The latest news from our regional teams about financial crime, corruption, sanctions and integrity issues worldwide.
This month’s Red Flag bulletin includes:
- The UK National Crime Agency announces its first ‘Unexplained Wealth Orders’;
- The threat of further sanctions as the fallout over the poisoning of a former Russian spy continues; and;
- Nine Iranian nationals accused of cyber theft by the US Department of Justice.
UK: First ‘Unexplained Wealth Orders’ announced by NCA
On 28 February, the UK National Crime Agency (NCA) announced that it had secured the UK’s first Unexplained Wealth Orders (UWOs) to investigate and temporarily freeze assets totaling GBP 22 million, believed to ultimately be owned by an unspecified politically exposed person from Central Asia. UWOs, which came into effect under UK law on 31 January 2018, enable UK enforcement authorities to apply for court orders against persons suspected of involvement in serious crime outside the European Economic Area, requiring them to explain the source of their assets.
USA: Theranos CEO charged with fraud
On 14 March, Elizabeth Holmes, CEO of Theranos Inc, a US medical device manufacturer, was charged with fraud by the US Securities and Exchange Commission (SEC). Theranos raised more than USD 700 million from investors between 2014 and 2015. The SEC claims that Holmes defrauded investors by making exaggerated or false claims about the disease screening tests provided by Theranos. Holmes also allegedly falsely claimed that Theranos’s products were used by US military forces, and exaggerated the company’s 2014 revenue. Subject to court approval, Holmes and Theranos have agreed to settle the charges brought by the SEC, with Holmes paying a USD 500,000 penalty, relinquishing her shares in Theranos, and being barred from serving as an officer of a US public company for ten years.
Peru: President Kuczynski resigns over vote-buying scandal
On 21 March 2018, Peruvian President Pedro Pablo Kuczynski (known as PPK) tendered his resignation after a secret video recording showed key allies trying to buy the support of opposition lawmakers. PPK resigned on the eve of an impeachment vote, the second in three months, which he appeared likely to lose. PPK was accused of repeatedly lying about the extent of his connections to Odebrecht SA, Latin America’s largest construction company subject to multiple corruption allegations. Martín Vizcarra, who had previously served as the vice president, was sworn in as president on 23 March.
Brazil: Odebrecht signs first contract post Operation Carwash
On 26 March, Odebrecht, signed its first public contract following the USD 2.7 billion fine it received over its involvement in Operation Car Wash, a far-reaching bribery and corruption investigation in Brazil. Odebrecht secured the contract, worth almost USD 174 million, through a public tender conducted by Furnas Centrais Elétricas SA, a Brazilian state-controlled energy company. Odebrecht has been hired to provide construction services for 58 months to one of Furnas’s power plants in the state of Rio de Janeiro. While this contract is only the first stage of Odebrecht’s recovery, it marks an important step for companies that have been implicated in Operation Car Wash.
MIDDLE EAST AND NORTH AFRICA
Iran/USA: Nine Iranians accused of cyber theft by the US Department of Justice
On 23 March, the US Department of Justice issued an indictment against nine Iranian nationals for conducting a campaign of cyber theft against more than two hundred universities, companies, government agencies and other institutions in the US and twenty-one other countries. The hackers targeted intellectual property and stole more than 31 terabytes of data. The individuals are alleged to belong to the Mabna Institute, an Iran-based cyber intrusion company. The group is previously thought to have conducted cyber-attacks on behalf of the Islamic Revolutionary Guard Corps (IRGC), a parastatal Iranian organisation that is subject to US, EU and international sanctions due to its support for terrorism.
Russia/UK: Threat of further sanctions looms as response to spy poisoning continues
On 26 and 27 March, 21 European countries, along with Australia, Canada and the US, announced the expulsion of 117 Russian diplomats in response to the suspected involvement of the Kremlin in the poisoning of Sergei Skripal and his daughter Yulia on 4 March in Salisbury, UK. The UK government has claimed that the Russian-made nerve agent novichok was used to poison the two in a state-sponsored assassination attempt, and itself announced the expulsion of 23 Russian diplomats on 14 March. Russia has vigorously denied its involvement and has promised retaliation.
South Africa: Zuma to face 16 charges relating to 1999 arms deal
In March, South Africa’s National Prosecuting Authority announced that it would be prosecuting former president Jacob Zuma on 16 charges of corruption, racketeering and money laundering relating to his involvement in South Africa’s controversial procurement of a multi-billion rand arms deal package in 1999. Although first charged in 2005, Zuma successfully avoided prosecution during his presidency through political interference and stalling tactics.
Gabon: Corruption trials of several ministers commence
On 15 March, corruption trials targeting several prominent Gabonese government ministers were opened in the Gabonese Special Criminal Court. These trials form part of Operation Mamba, an anti-corruption operation which began in Gabon in early 2017, and so far target Blaise Wada, a senior civil servant, Magloire Ngambia, the former economy minister, and Etienne Dieudonne Ngoubou, the former oil minister, for alleged embezzlement of state funds. Defence lawyers have described the trials as “politically motivated”, and an attempt by President Ali Bongo to quieten his critics and strengthen his support network following the controversial 2016 presidential elections.
Zimbabwe/China: President accuses 1,800 companies and individuals
On 19 March, Emmerson Mnangagwa, the president of Zimbabwe, released a list of over 1,800 companies and individuals accused of illegally holding funds abroad that should have accrued to the state during the rule of Robert Mugabe, the former president. The move came after the expiry of a three-month amnesty, which reportedly saw USD 591 million returned out of a total of USD 1.2 billion which the government estimates to be concealed overseas. The list showed China as the main source of returned funds and labelled a number of Chinese and state mining firms as the top offenders. The list has received criticism from a number of observers who note that it fails to include any of the president’s business interests or any politicians from his new administration.