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  • German Multinational Chemical Company Agrees to Pay DOJ More Than $11 Million, Receives Declination of FCPA Charges

    Financial Crimes

    On Friday, June 16, the DOJ issued a declination letter to attorneys for North American affiliates of a German multinational chemical company, in which the DOJ declined prosecution and closed an investigation of the company and certain of its subsidiaries and affiliates regarding potential FCPA violations that occurred between November 2006 and December 2009. The affiliates, which trades only on German stock exchanges and which has no securities registered with the SEC, agreed to pay DOJ a combined $11.2 million in disgorgement and forfeiture. 

    According to the DOJ letter, a New Jersey-based company acquired by the affiliate companies in October 2006, made corrupt payments to officials at and related to a Republic of Georgia state-owned and controlled entity to ensure continuity of business. Upon discovering this conduct, the affiliates initiated an internal investigation and subsequently withheld monies earmarked for a company controlled by the Georgian entity. These monies comprise the approximately $3.4 million that the affiliates agreed to forfeit.

    The DOJ letter stated that its decision is consistent with the FCPA Pilot Program, launched in April 2016 to encourage 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.” Accordingly, the DOJ determined that the affiliates had, among other things, voluntarily self-reported potential FCPA violations, conducted a thorough and proactive internal investigation, and continues to cooperate fully and remediate its compliance program and internal controls. Notably, the DOJ letter does not foreclose future prosecution of any individuals, and the letter explicitly delineates DOJ’s expectation that the affiliates will continue cooperating fully in any ongoing investigation of individuals.

    Financial Crimes DOJ Anti-Corruption

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  • SFO Announces Charges Against British Multinational Bank and Four Former Executives in Qatar

    Financial Crimes

    On Tuesday, June 20, the UK Serious Fraud Office (“SFO”) announced charges against a British multinational bank and four former executives for conspiracy to commit fraud and provision of unlawful financial assistance in violation of the Companies Act 1985. These charges relate to the company’s capital raising arrangements with a Qatar's state-owned holding company and a contract oil and gas land drilling provider in June and October 2008, as well as to a $3 billion loan facility made available to the State of Qatar acting through the Ministry of Economy and Finance in November 2008. According to the SFO press release, the investigation was first announced in 2012, and the individuals charged include a former Chief Executive Officer of the British multinational bank, a former Executive Chairman of the bank’s Capital Investment Banking and Investment Management in Middle East and North Africa, a former Chief Executive of the bank’s Wealth and Investment Management, and a former European Head of the bank’s Financial Institutions Group.

    While no US-based charges have been announced, the SFO’s announcement comes on the heels of Barclays Plc’s March 2017 disclosure to the SEC in which the company stated that “the DOJ and SEC are undertaking an investigation into whether the Group’s relationships with third parties who assist Barclays Plc to win or retain business are compliant with the U.S. Foreign Corrupt Practices Act.”

    Financial Crimes SEC UK Serious Fraud Office Fraud

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  • Connecticut Law Expands Credit Card Fraud Statutes, Addresses Penalties for Rent Collections on Foreclosed Property

    State Issues

    On June 6, Connecticut Governor Dannel Malloy signed into law Public Act No. 17-26, which expands the statutes on credit card fraud to cover crimes involving debit cards—including payroll and ATM cards—and outlines larceny penalties for collecting rent on foreclosed property. Paper and electronic checks or drafts are excluded from the definition of debit card under revised measure. Additionally, the law specifies changes pertaining to how “notice of a card’s revocation must be sent for purposes of these crimes and expands certain credit card crimes to cover falsely loading payment cards (credit or debit cards) into digital wallets.” Regarding larceny penalties, the law provides that a “previous mortgagor of real property against whom a final judgment of foreclosure has been entered” cannot continue to collect rent after the final judgment if there is no lawful right to do so. Penalties vary from a class C misdemeanor to a class B felony depending on the amount involved. The law takes effect October 1.

    State Issues Credit Cards Debit Cards Prepaid Cards State Legislation Financial Crimes Mortgages Digital Commerce Fraud

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  • Former Swiss Bank Executive Pleads Guilty in FIFA Investigation

    Financial Crimes

    On June 15, the U.S. Attorney’s Office for the Eastern District of New York announced that a citizen of Argentina and a former managing director of a Swiss Bank pleaded guilty to money laundering conspiracy charges. His guilty plea came in connection with allegations that he facilitated the payment of more than $25 million in bribes to soccer officials by opening and managing bank accounts for those officials. In exchange for his assistance in facilitating these bribes, the former managing director received over $1 million in bonus payments from other co-conspirators, an amount he agreed to forfeit in connection with his plea. 

    The guilty plea came as part of the U.S. government’s investigation into corruption in international soccer which has been ongoing since May 2015. Previous FCPA Scorecard coverage of the FIFA investigation can be found here.

    Financial Crimes Anti-Money Laundering Bribery FIFA

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  • Filipino National Sentenced for Running $9 Million Cybercrime Ring

    Financial Crimes

    On June 8, a U.S. District Court Judge sentenced a Filipino national to over five years in prison and two years of supervised release after pleading guilty to conspiracy to commit bank fraud last year. The defendant operated a $9 million international cybercrime operation that utilized stolen credit and debit accounts to process unauthorized financial transactions, according to an investigation led by the District of New Jersey U.S. Attorney’s Office. To obtain credit and debit card account information, the defendant engaged in computer hacking and ATM skimming, whereby millions of dollars were “monetized” through a “global network of ‘cashers’” who encoded the data onto counterfeit cards and then used the cards to withdraw money and make purchases.

    Financial Crimes Privacy/Cyber Risk & Data Security Litigation Credit Cards Debit Cards Anti-Money Laundering Fraud ATM

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  • OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List

    Financial Crimes

    Recently, OFAC announced implementation of sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designed Nations (SDN) and announced a settlement agreement with a Canadian-based motor vehicle finance company.

    North Korea Suppliers of Weapons Proliferation Programs. On June 1, OFAC announced it was taking action against six entities and three individuals in response to their involvement in North Korea’s continued efforts to develop weapons of mass destruction (WMD). The announcement targets the country’s military, nuclear, and WMD programs, in addition to its overseas financial operations. The sanctions prohibit any U.S. individual from dealing with the designees, and further states that “any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked.” John E. Smith, the Director of OFAC, stated, “Treasury is working with our allies to counter networks that enable North Korea’s destabilizing activities, and we urge our partners to take parallel steps to cut off their funding sources.” These sanctions are in addition to those imposed earlier in April on eleven North Koreans and one associated entity (see previous InfoBytes coverage here).

    Iraq-Based Chemical Weapons Developers. On June 12, OFAC announced, for the first time, designations against individuals involved in the development of ISIS’ chemical weapons. The sanctions were pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” The property and interests in property of the two individuals identified in the designations, subject to U.S. jurisdiction, are blocked, and “U.S. persons are generally prohibited from engaging in transactions with them.”

    Settlement Agreement with Motor Vehicle Finance Company. On June 8, OFAC announced it had reached a settlement with a motor vehicle finance company as a result of transactions by its Canadian based subsidiary. The enforcement action claims the majority-owned subsidiary, which “specializes in various forms of financing in the [U.S.] for purchasers, lessees, and authorized independent [auto] dealers,”—between 2011 and 2014—allegedly violated 13 Cuban Assets Control Regulations by leasing vehicles to the Cuban Embassy in violation of OFAC’s Blocked Persons and SDN list, which prohibited transactions with Cuban government entities. The company voluntarily self-disclosed the alleged violations and agreed to remit $87,255 to settle its potential civil liability.

    Foreign Narcotics Kingpin Sanctions. On May 24 and 25, OFAC made additions to the SDN list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise dealing in the property or interest in property of an entity or individual on the SDN list. Additions to the list were made under the Foreign Narcotics Kingpin Sanctions Regulations against several Mexican and Colombian individuals and entities.

    Financial Crimes Sanctions OFAC Treasury Department Enforcement Auto Finance

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  • Charges Filed by SEC Allege Bank Secrecy Act Violations

    Financial Crimes

    On June 5, the SEC filed charges against a U.S. brokerage firm (firm) for failure to comply with suspicious activity reports (SARs) filing requirements, in violation of the Bank Secrecy Act (BSA), the Exchange Act Section 17(a), and Rule 17a-8. The complaint, filed in the U.S. District Court for the Southern District of New York, alleges that although the firm had a BSA Compliance Program, the program did not accurately reflect what the firm did in practice. More specifically, the SEC alleges thousands of violations including failure to file SARs, failure to file SARs within the required 30 days after the date the suspicious activity was detected, and filing incomplete SARs that did not include the requisite narratives describing what is “unusual, irregular, or suspicious” about the transaction. According to the SEC press release, “by failing to file SARs, [the firm] deprived regulators and law enforcement of critically important information often related to trades in microcap securities used to investigate potentially serious misconduct.”

    The SEC requested relief in the form of permanent injunctions and monetary penalties and interest.

    Financial Crimes Anti-Money Laundering SEC SARs Litigation Bank Secrecy Act Securities

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  • Treasury Audit Report Analyzes Responses to Threats by Office of Terrorist Financing and Financial Crimes

    Agency Rule-Making & Guidance

    On May 23, the Treasury Department’s Office of Inspector General issued an audit report presenting the results of its study into how, and to what extent, the Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) addresses threats to international financial systems. The OIG reviewed TFFC—which is responsible for leading and assisting tasks forces, including the Anti-Money Laundering Task Force—to determine how its collaboration efforts with the national security community and other federal agencies identifies and addresses “threats to the international financial system from money laundering and other forms of illicit finance.” According to the findings, while the majority of federal agency officials interviewed for the report were satisfied with TFFC’s collaboration efforts overall, others believed enhanced collaboration efforts were warranted. The OIG also found that TFFC failed to establish “policies or procedures for collaboration or a mechanism to monitor, evaluate, and report the results of its collaborative efforts as recommended by the Government Accountability Office” in a 2009 report. Accordingly, the OIG recommended that TFFC develop and improve upon the necessary policies and procedures needed to monitor the effectiveness of “interagency collaboration,” as well as address areas of concern regarding collaboration efforts with foreign countries. TFFC agreed with these recommendations and stated it is currently working to improve interagency collaboration.

    Agency Rulemaking & Guidance Bank Secrecy Act Anti-Money Laundering OIG Treasury Department Financial Crimes

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  • Supreme Court Limits SEC Disgorgement

    Financial Crimes

    On June 5, the Supreme Court ruled in Kokesh v. SEC that the SEC’s authority to disgorge profits from defendants is subject to the five-year statute of limitations applicable to penalties and fines. The Court rejected the SEC’s position that disgorgement is an equitable remedy and not a penalty, resolving a circuit split on the issue. Writing for the unanimous Court, Justice Sotomayor said that disgorgement “bears all the hallmarks of a penalty,” reasoning that it “is intended to deter, not to compensate.” The defendant in Kokesh was an investment adviser who had been ordered to disgorge approximately $35 million for allegedly misappropriating investor funds.

    The SEC routinely seeks disgorgement in FCPA enforcement actions. The Kokesh decision may lead the SEC to seek tolling agreements sooner and in more circumstances, particularly where the alleged conduct occurred over a long period of time. The decision may also impact defendants’ ability to claim insurance coverage for disgorgement because insurers might deny coverage for payment of penalties.

    Financial Crimes SEC SCOTUS

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  • Big Bank Agrees to $41 Million Fine by Federal Reserve Over Lax AML Controls

    Financial Crimes

    On May 26, the Board of Governors of the Federal Reserve (Board) and a multinational bank agreed on a settlement over allegations of anti-money laundering (AML) and Bank Secrecy Act (BSA) violations. The settlement, which only relates to the bank’s U.S. operations, includes a $41 million fine and a cease and desist order. The agreement was reached after the most recent Board examination of the bank’s AML program identified “significant deficiencies” in the bank’s transaction monitoring capabilities as well as its risk management and compliance with BSA/AML requirements. According to the Board, among other things, the resulting regulatory compliance deficiencies prevented the bank from properly assessing potentially suspicious transactions between 2001 and 2015. Under the settlement, the bank must provide written plans to the Board within 60 days, which include the methodology and target date for enhancement of their transaction monitoring system. Within the same 60 days, the bank also must submit a strategy to “strengthen its oversight of anti-money laundering compliance across its U.S. operations.”

    Financial Crimes Anti-Money Laundering Bank Secrecy Act Federal Reserve

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