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Swiss banker sentenced to 10 years in Venezuelan state-owned oil company embezzlement and bribery scheme; official pleads guilty in same scheme
On October 29, a former banker was sentenced to serve 10 years in prison for his role in a scheme to launder funds embezzled from a Venezuelan state-owned oil company. The banker had pleaded guilty to one count of conspiracy to commit money laundering on August 22, 2018. He admitted to using his position at the bank to attract clients from Venezuela. He helped some of those clients launder proceeds from the company's foreign-exchange embezzlement scheme using false-investment schemes and Miami real estate. The PDVSA money was originally obtained through bribery and fraud.
Two days later, on October 31, a former executive director of financial planning at the Venezuelan state-owned oil company pleaded guilty to charges related to his role in the same scheme. He admitted to accepting $5 million in bribes to give priority loan status to a French company and Russian bank. The former executive was paid with the proceeds of the same foreign-exchange embezzlement scheme. He admitted that he ultimately received $12 million in bribes for his participation in the embezzlement scheme and laundered that money with a co-defendant through a false-investment scheme. He is expected to be sentenced on January 9, 2019.
On October 30, the DOJ charged a dual U.S.-Haitian citizen with conspiracy to violate the FCPA, commit money laundering, and violate the Travel Act, as well as substantive Travel Act violations. The individual is a licensed attorney and the CEO of a Haitian development and reconstruction company. The indictment is part of an ongoing case against a retired U.S. Army colonel who was indicted in 2017 related to an alleged plan to solicit bribes from potential investors for infrastructure projects in Haiti. (For prior coverage of the charges against the colonel, please see here.) According to the indictment, at a meeting in 2015, the citizen and retired colonel met with undercover FBI agents posing as potential investors in the development project, and allegedly asked the agents to invest $84 million in the project. The colonel told them that 5 percent of that total would be paid to Haitian officials to secure approval for the project. The colonel allegedly planned to disguise the funds through a non-profit he controlled. The FBI then wired money to the non-profit.
On October 30, a third-party debt collector and its affiliates (defendants) entered into a stipulated final judgment in the Superior Court of California to settle a consumer protection lawsuit brought by the state of California over allegedly illegal debt collection calling practices. According to a press release issued by the Los Angeles County District Attorney, the defendants allegedly violated California’s Rosenthal Fair Debt Collection Practices Act, the FDCPA, and the TCPA by calling consumers with “excessive frequency,” continuing to call consumers even after being advised that they had reached the wrong number, and using a “predictive dialer” to place calls to consumers’ cell phones without their consent. By entering into the judgment, the defendants—who have not admitted to the allegations in the complaint—will, among other things, (i) pay $1 million in monetary relief; (ii) pay an $8 million civil penalty; (iii) maintain records of calls and complaints; (iv) conduct compliance training for employees responsible for outbound debt collection calls; and (v) conduct an annual third-party audit to ensure compliance with the settlement.
On October 30, the CFPB released an updated HMDA Small Entity Compliance Guide to reflect Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) and the 2018 HMDA interpretive and procedural rule. As previously covered by InfoBytes, on August 31, the CFPB issued an interpretive and procedural rule to implement Section 104(a) of the Act, which amends section 304(i) of HMDA by adding partial exemptions from some of HMDA’s reporting requirements for certain insured depository institutions and insured credit unions.
On November 1, the FTC announced a proposed rule, which would implement the Economic Growth, Regulatory Relief, and Consumer Protection Act requirement for nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty servicemembers. The proposal defines the term “electronic credit monitoring service” as a service through which the CRAs provide, at a minimum, electronic notification of material additions or modifications to a consumer’s file and requires CRAs to notify servicemembers within 24 hours of any material change. The proposal notes that CRAs may require that servicemembers provide contact information, proof of identity, and proof of active duty status in order to use the free service and outlines how a servicemember may prove active duty status, such as with a copy of active duty orders. Additionally, the proposal prohibits CRAs from requiring servicemembers to purchase a product in order to obtain the free service or requiring the servicemember to agree to terms and conditions. Comments will be due 60 days after publication in the Federal Register.
On October 31, the Financial Crimes Enforcement Network (FinCEN) issued an advisory reminding financial institutions that, on October 19, the Financial Action Task Force (FATF) updated two documents that list jurisdictions identified as having “strategic deficiencies” in their anti-money laundering and combatting the financing of terrorism (AML/CFT) regimes. (See previous InfoBytes coverage here.) 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, Improving Global AML/CFT Compliance: On-going Process - 19 October 2018, identifies jurisdictions with strategic AML/CFT deficiencies that have developed an action plan with the FATF to address those deficiencies: the Bahamas, Botswana, Ethiopia, Ghana, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen. Notably, the Bahamas, Botswana and Ghana have been added to the list due to the lack of effective implementation of their AML/CFT frameworks. 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.
On October 30, the U.S. District Court for the Western District of Wisconsin denied a company’s motion to dismiss allegations that it violated the TCPA when it used a predictive dialer to try to collect a debt from the plaintiff. According to the opinion, the plaintiff alleged the company called him repeatedly without permission in an attempt to collect a debt using a predictive dialer. The company moved to dismiss because the plaintiff did not allege that the company used an autodialer with the ability to dial random or sequential phone numbers, which the company argued was required by the TCPA. The court found that a predictive dialer is an autodialer under the TCPA even if it does not generate random or sequential numbers. This conclusion was based on a 2003 FCC ruling, which stated that predictive dialers are autodialers “even if the device does not dial random or sequentially generated numbers.” The court further noted that the decision reached by the D.C. Circuit in ACA International v. FCC—which set aside the FCC’s 2015 interpretation of an autodialer as unreasonably expansive—did not invalidate the FCC’s 2003 order. (See previous Buckley Sandler Special Alert on ACA International here.) Based on this analysis, the court concluded that the plaintiff had established the three elements necessary to allege a TCPA violation.
On October 31, the OCC published in the Federal Register proposed changes to its “stress test” rules for covered financial institutions, as required by the Dodd-Frank Act. The proposal would, among other things, (i) revise the OCC reporting requirements to mirror the Federal Reserve Board’s proposed Comprehensive Capital Analysis and Review (CCAR) reporting form FR Y-14A for covered institutions with total consolidated assets of $100 billion or more; (ii) implement the revised asset threshold mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act; and (iii) remove the Retail Repurchase worksheet. Comments on the proposed changes must be received by December 31.
On November 1, the FTC announced a joint action with the New York Attorney General against a New York-based debt collection company for allegedly violating the FTC Act, the FDCPA, and New York state law by using false or deceptive tactics to collect money from consumers, sometimes resulting in the consumer paying more than what they allegedly owed. According to the complaint, the company’s employees threatened consumers with arrest or lawsuits while falsely posing as law enforcement officials or attorneys. Additionally, the employees allegedly added “more pressure” to consumers by telling them they owed more than the company’s records indicated they did, using forms to show a higher balance than the actual client balance—a practice known as “overbiffing.” On October 25, the U.S. District Court for the Western District of New York granted a temporary restraining order, halting the company’s allegedly illegal activity and freezing the company’s assets. The complaint seeks a (i) permanent injunction; (ii) consumer redress; and (iii) civil money penalties under New York law.
Interestingly, as covered by InfoBytes here, FTC Commissioner Rohit Chopra issued a concurring statement in another recent FTC action, suggesting the FTC should seek to partner with other enforcement agencies that have the authority to obtain monetary settlements from FTC targets. In this complaint, the New York Attorney General is seeking civil money penalties against the debt collectors under New York General Business Law § 350-d.
On October 29, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), fining a broker-dealer $2.75 million for identified deficiencies in its anti-money laundering (AML) program. According to FINRA, design flaws in the firm’s AML program allegedly resulted in the firm’s failure to properly investigate (i) certain third-party attempts to gain unauthorized access to its electronic systems, and (ii) other potential illegal activity, which should have led to the filing of Suspicious Activity Reports (SARs). FINRA notes that this failure primarily stemmed from the firm's use of an inaccurate “fraud case chart,” which provided guidance to employees about investigating and reporting requirements related to suspicious activity where third parties use “electronic means to attempt to compromise a customer's email or brokerage account.” Consequently, FINRA alleges that the firm failed to file more than 400 SARs and did not investigate certain cyber-related events. Among other things, FINRA also asserts that the firm failed to file or amend forms U4 or U5, which are used to report certain customer complaints, due to an overly restrictive interpretation of a requirement that complaints contain a claim for compensatory damages exceeding $5,000.
The firm neither admitted nor denied the findings set forth in the AWC agreement, but agreed to address identified deficiencies in its programs.
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues" at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program