China Insurer Trusts, U.K. VAT, Hong Kong-RBS: Compliance

Collective trusts that insurers are allowed to invest in are confined to those backed by financing assets and non-listed equity assets, according to draft rules posted on the website of China Insurance Regulatory Commission.

Collective trusts backed by fixed-income assets that insurers are allowed to invest in should have a rating of at least “A” by a Chinese rating agency, according to the statement.

Chinese insurers are banned from investing in stand-alone trusts, and trusts backed by assets in industries that are prohibited by the government, the statement said.

The regulator is soliciting opinions on the draft rules.

Compliance Action

U.K. Tax Authorities Question Investment Banks on VAT Scams

U.K. authorities are investigating possible tax fraud in the country’s 40 billion-pound ($67 billion) power-trading markets, according to accounting firms TMF Group and Deloitte LLP.

The alleged fraud involves traders paying value-added-tax, or VAT, to energy sellers who are suspected of keeping the money rather than turning it over to the government. Such scams are known as missing trader fraud.

Her Majesty’s Revenue & Customs has questioned traders from at least three trading firms, including two investment banks, according to Richard Asquith, a tax accountant at TMF in London, which advises the firms. It asked one of his clients for lists of all customers and suppliers, he said. Most of the alleged fraud involved the electricity market, Asquith said. He declined to identify the trading firms.

Tax inspectors have contacted gas and power market firms “with long and very detailed lists of questions” as part of a VAT investigation, Deloitte wrote in a March 3 note to clients.

Laura Parsons, a Deloitte spokeswoman, said no one was available to speak about its note.

While the tax office has questioned traders for investment banks, they aren’t believed to be targets of the investigation, according to Asquith and another person familiar with the inquiries. Asquith said he doesn’t know who allegedly perpetrated the fraud.

Prosecutors in Germany are going after similar VAT fraud in the carbon-emissions trading market.

Hong Kong Market Regulator Fines RBS for Trading Control Failure

Hong Kong’s securities regulator issued a reprimand to Royal Bank of Scotland Plc and fined the bank HK$6 million ($774,000) after it failed to detect and prevent trading misconduct.

The move follows an investigation into the lender’s systems and controls in 2011, after the discovery of unauthorized trading activities by former RBS trader Shirlina Tsang, Hong Kong’s Securities and Futures Commission said in a statement yesterday.

Risk management at RBS’s Emerging Markets Rates Desk in Hong Kong, where Tsang used to work, was “deficient,” according to the SFC.

Tsang pleaded guilty to fraud for trying to hide losses of 19.5 million pounds ($30.8 million), and was sentenced to 50 months in jail.

“RBS acted quickly in alerting the SFC,” Mark Steward, the SFC’s executive director of enforcement, said in yesterday’s statement. “This deserves substantial credit and is the reason why today’s sanctions are not heavier ones.”

Comings and Goings

Justice Department Names Marshall Miller Deputy Criminal Chief

Marshall Miller, who oversaw terrorism and fraud prosecutions as head of the criminal division of the U.S. Attorney’s Office in Brooklyn, New York, was selected to help run the Justice Department’s criminal unit.

Miller, 42, will be the division’s second-in-command, according to Peter Carr, a Justice Department spokesman.

His probable boss, Leslie Caldwell, was nominated for the top post by President Barack Obama, and is awaiting a Senate confirmation vote. David O’Neil is acting head of the division.

To contact the reporter on this story: Carla Main in New York at

To contact the editors responsible for this story: Michael Hytha at Andrew Dunn, Stephen Farr

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