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FinCEN, federal banking agencies provide exemption from customer identification program requirements for premium finance loans
On September 27, the Financial Crimes Enforcement Network (FinCEN), Federal Reserve Board, FDIC, NCUA, and OCC (together, the agencies) collectively issued an interagency order announcing an exemption from the requirements of the customer identification program (CIP) rules for premium finance loans extended by banks to commercial customers. The exemption, which is effective immediately, will facilitate short-term financing to business to aid in the purchase of property and casualty insurance policies. The order states that FinCEN believes these types of loans present a low risk for money laundering due to the “purpose for which the loans are extended and the limitations on the ability of a customer to use such funds for any other purpose.” However, banks engaged in premium finance lending are still required to comply with all other regulatory requirements implementing the Bank Secrecy Act (BSA), including filing suspicious activity reports. The federal banking agencies further determined that the order granting this exemption is consistent with both the purposes of the BSA and safe and sound banking practices. (See also Federal Reserve Board SR 18-6, FDIC FIL-52-2018, and OCC Bulletin 2018-35.)
OCC releases bank supervision operating plan for fiscal year 2019
On September 26, the OCC’s Committee on Bank Supervision released its bank supervision operating plan (Plan) for fiscal year 2019. The Plan outlines the agency’s supervision priorities and specifically highlights the following supervisory focus areas: (i) cybersecurity and operational resiliency; (ii) commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses; (iii) Bank Secrecy Act/anti-money laundering compliance; (iv) change management to address new regulatory requirements; and (v) internal controls and end-to-end processes necessary for product and service delivery.
The annual plan guides the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and service providers.
The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes previously has covered.
FinCEN advisory reminds financial institutions about recent updates to the lists of FATF-identified jurisdictions with AML/CFT deficiencies
On September 21, the Financial Crimes Enforcement Network (FinCEN) issued an advisory reminding financial institutions that, on June 29, the Financial Action Task Force (FATF) updated two documents that each list jurisdictions identified as having “strategic deficiencies” in their anti-money laundering and combatting the financing of terrorism (AML/CFT) regimes. The first document, the FATF Public Statement, identifies two jurisdictions, the Democratic People’s Republic of Korea and Iran, that are subject to countermeasures and/or enhanced due diligence (EDD) due to their strategic AML/CFT deficiencies. The second document, the Improving Global AML/CFT Compliance: On-going Process, identifies jurisdictions with strategic AML/CFT deficiencies. As further described in the document, FATF identified the following jurisdictions as having developed action plans to address their AML/CFT deficiencies: Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen. Notably, Pakistan has been added to the list based on FATF-identified AML/CFT deficiencies, whereas Iraq and Vanuatu have been removed from the list due to “significant progress in improving its AML/CFT regime . . . [and] establish[ing] the legal and regulatory framework to meet the commitments in its action plan.” FinCEN urges financial institutions to consider both the FATF Public Statement and the Improving Global AML/CFT Compliance: On-going Process documents when reviewing due diligence obligations and risk-based policies, procedures, and practices.
Financial advisor pleads guilty to money laundering in Ecuadorian energy company case
On September 11, a Miami-based financial advisor pleaded guilty to one count of conspiracy to commit money laundering in connection with his role in making corrupt payments to officials of an Ecuador state-owned and state-controlled energy company. He is scheduled to be sentenced on Nov. 14 in the Southern District of Florida.
He is the fourth individual, including two former officials of the company, to plead guilty in this case, which concerns efforts by an oil services contractor to make payments to the company's officials in an effort to retain existing contracts and win new business with the company. Another individual who was charged in the same indictment as him, has pleaded not guilty and is currently set to go to trial on October 15. His charges include one count of conspiring to violate the FCPA and one count of violating the FCPA.
FinCEN issues Spanish language version of its advisory on politically exposed persons and their financial facilitators
On September 11, the Financial Crimes Enforcement Network (FinCEN) released a Spanish version of its advisory for U.S. financial institutions to increase awareness of the connection between high-level political corruption and human rights abuses. As previously covered in InfoBytes, FinCEN issued regulatory guidance in June to remind financial institutions of their risk-based, due diligence obligations, which include (i) identifying legal entities owned or controlled by “politically exposed persons” (as required by FinCEN’s Customer Due Diligence Rule); (ii) complying with anti-money laundering program obligations; and (iii) filing Suspicious Activity Reports related to illegal activity undertaken by senior foreign political figures.
FinCEN director discusses approach to virtual currency and emerging technology
On August 9, Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco delivered remarks at the 2018 Chicago-Kent Block (Legal) Tech Conference to discuss, among other things, the agency’s approach to virtual currency and its efforts to protect financial institutions from being exploited for illicit financing purposes as new financial technologies evolve and are adopted. Blanco commented that while innovation provides customers with greater access to financial services, it can also create opportunities for criminals or serve as a vehicle for fraud. Blanco discussed several areas of focus, such as (i) the regulation of virtual currency and initial coin offerings (ICOs), along with coordinated policy development and regulatory approaches done in conjunction with the SEC and CFTC; (ii) examination and supervision efforts designed to “proactively mitigate potential illicit finance risks associated with virtual currency”; (iii) anti-money laundering/countering the financing of terrorism (AML/CFT) regulatory compliance expectations for companies involved in ICOs or virtual currency transmissions; (iv) enforcement actions taken against companies that fail to implement effective programs; (v) the rise and importance of virtual currency suspicious activity report filings which help the agency identify and investigate illicit activity; and (vi) the development of an information sharing virtual currency-focused FinCEN Exchange program. Blanco emphasized that “individuals and entities engaged in the business of accepting and transmitting physical currency or convertible virtual currency from one person to another or to another location are money transmitters subject to the requirements” of the Bank Secrecy Act.
Former Malaysia Prime Minister charged with money laundering
On August 8, Malaysia’s former Prime Minister pleaded not guilty to money laundering charges filed against him in Malaysia in connection with the ongoing investigation of a Malaysian strategic development company. He had previously pleaded not guilty to three charges of criminal breach of trust and one charge of abuse of power. The money laundering charges relate to approximately $10 million that was allegedly deposited into the former Prime Minister’s personal bank account. That is a small portion of the total funds under investigation as misappropriated from the state fund.
The day before, a $250 million super yacht was returned to Malaysia after it was previously seized in Indonesia following claims by the U.S. Department of Justice that is was purchased with funds misappropriated from the company. Back in July 2016, DOJ filed civil forfeiture complaints seeking recovery of more than $1 billion in assets associated with the alleged “international conspiracy to launder funds misappropriated from [the company].” In June 2017, DOJ filed additional civil forfeiture complaints to recover another $540 million in assets. The investigation into assets linked to the company continues with DOJ alleging that more than $3.5 billion in total funds were misappropriated from the company from 2009 through 2015.
Former Barbados Minister of Industry charged with money laundering
On August 6, the Department of Justice announced the arrest and first court appearance of a former Minister of Industry of Barbados who DOJ has charged with “laundering bribes that he allegedly received from a Barbadian insurance company in exchange for official actions he took to secure government contracts for the insurance company.” The indictment, which was initially issued under seal on March 15, charges him with one count of conspiracy to launder money and two counts of money laundering. It also seeks forfeiture of the funds he received as alleged bribes. The indictment alleges that as Minister of Industry, he caused an agency of the Barbados Government to renew two contracts with the Barbadian insurance company. In return, the insurance company purportedly paid him approximately $36,000, routing the payments through a dental company and its bank account located in New York. The indictment also references as co-conspirator, but does not name, the CEO of the dental company, a United States citizen and resident of Tampa, Florida. He is also a lawful permanent resident of Tampa, Florida.
OCC releases recent enforcement actions
On July 20, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. The new enforcement actions include cease and desist orders, civil money penalty orders, removal/prohibition orders, and terminations of existing enforcement actions. Two of the more notable actions by the OCC covered in this report are discussed below.
On May 31, the OCC issued a consent order against an international investment bank’s federal branches located in Stamford, Miami, and New York, which identified alleged deficiencies in the branches’ Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance programs. The alleged deficiencies include failure to adopt and implement adequate BSA/AML compliance programs and failure to file timely Suspicious Activity Reports. Among other things, the consent order requires the branches to (i) develop and implement an ongoing BSA/AML risk assessment program; (ii) adopt an independent audit program to conduct a review of the bank’s BSA/AML compliance program; (iii) submit a written progress report within 30 days after the end of each calendar quarter that details actions undertaken to ensure compliance with the consent order’s provisions; and (iii) ensure each branch has permanent, experienced BSA officers responsible for compliance functions. The bank has neither admitted nor denied the OCC’s findings, and a civil money penalty was not assessed against the branches.
In addition, on June 18 the OCC issued an order terminating a 2016 consent order against a national bank following the OCC’s determination that the bank had successfully completed the consent order’s requirements for complying with provisions of the Servicemembers Civil Relief Act.
Latest conviction in Venezuelan oil company bribery case
On July 16, 2018, a dual U.S.-Venezuelan citizen pleaded guilty to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering. The citizen’s convictions relate to allegations that he bribed officials at Venezuela’s state-owned oil company and laundered money for bribes to other company employees. FCPA Scorecard provided earlier coverage of this case here.
The citizen admitted to soliciting and directing bribes from two U.S. citizens in exchange for securing payment priority for their companies from the oil company and for awards of the company's contracts. The citizen also admitted to conspiring with these individuals to launder and conceal the proceeds of the scheme through a series of financial transactions, including wire transfers to offshore accounts. Sentencing is scheduled for September 24.
His conviction underscores how wide investigations can become as the DOJ continues pulling threads and obtaining guilty pleas. The DOJ has charged 15 defendants in the company's cases, 12 of whom have pleaded guilty to date, including the citizen. The DOJ also credited the assistance of the Swiss Federal Office of Justice and the Spanish Guardia Civil.