Documents detail customers who faced allegations including drug-running, corruption, doping and money laundering

Read More

http://bit.ly/16Z12Uc

In a landmark decision released on 10 February, 2015, the Chinese National Development and Reform Commission (“NDRC”) announced that Qualcomm, the US chip manufacturer, had been fined RMB 6.08 billion (approximately US$ 975 million) for abuse of market dominance, including unfair licencing practices.

The record fine, which is the largest on record in China, follows an investigation that ran for over fourteen months.

Qualcomm is also facing a Foreign Corrupt Practices Act probe over “instances in which special hiring consideration, gifts or other benefits” were paid to officials of Chinese state-owned firms.

Qualcomm disclosed in an SEC filing that it received a Wells Notice from the US Securities and Exchange Commission on March 13, 2014, which recommended enforcement action against the company.

The bribery allegations and subsequent investigations by US authorities commenced in 2010 following a whistle-blower complaint.

The NDRC found that Qualcomm had a dominant position in the licencing market for Standard-Essential Patents (“SEPs”) for 3G and 4G wireless communication technologies (CDMA, WCDMA and LTE) and the so-called baseband chips, which provide the network interface for mobile phones.

The NDRC found that Qualcomm had engaged in the following abusive conduct:

1. charging unfairly high patent royalties. The NDRC found that Qualcomm had
   1. (i) refused to provide detailed patent lists to licensees
   2. (ii) included expired patents in the patent portfolio used to calculate royalty payments and
   3. (iii) required licensees to grant patents they held back to Qualcomm free of charge
2. bundling non-SEPs and SEPs without justification; and
3. imposing unfair conditions on the sale of baseband chips.

The NDRC can impose fines to a cap of 10 per cent of a company’s annual revenue for abuse of dominance violations: the penalty imposed on Qualcomm amounts to 8% of the company’s 2013 China revenue.

The NDRC stated that in calculating the penalty it took into consideration the fact that Qualcomm had admitted to the misconduct and agreed to implement a series of remedial measures. The NDRC also noted that Qualcomm had cooperated with the regulator throughout the course of the investigation.

In August 2014, Zhang Xinzhu, an economist engaged by Qualcomm to assist in the NDRC investigation, was dismissed from his position as an advisor to the State Council’s Anti-Monopoly Commission, for allegedly “violating work discipline”. Qualcomm had allegedly failed to obtain approval from the State Council to engage Zhang.

The Qualcomm investigation is another example of the strenuous efforts being made by Chinese regulators to address the issue of corporate crime. It is also the latest in a string of high profile investigations against multi-national corporations for alleged corruption and anti-competitive activities in China.

This is not the first time that Qualcomm has faced scrutiny by antitrust regulators. In 2009, the South Korean Fair Trade Commission accused Qualcomm of abusing its dominant market position for CDMA mobile phone chips and imposed a record Won 260 billion fine (approximately US$ 207 million) – the largest fine imposed by the commission on one company.

Media reports note that the antitrust authorities in South Korea are now considering further enforcement actions following the NDRC decision.

Investment into Africa and building relationships with US fund managers were amongst the points discussed by Jersey Finance at its Annual Review presentation held at the Hotel de France recently (28 January).

Hosted by Jersey Finance Chairman, Robert Christensen, the event, attended by around 180 local financial services practitioners and politicians, included an introduction from Chief Minister Senator Ian Gorst and a keynote address from Philipp Härle, Director at McKinsey, who provided an overview of the global political and economic landscape and its relevance to Jersey.

Discussing recent developments and activities for the year ahead, Geoff Cook, CEO, Jersey Finance, described 2014 as another challenging year but one which had seen significant advances in its plans to increase Jersey’s leadership as an International Finance Centre. In particular, he highlighted the strong performance of the funds industry in a year that saw the introduction of the AIFMD, with the number of new fund registrations in Jersey more than doubling year on year in 2014:

• “Our funds industry continues to grow, with the value of assets under administration now at their highest level in five years. Meanwhile, within the private wealth sector, our trust legislation celebrated its 30th anniversary last year and the Jersey Foundation goes from strength to strength with almost 300 such structures having now been formed. Listings business is also well up on previous years. There are now 110 Jersey companies listed on exchanges around the world, whilst Jersey has the greatest number of AIM listed companies outside the UK and retains the greatest number of non-UK companies on the FTSE 100 index.”

He also pointed to two significant reports published in 2014 – ‘Moving Money’, published by two US academics, Richard Gordon and Andrew Morris, which challenged criticisms of the role of IFCs and analysed their vital contribution to the global economy, and ‘Jersey’s Value to Africa’, produced by Capital Economics, which set out the potential for Jersey to make a significant contribution to the development of Africa.

Also at the event, an update on Jersey Finance’s overseas markets strategy was provided by Richard Corrigan, Deputy CEO, Jersey Finance.

He told the audience that while London remains a core market for the industry, building a strong international presence would continue to be a key part of plans in 2015:

• “In 2015, following the recommendation of the Jurisdictional Review, we will look to maximize our additional resources in the Gulf region in order to capture significant private wealth and increasingly funds opportunities there, whilst we will also be focusing more on targeting hedge and private equity fund managers in the US.  In addition, in line with the findings of the Value to Africa report last year, we will also be increasing our efforts to build relationships with Sub-Saharan Africa where we see considerable outbound private wealth and inbound infrastructure investment opportunities.”

A panel debate also at the event was moderated by Geoff Cook and featured Assistant Chief Minister Senator, Philip Ozouf, Financial Services Director for the States of Jersey, Joe Moynihan, Director General of the Jersey Financial Services Commission, John Harris, and Commercial Director of TheCityUK, Dan Torjussen-Proctor. As well as answering questions from the audience, panelists discussed the progress made in implementing the recommendations of the ‘Finance Industry Strategic Jurisdictional Review’ and regulatory challenge on the radar for the year.

Geoff Cook added:

• “Looking ahead, we fully expect regulation to remain firmly on our agenda this year, whilst in a UK election year we will almost certainly see an uptick in political rhetoric surrounding tax and transparency. Thanks to commitments made by Jersey’s government and regulator, however, we are in an excellent position and are well regarded as a cooperative and transparent jurisdiction. Jersey has a robust tax information exchange framework in place and recently joined more than 50 countries to sign up as an early adopter of the OECD Common Reporting Standard. Combined, all this sends out a strong message about Jersey’s stance.”

http://bit.ly/17Niv39

This case is the first time a British company has been found guilty of bribing foreign agents, and follows an investigation by the Serious Fraud Office (SFO).

A Sussex printing firm’s director has been jailed for three years after being convicted of bribing public officials in Africa to win business contracts.

Smith and Ouzman Ltd gave £400,000 in backhanders to officials in Kenya and Mauritania for deals worth £2.26m to make ballot papers.

Sales and marketing director Nicholas Smith, 43, was jailed following an earlier trial at Southwark Crown Court.

His father, chairman Christopher Smith, received an 18-month suspended term.

The 72-year-old, who was convicted of two counts of corruptly agreeing to make payments, was told he would have to carry out 250 hours of unpaid work and given a three month curfew.

His son was found guilty of three counts of the same charge.

Both men were also disqualified from being company directors for six years, and have resigned from the company

Smith and Ouzman, based in Eastbourne, which specialises in security documents such as ballot papers and certificates, was also convicted of the same three offences and will be sentenced at a later date.

It is the first time a British company has been found guilty of bribing foreign agents, and follows an investigation by the Serious Fraud Office (SFO).

It targeted Kenya just after the 2007 political and humanitarian crisis, which was sparked by election malpractice and cost 1,300 lives and displaced 600,000 people.

Judge David Higgins said the case bore the marks of “tragedy”, and the pair were guilty of a “premeditated, pre-planned, sophisticated and very serious” crime.

“In short, your behaviour was cynical, deplorable and deeply anti-social and suggests, at least in this context, moral turpitude,” he said.

The company’s former international sales manager, Timothy Forrester, 57, was acquitted of three counts of making corrupt payments, while sales agent Abdirahman Omar, 38, was cleared of one count of corruptly agreeing to make payments in relation to a contract in Somaliland

In a statement following the sentencing, the company said it fully accepted accountability for the actions of its directors and apologised unreservedly.

It said it had co-operated fully with the SFO throughout its investigation.

“During this period we have learned many lessons and as a result have developed industry leading, anti-bribery and corruption management processes.”

Smith and Ouzman provided the certificates of authenticity for customers who bought the ceramic poppies from the Tower of London that made up the Blood Swept Lands and Seas of Red installation last year.

A hearing to deal with confiscation proceedings against the company and the individuals is due to take place in October.

http://bbc.in/1FXoZaR

The directive and regulation will strengthen EU rules against money laundering and ensure consistency with the approach followed at international level. The draft regulation deals more specifically with information accompanying transfers of funds.

International recommendations

The texts implement recommendations by the Financial Action Task Force (FATF), which is considered a global reference for rules against money laundering and terrorist financing. On some issues, the new EU rules expand on the FATF’s requirements and provide additional safeguards.

The strengthened rules reflect the need for the EU to adapt its legislation to take account of the development of technology and other means at the disposal of criminals. The main elements are:

• Extension of the directive’s scope, introducing requirements for a greater number of traders. This is achieved by reducing from €15 000 to €10 000 the cash payment threshold for the inclusion of traders in goods, and also including providers of gambling services;
• Application of a risk-based approach, using evidence-based decision making, to better target risks. The provision of guidance by the European supervisory authorities;
• Tighter rules on customer due diligence. Obliged entities such as banks are required to take enhanced measures where the risks are greater, and can take simplified measures where risks are demonstrated to be smaller.

Beneficial ownership

The package includes specific provisions on the beneficial ownership of companies. Information on beneficial ownership will be stored in a central register, accessible to competent authorities, financial intelligence units and obliged entities such as banks. The agreed text also enables persons who can demonstrate a legitimate interest to access the following stored information:

• name,
• month and year of birth,
• nationality,
• country of residence,
• nature and approximate extent of the beneficial interest held.

Member states that so wish may use a public register. As for trusts, the central registration of beneficial ownership information will be used where the trust generates consequences as regards taxation.

Gambling

For gambling services posing higher risks, the agreed text requires service providers to conduct due diligence for transactions of €2000 or more. In proven low-risk circumstances, member states will be allowed to exempt certain gambling services from some or all requirements, in strictly limited and justified circumstances. Such exemptions will be subject to a specific risk assessment. Casinos will not benefit from exemptions.

Sanctions

As concerns sanctions, the text provides for a maximum pecuniary fine of at least twice the amount of the benefit derived from the breach or at least €1 million. For breaches involving credit or financial institutions, it provides for:

1. a maximum pecuniary sanction of at least €5 million or 10% of the total annual turnover in the case of a legal person;
2. a maximum pecuniary sanction of at least €5 million in the case of a natural person.

Next steps

Agreement with the European Parliament was reached on 16 December 2014. The Council’s approval of that outcome paves the way for adoption of the package at second reading.

Member states will have two years to transpose the directive into national law. The regulation will be directly applicable.

Texts of the regulation and directive on money laundering as agreed on 10 February 2015 = http://bit.ly/1EkTeri

Statements on money laundering approved on 10 February 2015 = http://bit.ly/1EkTh6i

Financial Action Task Force = http://www.fatf-gafi.org/

European money laundering rules strengthened to undermine terrorist financing

1. Prevention of money laundering and terrorist financing has been strengthened by an agreement between the Council of the European Union and the European Parliament.
2. The new directive and regulation will make Europe more consistent with the approach followed internationally on information accompanying the transfer of funds, the Council of the European Union said in a statement.
3. The EU rules follow and expand on recommendations by the Financial Action Task Force (FATF), which is considered a “global reference for rules against money laundering and terrorist financing”, the Council said.
4. The regulation and directive text said:
   1. The right measures have to be in place to prevent money launderers and terrorists from taking advantage of the freedom of capital movement in the EU; and
   2. The soundness, integrity and stability of the system of transfers of funds and confidence in the financial system as a whole could be seriously jeopardised by the efforts of criminals to disguise the origin of criminal proceeds or to transfer funds for criminal activities or terrorist purposes.”

Main changes

1. The main changes include a reduction of the cash payment threshold from €15,000 (£11,000) to €10,000.
   1. This means that those trading in cash for goods, services or gambling services will be subject to the Directive when the amounts reach €10,000.
2. A risk-based approach, using evidence-based decision making, has been introduced to better target risks, and ‘obliged entities’ that must comply with the rules, such as banks, will now take stronger measures for high risk customers, and simplified measures when the risk is lower.
3. A central register will be set up to store ‘beneficial ownership’ information on companies and tax-liable trusts within the EU.
   1. This register should be accessible to ‘competent authorities’, financial intelligence units, obliged entities and “persons who can demonstrate a legitimate interest to access the information”.
   2. High-risk gambling services will have to do due diligence on transactions over €2,000, while low-risk services can be exempt from some or all of the requirements.

When

1. Member states have two years to incorporate the directive into their national law.

Observations – enforcement

1. The obligation placed upon EU member states to maintain central registers listing information on the ultimate beneficial owners of corporate and other legal entities, as well as trusts, will enable greater transparency in financial transactions.
2. This obligation will:
   1. make it more difficult for transactions to mask money laundering activity; and
   2. make it easier for regulators and prosecutors to identify potential wrongdoing, and to identify those businesses who are either intentionally or unknowingly caught up in illicit activity.

Observations – data protection

1. There are data protection concerns that must be taken into account when facilitating access to the register data to those pursuing a ‘legitimate interest’.
2. The wider availability of information including an individual’s name, month and year of birth, nationality, residency and details on ownership raise significant risks regarding inappropriate access or use of such personal data, in particular, due to the provision that this information will be accessible to people or organisations who can demonstrate a ‘legitimate interest’, such as investigative journalists and other concerned citizens.”

Conclusion

1. Only time will tell if these provisions extend to anyone placing their private residence in trust for their children upon their death being required to provide a range of personal data for storage on a central register.
2. A balance must be found between addressing the risks of money laundering with the protection of each individual’s personal data and right to privacy
3. Financial services firms involved in transactions:
   1. can expect to come under “significant scrutiny to identify the beneficial owners of those involved”; and
   2. should expect to be on the end of “swift and significant action from prosecutors and regulators should they fail to meet the requirements”.

http://bit.ly/1EUZd9H

A copy of the JFSC’s Business Plan for 2015 can be downloaded from the JFSC website by clicking here.

The Chairman, Lord John Eatwell and Directors from the JFSC will explore in detail their major priorities for the year ahead, and invite members of the financial services industry and other interested parties to attend the event.

Lord John Eatwell, Chairman, JFSC commented:

“The Plan reflects a number of ambitions and developments which I will seek to drive forward in my role as Chairman of the Board of Commissioners. The objective is to foster a regulatory regime that enables firms to innovate and to exploit market opportunities, whilst ensuring that they behave responsibly and have effective risk management procedures in place to protect consumers and to protect Jersey’s reputation – an objective that I am sure you share.

I am confident that our strategy and business plan will allow the Jersey Financial Service Commission to become an ever more agile regulator – able to understand the significance of new developments and decide swiftly on appropriate, well-founded responses, ensuring that Jersey can continue to be a respected and successful international financial centre.”

As if new requirements around the Foreign Account Tax Compliance Act are not complicated enough, several new acronyms are also being piled on us making the complex regulations even more difficult to follow.

To help you keep up with the verbiage, we defined the top 10 troublesome acronyms around FATCA.

1. FATF – Financial Action Task Force

The Financial Action Task Force is an inter-governmental group that develops and promotes international policies to combat money laundering and terrorist financing and has helped with FATCA regulations.

2. FDAP Income – Fixed, Determinable, Annual or Periodic Income

FDAP income is all income except gains derived from the sale of real or personal property or items of income excluded from gross income, such as tax exempt municipal bond interest. This is generally used to define what constitutes a withholdable payment under FATCA.

3. FFI-EIN – Foreign Financial Institution Employer Identification Number

This identifying number was revealed recently on the draft of Form W-8BEN-E and will be used by foreign financial institutions for filing purposes with the IRS.

4. FWP – Foreign Withholding Partner

A foreign withholding partnership is any foreign partnership that has entered into a WP withholding agreement with the IRS and is acting accordingly. The Treasury and the IRS have indicated that they intend to amend FWP agreements to require these foreign financial institutions to become participating or deemed-compliant FFIs.

5. FWT – Foreign Withholding Trust

A foreign withholding trust is a foreign simple or grantor trust that has entered into a WT withholding agreement with the IRS and is acting in that capacity. The Treasury and the IRS have indicated that they intend to amend FWT agreements to require these foreign financial institutions to become participating or deemed-compliant FFIs.

6. NFFE – Non-financial foreign entity

Most people are now familiar with the commonly used FFI denoting a foreign financial institution, but NFFE is not as well known. This acronym is used to identify foreign entities that are not financial institution, such as corporations, that may also be subject to some FATCA regulations.

7. POC – FATCA Point of Contact

FATCA Points of Contact were established in the recently released FATCA registration information. The FATCA Responsibility Officer can select up to five points of contact to help complete the registration process. At least one point of contact must be in-house, but third-party individuals may be included as well.

8. QI – Qualified Intermediary

A qualified intermediary is an eligible person that enters into a qualified intermediary agreement with the IRS, which generally means the intermediary agrees to assume certain documentation and withholding responsibilities in exchange for simplified information reporting for its foreign account holders. The Treasury and the IRS have indicated that they intend to amend QI agreements to require these foreign financial institutions to become participating or deemed-compliant FFIs.

9. RO – FATCA Responsibility Officer

Each participating foreign financial institution must identify one FATCA Responsibility Officer who will be identified in the IRS’s online registration system. This individual has authority to act for the foreign financial institution with regards to FATCA and is responsible for signing the agreement or certification on behalf the institution.

10. WA – Withholding Agent

A withholding agent is a U.S. or foreign individual, corporation, partnership, trust, association, or any other entity that has control, receipt, custody, disposal, or payment of any item of income that is subject to withholding. Several persons may be withholding agents for a single payment.

http://bit.ly/19rYb85