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  • OFAC Imposes Additional Iranian Sanctions, List Includes Entities Involved in DDoS Attacks Against U.S. Financial Institutions

    Financial Crimes

    On September 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on 11 entities and individuals for supporting designated Iranian actors or for conducting malicious cyberattacks, including engaging in a series of distributed denial of service (DDoS) attacks against approximately 46 U.S. financial institutions. As reported in an indictment delivered by a federal grand jury in the Southern District of New York (see March 24, 2016 DOJ press release), the DDoS attacks—allegedly conducted by seven Iranian individuals between December 2011 and mid-2013—denied customers access to online bank accounts and collectively cost the affected financial institutions “tens of millions of dollars in remediation costs as they worked to neutralize and mitigate the attacks on their [computer] servers.” During a DDoS attack, a “malicious actor” gains remote control of a server through the installation of malicious software. Once compromised, the “malicious actor” can collect hundreds or thousands of these compromised devices (collectively known as a “botnet”), and, once control is achieved, will “direct the computers or servers comprising the botnet to carry out computer network attack[s] and computer network exploitation activity.” Three of the seven sanctioned individuals worked for a company that was added to OFAC’s updated SDN list on September 14 and oversaw a network of compromised computers that powered DDoS attacks. The other four individuals operated a second DDoS botnet on behalf of a different company listed on OFAC’s non-SDN list. Both Iranian-based private computer security companies perform work on behalf of the Iranian Government, including Iran’s Islamic Revolutionary Guard Corps. Pursuant to E.O. 13694, U.S. persons are prohibited from dealing with the designated entities and individuals, and “foreign financial institutions that facilitate significant transactions for, or persons that provide material or certain other support to, the entities and individuals designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.”

    In addition, pursuant to E.O. 13382, OFAC sanctioned an Iranian-based engineering company for engaging in activities related to Iran’s ballistic missile program, which include providing “ financial, material, technological, or other support for, or goods or services in support of, the [Islamic Revolutionary Guard Corps].” Two Ukrainian-based companies were also sanctioned pursuant to E.O. 13224 for assisting previously sanctioned Iranian and Iraqi airlines in obtaining U.S.-origin aircraft, as well as crew and services.

    Financial Crimes Sanctions Treasury Department OFAC DOJ Indictment Privacy/Cyber Risk & Data Security

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  • FCPA Sting Operation Results in Conspiracy Charge for Retired U.S. Army Colonel

    Financial Crimes

    On August 29, the DOJ announced that it had unsealed a criminal complaint and FBI affidavit charging a retired U.S. Army colonel “for his alleged role in a foreign bribery and money laundering scheme in connection with a planned $84 million port development project in Haiti.” The DOJ alleges that he solicited bribes “from undercover [FBI] agents in Boston who posed as potential investors,” telling the agents “that he would funnel the payments to Haitian officials through a non-profit entity that he controlled . . . in order to secure government approval of the project.” The retired colonel allegedly received a $50,000 payment from the FBI, which he wired to his non-profit organization. While he ultimately used the payment for personal purposes, rather than his promised bribery, he allegedly “intended to seek additional money from the undercover agents to use for future bribe payments in connection with the port project.” The DOJ also alleges that FBI agents intercepted telephone calls where he “discussed bribing an aide to a senior Haitian official by giving him a job on the port development project after he left his position.”

    FCPA sting operations are relatively rare. An infamous FCPA sting operation involving Africa resulted in charges for 22 defendants, but it concluded unsuccessfully in 2012 after a series of acquittals and hung juries caused the DOJ to dismiss the remaining indictments.

    Financial Crimes DOJ Bribery Anti-Money Laundering

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  • SFO Director Urges Department to Compete With DOJ on Home Turf

    Financial Crimes

    In a September 4 speech, Serious Fraud Office (SFO) Director David Green urged the SFO to lead anti-corruption enforcement efforts against UK-connected companies, warning that “if we take our foot off the pedal . . . , others will fill the void.” Green noted that the DOJ “is not shy about enforcing the [FCPA] against foreign companies,” and emphasized that seven of the top ten highest-dollar FCPA cases since 2008 were brought against non-American companies. Green said that “it is surely right that the UK should lead enforcement in relation to UK companies or companies with strong connections here,” because it not only “demonstrates our commitment to the level playing field,” but it also “ensures that hefty financial penalties go to UK public coffers rather than elsewhere.”

    Financial Crimes UK Serious Fraud Office DOJ FCPA

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  • Report: California-Based Ride Sharing Company Facing DOJ Scrutiny

    Financial Crimes

    On August 29, the Wall Street Journal reported that a California-based ride sharing company is facing scrutiny from the DOJ, which has taken preliminary steps to investigate potential FCPA violations at the company. The company has expanded into more than 70 countries. A company spokesman confirmed the DOJ’s inquiry. The Wall Street Journal report stated that it was unclear whether DOJ would open a formal investigation.

    Financial Crimes FCPA DOJ

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  • DOJ Formally Ends Operation Chokepoint; Judicial and Financial Services Committee Leaders and Acting Comptroller of the Currency Respond

    Federal Issues

    On August 16, the DOJ sent a letter to House Judiciary Committee Chairman Bob Goodlatte (R-Va.) formally announcing the DOJ’s commitment to end its initiative known as Operation Chokepoint, which was designed to target fraud by investigating U.S. banks and the business they do with companies believed to be a higher risk for fraud and money laundering. Assistant Attorney General Stephen Boyd wrote: “All of the [DOJ]’s bank investigations conducted as part of Operation Chokepoint are now over, the initiative is no longer in effect, and it will not be undertaken again.” Boyd further reiterated that “the [DOJ] will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities.” However, criminal activity discovered as a result from responses to subpoenas may continue to be pursued by the DOJ. Additionally, the FDIC also rescinded a list identifying “purportedly ‘high-risk’ merchants” and the DOJ noted that it “strongly agrees with that withdrawal.”

    On August 18, Rep. Goodlatte’s office, along with other judicial and financial services committee leaders, issued praise for the DOJ’s decision: “Targeted industries, such as firearms dealers, were presumed guilty by the Obama Justice Department until proven innocent, and many businesses are still facing the repercussions of this misguided program.”

    Separately, on August 21, Acting Comptroller of the Currency Keith A. Noreika sent a letter to House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) repudiating Operation Chokepoint and claiming “the [OCC] rejects the targeting of any business operating within state and federal law as well as any intimidation of regulated financial institutions into banking or denying banking services to particular businesses.” Noreika further stated that the OCC “expects the banks it supervises to maintain banking relationships with any lawful businesses or customers they choose, so long as they effectively manage any risks related to the resulting transactions and comply with applicable laws and regulations.”

    The DOJ’s announcement comes after years of attempts by Congressional Republicans to end the initiative as well as lawsuits filed by payday lenders over claims that regulator interpretations of “reputational risk” violated their rights to due process. (See previous InfoBytes coverage here.)

    Federal Issues DOJ Operation Choke Point Payday Lending OCC House Financial Services Committee

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  • Minnesota-Based Company Announces Closure of FCPA Investigations

    Financial Crimes

    On August 7, a Minnesota-based company announced in its Form 10-Q the closure of DOJ and SEC FCPA investigations related to gift, travel, entertainment, and other expenses incurred in connection with its Asia-Pacific operations. The company initially informed the DOJ and SEC about this matter in 2012 and thereafter provided the government periodic updates. According to the company’s 10-Q, the government’s investigations were closed “without further action taken by either [the SEC or DOJ].”

    Financial Crimes FCPA DOJ SEC

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  • Ohio-Based Corporation Discloses FCPA Investigation in Quarterly Filing

    Financial Crimes

    On August 4, Ohio-based corporation disclosed in its 10-Q that the DOJ and SEC are conducting investigations concerning potential violations of the FCPA related to a subsidiary’s operations in Turkey. The company operates in more than 70 countries and develops and sells technology-enabled solutions, including data warehouse management and database technologies. 

    According to the 10-Q, the company “discovered certain questionable expenditures for travel, gifts and other expenses at one of its international subsidiaries” doing business in Turkey. The company stated that it promptly launched an internal investigation and, in February 2017, self-disclosed the investigation to the SEC and DOJ. According to its 10-Q, the company has periodically updated the government about its investigation and plans to “continue to cooperate fully.” The company also noted that it already has “taken remedial actions,” including terminations, and that the FCPA issues “involved specific individuals who are no longer with the Company.” 

    It appears that the company is making a case for full cooperation credit under the DOJ’s Pilot Program, which encourages companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.”

    Financial Crimes FCPA DOJ SEC

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  • DOJ Announces Settlements with Non-Bank Mortgage Lender to Resolve Alleged False Claims Act Violations

    Lending

    On August 8, the DOJ announced a $74.5 million settlement with a non-bank mortgage lender and certain affiliates to resolve potential claims that they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development and the Veterans Administration (VA), and by selling certain loans to Fannie Mae and Freddie Mac that did not meet applicable requirements. According to the terms of the two settlement agreements, $65 million of the settlement will be paid to resolve allegations relating to FHA loans, and $9.45 million will be paid to resolve potential civil claims relating to certain specified VA, Fannie Mae, and Freddie Mac loans. The settlements also fully resolved a False Claims Act qui tam lawsuit that had been pending in the United States District Court for the Eastern District of New York.

    The settlement included no admission of liability by the lender. The lender issued a statement responding to the settlements: “We have agreed to resolve these matters, which cover certain legacy origination and underwriting activities, without admitting liability, in order to avoid the distraction and expense of potential litigation. While we cooperated fully in these investigations since receiving subpoenas in 2013, we concluded that settling these matters is in the best interest of [the company] and its constituents.”

    Lending Mortgages False Claims Act / FIRREA Mortgage Origination HUD Fannie Mae Freddie Mac FHA Settlement DOJ Nonbank Supervision

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  • Three Companies Announce the Close of FCPA Investigations

    Financial Crimes

    During the week of July 24, 2017, three different companies announced the closure of DOJ and/or SEC FCPA investigations.

    In a Form 10-Q filed with the SEC on July 25, 2017, an American multinational technology company disclosed that the DOJ and SEC had each informed the company in June 2017 of the closure of their respective investigations into “alleged illegal activity by a former Poland employee in connection with sales to the Polish government.” The company initially informed the SEC in 2012 that the Polish Central Anti-Corruption Bureau was looking into the matter, and the DOJ followed up with its own investigation in April of 2013. The DOJ expanded the investigation from Poland to Argentina, Bangladesh, and Ukraine. The 2012 issues came on the heels of a 2011 settlement in which the company paid the SEC $10 million to settle separate FCPA allegations for alleged cash payments to Chinese and Korean officials.

    A South African alternative payment systems provider made a similar announcement on July 27, stating that the DOJ had written a letter to the company closing its investigation of alleged FCPA and disclosure violations. According to the announcement, the DOJ, along with the SEC and South African authorities, began looking into a 2012 contract award process involving a subsidiary of the company after an unsuccessful bidder for the same contract “refer[ed] unsubstantiated South African press articles to the DOJ.” The SEC was the first to bow out of the investigation, closing its inquiry through a letter in 2015, followed six months later by the South African government. The company is traded on NASDAQ’s Global Select Market, providing a jurisdictional hook into a case otherwise about payments made by a South African company in South Africa to South African citizens who were South African government employees. Our additional coverage of this matter can be viewed here.

    In a Form 10-Q filed on July 25, 2017, a mining company also announced the end of a DOJ investigation into alleged violations of the FCPA “relating to certain business activities of [the company] and its affiliates and contractors in countries outside the U.S.” According to the announcement, the Colorado company had already received a similar declination from the SEC earlier this year. Our additional coverage of this matter can be viewed here

    The DOJ simultaneously reportedly confirmed to the Wall Street Journal that the agency was still actively enforcing the FCPA. The Journal cited an anonymous source at the DOJ for assurances that “though there haven’t been any new corporate FCPA cases since mid-January, there is no letup in U.S. enforcement efforts.”

    Financial Crimes DOJ SEC FCPA

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  • Justice Department Official Stresses International Cooperation in FCPA Enforcement

    Financial Crimes

    In a recent speech before the Atlantic Council Inter-American Dialogue Event, Acting Assistant Attorney General Kenneth Blanco discussed the importance of foreign law enforcement cooperation in FCPA investigations. Blanco focused his remarks on cooperation between the United States and Brazil and also touched on the Justice Department’s Kleptocracy Asset Recovery Initiative. 

    Blanco noted: “As transnational crime continues to grow in scope and complexity, we increasingly find ourselves looking across the globe to collect evidence and identify witnesses necessary to build cases, requiring greater and closer collaboration with our foreign counterparts. As a result, we find ourselves relying more and more on the use of the various mechanisms of international cooperation with our foreign partners that permit for evidence exchange, fugitive apprehension, and asset recovery.” 

    Blanco’s remarks highlight the DOJ’s continued focus on international and transnational conduct with the cooperation of foreign law enforcement agencies. He concluded: “We at the Department of Justice will continue, like we have for years, pushing forward hard against corruption, wherever it is, and we welcome our fellow counterparts around the world who are fighting this important fight against corruption.”

    Financial Crimes FCPA Corruption DOJ International

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