Loyens & Loeff N.V has published the 13th edition of its ‘Holding Regimes 2018 – Comparison of Selected Countries’. Especially since « international taxation is developing at an unprecedented pace. » They have focused, among other countries, on Mauritius in this issue, and Mauritian law firm BLC Robert & Associates has contributed in terms of information
27 March 2018
FSC issues Public Notice – Suspension of the Investment Banking Licence held by Alvaro Sobrinho Africa Ltd
Notice is hereby given that in accordance with section 27(7) of the Financial Services Act 2007 (the “FSA”), the Investment Banking Licence held by Alvaro Sobrinho Africa Ltd, having its registered address at 1st Floor, Maeva Tower, Corner Silicon and Bank Streets, Cybercity, Ebene has been suspended with effect from 27 March 2018.
In accordance with section 27(5) of the FSA, Alvaro Sobrinho Africa Ltd shall cease to carry out the activity authorized under its licence but shall remain subject to the obligations of a licensee and to the directions of the Financial Services Commission, Mauritius until the suspension of the licence is cancelled.
Financial Services Commission
27 March 2018
26 March 2018
Foreign Direct Investment in India and Role of Tax Havens
Governments across the world are trying to attract Foreign Direct Investment (FDI), as a policy tool to promote growth, employment, etc. India has also adopted policies for promoting FDI and has seen significant increase in FDI in the decade of 2000 and onwards. In this context, the paper looks at the FDI flows to India between 2004-14. It analyses where the FDI is coming from, especially countries who are regarded as tax havens such as Mauritius and Singapore, and tries to explain the reasons behind it.
The paper makes use of a unique dataset which identifies the ultimate parent/controlling entity of the individual FDI inflows, and thus able to identify which FDI inflow is coming directly from the home country of investor and which are routed through the other country. To find the reasons behind the routing of FDI through a third country, it analyses the secrecy aspect as well as the tax agreement of that country with India to find the linkages between secrecy, tax agreements and routing of FDI to India
World Bank - Mauritius: Addressing Inequality through More Equitable Labor Markets
Mauritius is often cited as an African success story, given the last decade was characterized by substantial economic growth. However, the same decade was also marked by limited shared prosperity and increased inequality. According to the newly released World Bank report, the gap between the incomes of the poorest and the richest 10 percent of households increased by 37 percent from 2001 to 2015.
Titled Mauritius: Addressing Inequality through More Equitable Labor Markets, the report looks into the driving forces behind the growing income inequality and identifies policy levers that could mitigate and, in the long run, possibly reverse the upward trends, consolidate recent progress, and ensure Mauritius enters a sustainable track toward high-income-country status.
While the government’s effort to redistribute the benefits of growth through the social protection system helped offset the sharp increase in inequality in household labor income, more needs to be done. The report indicates that the single most important contributor behind this trend was the inequality of individual earnings.
“The rapid growth in wage inequality can be attributed to the skills shortage created by structural changes that occurred in Mauritius over the last decade,” said Marco Ranzani, Economist, World Bank Poverty Global Practice. “The economy experienced a progressive shift from traditional and low-skills sectors to services, notably professional, real estate, and financial services. This transformation generated a considerable increase in the demand for skilled workers that was not matched by an equally rapid increase in the supply of skilled workers, notwithstanding the significant improvements in educational attainments of the Mauritian population.”
In addition to market forces, the complex system of Remuneration Orders contributed moderately to the rise in wage inequality. Remuneration Orders are directives from the National Remuneration Board that set minimum wage rates and working conditions for private sector employees.
Another finding points out that Mauritian women are still substantially disadvantaged in terms of access to the labor market. Although women’s labor force participation increased steadily over the last decade and reached 57 percent in 2015, the gender gap is still large at a staggering 32 percentage points. Additionally, women in the private sector are paid on average 30 percent less per hour than men.
Finally, in addition to the skills shortage, the Mauritian labor market is increasingly characterized by the education mismatch, particularly among youth, and by unemployment among highly educated youth. The education mismatch measures to what extent the educational level of workers does not match the educational level required in the jobs they perform.
22 March 2018
Four Individuals Charged with Conspiring to Defraud the United States by Failing to Comply with Foreign Account Tax Compliance Act
A grand jury in Brooklyn has returned a five-count superseding indictment charging Panayiotis Kyriacou, Arvinsingh Canaye, Adrian Baron, and Linda Bullock with conspiracies to defraud the United States by obstructing the functions of the Internal Revenue Service in its administration of the Foreign Account Tax Compliance Act (“FATCA”). FATCA is a federal law that requires foreign financial institutions to identify their U.S. customers and report information (“FATCA Information”) about financial accounts held by U.S. taxpayers either directly or through a foreign entity. FATCA’s primary aim is to prevent U.S. taxpayers from using foreign accounts to facilitate the commission of federal tax offenses.
Last month, a grand jury in Brooklyn charged Kyriacou, Canaye, Baron, Bullock, and others with conspiracy to commit securities fraud and money laundering conspiracy.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Richard E. Zuckerman, Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the new charges.
“As alleged in the superseding indictment, Kyriacou, Canaye, Baron, and Bullock agreed to defraud the United States by opening foreign bank and brokerage accounts without collecting FATCA information to report to the IRS,” stated United States Attorney Donoghue. “The charges announced today reflect the commitment of this Office and our law enforcement partners to combat tax evasion by identifying fraudulent offshore safe havens that facilitate hiding financial assets from the IRS and to prosecute those individuals who violate U.S. tax laws.”
Mr. Donoghue thanked the U.S. Securities and Exchange Commission (SEC), both the New York Regional Office and the Washington, D.C. Office, the City of London Police, the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation.
“The Justice Department and the Internal Revenue Service are committed to investigating and prosecuting those who promote and facilitate the use of offshore bank accounts to evade U.S. tax,” said Principal Deputy Assistant Attorney General Zuckerman. “We will continue to pursue those around the globe who seek to violate the Foreign Account Tax Compliance Act and to help U.S. taxpayers conceal such accounts from the Treasury Department and the IRS.”
“Government fraud, in all its many forms, places ethical U.S. taxpayers at a significant disadvantage,” stated FBI Assistant Director-in-Charge Sweeney. “Those charged allegedly thought they could bypass federal laws in order to benefit and enrich themselves. Today, they are being held accountable.”
“Devising schemes to evade the reporting requirements of the Foreign Account Tax Compliance Act is a serious violation of the trust between registered foreign financial institutions and the Internal Revenue Service,” stated IRS-CI Special Agent-in-Charge Robnett. “Criminal Investigation and Large Business & International will continue monitoring compliance with FATCA and will seek prosecution for any registered individuals or entities suspected of willfully aiding U.S. taxpayers with evading reporting requirements.”
The Beaufort Scheme
As alleged in the superseding indictment, between August 2016 and February 2018, Kyriacou, an investment manager at Beaufort Securities, and Canaye, a general manager at Beaufort Management, together with others, conspired to defraud the United States by failing to comply with FATCA. Specifically, in the fall of 2016, an Undercover Agent contacted Kyriacou and stated that he was a U.S. citizen interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals. In furtherance of the stock manipulation scheme, Kyriacou and Beaufort Securities opened six brokerage accounts for the Undercover Agent. Notwithstanding that a U.S. citizen would be the beneficial owner of each of the accounts, at no time did Kyriacou or Beaufort Securities request FATCA Information from the Undercover Agent.
In July 2017, Kyriacou introduced the Undercover Agent to Canaye and advised that Canaye could assist with the Undercover Agent’s schemes. After meeting with the Undercover Agent and discussing the stock manipulation scheme, in January 2018, Canaye and Beaufort Management opened six global business corporations for the Undercover Agent. The Undercover Agent’s name did not appear on any of the account opening documents.
The Loyal Scheme
In June 2017, the Undercover Agent met with Baron, Loyal Bank’s Chief Business Officer. During the meeting, the Undercover Agent explained that he was a U.S. citizen and was involved in stock manipulation schemes. The Undercover Agent further explained that he was interested in opening multiple corporate bank accounts at Loyal Bank. In July 2017, the Undercover Agent met with Baron and Bullock, Loyal Bank’s Chief Executive Officer. During the meeting, the Undercover Agent described how his stock manipulation deals operated, including the need to circumvent the IRS’s reporting requirements under FATCA. In July and August 2017, Loyal Bank opened multiple bank accounts for the Undercover Agent. At no time did Loyal Bank request or collect FATCA Information from the Undercover Agent.
The charges in the superseding indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis, Michael T. Keilty and David Gopstein are in charge of the prosecution. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.
The Defendants:
PANAYIOTIS KYRIACOU, also known as “Peter Kyriacou”
Age: 26
Residence: London, England
ARVINSIGH CANAYE, also known as “Vinesh Canaye”
Age: 30
Residence: Mauritius
ADRIAN BARON
Age: 63
Residence: Budapest, Hungary
LINDA BULLOCK
Age: 57
Residence: St. Vincent/Grenadines
E.D.N.Y. Docket No. 18-CR-102 (S-1) (KAM)
Attachment(s):
21 March 2018
Forrester: Blockchain Will Transform And Radically Improve Fraud Management And Anti-Money Laundering
Financial institutions (FIs) find it increasingly difficult to meet tough new anti-money laundering (AML) and enterprise fraud management (EFM) requirements while also maintaining their edge to win, serve, and retain customers. This report presents a blueprint on how security and risk (S&R) pros can use blockchain, as it matures into a technology and process backbone, to re-architect and augment their AML and EFM systems.
Trouble in Paradise As Mauritius Tackles Corruption Scandal
The island of Mauritius seems to have it all. Pristine beaches, sunshine in abundance, and the best governance in Africa. That’s according to the latest iteration of the Ibrahim Index of African Governance, which once again ranks Mauritius as the best governed country on the continent. It boasts the top scores in the categories of safety and rule of law, sustainable economic opportunity, and human development; and the second-best score in the participation and human rights category. But a major corruption scandal is putting a dent in Mauritius’ picture-perfect image. It has forced the president – Africa’s only female head of state – to resign just two years into her term of office.
20 March 2018
Mauritius: Promoting Mauritius International Financial Centre in the Gulf
A delegation led by the Minister of Financial Services and Good Governance, Mr. D. Sesungkur, is currently on a financial services promotion mission in the Gulf region. The main objective is to increase visibility of the Mauritius International Financial Centre (IFC) in the key Gulf markets, including Dubai, Abu Dhabi and Qatar.
The mission, from 18 to 23 March, is organised at the initiative of the Ministry of Financial Services and Good Governance in collaboration with the Economic Development Board (EDB). The delegation includes the Permanent Secretary of the Ministry, the Head of the Financial Services Office of the EDB as well as representatives of private sector operators, management companies and banks.
The first leg of the mission comprised a Business Forum in the Dubai World Trade Centre. It was attended by more than 60 Dubai-based financial services professionals, including renowned tax advisors, wealth and asset managers, law practitioners, accountants, as well as decision makers in key multinational corporations.
During the Forum, there was an address by Minister Sesungkur and a technical presentation by the Head of the Financial Services Office of the EDB, was to showcase the attributes, key products and service offering of the Mauritius IFC.
The participants in the Business Forum demonstrated a keen interest for using the Mauritius IFC for UAE-based investments in emerging markets, including Africa, and vice-versa.
The mission also consisted of several highly targeted one to one meetings including a prominent Pan-African investment bank. The latter has signified its intention to set up its base and manage its operations in Mauritius. Discussions were also held with the Chief Executive and top management of a key Dubai-based international stock exchange for future collaboration with the Mauritius jurisdiction.
In the same context a field visit was held at the Dubai Campus of the Emirates Institute for Banking and Financial Services, a state-of-the art facility which trains more than 24,000 financial services professionals every year.
Other avenues which have been explored include the access by Mauritius to the e-learning facilities of the Institute, the development of an Islamic finance curriculum for Mauritian and African professionals, and exchange programs for concerned students. A Memorandum of Understanding will be signed in this respect in the near future.
Microsoft Cloud Society - Mauritius Cloud Camp
Here’s your chance to win an all-expenses-paid trip to the exotic shores of Mauritius to attend an exclusive cloud camp where you can:
- Get hands-on experience on disruptive technologies like IoT, Blockchain and AI.
- Participate in fun team building activities and interact with peers across the region.
14 March 2018
JTC Lists On Main Market Of London Stock Exchange
Having announced our intention to undertake an initial public offering (IPO) last week and having raised a significant £243.8 million in institutional investment prior to listing, JTC was admitted to the LSE this morning using the ticker JTC and with a market capitalisation of £310 million.
Headquartered in Jersey, JTC has a 30-year track record in providing market-leading services for international private and institutional clients, with the firm having experienced significant growth in recent years through organic growth, mergers and acquisitions. Today, the firm has a presence in 17 different jurisdictions in Africa, Americas, Asia-Pacific, the British Isles, the Caribbean and Europe and employs more than 550 staff.
This latest milestone in JTC’s history represents a move away from being a private equity-backed company, having received investment from CBPE Capital in 2012 to enable its global expansion, to a public company. CBPE have relinquished their shares as part of the IPO.
Meanwhile, JTC’s long-standing commitment to shared ownership, where employees can hold an interest in the firm and benefit from its performance, will be maintained, with its Employee Benefit Trust and Equity for All schemes evolving in line with JTC’s new public company structure.
Highlighting that the listing will position JTC strongly for its next stage of development and provide it with a robust structure for future growth, Nigel Le Quesne, CEO of JTC, said:
“This is a fantastic opportunity for JTC. Having grown the business over the last 30 years into a leader in the administration services market for funds, corporate and private clients, this is the next logical step in our strategy and will create a long-term capital base for the business. The IPO will provide us with access to the capital markets, as we look to deliver future growth, both organically and through our targeted acquisition strategy in a sector which we view as ripe for consolidation.
“We would like to thank CBPE for their role in the development of JTC from a Channel Islands focused administrator to a global service provider with a broad client reach. They have provided invaluable support and investment which has facilitated an acceleration in JTC’s growth and success.
“Our people are at the heart of everything we do and JTC has always set itself apart through its belief in the value of true shared ownership, which has led to a very high percentage of equity ownership amongst our staff. We have a very clear and proven strategy of investing in our people to enhance the services we provide to our clients and this will remain the case in our life as a public company. We look forward to delivering value for all stakeholders in the business in the years to come.”
Mike Liston, Chairman of JTC, commented:
“As JTC’s new Chairman I aim to build on its exemplary reputation for high ethical standards, rigorous governance and respect for its clients and people. These qualities equip it well for success as a substantial Public Company, thriving on the flight to quality in the complex world of international financial services.”
Ian Moore, Partner, CBPE Capital, added:
“Back in 2012, we saw in JTC a culture that stood out from the crowd and since then we have formed a successful and special partnership. The last six years have been an exciting journey as we have supported JTC in implementing its ‘local to global’ strategy and helped it expand from a Channel Islands centric business to one that now has over 550 colleagues in 17 jurisdictions around the world. We would like to wish everyone at JTC well as the Group embarks on the next stage of its journey.”
12 March 2018
AfricaFocus: Charting Where They Hide the Money
This two-part AfricaFocus contains substantive excerpts from the Financial Secrecy Index reports. This first part excerpts overview analyses from the authors covering the global picture and the African continent. The second part provides excerpts from country reports on the United Kingdom, the United States, Kenya, Liberia, South Africa, and Mauritius.
11 March 2018
Interview: Manou Bheenick “Yes, we had political leadership of the highest order when it mattered most”
Manou Bheenick really needs no introduction. However, it is useful to point out that he has had not only a ringside seat on the economic and political stage of the country as from 1968, when he was inducted as an economist into the newly formed Economic Planning Unit, but has also been an active player in the development of the country. He transitioned from being a technician to taking up politics, besides serving as Governor of the Bank of Mauritius. His is therefore an authoritative voice, as he gives his considered views on the major events and forces which shaped the course of the country from even before independence, and outlines the decision areas that can help us get out of the quagmire that we now find ourselves in. Rightly, he stresses enlightened political leadership and policy continuity as the critical underpinning of the polity. Read on…
09 March 2018
Game over for CRS avoidance! OECD adopts tax disclosure rules for advisors
Responding to a request of the G7, today, the OECD has issued new model disclosure rules that require lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the OECD/G20 Common Reporting Standard (CRS) or prevent the identification of the beneficial owners of entities or trusts.
As the reporting and automatic exchange on offshore financial accounts pursuant to the CRS becomes a reality in over 100 jurisdictions this year, many taxpayers that held undeclared financial assets offshore have come clean to their tax authorities in recent years, which has already led to over 85 billion of additional tax revenue.
At the same time, there are still persons that, often with the help of advisors and financial intermediaries, continue to try hiding their offshore assets and fly under the radar of CRS reporting. The new rules released today target these persons and their advisers, by introducing an obligation on a wide range of intermediaries to disclose the schemes to circumvent CRS reporting to the tax authorities. The new rules also require the reporting of structures that hide beneficial owners of offshore assets, companies and trusts.
"Time is up for tax evaders and their advisors that still want to game the rules and continue to hide assets offshore", Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration said today. "With the automatic exchange of CRS information becoming a global reality this year, it is the right moment to get hold of those taxpayers and advisors that attempt to undermine the reporting on offshore assets and that try to play the new global tax transparency framework. The mandatory disclosure rules will be a powerful tool to detect taxpayers that continue to refuse to be compliant with their obligations to declare their assets and income to their tax authorities. They will also have a deterrent effect against the design, marketing and use of schemes to avoid CRS reporting or hide beneficial owners behind opaque offshore structures. This is key both for the integrity of the CRS and for making sure that taxpayers that can afford to pay advisors and to put in place complex offshore structures do not get a free ride."
These model disclosure rules will be submitted to the G7 presidency and are part of a wider strategy of the OECD to monitor and act upon tendencies in the market that try to avoid CRS reporting and hide assets offshore. As part of this work the OECD is also addressing cases of abuse of golden visas and similar schemes to circumvent CRS reporting.
OECD: Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures
This publication contains the Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures. The design of these model rules draws extensively on the best practice recommendations in the BEPS Action 12 Report while being specifically targeted at these types of arrangements and structures.
Part I gives an overview of the model rules. Part II sets out the text of the rules. Part III provides a commentary on those rules.
08 March 2018
FSB, CPMI, FATF and BCBS press release on Wolfsberg Group CBDDQ
Following the publication of the updated Wolfsberg Group Correspondent Banking Due Diligence Questionnaire (CBDDQ), The Financial Stability Board (FSB), The Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the Financial Action Task Force (FATF) have released a joint statement welcoming this development.
The four institutions have recognised the CBDDQ as being ‘one of the industry initiatives that will help to address the decline in the number of correspondent banking relationships by facilitating due diligence processes.’
The Wolfsberg Group is pleased to receive such support for the Questionnaire and the benefit that it shall bring to the industry through the promotion of standardised Correspondent Banking Due Diligence.
To view the full press release please follow the link below
Reminisces: A short take on my career with BAI [By Dawood Rawat]
I joined on the 19th January of 1970 the branch of an international insurance company then present in almost 40 countries. I did not apply for a job, but the expatriate manager meeting me only a month after they had opened, offered me a job as his assistant since he had failed to get a work permit for another foreigner. However, he insisted that I should agree to be trained as an agent and work as such for a few weeks. His point was that to understand the job, it was essential that I practiced first to enable me to learn about that position to become proficient to supervise later agents doing the job. I agreed and was confirmed, as promised, as his assistant. Unfortunately, for his family, he died in a car accident by the end of November of that year...
Moody’s cale la croissance à 3,9% en 2018 et souligne les risques liés à l’offshore
L’agence internationale de notation estime une croissance stable à 3,9% en 2018 avec, en toile de fond, une «strong growth» du tourisme et des investissements directs étrangers qui demeureront élevés malgré la renégociation du traité fiscal Inde-Maurice. C’est la conclusion à laquelle arrive Moody’s dans son Banking System Brief sur Maurice daté de ce 7 mars.
05 March 2018
Index of Economic Freedom: Mauritius maintains its first position in Sub-Saharan Africa
Mauritius has maintained its first position as a “mostly free” economy in Sub-Saharan Africa and has been ranked 21st out of 180 countries with a score of 75,1 in the 24th Index of Economic Freedom published by the Heritage Foundation. The country has recorded an increase of 0,4 points with improvements in scores for government integrity and property rights indicators.
The Heritage Foundation has rated Mauritius for its efficient and transparent regulatory environment which supports relatively broad-based economic development, and its competitive tax rates, prudent banking practices and a fairly flexible labour code which facilitates private-sector growth. According to the 2018 Index, in Sub-Saharan Africa most of the 47 graded nations are “mostly unfree”, and more than half of the world’s “repressed” economies, 12 out of 21, are in Sub-Saharan Africa.
The Index of Economic Freedom launched in 1995 studies economies throughout the world and provides in-depth analysis of each country’s political and economic developments. The Index groups the world’s countries into five regions: America, Asia-Pacific, Europe, Middle East/North Africa and Sub-Saharan Africa.
It measures economic freedom on 12 quantitative and qualitative factors, grouped into four broad categories:Rule of Law (property rights, government integrity, judicial effectiveness); Government Size (government spending, tax burden, fiscal health); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). The Index measures the scores on a scale of 100 points classified as “free” ( combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).
Among the 180 countries ranked, scores improved for 102 countries and declined for 75. According to the Index, Hong Kong and Singapore each logged increases in their Index scores, finishing first and second in the rankings for the 24th consecutive year. Three other frequent top finishers, New Zealand 3rd globally, Switzerland 4th and the United Kingdom 8th also witnessed a rise in their scores.
02 March 2018
FSC issues Press Release –Beaufort Management Services Ltd
The Financial Services Commission, Mauritius (FSC) refers to the alleged fraudulent scheme involving Beaufort Management Services Ltd (BMSL), a company holding a Management Licence.
In this respect, the FSC has, today, suspended the Management Licence held by BMSL and has appointed Mr. Georges Chung Ming Kan as Administrator in relation to the whole business.
The FSC has started an investigation and is working closely with the Federal Bureau of Investigation of the United States of America and the Financial Intelligence Unit - Mauritius in this matter.
The FSC reiterates that it will take all necessary regulatory actions against any of its licensee/approved officer/ Management Company found to be linked with any illegal, harmful and/or fraudulent practices that may cause prejudice to the good repute of Mauritius.
Financial Services Commission
02 March 2018
Six Individuals And Four Corporate Defendants Indicted In $50 Million International Securities Fraud And Money Laundering Schemes
A multi-count indictment was unsealed yesterday, in federal court in Brooklyn, against Panayiotis Kyriacou, Arvinsingh Canaye, Adrian Baron, Linda Bullock, Matthew Green, and Aristos Aristodemou; Beaufort Securities Ltd (“Beaufort Securities”), a brokerage firm located in London, United Kingdom; Beaufort Management Services Ltd (“Beaufort Management”), an off-shore management company located in Mauritius; Loyal Bank Ltd (“Loyal Bank”), an off-shore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines; and Loyal Agency and Trust Corp. (“Loyal Agency”), an off-shore management company located in Saint Vincent and the Grenadines.
The charges include conspiracy to commit securities fraud and money laundering conspiracy. Canaye was arrested yesterday and is scheduled to be arraigned this afternoon before United States Magistrate Judge Vera M. Scanlon at the federal courthouse in Brooklyn.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the charges.
“As alleged in the indictment, the defendants engaged in an elaborate multi-year scheme to defraud the investing public of millions of dollars through deceit and manipulative stock trading, and then worked to launder the fraudulent proceeds through off-shore bank accounts and the art world, including the proposed purchase of a Picasso painting,” stated United States Attorney Donoghue. “The charges announced today reflect that this Office, together with our law enforcement partners, is committed to holding accountable those who defraud investors, regardless of the complex schemes they use to hide their ill-gotten gains.” Mr. Donoghue thanked the U.S. Securities and Exchange Commission (SEC), both the New York Regional Office and the Washington, D.C. Office, the City of London Police, the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation.
“As alleged, in a series of unscrupulous and illegal trading practices, the defendants contrived a scheme to defraud investors of U.S. publicly traded companies by manipulating stock prices and masking the true ownership of their clients’ financial interests,” stated Assistant Director-in-Charge Sweeney. “In order to discreetly receive their illegal proceeds, the defendants focused their efforts on laundering the money through a variety of means, including the art world, which they believed was a market free from direct regulation. Bringing to justice securities fraudsters and money laundering facilitators who engage in these types of schemes is and will remain a priority for the FBI and our law enforcement partners worldwide.”
“Since the Foreign Account Tax Compliance Act has been enacted, the financial expertise of our criminal investigators is needed now more than ever in this global economy,” stated IRS-CI Special Agent-in-Charge Robnett. “These allegations outline an intricate scheme to obscure beneficial ownership and launder illicit proceeds. This behavior harms the financial world abroad and here at home.”
Securities Fraud and Money Laundering Scheme
As alleged in the indictment, between March 2014 and February 2018, Beaufort Securities, Beaufort Management, and managers Kyriacou and Canaye, collectively the “Beaufort Defendants,” together with their co-conspirators, engaged in a scheme to defraud investors and potential investors in various U.S. publicly traded companies by concealing the true ownership of various U.S. publicly traded companies and manipulating the price and trading volume in the stocks of those companies.
Beginning in or about October 2016, an Undercover Agent contacted Kyriacou and stated that he was interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals.
In furtherance of the scheme, the Beaufort Defendants opened brokerage accounts for their clients in the names of off-shore shell companies with nominee shareholders and directors, and then conducted manipulative trading of stocks of U.S. publicly traded companies listed on U.S. over-the-counter exchanges. Beaufort Securities facilitated at least ten “pump and dump” schemes involving U.S. publicly traded stocks, generating over $50 million in proceeds for its clients. Notably, Beaufort Securities had affirmed to the Financial Conduct Authority (“FCA”) in the United Kingdom in July 2016 that it had taken remedial measures to correct deficiencies in the firm’s financial crime controls and anti-money laundering processes.
Additionally, between January 2011 and February 2018, the Beaufort Defendants; Loyal Bank; Loyal Agency; Baron, the Chief Business Officer of Loyal Bank and a Director of Loyal Agency; and Bullock, the Chief Executive Officer of Loyal Bank and a Director of Loyal Agency, together with their co-conspirators, devised and engaged in a scheme to launder securities fraud proceeds for their clients. To facilitate this scheme, Beaufort Securities transferred funds to corporate bank accounts at Loyal Bank opened in the names of off-shore shell companies that were controlled by the bank’s clients. Loyal Bank then provided debit cards to its clients to withdraw funds from those accounts in an untraceable manner to hide the source of the money and facilitate ongoing securities fraud.
Money Laundering Through Purchase and Sale of Art
Separately, between October 2017 and February 2018, Kyriacou; Aristodemou, the uncle of Kyriacou; and Green, the owner of an art gallery in London, United Kingdom, together with their co-conspirators, agreed to launder £6.7 million, the equivalent of over $9 million dollars, which the Undercover Agent represented to be the proceeds of securities fraud. After initially proposing the use of real estate investments to launder the funds, the co-conspirators devised a scheme to “clean up the money” through the purchase and subsequent sale of art. Aristodemou described the art business as the “only market that is unregulated,” and that art was a profitable investment because of “money laundering.” The defendants proposed the Undercover Agent could purchase from Green a painting by Pablo Picasso entitled “Personnages, Painted 11 April 1965,” and provided paperwork for the painting’s purchase. The money laundering scheme was halted prior to the transfer of ownership of the painting.
The FCA also took regulatory action yesterday against Beaufort Securities and a related clearing firm, including halting all regulated activities and initiating insolvency proceedings against both firms. The SEC filed a civil complaint today against Beaufort Securities and Kyriacou
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis, Michael T. Keilty and David Gopstein are in charge of the prosecution. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.
The Defendants:
PANAYIOTIS KYRIACOU, also known as “Peter Kyriacou”
Age: 26
Residence: London, England
ARVINSINGH CANAYE, also known as “Vinesh Canaye”
Age: 30
Residence: Mauritius
ADRIAN BARON
Age: 63
Residence: Budapest, Hungary
LINDA BULLOCK
Age: 57
Residence: St. Vincent/Grenadines
ARISTOS ARISTODEMOU
Age: 49
Residence: London, England
MATTHEW GREEN
Age: 50
Residence: London, England
BEAUFORT SECURITIES LTD
London, England
BEAUFORT MANAGEMENT SERVICES LTD
Mauritius
LOYAL BANK LTD
Budapest, Hungary and St. Vincent/Grenadines
LOYAL AGENCY AND TRUST CORP.
St. Vincent/Grenadines
E.D.N.Y. Docket No. 18-CR-102 (ENV)
01 March 2018
Tax Avoidance and Evasion in Africa
Nataliya Mykhalchenko asks whether the emerging effort to curb both illicit financial flows and tax avoidance is a global fight and not just another global flight driven by certain powerful entities and interest groups trying to avoid paying tax. Given that the issue has universal significance and undermines the development of many countries in the Global South, more research (and campaigning) is needed in order to understand the nature of these initiatives and the forces behind them.
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