Corporate Crime and Investigations Update - 21 February 2020

Read on for the latest news and updates in bribery and corruption; fraud; environmental and health and safety and more...

Money Laundering

Freezing order obtained over Leeds businessman's property portfolio

The National Crime Agency has obtained a Property Freezing Order preventing the sale of seventeen properties in relation to an ongoing investigation into a Leeds businessman, Mr Mansoor Hussain, who has suspected links to serious organised criminals. The properties have a combined value of approximately £10.5 million.

The NCA obtained a serious organised crime Unexplained Wealth Order relating to eight of the properties in July 2019. Following Mr Hussain's non-compliance with the Unexplained Wealth Order, the NCA applied for the Property Freezing Order in relation to nine further properties. The freezing order will prevent the sale or transfer of the seventeen properties, enabling the National Crime Agency to further investigate whether the source of the funds to make the original purchases were unlawfully obtained. If so, the properties may be subject to forfeiture.

NCA, 13 February 2020

Bribery and Corruption

Ex-Chief Executive of Pemex facing extradition to Mexico

The former chief executive of Mexican state oil firm Pemex, Emilio Lozoya, has been detained in a Spanish jail, pending a formal extradition request from Mexico where he faces corruption charges. It is alleged that Mr Lozoya is linked to a large bribery and money laundering case in Mexico, involving the Brazilian construction firm Odebrecht SA.

It has been reported that Mr Lozoya is yet to decide whether to fight extradition. If found guilty in Mexico, he could face 15 years in prison.

Reuters, 13 February 2020

Fraud

Alleged fraudster on trial accused of £12.9 million fraud

A 66-year old man has gone on trial for allegedly carrying out a fraudulent investment scheme and breaching financial services and proceeds of crime laws, resulting in him fraudulently obtaining £12,982,789.23. The prosecution has alleged that between 2001 and 2014 Mr Alistair Greig promised investors he would invest their cash in high interest accounts with the Royal Bank of Scotland. In return, Mr Greig guaranteed a return on capital and interest on their money. It is alleged that, in reality, there were no high interest accounts, no returns could be guaranteed and any money returned to investors was made up of sums deposited into the scheme by other investors.

Prosecutors have further alleged that Mr Greig encouraged investments by falsely claiming his scheme was authorised by the Financial Conduct Authority (FCA) (and its predecessor the Financial Services Authority) and that he himself had been personally authorised to accept deposits. Independent financial advisors were also employed by affiliated companies to Mr Greig, Park Row Associates PLC and Midas Financial Solutions (Scotland) Ltd, to handle invested deposits.

The trial continues before jurors in the High Court in Edinburgh.

BBC News, 17 February 2020

Former IBT Media owner pleaded guilty in fraud case

Etienne Uzac, a former co-owner of the US global digital news organisation IBT Media has pleaded guilty to money laundering in the second degree and a scheme to defraud in the first degree. Mr Etienne Uzac was the co-owner of IBT Media before it was restructured in September 2018. Mr Uzac will not face jail time as a result and may be sentenced to probation and a community service order. In related proceedings, the former CEO of Christian Media Corporation (CMC), William Anderson, has also pleaded guilty to the same charges.

The guilty pleas are the result of investigations ongoing since at least 2018 into a $35m scheme by CMC and IBT Media to fraudulently obtain loans to and defraud lenders. The charges against the companies included money laundering, falsifying business records and conspiracy. 

Newsweek, 14 February 2020

FCA Enforcement

Fine of £2.77m for unfair treatment of customers in arrears

Car finance provider Moneybarn Ltd has been fined £2.77m by The Financial Conduct Authority for not treating customers fairly when they fell behind with loan repayments. The FCA found that the company did not communicate the likely financial consequences of failing to keep up with payments to vulnerable customers in a way which was clear, fair and not misleading. This resulted in more than 1,400 customers defaulting on their repayments after entering into unsustainable short-term repayment plans.

Moneybarn Ltd has voluntarily provided redress of more than £30 million to all 5,933 customers affected by the failings without requiring evidence of financial detriment, an offer that was taken into account by the FCA when agreeing to a 30% discount on the imposed fine.

FCA, 17 February 2020

Speech on FCA Investigations and Enforcement: A guide to managing regulatory action

A speech was delivered on 12 February 2020 by Mark Steward, the executive director of enforcement and market oversight at The Financial Conduct Authority (FCA). The key takeaway points from the speech are as follows:

• There were over £310 million worth of financial penalties imposed in 2019. The purpose of financial penalties is deterrence. Over £231 million was also paid (or is being paid) in restitution to those victims of firms' misconduct.
• The purpose of enforcement is to address serious misconduct - which is done through early detection and the broad use of remedial orders to address the consequences and ensure appropriate action is taken to repair harm that has occurred.
• The FCA may impose tougher sanctions on firms where they fail to correct or address relevant deficiencies or make good losses to customers suffering from misconduct. Conversely, the FCA may be willing to reduce sanctions where firms can show proactive, thorough and rapidly-commenced remediation.
• It was observed that the majority of cases involving financial penalties involved serious breaches of the General Principles, and that too little attention has been paid to the General Principles when a firm is organising and planning what they are doing.
• It was stated that there have been several cases where the financial penalties have been reduced in excess of the automatic 30% discount for cases that were fully resolved at stage one. Firms are being encouraged to respond to this incentive by taking immediate, unprompted steps, in consultation with the FCA, to rectify harm caused by their conduct failure. The FCA wants firms to act with greater foresight, rather than simply more contrite hindsight.

For the complete speech, please follow the link below.

FCA, 13 February 2020

Sanctions

The Department for International Trade has removed Yemen, Lebanon and Turkey from some open general export licence lists

The Department for International Trade and the Export Control Joint Unit have published changes to the list of permitted destinations on a number of open general export licences. Yemen and Lebanon have been removed as permitted destinations on a number of OGELs and Turkey has been removed from the military components list.

Department for International Trade, 18 February 2020

Council of the European Union renews Zimbabwe arms embargo

The European Council has renewed its arms embargo and targeted assets freeze against the Zimbabwe Defence Industries, until 20 February 2021. It has been clarified that the arms embargo, as well as the asset freeze against Zimbabwe Defence Industries, do not affect the Zimbabwean economy, foreign direct investment, or trade. This has been implemented in light of the country's "ongoing acute humanitarian crisis" and "yet to be investigated alleged role of the armed and security forces in human rights abuses".

Council of the European Union, 17 February 2020

Health & Safety

Car retailer fined £120,000 after worker developed occupational asthma

Harwoods Limited has been fined £120,000 and agreed to pay costs of £2,657.55 after a car bodywork sprayer developed occupational asthma. The worker operated as a car bodywork sprayer at Audi Southampton between October 2011 and March 2018, using paints containing hazardous isocyanates.

An HSE investigation found that Harwoods Limited had failed to ensure adequate control measures were in place to minimise exposure to the paints, exposing the employee to the risk of asthma.

HSE, 12 February 2020

Suspended prison sentence for director following fire safety offences

Tyre Channel Limited and its director, Anup Patel, have each pleaded guilty to three separate charges relating to breaches of the Regulatory Reform (Fire Safety) Order 2005. Tyre Channel Limited has been ordered to pay £70,000 and Anup Patel has been given an eight-month prison sentence, suspended for two years.

The charges were brought after fire safety officers from the London Fire Brigade visited a tyre scrap yard and found an emergency fire exit door nailed shut and inaccessible due to piled up tyres. The building also had no smoke detection capabilities and was found to be heavily loaded with flammable items.

SHP online, 12 February 2020

Fishing company fined following death of crewman

A fishing company, M B Aquarius Limited, has pled guilty to a breach of the Merchant Shipping Act 1995 and has been fined £50,000 after a member of its crew, Mr Annang Neurtey, was lost at sea. The incident happened after a wire on-board the trawler snagged on the seabed, causing it to strike Mr Neurtey and propel him overboard.

An investigation by the Health and Safety Investigation unit found that there had been a failure to carry out a suitable and sufficient risk assessment of the wire and a wider failure to plan, supervise and ensure that there was a safe system of work in place. 

SHP online, 14 February 2020