header image

Red Flag Bulletin | December 2021

Martin Devenish MBE, Penelope Jenkins 2 December 2021
2 December 2021    Martin Devenish MBE, Penelope Jenkins

Red Flag Bulletin

This month’s Red Flag Bulletin includes the following stories: Executives at Swedish oil and gas company Lundin Energy charged with complicity in war crimes in connection with the company’s activities in South Sudan between 1999 and 2003; Document leak reveals that former DRC president embezzled and laundered over USD 138 million in state funds during presidency; and Son of former Panamanian president extradited from Guatemala to US on money laundering charges in connection with Odebrecht corruption scandal.

Download Pdf

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

This month’s Red Flag Bulletin includes the following stories:
  • Executives at Swedish oil and gas company Lundin Energy charged with complicity in war crimes in connection with the company’s activities in South Sudan between 1999 and 2003;
  • Document leak reveals that former DRC president embezzled and laundered over USD 138 million in state funds during presidency; and
  • Son of former Panamanian president extradited from Guatemala to US on money laundering charges in connection with Odebrecht corruption scandal.

EUROPE

CROATIA: FORMER MINISTER FOR REGIONAL DEVELOPMENT AND EU FUNDS ARRESTED ON SUSPICION OF CORRUPTION

On 10 November, Croatia’s former minister for regional development and EU funds, Gabrijela Žalac, was arrested on suspicion of corruption as part of a criminal investigation led by the European Public Prosecutor’s Office (EPPO), a prosecution unit focussed on investigating and prosecuting crimes that damage the EU’s financial interests. Žalac allegedly used her position to push through the purchase of an information system by the ministry in 2017 and 2018 at an inflated price. According to the EPPO, the damage caused to Croatia and the EU, which partly financed the procurement, reached EUR 1.8 million. Žalac has denied the accusations.

 

SWEDEN: LUNDIN ENERGY EXECUTIVES CHARGED WITH COMPLICITY IN WAR CRIMES FOR ACTIVITIES DURING THE SECOND SUDANESE CIVIL WAR

On 11 November, the Swedish Prosecution Authority charged the chairperson and the former CEO of Lundin Energy AB, the Swedish oil and gas company, with complicity in war crimes for the company’s activities during the Second Sudanese Civil War (1983-2005). According to the prosecutor, between 1999 and 2003, Lundin Energy employed the help of the Sudanese government and its allied militia to secure an oilfield in present-day South Sudan, allegedly in the knowledge that this would involve the use of force and contravene a local peace agreement. The measures taken by the Sudanese government to secure Lundin Energy’s oilfield reportedly led to the displacement of and attacks on civilians in the region, allegedly amounting to war crimes against the population. The Swedish prosecutor also filed a claim to confiscate SEK 1.39 billion (USD 161.7 million) from Lundin Energy, which reportedly corresponds to the profit from the sale of its Sudanese business in 2003. The charges against Ian Lundin, the company’s chairperson since 2002, and Alex Schneiter, its former CEO (2015-2020), were filed following an 11-year official investigation into Lundin Energy’s activities in South Sudan. Swedish legal professionals have opined that convictions against the Lundin Energy principals could result in life sentences. The company has denied all allegations of complicity in war crimes relating to its historical activities in South Sudan.


AMERICAS

PANAMA: SON OF FORMER PRESIDENT EXTRADITED TO US ON MONEY LAUNDERING CHARGES

On 15 November, Luis Martinelli Linares, one of the sons of former Panamanian president Ricardo Martinelli, was extradited to the US on money laundering charges filed against him and his brother, Ricardo Martinelli Linares. According to the US Department of Justice, the brothers conspired to launder USD 28 million in bribes paid by Brazilian construction company Odebrecht to a high-ranking Panamanian official between 2009 and 2014, during their father’s tenure as president. The brothers were arrested in July 2020 in Guatemala, where Ricardo’s extradition remains pending. Luis’s lawyer said on 16 November that he plans to plead guilty to the charges. The Martinelli family has been subject to various criminal investigations in recent years. On 9 November, former president Martinelli was acquitted of charges that he tapped the phones of journalists and political opponents.

 

CHILE: SENATE VOTES AGAINST IMPEACHMENT OF PRESIDENT PIÑERA

On 16 November, the Chilean Senate voted against a motion to impeach president Sebastián Piñera. Members of the opposition had filed the motion in October 2021, following the publication of the Pandora Papers, which included information that indicated irregularities in a business transaction carried out by Piñera during his presidential term. The House of Representatives had approved the opening of impeachment proceedings, but as the motion subsequently failed to garner sufficient votes in the Senate, Piñera will serve out his term in office, which ends in March 2022.

 

CANADA: FINANCIAL INTELLIGENCE REPORTS SHOW CRIMINAL ORGANISATIONS EXPLOITED FEDERAL PANDEMIC BENEFITS

According to a report from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit, criminal organisations appear to have “knowingly and actively” defrauded the country’s pandemic benefits programmes, including the Canada Emergency Response Benefit and Canada Emergency Business Account. The 2020 report, recently obtained by a Canadian public interest researcher, reportedly shows that criminal organisations exploited the programmes by filing applications using stolen identities and subsequently mixed fraudulently-obtained benefits with laundered funds. The Canada Revenue Agency had previously warned the country’s parliamentary finance committee in July 2020 that the pandemic benefits programmes had been targeted by organised crime. 


ASIA PACIFIC

INDONESIA: AUTHORITIES SEIZE SUHARTO FAMILY ASSETS AS PART OF LONG-RUNNING DEBT RECOVERY EFFORT

On 5 November, the Indonesian authorities seized 124 hectares of land linked to Tommy Suharto (Tommy), the son of late Indonesian president Suharto, as part of their effort to recover USD 180.9 million in outstanding central bank loans issued to PT Timor Putra Nasional (TPN), a car manufacturer owned by Tommy, in the late 1990s. TPN, which owns the land, had received this funding as a bailout during the 1997 Asian financial crisis and subsequently defaulted on the debt. The land seizure is part of the incumbent Widodo administration’s wider effort to recover a total of USD 7.7 billion in outstanding loans issued during the Asian financial crisis. Since establishing a special task force to recover the debt in April 2021, the Indonesian authorities have seized 49 plots of land.


SUB-SAHARAN AFRICA

DRC: DOCUMENT LEAK REVEALS MILLIONS ALLEGEDLY EMBEZZLED BY FORMER DRC PRESIDENT AND ASSOCIATES

On 19 November, investigative news outlets reported that the DRC’s former president, Joseph Kabila, and his associates used the DRC branch of Banque Gabonaise et Française Internationale (BGFI) to embezzle and launder at least USD 138 million in state funds during his presidency (2001-2019). The articles are based on a leak of over 3 million BGFI documents obtained by a consortium of investigative journalists and NGOs. Dubbed the ‘Congo Hold-Up’, this is Africa’s largest document leak. Kabila and his family allegedly moved funds from state institutions, including the central bank, through bank accounts held by companies they controlled at BGFI’s DRC branch, transferring millions abroad and purchasing properties in the United States and South Africa. The scheme was allegedly facilitated by Kabila’s adopted brother, Francis Selemani, then-managing director of BGFI’s DRC branch (2012-2018). On 20 November, the DRC’s minister of justice called for a judicial investigation into the allegations.

 

SOUTH AFRICA: INVESTIGATIVE PROBE INTO AWARD OF CONTRACTS TO INDEPENDENT RENEWABLE POWER PRODUCERS

On 23 November, the South African graft ombudsman started a week of public hearings into alleged corruption surrounding the public procurement of renewable energy from independent producers. The hearings form part of an ongoing investigation that was initiated in 2019 following a NGO’s complaint of improper conduct and maladministration. The NGO alleged that unidentified senior executives at Eskom, the state-owned electricity company, and the Department of Mineral Resources and Energy came under political pressure to award contracts to independent renewable power producers (IRPPs) as part of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The REIPPPP was created in 2011 to increase renewable energy generation through partnerships with IRPPs. To date, USD 3 billion has been invested and, at the COP26 climate summit, president Ramaphosa announced that USD 8.5 billion in loans and grants were pledged to accelerate investment in renewable energy.


RUSSIA AND CIS

BELARUS: EU PREPARES FOR NEW SANCTIONS AGAINST BELARUS OVER MIGRANT CRISIS

On 15 November, the EU amended its sanctions regime against Belarus to allow it to target companies that facilitate illegal crossings into the EU. The amendments were introduced in response to the migrant crisis on the Poland-Belarus border, which the EU believes was orchestrated by Belarus in retaliation for Western sanctions over the country’s controversial August 2020 presidential election. On 23 November, the EU announced its plans to sanction transport companies that are reportedly engaged in facilitating illegal border crossings, such as Belavia, the Belarusian national airline. The sanctions will significantly restrict companies’ operations by banning them from providing transport services, flying, transiting, refuelling, and carrying out maintenance across the EU territory. The EU has yet to formally announce the imposition of the sanctions and publish the full list of sanctioned individuals and entities.

 

RUSSIA: US SANCTIONS UK ENTITY OVER INVOLVEMENT IN NORD STREAM 2

On 22 November, the US State Department announced the imposition of sanctions on Transadria Ltd, a British oil and gas company involved in the Nord Stream 2 pipeline project between Russia and Western Europe, under the Protecting Europe’s Energy Security Act (PEESA). Two vessels involved in the project, including one owned by Transadria, were also designated as ‘blocked property’. The sanctions against Transadria are part of broader opposition to the Nord Stream 2 project in the US Congress, which has led to the imposition of sanctions on eight entities and the blocking of 17 vessels involved in the project.


MIDDLE EAST AND NORTH AFRICA

LEBANON: THREE JUDGES RESIGN IN PROTEST AGAINST ALLEGED POLITICAL INTERFERENCE IN JUDICIAL SYSTEM

On 26 November, three senior Lebanese judges resigned in protest against alleged political interference in the judicial system in Lebanon. In their resignation letters, Rola Husseini, Jeanette Hannam, and Carla Kassis cited political intervention, including in the investigation into the August 2020 Beirut port explosion, as well as the financial collapse of the country. These resignations come less than a month after the investigation into the August 2020 Beirut port explosion was postponed after two former Lebanese government ministers filed lawsuits questioning the authority of judge Tarek Bitar to lead the investigation.

 

UAE: MAJOR LEGAL REFORM ENACTED TARGETING FINANCIAL CRIME AND CYBERCRIME

On 27 November, the UAE enacted an overhaul of legislation relating to data protection, financial crime, and foreign investment into the UAE. The amendments extend the statute of limitations on the embezzlement of public funds, and will enable foreign investors and entrepreneurs to incorporate and wholly own companies in the UAE in most economic sectors. The reforms also target cybercrime, criminalising hacking with the intent of obtaining government data, and include provisions relating to women’s rights. The changes were drafted by a team of 540 legal specialists from various authorities in the UAE, in consultation with more than 100 private sector companies. The reforms “aim to keep [the UAE] apace” with legal best practice globally. In addition to ratifying the new laws, on 28 November, UAE president Sheikh Khalifa ordered the release of 870 prisoners ahead of the fiftieth anniversary of the UAE’s establishment as a federation on 2 December.

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

Martin Devenish MBE
Martin devenish mbe Board Director Email Martin
Penelope Jenkins
Penelope jenkins Associate Email Penelope

CYBER INCIDENT RESPONSE: PERSPECTIVES FROM INSIDE THE RISK ECOSYSTEM

In our latest report, we examine a cyber incident from the perspective of several key stakeholders.

Download Report