UK imposes sanctions on Russians and Saudis over human rights
Raab to name first foreign citizens to face visa bans and have their assets frozen
Dominic Raab, UK foreign secretary, will on Monday name the first foreign citizens to face visa bans and asset freezes for alleged human rights abuses under Britain’s new post-Brexit sanctions regime, with Russians and Saudis among those expected to be targeted.
Mr Raab, a former human rights lawyer, has pushed for a tough sanctions regime in spite of misgivings among some in the Foreign Office over its likely impact on bilateral relations with some strategic allies with poor human rights records, including Saudi Arabia.
Government officials have been working on targeting individuals in Russia, Saudi Arabia and North Korea under Britain’s version of the 2012 US Magnitsky Act, named after the Russian lawyer who died in a Moscow prison in 2009 after alleging officials were involved in tax fraud.
The Foreign Office declined to reveal the list of individuals covered in the first list of targets under the UK’s 2018 sanctions act. But Mr Raab’s blacklist, to be set out in parliament on Monday, is expected to include those believed by Britain to be implicated in the death of Magnitsky.
While UK relations with Moscow are already frozen after the 2018 nerve agent attack on former double agent Sergei Skripal, Mr Raab is also expected to target Saudi citizens suspected of involvement in the killing of the journalist Jamal Khashoggi in 2018 — a move which will strain ties to one of Britain’s biggest allies in the Gulf.
The new sanctions will come into force immediately, freezing the UK assets of those named by Mr Raab and banning them from entering the country. Several dozen people are expected to be named and the foreign secretary said they would include torturers, murderers and abusers.
“With this legislation, the UK will have new powers to stop those involved in serious human rights abuses and violations from entering the UK, channelling money through our banks and profiting from our economy,” said Mr Raab.
“This is a clear example of how the UK will act as a force for good in the world, standing up for human rights. We will not let those who seek to inflict pain and destroy the lives of innocent victims benefit from what the UK has to offer.”
He told the Financial Times that the new regime could be expanded later in the year to cover issues such as corruption. The oppression of journalists and abuses of people because of their religious beliefs could also be added.
He admitted there had been “some disquiet” about the effect of the sanctions regime on bilateral relations, but added: “It is morally the right thing to do.”
Mr Raab and former Labour foreign secretary David Miliband raised the Magnitsky case in the Commons in 2012. Mr Raab has stayed in touch with Natalia, the widow of the former Russian lawyer, over the intervening years.
“This case is very close to my heart,” he said, calling Magnitsky the “Solzhenitsyn of his generation” who had been determined to expose wrongdoing at the heart of the country he loved.
Mr Raab said Britain would use its autonomous sanctions regime to work with other allies including the EU, the US, Canada and Australia to punish those involved in serious crimes.
Wirecard’s core business has been lossmaking for years, audit shows
Operating performance in Europe and the Americas far worse then previously known, according to KPMG report
Wirecard’s core business in Europe and the Americas has been lossmaking for years, casting doubt on the economic substance of the parts of the company not directly affected by its accounting scandal.
The German payments group collapsed into insolvency last month after revealing that €1.9bn in cash in its accounts probably did “not exist”. For years it had portrayed itself as a highly-profitable business.
According to its EY-audited financial reports, between 2016 and 2018 Wirecard generated operating margins of around 22 per cent and almost doubled annual earnings before interest and taxes to €439m. The company last year also promised investors a fivefold increase in profits by 2025.
But such profits appear to have existed largely on paper, according to data in the confidential appendix of a special audit conducted by KPMG and seen by the Financial Times. The report was commissioned by the company late last year in response to questions over its accounting practices.
Wirecard’s internal numbers reveal that the operating performance of its core business — mainly payments processing in Europe and issuing credit cards in Europe and North America — was far worse than previously known.
The figures show that those core activities have also become increasingly lossmaking in recent years, despite accounting for half of the company’s reported revenue and almost two-thirds of the transaction volume.
In 2018, when Wirecard’s stock market valuation topped €24bn and it replaced Commerzbank in Germany’s prestigious Dax index, activities under the company’s direct control produced €74m in operating losses, compared to losses of €3m a year earlier, numbers in the appendix to the KPMG report show.
This was masked by profits attributed to outsourced activities in Asia, where Wirecard said it relied on third-party business partners because it did not possess its own licences to operate.
These outsourced activities are now at the centre of an accounting scandal that has rocked German finance. Wirecard warned investors last month that this part of the business may not have “actually been conducted for the benefit of the company” and was misrepresented to investors.
Wirecard declined to comment.
The published version of the KPMG report, which did not include the appendix, stated that the outsourced activities accounted for “the lion’s share” of group profits but did not disclose any numbers.
But the activities outside Asia have failed to generate profit since 2016, when that part of the business made €20m, contributing just 8 per cent to group EBIT.
When the Financial Times reported last year that three opaque business partners in Asia were responsible for most of Wirecard’s profits, chief executive Markus Braun told analysts in an earnings call that “this is simply not true”.
The poor operating performance of Wirecard’s activities outside Asia highlights the challenges that Wirecard’s administrator Michael Jaffé is facing as he is looking for buyers of Wirecard’s remaining business.
A sale of Wirecard’s subsidiaries needs to happen within weeks or they will lose any remaining value, said people familiar with the matter.
“Wirecard has very few physical assets, and the risk is that many of its clients will switch to rivals soon,” said one of the people, adding that Wirecard’s legal claims against its former management and its accountant may be more valuable than its remaining operating business.
Last week, Mr Jaffé said that “numerous” potential buyers had flagged appetite for parts of Wirecard. Germany’s largest lender, Deutsche Bank, has emerged as one of the potential bidders for parts of the defunct payments group.
“We're obviously a big participant in the payments business, it's a big part of what we do, especially in the corporate bank,” Deutsche’s chief financial officer James von Moltke told the Financial Times, adding that the lender had been “quite clear that we would look for opportunities to grow” in that business.
Last week, Deutsche Bank said it was willing to provide financial support to Wirecard Bank, the payments group’s lending arm which so far is not part of the insolvency proceedings. Mr von Moltke said that the discussions over Wirecard were “in the early days” and that the assessment of the true value of Wirecard's remaining operations was “very, very hard”.
Germany’s finance minister Olaf Scholz on Sunday said that he thought “we have so far only seen the tip of the iceberg” with regard to the Wirecard scandal. “There is probably more to come,” he told Frankfurter Allgemeine Sonntagszeitung in an interview.
best and worst-performing funds of 2020
Products run by BlackRock, H2O and Invesco battered by pandemic
Funds run by BlackRock, H2O and Invesco have topped a list of the worst-performing investment products in Europe so far this year, losing more than a quarter as the coronavirus pandemic battered active managers.
According to Morningstar, the data provider, BlackRock’s BGF Latin American A2 fund took the title of worst-performing fund, down 37 per cent in the first six months of 2020. Another BlackRock fund, BGF World Energy A2, also appeared among the 10 worst performers in terms of investment returns.
Two H20 products also featured, including the H2O Multibonds fund that lost 36.2 per cent. The Morningstar data looked at open-ended funds with at least €1bn in assets at the end of June that were domiciled in Europe, including the UK.
About two-thirds of the more than 1,700 actively managed funds Morningstar examined delivered negative returns this year, meaning investors have lost money. Active managers select stocks or bonds rather than track an index.
Laura Suter, personal finance analyst at AJ Bell, the investment platform, said active managers had “not covered themselves in glory” this year.
“Most investors would expect during times of market turmoil that is when active managers would shine, being able to navigate the worst of the market falls and dodge the companies that look likely to fail in the current lockdown and pandemic,” she said.
“But in lots of markets that hasn’t proven true and in many cases active fund managers have actually underperformed markets — some quite considerably.”
Two funds from Invesco — the Income and High Income funds — also ranked among the worst performers this year in Europe, suffering as companies slashed dividends in response to the pandemic.
The two Invesco funds were once hugely popular, but have struggled with years of underperformance after Mark Barnett took over their management from Neil Woodford when he left to set up his ill-fated investment business. In May, Invesco announced Mr Barnett was leaving the $1tn asset manager, with James Goldstone and Ciaran Mallon named as new managers of the funds.
The 10 worst performers also included two UK-focused funds from JO Hambro Capital Management, and one fund each from Man Group and Ninety One, the investment house formerly known as Investec Asset Management.
Invesco, BlackRock, H2O and Man Group declined to comment.
JO Hambro said its UK Dynamic and UK Equity Income funds had been hit because of their bias for so-called value stocks. Value stocks trade at a lower price compared with their fundamentals, such as earnings.
“The Covid-19-related market sell-off proved particularly acute for value stocks, compounding the underperformance of value stocks in recent years,” the company said.
It said while the short-term performance had suffered this year, “both funds have excellent long-term track records and both investment teams are excited by the potential within their portfolios”.
Ninety One said markets in Latin America had been volatile in 2020. While its fund was hit by the sell-off in Brazil at the start of the year, the asset manager said performance picked up significantly in the second quarter with the fund delivering 29.7 per cent net of fees.
About two-thirds of passive funds that Morningstar examined also generated negative returns. But the analysis also found fewer examples of outsized positive returns among index or exchange traded funds compared with active funds.
The best-performing actively managed fund was the Ruffer gold fund, which returned 55.7 per cent. The best performing passive fund, BlackRock’s iShares Gold Producers ETF, returned 22 per cent.
An actively managed BlackRock fund that invests in the precious metal also appeared on the best-performing list, benefiting as investors turned to the metal that traditionally acts as a haven in times of market stress.
Three funds from Baillie Gifford, the Scottish fund house, also appeared on the best-performing list, including the Baillie Gifford American product, which returned 54 per cent this year.
Vitamin D promoted as potential defence against coronavirus
But scientists say more research is needed to prove whether ‘sunshine’ supplements can fight off Covid-19
Calls are growing for people to take vitamin D supplements to reduce the risk of contracting Covid-19, as some research suggests they could be especially beneficial to those with darker skin.
This week in the UK people were urged to make sure they are consuming enough of the vitamin D three influential organisations, including the government’s Scientific Advisory Commission on Nutrition.
But even advocates of the “sunshine vitamin” — so called because the body makes it in the skin through exposure to sunlight — say more evidence is needed to prove definitively that it cuts the risk of coronavirus infection and severity of symptoms.
Vitamin D, a steroid hormone, is essential for maintaining a healthy immune system. In mid-latitude countries such as the UK, people with pale skin can make enough of it during summer by exposing bare arms or legs to sunlight for a few minutes a day.
The process takes longer in those with heavily pigmented skin that blocks more UltraViolet radiation from the sun. In winter all our vitamin D has to come from foods, such as oily fish, egg yolks and mushrooms, or pills.
Other reports promoting vitamin D came from the National Institute for Health and Care Excellence and the Royal Society, Britain’s senior scientific body. The latter urged the government to strengthen its public health advice for the public to take daily vitamin D supplements while more research takes place.
Charles Bangham, professor of immunology at Imperial College London and co-author of the Royal Society paper, said: “I started from quite a sceptical position, doubting whether vitamin D was going to play an important role in Covid-19, but I am now convinced that there is strong evidence that people who are deficient in vitamin D are more susceptible to acute respiratory tract infections.”
He added: “It is possible that higher rates of vitamin D deficiency could be one reason why people with darker skin are affected more seriously by the disease, but there are a lot of other factors as well so we need to collect this data.”
In the UK people from black and minority ethic groups make up about 13 per cent of the population but account for a third of Covid-19 patients admitted to critical care units. Black Americans represent around 14 per cent of the US population and 30 per cent of Covid-19 hospital admissions.
Vitamin D has long been recognised as essential for bone and muscle health, but other benefits such as warding off infections and cancer are controversial.
The government’s advisory commission on nutrition and the National Institute for Health and Care Excellence reviewed evidence from clinical studies to see whether taking vitamin D supplements reduced the risk of acute respiratory tract infections in general or Covid-19 in particular.
Both concluded that research results so far were insufficient to give a clear answer. But Alison Tedstone, chief nutritionist at Public Health England which commissioned both reviews, said: “With many people spending more time indoors, particularly the more vulnerable groups and those ‘shielding’, there is a risk that some people may not be getting all the vitamin D they need from sunlight. It’s important they consider taking a daily 10 micrograms vitamin D supplement.”
Naveed Sattar, professor of medicine at Glasgow University, remains sceptical, after leading a study of 340,000 UK Biobank participants, of whom 650 were hospitalised with Covid-19 and 200 died from the disease. After adjusting for other variables the researchers found no association between Covid-19 and vitamin D levels in blood.
“Many want to believe Vitamin D works but we all have to be fully objective and look at the best evidence,” said Prof Sattar. “You can argue biological plausibility for anything but only a well-controlled randomised clinical trial of vitamin D will tell us the answer.”
Adrian Martineau, professor of respiratory infection and immunity at Queen Mary University of London, aims to provide more evidence. His team pooled data from 25 clinical studies in 2017 and found a modest protective effect of vitamin D against respiratory infections, which was stronger in people with low levels of the vitamin in their blood.
Prof Martineau is expanding that meta-analysis to take in data from 14 more trials while aiming to provide new evidence through Covidence UK, a national study examining risk factors for Covid-19 with a particular focus on vitamin D.
Sue Lanham-New, head of nutritional sciences at the University of Surrey, led a study that dismissed the effectiveness of very high doses of vitamin D — above 100 micrograms or 10 times the recommended UK daily intake — for preventing coronavirus infection or treating disease.
“Although these excessive doses do not reduce the risk of contracting Covid-19, it is very important that people have enough vitamin D — and many people from Afro-Caribbean and Asian backgrounds have too little,” said Professor Lanham-New. “Amid all the misinformation and confusion about vitamin D, the most important message is that people must avoid deficiency.”