This week’s Americas Brief newsletter analyses the US national emergency declaration, violent anti-government protests in Haiti, and organised crime in Mexico.
United States & Canada
• United States – Former lawyer at tech giant charged with insider trading
• United States – E.U. updates money laundering blacklist, adds U.S. territories
• United States – President declares national emergency to fund border wall
• United States & Brazil – FBI probes multinational commodity group for bribery
Mexico, Central America & Caribbean
• Haiti – U.S. nationals held on conspiracy charges as protests continue
• Mexico – Canadian miner accuses local criminal group of theft
• Mexico – U.S. conviction of cartel leader unlikely to stifle violent crime risks
• Panama – Farmers’ protests set to increase travel risk across country
• Bolivia – Opposition protests to mark 2016 referendum anniversary
• Venezuela – Russian bank freezes assets of state-owned oil company
United States & Canada
United States – Former lawyer at tech giant charged with insider trading
UNITED STATES – Corruption risk: Low
13 February: A former lawyer at U.S. technology giant Apple Inc. was charged by U.S. prosecutors with insider trading. According to court documents filed by the Securities and Exchange Commission on 13 February, Gene Levoff is accused of using confidential information to trade his own Apple shares for personal gain of up to USD600,000. The insider trading, in which Levoff is accused of trading shares on the basis of financial reporting that had yet to be released, allegedly occurred between 2011 and 2016. Levoff, who worked for Apple from 2008 until 2018, denies the allegations against him.
Why it matters: The allegations highlight the high insider threat companies face, particularly publicly traded companies, from employees with access to sensitive financial information. Firms should assess the nature and likelihood of an insider threat. Companies should also develop appropriate countermeasures, including through IT monitoring systems to detect unusual staff behaviour, such as the downloading of large quantities of proprietary information. Staff with access to sensitive financial information should have been adequately vetted. Companies should self-report any financial irregularities to the competent securities and anti-corruption bodies.
United States – E.U. updates money laundering blacklist, adds U.S. territories
UNITED STATES – Political risk: Low
13 February: The European Commission, which is responsible for proposing and implementing E.U. decisions, added several countries and territories to its list of jurisdictions which it considers as having lax controls on terrorist-financing and money-laundering. Four U.S. territories were added to the list: American Samoa, U.S. Virgin Islands, Puerto Rico and Guam. The list must be now be approved by the European Council and the European Parliament within one month.
Why it matters: The U.S. Treasury claimed the listing process was ‘flawed’. If approved, E.U. companies trading with businesses from territories on the list will face heightened scrutiny, while E.U. banks will be forced to conduct additional checks on transactions involving entities in jurisdictions on the list. A2 Global advises compliance managers and officers to monitor updates on the European Council and European Parliament’s respective decisions and, if approved, incorporate the listing into company compliance programmes.
United States – President declares national emergency to fund border wall
UNITED STATES – Travel risk: Medium
14 February: President Donald Trump announced on 14 February that he would declare a national emergency to secure the funding needed to build a border wall with Mexico. Trump made the declaration on 15 February. The declaration now faces legal challenges from a coalition of 16 states.
Why it matters: Trump’s declaration of a national emergency marks a significant departure from previous implementations of the power, which largely focused on foreign policy issues. Trump’s usage possibly sets a precedent for further such circumventions of congressional approval. The measure would allow him to bypass conventional mechanisms, such as Congress’s rejection of his previous funding proposal, by diverting funds ordinarily allocated to issues such as disaster relief or counter-narcotics operations. A2 Global warns businesses that heightened tensions concerning the construction of the wall will result in greater uncertainty in the cross-border operating environment.
United States & Brazil – FBI probes multinational commodity group for bribery
UNITED STATES – Corruption risk: Low
BRAZIL – Corruption risk: Elevated
14 February: According to a Reuters news agency report on 14 February, the FBI – the U.S.’s domestic intelligence and security service – is investigating two senior executives at Switzerland-based energy trading firm Vitol over their alleged involvement in a bribery case implicating Brazilian state-owned oil group Petrobras. The two individuals, neither of whom have been charged by either U.S. or Brazilian prosecutors and did not comment when contacted by Reuters via email, are accused of bribing Petrobras employees via middlemen, in exchange for preferential deals involving petroleum derivatives and fuel storage. The report did not state when the alleged bribery occurred.
Why it matters: The report highlights the FBI’s increased scrutiny of foreign-based energy firms trading with Petrobras. The investigation, part of the wider ‘Car Wash’ corruption probe, has already led to many convictions in Brazil, and this development could prompt further developments in the probe, particularly against other firms in the commodity trading sector. A2 Global advises compliance officers to review prior transactions with Petrobras, report financial irregularities to local anti-corruption authorities, and co-operate fully with investigations in either the U.S. or Brazil.
Mexico, Central America & Caribbean
Haiti – U.S. nationals held on conspiracy charges as protests continue
HAITI – Travel risk: High
18 February: The U.S. Department of State confirmed that U.S. nationals are among a group of eight people detained in the capital Port-au-Prince on conspiracy charges. According to police, the group had been in cars without licence plates and were carrying weapons, drones and satellite phones. The action comes amid nationwide violent protests since 7 February demanding the resignation of President Jovenel Moïse. This is due to corruption allegations related to alleged misappropriation of Petrocaribe oil development funds – under which the Venezuelan government provides subsidised oil to regional allies – by government officials, and rising inflation.
Why it matters: Haiti has long suffered from rampant corruption, with accusations against the government exacerbating political instability. Access to essential goods such as gasoline, water and food was limited for around one week due to road blocks and business closures, though public transportation, government offices and businesses reopened yesterday (18 February). The arrest of these U.S. nationals will likely raise suspicions by the public and authorities against U.S. nationals in particular and other foreigners in general. Foreign nationals in the country should be particularly vigilant in the wake of these arrests. A2 Global notes that travel risk in Haiti remains high and travellers are therefore strongly advised against non-essential visits to the country, while violent unrest continues.
Mexico – Canadian miner accuses local criminal group of theft
MEXICO – Security risk: Elevated
12 February: Telson Mining Corporation, a Canadian mining company, accused a Mexican criminal group of stealing an estimated USD2 million to USD3 million of metal concentrates. Ralph Shearing, the company’s president, said that a group of compromised truck drivers employed by the company worked with thieves who stole the material while it was being transported from the Campo Morado mining complex in the state of Guerrero, southern Mexico.
The mining complex is used to produce zinc and lead concentrates. Shearing, who claimed that additional security measures helped address the problem, said that the thefts appear to have taken place over a four to five-month period.
Why it matters: The accusations underscore the risk posed by organised criminal groups who sometimes rely on compromised company employees to steal valuable materials from foreign businesses with interests in the extractive sector. The development is also consistent with the growing diversification of organised crime in Mexico, which in addition to drug-trafficking, has expanded operations to include fuel theft. A2 Global advises businesses with interests in the extractives industry in Mexico to regularly review security protocols and adopt measures that can mitigate the risk of theft or robbery. Effective measures include implementing more robust screening of potential and existing employees, including drivers, as well as deploying additional security staff to safeguard goods during transport. Logistics managers with operations in the country should also ensure that delivery vehicles are locked, and cargo properly secured at all times.
Mexico – U.S. conviction of cartel leader unlikely to stifle violent crime risks
MEXICO – Security risk: Elevated
12 February: A jury found Joaquín ‘El Chapo’ Guzmán, the former leader of a major Mexican drugs cartel, guilty of all criminal counts against him during a federal trial in New York City. Guzmán, who will be sentenced on 25 June, was accused of leading the powerful Sinaloa Cartel, a powerful Mexican organised crime group.
Why it matters: Despite the high-profile trial and guilty verdict against Guzmán, the development is largely symbolic as the flow of drugs into the U.S. from Mexico has continued to grow in recent years. The considerable number of drug cartels, which generally rely on violence to aggressively expand operations, means that if one group is weakened others will attempt to take over parts of their illicit activities.
In 2018, there were 33,341 homicides in Mexico, a 15 per cent increase on 2017. Most of these deaths were linked to cartel-related violence and illustrate the struggles successive governments have faced to combat violent crime. Businesses currently considering investments in Mexico should note that the security risk in the country remains elevated. Security managers responsible for staff in Mexico should continue to enforce strict security protocols for staff journeys and brief staff of the security threats.
Panama – Farmers’ protests set to increase travel risk across country
PANAMA – Travel risk: Elevated
19 February: Farmers are holding protests in various parts of the country on 21 February, starting at 1000 local time. According to farmers’ representatives, locations include the western provinces of Chiriqui and Bocas del Torro, the central provinces of Veraguas, Herrera, Los Santos, Coclé and Panamá Oeste province, west of the Panama Canal, and the north-central province of Colón. In particular, protests are planned in the capital, Panama City, second city and Caribbean seaport Colón, and La Chorrera, provincial capital of Panamá Oeste. Among farmers’ grievances are food safety regulations which they claim leave them at a disadvantage to cheaper imports.
Why it matters: While it is currently unclear whether the farmer protest will include blocking main roads and highways with agricultural vehicles, this is a strong possibility. Demonstrating producers on 21 June 2018 partially blocked the Pan-American Highway, at the town of Divisa, in the Azuero Peninsula. Business travellers should vacate the area of any protests, as there is the likelihood that these could escalate into confrontations with security forces. Logistics companies should factor into delivery schedules the likelihood that the Panama Canal, ports and major highways could be impacted by protests.
Bolivia – Opposition protests to mark 2016 referendum anniversary
BOLIVIA – Travel risk: Elevated
19 February: Opposition groups are calling on supporters to stage demonstrations in the cities of Sucre, in the southern highlands, and Santa Cruz, the business hub, on 21 February. This is to mark the second anniversary of the 2016 constitutional referendum which proposed amendments that would have allowed president Evo Morales to run for a fourth term as president. A majority of voters voted against the proposals, preventing Morales from seeking another term. However, on 4 December 2018, the supreme electoral tribunal ruled that Morales would be allowed to run, which critics argued was unconstitutional and prompted widespread anti-government protests. In Santa Cruz, opposition groups will gather at Cristo Redentor monument at 1700 local time, while protesters will also gather at Plaza 25 de Mayo, a central square in Sucre.
Why it matters: The protests on 21 February will likely resemble past demonstrations over the same issue, which means there is a high risk of violent confrontations between opposition protesters and police. Business travellers in Sucre and Santa Cruz should avoid any demonstrations as a precaution and follow instructions from local police.
Venezuela – Russian bank freezes assets of state-owned oil company
VENEZUELA – Corruption risk: Extreme
17 February: Russian state-owned lender Gazprombank, Russia’s third-largest bank, decided to freeze the accounts of Venezuela’s state-owned oil company, PDVSA. The news comes after Reuters reported that PDVSA informed its customers of its joint ventures earlier this month to deposit oil-sales proceeds into Gazprombank accounts. According to reports, Gazprombank decided to take this action in order to avoid violating U.S. sanctions that were imposed on PDVSA on 29 January.
Why it matters: Gazprombank’s decision will most likely have a large impact on Venezuela’s weak economy, which is heavily reliant on oil exports. The U.S. sanctions on Venezuelan state oil were imposed by President Donald Trump in order to pressure President Nicolás Maduro to step down. The Russian government is the biggest supporter of the Maduro government, making the decision by the Russian state-owned bank an alarming one for Venezuela and Russian relations. PDVSA has denied the freezing of its assets according to Russian media. A2 Global advises businesses whose operations will be impacted by the PDVSA sanctions and the freezing of its assets to seek alternative crude oil suppliers and adjust supply chains accordingly.