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  • U.S. and Saudi Arabia Agree to Enhance Counter Terrorist Financing Capabilities

    Financial Crimes

    On May 21, the Treasury Department announced an agreement between the U.S. and Saudi Arabia to establish a Terrorist Financing Targeting Center as a collaborative effort between the two countries and several Persian Gulf nations, including Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. The new center is intended to (i) enhance information-sharing regarding terrorist financial networks; (ii) coordinate action on sanctions; and (iii) facilitate technical assistance for participating countries that need support developing their counter terrorist programs and provide best practices guidance “in line with Financial Action Task Force standards.” The participants intend to implement the outlined activities immediately.

    Financial Crimes Combating the Financing of Terrorism FATF

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

    Financial Crimes

    In May, 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 Designated Nationals.

    Pakistan-Based ISIS Financial Facilitators. On May 11, OFAC imposed sanctions against three Pakistani individuals and one entity for their roles in assisting ISIS’s financial networks and their “connections with terrorist groups that are a direct threat to the security of both the [U.S.] and Pakistan.” The designations block the individuals and entity—each of whom has been designated as providing the identified networks with material and financial support—from participating in the global financial system, and further state that “all property and interests in property . . . subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with” those listed.

    Syrian Government Supporters. On May 16, OFAC announced it was taking action against five individuals and five entities in response to the Syrian Government’s continued acts of violence committed against its own citizens. The sanctions came as a reaction to three Executive Orders: (i) E.O. 13572—targeting persons responsible for human rights abuses in Syria, their supporters, and supporters of senior officials or certain activities related to public corruption; (ii) E.O. 13582—targeting the Government of Syria and its supporters; and (iii) E.O. 13382—targeting proliferators of weapons of mass destruction and their supporters. The new sanctions prohibit transactions by U.S. persons with those listed and “any property or interest in property of the identified persons in the possession or control of U.S. persons or within the United States must be blocked.”

    Yemen-Based Financial Facilitators and Arms Trafficker. On May 19, OFAC imposed sanctions against two Yemen-based financial facilitators for their roles in assisting al-Qa’ida leaders in the Arabian Peninsula. The designations block the individuals, both of whom were designated as engaging in actions through weapon trafficking, from the global financial system, and further state that “all property and interests in property . . . subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with” the identified individuals.

    Foreign Narcotics Kingpin Sanctions. On May 19, OFAC made additions to the Specially Designated Nationals (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 two two Peruvian individuals and three Peruvian entities.

    Financial Crimes OFAC Sanctions

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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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  • FinCEN Recognizes Law Enforcement Agencies for Use of BSA Reporting

    Financial Crimes

    On May 9, the Financial Crimes Enforcement Network (FinCEN) announced its third annual Law Enforcement Awards to law enforcement agencies that use Bank Secrecy Act data provided by financial institutions in their criminal investigations. The program seeks to recognize law enforcement agencies that made effective use of financial institution reporting to obtain a successful prosecution, and to demonstrate to the financial industry the value of its reporting to law enforcement. The following agencies were recognized:

    • Suspicious Activity Report Review Task Force Category—New York State Police. Based on a financial institution reporting an unusual pattern of cash deposits, the New York State Police Special Investigations Unit identified suspicious transactions occurring in the Hudson Valley Region indicative of money laundering. The investigations led to the identification of expansive criminal organizations responsible for bringing large quantities of narcotics into the region, operating business fronts used for money laundering, and extensive gang activity.
    • Transnational Organized Crime/Third Party Money Launderers Category—FBI. After receiving a referral from local law enforcement regarding an individual suspected of carrying out various fraud and money laundering schemes, the FBI conducted an investigation, and its review of sensitive financial information resulted in investigators uncovering a network of criminal actors located in the U.S. and Canada, which was bringing in $100-$300 million in annual criminal proceeds in North America alone.
    • Transnational Security Threats Category—FBI. The FBI used a high volume of sensitive financial information obtained in connection with its investigation into a criminal organization moving hundreds of millions of U.S. dollars to support foreign nuclear and ballistic missile programs, to identify two families  that operated a network of exchange houses, precious metals companies, trading companies, and front companies throughout the Middle East to carry out financial activity for the benefit of multiple OFAC-sanctioned entities, as well as several entities with close ties to foreign military organizations.
    • Cyber Threats Category—Internal Revenue Service-Criminal Investigation (IRS-CI). A multi-year, multi-agency investigation led by IRS-CI focused on several targets selling narcotics on the dark web and distributing them throughout the U.S. The investigation identified sensitive financial information, which enabled investigators to corroborate the financial and personal information of the targets. The data also indicated that the subjects used Bitcoins in an effort to conceal their illicit proceeds. The information identified in the financial data and from subpoenas issued to numerous financial institutions and Bitcoin exchangers helped clarify the series of transactions conducted to launder the funds.
    • Significant Fraud Category—Defense Criminal Investigative Service (DCIS). DCIS initiated a long-term investigation based on structuring and excessive credit card charges identified by multiple financial institutions on a single individual. Investigators determined that one of the subjects was transferring funds to a shell company owned by a U.S. military official. A detailed analysis of sensitive financial information and contract documents revealed that the U.S. military official had received bribes from the primary target in exchange for helping the primary target win military contracts in Afghanistan.
    • Third-Party Money Launderers Category—Immigration and Customs Enforcement Homeland Security Investigations (HSI). HSI investigators utilized an extensive volume of sensitive financial information to assist in their investigation into a large-scale illegal third-party money laundering organization. The investigation began based largely on information gleaned from a FinCEN-issued Geographic Targeting Order (GTO). The GTO information used by investigators allowed them to identify an “armored car company, which was importing U.S. dollars and Mexican pesos from casas de cambio in Mexico and depositing them into shell company bank accounts that were opened and operated by the two individuals who owned and operated the company.”

    Financial Crimes FinCEN Bank Secrecy Act Anti-Money Laundering

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  • Ukrainian Billionaire Files Motion to Dismiss Indictment

    Financial Crimes

    A Ukrainian billionaire indicted in 2013 for his alleged role in a conspiracy to bribe government officials in India to permit the mining of titanium minerals filed a motion to dismiss the indictment on May 9 in a federal district court in Illinois. The billionaire also faces money laundering and RICO charges along with five alleged coconspirators. In 2015, an Austrian court denied the United States’ extradition request, but that decision was eventually reversed and the billionaire was extradited earlier this year. See previous Scorecard coverage here.

    The billionaire’s motion to dismiss focuses on the lack of jurisdictional contact between the charged conduct and the United States. It vigorously challenges the jurisdictional basis alleged in the indictment, which was that the billionaire’s coconspirators, but not the billionaire himself, transferred money through United States correspondent banks, traveled to the United states, and used email accounts and cellular phones hosted on servers in the United States. However, the billionaire claims that the indictment fails to allege that any of these contacts have any connection to the alleged bribery scheme and that he never entered the United States in connection with the charged conduct, and never made or received any phone calls or sent or received any emails regarding the allegations in the indictment.

    The amount and quality of contacts with the United States required to support jurisdiction under the FCPA is a frequently contested issue. The United States has repeatedly taken the position that jurisdiction is proper even where the wrongful conduct took place outside the United States and did not involve any United States companies or citizens, so long as there was some contact with the United States. For example, in the recent Hungarian telecommunications company cases, emails sent through servers hosted in the United States were held to be sufficient to support jurisdiction. See previous Scorecard coverage here. The outcome of the billionaire’s motion to dismiss will shed further light on the jurisdictional standard.

    Financial Crimes RICO Bribery Indictment

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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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  • Federal Regulators Enter Settlement Agreement with Former Chief Compliance Officer Following AML Program Investigation

    Financial Crimes

    On May 4, FinCEN and the U.S. Attorney’s Office for the Southern District of New York announced a $250,000 settlement with the former chief compliance officer of an international money transfer company over allegations that he failed to report suspicious activity and knowingly participated in the company’s failure to maintain an effective anti-money laundering program. The settlement resolves a lawsuit filed in December of 2014 against the defendant, in which the district court dismissed the defendant’s motion to dismiss, ruling that the Bank Secrecy Act’s (BSA) general civil penalty provision, § 5321(a)(1), could subject a partner, director, officer, or employee of a financial institution to civil penalties for violations of any provision of the BSA or its regulations, excluding the specifically excepted provisions, and that because § 5318(h) was not listed as one of those exceptions, “the plain language of the statute provides that a civil penalty may be imposed on corporate officers and employees like [the defendant], who was responsible for designing and overseeing [the company's] AML program.” U.S. Dep’t of Treasury v. Haider, No. 15-cv-01518, WL 107940 (Dist. Ct. Minn. Jan. 8, 2016). (See previous InfoBytes summary.) In the stipulation and order of settlement and dismissal, the defendant (i) accepted responsibility for failing to further investigate consumer fraud reports; (ii) is required to pay $250,000 to the Department of the Treasury; and (iii) is banned for three years from performing compliance functions for other U.S.-based money transmitters. Notably, in February 2016, the money transfer company agreed to pay $13 million to settle claims from 49 states and the District of Columbia over charges that it transferred money to third parties that were defrauding customers. As part of the company’s settlement, it was required to ensure its agents attend mandatory compliance training, enhance its comprehensive anti-fraud compliance program, and implement a hotline system for employees to report noncompliance.

    Financial Crimes Anti-Money Laundering Bank Secrecy Act FinCEN Courts State AG

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  • Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges

    Financial Crimes

    A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies. 

    The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.

    The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former asset management executives with bribing government officials across Africa to secure mining deals, including in Guinea.

    Financial Crimes SEC Bribery Anti-Money Laundering

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  • House Financial Services Subcommittee Explores Ways to Safeguard Financial System from Terrorist Financing

    Financial Crimes

    On April 27, the Financial Services Subcommittee on Terrorism and Illicit Finance held a hearing entitled Safeguarding the Financial System from Terrorist Financing to examine information sharing and data collection practices at the Financial Crimes Enforcement Network (FinCEN) and assess how the process could be improved. According to a Committee memorandum released in advance of the hearing, the hearing was also called for the purposes of considering whether to amend the Bank Secrecy Act and USA PATRIOT Act to improve FinCEN’s effectiveness in disrupting terrorist financing and money laundering.

    Jamal El-Hindi, the Acting Director of the Financial Crimes Enforcement Network (FinCEN) at the Department of the Treasury, was the only witness. For just over an hour, the Acting Director offered testimony and answered questions concerning, among other things, the collection, analysis and dissemination of Bank Secrecy Act data and information sharing between the public and private sectors. Mr. El-Hindi also discussed several new and evolving money laundering and terrorist financing challenges, including potential money laundering vulnerabilities associated with “all cash” real estate transactions, virtual currency, and cybersecurity.

    In a statement delivered by Rep. Maxin Waters (D-CA), the Ranking Member of the Committee on Financial Services, the Congresswoman noted, among other things, that “high-end U.S. real estate is a key sector used by corrupt foreign leaders, drug traffickers and other criminals to launder illicit money.”  The Ranking Member explained further that she “find[s] it disturbing that FinCEN continues to largely exempt the real-estate sector from even the most basic anti-money laundering requirements,” and urged the regulator to “take more urgent action to address these risks nationwide and on a permanent basis.”

    A video recording of the hearing may be accessed here.

    A copy of Acting Director El-Hindi’s prepared testimony may be accessed here.

    Financial Crimes Anti-Money Laundering Bank Secrecy Act FinCe

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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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