Saudi Arabia Public Prosecution Takes Actions Against Money Laundering

Since the 2020 revisions that gave it independent powers to investigate major crimes requiring detention, the Saudi Arabia Public Prosecution has taken a number of steps that demonstrate its commitment to pursuing serious financial crimes.

Three recent developments involving the Public Prosecution reflect that continuing commitment with regard to anti-money laundering (AML) enforcement.  First, on December 25, the Public Prosecution clarified its approach to pursuing foreign nationals who have been accused of committing money laundering inside Saudi Arabia after they leave the Kingdom.  According to Abdullah Al-Zahrani, Acting Member of the Public Prosecution Anti-Money Laundering Unit, Saudi authorities would submit a request through the Kingdom’s International Cooperation Unit to the countries of those foreign nationals who were accused of the crime and left the Kingdom to extradite them to Saudi Arabia and hand them over for trial.

Although the countries of those convicted of the crime have the right to extradite them to the Kingdom, Al-Zahrani reportedly also noted that the Kingdom allows the countries of the foreign nationals accused on money laundering to pledge to Saudi Arabia that they would try them in their competent courts for those crimes.

Second, on January 2, the Public Prosecution announced that it had convicted six defendants, some Saudi nations and some non-Saudi nations, in money laundering cases.  Those defendants received sentences totaling 31 years’ imprisonment and fines totaling more than SR152 million ($40.5 million), as well as travel bans on the convicted Saudi citizens for a period equal to their jail terms and deportation of the convicted expatriates after serving their prison terms.

According to the Public Prosecution, the defendants included some Saudi citizens, who are owners of commercial entities such as furniture upholstery and flower businesses as well as fake businesses, and several expatriates who were involved in money laundering transactions.  Public Prosecution investigations established that the Saudi citizens allowed the expatriates to use their bank accounts, in return for a monthly fee of SR10,000, as a cover for transferring their illegal funds to locations outside the Kingdom. Under article two of the Saudi Anti-Money Laundering Law, transactions that are made under the pretext of practicing bogus commercial activities are considered a criminal act.

Third, on January 20, the Saudi Oversight and Anti-Corruption Authority reportedly stated that an unnamed head of a committee at the Saudi Ministry of the Interior was recently convicted of embezzlement, forgery, and money laundering, and was sentenced to nine years’ imprisonment and ordered to pay SR1.02 million ($271,620).  A businessman who was convicted of complicity in the same case was sentenced to seven years’ imprisonment and a fine of SR500,000 ($133,147).  In addition, both defendants were banned from travel outside the Kingdom for three years each after serving their terms.

Compliance officers in companies that are based or operate in Saudi Arabia should brief other company executives, as appropriate, on these recent developments, and incorporate information about the developments into their AML training.  Company executives and managers, whether physically located in the Kingdom or elsewhere, need to understand that complicity in money laundering activities affecting the Kingdom can lead to sustained efforts to prosecute them, whether in the Kingdom or the country in which they reside.

United Kingdom Supreme Court Recognizes Guaidó Board of Venezuela Central Bank, Provisionally Denies Maduro Regime Control of $1 Billion in Gold Reserves

In the field of international commercial litigation, it is routine for two parties to make competing claims on assets under a financial institution’s control.  What is far from routine is a situation in which the competing claimants also claim to be the legitimate government of a sovereign nation.

Since 2018, Venezuelan President Nicolás Maduro has maintained that he was lawfully reelected, while the United Kingdom Government has recognized Juan Guaidó, President of the democratically elected Venezuelan National Assembly, as interim president.  Because of the crippling sanctions that the United States has imposed on the Maduro government and various Venezuelan-connected individuals, the Maduro regime has been desperate to identify financial assets that they can control or sell.

One significant set of assets that the Maduro government has been avidly pursuing concerns foreign currency reserves.  The Bank of England has been holding gold reserves of approximately $1 billion for the Central Bank of Venezuela (BCV), and Deutsche Bank (“DB”) is obliged to pay the proceeds of a gold swap contract to the BCV for approximately $120 million that have been held by court-appointed receivers.  Because Guaidó and Venezuelan Special Attorney General José Ignacio Hernández appointed different members to the BCV Board, the Bank of England, DB, and the receivers received conflicting instructions regarding the gold reserves from the Maduro-appointed Board and the Guaidó-appointed Board.  These competing claims led to extended litigation in United Kingdom courts.

On December 20, 2021, the United Kingdom Supreme Court decided two fundamental and complex legal issues, both critical to the litigation, in favor of the Guaidó Board.  First, the Supreme Court addressed the issue of whether Her Majesty’s Government (HMG) had recognized Guaidó as President of Venezuela.  The Court held that that issue, under the United Kingdom’s constitutional arrangements, is a matter for the executive.  It determined that HMG’s statement was a “clear and unequivocal recognition” of Guaidó as President, and that courts in the United Kingdom “are bound to accept HMG’s statements” that establish Guaidó’s status and that Maduro is not recognised by HMG as President of Venezuela “for any purpose.”

Second, the Supreme Court addressed the foreign act-of-state doctrine, which a leading legal authority described as “one of the most difficult and most perplexing topics which, in the field of foreign affairs, may face the municipal judge in England.”  Two critical aspects of that doctrine are that United Kingdom courts will recognise and not question the effect of (1) a foreign state’s legislation or other laws in relation to any acts which take place or take effect within the territory of that state (“Rule 1”); and (2) an act of a foreign state’s executive in relation to any acts which take place or take effect within the territory of that state (“Rule 2”).

The Supreme Court determined that Rule 2 applies to an exercise of executive power such as Guaidó’s appointments to the BCV’s Board.  It also held, however, that judicial rulings of a foreign state are not subject to the act of state doctrine.  In this case, the Court acknowledged that the Venezuelan Supreme Tribunal of Justice (“STJ”) has issued several judgments holding that the Venezuelan transition statute under which Guaidó was appointed interim President of Venezuela is null and void.  Accordingly, the Supreme Court ruled that because it remains necessary to consider whether the STJ judgments should be recognised or given effect in the United Kingdom, it remitted the proceedings to the Commercial Court for it to do so.

For lawyers interested in complex litigation involving foreign states, the Supreme Court’s decision in Maduro Board provides some welcome clarity on certain aspects of the foreign act of state doctrine.  The Court’s resolution, however, is in no way a definitive victory for the now-floundering opposition forces under Guaidó’s leadership.  Indeed, the remittance of the case back to the Commercial Court ensures that there will be no final resolution regarding the disputed gold reserves for some time to come, as the parties litigate the issue of recognition of the STJ judgments in that Court and the losing party in that Court will undoubtedly seek to appeal.  Whether the Guaidó opposition can last long enough for such a final resolution is regrettably open to question.

Vietnam Imposes Record 14-Year Prison Sentence for Wildlife Trafficking

In the global matrix of illegal wildlife trafficking, Vietnam is a critical node.  According to the United Kingdom nonprofit Environmental Investigation Agency, Vietnam “is the primary destination for illegal wildlife products sourced from across Africa and shipped by criminal networks directly or indirectly to meet the demand in Vietnam and beyond.”  Vietnamese nationals reportedly have established wildlife trafficking networks in cooperation with providers in Africa and Central Europe, and the illegal wildlife trade has been incorporated into Vietnamese criminal activities in Central Europe.

Until fairly recently, the Vietnamese government’s response to wildlife crime was anemic at best.  Since 2010, Vietnamese authorities made at least 120 wildlife seizures at air and seaports involving elephant, pangolin and rhino horn, and at least 51 percent of those shipments “originated from Africa and a significant number were high volume.”  Yet of the large-scale seizures at seaports since 2018, none resulted in arrests or convictions.

To its credit, Vietnam has lately been taking significant steps to combat wildlife crime.  These include revising its penal code in 2018 to establish significantly increased penalties for such crime, substantially increasing the number of wildlife trafficking seizures, and successfully prosecuting major wildlife traffickers.

On December 8, a Vietnamese court sentenced a rhino horn trader, Do Minh Toan, to 14 years’ imprisonment – the longest sentence that a Vietnamese court has meted out for wildlife crime.  The case began in  2019, when Vietnamese customs officials at Noi Bai international airport in Hanoi discovered  55 pieces of rhino horn, weighing approximately 275 pounds, “in a carefully disguised shipment.  The pieces were encased in plaster and police used rods to break the casts apart.”

Although this prosecution is only one relatively small contribution to international efforts to stem the tide of rhino poaching, it provides a further indication of Vietnam’s commitment to combating wildlife crime.  It should also remind other countries with poor records on animal protection that taking similar measures is not merely desirable as a way of improving their reputations in the international community, but necessary to implement their obligations under longstanding international conventions such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora and the United Nations Convention Against Transnational Organized Crime.

APWG Issues Second Quarter 2021 Phishing Activity Trends Report

In the field of cybercrime, one of the oldest and simplest, and still one of the most effective, cyberattack methods is phishing: i.e., engaging in fraudulent solicitations via emails or websites to acquire access to victims’ computers and data.  In 2020, the Federal Bureau of Investigation’s Internet Crime Complaint Center (IC3) received 241,342 reports from victims of phishing and phishing variants – by far the largest number of victim reports filed with the IC3 in 2020.

On September 22, the APWG (formerly the Anti-Phishing Working Group) issued its Phishing Activity Trends Report for the second quarter of 2021.  Key findings in the report included the following:

  • General Phishing Trends: After approximately doubling from mid-2020 to mid-2021, the amount of phishing remained “at a steady but high level” in Q2 2021.  APWG saw 222,127 attacks in June 2021, which was the third-worst month in APWG’s reporting history.
  • Most Affected Sectors: Phishing cyberattackers most frequently victimized the financial institution and social media sectors in Q2 2101.  The financial sector accounted for 29.2 percent of all attacks – a 30 percent increase from 22.5 percent of all attacks in 4Q 2020 – while the social media sector accounted for 14.8 percent and the payment sector for 12.2 percent of all 2Q 2020 attacks.  Phishing against cryptocurrency targets, such as cryptocurrency exchanges and wallet providers, increased substantially in 2021, from just 2 percent of all attacks in Q1 2020 to 7.5 percent in Q2 2020.
  • Business Email Compromise Schemes (BEC): A BEC can be defined as a response-based “spear phishing” attack that involves the impersonation of a trusted party (such as a company executive or vendor) to deceive a victim into conducting a financial transaction or sending sensitive materials.  According to the APWG report, the average amount requested in wire transfer BEC attacks in Q2 2021 was $106,000 – a 140 percent increase from the average $75,000 in Q4 2020 BEC attacks.  The APWG attributed this increase to “both a rise in high-dollar transfer requests (20 percent of attacks requested more than $100,000 in Q2 compared to just 10 percent in Q1), as well as a decrease in lower-dollar requests.”
  • BEC Finance Attacks:  In addition, there was a substantial resurgence in BEC attacks directed at payroll diversion in Q2 2021. 24 percent of all BEC attacks reportedly tried to divert employee payroll deposits. That percentage “surpassed wire transfer BEC attacks for the first time since September 2019.”
  • Use of Encryption to Deceive Victims: In Q2 2021, 82 percent of phishing websites were protected by Secure Socket Layer encryption – only a slight decline from Q1 2021.  Cyberattackers’ use of encryption technology is directed solely at making their sites appear more legitimate to prospective victims.

Information security and compliance officers in companies and government agencies should disseminate this APWG Report to appropriate members of their teams, and include selected data from the Report to other senior officials in their respective enterprises.  At a time when many executives have asserted that the COVID-19 pandemic forced their organizations to bypass cybersecurity processes, it is important that Chief Information Security Officers keep them informed about key cybercrime trends and the need to bolster cyberdefenses.

Saudi Arabian Prosecution Service: Failure to Give Required Vaccines to Children Under 18 Is Abuse

One of the more hotly debated issues, in the global welter of reporting (and misinformation) about COVID-19 vaccines, is whether children below the age of majority should be given the COVID-19 vaccine.  Even as infection from the Delta variant is surging among children in multiple countries, a Kaiser Family Foundation poll recently calculated that approximately half of parents are holding off on COVID vaccinations for their children and found “significant opposition to schools mandating the vaccines for children ages 12-17.”

In the midst of this global debate, the Saudi Arabian Public Prosecution Service (PPS) has taken an exceptionally bold step to ensure that children receive all required vaccinations, including COVID.  According to Arab News, the PPS has declared that every child under age 18 “has the right to be vaccinated against diseases and failure to do so amounts to abuse.”   This statement is firmly based in Saudi law.

Article 1 of Saudi Arabia’s Child Protection System, any failure to provide a child’s “basic needs or failure to do so, including: physical, health, emotional, psychological, educational, intellectual, social, cultural and security needs” is considered neglect.  The Child Protection System also provides that a child must be provided with vaccines “as specified by the relevant health authorities and in accordance with the scheduled dates and periods prescribed in this regard.”  Under Article 3/3 of the Child Protection System, not completing a child’s required health vaccinations is considered abuse or neglect.

Moreover, Article 18 of the Child Protection System directs the relevant authorities to take “all appropriate measures” for “[p]revention of infectious and dangerous diseases of the child” and “[s]upporting the school health system to play its full role in the field of prevention and health guidance.”  In that regard, the Saudi government has previously directed that only fully vaccinated students could return to the classroom when the new school year begins at the end of August.

Under Saudi law, providing vaccinations to a child is the duty of the child’s father or guardian, and authorities “are obliged to create a medical file for every child to register the required vaccinations and the development of his or her health conditions.”  In addition, school health or substitute health authorities are required, at least annually, to conduct periodic medical checkups for school students throughout pre-university education levels.

This announcement by the PPS is not surprising, in light of the global surge of the Delta variant and the fact that only 30 percent of Saudi Arabia’s population has received full COVID vaccination.  Nonetheless, few countries are likely to take as strong a position on child COVID vaccination as Saudi Arabia has – at least until after clinical trials, perhaps this fall, further establish that children can safely be vaccinated and health authorities can establish how great a risk COVID continues to pose to children.