6 September 2019

8 min read

Red Flag Bulletin | September 2019

Red Flag Bulletin | September 2019 placeholder thumbnail

This month’s Red Flag Bulletin includes the following stories:

  • Swiss authorities charge Israeli mining tycoon Beny Steinmetz with corruption;
  • Researchers report first major biometrics hack at South Korean security firm;
  • US imposes new financial sanctions on Russia over Skripal poisonings.



United States: Foreign Extortion Prevention Act proposed to combat extortion

On 2 August, new anti-bribery legislation was introduced to the US House of Representatives by a cross-party congressional group. The Foreign Extortion Prevention Act (FEPA) seeks to plug a gap in existing US legislation by criminalising both the requesting and acceptance of bribes by foreign officials from US businesses. House members said that FEPA would seek to protect US businesses by “punishing the demand side”, and allowing the Department of Justice to indict all foreign officials attempting to request or extort bribes. Those in violation could face a fine and prison sentence of two years.

United Kingdom: National Crime Agency freezes accounts containing GBP 100 million

On 12 August, the UK’s National Crime Agency (NCA) obtained a court order freezing eight UK bank accounts containing more than GBP 100 million in total. The accounts are all reportedly linked to a single unidentified individual, and the funds have been connected with alleged bribery and overseas corruption. The order represents the largest amount of money frozen using such court orders since their introduction under the Criminal Finances Act in 2017. This is the latest in a number of high-profile NCA crackdowns on foreign nationals resident in the UK, who are believed to have derived their wealth illegally. Earlier in 2019, the NCA seized USD 650,000 from the son of the former Prime Minister of Moldova, and compelled the niece of Syrian President Bashar al-Assad to forfeit the contents of her UK bank account.



Guinea: Swiss authorities charge Israeli businessman with bribery in Guinea

In August, Beny Steinmetz, a prominent Israeli businessman, was charged with corruption and forgery by Swiss prosecutors, following a six-year investigation into his dealings in Guinea. Steinmetz and two associates are suspected of complicity in the payment of USD 10 million in bribes to one of the wives of Lansana Conté, the deceased former President of Guinea (1984-2008), to secure mining rights for an iron ore concession in the country. The bribes were allegedly paid between 2005 and 2010, with Steinmetz and his associates issuing false contracts and invoices as a disguise. Swiss prosecutors are believed to be seeking prison sentences of two to ten years for each of them, although a trial date has yet to be set. The allegations were investigated by the Guinean authorities, which revoked the mining rights after determining that Steinmetz had acquired them corruptly.

South Africa: President Ramaphosa alleged to have financed election campaign irregularly 

In July 2019, South Africa’s public protector, Busisiwe Mkhwebane, published an investigative report alleging that there were irregularities in the financing of President Cyril Ramaphosa’s 2017 election campaign. Notably, she said that the campaign’s donors included a private South African company alleged to have irregularly benefitted from numerous state contracts. Mkhwebane is widely perceived to represent a dissenting faction within the governing party, and several of her previous investigations have been formally set aside. However, these specific allegations have gained traction in light of documents leaked alongside her report. These documents have linked Ramaphosa’s campaign to numerous prominent local and international businesspeople, and have been the focus of recent media scrutiny. In August, Ramaphosa filed a motion to seal some of the evidence referenced in Mkhwebane’s report. The outcome of this motion is still pending.



Colombia: Odebrecht corruption case leads to termination of railway construction contract

On 6 August 2019, a Colombian arbitration court voided the construction contract of the Ruta del Sol II project, a railway construction project which had been awarded to Concesionaria Ruta del Sol SAS, a Colombia-incorporated joint venture controlled by Odebrecht, the Brazilian construction conglomerate. The decision is a development of Colombian investigations linked to Operação Lava Jato, an anti-corruption investigation in Brazil. The Colombian authorities started investigating Odebrecht in 2016, after senior company executives confessed to paying over USD 28 million in bribes to secure infrastructure contracts in the country. In contrast, the Colombian government was ordered to pay USD 61 million to the banks that financed Ruta del Sol II, corresponding to portion of the railway which had already been completed.



South Korea: Biometric and facial recognition data leaked in Suprema hack

On 14 August, a UK newspaper reported that Suprema Inc, a South Korea-headquartered biometrics and security firm had been hacked, in what commentators described as the first major breach of a biometric database. The incident was discovered in early August by two Israeli security researchers, who said that they had been able to access fingerprints, facial recognition data, unencrypted usernames and passwords for more than one million people, which had been uploaded to a publicly accessible database. Suprema’s clients include the UK’s Metropolitan Police, banks and defence contractors.

Philippines: Gaming regulator investigated for corruption; applications for new gaming licences suspended

On 16 August, a Philippine newspaper reported that at least 15 officials from the Philippine Charity Sweepstakes Office (PCSO) had been investigated as part of an ongoing corruption investigation ordered by President Rodrigo Duterte. PCSO is a government agency that raises funds for health programmes and medical assistance through daily sweepstakes and lotteries. In late July, Duterte ordered the cessation of all of the PCSO’s gaming operations, although some have since resumed. The Philippine gambling regulator also announced that it would stop issuing new licences to offshore gaming operators, citing concerns that the industry facilitates money laundering and exacerbates social problems in the People’s Republic of China (PRC). Many offshore gaming operators based in the Philippines cater to customers in the PRC, where most forms of gambling are illegal. Philippine lawmakers also called for tighter controls on visitors from the PRC, many of whom are illegally employed in the industry.



Uzbekistan: Prosecutor-general opens new case against former president’s daughter

On 19 August, Uzbek authorities reportedly opened a new criminal case against Gulnara Karimova, the daughter of former Uzbek President Islam Karimov. Uzbekistan’s prosecutor-general stated that Karimova is accused of having illegally acquired shares in two state-owned cement plants, and selling these to foreign businessmen for a large profit. The new charges are the latest against Karimova, who was placed under house arrest in 2014 and received a five-year custodial sentence in 2015 for large-scale embezzlement and extortion. In March 2019, she was imprisoned for violating the terms of her house arrest and was indicted for bribery under the US Foreign Corrupt Practices Act.

Russia: US imposes new sanctions on Russia in response to Skripal poisoning

On 2 August, the US Treasury introduced a new round of sanctions limiting Russia’s access to international financial institutions. The sanctions were announced as a response to the use of a nerve agent in the attempted assassination of former Russian spy Sergei Skripal and his daughter Yulia in the UK in March 2018. As a part of the new sanctions, US banks are banned from providing loans to Russia and the US government will oppose any loan extension to Russia by international financial institutions, such as the World Bank or International Monetary Fund.

Kyrgyzstan: Former president arrested and charged with murder and corruption

On 8 August, Kyrgyz authorities arrested former President Almazbek Atambayev following violent clashes with his supporters that left one security officer dead. Atambayev’s arrest was precipitated by his refusal to surrender to police for questioning in an unspecified investigation. In addition to five initial charges of corruption and abuse of power concerning his presidency from 2011 and 2017, Atambayev has now also been charged with murder and organising a government coup, and will be held in pretrial detention until at least late October. Kyrgyzstan’s prosecutor-general announced that Atambayev’s wife is also under criminal investigation for her alleged connection to crimes committed by Manasbek Arabaev, a key member of Atambayev’s presidential administration who was charged with corruption in June.

The latest news from our regional desks about financial crime, corruption, sanctions, and integrity issues worldwide.

To discuss this article or other industry developments, please reach out to one of our experts.


Share this post

Subscribe to our insights

Get industry news and expert insights straight to your inbox.