laws through its overseas offices. Due to its outstanding client service and excellent reputation, JunHe is the only Chinese law firm to have been accepted for membership in Lex Mundi and Multilaw, two leading associations of independent law firms around the world. Through such alliances, JunHe is able to extend its premier legal services efficiently and consistently to every corner of the globe. 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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mcaratsch@bclaw.ch www.bclaw.ch |
Address
Zeltweg 44
8032 Zurich, Switzerland |
Telephone
+41 44 250 2525
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Languages
German, English, Italian, French, Spanish, Portuguese
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Is the United States Really the World's Biggest Tax Haven? TalkFraud provides thought leadership on important international legal and financial news related to large-scale fraud, asset recovery and insolvency. This week we gather insight on this question from our ICC FraudNet member in Switzerland, a country known for being one of the most infamous tax havens in the world. We talk with Michele Caratsch, partner and head of litigation for Baldi & Caratschin Zurich, whose focus includes large scale fraud and asset recovery.
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In a recent article, Bloomberg Business quoted a managing director of Rothschild & Co., the venerable European bank, as saying that the United States “is effectively the biggest tax haven in the world”, lacking “the resources to enforce foreign tax laws and has little appetite to do so.” Remarks were taken from a presentation advising lawyers and financial advisers to uber wealthy foreigners on how to hide assets and avoid paying taxes. Bloomberg identified what seems to be a growing trend, and a revelation. The United States, quick to point fingers at governments including Switzerland and the Cayman Islands for being on the list of the biggest offshore tax havens, may in fact hold the top spot. Bloomberg sources said that the U.S. has become the world’s top tax haven, because it has refused to adopt new global disclosure standards. Has Switzerland adopted these standards, and if so why did it opt to do so? Also has adoption of global disclosure standards decreased use of the country as a tax haven? In the wake of the financial and debt crisis, combating tax evasion worldwide has become an important issue, which is broadly pursued by the global community. On 15 July 2014, the Organisation for Economic Co-operation and Development Council adopted the new global standard for the automatic exchange of information in tax matters. In the plenary meeting of the Global Forum held 29 October 2014 in Berlin, 97 countries committed themselves to introducing this new global standard. All major financial centres accessed this new standard, with the notable exceptions of Bahrain, Vanuatu, Nauru and …the U.S.A. Switzerland is implementing national legislation, and will become a reporting country starting 1 January 2018. At present, Switzerland has entered into bilateral treaties with the 28 countries of the EU, plus Australia, Jersey, Guernsey, Isle of Man, Iceland, Norway, Japan and Canada. Starting from 1 January 2018, Switzerland will turn over names of foreign taxpayers with Swiss bank accounts to tax authorities in the countries with which it entered into bilateral treaties. This exchange applies both to individuals, and to so-called "controlling persons", who are beneficial owners of 25% or more of an offshore-entity, irrespective of the place of incorporation. Once these principles have become fully operative, Switzerland aims to maintain a flourishing financial industry due to its political stability and to the excellent banking infrastructure and know-how it has consistently built in the last 60 years. However, it will no longer be attractive as a tax haven. According to the Swiss Bankers' Association, more than a quarter of global assets invested cross-border is managed in Switzerland. Having recognised the change of times and the global perception in relation to tax evasion, the Swiss government and the Swiss financial industry wanted to be part of the process of implementing a global standard which was unified, granted sufficient legal and technical protection of data and was based on the principle of reciprocity. This latter principle is now being severely questioned by the failure of the U.S. government to adhere to these globally accepted principles and standards. It is somewhat ironic that the very government which had started the whole process by actively hunting down its own tax evaders takes a hypocritical approach when it comes down to applying the same principle also to taxpayers of other jurisdictions. Do you think the U.S. has actually topped Switzerland as the world’s top tax haven? Why? According to a 2015 study by the Tax Justice Network, Switzerland still maintains the top ranking with respect to financial secrecy. But the U.S.A is surging in this particular ranking, and reached number three behind Hong Kong, having overtaken Singapore and the Cayman Islands. It is just a matter of time until the U.S. will top the ranking, and I anticipate this to happen as soon as the new global disclosure standards have been introduced in the rest of the world. Being an offshore tax haven can be a lucrative business. How do the U.S. and other countries including Switzerland benefit from being a tax haven? It is undeniable that Switzerland has greatly benefitted from having been a tax haven. The attractiveness of the banking industry did have a direct impact also on other sectors of the economy, starting from legal services, asset management, tourism and infrastructure. In a small country like Switzerland, the development of these sectors has contributed to the overall wealth of the country. It is interesting to note that, according to the Bloomberg Business article, the efforts to develop a U.S. tax haven industry are being targeted in smaller and less developed area, such as Reno, Nevada, Sioux Falls, South Dakota or Wyoming. It seems that the state governments are eager to attract this type of business in an effort to copycat the success obtained in Europe in this sector by smaller jurisdictions such as, in addition to Switzerland, Luxembourg, Liechtenstein or the Channel Isles. Offshore tax havens also benefit criminals focused on corruption and fraud. How do they impact the process of international asset recovery for victims of large-scale fraud in Switzerland? Sophisticated criminals want to exercise their "business" properly, and have a tendency to use to this purpose the most sophisticated tools at their disposal. The use of a Swiss bank account was deemed to constitute the "Rolls-Royce"-solution, giving a particular legitimacy to the fraudsters using this tool. Often just the ultimate proceeds of the crimes ended up in a Swiss bank account, after having been properly laundered and cleaned, with the "dirty part" of the transactions carried out in other jurisdictions. For these criminals, the regulation of tax issues usually constitutes a side issue, and almost the easiest part to deal with. Thus, I do not think that the new disclosure rules will have a material impact on subjects such as large scale fraud cases. Swiss banks have already introduced for many years advanced anti-money laundering measures, and yet this has not completely prevented sophisticated criminals from harboring the proceeds of their frauds in Swiss bank accounts. The new disclosure rules might make the access for less sophisticated criminals more cumbersome, thus reducing the overall figure of assets of criminal origin ending up in Swiss bank accounts, but in my view it will not completely eradicate the problem. What lessons could the U.S. learn from Switzerland? Swiss banking secrecy was originally introduced in the 1930s and its scope was to protect assets of foreigners from totalitarian regimes. This legitimate scope of banking secrecy was later supplemented by the offer of a safe harbor to wealthy families eager to protect their assets from expropriation, changes in political regimes or threats of extortion. The tax avoidance and evasion angle only came about at a later point in time, and partly delegitimized the core values inherent in banking secrecy. Since the last financial crisis of 2008, under the pressure of various governments keen to increase their tax revenues heavily affected by the crisis, the general perception of what constitutes a legitimate harbor for foreign assets or a tax haven has changed drastically, both within Switzerland and in the worldwide community, and Switzerland, under pressure, ultimately decided to opt out of this "business model", realizing that it would not have a future. The U.S. should learn from this lesson. What might turn out to be an immediate economic bonanza, attracting substantial assets for its financial industry, is bound to decline drastically, as soon as the U.S. government realizes that it cannot maintain a hypocritical approach to tax issues, creating a disparity between what it practices and what it preaches. It will not take long until the American public perceives the unjust and unequal treatment between its own citizens and wealthy foreigners being granted a free pass to deposit their undeclared assets in U.S. banks. Michele Caratsch is a member and head of the litigation team of Baldi & Caratsch, a Swiss litigation boutique with offices in Zurich. A member of ICC FraudNet, he specialises in complex commercial litigation and arbitration, with a particular focus on fraud and asset recovery. The firm has been involved in major fraud disputes and worked with other ICC FraudNet members in transnational cases, including the freezing of assets concealed in Swiss bank accounts, assistance in international legal assistance matters and recovery proceedings, institution of local criminal proceedings in aid of a request for tracing concealed assets or a money laundering investigation, recognition of foreign bankruptcy proceedings and of foreign interlocutory measures in Switzerland. 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. |
- Details
kangy@junhe.com www.junhe.com |
Address
25th Floor
China Resources Building 8 Jiangguomenbei Avenue Beijing 100005, P. R. China |
Telephone
+86 10 8519 2161
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Languages
Mandarin, English, French
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China’s Billion Dollar Ponzi Scheme Puts Focus on Stricter Regulations and Asset Recovery Nearly a million online investors in China are still reeling from news that they are victims of a billion dollar Ponzi scheme, perpetrated by Ezubao, a large peer-to-peer lender and its founder Ding Ning, 34, that ultimately took in 50 billion yuan or $7.6 billion. While the company operates primarily in China, so far it is unclear whether there are foreign victims, or whether the government was also defrauded.
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According to China’s criminal law, assets resulting from fraud are to be used preferentially to compensate the victims. Chinese enforcement authorities have already frozen some assets of entities known to be associated with the crime. Meanwhile the government is expected to respond quickly to a public outcry over the fraud by rolling out stricter regulations to protect investors in the future. However, in addition to a crackdown on the criminals, more aggressive asset tracing and asset recovery for victims would also help rebuild confidence in a wary public and send a message that criminals cannot get away with hiding stolen money. As China’s regulations attempt to catch up with financial services industries that grew too quickly, asset recovery may play a more important role in government efforts. Ding’s case has raised great concern about the safety of online wealth management products in China, a business that developed rapidly here over the past five years. Xinhua, the state news agency, reported earlier this month that police had arrested 21 people connected to Ezubao for defrauding about 900,000 online investors. Ding promised 9-14 % annual return, much higher than banks or other peer-to-peer lenders. However, according to Xinhua, 95 percent of the investments were fake. Ding used the money on a lavish lifestyle including luxury cars and real estate including a home in Singapore worth 130 million renminbi or $20 million, according to the news reports and a confession by Ding. He also used mass advertisements on state media to attract investors and a large amount of money within a very short period. He purposely held his company’s annual meeting last year in Beijing’s Great Hall of the People, where usually China’s legislature meets and official government meetings are held, and invited famous TV hostess and government officials to attend the event. These public displays misled the public and inspired confidence, and investors never considered that the investments could be a fraud. China’s wealth management industry has grown rapidly over the last decade as a strong economy brought fortune to the Chinese people. According to one survey by the Bain Company, China’s total private wealth market grew by 16% annually from 2012 to 2014. Commercial banks, security companies, fund companies, trust companies and insurance companies are five main players in the industry. All are under strict regulation in China. However, some new players, including companies on the P2P platform, crowd-funding platform and other wealth management companies are newly emerging and lack adequate regulation so far. The Ezubao Ponzi scheme and its large number of victims now has the government's attention to tighten the regulations on these new players. Despite strict government regulations, Ponzi schemes are not new in China. In famous cases including the Wu Ying case, Yilishen case, Fanya Case and Thousands of Miles Forestation case are large Ponzi scheme cases in China and have been widely reported. For instance, in the Wu Ying case in 2007, Wu Ying defrauded RMB 770 million from the public for fake investments with alleged high returns. Wu Ying was arrested and eventually sentenced to life. All of her properties were confiscated, but only RMB 380 million have been returned to the victims. The Chinese public security authorities in different cities have frozen Ezubao's assets, including a bank deposit of RMB 1.071 billion from Anhui Yucheng Finance Lease Co. Ltd., the holding company for Ezubao and an active participant in the Ponzi scheme. If those assets are deemed by Chinese courts as illegal property resulting from the fraud, they should be preferentially used to compensate the investors. On December 28, 2015, two weeks after Ezubao was investigated, the China Banking Regulatory Commission, along with the Ministry of Public Security and other authorities, published a draft of P2P rules for public feedback, which seeks to tighten regulation on the P2P industry. According to news reports, Chinese public security authorities are still in the progress of investigating Ezubao and tracking its assets and its affiliates’ assets. So far, there is no detailed asset recovery plan published by the Chinese Ministry of Public Security, but the latter has opened an online information platform for the Ezubao investors, and the investors of all other illegal fun-raising cases in the future, to register their loan and investment for the purpose of evidence collection by the Chinese public security authorities. It is an important start of what will hopefully be a larger role for asset recovery in helping the government return the people’s money. Christine Yi Kang is a partner of Jun He Law Offices (“JunHe”). She has significant experience in international commercial dispute resolution, including international commercial arbitration and litigation, both in China and abroad for over 15 years. She also practices extensively in corporate compliance and ant-commercial bribery investigation. She joined JunHe in 2011 after practicing with international law firms and with China International Economic and Trade Arbitration Commission (CIETAC) for over ten years. Established in 1989, JunHe is one of the first private partnership law firms in China and has grown to be one of the largest and most recognized Chinese law firms. JunHe has nine offices around the world and a team comprised of more than 600 professionals, including over 180 partners and legal counsel, as well as over 420 associates and legal translators. JuneHe provides first-class full services on Chinese Law, as well as legal services on local laws through its overseas offices. Due to its outstanding client service and excellent reputation, JunHe is the only Chinese law firm to have been accepted for membership in Lex Mundi and Multilaw, two leading associations of independent law firms around the world. Through such alliances, JunHe is able to extend its premier legal services efficiently and consistently to every corner of the globe. 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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