Syria civil war hits livestock hard

Global Meat News

Running on near-empty

As Syria’s conflict continues, its livestock sector weakens. Now facing a fifth year of civil war, livestock levels are down on even on 2014’s paltry levels, with the sector facing a shortage of fodder, veterinary vaccines and available pastureland.
According to a United Nations’ Food & Agriculture Organisation (FAO) and World Food Programme (WFP) report released in July 2015, food production in Syria "remains way below its pre-­crisis levels as the ongoing conflict continues to push more people into hunger and poverty".
The report was based on a food security assessment mission, estimating the country has lost 40% of its sheep and goats, 30% of its cattle and 50% of its poultry, compared to 2011. "We don’t have actual figures or estimates as the assessment was not as quantitative as it should be and was largely based on semi­-structured interviews, cross-­checking and informal discussions, while substantial areas were inaccessible,” said Markos Tibbo, FAO livestock officer for the Near East and North Africa. “But the situation has not improved (since 2014), it has only become worse."
The impact of the conflict on livestock varies throughout the country, depending on conflict zones and if the government is in control. In October, Syrian newspapers quoted the government’s director of agriculture for Damascus and its surrounding countryside, saying the livestock sector in his region had lost around $105m a year since 2011, with the number of sheep, cows and goats down by more than 60%.

Price 'doubles' in rebel areas  

In state­ controlled areas, the government is trying to impose price controls. London­ based Arabic daily Al Araby Al Jadeed reported in August that according to the state­-run General Organisation for Poultry (GOP), a kilo of chicken sells in government­ controlled areas for Syrian pounds SYP900 ($4.70). The price doubles in rebel­ held areas, while a kilogram of mutton sells for SYP3,800 ($20) in regime­ controlled Damascus, and SYP2,800 ($14.82) in rebel­ occupied north western Syria.
The GOP said that theft was a major problem, with up to 100,000 stolen chickens being sold every week in uncontrolled areas. High fodder, fuel and electricity prices have caused prices for chicks to double.
Livestock levels have plummeted due to the lack of fodder, available pastureland and a shortfall in imports due to the sanctions, while vaccine production has been devastated. Rebel groups have also been exporting livestock to fund militant operations, according to Al Araby Al Jadeed.

Livestock 'abandoned'

According to the FAO, Syrian wheat production in 2015, estimated at 2.445 million tonnes (t), looks set to be better than last year but is still 40% lower than in 2011, with the country facing an annual wheat deficit of 800,000t. “If you look at the sector as a whole, because of the crisis, livestock owners have moved from insecure areas, some bringing their livestock with them, others selling them or simply abandoning them,” said Tibbo. “There has been increased slaughter of female animals because of the difficultly and expensive of maintaining them, and partly because of the fear of theft.”
The lack of safe pastureland has raised the risk of disease. “This facilitates disease transmission, not only animals living in close proximity, but mixing animals from different parts of country creates a conducive environment for disease to spread,” said Tibbo. “It is really hard to get vaccines, and unless the cold chain is maintained, which is difficult in the current environment ­ the vaccines are useless.”

Copyright ­ Unless otherwise stated all contents of this web site are © 2016 ­ William Reed Business Media Ltd ­ All Rights Reserved ­ For permission to reproduce any contents of this web site, please email Robert Proctor

Refugee influx promoting commercial crime in Lebanon/Jordan

Commercial Crime International
January 2016

The conflict in Syria has seriously impacted trade and business in the Levant. The millions of Syrian refugees that have fled to neighbouring Lebanon and Jordan are putting economies under serious strain, causing the authorities to turn a blind eye to illicit trade and unregulated business. Paul Cochrane reports from Beirut and Amman.

There is no doubt that Syria’s civil war, which erupted in 2011 and is now into its fifth year, has harmed the economies of neighbours Lebanon and Jordan, increasing their exposure to commercial crime. Trade routes that had transited Syria to and from Turkey, Europe and the Gulf states have been cut off, and instability has warded off tourists, an important revenue earner for both countries.

According to the United Nations, the Syrian crisis has cost Jordan more than $5 billion in economic losses, while a World Bank report from 2013 estimated that the Lebanese economy would incur a cost of $7.5 billion by end 2014 as a result of the conflict.
Lebanon, a country of 4.5 million, has taken in over 1.5 million Syrian refugees, and Jordan, with a population of 6.6 million, has 937,830 registered refugees, according to the UN High Commissioner for Refugees (UNHCR) office. Both countries are proverbially splitting at the seams from the refugee influx, with infrastructure and government services overburdened and investors hesitant to invest with a conflict next door, which includes the notorious Islamic State.
“The crisis is hindering competitiveness, affecting productivity and not creating income for companies already going through the impact of the (global) financial crisis and the slowdown in the overall economy. For Jordan, it has also created an unexpected burden on infrastructure, which was established, hypothetically, for 5 million people, but has reached more than our estimates for 2020, or by 2030,” said Hana Uraidi, CEO of the Jordan Enterprise Development Corporation (JEDCO).

Crime circle

With 80% of Syrian refugees living outside of camps in Jordan, and there being no official camps in Lebanon at all, refugees have had to rely on aid agencies or seek employment to survive. This has driven down wages among the lower social-economic groups with, for instance, agriculture wages in Lebanon down by 50% over the past four years, according to the UN. This means that not only have some refugees been tempted to turn to crime to earn a living, but law breaking has become more attractive to agricultural workers whose pay packets have dwindled.
Both governments are restricting employment to Syrians unless they are able to get official work permits. “To have a commercial business you have to be Jordanian or have a partner, split fifty-fifty, with a minimum capital requirement. Many cannot meet that, so they set up unregistered businesses or under the name of a Jordanian, and sign side contracts,” said an Amman-based commercial lawyer that wanted anonymity.

Blind eye

The refugee influx, equivalent to around 20% or more of both countries' populations, and the lack of government support due to high debt levels, has pushed the authorities to turn a blind eye to the grey as well as black markets to keep people employed and prevent social unrest. “(Jordanian) government enforcement is on and off. They know the situation; that people need to live. They are not going after them but not making life easy at the same time. It is difficult to balance humanity with law enforcement,” added the lawyer. 

A member of Lebanon's Internal Security Force (ISF) – the country's police – said off-the-record that commercial crime and intellectual property right infringement is not a top priority in the current environment, it is security. Lebanon has to deal with a porous northern and eastern border, with Islamic State (IS) and other rebel groups on the other side, while there have been several bombings linked to Islamist militants in recent years, the latest in early November (2015) in Beirut's southern suburbs. “We are trying to prevent smuggling, of course, but security and counter-terrorism comes first,” added the ISF officer.

More smuggling

That said, crime statistics are elusive and there is no statistical proof of a major up-tick in commercial crime within Jordan and Lebanon due to the crisis, although smuggling of goods to and from Syria has certainly increased and can be demonstrated. The smuggling of tobacco in particular has risen, according to the Lebanese authorities, while there has been a number of high profile seizures of Captagon, a pharmaceutical amphetamine drug which is manufactured illegally in Lebanon and exported to Syria and the Gulf.
There has also been a rise in Syrians acquiring passports through semi-official means, with a Jordanian passport selling for up to $500,000. In Lebanon, some 600 Syrians have managed to buy Lebanese citizenship following former President Michel Sleiman's departure from office in late May 2014 – the Lebanon parliament has yet to approve a replacement head of state. This is according to a UN source involved in Syria's planned reconstruction, by paying between $70,000 and $150,000.

Such passport acquisitions by Syrians, and the international sanctions on Syria and designated individuals, has led to a spike in due diligence investigations on Lebanese, Jordanian and Syrian companies, according to a Beirut lawyer who also wanted anonymity.

He added that the Syria sanctions are a major concern for the Lebanese and Jordanian governments so that financial and commercial interests do not fall foul of international regulators.

Transport crime

Transportation through Syria is a particular challenge for Lebanese and Jordanian companies due to the rebel controlled areas demanding transit fees for safe passage. According to the lawyer, Islamic State militants are charging between $2,000 to $5,000 for a truck, depending on the cargo, to pass through their areas, even providing receipts embossed with the Islamic State's logo. Such payments are clearly a form of bribe that has to be written-off through creative book-keeping – if governments are even checking.
“If you have to pay (a non-state actor) to transport goods, that could be seen as a commercial crime, as well as being an additional cost of business. But if the state is essentially limited in its functions, how much of a priority is it to check the account books of companies?” queried Karl Lallerstedt, programme director for illicit trade and financial and economic crime, at the Switzerland -based Global Initiative against Transnational Organised Crime.
A particular issue with assessing commercial and organised crime in the Levant is that the international regulatory and policy focus has been on countering the financing of the Islamic State and helping or hindering other Syrian rebel groups. Such high profile media and regulatory attention has meant less focus on curbing other financial and commercial crimes.
“A challenge is that illicit trade and organised crime is an ongoing problem, a dripping problem so an innate challenge, as opposed to more extreme cases like the Islamic State. The underlying data is so limited, it is harder to motivate action,” unlike against the Islamic State, added Lallerstedt.

Photo by Ibrahim Owais via Wikicommons

Qatar hits the gas to ride out economic storm

Middle East Eye

Qatar is the self-touted world's top liquefied natural gas (LNG) supplier and swing producer. But low natural gas prices are changing the game, with sellers no longer able to dictate prices, while global LNG production is ramping up, making for an increasingly competitive market with much lower revenue returns.

Qatar had ridden the proverbial crest of the wave of high energy prices. It had invested tens of billions of dollars in energy infrastructure, especially in LNG, with projects coming online at an opportune time when oil was at around $100 per barrel and LNG selling for up to $13 per million British thermal units (MBTU).

Doha's returns from hydrocarbons, which account for 49 percent of its revenues and 90 percent of exports, hit an all-time high of $147.9bn in 2013, but with oil now selling for around $30 per barrel, and gas more than halved on the spot markets to $5.75 MBTU, revenues this year are forecast at just $42.9bn.

For the first time in 15 years, Qatar will run a deficit of $12.7bn, if not higher, as the budget is based on a conservative $48 per barrel of oil. “If (energy) prices keep going down, that means the deficit for Qatar will widen, and could hit $20-$25bn. The link between oil prices and LNG is direct, and the more oil prices go down, the more LNG prices drop,” said Naser Tamimi, an independent Middle East analyst.

Buyers have seized on the price slump and heightened global LNG production to renegotiate long-term contracts that had locked them into prices way above current spot prices. For Qatar, this is prompting a strategy rethink, as 70 percent of its LNG exports are under long-term contracts.

“The pressure is mounting and Qatar has read the writing on the wall. They have renegotiated with India, and I think will do so with South Korea and Japan as they can't afford to lose the Asian market, which is nearly three quarters of Qatar's LNG exports. If buyers renew (contracts) it will be on their terms, not Qatar's,” added Tamimi.

Abritration: A harbinger of things to come

In January, India's Petronet successfully renegotiated a long-term gas deal with Qatar, with prices almost halved, from $12-13 MBTU to $6-7 MBTU. Indicative of Qatar no longer being able to dictate deals, a penalty of $1.8bn that Petronet accrued for buying below the contracted amount of LNG was waived.

“It is a bit of a harbinger of things to come,” said Justin Dargin, a Middle East energy expert at Oxford University.

But this was not the first renegotiation. “In the last few years there have been ongoing discussions with European buyers that have culminated in arbitration proceedings. The new part of the story is going beyond Europe to India,” said Karim Nassif, associate director at Standard & Poor's Ratings Services in Dubai.

The India deal has set a precedent for Asia, although Qatar was already being less rigid than in the past to retain customers. With China for instance, Qatar has a 25-year LNG contract, but with consumption spiking in winter, Beijing has to go to the spot markets to meet demand. “Qatar is trying to work to its clients needs, and reconfigured shipments to send more ships to China so they wouldn't have to buy from the spots. That is interesting as it shows that Qatar's willing to go beyond the contractual straight jacket, as until 2015, they wouldn't have wanted to do that,” said Dargin.

A further sign of Qatar's willingness to strike better deals was the inking of a $16bn long-term contract with Pakistan in February. Notably, it is a take-or-pay deal, allowing Islamabad flexibility in cargo orders that can be reviewed after 10 years - a more medium-term contract than with previous Asian contracts. The pricing of arriving LNG is based on 13.37 percent of the previous three-month average price of a barrel of Brent crude oil. “Before Qatar was trying to get 16 percent,” added Dargin.

Global supply changing the game

It is not just low energy prices that are making buyers want to renegotiate. Global supply of LNG is rising with 81.6 billion cubic metres (bcm) of new LNG supply slated to come on stream this year, raising global capacity by around 20 percent, to some 469 bcm per year. The big new players are in the East as well as the US due to the “shale gas revolution”.

“We're already seeing less Qatari LNG going to Asia, and they were really affected by increased production from Papua New Guinea, Australia and Indonesia last year. That is going to increase, so Qatar will be forced to look for markets outside of Asia,” said Andy Flower, an independent gas consultant.

An issue is what markets Qatar will target. Demand for natural gas in Europe is currently flat, and despite Europeans' intentions to reduce gas supplies from Russia due to geopolitical tensions, this has been more hyperbole than reality so far.

But even if that happens other suppliers will be waiting in the wings. “Qatar is banking on European efforts to diversify away from Russian gas and potentially go into arms of Doha, but they would have to compete with US gas,” said Dargin.

Buyers, especially in Asia, are also wanting to get LNG from as close to home as possible in case of transportation disruptions, such as through the Straits of Hormuz, the top choke point for global energy supplies.

“From the Asian side even if some of the LNG exports from the US or Australia are more expensive, they need security and diversification. They don't want to rely exclusively on Qatar and the Middle East. It is happening with China, Japan and other countries. Asian demand is a huge uncertainty,” said Tamimi.

Countries are also diversifying their energy portfolios. “The issue is ultimately the balance of nuclear power, coal and gas, and with nuclear back on stream [60 power plants are under construction globally], it aggravates gas demand. We will need to watch very closely how the gas demand equation plays out as there's the expectation of an LNG glut, with an increase of a third by 2018. It is important for Qatar to figure out where there is a decline in its own end markets,” said Nassif.

Asia bites back

When prices were high, Asian states were in discussions to set up a buyers' club to rival the Gas Exporting Countries Forum (GECF), the equivalent of OPEC. That idea has been largely muted due to the lower prices. “There were informal meetings about a year ago (among Asian importers) to negotiate en bloc with exporters, as they were sick of paying top dollar on LNG pricing. This shows the push back, particularly against Qatar due to its rigid pricing,” said Dargin.

While a buyers' club has yet to materialise, change is already afoot with the launch in January of Asia LNG futures and swaps on the Singapore Exchange (SGX). “This is another nail in the coffin of both long-term contracts and a 'unique' Asian-Pacific price. The development of various Asian LNG trading hubs is a significant phenomenon,” added Dargin.

Such developments may well result in a move away from long-term contracts and, significantly, gas prices pegged to the barrel price of oil. Following Singapore's move there may be more appetite for an international pricing system to follow the Henry Hub system in the US - the price benchmark for the North American gas market - where natural gas futures are bought on the New York Mercantile Exchange (NYMEX) for delivery 18 months in the future, rather than through long-term contracts.

“An interesting game changer will be to see to what extent these buyers push for a Henry Hub based contract instead of oil based,” said Nassif.

If history is anything to go by this might well happen, as crude oil sales were based on long-term contracts until the 1973 oil crisis prompted a need for more flexibility in the system. “I'll go out on a limb and say that by 2025, the LNG market will closely mimic the oil market,” said Dargin.

Ride it out?

Despite the rising competition, Doha has a major advantage over other LNG producers. The massive LNG infrastructure that was bank rolled over the past decade is being paid off, and no major investments are planned requiring further capital expenditure. Qatar also has its own fleet of 60 LNG vessels - including 27 of the huge Q-Flex and Q-Max ships - that are able to cover the world. As such, Qatar has a good handle on the supply chain from start to finish.

“Qatar is in a strong position as production is cheap, at $1.6-$2 MBTU compared to $2.5 in the US, and $3 in Australia. The Qataris can afford to sweeten their contracts and be more flexible to keep their market share,” said Tamimi.

Photo of West Bay, Doha by Paul Cochrane

Revealed: Secret details of Turkey's new military pact with Qatar

Middle East Eye

Documents obtained by Middle East Eye show strategic alliance includes pledge by Ankara to protect Gulf state from external threats

In December 2015, Turkey announced, to the surprise of many, that it planned to establish a military base in Qatar. Behind the scenes, the agreement was about forming a major strategic alliance.
After a 100-year hiatus, Turkey is militarily back in the Gulf and ramping up its presence overseas. In January, Ankara announced that it would also establish a military base in Somalia.
Specific details about the Qatar agreement, which Turkey described as an alliance in the face of "common enemies", remain scant, but Middle East Eye has acquired copies of the agreements, as well as further details, which include a secret pledge by Ankara to protect Qatar from external threats.

A long time coming?

Turkish-Qatari defence and military agreements go back nearly a decade. In 2007, Ankara and Doha signed a defence industry cooperation agreement, and in 2012, signed a military training agreement. (For the agreements go to bottom of article).
In March 2015, the Turkey-Qatar Military Cooperation Agreement was passed by the Turkish parliament, but the negotiations to create an overarching comprehensive agreement were still ongoing. Only in July 2015, according to France-based Intelligence Online, did the Qatari Emir, Tamim bin Hamad al-Thani, first tell the Saudi king about the true extent of the agreement. Under the agreement, about 3,000 Turkish troops, air and naval units, as well as special forces are to be based in Qatar for training and joint exercises. The two countries also promised greater bilateral cooperation between intelligence services.
Riyadh reportedly welcomed the deal to help counter Iran's growing regional influence as Turkey's military's presence will bring additional foreign muscle in the Gulf, joining the United States' Al Udeid air base in Qatar, the French naval base in Abu Dhabi, and the US and British naval bases in Bahrain, among others.
But the move was not unanimously accepted in the Gulf Cooperation Council (GCC). When Abu Dhabi got wind of the agreement in the wake of the 35th GCC summit in December, it was not viewed positively, with the Emirates fearing stronger Turkish-Qatari ties could reverse the regional fortunes of the down-on-its-heels Muslim Brotherhood.

A comprehensive agreement

According to the news outlet Intelligence Online, the head of Turkey's National Intelligence Organisation (Milli Istihbarat Teskilati – MIT) made multiple trips to Doha in December to cement a secret pledge that Ankara would protect Qatar from external military threats. In return, Doha would help offset Ankara's strained relations with Moscow following Turkey's downing of a Russian jet. Qatar would shore up the Turkish economy due to the loss of Russian tourists – estimated at some $3bn - as well as provide gas export guarantees if Moscow turns off the taps.
While the economic assistance is a typical sweetener by Gulf states securing bilateral agreements, it is the defence pledge that is of greatest significance. Whether the pledge has been actually signed has not been reported outside of Intelligence Online. There is no mention of it in the comprehensive agreement that was signed in December, but talks are reportedly ongoing.
“Turkey and Qatar are in the process of devising a possible 'Status of Forces Agreement'. In the deliberations that are said to be under way, the two sides would have discussed the incorporation of a casus foederis ["case for the alliance"] clause in the agreement,” said Dr Eyup Ersoy, an international relations expert at Turkey's Bilkent University.
“However, first, this clause, if agreed upon, could be confidential and may not be revealed to the public. Second, the substance of the clause, again if agreed upon, would be qualified. For example, it may read that Turkey will provide diplomatic and military assistance to the extent possible in case of armed aggression against Qatar. In other words, it may not be unequivocal and unconditional.”
As such, the agreement may not be overly different from unwritten pledges by the UK and the US to aid the Gulf states in the advent of an attack, last evidenced in the 1990 Gulf War. What is clear from the comprehensive agreement is that the Turkish base will be under Qatari control, with the possibility for Qatar to establish a base in Turkey.
While the agreement states that Turkey is to cover the Qatari base's expenses, there are no details about overall costs.
“Since the base is to be under Qatari military structure, it is simply a Qatari base put to the use of the Turkish military, so Doha will bear the financial costs of it,” said Ersoy.
If this is the case, it will follow the precedent of Qatar reportedly covering the $1bn construction cost of the US's Al Udeid air base.

Strategic goals

That the two countries have become closer through the agreement has not come as a surprise.
“Turkey has been pursuing a strategic relationship with Qatar for over a year. I don't think it was necessary to sign the deal as it was very obvious to anyone watching,” said Jonathan Schanzer, vice president for research at the Foundation for Defense of Democracies.
Ersoy however thinks the agreement was essential to provide a legal foundation and create political legitimacy to further Ankara's goals in the Gulf, even if the "Status of Forces Agreement" is not made public.
“In my view, the ‘real’ motivation, from Turkey’s perspective, is to transform the regional alignment with Qatar into a tentative alliance. This military cooperation agreement is imperative for the sustainability of Turkey's strategic relations between Qatar, and by extension, between Turkey and the Gulf,” he said.
The two states had found a common cause in meddling in the so-called "Arab Spring", particularly in Egypt, where both support the Muslim Brotherhood, as well as in Syria. Their backing of the Muslim Brotherhood had invoked the ire of other GCC states, especially the UAE and Saudi Arabia.
But since the overthrow of Egyptian president Mohamed Morsi in 2013, and Riyadh last year reconciling itself with the party, Ankara is using Doha as an inroad to the rest of the Gulf.
Furthermore, Turkey is being viewed as an additional line of defence against Iran following the normalising of relations with Tehran by the West. This is considered the prime motivation for the agreement. In December, the Turkish ambassador to Qatar had told Reuters that the agreement was to face "common enemies," considered a veiled allusion to Iran.
“I don't know if the US would fight for Qatar, as the whole region is afraid that the US has sold them out to Iran. The [Turkish] soldiers in Somalia are there for formality, to show the flag, whereas in Qatar it's a real fighting force,” said Atilla Yesilada, an Istanbul-based analyst at Global Source Partners, Inc.

Common enemies

Turkey's move into Qatar, and the GCC's general acceptance of the deal is considered a form of security diversification. David Roberts, a lecturer in the Defence Studies Department of King’s College London, thinks that the Gulf has interpreted US strategy incorrectly, that the pivot to Asia is not about abandoning the GCC but rather a pivot away from Europe.
“There is perhaps a slight loss of confidence, and the US are blue in the face about it. What can they possibly do? They have invested huge amounts in Al Udeid, which has a major role in the US defence review,” he said. Indeed, since 2009, Al Udeid has been the headquarters of the US Central Command (CentCom), covering 20 countries in the region.
The US is considered to have approved the strategic alliance, not wishing to ruffle the feathers of either country in the current regional environment.
“I'd not expect to see anything from CentCom on this, given how important the Incirlik air base [in Turkey is for strikes against the Islamic State group] and the Al Udeid base is to the US,” said Schanzer.
The US is not however expected to be undermined when it comes to arms deals with Qatar or the GCC at large, with Turkey only accounting for 2.4 percent of overall sales to the GCC between 2010-14 (by comparison the US is 48.1 percent and Britain 18.6 percent), according to SIPRI figures.
“For Turkey it could be a golden opportunity to develop their military-industrial complex by cashing-in with Qatar. However, they've kind of missed the boat a bit as Qatar is cutting back on spending - the military not so much - but it's not the good old days,” added Roberts.
The training aspect of the agreement also does not appear to be of major strategic important to Qatar.
“What is this alliance about? If it is about military training with counterparts, Qatar already has the Brits and the Americans doing training. How many trainers do you need? And they already have a smorgasbord of international equipment, although it is another NATO country [Turkey] joining them. Qatar is in desperate need of one unified security document,” said Roberts.

The Terrorist Financing Tracking Programme (TFTP). In tension over terrorist finance – EU to US data transfer & privacy rights

Money Laundering Bulletin

www.moneylaunderingbulletin.com/terroristfinancing/in-tension-over-terrorist-finance--eu-to-us-data-transfer-privacy-rights--1.htm

The 'Freiheit statt Angst' (Freedom instead of fear) demonstration in Berlin in August 2014 , protesting against the mass surveillance of the NSA, GCHQ and BND, and in support of whistleblower Edward Snowden.

 

US intelligence has access to European Union citizens’ banking transfer records by virtue of a controversial 2010 agreement. Paul Cochrane examines the Terrorist Financing Tracking Programme, currently set for renegotiation.

The Terrorist Financing Tracking Programme (TFTP), used by the United States, and revealed by the media in 2006, remains cloaked in secrecy. Implemented by the US Department of Treasury following the September 11th attacks in 2001, it utilises data provided by the Brussels-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) through a private agreement.

Europol inspection

The transfer of financial data from the European Union (EU) to the US was legitimised through a EU-US TFTP agreement in 2010. Supervision of US data searches was henceforth assigned to EU police agency Europol.

The agreement was to be renegotiated this year, but talks have stalled over data privacy concerns, especially in the European Parliament. That said, an 'Umbrella Agreement' on all kinds of exchanges between the EU and the US was reached in September 2015 (1) - it mandates both sides to protect personal data exchanged during criminal and terrorism investigations. The deal followed four years of negotiations between the two jurisdictions and should cover the TFTP. Moreover, the 2010 TFTP agreement does not have a sunset clause and remains in force.

The programme, exposed by the New York Times in June 2006, caught the EU and nearly all 7,800 banks sending client data to SWIFT unaware that confidential information was being provided to the US Treasury. Although strongly condemned in the EU as breaching citizens' privacy rights, it was not annulled.

Snowden reopens debate

The TFTP came under renewed scrutiny following the 2013 revelations by American whistleblower Edward Snowden of widespread surveillance by the US' National Security Agency (NSA) of European governments. Leaked classified documents showed the NSA had access to SWIFT's internal data traffic, with one document from 2011 designating the SWIFT computer network an agency “target”.

“The Snowden revelations had a gigantic impact on the programme and US-EU relations,” said Camino Mortera-Martinez, a Research Fellow on Justice and Home Affairs at the Centre for European Reform, a UK think-tank, in Brussels. “Because of that we've seen stronger and more open discussions about privacy.”

In 2014, the European Court of Justice (ECJ) requested that EU governments and the US make the TFTP’s practices more transparent. Concerned that the EU might amend the agreement this year (2015), Adam Szubin, director of the US Treasury's Office of Foreign Assets Control (OFAC), has been actively lobbying the EU to keep the TFTP in place, arguing that it is essential to countering the Islamic State (IS).

What's yours is ours

An ongoing issue for the EU is the essentially one-way aspect of the TFTP. While Europol ensures data provided to the US complies with the Swift agreement, EU officials are not able to scrutinise documents of Europol's internal data protection committee, the Joint Supervisory Body. In January 2015, Washington prevented Europol from accessing classified data they had contributed, on the ground that parts of the report were compiled in the US.

“What is the US doing with the data? We don't know,” noted Dr Mara Wesseling at the Centre de Sociologie des Organisations at Sciences-Po, Paris. “It is probably link analysis and social network analysis, but we're not sure, as there is no public information, we have no oversight, and we have to believe it is efficient.”

Take it on trust

She added: “The number of data sets sent to Treasury is also secret. The Belgian Privacy Commission tried to find out, as European members of parliament [MEPs] want transparency on the volume of data, which is something the US doesn't want to disclose.”

According to the latest joint report (2013) on TFTP provided data by the EU Commission and the US Treasury (2), since 2001 the programme “has produced tens of thousands of leads and over 3,000 reports (which contain multiple TFTP leads) to counter terrorism authorities worldwide, including over 2,100 reports to European authorities.”

But other than such published figures, MEPs and most EU officials have largely been kept in the dark. To ease concerns, an EU TFTP overseer was appointed, who is privy to US intelligence. However, his identity is hidden for privacy reasons. “This is very mysterious as his role is to give more legitimacy and confidence in the programme, but at the same time we do not know the person,” explained Wesseling.

“How successful has the TFTP been? That's the rub. We've collected all of this data, but just a few cases can be released to the public, and due to the very nature of it, like suspicious activity report (SAR) disclosures, we can't discuss it,” said Dr. Michelle Frasher, an independent research scholar previously affiliated with the European Union Centre at the University of Illinois at Urbana-Champagne.

Inside view

While SWIFT did not respond to questions from MLB about the issue, Europol did. A spokesperson said: “The TFTP is an important instrument to provide timely, accurate and reliable information about activities associated with suspected acts of terrorism or terrorist financing. It helps to identify and track terrorists and their support networks worldwide.” She added that more than 13,000 leads to support investigative activities have been generated by the TFTP to date: “The significance of the phenomenon of so called travelling fighters can also be identified from the TFTP. While in 2014 there were over 900 leads [from the overall number mentioned before] of relevance to 11 EU member states, the developments in 2015 show that since the beginning of the year, over 6,300 leads – of relevance to all 28 EU member states – were retrieved.”

A former FBI special agent, who set up and ran the US intelligence service's terrorist financing section, agreed that TFTP had “definitely provided a lot of good results”: Dennis Lormel, who now runs DML Associates, added, “I am definitely an advocate for that programme to continue, and surprised of the longevity it's had in terms of being kept secret. When I was involved - I can't speak of where it evolved to - it was extremely limited to terrorist specific threats. The perception that we are overstepping our authority or misusing information is totally wrong. It is one of the most tightly monitored programmes I've been involved in.”

Not such a bad idea

In July 2011, the European Commission outlined its plans for an EU-TFTP that would monitor suspects' financial transaction data in real-time, allow for searches of transactional data, and create a international communications system and database for suspicious transactions.

The plan has repeatedly been put on hold despite sporadic calls for its implementation, for example by the French government following the Charlie Hebdo attacks in January 2015. An EU-TFTP would be very dependent on whether the Swift agreement with the US is renegotiated.

“In my discussions with diplomats they are very tight lipped about TFTP and renegotiations, saying it is not going to be challenged,” said Dr Frasher. “There's plenty to believe that right now, but we're also seeing things happen like the Umbrella Agreement and France saying there needs to be a EU-TFTP.”

Expect more argument

Significant concern and opposition about sharing data with the US persists in member states and at the EU Commission and the EU Parliament. Furthermore, the Fourth EU Money Laundering Directive contains multiple references to data protection that will need to be addressed with regard to any information-sharing with Washington. “I expect the renegotiation of TFTP to be a bloodbath again if they open it up for discussion, particularly [with regard to] what the oversight is, as the European Council is up in arms about the lack of accountability,” said Mortera-Martinez. “The Council would need clear examples of how the TFTP has disrupted terrorism, but they can only do that after a plot is discovered.”

EU reforms to its data protection framework, currently grinding on, mean that many decisions face delay, not least until controls around the Passenger Name Record (PNR) database on flying in and out of the EU are resolved. “When the PNR is in place maybe an EU-TFTP would be on the table again,” Dr Frasher added.

Notes

1) Joint Report from the EU Commission and the U.S. Treasury Department regarding the value of TFTP Provided Data, 2013 -

http://ec.europa.eu/dgs/home-affairs/what-is-new/news/news/docs/20131127_tftp_annex_en.pdf

2) Umbrella Agreement -http://europa.eu/rapid/press-release_MEMO-15-5612_en.htm

Photograph by Markus Winkler, via Wikicommons

Dualism – Russian Anti-Money Laundering and Sanctions

Money Laundering Bulletin

http://www.moneylaunderingbulletin.com/sanctions/dualism--russian-aml-and-sanctions--1.htm?origin=internalSearch 

Annexation of Crimea comes at a high price: the sanctions against Russia hurt; they are, though, to be distinguished from AML by, if not bright lines, at least a continuing dialogue with international partners through the Financial Action Task Force, says Paul Cochrane. Some, though, question Moscow's real compliance agenda.

US and European Union (EU) sanctions (1) against Russia continue to biting - domestic banks are closing, Western banks are de-risking Russian assets and clients - but have the same measures undermined Moscow's role in global compliance initiatives? The fact that Russia has an asset amnesty in place to repatriate capital, whether clean or dirty, suggests that its grip, never rock solid, maybe slipping.

Still in the fold

US and EU moves against Russia in March 2014 caused some consternation at the Financial Action Task Force (FATF), since their target held the presidency until July 2014, and a high-level meeting of anti-money laundering (AML) officials was scheduled to be held in Moscow in June. In the event, the meeting did proceed. 

Unlike the Group of Eight (G8), which expelled Russia to become the G7 once more at the same time as imposing sanctions, international regulators, including FATF, were keen to keep Russia on-side of AML and counter terrorist financing (CTF).

“FATF recognises [Russia's financial intelligence unit, FIU] Rosfinmonitoring as one of the most powerful FIU's in existence,” said Andrew Bowen, a researcher for geopolitical consultancy Wikistrat. 

So far, FATF’s good offices seem to be working. “I wouldn't say that the sanctions [have] impacted the issue of AML in a material way. Apart from different political views, all governments are interested in tightening scrutiny on those issues,” said Mikhail Kazantsev, a partner at Moscow law firm Egorov Puginsky Afanasiev & Partners.

Sanctions – impact assessment

Sanctions have, though, shaken up capital flows. In 2014, US$151.5 billion exited the Russian economy; the figure was US$32.6 billion in the first quarter of 2015, according to Central Bank of Russia data. “The sanctions are starting to bite. It is delaying certain energy projects in Russia, and sanctions relief is at the top of their policy agenda, so I can't imagine them doing something to undermine that,” said Shane Martin, regulatory compliance director at Walkers, the law firm. “The other point is that Russia is a member of FATF, and I've seen no evidence of them stopping efforts in terms of supervising AML. You often hear sanctions being described as smart or targeted, so I expect Russia to be smart, and not give a knee jerk reaction.”

Russia’s plunging economy and associated compliance risks due to the sanctions have prompted some foreign financial institutions to withdraw. “My sense is that banks are certainly de-risking, although they won't say so,” said Dennis M Lormel, head of DML Associates, LLC, in the US. 

The most high profile example so far came in September 2015, when Deutsche Bank closed its onshore corporate banking and securities business, the biggest foreign securities firm in Russia. The bank is also being probed by financial regulators, including the UK’s Financial Conduct Authority (FCA), over an alleged money-laundering scheme by Russian clients involving US$6 billion in trades in Moscow and London. 

Local enforcement

Russian banks are also closing operations, attributed to the economic recession and central bank action to rein in risky lenders. “Historically there were a huge number of banks, over 900, and 90 per cent were small regional banks associated with regional business. For wealthy businessmen it was nice to have their own bank within the group. Now the central bank is tightening screws and every other week we see a bank licence revoked as not compliant, so banks are either merging, being liquidated or going bankrupt,” said Kazantsev.

In September, the central bank closed 37 banks, out of a total of 55 closed this year, reducing the number of banks from 783, at the beginning of 2015, to 728, according to central bank data. Over 140 banks have closed since 2013. Moreover the central bank has barred more than 4,100 Russian citizens from commercial bank management for alleged involvement in risky activity that resulted in past bank failures.

Underlying motive, perhaps

While the central bank and its FIU are enforcing compliance, the motivation may not simply be a cleaner and positive FATF evaluation, in 2018, according to Bowen: “Rosfinmonitoring has become a repository of information on shady deals, assets of the elite, and a massive surveillance monitoring system, like a financial NSA [the US' National Security Agency]. Rosfinmonitoring is directed at ensuring the regime can monitor the elites, and two, reinforces the agreement that elites only have their money as the state allows them to,” he argued. “At any moment assets could be revoked; it is a Damocles sword hanging over the heads of the elite. These are methods of control and allows the regime to justify it as regulatory control.”

Capital crimes – an amnesty

The FIU's moves tie in with new policies by the Kremlin to stem the outflow of illicit cash from Russia, estimated at US$1.3 trillion between 1994 and 2012, according to US-based Global Financial Integrity figures released this January. In November 2014, the Russian federal parliament passed a law requiring citizens to pay tax on offshore assets – Federal Law No. 376 ‘On amendments to parts one and two of the Russian tax code (concerning taxation of income of controlled foreign corporations and proceeds of foreign organisations)'. And in June 2015 a capital amnesty bill was passed, authorising a no-questions-asked repatriation of illicit funds that is to last until the end of the year (2015). Russia’s finance minister Anton Siluanov has said the law "declares immunity from criminal, administrative and tax punishment” for capital returned to Russia.

FATF acquiescence

Despite concerns over the possible origins returning capital, FATF has gone along with the law. “I recently helped the finance ministry on the amnesty of capital law. One of the key principles is to fully comply with FATF. There have been a lot of discussions with them, and at the end of the day, said they were comfortable with the amnesty law,” claimed Kazantsev. An FATF spokesperson said the organisation had reviewed Russia’s capital repatriation initiative, adding, “The programme met the requirements of the FATF’s basic principles. While the programme is in effect, the FATF will continue to monitor whether any suspicious transactions in relation to the [programme] are reported." 

Return on leniency

Russia expects the amnesty law to bring in US$4.3 billion in taxes over the next year and 10% of the assets lost since 2014. However, no figures have been released as to the law's current effectiveness. “We've no idea of how much money has come in, but there's still a net outflow, as the de-offshorisation law came at the same time as concerns about sanctions and how the situation will develop,” said Bowen. Russia's ministry of economic development forecasts capital flight to slow to US$70 billion in 2016, and to US$55-60 billion in 2017.

Ever inventive – the money will flow

Given Rosfinmonitoring's actions and the country’s recession, it is no surprise that sanctions are being circumvented. In the Crimea, rather than VTB or banks owned by state gas giant Gazprom opening, “small banks move in and suddenly expand as they are not as exposed to sanctions or compliance issues,” said Bowen. “The way Russia is paying pensions in Donetsk [in eastern Ukraine] is by sending transactions via South Ossetia to eastern Ukraine, so a 'quasi layering' effect. Money is also going from Russia to Moldova, then to Latvia and onto London. Russia is exploiting the financial system as much as financial players in the West allow them,” said Bowen. 

The more traditional offshore hubs used by Russians to launder money, such as Cyprus and Dubai, have also rebounded, and now Russians are expanding their horizons. “Russians are looking to exploit Singapore and Asia. Before [the sanctions] launderers were purely looking at Europe; now they're looking elsewhere,” Bowen added. 

While there is speculation that Russia will pivot eastwards to overcome Western sanctions through major unilateral trade deals with China, private businesses have not followed Moscow's lead. “Both Russia and China are trying to extend the economic relationship, but private businesses have not been enthusiastic,” said Kazantsev. “But if the current situation continues, it will be one of the few options on the table for Russian business. Will eastern partners substitute for western ones? Probably not, but business with the east will increase.”

Political restraint

Looking ahead, further sanctions against Moscow are not likely, as Russia’s entry into the Syrian conflict in September has created further geopolitical concerns to address. “Because of the political importance of the Russian role in Syria, I do not think that currently anyone – the US Treasury or the EU – is willing to sanction the Russian leadership and further ossify any meaningful movement towards a political solution [in Syria],” explained Bowen. “Rather than creating momentum for more sanctions it will actually create momentum to reduce, or at least be less enthusiastic about enforcing, the current sanctions.” 

1) http://www.state.gov/e/eb/tfs/spi/ukrainerussia/ and http://europa.eu/newsroom/highlights/special-coverage/eu_sanctions/index_en.htm

Photograph by Anubis8, via Wikicommons

Syria crisis hits Jordanian meat market

GlobalMeatNews.com (copyright protected)

THE DEMAND for meat in Jordan has been weakened by the conflict in its troubled neighbour Syria, with the Jordanian economy slowing down due to regional instability, impacting consumer purchasing power. However, at the same time, demand for meat is being bolstered by Syrian refugees.

A country of 6.6 million people, Jordan is currently hosting 937,830 Syrian refugees, according to the United Nations High Commissioner for Refugees (UNHCR), with 80% living outside of refugee camps. The influx of Syrians has boosted meat imports, mirroring the impact of an influx of Iraqi refugees following the US-led invasion in 2003.

“At a food level it has been a plus as increased imports of meat, like when the Iraqis came from 2003 onwards. But there are psychological differences. The Iraqis had money but the Syrians less so, and are more conservative in spending,” said Ali Noor, general manager of Kaylani Food Centre, a meat distributor in Amman, Jordan’s capital.

Until 2014, food was provided to refugees by the UN and aid agencies, in addition to handouts from wealthy Gulf Arab donors, purchased either via international tenders or local retailers. Over the past year, however, food vouchers have been provided to 538,274 refugees, according to the UNHCR, to buy whatever food they need: “Syrians go to the supermarket, to Carrefour, with coupons for rice, sugar, oil and sometimes meat,” said Noor.

Market Instability

 

However, regional instability has seriously impacted Jordan's economy by warding off tourists and foreign investment. Economic growth is forecast at just 2.8% this year, according to the World Bank.

“For commercial products – beef and lamb – you see demand going up and down. Is it a reflection of the crisis? Possibly, but I can't put my finger on it and say for certain,” said Noor.

The crisis has also affected trade that had previously transited through Syria to and from Turkey and Europe. “Meat imports from Turkey are taking up to 21 days instead of a week, due to having to ship to Aqaba port (in southern Jordan),” said Ahmad Al-Hamad, Kaylani's commercial manager.

But while logistical costs have risen, the domestic market has been bolstered by the closure of the border with Syria. “People used to buy in Syria as it was 2 Jordanian Dinar (USD2.80) for a kilo of lamb compared to 10 JD (USD14) in Jordan. There was price gouging with people taking advantage (of the price difference), but the government has stopped this,” said Noor.

Fear of Disease

 

However, despite Jordan's borders being better monitored by the authorities and restricting meat trades, there is a high risk of disease due to smuggled livestock from both Syria and Iraq. “The threat of transboundary animal disease has increased,” said Markos Tibbo, livestock officer at the UN's Food & Agriculture Organisation (FAO) for the Near East and North Africa. “I think the vaccination coverage in Jordan is not up to the recommended standard as their capacity and resources are limited in undertaking disease surveillance and control.” He noted: “We've helped Lebanon vaccinate the entire livestock population via a USD5.6 million programme from the UK's Department of International Development (DFID), implemented in 2014-15. We want to repeat this in Jordan, as well as to protect the livestock assets of the poor.”

 

IS, and will be yet - Islamic State and Terrorist Financing

Money Laundering Bulletin
http://www.moneylaunderingbulletin.com/terroristfinancing/is-and-will-be-yet-112349.htm

Islamic State controlled areas in Syria and Iraq 

The oil price may have dropped but Islamic State runs varied funding streams, making it brutally resilient. New thinking on financial lines of attack may be needed, discovers Paul Cochrane, in Beirut.

The Islamic State is touted as the wealthiest terrorist organisation on the planet, yet the financial war against the group is stumbling, highlighting deficiencies in methodologies and approaches to countering the financing of terrorism.

There has been no shortage of effort against the IS, including: UN Security Council Resolutions– for example 2199 (2015), requiring member states to do all they can to prevent its financing; the Financial Action Task Force (FATF) has published an extensive report on the group's funding; a Bahrain-hosted November 2014 meeting of counter terrorist financing (CTF) experts result in the Manama Declaration, which set out policy proposals; and Italy, Saudi Arabia, and the United States co-established a Counter-ISIL Finance Group in Rome. Despite such measures, ISIL goes from strength to strength in northern Iraq and Syria.

Black gold behind the black flag

“Twelve months ago everyone was saying ISIL [Islamic State of Iraq and the Levant] is incredibly wealthy from oil. Although it seems its ability to rely on oil revenue has declined considerably since then, it is still functioning reasonably well,” said T

om Keatinge, Director of the Centre for Financial Crime and Security Studies at RUSI in London.

Indeed, reports suggest IS was generating millions of dollars a day in oil revenues, either sold in territory under its control, smuggled over borders or, in a curious twist, sold to the Syrian regime. The group appears to have weathered the recent drop in oil prices and adapted.

“When IS first started to control territory there were a number of jackpot events; there may or may not have been a large quantity of money in the Central Bank in Mosul, and it took oil storage facilities and agricultural stores. That was phase one, using resources it gathered. Now it needs to raise finance from day to day, like any other governing authority, something it seems to do effectively albeit by imposing increasing taxes on people and businesses,” said Keatinge.

Adaptive response

Furthermore, ISIL appears to be getting around many of the financial controls arrayed against it. Jimmy Gurule, Professor of Law at Notre Dame University in Indiana, and a former undersecretary of the US Treasury, describes the CFT strategy against the group as “weak and ineffective,” saying the efforts by FATF and the US Treasury have been “misguided”.

“There are a couple of obvious observations – one, not going after the money, and if there is a strategy, it's been largely ineffective. Secondly, the current strategy is based on the old Al Qaeda model, so we need to do something different,” said Gurule.

While FATF recognises that IS presents “a new form of terrorism” and that its financing is a “constantly changing picture,” Gurule criticises the focus on money going to IS, and not out from its territories. “When money comes in typologies makes sense, but for services (ISIL needs) that is money going out, and I don't think typologies work there. Let's target service providers that help ship or transport oil, and impose sanctions on these providers,” he said.

He cited the lack of IS-linked designated individuals under US Executive Order 13224 on blocking terror funds as indicative of the difficulties of going after external financiers. “I testified before a Congressional hearing last November (2014) and I pointed out the paucity of designations, just three that worked on raising money for ISIL,” he added.

To Gurule, part of the problem is treating ISIL as a non-state actor when it controls land and is operating like a government. The international community “doesn't want to recognise it as a government or at the UN but it's a defacto state. Because of the way it's generating revenues it shouldn't be treated merely as a terrorist organisation. If it is state like, governs resources and provides services, then it needs to be treated like a state to change its behaviour. That strategy should include second tier economic sanctions that have been relatively effective against Iran.”

In February, following the release of the FATF report, a senior international AML/CFT export told MLB that “there may need to be some changes to typologies, but the existing machinery is likely to be adequate. We will be doing a typological renewal, having another look at the ways finances flow.” A new report is slated to be published in October (2015).

“I do think there is a need for a typology review, and the FATF report has been an excellent tool for the private sector,” said Jon Byrne, Executive Vice President of the Association of Certified Anti-Money Laundering Specialists (ACAMS). “The new head of FATF is actively seeking input from the private sector, and this has become increasingly important as ISIL has access to oil and other revenues, and money has to go somewhere, through legitimate institutions.”

Alternative sources of funds

To John Cassara, a former US Treasury special agent, the fight against IS has fallen short in its approach to trade-based money laundering; he argues a new methodology that adds to a fact-finding intelligence report would “break some new ground.”

“I would urge FATF, instead of getting experts with a PhD from the US or UK to (address shortcomings), to get them from MENA-FATF. Get the Lebanese, the Saudis involved, those that know the region and what needs to be reported,” he said.

With IS using multiple streams to generate funds, new typologies may need to address certain revenue streams. “The potential exfiltration of value – antiquities – is a risk spot. It is striking how little the UN appears to know about this trade. Everyone says its happening, but where is the evidence and the facts? That's where the argument stops,” said Keatinge.

An approach to tackling the smuggling of artefacts from ancient sites in Iraq and Syria that IS now controls, such as Palmyra in eastern Syria, should also include looking for orders for items. “I heard from a source that when Palmyra was overrun (in May 2015) you could ask for a specific piece. So apparently there is a pull as well as a push factor,” Keatinge added.

Gurule also raised the issue of antiquities traded on the black market. “Selling stolen artefacts is generating tens of millions of dollars, but what are the typologies?” Kidnap for ransom has also been identified by FATF as a key revenue stream for IS. “Is there a typology for money generated from the release of hostages? If the family of a victim agrees to pay $1.2 million, how is that money transferred? Are ransom payments being deposited in offshore bank accounts or disguised as donations to charities or NGOs?” said Gurule.

Human trafficking is a further area of concern. “Is IS making money from human traffickers as they seek to traffic migrants through areas under its control?” said Keatinge.

Whether typologies ought to be made public, and risk enabling IS to wise up to CFT efforts is also in question. Byrne cited the example of banks looking for account-holders who suddenly fall off the grid, and are then found to be withdrawing cash in Turkey. In another example, potential fighters or funders give a third party their ATM cards to withdraw cash in another country, such as Italy, and then the cash is taken to IS territory. “But any time you make typologies public they become stale. I think it is about staying as current as much as you can, as IS is obviously able to get hold of information so much easier now through social media,” said Byrne.

FATF's report downplayed the role of foreign 'deep pocket' funders behind IS, despite a statement in 2014 by US Vice President Joe Biden that fingered supporters in the Gulf, and other reports that have surfaced. MLB has also reported on donations and funding from the Gulf, particularly Qatar and to a lesser degree Kuwait, Saudi Arabia and the United Arab Emirates (see http://backinbeirut.blogspot.com/2015/03/islamic-state-model-of-modern-terrorist.html).

Financial institutions are certainly keeping an eye on Gulf countries. “It is all very well for international banks to do their bit to interrupt IS financing, but the regulatory and enforcement structure in surrounding countries (bordering Iraq and Syria) represent possible vulnerabilities and ways IS funds could get into the international system,” said Keatinge.

The Gulf has made public moves to show it is trying to counter ISIL financing, such as organising the Manama Declaration on CFT in November 2014, but Keatinge suggests this rhetoric needs to be reinforced by continued raising of regulatory and enforcement standards.

Cassara believes more pressure should be brought on the Gulf states. “Even though for the most part they have adhered to the FATF recommendations and put in place compliance programs, with some exceptions enforcement has been somewhat lax,” he said. “If the West comes to them with a case, 'look at this', they'll do it, unless (it involves) a politically exposed person (PEP), but they rarely use their own initiative, and that is frustrating as they know what is going on or should.”

Image via Wikicommons