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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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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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International Fraud Litigation: Should You Consider Arbitration an Alternative? In the right circumstances, arbitration can provide a time- and cost-effective alternative to fraud litigation that is worth considering, particularly given the growing prevalence of arbitration agreements internationally and the potential risk of fraud or corruption in international business deals. The less public, more flexible nature of the arbitration process are also part of what make it an appealing option. However, though there are benefits, a fraud claimant should also be prepared for the challenges before taking this route toward resolution.
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Third Parties The hallmark of arbitration is that it is by agreement. To bring a claim, a party must have an arbitration agreement in place with the respondent. It follows from the consensual nature of arbitration that an arbitral tribunal has no jurisdiction over third parties who are strangers to the arbitration agreement, and this limit on an arbitration tribunal's jurisdiction can have serious consequences in a fraud context. For example, although an arbitral tribunal can order freezing orders, interim injunctions, etc., these orders are only enforceable against the parties to the arbitration. A claimant could seek a freezing or Mareva order from the arbitral tribunal to prevent a respondent from dissipating assets, but that order would not be enforceable against third parties like the respondent's bank.1 To bind third parties and better prevent dissipation, a claimant must go before the courts and obtain a judicial freezing order. A party may be able to go directly to court and request an urgent freezing order if necessary. However, where urgency is not made out, the party might first have to obtain permission from the arbitral tribunal before seeking a freezing injunction in court. Particularly if the claimant waits until after the arbitral process begins before seeking to freeze the respondent's assets, it could need permission from the tribunal, which would tip off the respondent and risk dissipation. Claimants should therefore front-load the work where there is urgency, and obtain judicial freezing injunctions during in the period before a tribunal is constituted. Pre-hearing Discovery Rules Another important feature of arbitration is the more limited pre-hearing disclosure and discovery rules. Particularly in fraud claims, inadequate or unreliable disclosure can be a significant problem when proceeding by way of arbitration. Procedurally, although an arbitral tribunal has broad powers to conduct the arbitration "in such a manner as it considers appropriate",2 party disclosure is often simplified compared to the regimented procedural rules of the courts. In an international arbitration, both the claimant and the respondent should be aware that they may have to prove their case solely with documents or testimony within their own possession or under their control. Even where more comprehensive disclosure is ordered by an arbitral tribunal, there is no prescribed sanction for failing to follow arbitral procedural orders, such as striking a defence or dismissing a claim which would be available in court. Obtaining evidence from third parties can also cause difficulties, since in many jurisdictions there is no express power for arbitral tribunals to issue letters of request directly to a foreign court or a person outside the jurisdiction where the arbitration is held. Parties should therefore be prepared to go to court and seek assistance where they require evidence or a witness that is located outside the arbitral tribunal's jurisdiction. Limited Grounds for Judicial Appeal of Awards One of the main purposes of arbitration is to avoid recourse to the courts, particularly in the international context where parties may not be keen to have their dispute decided by foreign courts. Court involvement is purposefully limited – it follows that the grounds for judicial appeal of an arbitral award are also limited. An international arbitral award cannot generally be appealed on either errors of facts or errors of law; instead, a party must bring an application for judicial review or an application to set the award aside on certain limited grounds (including, for example, where the award was obtained by fraud). Where one party does not comply with an arbitral award, the other party can seek a court judgment to enforce it. In limited circumstances, a foreign award can be enforced even if it is set aside in the jurisdiction where it was made (i.e., where the party can show the award was set aside by a partial, unfair court in the foreign jurisdiction). Enforcement of a foreign arbitral award is usually more straightforward than enforcing a foreign judgment, and can be done by way of application rather than through an action. Once sanctioned by a domestic court, an arbitral award can be enforced in the same way as a judgment. Resolution or Vindication? Arbitration can provide a means of resolving disputes that may be less public, less expensive, more efficient than litigation, and which often provide more flexibility to the parties. However, arbitration also presents unique challenges stemming from its private nature, including the tribunal's inability to bind third parties, enforce interlocutory orders, and compel evidence from outside its jurisdiction. A fraud claimant should also remember that the arbitrators are paid for by the parties. Likewise if justice in the form of vindication through the legal process is the goal, arbitration may be a less attractive option. An arbitrator may be less willing than a judge to make hard findings that a party's evidence is not credible, or that a party is a fraudster. 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’sWhoLegal: 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. 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. 1 See Farah v Sauvageau Holdings Inc.,2011 ONSC 1819. 2 See i.e., article 19(2) of the Model Law. |
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snp@pcblitigation.com www.pcblitigation.com |
Address
4th Floor
90 Chancery Lane London WC2A 1EU DX: 0038 LDE United Kingdom |
Telephone
+44 (0) 20 7831 2691
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Languages
English
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The People’s Money $£¥ ICC 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: That the only or the most effective way of pursuing complex fraudsters is via the criminal justice system. There is an array of tools available in the civil arena, which I have deployed numerous times over the past 35 years and which can be equally and often more effective. |
The biggest misconception government officials have about complex fraud is: That using mutual legal assistance is the most appropriate method of seeking relief against fraudsters. This method can often be time-consuming and inflexible, whereas in contrast civil relief offers a dynamic and often quicker alternative. Putting together a dedicated team of specialists in the private sector frequently leads to successful outcomes. The greatest challenges in asset tracing and recovery in my part of the world are: Spreading the word about the breadth of tools available to assist the pursuit of overseas proceedings. For example, my firm PCB Litigation regularly works obtaining orders for interim relief in support of foreign proceedings on behalf of overseas lawyers and clients, notwithstanding that there are no ongoing proceedings in England. This can be an extremely effective tool, not least given some of the powers available to the English courts to seek to ensure compliance with court orders. The greatest challenges worldwide are: Staying one step ahead of fraudsters. Fraudsters are constantly evolving and using ever more sophisticated techniques to commit fraud and then conceal the proceeds. Fortunately, the legal system has been quick to recognize this and develop an arsenal of weaponry to tackle such persons. What I tell victims of fraud about the process of asset tracing and recovery is: There are three key words to successful asset tracing and recovery: strategy, strategy and strategy. It is important at the outset to build a coherent, consistent and co-ordinated strategy, often across multiple jurisdictions, using a skilled bespoke team of specialists in their respective fields. This is one of the prime benefits of Fraudnet, as its members are well versed in this approach. The most challenging day I’ve faced on a case was: Facing a strike out application for lack of evidence, I persuaded the Court to adjourn the application pending my inspection (limited to 24hours) in the Middle East of material documents belonging to a State Owned Company. Within that period the relevant documents were located which led to a substantial settlement. The best day I’ve ever had working on a fraud case was: Simultaneously recovering assets of a serial fraudster from proceedings in multiple jurisdictions. I became a member of ICC FraudNet because: Given the increasingly global nature of fraud and number of victims being targeted, I helped to launch Fraudnet in order to establish an unrivalled team of specialists in fraud, asset tracing, and recovery, money laundering and cybercrime that would be able to assist fraud victims in most jurisdictions throughout the world. Asset tracing and recovery is a chosen part of my work because: The cutting edge strategy that is available to fraud practitioners has enabled us to be constructive and successful in implementing methods that lead to recovery of monies wrongfully misappropriated. Steven Philippsohn is a leading authority on complex international asset recovery. Over the last 30 years his firm has been retained by governmental, national and international organisations. A founding member of ICC FraudNet, he is listed by The Times of London as one of the 100 key influential legal professionals in the United Kingdom.” Among his firm's highlighted work is representation of the primary defendant to a $1 billion claim (one of The Lawyer’s Top 20 cases for 2014 and 2015). 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
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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Stanford Ponzi Scheme: Ruling Sends $5.5 Billion Suit Against TD Bank to Trial Creditors of America’s second largest Ponzi scheme will get their day in courtas a result of a key ruling earlier this month by the Superior Court of Justice – Ontario. The court dismissed a motion for summary judgment from Toronto-Dominion Bank, which would have set aside a $5.5 billion claim against the bank by liquidators of Stanford International Bank (SIB). This decision in Canada, in a massive case that has played out in courts in several jurisdictions since 2009, is particularly meaningful. The ruling by the Honourable Barbara A. Conway opens the door for the case to proceed and victims’ claim to be heard. It comes after more than two years of work by our team of lawyers at Bennett Jones, representing the joint liquidators working to recover assets for victims.
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On the heels of the Bernie Madoff investment scandal in 2008, the Stanford scam stunned the financial community and investors around the world. How could another Ponzi scheme have occurred under the noses of so many? An offshore bank based in Antigua, Stanford International Bank, sold about $8 billion in high-yield certificates of deposits in what was a massive Ponzi scheme second only to the Bernie Madoff debacle. The scam was perpetrated primarily by Allen Stanford, SIB’s chairman and James Davis, chief financial officer. TD Bank was SIB’s main correspondent bank from the early 1990s to 2009 when the bank collapsed, and as such, “maintained accounts for SIB through which funds flowed between SIB and its investors for the purchase and redemptions of CDs” as outlined in Judge Conway’s decision. In February 2009, the U.S. Securities and Exchange Commission (SEC) filed civil charges in the U.S. District Court for the North District of Texas (Dallas Division) against SIB, related entities, Stanford, Davis and others alleging a massive ongoing fraud. That same year, liquidators filed suit against TD Bank on behalf of SIB and its customers, for damages of US $5.5 billion for “negligence” and “knowing assistance”. The decision to dismiss TD’s motion states: "Essentially, the claim alleges that as SIB's correspondent bank from the 1990s to 2009, TD failed to act in accordance with the standard of care applicable to a reasonable banker…The plaintiffs allege that TD failed to conduct proper due diligence before it started providing banking services to an Antiguan off-shore bank, and compounded its negligence by continuing to provide banking services to SIB for 20 years. They allege that TD ignored public information and red flags that should have led it to terminate SIB's access to TD's facilities, report the conduct of Stanford and others to the appropriate authorities, and/or freeze SIB's accounts," the decision says. TD’s motion hinged on its assertion the claim on behalf of SIB and its shareholders was filed after the two-year filing limit expired. TD argued that because of extensive media coverage and other information, SIB’s previous liquidators should have known that SIB had filed suit against TD before Aug. 22, 2009. In her decision, Judge Conway says, “the parties acknowledge that the joint liquidators were not in office from February 16, 2009 to August 22, 2009 – it was their predecessors, the Former Office holders (first as receivers-managers and then as liquidators) who were in office, and it is the Former Office holders’ knowledge that is relevant in this case.” However, in dismissing TD’s motion, the court ruled that without a trial, it could not determine when a possible claim against TD could have been discovered by previous SIB liquidators. The decision states, "the issue of when the former officeholders ought to have known that SIB had a potential claim against TD cannot be fairly adjudicated on this motion and is a genuine issue for trial." The facts of the case will be laid out at trial, and our team looks forward to bringing those facts to light. However, for now this decision gives victims of this devastating financial crime the very least that they deserve -- their day in court. 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’sWhoLegal: 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. 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
Andrew.Witts@wragge-law.com wragge-law.com |
Address
4 More London Riverside
London, SE1 2AU, United Kingdom |
Telephone
+44 (0)870 903 1000
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Languages
English
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Brazil’s Victory Strikes a Blow for Victims of Government Fraud Amidst this year’s all too frequent news reports of massive government frauds in countries from Moldova to Guatemala, there was good news for taxpayers and governments -- a landmark court victory in the UK in the largest corruption and asset recovery case ever undertaken by the Municipality of Sao Paulo and the government of Brazil outside of Brazil. More importantly, this judgment will have a significant effect on the law of civil fraud internationally.
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The decision in the case, The Federal Republic of Brazil et al v Durant International Corporation et al, entitled the Municipality of Sao Paulo and the government to recover, through the principle of backwards tracing, the full proceeds of fraud perpetrated against the city of São Paulo, plus compound interest, totaling more than US $28 million. The principle of backwards tracing comes into play in somefraud cases where victims seek to trace and recover the proceeds of fraud, where no direct link can be established between the stolen funds and money or other assets discovered in the hands of the perpetrators. Decided in August of this year by the Privy Council, the case has changed the law in Jersey (a crown dependency and the largest of the Channel Islands) and arguably, in England as well. The Privy Council’s Judicial Committee is the court of final appeal for the UK overseas territories, crown dependencies and Commonwealth countries. The case, involving Paulo Maluf, the former mayor of the City of São Paulo and one of the country’s most high-profile political figures, and his son Flavio, illustrates the global nature of financial crime. In March 2009, the Municipality of São Paulo commenced proceedings in Jersey against two British Virgin Islands companies, which were under the practical control of Paulo Maluf. The basis for the claim was that more than $10 million received by the defendants constituted the proceeds of fraud, as a result of a multi-million US dollar 'kick-back' scheme arising from a large construction project in São Paulo. The suit claimedmore than US$10 million plus interest, which Paulo had received in bribes related to a road construction project, on the grounds that the defendants were liable in knowing receipt and/or restitution on the grounds of unjust enrichment. The Royal Court of Jersey handed down judgment "unhesitatingly" in favour of the Municipality and the Brazilian government. The defendants appealed the judgment. The Court of Appeal then dismissed the defendants' appeal on all grounds, including their argument that backwards tracing, which had not been previously applied or established in Jersey law, could not be applied. The defendants applied to the Privy Council for permission to appeal. The appeal was granted, but only in relation to a limited point of law, namely whether Jersey law recognised the principle of backwards tracing and if so, whether it applied in this case. The appeal was heard on 7 May 2015. On 3 August 2015 the Privy Council handed down its judgment. The Privy Council dismissed the defendants' appeal and held that backwards tracing is available in certain circumstances, namely when a claimant can establish that there is a close causal and transactional link between the relevant payments. This judgment has clarified the law in this area in Jersey and arguably in England as well, which was previously unsettled. Lord Toulson said it is "particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true overall purpose and effect. If the court is satisfied that the various steps are part of a coordinated scheme, it should not matter that, either as a deliberate part of the choreography or possibly because of the incidents of the banking system, a debit appears in the bank account of an intermediary before a reciprocal credit entry". While the ruling did not swing the doors wide open to permit backwards tracing worldwide, in this global economy, we are all connected. Likewise are our finances, and the shared threat of cross border fraud. The victory for Brazil and its taxpayers is arguably one that everyone should celebrate. Andrew Witts is the Chairman of Wragge Lawrence Graham & Co, which represented the government of Brazil in this landmark case. He specialises in fraud and international asset tracing, with particular experience in running complex, multi-jurisdictional cases. His work has encompassed a wide range of trust litigation matters in most of the off-shore jurisdictions. Andrew is one of the founder members of FraudNet. He is acting in major litigation arising out of the Madoff affair, and continues to advise the Government of Brazil in the Paulo Maluf case and the liquidators of Stanford International Bank (Allen Stanford). 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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