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  • Upon Review, NYDFS Requires International Bank to Continue Independent Monitoring

    State Issues

    On April 21, the New York Department of Financial Services (NYDFS) announced it had entered into a supplemental consent order with an international bank to modify its 2012 and 2014 consent orders. In 2012, the bank agreed to engage an independent on-site monitor for 24 months to evaluate the New York branch’s BSA/AML and OFAC compliance programs and operations. The bank was also issued a $340 million civil money penalty. The 2014 consent order outlined the monitor’s findings including reports of significant failures in the bank’s transaction monitoring. The 2014 order extended the engagement of the monitor for another two years, outlined remedial measures to address continued deficiencies, and required the bank to pay an additional $300 million civil money penalty.

    While NYDFS acknowledged in the 2017 supplemental consent order that the bank has made significant improvements in its BSA/AML compliance program, the engagement of the monitor has been extended until December 31, 2018 with all the other terms and conditions of the 2012 and 2014 consent orders remaining in full effect.

    State Issues Financial Crimes Anti-Money Laundering Bank Secrecy Act OFAC

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  • Two Telecom Executives Pay FCPA Penalties

    Financial Crimes

    Two former executives of a Hungarian telecommunications company recently agreed to settle their FCPA claims with the SEC and pay related penalties, along with five-year bars against serving as an officer or director of any SEC-registered public company. The company’s former CEO agreed to pay a $250,000 penalty, while its former Chief Strategy Officer agreed to pay a $150,000 penalty. The settlements are still subject to court approval.

    The SEC’s case against these individuals was heading to trial this month prior to this week’s settlement. The SEC’s complaint alleged that these individuals used sham contracts to funnel millions of dollars in bribes to foreign officials in Macedonia and Montenegro to win contracts and, importantly, block out competitors including U.S.-traded telecoms. This action was related to similar claims previously brought against the company and its majority owner, who settled civil and criminal FCPA charges in December 2011 for $95 million. In February 2017, another former executive settled FCPA charges, agreeing to pay a $60,000 penalty without admitting or denying the charges.

    These settlements underscore the FCPA’s broad territorial and jurisdictional reach, which can encompass transactions that facially do not even involve U.S. companies. As the SEC’s Stephanie Avakian noted, these individuals were ultimately charged because they “spearhead[ed] secret agreements with a prime minister and others to block out telecom competitors,” and “[the SEC] persevered in order to hold these overseas executives culpable for corrupting a company that traded in the U.S. market”.

    Financial Crimes SEC FCPA

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  • Senators Introduce Combating Global Corruption Act of 2017

    Financial Crimes

    Senator Ben Cardin and Republican co-sponsors recently introduced a bill titled the “Combating Global Corruption Act of 2017,” which seeks “to identify and combat corruption in countries, to establish a tiered system of countries with respect to levels of corruption by their governments and their efforts to combat such corruption, and to assess United States assistance to designated countries in order to advance anti-corruption efforts in those countries and better serve United States taxpayers.”

    This bill, if enacted, would require the Secretary of State to publish annual rankings of foreign countries split up into three tiers that depend on whether those countries’ governments comply with “minimum standards for the elimination of corruption.” The introduced bill defines corruption as “the exercise of public power for private gain, including by bribery, nepotism, fraud, or embezzlement.”

    Once a country’s tier-rank is established, the bill would then require the Secretary of State, Administrator of USAID, and the Secretary of Defense to take various steps, including the creation of a “corruption risk assessment” and “corruption mitigation strategy” for U.S. foreign assistance programs; fortified anti-corruption and clawback provisions in contracts, grants and other agreements; disclosure of beneficial ownership for contractors and other participants; and mechanisms to investigate misappropriated funds.

    If passed into law, this bill would create substantial new enforcement powers to combat international corruption activities. And, unlike the current ambiguity under the FCPA regarding its applicability to state-owned or state-controlled enterprises (“SOEs”), as drafted, this bill expressly would cover SOEs. Like the FCPA, however, this bill also contains a broad national security waiver component, if the Secretary of State “certifies to the appropriate congressional committees that such waiver is important to the national security interest of the United States.”

    Financial Crimes Anti-Corruption FCPA Bribery Fraud

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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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  • South Korea’s Former President Formally Indicted on Corruption Charges

    Financial Crimes

    On April 17, the former South Korean president was formally indicted on 18 charges of corruption including bribery, extortion, abuse of power, and leaking state secrets. The former president was impeached in December after months of public protests. Last month, she was removed from office and arrested.

    The corruption scandal has also implicated the former president’s longtime confidante, who is currently on trial on corruption charges. The pair is accused of coercing Korean businesses into donating $68 million to two non-profit foundations that the former president’s confidante controlled. They are both also accused of collecting or demanding $52 million in bribes from businesses, including $38 million from a Korean multinational conglomerate, $6.2 million from a retail conglomerate, and $7.8 million from a telecommunications and semiconductor conglomerate. The chairman of the retail conglomerate, was indicted on bribery charges on Monday.

    Financial Crimes FCPA Anti-Corruption Bribery

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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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  • FINRA Releases Revisions to Its Sanction Guidelines

    Financial Crimes

    On April 10, FINRA issued a notice revising its Sanction Guidelines to reflect recent developments in its disciplinary process, revisions to certain rules, and amendments to the levels of sanctions imposed during proceedings. FINRA Regulatory Notice 17-13 states that the revisions: (i) establish a new factor that requires “the exercise of undue influence over a customer be considered for all violations”; (ii) introduces new guidelines concerning systemic supervisory failures, short interest reporting, and borrowing and lending arrangements with customers; (iii) provides guidance on a new factor related to the mitigating effect of sanctions imposed by other regulators or firms; (iv) describes amendments made to twelve sections that revise sanctions for more serious rule violations; and (v) harmonizes “the Sanction Guidelines to the relevant precedent, prior amendments to the Sanction Guidelines and FINRA’s rulebook consolidation process.” FINRA further states that the purpose of the Sanction Guidelines is not to “prescribe fixed sanctions for particular violations . . . [but to] provide direction for Adjudicators in imposing sanctions consistently and fairly. The guidelines recommend ranges for sanctions and suggest factors that Adjudicators may consider in determining, for each case, where within the range the sanctions should fall or whether sanctions should be above or below the recommended range.” The revised guidelines are effective immediately.

    Financial Crimes FINRA Sanctions

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  • OCC Issues Consent Order to U.S. Branch of International Bank, Requires Development of BSA/AML Program

    Financial Crimes

    As previously reported in InfoBytes, on March 17 the OCC released its list of enforcement actions taken in February against national banks, federal savings associations, and current and former affiliated individuals. Among those actions is a consent order issued on February 13 against a U.S. branch of a Curacao-based subsidiary of a United Arab Emirates bank for allegedly failing to comply with the Bank Secrecy Act’s anti-money laundering (BSA/AML) rules and requirements, failing to timely file suspicious activity reports (SARs), and failing to conduct adequate due diligence on foreign correspondent accounts. The consent order, among other things, requires the U.S. branch to: (i) create and submit a comprehensive BSA/AML compliance action plan; (ii) appoint a BSA officer who will “ensure compliance with the requirements of the BSA and the Office of Foreign Assets Control (OFAC)”; (iii) review, update, and implement an enhanced written ongoing BSA/AML Risk Assessment and a separate OFAC Risk Assessment process to timely identify and analyze risk categories; (iv) acquire an independent third-party consultant to conduct a “Look Back” plan to determine whether suspicious activity was timely identified and reported by the branch; (v) develop and implement a written program to ensure the timely review of BSA/AML suspicious activity alerts and filing of SARs; and (vi) create a comprehensive training program for “appropriate operational and supervisory personnel.”

    Financial Crimes Bank Secrecy Act OCC OFAC Anti-Money Laundering

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  • FinCEN Seeks Comments on Proposed Renewal of its AML, Due Diligence Program Requirements for Correspondent Banks

    Financial Crimes

    The Financial Crimes Enforcement Network (FinCen) published a notice and request for comments in the March 30 Federal Register. The notice sought public comment on its proposed renewal, without change, of the regulation implementing Section 5318(i)(1) & (2) of the Bank Secrecy Act (found at 31 CFR 1010.610). The regulation generally requires covered financial institutions (as defined in 31 CFR 1010.605(e)(1)) to establish due diligence policies, procedures, and controls reasonably designed to detect and report money laundering through correspondent accounts that covered U.S. financial institutions establish or maintain for certain foreign financial institutions. Written comments must be received on or before May 30.

    Financial Crimes FinCEN Bank Secrecy Act Anti-Money Laundering

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