OECD releases guidance on the spontaneous exchange by no or only nominal tax jurisdictions

As part of BEPS Action 5 to curb harmful tax practices, jurisdictions may only maintain preferential regimes if certain "substantial activities" requirements are met. In order to ensure a level playing field,  these requirements must also apply to jurisdictions with zero or only nominal tax rates. As a result, the Inclusive Framework on BEPS decided in November 2018 to resume the application of the substantial activities requirement for no or only nominal tax jurisdictions. This will ensure that substantial activities must be performed in respect of the same types of mobile business activities, regardless of whether they take place in a preferential regime or in a no or only nominal tax jurisdiction.

Against that background, the new substantial activities standard for no or only nominal tax jurisdiction, requires them to spontaneously exchange information on the activities of certain resident entities with the jurisdiction(s) in which the immediate parent, the ultimate parent and/or the beneficial owners are resident. This information will allow the tax authorities of these jurisdictions to assess the substance and the activities of the entities resident in no or only nominal tax jurisdictions.

In order to ensure that these spontaneous exchanges take place in a coordinated and efficient manner, the guidance released today sets out the practical modalities regarding the exchange of information requirements of the Standard.

It contains guidance on the timelines for the exchanges, the international legal framework and clarifications on the key definitions in order to make sure that jurisdictions receive coherent and reliable information on the activities of the entities in no or only nominal tax jurisdictions and their owners.

It is expected that exchanges pursuant to the standard will commence in 2020.

The guidance also contains a standardised IT-format for the spontaneous exchanges, the NTJ XML Schema and the related user guide.

FATF: Best Practices on Beneficial Ownership for Legal Persons

Anonymous shell companies are one of the most widely used methods for laundering the proceeds of crime and corruption.  New FATF Best Practices help countries get rid of the cloak of secrecy concerning the ultimate owner of a company, foundation, association or any other legal person, and prevent their misuse for crime and terrorism.

The Financial Action Task Force (FATF) is the global standard-setter for measures to fight money laundering and terrorist financing.  In 2003, the FATF became the first international body to set global standards on beneficial ownership. It required countries to ensure that their authorities could obtain up-to-date and accurate information about the person(s) behind companies and foundations and other legal persons.  The FATF further strengthened and clarified its beneficial ownership requirements in 2012.

Nevertheless, the assessments of countries actions’ in this area since then show that many countries still find it challenging to ensure transparency of ownership of legal persons. Many are not able to effectively prevent criminals and terrorists from hiding their identity and illegal activities behind the façade of seemingly legitimate activity.

The FATF has finalised best practices with examples from across the global network of FATF and FATF-Style regional bodies' members, which will help countries implement the FATF’s requirements.  The report highlights that jurisdictions using a multi-pronged approach with several sources of information are often more effective in preventing the misuse of legal persons for criminal purposes. 

The report identifies the most common challenges that countries face in ensuring that the beneficial owner(s) of legal persons is identified, and suggests key features of an effective system.

The paper also suggests options for jurisdictions to obtain beneficial ownership information of overseas entities.

Raconteur: Fighting Fraud 2019

Insurance fraud in the UK is on the rise, in 2018 alone UK insurance fraud cases reached a combined value of £17 million, almost £5m more from 2017. The Fighting Fraud special report explores the cost of fraud for various global industries, Brexit causing UK fraud concerns to rise, and the dark side of medical image manipulation. It examines the importance to educate and caution younger generations on financial risks with online data sharing and emerging technologies that help to combat the rise in cybercrime. Finally, it covers the real cost of cybercrime through an infographic looking at what companies stand to lose with poor cybersecurity.

Nespresso Launches its First-ever Cafecito de Puerto Rico Coffee and Reaffirms its Commitment to Reviving the Island's Coffee Sector

Coffee has been a part of Puerto Rico’s rich culture and heritage for generations, but in 2017, hurricanes Maria and Irma destroyed more than 80 percent of the island’s coffee harvest and trees. Working alongside the Hispanic Federation, TechnoServe, and others, Nespresso is helping coffee farmers and communities replant their land, reclaim their futures and restore Puerto Rico’s incredible coffee industry.

Our efforts in Puerto Rico are part of the Nespresso REVIVING ORIGINS program, which helps revitalize coffee production in farming regions that are under threat due to political conflict, economic hardship or environmental disasters.

Zesty and intense, Cafecito de Puerto Rico is a limited edition coffee that highlights the natural earthiness of Puerto Rico's coffee beans. Perfect on its own, Cafecito de Puerto Rico also mixes perfectly with cream and brown sugar for a "Café Cortadito," a favorite of locals in the city of San Juan.

Reviving Origins by Nespresso - Puerto Rico

"Nespresso has a long legacy of supporting coffee growing regions and communities around the world. We established our Reviving Origins initiative to help farmers revive their coffee farms in areas where production has been negatively impacted or completely destroyed by natural disasters or other adversities," said Guillaume Le Cunff, President and CEO of Nespresso USA. "Coffee is vital to Puerto Rico's rich and vibrant culture and economy. By leveraging the Hispanic Federation's deep understanding of the needs on the island, we can support farmers' livelihoods and foster economic opportunity while offering U.S. customers a truly unique coffee experience."

In October 2018, working alongside the Hispanic Federation, global non-profit TechnoServe, and other organizations, Nespresso committed $1 million as part of a three-year initiative to help revitalize Puerto Rico's coffee industry. The effort plans to reach 1,500 farmers in Puerto Rico through on-the-ground training and mentoring in agronomic and business skills that will help farmers improve the quality and quantity of their crop yields and increase their incomes.

Nespresso Ambassador George Clooney and acclaimed playwright and actor, and proud Puerto Rican, Lin-Manuel Miranda joined forces with Nespresso and the Hispanic Federation to champion the importance of coffee farming in Puerto Rico and spotlight the transformative power coffee can have on farmer livelihoods, communities, and the island's revitalization efforts.

"Puerto Rico still needs our help, and it will take a tremendous effort from both private and public organizations to ensure efforts on the ground have a meaningful and lasting impact," said José Calderón, President of the Hispanic Federation. "We're pleased with the progress we're making, but it is only the beginning. With the help of Nespresso and its consumers, we're optimistic about the future of coffee on the island."

Contributions to the Hispanic Federation will support the organization's efforts with World Coffee Research and Puerto Rico Coffee Roasters to plant 2.25 million new coffee trees in Puerto Rico. In addition to funding the initial revitalization initiative, Nespresso has committed 50,000 trees to this effort. Starting in November, Nespresso consumers can further support these efforts by simply recycling their capsules using a limited edition recycling bag. Every Puerto Rico recycling bag represents one new coffee tree that will be planted on the island. To celebrate coffee, culture and art in Puerto Rico, the bag features original artwork, titled Inspiration, by Puerto Rican artist Gerardo Cloquell.

Mauritius - Kenya: Expansion of the Double Taxation Avoidance Agreement (DTAA) network

A Protocol amending the Double Taxation Avoidance Agreement (DTAA) network finalised by Mauritius and Kenya on 10 April 2019, was signed on Wednesday 16 October 2019, in Washington, by the Financial Secretary of the Ministry of Finance and Economic Development, Mr Dharam Dev Manraj. The latter is presently attending the IMF/World Bank meetings. Discussions by technical teams of both parties were successfully concluded in September.

The DTAA will eliminate double taxation and provide greater tax certainty for Mauritian businessmen.  It will make clear the taxing rights of Mauritius and Kenya on all forms of income arising from cross-border economic activities between the two countries.  Mauritian businessmen and investors looking for opportunities in Kenya will benefit from this Agreement as will the Kenyan businessmen and investors looking for opportunities in Mauritius.

The Agreement aims at encouraging greater cross-border investment flows between the two countries. The DTAA will ensure that income derived by investors do not suffer double taxation, and will provide greater tax certainty for businessmen of both countries as it makes clear the taxing rights of Mauritius and Kenya on all forms of income arising from cross-border economic activities.

Moreover, it will enable investors to enjoy more favourable tax rates than what is applied under the domestic law.  The Mauritius-Kenya DTAA will also bring the competitiveness of Kenyan companies at par with other African countries already having a DTAA with Mauritius.

In addition, the Mauritius-Kenya DTAA will offer Kenyan companies with fiscal certainty in their international business operations involving Mauritius. As such, Mauritian businessmen and investors looking for opportunities in Kenya will benefit from this Agreement as will the Kenyan businessmen and investors looking for opportunities in Mauritius.

The DTAA will also provide Mauritius-Kenya tax authorities an effective mechanism to fight tax evasion and other malpractices.

Raconteur: Cloud for Business 2019

Adopting cloud technology can transform your business, but finding the best strategy is not always easy. The Cloud for Business special report explores various cloud business models, what to look for when deciding on a cloud service beyond initial cost, and five ways to make the most of a multi-cloud approach. It also examines overcoming your data quality issues to become more data enabled and the impact of cloud technologies on employee development, the workforce, and overall business performance. Also featured is an infographic showing how different companies are approaching cloud deployment.

Raconteur: Combating Cancer 2019

In the UK, 340 people are diagnosed with cancer every day so what is being done to combat the disease? The Combating Cancer special report explores pilot assessment centres for patients who present inconclusive symptoms and how immunotherapy advancements are giving patients a new lease on life. It covers dealing with cancer in the workplace, using proton beam therapy for hard-to-treat cancers, and the use of art to help cancer patients in hospitals. Also featured is an infographic showing the rising global rates of obesity and cancer.

Raconteur: Legal Innovation 2019

Can machines reach more trusted verdicts than juries? The Legal Innovation special report covers the debate for and against the jury system, how robo-mediators might become the norm to help solve common legal problems and co-parenting issues, and the changing day-to-day lives of junior lawyers as automation becomes implemented in law firms. It explores the complicated patenting process with the cross-pollination of ideas and technologies in the autonomous vehicles market. Finally, it covers how in-house legal departments are becoming valued decision-making partners within large enterprises.

Deeptrace: Mapping the Deepfake Landscape

The rise of synthetic media and deepfakes is forcing us towards an important and unsettling realization: our historical belief that video and audio are reliable records of reality is no longer tenable.

I choose the word “historical” as this belief is a coincidence of how technology has evolved. Still today, we trust a phone call from a friend or a video clip featuring a known politician, simply based on the recognition of their voices and faces. Previously, no commonly available technology could have synthetically created this media with comparable realism, so we treated it as authentic by definition. With the development of synthetic media and deepfakes, this is no longer the case. Every digital communication channel our society is built upon, whether that be audio, video, or even text, is at risk of being subverted.

Since its foundation in 2018, Deeptrace has been dedicated to researching deepfakes’ evolving capabilities and threats, providing crucial intelligence for enhancing our detection technology. In this report we share the insights f rom our most comprehensive mapping of the deepfake landscape to date, revealing deepfakes’ real-world impact. In doing so, we provide an expert overview of the current state of deepfakes, cutting through some of the hyperbole surrounding the topic. The findings we present here are grounded in independently sourced data, accompanied by insights f rom leading experts in this area.

Our research revealed that the deepfake phenomenon is growing rapidly online, with the number of deepfake videos almost doubling over the last seven months to 14,678. This increase is supported by the growing commodification of tools and services that lower the barrier for non-experts to create deepfakes. Perhaps unsurprisingly, we observed a significant contribution to the creation and use of synthetic media tools from web users in China and South Korea, despite the totality of our sources coming from the English-speaking Internet.

Another key trend we identified is the prominence of non-consensual deepfake pornography, which accounted for 96% of the total deepfake videos online. We also found that the top four websites dedicated to deepfake pornography received more than 134 million views on videos targeting hundreds of female celebrities worldwide. This significant viewership demonstrates a market for websites creating and hosting deepfake pornography, a trend that will continue to grow unless decisive action is taken.

Deepfakes are also making a significant impact on the political sphere. Two landmark cases f rom Gabon and Malaysia that received minimal Western media coverage saw deepfakes linked to an alleged government cover-up and a political smear campaign. One of these cases was related to an attempted military coup, while the other continues to threaten a high- profile politician with imprisonment. Seen together, these examples are possibly the most powerful indications of how deepfakes are already destabilizing political processes. Without defensive countermeasures, the integrity of democracies around the world are at risk.

Outside of politics, the weaponization of deepfakes and synthetic media is influencing the cybersecurity landscape, enhancing traditional cyber threats and enabling entirely new attack vectors. Notably, 2019 saw reports of cases where synthetic voice audio and images of non-existent, synthetic people were used to enhance social engineering against businesses and governments.

Deepfakes are here to stay, and their impact is already being felt on a global scale. We hope this report stimulates further discussion on the topic, and emphasizes the importance of developing a range of countermeasures to protect individuals and organizations from the harmful applications of deepfakes.

Giorgio Patrini

Founder, CEO, and Chief Scientist

EU list of non-cooperative jurisdictions for tax purposes - Annex II Update: Mauritius

Mauritius adopted on 25 July 2019 its Finance Bill 2019 and on 16 August 2019 additional regulations that amended the legislation applicable to its Freeport zone (MU012) and Partial Exemption (MU010) regimes.The COCG meeting of 13 September 2019 examined these amendments and concluded that Mauritius had met its commitment to address the deficiencies identified in these two regimes: whilst the Freeport zone regime is no longer preferential, substance requirements have been introduced in both regimes and the issue of lack of anti-abuse rules has been addressed by the introduction of CFC rules broadly aligned with those of EU's anti tax avoidance directive (ATAD 1). As a result, the COCG concluded that Mauritius should therefore be removed from section 2.1 of Annex II.

ESAs highlight money laundering and terrorist financing risks in the EU financial sector

The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) published today their second joint Opinion on the risks of money laundering (ML) and terrorist financing (TF) affecting the European Union's (EU) financial sector. Drawing on data and information provided by national anti-money laundering (AML) and countering the financing of terrorism (CFT) competent authorities (CAs), the ESAs found that the monitoring of transactions and suspicious transactions reporting still raise concerns, particularly in sectors where a financial institution's business model is based on frequent transactions. This Opinion contributes to strengthening the EU's AML and CFT efforts.

The ESAs are concerned about weaknesses in the control frameworks put in place by financial institutions, particularly for transaction monitoring and suspicious transactions reporting, in sectors with high volumes of transactions.  Equally, it appears that the development of adequate business-wide and customer risk assessments is still a challenge for financial institutions across different sectors and is an areas that would benefit from more guidance from CAs.

Furthermore, in addition to divergences in the national transposition of the Fourth Anti-Money Laundering Directive (AMLD4), as identified in the first Joint Opinion published in 2017, today's Opinion identifies divergences between certain provisions in the AMLD4 and other EU legal acts, particularly those related to authorisations, fitness and propriety and assessments of qualifying holdings. Some of these concerns have already been addressed through recent revisions in legal frameworks like the Capital Requirements Directive (CRDV).

The ESAs acknowledge that the use of new technologies may offer opportunities to better fight financial crime, however, this Opinion also confirms that the increasing use of new technologies by credit and financial institutions may give rise to ML/TF risks if vulnerabilities are not understood and mitigated. Equally, the rapid spread of virtual currencies is also an area of growing concern for the ESAs, as they often give rise to heightened ML/TF risks due to the absence of a common regulatory regime and the anonymity associated with them. 

To tackle these risks and concerns effectively, the ESAs consider that CAs  must play a more active role and enhance their engagement with the private sector to develop a better understanding of new technologies, products and services available to credit and financial institutions. CAs should also consider whether they have a sufficient understanding of risks and controls in those sectors where they have carried out only limited assessments and may need to review their supervisory approach.

Smash and Grab – The UK’s Money Laundering Machine

In 2017, Bellingcat and Transparency International UK published their joint report, “Offshore in the UK”, describing the phenomenon of Scottish Limited Partnerships (“SLPs”) and their use as a mechanism in global money laundering scandals and a range of illicit activities. Since then, SLPs have continued to be implicated in further scandals, perhaps most notably the Azerbaijani Laundromat, a scheme where $2.9 billion was laundered through UK companies.