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  • Former Currency Manufacturer Manager Convicted and Sentenced In UK for Making Corrupt Payments

    Federal Issues

    On May 11, following a five-week trial in a London court, a former manager of an Australia-based banknote manufacturer was convicted of four counts of making corrupt payments to a foreign official in violation of the Prevention of Corruption Act 1906. Peter Chapman, the former manager of the polymer banknote manufacturer’s Africa office, was acquitted on two other counts. Chapman was convicted of bribing an agent of Nigerian Security Printing and Mining PLC in order to secure contracts for the purchase of reams of polymer substrate from the banknote manufacturer. The total amount of bribes to the agent equaled approximately $205,000. On May 12, Chapman was sentenced to two and a half years (30 months on each convicted count, to be served concurrently).

    The UK Serious Fraud Office (SFO) prosecuted the case following a joint investigation by the SFO and the Australian Federal Police, which initiated the investigation in May 2009.

    Anti-Corruption

  • DOJ Proposes Legislation Intended to Advance Anti-Corruption Efforts

    Federal Issues

    On May 5, the DOJ announced that it plans to submit to Congress proposals for legislative amendments that would provide the DOJ with additional tools to advance anti-corruption work in the areas of pursuing illegal proceeds of transnational corruption and modifying the substance of criminal corruption offenses. The DOJ’s proposals regarding the illegal proceeds of transnational corruption would amend various sections of the U.S.C. to (i) expand foreign money laundering predicate crimes to include any violation of foreign law that, if committed in the U.S., would be a money laundering predicate; (ii) allow administrative subpoenas for money laundering investigations; (iii) enhance law enforcement’s ability to obtain overseas records by allowing access to foreign bank or business records by serving subpoenas on foreign bank branches located in the United States regardless of bank secrecy or data privacy laws in the foreign jurisdictions; (iv) create a framework to use and protect classified information in civil kleptocracy-related cases; and (v) extend the time period in which the United States can restrain property based on a request from a foreign country from 30 to 90 days. The proposals pertaining to substantive corruption offenses would amend 18 U.S.C. § 666 (theft or bribery concerning programs receiving federal funds) to (i) expressly criminalize the corrupt offer or acceptance of payments to “reward” official action; and (ii) lower the dollar threshold for liability from $5,000 to $1,000 to address cases where the dollar amount may be low but threat to the integrity of a government function is high.

    Anti-Money Laundering Anti-Corruption Bank Secrecy Act DOJ

  • Printing Company Fined £2.2 Million in United Kingdom for Africa Bribes

    Federal Issues

    On January 8, the United Kingdom’s Serious Fraud Office announced that a printing company specializing in official documents such as election ballots was ordered to pay penalties totaling £2.2 million following its 2014 conviction under the Prevention of Corruption Act 1906. The SFO’s announcement regarding the sentencing stated that its investigation began in 2010 and centered on £395,074 in corrupt payments made to foreign officials in Kenya and Mauritania. Two of the company’s former employees, also convicted in connection with the same investigation, were ordered to pay penalties totaling over £20,000.

    Anti-Corruption

  • FIFA Ethics Committee Issues Eight-Year Bans to President and Vice President

    Federal Issues

    On December 21, the FIFA Ethics Committee announced that it would ban its embattled President, Sepp Blatter, and Vice President, Michel Platini, from all football-related activities for eight years. The ban was imposed as a result of an investigation into a payment of $2 million from FIFA to Platini in 2011 that was authorized by Blatter. The Ethics Committee’s statement on their decision stated that the payment was made without a legal basis. Platini is currently the head of UEFA, the governing body of European football. News reports state that it was widely anticipated that Platini would be elected President of FIFA in the upcoming 2016 election, but he has now withdrawn his candidacy following the Ethics Committee’s decision. Click here to view prior InfoBytes coverage on FIFA.

    Anti-Corruption

  • DOJ Announces Racketeering Indictment Alleging Money Laundering Schemes

    Financial Crimes

    On December 10, the DOJ announced three unsealed indictments of a total of 20 defendants in connection with various money laundering schemes. Fifteen of the defendants were arrested and taken into custody, while the remaining individuals are still being sought by authorities.

    The first indictment alleges that the former president and CEO of an Orange County, California bank and five other individuals, as members of a narcotics trafficking and international money laundering organization, violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by participating in schemes to launder drug proceeds. According to the DOJ, the former bank official used his position, insider knowledge, and connections to “promote and facilitate money laundering transactions involving members and associates of the enterprise.” The DOJ alleges that the six defendants (i) arranged to convert purported drug proceeds, in the form of cash provided by an undercover informant, into cashier’s checks made out to a company the informant claimed to own; (ii) proposed to an informant that the informant and his boss purchase a controlling interest in the Orange County bank to more easily facilitate money laundering operations; and (iii) proposed to set up a foundation in Liechtenstein to be used, in part, to launder the informant’s drug sale proceeds. The DOJ also asserts that the bank official introduced the five other defendants to operatives of a drug cartel aspiring to launder millions of dollars monthly and discussed plans to purchase the bank with the drug cartel operatives. In addition to the RICO count, the indictment charges a total of 16 defendants with 27 additional counts, including conspiracy, money laundering, structuring transactions to avoid federal reporting requirements, and evidence tampering.

    The two additional unsealed indictments charge a total of four defendants with conspiring to launder money they believed to be proceeds from narcotics trafficking.

    Anti-Corruption DOJ RICO

  • DOJ Charges 16 Additional Individuals with FIFA-Related Corruption; Swiss Authorities Arrest Two High-Ranking FIFA Members

    Federal Issues

    On December 3, the DOJ charged an additional 16 individuals in connection with its ongoing corruption investigation into FIFA. The new indictment included a number of high ranking FIFA members, including Alfredo Hawit, the president of the Confederation of North, Central America and Caribbean Association Football (CONCACAF) and vice-president of FIFA, and Juan Angel Napout, the president of the South American Football Confederation (CONMEBOL) and a member of the FIFA executive committee. Both of these individuals were arrested by Swiss authorities in Zurich and are opposing extradition to the United States.

    With the additional 16 individuals, a total of 41 people and entities have been charged as part of the DOJ’s ongoing investigation.

    Anti-Corruption DOJ

  • FinCrimes Webinar Series Recap: The Role of Corruption Risk in a Financial Crimes Compliance Program

    BuckleySandler hosted a webinar, The Role of Corruption Risk in a Financial Crimes Compliance Program: What are Banks Doing to Detect Corruption in the Wake of the FIFA Scandal?, on September 24, 2015 as part of their ongoing FinCrimes Webinar Series. Panelists included Thomas Coupe, EMEA Global Financial Crimes at Bank of America Merrill Lynch; and Compliance; Gaon Hart, Global Anti-Bribery & Corruption Policy and Education Lead at HSBC; and Denisse Rudich, Financial Crimes Compliance Specialist at Firedrake Consulting. The following is a summary of the guided conversation moderated by Jamie Parkinson, partner at BuckleySandler, and key take-aways you can implement in your company.

    Best Practice Tips and Take-Aways:

    1. Corruption risk for a financial services firm is presented both directly and indirectly. Corruption risk is presented directly when an employee or third parties acting on behalf of an institution act in a way that implicated anti-corruption laws, such as the Foreign Corrupt Practices Act, U.K. Bribery Act or another anti-corruption law. Corruption risk is presented indirectly when a customer seeks to use a financial institution for a corrupt deal or to hold or transmit funds associated with a corrupt scheme.
    2. It is important to have one person your organization can look to when an anti-corruption concern arises. This person should serve as the point of contact for your regulators and have the ability to quickly escalate concerns to senior management and the board of directors.
    3. New customers with past corruption issues present special challenges. Be sure that your onboarding and due diligence processes are able to identify and evaluate these concerns.
    4. Bear in mind that corruption risk management also requires looking at your organization internally. This means examining your own employees for conflicts issues, evaluating your organization’s sponsorships and donations, and performing due diligence on your third-party suppliers.
    5. Effective anti-corruption risk management requires cultivating a culture within your organization that supports your efforts. This is an area that regulators are increasingly interested in.

    Structuring an Effective Corruption Risk Management Function

    The panelists began the session by discussing where best to locate corruption risk management within a bank. The panelists observed that corruption risk management differs from other financial crimes areas, such as anti-money-laundering, because it is more inwardly focused. Panelists commented that, for some institutions, corruption risk management might be a better fit with areas that deal more with the culture of the organization, such as reputational risk and conduct risk. One panelist observed that the regulators have been increasing their focus on the culture of organizations, heightening the importance of this aspect of corruption risk management.

    The panelists discussed the most efficient way to structure an organization’s anti-corruption standards. Generally, the panelists agreed that it makes the most sense to develop centralized standards based on the most stringent anti-corruption statutes, such as the FCPA and UK Bribery act. This approach will help account for the extraterritorial application of the FCPA and UK Bribery act. The panelists recommended developing add-on standards that apply in countries where there is a local statute with additional requirements. In particular, the panelists observed that local statutes may provide different rules for entertainment expenses and facilitating payments.

    The panelists observed that corruption-risk screening should be integrated into the onboarding process for new customers. In this area, it is important to consider the differences between Public Officials (“PO’s”) and Politically-Exposed Persons (“PEP’s”). One key issue to be aware of is that screening tools and databases designed to identify PEP’s may miss lower-level PO’s. PEP screening tools may also miss State-Owned Enterprises; for example if the government owns only a small share of the company. Therefore, it is important to look closely at new customers and suppliers to identify if there are indirect links to government officials, or if the company has a history of working closely with the government, or if the company’s beneficial ownership raises any concerns.

    One of the panelists observed that a new customer with past corruption issues presents special concerns in the due diligence process. Here, robust due diligence is needed to assess what changes the customer has implemented since the corruption issue came to light, and whether they have cooperated with the authorities and/or compliance monitors. Heightened monitoring should also be put in place for these customers.

    Responding to a Corruption Concern

    The panelists discussed how to respond when the bank receives news that a counterparty or a customer may pose a corruption risk. Here, the panelists agreed that it is important to have a well-thought out and comprehensive incident response plan in place. This plan should:

    • Identify who in the organization is the designated point person for coordinating the response. This person should serve as the contact point for regulators, and be able to quickly escalate issues to senior management and board of directors. Along these lines,
    • Specify who is to be notified of the issue and when. The panelists stressed the need for the incident plan to also address reputational risk to the bank.
    • Lay out steps that allow the bank to determine if the corruption risk affects the bank, and if so, to what degree. This will involve using databases to search for names of both corporate and individual customers. This will also require setting up suspense accounts if needed and reporting these accounts as appropriate. After addressing the funds on hand within the bank, it will be necessary to perform a historical look-back for suspicious transactions.

    The panelists also discussed how to respond to corruption concerns that arise from within the organization. The panelists observed that AML monitoring tools will often detect transactions that may present a corruption risk. Therefore, it makes sense to have close communication between the AML function and corruption risk management. The panelists concluded the discussion by observing that corruption risk should become as central to a bank’s business function as credit-risk has been traditionally.

    Anti-Corruption Compliance Financial Crimes

  • Eletrobras Hires U.S. Law Firm to Conduct FCPA Investigation

    Federal Issues

    On June 10, Eletrobras, Brazil’s state-run power company, announced that it had hired Hogan Lovells to investigate potential violations of the FCPA and other anti-corruption laws and corporate policies. The focus of the investigation will be “projects in which Eletrobras Companies take part in a corporate form or as minority shareholder, through special purpose entities.” According to an earlier Eletrobras filing, the investigation was triggered by testimony taken in conjunction with the Brazilian government’s ongoing investigation of corruption allegations against Petrobras, dubbed “Operation Car Wash.” That testimony alleged that the CEO of an Eletrobras subsidiary received illicit payments from a consortium of companies bidding for the Angra 3 power plant project.

    FCPA Anti-Corruption

  • FinCrimes Webinar Recap: Dealing with PEPs - AML & Corruption Risks

    BuckleySandler hosted a webinar, Dealing with PEPs: AML & Corruption Risks, on December 18, 2014 as part of its ongoing FinCrimes Webinar Series. Panelists included Mary Butler, Deputy Chief, International Unit, at the Asset Forfeiture & Money Laundering Section, Criminal Division at the U.S. Department of Justice; Paul Dougherty, Managing Director of the anti-money laundering program for the United States and Canada at Bank of America; and Noreen Fierro, Vice President and Chief Compliance Officer of the Group Insurance Division of Prudential Financial. The following is a summary of the guided conversation moderated by Jamie Parkinson, partner at BuckleySandler, and key take-aways you can implement in your company.

    Key Tips and Take-Aways:

    1. Make sure that the organization has appropriate procedures in place to identify Politically Exposed Persons (PEPs) and that those procedures appropriately explain how a PEP is defined by the institution.

    1. Understand the different global standards for PEP compliance and, where appropriate, have country-specific policies and procedures to manage onboarding and monitoring.

    1. Encourage cooperation among the different financial crime compliance disciplines within your institution to assist in identifying and monitoring PEPs.

    Onboarding and Monitoring PEP Accounts

    The session began with a discussion of the basic regulatory requirements associated with the onboarding of PEP accounts. The panel addressed the significance of having specific policies and established procedures to identify PEPs on the front end. Specifically, the panelists noted the importance of having procedures that discuss the borrower approval process, the steps taken to onboard the customer and how those steps differ from normal customer onboarding steps, and who is involved in the process. The panelists further noted that regulators pay significant attention to how transactions are monitored for PEPs in comparison to normal customers and what the organization does when an account is flagged. With regard to the actual onboarding procedures, the panelists noted that the primary concern is associated with identifying risks associated with the PEP and investigating the source of the PEPs funds.

    Global Approaches to PEP Programs

    The panelists then discussed the complications that arise when dealing with the global application of PEP requirements. Specifically, the panelists noted the significant differences from country to country regarding who qualifies as a PEP and whether or not an individual’s status as a PEP continues after the individual leaves his position. Significantly, one of the panelists noted that their company took a country by country approach with regard to PEP onboarding and monitoring in order to address the differences. Panelists further noted a concern regarding the duplication of names between OFAC screening lists and local country lists. Panelists also noted that because of the global nature of PEP regulations, they tend to refer to Senior Foreign Political Figures as Senior Political Figures, even though official guidance uses the foreign distinction.

    Intersection of PEPs, Money Laundering and Corruption

    Panelists next discussed how the DOJ views the intersection of programs dealing with money laundering and corruption. The panel noted the significant cooperation that exists between individuals working in different areas associated with AML and bribery. The panel highlighted the importance of Suspicious Activity Reports and their use in investigating alleged illegal conduct. The panel also noted that with the increase in disclosure requirements, it is becoming easier to find evidence of money laundering and to eventually recover those illegal proceeds.

    Dealing with Local Political Officials

    In response to questions from attendees, the panelists then shifted to discussing the domestic application of PEP policies and procedures. The key points discussed were associated with how local political officials are categorized when dealing with PEPs. Specifically, the panelists noted the difficulties associated with deciding how broadly to extend the definition of a PEP with regard to local political officials. The panel suggested that the primary concern when defining local PEPs was to make sure that an organization’s policies and procedures are clearly defined and at least reasonably defensible. Panelists observed that the key regulatory concern is not that the definitions should be identical, but that entities have reasonable definitions that are enforced uniformly.

    Monitoring Techniques and Metrics

    The panel also discussed the specific complications associated with dealing with the monitoring of PEP accounts. The panelists noted that one of the key aspects of account monitoring is to leverage any AML programs currently in place and allowing that process to help identify any particularly suspicious practices. Furthermore, the panelists pointed out that a key aspect of dealing with suspicious PEP activity is the filing of SARs. One panelist also noted that, while not required statutorily, cooperation with local law enforcement can greatly assist the DOJ with recovering any illegal proceeds.

    Anti-Money Laundering Anti-Corruption Financial Crimes

  • Federal Appeals Court Affirms Dodd-Frank Whistleblower Protections Do Not Apply Outside U.S.

    Securities

    On August 14, the U.S. Court of Appeals for the Second Circuit affirmed a district court’s holding that the Dodd-Frank Act’s antiretaliation provision does not apply extraterritorially. Liu Meng-Lin v. Siemens AG, No. 13-4385, 2014 WL 3953672 (2nd Cir. Aug. 14, 2014). A foreign worker was allegedly fired by his foreign employer for internally reporting violations of U.S. anti-corruption rules, which he claimed violated the antiretaliation provision of the Dodd-Frank Act. This provision prohibits an employer from firing or otherwise discriminating against any employee who makes a disclosure that is required or protected under Sarbanes-Oxley or any other law, rule, or regulation subject to the SEC’s jurisdiction. The court first determined that the facts alleged in the complaint revealed “essentially no contact with the United States” and rejected an argument that the foreign company voluntarily subjected itself to U.S. securities laws by listing its securities on the New York Stock Exchange. The court also held that, given the longstanding presumption against extraterritoriality and the absence of any “explicit statutory evidence that Congress meant for the provision to apply extraterritorially,” the cited provision does not apply to purely foreign-based claims.

    FCPA Dodd-Frank Anti-Corruption SEC Whistleblower

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