BIS publishes FAQs on HK export/re-export documentation requirements

/ Global Compliance Solutions Group LLC/

Ninth Circuit adopts a broad whistleblower definition

/ Global Compliance Solutions Group LLC/

The U.S. Court of Appeals for the Ninth Circuit on March 8, 2017, found that the whistleblower provisions of the Dodd-Frank Act applied to employees who raise concerns internally, and not just to those employees who make reports directly to the U.S. Securities and Exchange Commission (the "SEC").  The ruling finds that the anti-retaliation provisions of the Dodd-Frank Act also protects employees fired after making internal disclosures of alleged unlawful activity under the Sarbanes Oxley Act and other laws, rules, and regulations. 

The Ninth Circuit decision in Somers v. Digital Realty Trust takes sides on an issue that has already resulted in a circuit split.  The Second Circuit ruled that Congress did not intend to limit protections to whistleblowers who disclosed information to the SEC.  The Sixth Circuit avoided the question altogether in a January decision, while the Fifth Circuit, the first to weigh in on the issue, ruled that Dodd-Frank limits the definition of "whistleblower" to those who report alleged securities violations to the SEC. 

Judge Schroeder said, "we conclude that the SEC regulation correctly reflects congressional intent to provide protection for those who make internal disclosures as well as to those who make disclosures to the SEC."

The anti-retaliation provision in question states:

"No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower

(I) in providing information to the Commission in accordance with this section;

(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or

(iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j-1(m) of this title, section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission."    

The issue decided by the Ninth Circuit involved subdivision (iii).  This provision was added after the bill went through Committee so there is no legislative history to explain its purpose.  The court ruled that the Sarbanes-Oxley Act and the Securities Exchange Act of 1934 mandate internal reporting and that this reporting is to occur before external reporting.  So, in the courts opinion, leaving employees without protection for the required internal reporting may result in early retaliation before the regulators were informed. 

This issue is almost certain to reach the Supreme Court to be resolved, unless Congress amends Dodd-Frank to clarify their intent.  Corporate General Counsels should keep an eye on this issue as it works its way through the courts.  GCSG will follow developments on this issue.  Contact us at info@globalcompliancesg.com with any question's or for more information. 

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EU Parliament passes draft conflict minerals regulation

/ Global Compliance Solutions Group LLC/

A draft "conflict minerals" regulation was recently approved by the European Union (EU) parliament.  This regulation will require importers of tin, tungsten, tantalum, and gold to conduct due diligence on their suppliers.  In addition, large manufacturers will be required to disclose how they intend to monitor their sources of supply to ensure compliance with the rules.  The vote on approval was 558 votes For, 17 Against, and 45 abstentions. 

"The vicious circle has now been broken.  The importers of tin, tantalum, tungsten and gold will have to carry out mandatory due diligence in order to check their suppliers and prevent armed rebels or human rights violations being financed by illegal revenue," said luliu Winkler, Group of the European People's Party, Romania." (1)

Individual EU member states will be responsible for ensuring companies within their jurisdiction are in compliance with the regulation.

Key Points to Know

  • The regulation will become effective on January 1, 2021
  • Due diligence will be mandatory
  • EU firms over 500 employees, subject to EU law on "non-financial reporting", that buy tin, tantalum, tungsten and gold to use in their products will be encouraged to report on their sourcing practices and will be able to join an EU registry
  • Sufficient due diligence is defined by the international OECD guidelines (See below)
  • Small importers (such as dentists, jewelers, etc...) will be exempted
  • It is estimated the regulation will directly impact between 600 and 1,000 EU importers and will indirectly affect about 500 smelters and refiners of tin, tantalum, tungsten and gold, whether they are based inside the EU or not (3)
  • The European Commission will create a "white list" of global smelters and refiners which it knows source responsibly

OECD Guidelines include the below Steps (4)

  • Strong company management systems
    • Adopt and communicate a policy
    • Establish traceability
  • Identify & assess risks in the supply chain
    • Identify and verify treaceability
    • Undertake on-the-ground assessments for all red flag locations
  • Manage risks
    • Report identified risks to senior management
    • Disengage from suppliers with the most serious impacts
    • Mitigate risk, monitor and track progress
  • Audit of smelter / refiner due diligence practices
    • Allow auditors to access company documentation, records, and access to suppliers
    • Publish summary audit report with conclusions
  • Publicly report on due diligence
    • Annually describe all due diligence efforts and make the report publicly available

GCSG's compliance experts are closely following the developments with the EU's conflict mineral regulations.  Contact us at info@globalcompliancesg.com with any additional question's or for more information. 

Key term(s):

  • "Conflict minerals – Tin, tantalum, tungsten and gold are used in the production of many high-tech devices, in the automotive, electronics, aerospace, packaging, construction, lighting, industrial machinery and tooling industries, as well as in jewelry." (2)

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GCSG Celebrates International Women's Day

/ Global Compliance Solutions Group LLC/

Global Compliance Solutions Group LLC (GCSG) Celebrates International Women's Day

Today, March 8 GCSG celebrates a global day set aside to recognize Women's achievements

PRAIRIEVILLE, Louisiana, March 8, 2017 – GCSG, an advisory, audit and due diligence firm focused on helping companies manage compliance and risk in their own business and with their third parties, celebrates International Women's Day.

International Women's Day is a "global day celebrating the social, economic, cultural and political achievements of women."(1)

GCSG supports the bold for change message of challenging bias and inequality, campaigning against violence, forging women's advancement, celebrating women's achievement, and championing women's education.

"Will you #BeBoldForChange on International Women's Day 2017 and beyond by taking groundbreaking action that truly drives the greatest change for women...Through purposeful collaboration, we can help women advance and unleash the limitless potential offered to economies the world over."(1)

For more information: (1) https://www.internationalwomensday.com/

#BeBoldForChange

#IWD2017

#PledgeForParity

 ** *** **

About GCSG

Global Compliance Solutions Group LLC was founded in 2016 and is headquartered in Louisiana, USA.  We provide Advisory, Audit, and Due Diligence services for our clients across a range of industries in the areas of Import, Export and Customs Compliance, Anti-Bribery and Anti-Corruption, Drug Precursor, and Distilled Spirits Plant compliance.  The GCSG service team delivers compliance program assessment, development and implementation support, audit, and acquisition and third party due diligence services.  We partner with our clients to solve challenging compliance issues with a strategic, comprehensive, and common sense methodology.  GCSG's innovative solutions enable our clients to operate in compliance with the law while facilitating efficient sales and trade.  More information can be found at: http://www.globalcompliancesg.com

Learn more about GCSG by following us online:

Contact us here.

France passes supply chain due diligence law

/ Global Compliance Solutions Group LLC/

On February 21, 2017, the French National Assembly passed a law that requires certain companies based in France, to establish an "effective vigilance plan" (the "Plan") within their global supply chains.  The due diligence law is applicable to the following types of companies:

  • Any company that has its registered office in France that employs at least 2,000 employees (at its close of two consecutive financial years), within the country, in its head office and in its direct or indirect subsidiaries; and
  • Any company, registered in France, with at least 10,000 employees worldwide in its parent company and its direct or indirect subsidiaries, whose head office is in France or whose head office is abroad

The law requires the Plan to include "reasonable vigilance" measures to identify risks and prevent serious violations of human rights and fundamental freedoms, the health and safety of persons and the environment resulting from the activities of society, those of the companies it controls (directly or indirectly), as well as the activities of subcontractors or suppliers with whom an established commercial relationship is maintained.  The law outlines the following key measures to be included in the Plan:

  • Risk mapping intended to identify, analyze, and rank
  • Procedures that require regular assessment of compliance with the plan of subsidiaries, subcontractors or suppliers with whom an established commercial relationship is maintained with regard to risk mapping
  • Documented actions to be taken to mitigate risks or prevent serious harm
  • A mechanism for collecting alerts on the existence or risks
  • A mechanism for monitoring the measures implemented and evaluating their effectiveness

Failure to comply with the requirements of the law within three months of the date of the formal notice, can subject a company to a civil fine that can not exceed € 10 million. 

Human Rights Watch said of the law, "..France took a historic step toward reducing these human rights abuses.  Parliament passed a law that pushes for accountability for multinational companies sourcing from global supply chains."(1)

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GCSG Marks One Year Anniversary

/ Global Compliance Solutions Group LLC/

Press Release

Global Compliance Solutions Group LLC (GCSG) marks one year anniversary

GCSG celebrates growth and impact in its inaugural year  

PRAIRIEVILLE, Louisiana, March 1, 2017 – GCSG, an advisory, audit and due diligence firm focused on helping companies manage compliance and risk in their own business and with their third parties, marks our first anniversary today.  Twelve months after our launch, GCSG is delivering innovative solutions to our growing client base across the United States, Europe, and Asia.

Our expertise focuses on the overlapping compliance triad of trade compliance, anti-bribery/anti-corruption, and third party due diligence.  Our core values of integrity, service, and accountability matched with common sense solutions tailored to our client’s individual business model help our clients reduce risk, stay compliant and facilitate sales and trade.     

“One year is a big milestone for any company.  In 2016, we enjoyed an exciting year bringing services to our clients and developing new relationships and partnerships.  As we grow and improve our core services over the next year we look forward to continuing to deliver exceptional value to our clients.” says Jonathan Mellard, Founder, GCSG.

Over the last year, we’ve passed a lot of promising milestones and we’ve launched several new products and services, including but not limited to the following:

  • A due diligence report product, designed to provide our clients with the security of knowing their third-party relationships have been properly vetted;

  • Adding data analytics capabilities to our fraud investigation service; and

  • Launched an informative monthly newsletter.

“It’s been exciting and humbling to watch our growth.  We are sincerely grateful for our clients and our partnerships.  We couldn’t have done any of this without them.  As we continue to grow we remain committed to our core values of integrity, a service mindset, and being accountable to our clients,” added Mellard. 

 ** *** **

About GCSG

Global Compliance Solutions Group LLC was founded in 2016 and is headquartered in Louisiana, USA.  We provide Advisory, Audit, and Due Diligence services for our clients across a range of industries in the areas of Import, Export and Customs Compliance, Anti-Bribery and Anti-Corruption, Drug Precursor, and Distilled Spirits Plant compliance.  The GCSG service team delivers compliance program assessment, development and implementation support, audit, and acquisition and third party due diligence services.  We partner with our clients to solve challenging compliance issues with a strategic, comprehensive, and common sense methodology.  GCSG's innovative solutions enable our clients to operate in compliance with the law while facilitating efficient sales and trade.  More information can be found at: http://www.globalcompliancesg.com

Learn more about GCSG by following us online:

Contact us here.

China announces launch of new anti-corruption system

/ Global Compliance Solutions Group LLC/

In November 2016 the general office of the Communist Party of China Central Committee announced that a new anti-corruption system would be created to improve oversight efficiency.  A pilot program was launched in Beijing, Shanxi and Zhejiang provinces.

"Zhuang Deshui, deputy director of the clean government research center at Peking University, said, 'the pilots were chosen as a foundation for anti-corruption.  It is unusual to pilot reforms in Beijing, and this move reflects China's determination to press ahead with reform.'"(1)

The goal of the reform is to establish a national anti-corruption work agency, similar to the Corrupt Practices Investigation Bureau in Singapore.  The plan is to expand the scope of inspections and cover more types of public officials.

"Li Yongzhong, former deputy head of the Chinese Discipline Inspection Institute said, 'The current supervision system only covers the country's administrative organs...The new plan will make everyone on the government payroll subjects of the supervision committee, even those in public hospitals and schools.'"(1)

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WTO Trade Agreement enters into force

/ Global Compliance Solutions Group LLC/

On February 22, 2017, the first multi-lateral trade agreement in the history of the World Trade Organization (WTO) was entered into force.  The 110 nation ratification threshold for triggering the Trade Facilitation Agreement ("Agreement") was reached with the ratification and submission of instruments of acceptance by Rwanda, Oman, Chad and Jordan.

While this is an important milestone, the hard work of implementation is just beginning.  Developed countries have in principle agreed to implement the Agreement immediately, while developing countries have a longer timetable to implement the provisions of the Agreement. 

The following members have accepted the TFA: Hong Kong, Singapore, the United States, Mauritius, Malaysia, Japan, Australia, Botswana, Trinidad and Tobago, the Republic of Korea, Nicaragua, Niger, Belize, Switzerland, Chinese Taipei, China, Liechtenstein, Lao PDR, New Zealand, Togo, Thailand, the European Union, the former Yugoslav Republic of Macedonia, Pakistan,  Panama,  Guyana, Cote d'Ivoire, Grenada, Saint Lucia, Kenya, Myanmar, Norway, Vietnam, Brunei Darussalam, Ukraine, Zambia, Lesotho, Georgia, Seychelles, Jamaica, Mali, Cambodia, Paraguay, Turkey, Brazil, Macao China, the United Arab Emirates, Samoa, India, the Russian Federation, Montenegro, Albania, Kazakhstan, Sri Lanka, St. Kitts and Nevis, Madagascar, the Republic of Moldova, El Salvador, Honduras, Mexico, Peru, Saudi Arabia, Afghanistan, Senegal, Uruguay, Bahrain, Bangladesh, the Philippines, Iceland, Chile, Swaziland, Dominica, Mongolia, Gabon, the Kyrgyz Republic, Canada, Ghana, Mozambique, Saint Vincent & the Grenadines, Nigeria, Nepal, Rwanda, Oman, Chad and Jordan.

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BIS adds Hong Kong documentation requirements for exports/re-exports

/ Global Compliance Solutions Group LLC/

On January, 19, 2017 the Department of Commerce, Bureau of Industry and Security (BIS) published a final rule (82 FR 6216-6218) which will require, in certain cases, that documents be obtained prior to exporting to Hong Kong or re-exporting from Hong Kong (HK).  BIS issued this rule to provide more assurance that items subject to multilateral control regimes, that pass through HK, are appropriately authorized to their final destination. 

Export Administration Regulation (EAR) regulated items, controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear non-proliferation (NP column 1), or chemical and biological weapons (CB) will now be required to obtain, prior to export or re-export, a copy of a Hong Kong import license.  If a license is not required the exporter or re-exporter will be required to obtain a statement from the Hong Kong government that a license is not required.

This rule will be effective on April 19, 2017.

 

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US Treasury, State, and Commerce - Monetary Penalty Increases Last Two Years

/ Global Compliance Solutions Group LLC/

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the "Act") required federal agencies to adjust their maximum allowable civil monetary penalties ("CMPs") annually.  The initial "catch-up" adjustments occurred in 2016; and now the first annual adjustments have been finalized by the US Department of Commerce's Bureau of Industry and Security ("BIS"), the US Treasury Department's Office of Foreign Assets Control ("OFAC"), and the US Department of State's Directorate of Defense Trade Control ("DDTC").  The chart below provides a reference for the original, 2016 "catch-up", and 2017 annual adjustment penalty amounts. 

Employers can use FBI "Rap Back" service for real-time background updates

/ Global Compliance Solutions Group LLC/

For years, authorized entities have collected and submitted civil fingerprints to the FBI for criminal background checks for noncriminal purposes.  For various reasons, most of the submitted civil fingerprints were not retained.  However, the Next Generation Identification (NGI) system will now retain all civil fingerprints.  The retention of all civil fingerprints now provides for the feasibility of the Rap Back Service (RBS).

"Employers enrolled in federal and state Rap Back programs receive ongoing, real-time notifications and updates about their employees' run-ins with law enforcement", according to a report by the The Intercept, by Ava Kofman. 

For the RBS, the FBI will retain the prints it collects on behalf of companies so they are able to notify employers about their employee's future encounters with law enforcement.

The Rap Back program is targeted for individuals in "positions of trust", but there is no formal limit on the population of individuals that can be enrolled in the service.     

The first step in using the RBS is an initial determination of suitability.  Following the initial background check, a subscription to the service may be created.  Employers may even purchase a lifetime subscription for $13 per person.

Several organizations have voiced civil liberty concerns, with the FBI retaining this type of data.  Jay Stanley, with the American Civil Liberties Union (ACLU), said "With the Construction of such a powerful surveillance tool, and all the potential for abuse that it brings, comes the need for checks and balances of commensurate strength.  Yet the FBI appears to be moving in exactly the opposite direction, seeking to exempt itself even from the limited privacy protections that so far exist in law."  

Key Link(s):

SEC Acting Chairman Issues Statement on Conflict Minerals Rule

/ Global Compliance Solutions Group LLC/

An April 2014 D.C. Circuit Court of Appeals decision determined that portions of the U.S. Securities and Exchange Commission ("SEC" or "Commission") Conflict Minerals Rule (the "Rule") violated the First Amendment.  Because of that decision, the Commission issued a stay on the compliance date for portions of the Rule that were found to be unconstitutional.

Since the Appeals court decision, litigation in the case has continued and the temporary transition period found within the Rule has expired.  As of January 1, 2017, all applicable issuers fall outside the terms of the transition period.  

With that as background, on January 31, acting SEC Chairman Michael S. Piwowar issued a public statement on the Rule.  In his statement, acting Chairman Piwowar announced that he has asked his staff to consider the continued appropriateness of the 2014 Commission guidance and whether any additional relief from the Rule is warranted.  

In an additional statement Chairman Piwowar discusses the negative impact the Rule has had on legitimate mining operators and questions whether or not the rule has resulted in "any reduction in the power and control of armed gangs or eased the human suffering of many innocent men, women, and children in the Congo and surrounding areas."

Chairman Piwowar is asking for public comments, over the next 45 days, on the rule and on the 2014 guidance.  Click here to access the SEC comment page.  

Key Link(s):

 

CBP delays effective date for TSCA Import Certification Process Revisions

/ Global Compliance Solution Group LLC/

The U.S. Customs and Border Protection (CBP) published a final rule (81 FR 8590), on January 27, 2017, delaying the effective date of the final rule published on December 27, 2016 (81 FR 94980-94986) which finalized revisions to the Toxic Substances Control Act (TSCA) certification process when importing bulk chemicals or when importing as part of mixtures and articles containing a chemical or mixture.

This final rule is effective January 25, 2017 and the effective date of the December final rule is now March 21, 2017.  The delay is in response to the January 20, 2017 Memorandum for the Heads of Executive Departments and Agencies from Reince Priebus, Assistant to the President and Chief of Staff.  Click here to see the memorandum. 

For more information on the specific changes finalized in the December rule, click here to read an earlier post by GCSG related to the August 29, 2016 proposed rule (81 FR 59157-59162).     

DEA delays effective date of final rule revising Import/Export Requirements

/ Global Compliance Solutions Group LLC/

The Drug Enforcement Administration (DEA) published a final rule on January 30, 2017 (81 FR 8688-8689)  which delays the effective date of their December 30, 2016 final rule (81 FR 96992-97044) that amended export/import requirements for Tableting and Encapsulating machines, Controlled Substances, and Listed Chemicals as well as domestic transactions for Listed Chemicals and Tableting and Encapsulating Machines.  

The federal register notice states the temporary delay allows "Department of Justice officials an opportunity to review any potential questions of fact, law and policy raised by this regulation, consistent with the Chief of Staff's memorandum of January 20, 2017."  Click here for the January 20, 2017 Memorandum for the Heads of Executive Departments and Agencies from Reince Priebus, Assistant to the President and Chief of Staff. 

This final rule is effective January 30, 2017 and temporarily delays the December final rule until March 21, 2017.  In addition, the required compliance date has now been moved from June 28, 2017 until July 31, 2017.

For more information on the specific changes finalized in the December rule, click here to read the earlier post by GCSG related to the proposed rule (81 FR 63575-63631). 

 

TTB Streamlines Import requirements

/ Global Compliance Solutions Group LLC/

The Alcohol and Tobacco Tax and Trade Bureau (TTB) published a final rule (81 FR 94186-94210), on December 22, 2016, that amends the import requirements for Distilled Spirits, Wine, Beer, Malt Beverages, Tobacco Products, Processed Tobacco, and Cigarette Papers and Tubes and facilitates the use of the International Trade Data System (ITDS). 

The amendments "clarify and streamline import procedures, and support the implementation of the International Trade Data System and the filing of import information electronically" and include "providing the option for importers to file import-related data electronically when filing entry or entry summary data electronically with U.S. Customs and Border Protection (CBP), as an alternative to current TTB requirements that importers submit paper documents to CBP upon importation."  

Some of the changes finalized with this rule include, but are not limited to, the following:

  • Removes the requirement that importers of alcohol beverages file a copy of their FAA Act basic permit with CBP at the port of entry when importing these products into the U.S. from the U.S. Virgin Islands (27 CFR 26.202)
  • Removes the requirements for distinctive liquor bottles to provide a photograph of the bottle to CBP upon entry (27 CFR 26.314 and 27.204)
  • Removes the requirement for certain Gin Statements of Process (27 CFR 5.51(d))
  • Adds a definition of natural wine that is applicable to all of parts 26 and 27
  • Amends 27 CFR 27.48 and 26.200 requiring importers file with CBP and/or retain certain information identifying distilled spirits, wine, and beer imported or brought into the US from the US Virgin Islands subject to tax, as well as information identifying the importer and ultimate consignee of the products
  • Removed the requirement that the importer of distilled spirits submit the certificate of effective tax rate or the standard effective tax rate approval applicable at entry or entry summary, and instead requires that the importer have the certificate in its possession at the time of filing the entry summary and make it available upon request
  • Generally provided for the transfer of tax liability for bulk imports of natural wine from the Virgin islands, to the proprietor of the bonded wine cellar or bonded brewery receiving such bulk wine or beer
  • Allows for electronic filing of the consignee permit number and other information for tax-free industrial alcohol shipments to the US from the US Virgin Islands
  • Allows for electronic filing of the permit number of government agencies importing distilled spirits for non-beverage purposes free of tax, and for other information associated with such imports
  • Removes the requirement to file a certificate with CBP at the time of entry summary for Distilled Spirits, Wine, or Beer brought into the US from the US Virgin Islands, and instead provides that a copy must be maintained as a record
  • Removes the requirement for CBP to gauge or inspect shipments of alcohol before they are released
  • Clarifies that the three year record retention requirements in parts 26 and 27 are measured from the time of release from customs custody, and require that such records be made available to TTB or CBP upon request

The rule became effective on December 31, 2016.

COSO/ACFE publish a new Fraud Risk Management Guide

/ Global Compliance Solutions Group LLC/

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the Association of Certified Fraud Examiners (ACFE) jointly published a new Fraud Risk Management Guide (FRMG) in September 2016. 

COSO/ACFE developed the guidance because they felt there was a demand for more guidance on fraud risk management.  They formed the task force to draft the guidance in January 2015 and they finished their work at the end of 2015.

The guidance is aligned with and supports the five key principles of the 2013 COSO Framework's internal control components.  These key principles include: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring Activities.  The FRMG describes five essential processes that are necessary for the effective implementation of the key principles. These processes include:

  • Establish a fraud risk governance policy
  • Assess your organizations fraud risk
  • Design and implement fraud prevention control activities
  • Establish reporting and investigation processes
  • Monitor the entire fraud risk management process

Key Link(s):

DEA publishes final rule revising Import/Export Requirements

/ Global Compliance Solutions Group LLC/

On Friday, December 30, 2016 the Drug Enforcement Administration (DEA) published a Final Rule (81 FR 96992-97044) that updates their regulations for the import and export of tableting and encapsulating machines, controlled substances, and listed chemicals.  The rule also updates their regulations related to the required reports for domestic transactions of listed chemicals, gamma-hydroxybutyric acid, and tableting and encapsulating machines.

The rule becomes effective on January 30, 2017.  Compliance with the final rule is required by June 28, 2017.

For more information on the specific changes included in this final rule, click here to read the earlier post by GCSG related to the proposed rule.  

OECD and IBA form Task Force to develop corruption guidance for lawyers

/ Global Compliance Solutions Group LLC/

The Organisation for Economic Co-operation and Development (OECD) and the International Bar Association (IBA) will form a Task Force to develop conduct standards and guidance for lawyers involved in international commercial structures and recommendations for governments.  The Task Force will be comprised of lawyers and policy leaders with experience in professional ethics, taxes, anti-money laundering, anti-corruption, financial services, trade and government affairs. 

When the International Consortium of Investigative Journalists (ICIJ) published the “Panama Papers” on May 9, 2016 it exposed a landscape with potential land mines for lawyers to unknowingly assist their clients in concealing assets or in laundering money.

The Financial Action Task Force (FATF) has published international standards for conducting due diligence on customers and identifying beneficial owners.  However, it’s become obvious these standards are not sufficient alone.  Underlying this issue is the professional obligation lawyers have to maintain attorney-client privilege.

In a December 14, 2016 OECD news release IBA President David W Rivkin, said the following: “It is undeniable that lawyers must play a central role in complex offshore financial transactions.  To ensure that they do not unwittingly facilitate economic crime, it is imperative that lawyers ask the right questions of their clients, vet them sufficiently, understand who are to be the ultimate beneficiaries of their client’s actions, and have an understanding of sovereign laws.  In practice, inevitably complications arise. For example, what are a law firm’s obligations when conflicting sovereign laws apply in cross-border transactions? Recent events have shown that existing international and professional standards may not provide sufficiently clear guidance to lawyers who handle such transactions. Recent actions also present the danger that in their anti-corruption activities, governments may ignore the need for lawyers to advise their clients in confidence. For this reason, the IBA has partnered with the foremost inter-governmental organization analysing and promoting economic policies, the OECD, to create appropriate standards while, at the same time, respect the fundamental rules applicable to the profession that are a key element of the rule of law. Each organization will bring its relevant expertise to the project.”  

Some of the questions the Task Force will consider, per the OECD news release, include the following:

  • What is the legal profession’s role in combatting corruption, tax evasion money-laundering and terrorism financing taking into account relevant international standards professional duties of lawyers and the role that such duties play in preserving the rule of law?

  • What steps, if any, should lawyers take in the event that acts or transactions previously legal become illegal as a result of a change of law?

  • What should be the result when – notwithstanding the best efforts from the law firm – the client engages in activities that are legal in one jurisdiction but illegal in another?

  • What use, if any, may be made of illegally garnered information and what liability do lawyers have for inadvertent breach of client confidentiality?

  • What steps should governments take to provide transparency of such transactions while recognizing legitimate attorney-client privilege and professional secrecy?

  

OECD issues guidance designed to reduce corruption in the aid sector

/ Global Compliance Solutions Group LLC/

On December 9, 2016 the Organisation for Economic Co-operation and Development (OECD) issued guidance intended to improve control systems for avoiding and responding to corruption in the management and delivery of aid. 

The guidance is designed to implement more checks and balances in work processes of international development agencies and private firms.  The recommendations apply to the 41 countries party to the OECD Anti-Bribery Convention and the 30 members of the OECD Development Assistance Committee (DAC). 

The report recommendations include implementing the system of controls (as appropriate) noted below:

  • Code of Conduct
  • Ethics or anti-corruption assistance/advisory services
  • Training and awareness on anti-corruption
  • High level of auditing and internal investigation
  • Active and systematic assessment and management of corruption risks
  • Measures to prevent and detect corruption enshrined in contracts
  • Sanctioning regime
  • Joint responses to corruption
  • Taking into consideration the risks posed by the environment of operations

You can access the full report here: 

Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption 2016

DEA Proposes to designate Alpha-Phenylacetoacetonitrile as a List I Precursor Chemical

/ Global Compliance Solutions Group LLC/

On Monday, December 12, 2016 the Drug Enforcement Administration (DEA) published a proposed rule (81 FR 89402-89407) which would designate the chemical Alpha-Phenylacetoacetonitrile (APAAN) and its salts, optical isomers, and salts of optical isomers, as a List I Chemical.  APAAN can be used in the illicit manufacture of phenylacetone, methamphetamine, and amphetamine.  The DEA did not propose a regulatory threshold for APAAN, so all transactions of APAAN would be regulated.

Designation as a List I Chemical will require manufacturers, importers, exporters, and distributors of APAAN to obtain a registration as well as comply with all applicable security, know-your-customer, import, export, recordkeeping, and reporting requirements associated with a List I Chemical. 

APAAN also goes by: 1-cyano-1-phenylpropan-2-one; 2-phenylacetoacetonitrile, 2-acetyl-2-phenylacetonitrile; alpha-acetyl-benzene acetonitrile; phenyl aceto-acetonitrile; [alpha] - acetylphenylacetonitrile; and 3-oxo-2-phenylbutanenitrile and it's CAS Number is 4468-48-8.

If you are a manufacturer, importer, exporter, or distributor of APAAN and would like more information on how this may impact your operations, please contact GCSG here.   

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