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  • California-Based Financial Institution Reaches Agreement with DOJ, Forfeits Over $97 Million for Bank Secrecy Act Violations

    Financial Crimes

    On May 22, the U.S. Department of Justice announced that a California-based financial institution and its parent company have agreed to forfeit over $97 million to resolve an investigation into alleged Bank Secrecy Act (BSA) violations. The May 18 agreement between the Bank and the DOJ included a Statement of Facts in which the Bank admitted to criminal violations for willfully failing to maintain an effective anti-money laundering compliance program with appropriate policies, procedures, and controls to guard against money laundering, as well as willfully failing to file suspicious activity reports (SARs). It further admitted that from at least 2007 until at least 2012, it processed more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion, but, while its monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions, it conducted fewer than 10 investigations and filed only nine SARs. Notably, the nine SARs covered only 700 transactions totaling overall approximately $341,307. Furthermore, the financial institution recognized that over the same time period it needed to improve its monitoring of its money services businesses’ (MSBs) remittances but failed to provide appropriate staffing and resources, which led to its BSA department being unable to “conduct appropriate transaction monitoring.” This resulted in a failure to file SARs on suspicious remittance transactions. Although the financial institution recognized the need to enhance its monitoring process as early as 2004, it continued to expand its MSB business without adding staffing resources and failed to make necessary improvements to its transaction monitoring controls.

    However, the DOJ stated its decision to enter into a non-prosecution agreement with the financial institution was based on evidence of extensive remedial actions. According to the DOJ’s press release, the financial institution devoted significant resources to remediation of its BSA and anti-money laundering (AML) deficiencies, exited its MSB business entirely, and ultimately ceased all banking operations. It was further credited for its cooperation with the DOJ’s criminal investigation by: (i) providing factual presentations; (ii) voluntarily making available foreign-based employees for interviews in the U.S.; (iii) producing foreign documents without implicating foreign data privacy laws; and (iv) collecting, analyzing, and organizing voluminous evidence and information for the DOJ. Under the terms of the agreement, the financial institution and its parent company have agreed to fully cooperate in this and any future DOJ investigations relating to violations of the BSA and AML statutes, as well as report, for a period of one year, any evidence or allegations of such violations. The parent company has also agreed to report to the DOJ “regarding [the] implementation of compliance measures to improve oversight of its subsidiaries’ BSA compliance.”

    Financial Crimes Anti-Money Laundering Bank Secrecy Act DOJ SARs

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  • FTC, Federal, State, and International Partners Announce Crackdown on Tech Support Scams

    Privacy, Cyber Risk & Data Security

    On May 12, the FTC, along with federal, state and international law enforcement partners, announced new enforcement actions in its “Operation Tech Trap” program. The program is designed to crack down on tech support scams that, among other things, deceive consumers into believing their computers are infected with viruses and malware and then charge them for unnecessary repairs. According to FTC, its Operation Tech Trap partners have brought 29 law enforcement actions against deceptive tech support operations in the last year. Among the four new complaints announced on May 12, the FTC has already been granted temporary restraining orders in three of the cases to stop the tech support companies’ deceptive practices, freeze their assets, and appoint a temporary receiver to take control of them.

    The FTC also announced a settlement in a pending action brought by the FTC and the Attorneys General of Connecticut and Pennsylvania against two defendants who allegedly participated in deceptive acts and practices in connection with the advertising, marketing, and sale of computer security or technical support products and services. Under the terms of the settlement, the defendants are subject to a money judgment in excess of $27 million. The stipulated final order has been entered by the U.S. District Court for the Eastern District of Pennsylvania. In addition to the FTC and state cases, DOJ brought federal criminal charges against seven individuals, two of whom have entered guilty pleas, for their participation in an international “Tech Support Scam.” Moreover, with respect to its international efforts, Operation Tech Trap is working with authorities in India to crack down on tech support scammers, and have also instituted consumer and business education outreach initiatives with Australia and Canada.

    Privacy/Cyber Risk & Data Security FTC Enforcement State AG DOJ

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  • CFPB, DOJ Argue Against State AGs Request to Redirect Unused Consumer Redress Funds


    On May 10, the CFPB filed a brief and the DOJ filed a separate “Statement of Interest of the United States of America” opposing a request by the Attorneys General of Connecticut, Indiana, Kansas, and Vermont (State AGs) to intervene in a CFPB lawsuit to address the distribution of unclaimed settlement funds.

    As previously reported in InfoBytes, in December 2014 the CFPB sued a telecommunications company over allegations that it violated Dodd-Frank and the Consumer Financial Protection Act by knowingly allowing third-party aggregators to bill unauthorized charges to its wireless telephone customers and failing to respond to consumer complaints for nearly a decade. Under the terms of the 2015 Stipulated Final Judgment and Order, the company was required to set aside $50 million for consumer redress. The consumer claims period expired with approximately $15 million remaining unclaimed, and the State AGs sought to have those funds deposited with the National Association of Attorneys General to be used for “consumer protection purposes.” Specifically, in their  January 3 Memorandum in Support of Joint Motion to Intervene to Modify Stipulated Final Judgment and Order, the State AGs asked that, “[a]ny funds not used for such equitable relief will be deposited . . . with the National Association of Attorneys General”—instead of being deposited in the Treasury as disgorgement—to be used to “train, support and improve the coordination of the state consumer protection attorneys charged with enforcement of the laws prohibiting the type of unfair and deceptive practices alleged by the CFPB in this [a]ction.”

    In its memorandum opposing the joint request to intervene, the CFPB countered that although the redress plan provides that the Bureau may, in consultation with certain states and the FCC, apply unused redress funds to “other equitable relief reasonably related to the Complaint’s allegations,” it has not proposed doing so and any undistributed amounts are to be directed to the Treasury. The DOJ supported the CFPB’s position, arguing that the State AGs’ motion is untimely because that the States were “well aware of this action” over 18 months before filing their motion. The DOJ further asserted that “beyond being consulted by the CFPB if remaining funds were to be devoted to further equitable relief, the Consent Order afforded the States no role with respect to distribution of the remaining Redress Amount funds.”

    Courts Consumer Finance CFPB DOJ State AG

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  • DOJ Issues Strict Charging and Sentencing Policy for All Federal Crimes

    Financial Crimes

    On May 10, 2017, U.S. Attorney General Jeff Sessions issued a memorandum ordering all federal prosecutors, in all criminal cases, to “charge and pursue the most serious, readily provable offense,” and to “disclose to the sentencing court all facts that impact the sentencing guidelines or mandatory minimum sentences.” The new policy – which immediately rescinds Obama-era leniency policies – is likely primarily aimed at drug-related cases, but it will impact white collar and FCPA cases as well. For instance, under the policy, prosecutors may charge more defendants with money laundering or wire fraud in addition to FCPA violations, taking into account the FCPA’s relatively low five-year maximum sentences. Prosecutors seeking an exception must secure supervisory approval and document their reasoning in the case file, which may complicate plea deals. In a May 12 speech, Sessions said of the new policy: “Charging and sentencing recommendations are bedrock responsibilities of any prosecutor. And I trust our prosecutors in the field to make good judgments. They deserve to be unhandcuffed and not micro-managed from Washington.”

    Financial Crimes DOJ Sessions

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  • Reports: American Multinational Retailing Corporation Nearing Resolution of Bribery Probe

    Financial Crimes

    Bloomberg reports that an American multinational retailing corporation is nearing a resolution of a five-year old joint inquiry by the DOJ and SEC. Citing an unnamed source familiar with the matter, Bloomberg reports that the company is preparing to pay $300 million to settle allegations that company employees paid bribes in Mexico, China, and India. The same source reported that the resolution will also include at least one guilty plea by a subsidiary of the company, a non-prosecution agreement for the parent company, and a monitorship.

    In March of 2015, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing the company's board of directors of concealing Mexican bribery claims from investors. The lawsuit was filed after a 2012 article by the New York Times reported that top officials at the company’s Mexican subsidiary oversaw millions of dollars in bribes in connection with the company’s expansion in Mexico. See previous Scorecard coverage here. The same article is believed to have touched off the DOJ’s and SEC’s inquiry. If true, a $300 million resolution would not be near the top end of FCPA resolutions.

    Financial Crimes DOJ SEC Bribery

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  • AG Sessions Discusses Approach to Enforcement at Annual Ethics Conference

    Agency Rule-Making & Guidance

    In prepared remarks delivered April 24 at the Ethics and Compliance Initiative Annual Conference, Attorney General Jeff Sessions discussed the DOJ’s anticipated approach to prosecuting corporate fraud and misconduct under his leadership. The Attorney General announced the DOJ’s commitment to “re-double” its efforts to combat violent crime, while continuing to investigate and prosecute “corporate fraud and misconduct.” Specifically, Mr. Sessions pledged that the DOJ will “continue to emphasize the importance of holding individuals accountable for corporate misconduct” and when making charging decisions, will account for “whether companies have good compliance programs; whether they cooperate and self-disclose their wrongdoing; and whether they take suitable steps to remediate problems.”

    Notable among the many points made by Mr. Sessions during his speech, was his emphasis on the Foreign Corrupt Practices Act (“FCPA”). As explained by Mr. Sessions, “corruption harms free competition, distorts prices, and often leads to substandard products and services coming into this country” and, ultimately, “increases the cost of doing business, and hurts honest companies that don’t pay these bribes.” To this end, the Attorney General promised to “strongly enforce the FCPA and other anti-corruption laws.”  As he put it, “[c]ompanies should succeed because they provide superior products and services, not because they have paid off the right people.” In closing, the Attorney General took a moment to remind the audience that “[o]ur economy, and indeed, our whole system of self-government, depends on people believing that those who choose to disregard the law will be caught and punished. This is ultimately the responsibility of the Justice Department.”

    Agency Rulemaking & Guidance Federal Issues DOJ Enforcement FCPA Sessions

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  • DOJ Voices Continued Support for Robust FCPA Enforcement

    Financial Crimes

    On April 24, 2017, in a speech at the Ethics and Compliance Initiative Annual Conference in Washington, D.C., Attorney General Jeff Sessions appeared to commit to the continued aggressive enforcement of the FCPA. He noted that bribery "increases the cost of doing business and hurts honest companies that don’t pay these bribes,” and he explained that the Trump administration’s DOJ will enforce laws that protect honest businesses: “One area where this is critical is enforcement of the Foreign Corrupt Practices Act (FCPA). Congress enacted this law 40 years ago, when some companies considered it a routine expense to bribe foreign officials in order to gain business advantages abroad.” AG Sessions also emphasized that individuals, not just companies, may face increased FCPA focus.

    These remarks come on the heels of comments from another senior DOJ official who recently noted that robust FCPA enforcement will continue. As previously reported, Trevor McFadden, the DOJ’s Criminal Division's Acting Principal Deputy Assistant Attorney General, noted that the DOJ remains "intent on creating an even playing field for honest businesses."

    These remarks suggest that the DOJ will remain active in enforcing FCPA compliance issues, despite comments from then-candidate Trump that FCPA enforcement may be scaled back under his watch.

    Financial Crimes DOJ FCPA

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  • DOJ’s Trevor McFadden Addresses Anti-Corruption, Export Controls & Sanctions Compliance Summit

    Financial Crimes

    On April 18, Acting Principal Deputy Assistant Attorney General Trevor McFadden spoke at the 10th annual Anti-Corruption, Export Controls & Sanctions Compliance Summit in Washington, D.C. According to Mr. McFadden, the Justice Department “remains committed to enforcing the FCPA and to prosecuting fraud and corruption more generally.” He emphasized the importance of company cooperation, stating that that the department considers voluntary self-disclosures and remedial efforts when making charging decisions. Mr. McFadden also stated that the department is making a “concerted effort to move corporate investigations expeditiously,” adding that FCPA investigations should be “measured in months, not years.”

    Mr. McFadden also discussed an increased prioritization of anti-corruption prosecutions around the world and stated that the DOJ will “seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies that want to accept responsibility for misconduct are not unfairly penalized by multiple agencies.”

    Additionally, the department is assessing its FCPA Pilot Program. Last year, as part of the Program, the department began publishing information on cases it declined to prosecute due to voluntary self-disclosure, full cooperation, and comprehensive remediation. Mr. McFadden stated that the Program is “one example of an effort to provide more transparency and consistency for our corporate resolutions” and “will continue in full force.”

    Financial Crimes DOJ Anti-Corruption Export Controls Sanctions FCPA Pilot Program

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  • California Joins 49 States and the District of Columbia in Settlement with Global Money Services Business

    Consumer Finance

    On April 12, California Attorney General Xavier Becerra announced that California has joined a multistate settlement between state attorneys general from 49 states and the District of Columbia and a global money services business to resolve allegations that scammers used the company’s wire transfer services to defraud consumers (see previous InfoBytes post). Under the terms of the settlement, California consumers who made a wire transfer during the period of January 1, 2004 through January 19, 2017, may be eligible for a share of more than $65 million in refunds. As previously covered in InfoBytes, on January 19 of this year, the global money services business entered into a Deferred Prosecution Agreement with the DOJ and FTC requiring, among other things, the business to pay $586 million in refunds to consumers to settle allegations that the company had failed to maintain an effective anti-money laundering program and aided and abetted wire fraud.

    Consumer Finance State AG Enforcement DOJ FTC

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  • DOJ Reduces Brazilian Construction Company Penalty Based on Inability to Pay

    Financial Crimes

    On April 11, the DOJ filed a memorandum in its case against a Brazilian construction company, requesting that the Court approve a lower sentence than originally proposed based on the company's inability to pay. On December 21, the company and its petrochemical affiliate reached a $4.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations, in which both companies agreed to plead guilty in the U.S. to conspiracy to violate the FCPA. As part of that agreement, the U.S. and Brazilian authorities agreed to conduct an independent analysis to confirm the accuracy of the construction company's representation that it had an inability to pay a penalty in excess of $2.6 billion. The memorandum set forth the DOJ’s determination that the construction company lacks the ability to pay a criminal penalty in excess of $2.6 billion and included adjustments for the requested penalty to match that ability. In particular, the portion of the penalty paid to the United States would be lowered from approximately $117 million to approximately $93 million. The sentencing hearing is scheduled for April 17.

    Prior Scorecard coverage of the company's settlement can be found here.

    Financial Crimes DOJ FCPA Ability To Repay

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