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Red Flag Bulletin | February 2021

Martin Devenish MBE, Penelope Jenkins 4 February 2021
4 February 2021    Martin Devenish MBE, Penelope Jenkins


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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:
  • Swiss court convicts Israeli mining magnate Beny Steinmetz of bribery and forgery in Guinea;
  • Trial of 355 individuals associated with Mancuso mafia family begins in Calabria; and
  • Outgoing British Virgin Islands (BVI) governor launches inquiry into alleged government corruption.

Russia and CIS

Ukraine: US imposes sanctions on Ukrainian nationals for interference in the 2020 presidential election

On 11 January, the US Treasury imposed blocking sanctions on 11 Ukrainian individuals and entities for attempting to interfere in the 2020 US presidential election as part of a Russia-backed disinformation campaign. Four of the individuals are current or former Ukrainian government officials, whom the US Treasury accuses of being members of “the inner circle” of Andriy Derkach, a Ukrainian MP and suspected Russian agent. Derkach was sanctioned in September 2020 for disseminating unsubstantiated conspiracy theories concerning US president Joe Biden during his presidential election campaign, related to his historical activities in Ukraine. One of the newly-sanctioned Ukrainians, Oleksandr Onyshchenko, is a prominent former MP and fugitive businessman who was charged in absentia with corruption in 2017. Onyshchenko was reportedly the source of edited audio recordings of Biden and former Ukrainian president Petro Poroshenko that Derkach released in May 2020 to discredit Biden.

Estonia: Prime minister resigns after his party is implicated in corruption case

On 13 January, Jüri Ratas, Estonia’s prime minister since 2016, resigned following the arrest of individuals linked to Ratas’ Centre Party as part of a high-profile corruption case. The previous day, the Estonian Prosecutor General’s Office announced that it suspected the Centre Party and five individuals, including the party’s secretary general, of organising a scheme to obtain real estate development permits in exchange for political donations. Notably, Hillar Teder, an Estonian property developer, allegedly agreed to donate EUR 1 million to the Centre Party in exchange for a construction permit for a car park in Tallinn, the Estonian capital. Ratas has not been personally accused of any wrongdoing in the case, which is ongoing. He continued to serve as Estonia’s acting prime minister until the country’s new prime minister, Kaja Kallas, was sworn in on 26 January.

Russia: Construction of Nord Stream 2 gas pipeline resumes ahead of potential review of US sanctions

On 24 January, seemingly anticipating a policy change from the new Biden administration, Russia resumed the construction of its Nord Stream 2 gas pipeline to Germany following a hiatus of over a year. Construction resumed despite the imposition of fresh US sanctions on the project’s insurers and the ship which is constructing the pipeline on 19 January, Donald Trump’s final day in office. Nord Stream 2 is seen by some commentators as a project designed to strengthen Russia’s energy hold on Europe and exert political influence over traditional transit countries, such as Ukraine. German chancellor Angela Merkel, who is supportive of the project, has indicated that she hopes to reach a compromise with the new US administration to allow the pipeline to be completed. On 26 January, the White House said that the Biden administration will review restrictions on the project.

Middle East and North Africa

Lebanon: Swiss federal prosecutors investigate Lebanese central bank

On 19 January, the office of the Swiss federal prosecutor announced that it was opening an investigation into allegations of “aggravated money laundering” and “possible embezzlement” at Banque du Liban (BDL), the Lebanese central bank. The announcement comes amid Lebanon’s ongoing financial crisis and the collapse of the Lebanese pound. Swiss authorities submitted a request to question Riad Salameh, the head of BDL since 1993, over transfers he reportedly made to his brother and an advisor totalling USD 400 million. Salameh denied the allegations, which he termed “fake news”, although he agreed to comply with the request for questioning. Lebanese authorities have also agreed to cooperate with Swiss prosecutors.

Asia Pacific

China: Death sentence for former chairman of China Huarong charged with large-scale bribery

On 5 January, a court in Tianjin sentenced Lai Xiaomin, former chairman of state-owned asset manager China Huarong, to death on charges of embezzlement and accepting bribes of approximately CNY 1.79 billion (USD 276 million). The court also deprived Lai of political rights for life and confiscated his assets. In January 2020, Lai had admitted to stashing millions in cash bribes in a Beijing apartment he referred to as ‘the supermarket’. Bloomberg described it as one of the biggest financial corruption cases in Chinese history. On 21 January, the Higher People's Court of Tianjin dismissed Lai’s appeal against the death sentence, and he was executed on 29 January.

South Korea: Uncertainty for Samsung Group as heir sentenced to 2.5 years on corruption charges

On 18 January, Seoul High Court sentenced Jay Y Lee, acting chairman of Samsung Group, to 2.5 years in prison in connection with longstanding corruption charges related to the manner in which he secured control of Samsung from his late father. On 14 January, the Supreme Court had upheld a 20-year prison sentence against South Korea’s former president Park Geun-hye for abuse of office and coercion in connection with the same events. Lee reportedly does not intend to appeal. The judge also criticised Samsung’s newly-established compliance committee, which Korean legal commentators have said was outside the court’s remit. Industry analysts expect the judgment to create significant uncertainty for Samsung’s future management, especially as it appears Lee will be barred from serving in any part of Samsung Group for an additional five years after his sentence, unless approved by the Ministry of Justice.

Malaysia: Investigation into counterfeit halal meat scandal

On 18 January, the Malaysian Anti-Corruption Commission called 27 witnesses to testify in an ongoing investigation into allegations of widespread bribery related to the import of counterfeit halal meat into the majority Muslim country. Prime minister Muhyiddin Yassin will also temporarily chair a reactivated Malaysia Halal Council in response to the incident. The emerging scandal originated with investigative reporting by local news outlet SinarHarian, which alleged in December 2020 that a cartel was smuggling frozen meat under forged import documentation and repackaging it with counterfeit halal labels at a factory in southern Malaysia. New Straits Times later alleged that the cartel had been operating for over 40 years, a claim repeated in international media. At least eight suspects have reportedly been remanded in custody, including two officers from the Quarantine and Inspection Services Department. One reportedly implicated meat supplier, Raihanah Cold Storage, has filed a defamation lawsuit.


Cuba: Trump administration returns Cuba to list of state sponsors of terrorism

On 12 January, eight days before leaving office, the Trump administration placed Cuba back on the US list of state sponsors of terrorism, making it the fourth country on the list alongside Iran, Syria, and North Korea. Cuba had previously been removed from the list in 2015 under the Obama administration. Former Secretary of State Mike Pompeo stated that Cuba was returned to the list for harbouring US fugitives and Colombian rebel leaders. On 15 January, the US also imposed sanctions on Cuba’s Interior Ministry for alleged human rights abuses. US president Joe Biden is expected to face significant hurdles from political opponents if he decides reverse the decision.

BVI: Former governor launches inquiry into alleged government corruption

On 18 January, Gus Jaspert, the outgoing governor of the British Virgin Islands (BVI), announced the establishment of an independent judge-led commission of inquiry to investigate allegations of widespread political corruption and misuse of taxpayers’ money. The commission will investigate a variety of concerns about the territory’s governance, including specific allegations concerning possible infiltration by organised criminal groups; misuse of funds intended to combat COVID-19 on the islands; coercion and interference in public service appointments; and intimidation of public servants and members of the media. The inquiry has been backed by the UK foreign secretary. Jaspert’s term as governor of the BVI ended on 23 January.

Venezuela: Opposition leader Juan Guaidó accused of corruption

On 23 January, the National Assembly of Venezuela, which is aligned with disputed president Nicolás Maduro, agreed to request support from the US, Argentina, Paraguay, Colombia, Panama, and Spain in investigating alleged corruption by Juan Guaidó, Venezuela’s opposition leader and the country’s self-appointed interim president. The National Assembly accuses Guaidó and his allies of mishandling and embezzling Venezuelan state funds held overseas that had been frozen under international sanctions but made available to Guaidó by western governments aligned with him. For example, Guaidó has been accused of refusing to use funds under his control to purchase additional COVID-19 vaccines for the country. The president of the NA, who is aligned with Maduro, has also accused Guaidó and his associates of using public money "for personal enrichment purposes".

Sub-saharan Africa

DRC: US sanctions imposed on Dan Gertler for DRC mining deals eased

On 15 January, the outgoing Trump administration eased the blocking sanctions on Israeli mining magnate Dan Gertler imposed in late 2017 following allegations that he had corruptly secured mining deals worth over USD 1 billion through his friendship with the Democratic Republic of the Congo’s former president, Joseph Kabila. Although Gertler remains on the US Treasury’s Specially Designated Nationals and Blocked Persons sanctions list, he and his roughly 30 companies may now transact and conduct business with US entities until 31 January 2022, with partial oversight from the US Treasury. The easing of sanctions has been met with widespread criticism by transparency and anti-corruption NGOs. The newly-appointed administration of US president Joe Biden is yet to comment on whether any measures will be taken to revoke the licence easing the sanctions, whose issuance had not been announced publicly.

Guinea: Swiss court convicts mining magnate of bribery and forgery in Guinea

On 22 January, a Geneva court found Beny Steinmetz, a French-Israeli businessman formerly resident in Geneva, guilty of bribery in Guinea, sentencing him to five years in jail and fining him USD 56.5 million. Steinmetz and two colleagues were convicted of paying USD 8.5 million in bribes to a wife of Guinea’s late president Lansana Conté (1984-2008) to obtain mining rights in the iron-ore rich Simandou region between 2006 and 2010. Steinmetz sold the rights in 2010 to Vale SA, the Brazilian mining multinational, for USD 2.5 billion. That deal was subject to UK arbitration, which found that Steinmetz’s company made fraudulent representations during joint venture negotiations with Vale in 2010. The Geneva court also found Steinmetz guilty of forging official documents to hide the bribery. Steinmetz is appealing the Geneva verdict and will not be imprisoned pending the outcome of the appeal.


Italy: Largest mafia trial in decades begins

On 13 January, the largest Italian organised crime trial in almost 40 years started in Lamezia Terme, a town in Calabria. Known as Rinascita Scott, the trial targets the Mancuso family, a powerful clan within the ‘Ndrangheta mafia, and the families and individuals associated with them. Over 440 individuals have been charged with crimes including murder, drug trafficking, extortion, abuse of office, and money laundering. 355 of them will be tried in this process, with the remaining defendants choosing a separate fast-tracked trial. Apart from its size, the trial has garnered attention due to the large number of people who have come forward with evidence and who are willing to testify. The trial is expected to last at least two years.

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

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