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:
- UK oil services provider Petrofac Limited fined GBP 77 million for failing to prevent bribery by executives in Iraq, Saudi Arabia, and the United Arab Emirates;
- US Justice and Treasury departments take steps to regulate cryptocurrency sector; and
- FBI raids US properties linked to Oleg Deripaska as part of sanctions breach investigation.
AUSTRALIA: NEW SOUTH WALES CORRUPTION WATCHDOG LAUNCHES INVESTIGATION INTO STATE PREMIER GLADYS BEREJIKLIAN
On October 1, the New South Wales Independent Commission Against Corruption (ICAC), the Australian state’s corruption watchdog, announced that it was investigating whether the actions of Gladys Berejiklian, the state’s premier, between 2012 and 2018 had constituted a conflict of interest. The investigation focuses on Berejiklian’s personal relationship with former New South Wales MP Daryl Maguire, which had been kept secret, and her award of AUD 35.5 million (USD 26.5 million) in government grants to community organisations in Maguire’s former electorate. Maguire stepped down from his own position as MP in 2018 after the state’s corruption watchdog announced it was investigating his suspected abuse of office for personal financial gain. Berejiklian resigned in response to the ICAC’s announcement. Deputy Premier John Barilaro and transport minister Andrew Constance also announced that they would immediately step down from state politics, triggering three by-elections across the state.
PHILIPPINES: SENATE CORRUPTION INVESTIGATION COMMITTEE RECOMMENDS FILING CHARGES AGAINST OFFICIALS INVOLVED IN AWARD OF COVID-19 CONTRACTS
On 19 October, the corruption investigation committee of the Philippines Senate recommended filing charges against several individuals involved in the government's award of inflated medical supply contracts to Pharmally Pharmaceutical Corporation (PPC). Senators believe PPC has secured at least PHP 12 billion (USD 237.64 million) in COVID-19 supply contracts, including one contract worth PHP 8.68 billion (USD 171.9 million), despite effectively having had no existing track record. Filipino investigative journalists have also highlighted a connection between PPC’s majority shareholder and Michael Yang, President Rodrigo Duterte’s former economic adviser. The Senate committee also recommended filing charges against Yang and Lloyd Christopher Lao, the former chief of the procurement service of the Department of Budget and Management. The committee’s recommendations are included in a preliminary report that is yet to be approved by the wider senate.
US: JUSTICE AND TREASURY DEPARTMENTS TAKE STEPS TO REGULATE CRYPTOCURRENCY SECTOR
Responding to a rise in the number of suspected ransomware attacks in recent months, on 6 October, the US Department of Justice announced the creation of a national cryptocurrency task force to lead the investigation and prosecution of criminal misuses of cryptocurrency. Subsequently, on 15 October, the US Department of the Treasury issued best practices and guidelines to ensure that digital currency companies – including virtual currency exchangers, administrators, miners, and wallet providers – comply with US sanctions. Treasury officials also warned the cryptocurrency industry against delaying to implement the new compliance procedures, as failure to do so could expose them to potential sanctions risks, including civil and criminal penalties.
CHILE: PRESIDENT PIÑERA UNDER INVESTIGATION FOR CORRUPTION FOLLOWING PANDORA PAPERS LEAK
On 8 October, Chile’s Public Prosecutor announced that it had opened a corruption investigation into Chilean president Sebastián Piñera for his sale of a stake in the Dominga Project, a large mining project, to a close friend in 2010. Information disclosed in the recent Pandora Papers leak indicated that the sale was completed in three instalments, with the final instalment being contingent on Piñera’s government not declaring the area surrounding the mining project an environmentally protected reserve. On 13 October, opposition members of parliament launched impeachment proceedings against Piñera in connection with the Dominga Project deal. President Piñera has denied any wrongdoing.
BRAZIL: PARLIAMENTARY INQUIRY RECOMMENDS CRIMINAL CHARGES AGAINST PRESIDENT BOLSONARO FOR MISHANDLING OF COVID-19 PANDEMIC
On 26 October, Brazil’s parliamentary inquiry into the mishandling of the COVID-19 pandemic by the Brazilian government approved its final report. The report includes the recommendation that President Jair Bolsonaro be indicted on nine charges – including crimes against humanity and the dissemination of misinformation related to the pandemic – for omissions and actions that resulted in Brazil’s over 600,000 COVID-19 deaths. The report will be sent to Brazil’s Prosecutor-General, Augusto Aras, who will decide whether to press charges against the president and the individuals listed. Aside from President Bolsonaro, the report proposes charges against two companies and 77 individuals, including Brazil’s minister of health, Marcelo Queiroga, and President Bolsonaro’s three sons.
Russia and CIS
ARMENIA: FORMER DEFENCE MINISTER AND LONGSTANDING WEAPONS SUPPLIER ARRESTED ON EMBEZZLEMENT CHARGES
On 30 September, the Armenian authorities arrested former defence minister Davit Tonoyan on charges of embezzling AMD 2.3 billion (USD 4.7 million) during the purchase of faulty weaponry for the Armenian military. Tonoyan was arrested alongside David Galstyan, a longstanding weapons supplier to the Armenian military with whom he allegedly collaborated. Tonoyan has denied wrongdoing and unsuccessfully appealed against his arrest, while Galstyan has claimed that the charges against him have been fabricated by his competitors. As part of the wide-ranging investigation into Tonoyan, the Armenian authorities have launched criminal proceedings against a number of other serving and retired military personnel. These have included the head of the Armenian air force, who was arrested in September 2021 on charges that he abused his powers by arranging and personally benefitting from a USD 4.7 million contract for the supply of outdated rockets to the armed forces.
RUSSIA: FORMER DEPUTY EDUCATION MINISTER ARRESTED ON SUSPICION OF FRAUD
On 6 October, the Russian authorities arrested former Russian deputy minister of education, Marina Rakova, on suspicion of fraud in connection with the embezzlement of RUB 50 million (USD 712,961) in state funds in 2019. According to the authorities, during her tenure as a deputy education minister between 2018 and 2020, Rakova allegedly embezzled funds allocated to a state education foundation that she supervised. She allegedly awarded the funds in two state contracts to a subcontractor that did not complete the work to the required specifications and falsified relevant documentation. Rakova is also accused of fraudulently employing her husband, Artur Stetsenko, at the state education foundation and paying him a state salary. Stetsenko and several former employees of the state education foundation have also been arrested and placed in pre-trial detention as part of the investigation.
RUSSIA: OLEG DERIPASKA’S US PROPERTIES RAIDED IN SANCTIONS BREACH INVESTIGATION
On 19 October, the US Federal Bureau of Investigation raided two properties in Washington DC and New York City linked to Russian billionaire Oleg Deripaska. The raids were part of an investigation by the US authorities into whether Deripaska has violated US sanctions imposed against him in 2018 in response to his close ties to Russian president Vladimir Putin. In 2019, Deripaska reached an agreement with the US authorities to cede control of aluminium giant Rusal and reduce his shareholding to below 50 percent in return for the company being removed from the US sanctions list. European officials indicated to the US government in late 2020 that Deripaska has retained control over Rusal, thereby breaching the agreement.
UK: PETROFAC FINED GBP 77 MILLION FOR FAILING TO PREVENT BRIBERY BY EXECUTIVES
On 4 October, Petrofac Limited, a Jersey-headquartered oilfield services provider, was fined GBP 77 million after pleading guilty to seven counts of failure to prevent bribery by executives in a case brought against it by the UK’s Serious Fraud Office. Petrofac admitted to paying GBP 32 million in bribes to officials in Iraq, Saudi Arabia, and the United Arab Emirates between 2011 and 2017 to secure contracts worth GBP 2.6 billion. The bribes were reportedly paid through an “opaque system of fake invoices” and a complex network of subcontractors. As part of the SFO investigation and legal proceedings, David Lufkin, Petrofac’s former global head of sales, was given a two-year suspended custodial sentence after he pleaded guilty to 14 counts of bribery. The SFO stated that while the investigation into Petrofac as a corporate entity has now been concluded, its investigation into individual suspects is ongoing.
SLOVAKIA: GOVERNOR OF CENTRAL BANK CHARGED WITH CORRUPTION
On 8 October, Slovakia’s Prosecutor’s Office filed corruption charges against Petr Kažimír, a former finance minister and the governor of the National Bank of Slovakia since 2019. Kažimír is alleged to have acted as an intermediary in passing on a bribe of around EUR 50,000 to František Imrecze, the former head of Slovakia’s tax and customs body. Kažimír has denied the accusation and reportedly filed a complaint against the charges. He has resisted calls for him to resign from the governing council of the European Central Bank, to which he was appointed in 2019.
Middle East and North Africa
LEBANON: INVESTIGATION INTO BEIRUT PORT EXPLOSION POSTPONED AMID POLITICAL DISAGREEMENT AND VIOLENCE
On 28 October, the judge leading the investigation into the August 2020 Beirut port explosion postponed proceedings after former Lebanese prime minister Hassan Diab and former interior minister Nohad Machouk – who were due to be interrogated – filed lawsuits questioning the authority of judge Tarek Bitar, who had been appointed in February 2021 to lead the investigation. The investigation has been the subject of wider disagreement between political factions representing Lebanon’s Christian and Shi’i communities: Shi’i militant group and political party Hezbollah and its allies have accused Bitar of being politically biased, while their opponents have claimed that Hezbollah and its allies in the Lebanese political establishment are deliberately obstructing the investigation. Violent clashes have also broken out in Beirut between Christian and Shi’i militias in connection with the investigation.