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Ukraine’s Gestors law firm has provided Gomelglass-Ukraine and PJSC Gomelglass with legal support during the government’s review and revision of antidumping measures regarding the import of “float-glass” originating in Russia, Poland, and Belorussia into Ukraine.

According to Gestors, the revision was conducted by the Ministry of Economic Development and Trade of Ukraine from June 2014 to October 2015. During this period the Ministry investigated the conditions of import of float-glass into Ukraine and its impact on the domestic industry. On October 1st, the Interdepartmental Commission on International Trade of Ukraine concluded its “interim review.”

The firm’s team was led by Partner Yaroslav Snigur.

Egorov, Puginsky, Afanasiev & Partners has defended the interests of the Transammiak joint stock company in a dispute with OAO Minudobrenia.

The firm’s team on the matter was led by Maria Alina Kudryavtseva, and included Olga Denchenkova, Xenia Firsova, and Alexander Podgorny, all working under the leadership of Partners Natalia Korosteleva and Valery Eremenko.

Hogan Lovells has advised E.D.F. International (EDF) on the sale of its majority stake in Hungary’s Budapesti Eromu Zrt. (BERT) to EP Hungary a.s., a subsidiary of Energy a.s., which now owns more than 95% of BERT shares. Hogan Lovells was assisted in Hungary by Lakatos, Koves & Partners. Wolf Theiss advised EP Energy.

BERT owns three gas-fired cogeneration plants (combined heat & power), which meet almost 60% of the demand for heat in Budapest and generate approximately 3% of Hungarian electricity.

The Hogan Lovells team acting for EDF consisted of Paris-based Partner Xavier Doumen and Counsel Sophie Thomazi and London-based Associate Hannah Logan. The Lakatos, Koves & Partners team was led by Partner Peter Lakatos and Associate Balazs Fazakas.

The Wolf Theiss team advising EP Energy was led by Partner Laszlo Keneyeres.

Image Source: budapestieromu.hu

Capital Legal Services (CLS) has advised Messe Munchen GmbH — which the firm describes as “among the global leaders in holding international specialized exhibitions” — on its acquisition of an unnamed company tied to organizing an annual construction machinery trade fair at the Crocus Expo center in Moscow. CLS describes the annual trade fair — CTT — as “the largest construction machinery trade fair in Russia and CIS, and the fifth largest in the world.”

Messe Munchen is a leading trade-show company. It organizes some 40 trade shows for capital and consumer goods and key high-tech industries in Munich and around the world, including in China, India, Turkey, and South Africa. Each year over 30,000 exhibitors and some two million visitors take part in events held at the Messe Munchen trade-fair center, the Internationales Congress Center Munchen and the MOC Veranstaltungscenter Munchen. The company’s acquisition of rights to the CTT fair marks its entrance to the Russian market. 

According to CLS, “Messe Munchen has high hopes for developing its activity in the Crocus Expo exhibition complex in Moscow and for the promotion of goods of its participants on the Russian market, and guarantees a high professional level for the exhibition organization, European quality standards and a ‘German’ approach to holding events. Messe Munchen plans an effective integration of the Russian CTT fair into a global system of specialized construction machinery trade fairs. Over 90% of foreign participant companies of such fairs believe that Crocus Expo is the most promising exhibition facility in Russia and complies with the highest standards set by the world’s leading exhibition facilities.”

“With the opening of the Moscow fair, we have achieved a global market share of more than 50 percent,” said Klaus Dittrich, Chairman and CEO of the Messe Munchen Board of Management. 

Stefan Rummel, Managing Director of Messe Munchen responsible for foreign activities noted: “This provides us with a long-term platform for tapping into the Russian market. Because beyond the current political situation there is considerable potential in Russia, especially for Messe Munchen’s main focus areas.”

“Regardless of the complex economical situation, Russia remains attractive for foreign investments and for global companies entering the market,” said CLS Partner Pavel Karpunin. “This transaction was a unique project for us because the business was sold under Russian law, using new legal instruments provided by the Russian Civil Code. We hope that Messe München’s acquisition of the fair will boost the construction machinery market in Russia.” 

Image Source: media.messe-muenchen.de

Rojs, Peljhan, Prelesnik & partners has advised the Avtotehna Group on the sale of its SWATYCOMET subsidiary to the Weiler Corporation — which was advised by Reed Smith. The transaction was completed on December 23, 2015.

SWATYCOMET is a Slovenian company which develops high quality artificial abrasives products. Approximately 95% of its revenue is generated in foreign markets.

The Weiler Corporation, based in Pennsylvania in the United States, is a leading provider of power brushes, abrasives, and maintenance products for surface conditioning. The acquisition of SWATYCOMET substantially expands Weiler’s global reach into the bonded abrasives segment. This will enable Weiler to offer a comprehensive solution to welding, metalworking, and general industrial markets, while allowing the company to add a broad range of cut-off and grinding wheels and technical fabrics to serve industrial markets.

The firm’s team acting for Avtotehna was led by Partners Grega Peljhan and Bojan Sporar.  

The Reed Smith team was led by Frankfurt-based Partner Andreas Jurgens. 

Freitag & Co and the Bastion Group acted as financial advisors to the seller and Delphi Advisors to the buyer.

Image Source: swatycomet.si

Turkey’s Bener law office has announced that Partner Funda Ozsel has been appointed a Managing Partner at the firm.

According to a Bener press release, Ozsel — who in 2014 returned to Bener, where she had worked for 9 years, after taking two years off (reported by CEE Legal Matters on January 13, 2014) — “has excellent credentials to serve in an administrative and management capacity and we appreciate her willingness to accept this appointment.” The firm described Ozsel as “a highly experienced and effective lawyer, well known for her intense commitment to excellence in the provision of legal services,” and said that “she has over 20 years of experience a full range of contract law, real estate law, advertisement and consumer law.”

The firm concluded its announcement by stating that “we would like to wish her every success in her new role.”

Cobalt’s Vilnius office has advised Coca-Cola HBC on its December 2015 acquisition of acquiring one of the major mineral water producers in UAB Neptuno Vandenys. The deal, which is expected to close towards the end of Q1 2016, remains subject to the approval of Lithuanian Competition Council. Tark Grunte Sutkiene advised majority shareholder Gintas Petrus, with Fort advising the minority shareholders.

UAB Neptuno Vandenys, which was established in Lithuania in 1999 by Petrus, produces the Neptunas brand of bottled natural mineral water. Last year the sales revenue of the company reached EUR 5.3 million — a 25.7 percent growth over 2014. According to Cobalt, “the acquisition will allow further development of the Neptunas mineral water brand and encourage future investments into the company.”

“We are proud to be adding this powerful brand to our existing portfolio,” said Valdas Pakstys, sales manager for Coca-Cola HBC Baltics. “We look forward to working together with the people of Neptunas to further grow and develop the brand by utilising our strong sales and distribution capabilities and extensive market know-how.”

Cobalt’s advice included “an in-depth legal due diligence,” the drafting and negotiation of share acquisition and other transaction documents, and advising on structuring the transaction. The firm’s team was led by Managing Associate Maksimas Saveljevas.

The Tark Grunte Sutkiene team was led by Partner Marius Matonis.

The Fort team was led by Partner Mindaugas Zolynas.

Image Source: coca-colahellenic.com

Lawyers from the Dnipropetrovsk office of Ukraine’s Ilyashev & Partners Law Firm are providing pro bono legal assistance to Jadwiga Lozinska in connection with what the firm describes as “inactivity of government agencies during searching and establishing [the] location of her son.”

According to an Ilyashev & Partners summary, “Andriy Lozinsky did military service as part of the 93rd mechanized brigade of the Armed Forces of Ukraine. In late August 2014, when leaving encirclement under Ilovaisk, connection with the soldier was lost, and the soldier went missing.”

The Battle of Ilovaisk started on August 7, 2014, when the Ukrainian army began an attempt to capture the city from pro-Russian insurgents affiliated with the the Donetsk People’s Republic. Government forces were able to enter the city on the 18th, but quickly became encircled by the DPR. After days of encirclement, government forces made an agreement with the insurgents providing for a retreat from the city, but many soldiers nonetheless died in the process.

The Ilyashev & Partners team have provided assistance “in gathering information on the location of Andriy Lozinsky by filing the relevant requests and addresses to the people’s deputies of Ukraine, the representatives of the Ministry of Defense of Ukraine, and the Ukrainian Security Service.” The firm reports that its team “also represents the interests of Jadwiga Lozinska in criminal proceedings initiated both upon the events under Ilovaisk and directly related to disappearance of [the] missing soldier. During representation, the attorneys of Ilyashev & Partners Law Firm appeal against omissions of the bodies conducting pre-trial investigation [and] initiate investigative actions necessary to establish the truth in the case.”

The firm’s team is led by attorneys Lesia Samarina and Ivan Bozhko

The BASEAK law firm — the Turkish arm of Dentons — has successfully represented China North Industries Corporation (Norinco) in the course of ultimately-successful settlement negotiations with ISKI (Istanbul Water and Sewerage Administration) regarding a litigation dispute pending between the parties ongoing since 1998.

Norinco is a pioneer and leader of Chinese military trade. The company’s portfolio of products includes vehicles (trucks, cars, and motorcycles), machinery, optical-electronic products, oil field equipment, chemicals, light industrial products, civil and military equipment, and ammunition. Norinco is also involved in domestic civil construction projects.    

ISKI, the entity responsible institution for water operations in Istanbul, was founded in 1981 to plan Istanbul’s water supply, storage, and distribution and wastewater investments under the supervision of Istanbul Metropolitan Municipality. 

The BASEAK team was led by Partner Ozgur Akman, supported by Senior Associate Mahmut Karyagdi and Associate Zeynep Serim.

Over the years, the anti-money laundering landscape has become a risky arena, especially for companies active in the financial sector.

The risk demonstrates itself as increasingly demanding regulatory requirements, the possibility of multiple enforcement actions for companies active in multiple jurisdictions and sky-rocket fines, as well as criminal enforcement against those liable. This is without mentioning the reputational harm even the allegation of money-laundering offences may cause the companies. As an example, HSBC had to pay $ 1.9 billion to settle the charges that HSBC violated US anti-money laundering legislations. Given the devastating consequences of money laundering for both private sector actors and public sector, employing a preventative approach against money laundering risks seems like the smart thing to do. In the same vein, Financial Action Task Force (“FATF”) recommends member states to enact legislation that requires financial institutions to have programs against money-laundering. This preventative mechanism requirement, practiced in the form of compliance programs, bears especial significance in Turkey, given the region’s geographical location as a neighbor to Middle East and Asia, its role as a business hub opening up to those regions, its belated anti-money laundering legislative developments. 

Turkish AML Climate – The Crimes and Offences

According to FATF Mutual Evaluation of Turkey Follow-Up Report No. 15 of October 2014, Turkey has an effective anti-money-laundering (“AML”) and counter terrorist financing (“CTF”) system. Turkey’s involvement in the FATF has been turbulent, although Turkey became a member to the institution as early as 1991.  In October 2012, FATF had released a statement indicating its concerns about Turkey’s failure to fully criminalize terrorist financing as at the time, Turkey did not have a thorough counter terrorist financing system. In case Turkey did not adopt necessary legislation and establish the legal framework prescribed by the FATF Recommendations before 22 February 2013, Turkey’s FATF membership would be suspended. To that end, Turkey adopted the molded its legislation to get its AML system declared complete. 

In order to meet the requirements of its FATF membership and to establish a credible AML legal system, Turkey has taken many steps since 1991. In order to define its money laundering crime in accordance with the international AML framework, Turkey reduced the threshold of predicate offences to a minimum penalty of 6 months of imprisonment, from a previous threshold of a minimum of 1 year. The term of imprisonment for the offence of money laundering has also been raised from a range of 2 to 5 years to a range of 3 to 7 years. Following the amendments, Article 282 of the Turkish Criminal Code now provides that laundering of proceeds of a crime occurs when (i) a person who takes out of the country the funds obtained due to a crime that is fulfilling the abovementioned threshold, (ii) subjects the funds to certain transactions to create the impression that they have been obtained legitimately or (iii) subjects the funds to transactions to conceal their illegitimate source. This crime can occur not just for the person who committed the predicate crime, but for anyone who is launders the proceeds of a crime. The perpetration of this crime by a public officer or during the performance of one’s professional duty (e.g. when a banker is performing its professional duties), is deemed as an aggravating circumstance. Leniency procedure is available for the crime provided that the relevant persons comply with the procedure set out by the law. Due to the perpetration of this crime, security measures against legal persons might be taken. These security measures are: (i) cancellation of permits provided by public authorities, and (ii) seizure of assets. 

Turkish law does not recognize corporate criminal liability. However, Article 43/A Law on Misdemeanors No. 5326 further liabilities on legal persons, in case the crime of laundering the proceeds of crime has been perpetrated by the representative of a legal person to the benefit of that legal person. Accordingly, the stated legal persons will be punished by an administrative fine between TL 14,969 and TL 2,994,337. 

Turkish AML Climate – The Regulatory Requirements

On the regulatory front, Turkish law imposes preventative mechanisms such as customer due diligence and a risk based compliance program to be adopted by the incumbents as stipulated by the legislation. Accordingly, incumbents include banks, insurance companies, other financial service companies, companies whose operations include activities related to valuable stones and minerals, luck and betting games etc. According to the Regulation on Measures Against Laundering of Proceeds of Crime and Financing of Terrorism (“Regulation”), the incumbents are expected to engage in customer due diligence for all of their transactions. Moreover, when the incumbents determine a suspicious transaction is being conducted through their services, the incumbents should notify the Financial Crimes Investigations Board (“Board”) with regard to such suspicion. Aside from these, the incumbents are also expected to inform the Board on a regulatory basis with regard to transactions that exceed the threshold amount determined by the Board. In case the incumbents do not realize their obligations, the Law prescribes certain administrative fines, in addition to criminal measures.  

In matters relating to CTF, the Law No. 6415 on the Financing of Terrorism (“Law on Financing of Terrorism”) was promulgated on February 2013, in order to prevent Turkey from getting its FATF membership suspended. As per the Law on Financing of Terrorism, Turkey now accepts UN Security Council resolutions no. 1267 (1999), 1988 (2011) and 1989 (2011); and the relevant institutions are obliged to abide by the asset freeze decisions published in the Official Gazette. This was deemed a major step in Turkey’s effort to combat the financing of terrorism. With this law, terrorist financing offence has been redefined, an administrative mechanism has been established in order to execute the UN Security Council resolutions.

As of September 2008, the promulgation date of the Regulation on Compliance Programs Regarding Obligations on Laundering the Proceeds of Crime and Prevention of Financing of Terrorism (Regulation on Compliance Programs), banks, capital markets intermediary institutions, insurance and pension companies and Post and Telegram Organization General Directorate, are obliged to create risk-based AML and CTF compliance programs. As per the Regulation of Compliance Programs, the institutions obliged to create compliance programs should (i) develop institution policy and procedures, (ii) carry out risk management activities, (iii) carry out monitoring and controlling activities, (iv) assign a compliance officer and establishing a compliance unit, (v) carry out training activities and (vi) carrying out internal control activities. The risk management and activities regarding monitoring and control should be carried out by the compliance officer. However such activities are under the responsibility of the board of directors (“BoD”), and the BoD should exercise monitoring and control over these activities. In fact, the ultimate body responsible for the sufficient and effective use of the compliance program is the BoD of the company. The Regulation on Compliance Program stresses that the compliance program of each company should be constituted by considering the size of the institution, the volume and type of their transactions. 

Global Examples

The significance of companies complying with AML and CTF regulations, as well as retaining an effective compliance program echo in the international arena, through the record fines imposed against companies like HSBC and BNP Paribas. According to the allegations against HSBC, between 2006 and 2010, at least $881 million in drug trafficking proceeds were deposited into HSBC Mexico accounts. The Department of Justice stipulated that HSBC failed to exercise oversight over its AML system, failed to implement an adequate AML compliance program which monitored its subsidiary’s activities in Mexico and the company’s compliance department was severely understaffed, as a result of which, the company engaged in transactions with drug traffickers and sanctioned countries. In addition HSBC did not inform its US subsidiary of the deficiencies which prevented the US subsidiary to disclose the situation to the US authorities.¹  Recently in 2015, HSBC also settled with Swiss authorities for money laundering allegations against its Swiss subsidiary. As part of the settlement, HSBC agreed to pay 40 million Swiss francs, so that the Swiss authorities will not be able to publish the findings of their investigation.² 

Likewise, in 2014, BNP Paribas pleaded guilty for violation of several US CTF legislations, paying almost $ 9 billion for its transactions with Sudan, Iran and other sanctioned countries. As a part of the bank’s settlement agreement, BNP Paribas will not be able to engage in certain transactions in US dollars for a year. Among the reasons behind the gigantic fine imposed on BNP Paribas are the facts that the bank kept its employees in the US intentionally in the dark so as to keep them from reporting the allegations to the authorities and intentionally attempted to cover up its tracks with regard to the wrongdoing.³  

Conclusion

The examples above demonstrate that institutions subject to AML regulations, and especially financial institutions, have to be diligent both in the compliance of their transactions and internal processes to the legislation. Companies have to set risk-based compliance programs proportionate to the size and volume of their operations. The consequences of AML in compliance are severe including severe fines, criminal penalties, civil actions, reputational damage and debarment from projects finances by international finance institutions. The risk of incompliance of course, depends on the territory the company is active in. In territories such as Turkey, which acts as a business hub, opening up to a multitude of jurisdiction with different legislative and political sensibilities, the companies are urged to be vigilant in terms of their compliance with applicable legislations.

(First published in Mondaq on January 4, 2016)

1. http://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations 
2. http://www.theguardian.com/business/2015/jun/04/hsbc-fined-278m-over-money-laundering-claims
3. http://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspiring-violate-international-emergency-economic-powers-act-and 

By Gonenc Gurkaynak, Managing Partner, Ç. Olgu Kama, Partner and Burcu Ergün, Associate, ELIG, Attorneys-at-Law