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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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StephenBaker@bakerandpartners.com www.bakerandpartners.com |
Address
Baker and Partners
Midland Chambers 2-10 Library Place St Helier JE1 2BP Jersey |
Telephone
+44 1534 766254
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Languages
English
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Financial Attraction: Big Corporations and the Caymans Can governments put enough pressure on the world’s offshore tax havens to make a dent in what has become a competitive trillion dollar industry? Both the U.K. and the U.S. hope so. They are developing strategies to force corporations to pay taxes at home, even as the Cayman Islands and other havens continue to compete for corporate business. However, with so much money involved andconstitutional questions at play, the idea of forcing British territories to bend to the governments’ demands is probably more an aspiration rather than a near term reality. Focusing on their own reporting laws at home, and working with Overseas Territories (OTs) and Crown Dependencies to update and improve their systems, would more likely yield results and additional corporate tax funds in government coffers.
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These days it is difficult to gauge whether the Cayman Islands is better known for its idyllic landscape or as an offshore tax haven for Fortune 500 corporations.Few jurisdictions rise to the level of attention and criticism leveled at the Caymans over the issue, but lately,calls for action have reached a fever pitch in the UK and in the U.S. According to a recent study, the 500 largest American companies hold more than $2.1 trillion in accumulated profits offshore to avoid paying U.S. taxes. The study by Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund estimates that the companies would owe about $620 billion to the U.S. government were they to repatriate those funds. Apple alone holds $181 billion offshore, more than any other U.S. company. Other brands include Nike and General Electric. In addition to corporations, however, the wealthy also hold assets offshore. In 2012 a study commissioned by Tax Justice Network a British activist group, found that worldwide, the wealthy have accumulated at least $21 trillion in such jurisdictions. The study was conducted by James Henry, former chief economist at McKinsey, and an expert on offshore tax havens.
These revelations, which anger taxpayers everywhere, coupled with the recent financial crisis, have spurred governments to aggressively go after money owed to them. The issue is popular with voters, unlike tax increases or spending cuts. In the UK last month, Sir Eric Pickles, a member of Parliament and an anti-corruption advocate, said the government could use legislation among other means to force its former territories to reveal the identities of the ultimate beneficial owners of offshore companies.The Guardian has reported that both the Caymans and the British Virgin Islands have received joint letters from the Treasury and Foreign Office ordering them to present an implementation plan by November. “How to get there, through legislation, guidance or naked pressure, the Prime Minister is pretty determined to get there,” Pickles told the Guardian. One option on the table is the use of a public registry of beneficial ownership, which would identify who really owns and controls companies in tax havens. The popular thinking behind the idea of a public registry of beneficial ownership is that it would enable anyone to see who owned a particular company. Arecent spike in receipts from a tax on homes bought up by companies, trusts and investment funds, rather than individuals, led to the assertion by Donald Toon, director of economic crime at the UK NationalCrime Agency, that foreign criminals were investing in real estate as a way of storing their ill-gotten gains. Supporters argue that revealing beneficial ownership would unearth the practice and make it easier to trace assets. In reality, as with all steps law enforcement takes, criminals will always find a way to get round them. For example, little has been said about how discretionary trusts would be recorded. By their very nature, discretionary trusts do not have beneficial owners and many criminal cases have these structures as a feature. Foundations are another example. In short, sophisticated criminals will find a way of disconnecting their ownership and control of a structure from the view of the authorities. Governments world wide have become more innovative in recovering tax they believe has either been evaded or, crucially, avoided by using aggressive tax planning schemes. For example, the UK government is looking to recover over £7bn in tax by issuing accelerated payment notices to taxpayers where tax avoidance schemes have been used. It is questionable as to whether the publication of beneficial ownership information of offshore companies will produce results especially when alternative mechanisms for finding out the information – witness the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard - or recovering the tax already exist. It looks more like a political ploy than a tax recovery exercise. Realistically, the British government does not have the constitutional power to force the Caymans to do anything. The Cayman Islands are an Overseas Territory (OT) as opposed to a Crown Dependency like Jersey, Guernsey and the Isle of Man. Putting aside the complexities of constitutional law, the Cayman Islands has its own legislature and determines its own fate, only relying on the UK in matters of foreign policy and defence. While it has a Governor, who is appointed by the Queen, and requires Privy Council (the UK body which represents the Crown) assent for all its legislation, pressure can really only be applied indirectly without causing a constitutional crisis. It is interesting to note that before the Overseas Territories Joint Ministerial Council meeting which is due to be held in London later this month, leaders of several OTs met in Bermuda in July to discuss the matter. The clear message arising from that meeting was that developing a collective position was central to furthering the OTs’ interests so that the UK was not able to ‘divide and conquer’. To some extent it seems as though this has had some effect. In August, Grant Schapps, the Acting UK Overseas Territories Minister said that “There’s more than one way to skin a cat.” Following this the Cayman Islands’ Premier has said that the UK Government appeared to have “moved its position” and would accept “another effective mechanism” for releasing beneficial ownership information. This will be further addressed at the OT Joint Ministerial Council meeting. Watch this space. As to tax and large corporates, a public registry of beneficial ownership is not as relevant. The use of offshore entities in this context is part of tax planning strategies which are designed to exploit loopholes in tax legislation and practice across the world, either resulting in double non-taxation or diverting profits to jurisdictions which have highly beneficial taxation regimes. This is what the OECD Base Erosion and Profit Shifting programme is designed to address (although usurped to some extent by the UK’s Diverted Profits Tax proposals). Of course, the United States already has its own problems with U.S. corporations stashing away cash offshore thanks to its worldwide approach to taxation under which the government only taxes profits when they are remitted to the U.S. In short, the tax issue for large companies is not so much one of disclosure as to weaknesses in international and domestic tax regimes. For OTs and Crown Dependencies, the greatest fear is not the adoption of a register per se but that it is done unilaterally. The offshore financial services industry is fiercely competitive and any advantage that one jurisdiction can gain over another would be seized upon immediately by competitor jurisdictions. This issue has brought out a surprising degree of cooperation between offshore centres in adopting a near-uniform approach of rejecting the idea. It is also not without some irony that neither the UK nor the U.S. operate a central register of beneficial ownership or, in the case of the U.S., require the collection of beneficial ownership information – as recently noted by New York County District Attorney Cyrus R. Vance Jr. The message is that the onshore jurisdictions should get their house in order first before pointing the finger offshore. Stephen Baker is an Advocate and Partner of Baker & Partners, and a member of ICC FraudNet. He is also an appointed Crown Advocate. He has acted regularly for foreign governments including Brazil, Kenya, Pakistan and Nigeria in asset recovery actions, and has been responsible for handling suspicious activity reports and investigations for the Attorney General of Jersey. Regularly instructed by both the Attorney General and the Jersey Financial Services Commission, Stephen is a specialist in conducting investigations into the flow of suspected corrupt payments made to politicians through Jersey. He also has expertise in cases involving complex fraud and money laundering, particularly those with an international and political dimension. 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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Offshore Tax Havens Feds Playing Hardball to Nab Middle Men Offshore professionals who have made an industry of helping businesses hide assets overseas are finding themselves far from the picturesque locations in which they do business.
Instead, more and more of these professionals are cooling their heels in prison, courtesy of FBI stings morecommonly associated with high-profile cases against mob kingpins, terrorists and, occasionally, unscrupulous politicians. Wire taps, big money hand-offs and snitches are all part of this takedown to stop tax evasion. |
The strategy is part of a large-scale U.S. offensive against tax evasion. Internal Revenue Service (IRS) disclosure programs allow taxpayers to seek amnesty if they turn in the professionals they use to incorporate off shore. They are also ratting on Swiss banks and other financial institutions involved. According to the IRS, since 2009 more than 50,000 U.S. taxpayers have avoided charges under disclosure programs that require them to name the banks and professionals who helped them. Offshore entities set up to exploit a tax advantage are a perfectly legitimate vehicle for individuals and companies to avoid paying taxes. The process only becomes illegal when the intent is to evade paying what is lawfully due to the government. Offshore tax evasion costs the U.S. billions each year, with some estimates putting the figure as high as $100 billion a year, according to a report released earlier this year by the Congressional Research Service. While these purveyors of tax crimes may be surprised, those of us who specialize in asset recovery and asset tracing on behalf of victims are not. It is hardly surprising that U.S. law enforcement has decided to attack the soft-underbelly of facilitators – those who offer their services to U.S. citizens seeking to hide their taxable income offshore – nor that the Feds are using tactics they readily employ against organised crime. Implementing these stings with skill and ease, FBI officers set traps for the unwary, luring them onto U.S. soil. These sting operations are indicative of the Feds’ determination to prosecute offshore middlemen who act as an illegal enabler to U.S. citizens looking to score a tax haven. It is for society to debate whether the Feds are using a sledgehammer to crack a nut. After all, these were supposedly just businessmen seeking to evade taxes… or were they? Defense attorneys may rail against the tactics, time and government dollars spent on these non-violent offenders. However, the reality is that the safe-havens these offshore professionals design and implement effectively make them co-conspirators to a criminal act. In a case featured recently in an article in Bloomberg Business, perpetrators were seeking to hide some $2m dollars from the IRS, allegedly made during property transactions. If this had been somebody seeking to hide $2m arising from an illicit drug deal, people’s perceptions would almost certainly be different; the point is, both are illegal and both amount to money laundering. The problem is that facilitators can never be certain of the origins of funds. Yes, they will conduct their due diligence and ‘know your client’ (KYC) checks for integrity purposes. However, for the more unscrupulous, it is debatable whether they are concerned about the origin of the funds. It is at these offshore operators that the crackdown is aimed. These new proactive and aggressive tactics by the Fedsare sending a message to facilitators and enablers: if you help U.S. citizens evade taxes, you’re going to jail. The message is clear: the authorities are watching, listening and planning their next move in order to entrap those who dare flout the tax system. So if you are an unscrupulous enabler based in the Caribbean, Switzerland or elsewhere, it may be time to batten down the hatches and rethink your business model. Martin S. Kenney is an international expert on asset recovery and commercial litigation and a member of ICC FraudNet. Based in the British Virgin Islands, Martin Kenney & Co. Solicitors focuses on representation of people harmed by international economic crime, as well as on complex insolvency, bankruptcy and commercial litigation work. www.martinkenney.com | @MKSolicitors 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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Just Investing: Spread of Litigation Funding Evens Playing Field Your drinking water has been poisoned, your car is defective, or you have lost your life savings in an investment fraud. Neither you, nor the other victims have the money to pay for a lawsuit, but an investment company backs the suit, allowing you to mount a vigorous case. A win would not only net damages for you, but a return on investment for the company that banked the lawsuit. This is the brave new world of third-party litigation funding, or litigation finance, in which institutional investors offer financing in return for a contingency in the recovery. One of the most critical developments in civil and potentially commercial litigation, the practice has the potential to impact many types of cases, including international fraud, environmental and corporate cases worldwide.
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Originating in Australia and the UK more than a decade ago, third party litigation funding agreements (LFA’s) are becoming commonplace in class actions in Canada, and have spread to the United States and Asia. However, while LFAs have yet to become as common in commercial litigation, a court ruling in Ontario earlier this year (Schenk v. Valeant Pharmaceuticals International Inc.,2015 ONSC 3215), could signal further expansion of the practice. Although the motion for approval of the LFA was ultimately denied, the court permitted the LFA to be amended in accordance with its decision. In the wake of the decision from Schenk, Canadian courts are bound to see more LFAs in commercial litigation. In a global world, other jurisdictions may not be far behind. The deck is often stacked against plaintiffs who dare to take on companies with deep pockets. LFAs level the playing field, by providing access to the courts for parties who would not otherwise be able to litigate a case. Funders can also balance lopsided financial resources between parties and assist parties who would otherwise accept lower settlements, because they lack the financial resources to continue with the litigation. Third-party funders do not fund meritless cases, or at least those that do will not be in business for long. Accordingly, access to funding will not clog the courts with meritless cases. Meanwhile, as the debate continues, what are the big issues, responses by the courts and the future of LFAs? Are LFAs a hindrance or do they actually facilitate the administration of justice? Courts have aimed to strike a balance in governing the use of LFAs, between their potential to interfere with the administration of justice and their potential to unlock greater access to justice. On one hand, concerns arise when third-party funders are permitted to interfere with lawsuits in which they have no legitimate interest. Intermeddling in a dispute in which a third-party has no interest without justification or excuse is known in common law as maintenance. Profiting off such a dispute is known as champerty. The common law prohibitions against maintenance and champerty have historically deterred LFAs. On the other hand, there isthe notion that LFAs facilitate access to justice, a concern that has grown increasingly prevalent in recent years. In the commercial litigation context, contingency retainers are less common than in class actions or personal injury litigation. As such, the risks and expenses associated with litigation fall primarily on the client. The often complex and document heavy nature of commercial litigation typically makes it very expensive and therefore a lack of access to adequate funding may create a barrier to justice. Given that investments are designed to make a profit, when is that profit mercenary? In Schenk, the primary basis on which the court refused to approve the LFA was that the third-party funder could potentially receive over 50% of the proceeds of the litigation. That threshold was adopted from Ontario's statutory cap on contingency fee agreements, which is set at 50%.In the court's view, an LFA in which the third-party could receive the majority of the proceeds did not provide access to justice. Rather, the LFA provided an attractive business opportunity to the third-party, who suffered no wrong. However, obviously funders find investing in litigation is good business when the payments are less than 50% or they would not invest. Limiting the third-party funder's decision making power Third-party funders may exercise influence over the litigation where the funder is permitted to terminate the LFA. Courts have refused to approve LFAs where the funder possessed the power to terminate the LFA without cause (see e.g. Metzler Investment GMBH v. GildanActivewear Inc., [2009] O.J. No. 3315 (Sup. Ct.)). However, where reasonable limits are placed on the funder's ability to influence the litigation through termination of the LFA, courts will not interfere. In Schenk, the funder possessed the ability to terminate the LFA in the event that it reasonably ceased to be satisfied with the merits of the claim. This was viewed as a reasonable limit on the power to terminate the LFA. Courts may require the disclosure of an LFA An LFA itself is not confidential, and its terms may be required to be disclosed. In the recent International Centre for Settlement of Investment Disputes tribunal decision from MuhammetÇap&SehilInşaatEndustriveTicaret Ltd. Sti. v. Turkmenistan, the claimants were ordered to disclose the identity of the third-party funder and the terms of the LFA. Grounds cited by the tribunal for requiring the disclosure included the potential that a conflict of interest existed between the arbitrators and the funder as well as the opposing party's intention to apply for security for costs.Similarly, Canadian courts have required LFAs to be disclosed to opposing parties (see e.g. Fehr v. Sun Life Assurance Co. of Canada, 2012 ONSC 2715). LFAs in the United Kingdom With its lengthier history of permitting LFAs, the United Kingdom has a more progressive approach in place. In particular, the U.K. has developed the Association of Litigation Funders of England and Wales, which is an independent body whose purpose is to regulate litigation funding. A Code of Conduct for Litigation Funders was also put into place, which mirrors some of the concerns discussed above that were addressed by Canadian courts. For example, litigation funders may not try to take control of the litigation, may not terminate funding absent a material adverse development, and must have the financial resources to pay for the litigation. In Schenk, the court noted that the third-party funder was a member of the Association of Litigation Funders of England and Wales and that it was therefore expected to adhere to the Code of Conduct. The future of LFAs in Canada and beyond In the absence of legislation or a Code of Conduct, LFAs are still governed by the courts in Canada. As such, there are no clear guidelines and no guarantees that any particular LFA will hold up in court. However, even where LFAs are not approved, Canadian courts have provided guidance on how to amend the LFAs and permitted the parties to renegotiate the LFAs accordingly. Although the court in Schenk opened the door for LFAs in the commercial litigation context, it may be some time to feel the impact of the decision. This is because parties to commercial litigation often have their own financial resources with which to finance the litigation. However, where individuals are involved in commercial disputes, where sophisticated parties lack adequate financial resources, or where sophisticated parties wish to hedge the economic risks associated with litigation, LFAs will continue to be a valuable tool. 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
s.bonifassi@lebray.fr www.lebray.fr |
Address
7, rue de Madrid
75008, Paris, France |
Telephone
+33 1 44 90 17 10
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Languages
French, English, Russian, divish, Arabic, Romanian, Bulgarian
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Why You Are Probably a Victim of International Corruption If you are reading this, chances are you have been affected by international corruption. Because this type of fraud occurs in the shadows in the form of bribery and other financial crime -- and it happens to corporations and governments rather than individuals -- the problem generally fails to arouse media attention or public anger sufficient to facilitate change. People know it’s a problem, but it’s not personal.
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However, those in the field of asset recovery know that we are all ultimately victims of these crimes. Just how big is the problem? This month at ICC FraudNet’s annual conference, held this year in Vienna, one of our featured speakers, Martin Kreutner, executive secretary of the International Anti-Corruption Academy (IACA) based in Laxenburg, Austria, shared some sobering statistics – even to me and our members who tackle fraud around the world every day. An estimated $1 trillion dollars is paid in bribes every year around the world, Kreutner said, resulting in significant losses to governments. In some African countries, bribes accounted for losses of up to 25 percent of the GDP, while in Asia the number was close to 17 percent. In Europe, the figure is estimated at between 5 to 10 percent of the GDP. Given our global economy, the effects are also global, including public discontent. The latest Eurobarometer survey found that about 76 percent of Europeans believe corruption in government is widespread, and more than half believe it has increased in their own countries. Not only Europeans are distrustful of their government. In the U.S., according to a recent Gallup poll, about 75 percent of Americans believe corruption in the government is widespread. The IACA is an international organization established to contribute to the fight against corruption through education, research and cooperation among nations. Kreutner was just one of the experts who addressed ICC FraudNet members at the conference, and participated in panel discussions focused on fraud trends and strategies we use to help victims recover their assets and hopefully a sense of well-being. The purpose of the event is to increase worldwide cooperation in the fight for fair competition and a business environment free of corruption and fraud. For example the keynote speaker was Elena Panfilova, vice chair of Transparency International (TI) and the chair of TI Russia, whose speech included information about tracing property in foreign jurisdictions. Attended by FraudNet members and strategic partners: Andrews International, BDO, Grant Thornton, The Mintz Group and PwC and international government and business executives, this working event was supported by ICC Austria, Transparency International and the International Anti-Corruption Academy Austria (IACA) and hosted by FraudNet’s Austrian member Bettina Knoetzl of Wolf Theiss. Kreutner lauded the work of the United Nations Convention against Corruption (UNCAC), which includes 175 countries united in a common goal of reducing bribery and corruption in the next 15 years. Given the size of the problem, he also posed an interesting question. Should international corruption cases be viewed as human rights violations? Some experts think so, and are pushing this view, which could open up a new method of sanctions against the perpetrators. Nothing illustrates the need for a different view of these crimes more than the economic and human tragedy in Moldova, where an elaborate fraud allowed thieves to make off with an estimated $1 billion from the country’s banks. Because Moldova is among the poorest nations in Europe, the people are suffering the consequences. They are taking to the streets by the thousands to protest, demanding justice and change, which they deserve. However, in addition to finding and punishing the guilty, the government should make every effort to return the people’s money. The use of conventional techniques by enforcement agencies is not the answer. Casting a wide net around the world using experts in asset tracing and asset recovery is the only way to recover assets stolen as a result of a complicated international fraud. Established in 2004 by the International Chamber of Commerce (ICC), the world’s largest business organization, ICC FraudNet has expert resources in 67 countries, and has recovered assets in similar complicated government cases. Coming together as a world wide team, and learning about the challenges of global fraud, is not only a reminder of just how big the problem is. It is also a reminder of our successes -- how skilled we are as members of ICC FraudNet, how well we mobilize to help victims and that there are more victories to be won. Stéphane Bonifassi, of Lebray&Associés, specializes in representing victims of fraud, and is the executive director of ICC FraudNet. Regarded as a Most Highly Individual by WhosWhoLegal: Asset Recovery 2015, he is the former president of the criminal law commission of the International Association of Lawyers (UIA) and the former chair of the business crime committee of the International Bar Association (IBA). Bonifassi regularly speaks and writes about issues including corruption, fraud, asset recovery and mutual legal assistance. He contributed to the book, Asset Tracing & Recovery: the FraudNet World Compendium, and his article The Long Arm of the Law – Obtaining Jurisdiction and Evidence in France, was published in International Legal Practitioner. 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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