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Financial Services Law Insights and Observations


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  • German-headquartered financial institution to pay $1.3 billion for Iran sanctions violations

    Financial Crimes

    On April 15, U.S. regulators announced settlements totaling $1.3 billion with several banking units of a German-headquartered financial institution to resolve allegations by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the DOJ, the Federal Reserve Board, the New York Department of Financial Services (NYDFS), and the New York County District Attorney’s Office of apparent violations of multiple sanctions programs, including those related to Burma, Cuba, Iran, Libya, Sudan, and Syria. According to OFAC’s announcement, between January 2007 and December 2011, the institution’s banking units in Germany, Austria, and Italy processed thousands of payments through U.S. financial institutions on behalf of sanctioned entities “in a manner that did not disclose underlying sanctioned persons or countries to U.S. financial institutions which were acting as financial intermediaries.”

    According to the roughly $611 million combined settlement agreements (see here, here, and here), OFAC considered various aggravating factors, and noted, among other things, that the institution’s banking units failed to sufficiently enforce policies addressing OFAC sanctions concerns or restrict the processing of transactions in U.S. dollars involving persons or countries subject to sanctions programs administered by OFAC. Additionally, OFAC asserted that the Austrian banking unit claimed on several occasions that OFAC’s sanctions programs “were not legally binding or relevant to [the bank].” OFAC further stated that while the banking units failed to voluntarily self-disclose the alleged violations, they have each agreed to implement and maintain compliance commitments to minimize the risk of the recurrence of the alleged conduct.

    The approximate $611 million penalty will be deemed satisfied by the banking units’ payments to other U.S. regulators, which includes an almost $317 million forfeiture and roughly $468 million fine to the DOJ, $158 million fine to the Federal Reserve, and $405 million fine to the NYDFS.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Settlement Iran Sanctions DOJ Federal Reserve NYDFS

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  • DOJ settles with multinational corporation for $1.5 billion over RMBS


    On April 12, the DOJ announced that a multinational corporation will pay $1.5 billion in a settlement resolving claims brought under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) that a financial services subsidiary of the corporation misrepresented the quality of loans it originated in connection with the marketing and sale of residential mortgage-backed securities (RMBS). According to the DOJ, between 2005 and 2007, the majority of the mortgage loans sold by the subsidiary for inclusion in RMBS did not comply with the quality representations made about the loans. Specifically, the loan analysts allegedly approved mortgage loans that did not meet criteria outlined in the company’s underwriting guidelines, as they would receive additional compensation based on the number of loans they approved. The DOJ asserts that there were inadequate resources and authority for the subsidiary’s quality control department, resulting in deficiencies in risk management and fraud controls. Additionally, if an investment bank were to reject a loan due to defects in the loan file, the DOJ alleges the subsidiary would attempt to find a new purchaser, without disclosing the previous rejection or identifying the alleged defects. The corporation does not admit to any liability or wrongdoing, but agreed to pay a $1.5 billion civil money penalty to resolve the matter.

    Securities DOJ RMBS Mortgages FIRREA Settlement

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  • London-based financial institution to pay $1.1 billion for U.S. sanctions violations

    Financial Crimes

    On April 9, U.S. and U.K regulators announced that a London-based global financial institution would pay $1.1 billion to settle allegations by the DOJ, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the Federal Reserve Board, the New York Department of Financial Services (NYDFS), the Manhattan District Attorney, and the U.K.’s Financial Conduct Authority (FCA) for allegedly violating multiple sanctions programs, including those related to Burma, Cuba, Iran, Sudan, and Syria. According to the OFAC announcement, from June 2009 until May 2014, the institution processed thousands of transactions involving persons or countries subject to sanctions programs administered by OFAC, but the majority of the actions at issue concern Iran-related accounts maintained by the institution’s Dubai branches. OFAC alleged the Dubai branches processed transactions through the institution’s New York branches on behalf of customers that were physically located or ordinarily resident in Iran.

    According to the $639 million settlement agreement, OFAC noted, among other things, that the institution “acted with reckless disregard and failed to exercise a minimal degree of caution or care” with respect to the actions at issue. Moreover, OFAC alleged that the institution had actual knowledge or reason to know its compliance program was “inadequate to manage the [the institution]’s risk.” OFAC considered numerous mitigating factors, including that the institution’s substantial cooperation throughout the investigation and its undertaking of remedial efforts to avoid similar violations from occurring in the future.

    The $639 million penalty will be deemed satisfied by the institution’s payments to other U.S. regulators, which includes, $240 million forfeiture and $480 million fine to the DOJ, $164 million fine to the Federal Reserve, and $180 million fine to the NYDFS. The institution also settled with the FCA for $133 million. The settlement illustrates the risks to foreign financial institutions associated with compliance lapses when processing transactions through the U.S. financial system.

    Financial Crimes OFAC Department of Treasury Sanctions DOJ Federal Reserve NYDFS UK FCA Settlement Of Interest to Non-US Persons

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  • Micronesian official pleads guilty to corruption-related money laundering conspiracy

    Financial Crimes

    On April 3, the DOJ announced that a Micronesian government official pleaded guilty in the District of Hawaii to a money laundering conspiracy “involving bribes made to corruptly secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM), in violation of the” FCPA. The official was arrested in February after a Hawaiian executive pleaded guilty to a related FCPA conspiracy charge the prior month (see previous FCPA Scorecard coverage here). 

    According to the DOJ, the official "was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs, including the management of its airports.” The official admitted that, between 2006 and 2016, a Hawaii-based engineering and consulting company “paid bribes to FSM officials, including [the official], to obtain and retain contracts with the FSM government valued at nearly $8 million.” The official’s sentencing is scheduled for July 29.

    Financial Crimes DOJ Anti-Money Laundering FCPA Of Interest to Non-US Persons

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  • German medical equipment provider settles FCPA claims for $230 million

    Financial Crimes

    On March 29, DOJ publicly released a non-prosecution agreement it had entered into in late February with a Germany-based provider of medical equipment and services in which the company agreed to pay over $230 million to settle claims that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. The alleged misconduct, which included various schemes to pay bribes to public and/or government officials in exchange for business opportunities, occurred over the course of at least a decade and spanned 17 or more countries in Africa, Europe, and the Middle East. On the same day, the company also entered into an administrative order with the SEC. The SEC stated that the company had failed to timely address “numerous red flags of corruption in its operations” that were known to the company as far back as the early 2000s, and that it “failed to properly assess and manage its worldwide risks, and devoted insufficient resources to compliance.”

    While the company received credit for making a voluntary disclosure to DOJ in April 2012 and for remedial measures undertaken since that time, DOJ stated that the company failed to timely respond to certain of its requests and, at times, provided incomplete responses to those requests. Accordingly, the company did not receive full credit for cooperation and did not qualify for a declination under the FCPA Corporate Enforcement Policy. In its non-prosecution agreement, among other things, the company agreed to: (i) the appointment of an independent compliance monitor for a two-year term, followed by one year of self-reporting, (ii) continuation of its efforts to cooperate with the DOJ’s investigation, and (iii) disgorgement of approximately $147 million to the SEC and payment of approximately $85 million in fines to the U.S. Treasury. The fine amount was calculated with a 40% discount off of the bottom of the United States Sentencing Guidelines fine range based on $141 million in profits from the alleged misconduct.

    Notably, the alleged misconduct involved no U.S.-based conduct, individuals, subsidiaries, or third parties. Instead, the individuals alleged to have engaged in misconduct apparently used internet-based email accounts hosted by service providers in the U.S. (and therefore utilized means and instrumentalities of U.S. interstate commerce), and the company’s American Depository Shares trade on the NYSE so the company files periodic reports with the SEC.


    Financial Crimes Of Interest to Non-US Persons FCPA DOJ

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  • Hong Kong energy executive sentenced to three years in prison for Chad and Uganda bribes

    Financial Crimes

    According to the DOJ, on March 25 a Hong Kong executive was sentenced in the SDNY to a 36-month prison sentence. He headed up a private Chinese energy company and was sentenced “for his role in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages.”

    He was convicted of money laundering, violating the FCPA, and conspiracy after a week-long trial in December 2018. The DOJ alleged that starting in the fall of 2014, he used his US-based NGO to cover up a scheme in which he offered $2 million in cash to the President of Chad concealed in gift boxes, in exchange for the company receiving oil rights from the government; the President rejected the bribe. In Uganda, the DOJ alleged that he gave $1,000,000 in cash payments to the Foreign Minister of Uganda and the President of Uganda.

    Financial Crimes Anti-Money Laundering FCPA DOJ Bribery Of Interest to Non-US Persons

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  • DOJ amends its FCPA Corporate Enforcement Policy, softens disappearing messaging ban

    Financial Crimes

    In March 2019, the DOJ amended its FCPA Corporate Enforcement Policy, including to clarify the agency’s position on the use of ephemeral messaging apps by companies seeking full cooperation credit under the policy. Ephemeral messaging apps such as Signal, WhatsApp, and Telegram, now common in many workplaces, allow users to send messages that may not be preserved and retrievable later in the same way as e-mails. To the DOJ, the impermanence of ephemeral messaging makes uncovering details about past events more difficult. Prior to the amendments, the DOJ’s initial Corporate Enforcement Policy had indicated that full cooperation credit would not be available to companies which allowed employees to use “software that generates but does not appropriately retain business records or communications.” 

    The updated policy softens this position and specifically addresses ephemeral messaging platforms.  Companies using the platforms may now be eligible for full cooperation credit, provided that they “implement[] appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company’s ability to appropriately retain business records or communications or otherwise comply with the company’s document retention policies or legal obligations.” While the amendment may allow companies to take advantage of the beneficial aspects of ephemeral messaging, it also begs new questions as to what constitutes “appropriate” guidance and controls.

    The March 2019 amendments also provide additional clarification on de-confliction; add a new comment explaining how the DOJ will implement a presumption of a declination in cases where a company involved in a merger or acquisition “uncovers misconduct through thorough and timely due diligence . . . and voluntarily self-discloses,” with the potential for a declination for the acquiring company even where there are aggravating circumstances regarding the acquired company; and enlarge the voluntary self-disclosure of individuals category to include information not just about “all individuals involved in the violation,” but “all individuals substantially involved in or responsible for the violation.”

    In his March 8, remarks to the American Bar Association’s National Institute on White Collar Crime, Assistant Attorney General Brian A. Benczkowski referenced the updates and emphasized the importance of reviewing the 12 previous case declinations made under the policy as supplemental guidance in understanding the policy. 


    Financial Crimes FCPA DOJ Enforcement Of Interest to Non-US Persons

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  • DOJ announces $1.59 million settlement with real estate management company for alleged SCRA violations

    Federal Issues

    On March 15, the DOJ announced a $1.59 million settlement with a real estate management company resolving allegations that the company and its entities violated the Servicemembers Civil Relief Act (SCRA) by obtaining unlawful court judgments and charging unlawful lease termination fees. According to the complaint, from 2006 to 2017, the company obtained at least 152 default judgments against 127 “SCRA-protected servicemembers” by failing to accurately disclose their military status in affidavits filed with the court. Additionally, the DOJ alleged that the company wrongfully withheld security deposits and imposed early lease termination fees on servicemembers who sought termination due to qualifying military orders under the SCRA. Under the terms of the settlement, the company will pay (i) nearly $1.5 million to compensate 127 servicemembers who had allegedly unlawful default judgments entered against them; (ii) nearly $35,000 to compensate 10 servicemembers who were charged early lease termination fees; and (iii) a civil money penalty of $62,000. The settlement also requires the company to develop policies and procedures related to SCRA lease terminations and default judgments, conduct SCRA compliance training for employees involved with lease issues, and request that major credit reporting agencies delete trade lines and negative credit information for the affected servicemembers.

    Federal Issues DOJ SCRA Servicemembers Military Lending Settlement Enforcement

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  • FTC announces new action and proposed settlement in DOJ elder abuse sweep

    Federal Issues

    On March 7, the FTC announced a new legal action and a final settlement issued against individuals and their operations for allegedly engaging in schemes that exploit elderly Americans. The actions are part of an enforcement sweep spearheaded by the DOJ in conjunction with, among others, the FBI, the FTC, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Louisiana Attorney General, which—according to a press release issued the same day by the DOJ—is the largest-ever coordinated nationwide elder fraud sweep, involving multiple cases, over 260 defendants, and more than two million allegedly victimized U.S. Citizens, most of whom are elderly.

    According to the FTC’s complaint, the company used deceptive tactics to convince consumers, the majority of whom were older, that their computers were infected with viruses in order to sell expensive and unnecessary computer repair services in violation of the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act. Specifically, the company allegedly used internet ads to target consumers looking for email password assistance and once they contacted the consumers, the telemarketers would run phony “diagnostic” tests that falsely showed the consumer’s computer was in danger and needed software and services to be fixed. On February 27, the U.S. District Court for the Southern District of Utah, granted a temporary restraining order against the company and its founder.

    The FTC also announced a proposed settlement with a sweepstake operation that allegedly bilked consumers out of tens of millions of dollars through personalized mailers that falsely implied that the recipients had won or were likely to win a cash prize if they paid a fee. As previously covered by InfoBytes, the FTC announced the charges against the company in February 2018, alleging that consumers, most of whom were elderly, paid more than $110 million towards the scheme. The final settlement not only requires the operation to turn over $30 million in assets and cash to provide redress to the victims, but also permanently bans the operators from similar prize promotions in the future. The proposed settlement has not yet been approved by the court.

    Federal Issues DOJ FTC Fraud Consumer Finance Consumer Protection State Attorney General Telemarketing Sales Rule FTC Act Elder Financial Exploitation Courts

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  • CFTC adds self-reporting of foreign corrupt practices by non-registrants to cooperation program

    Financial Crimes

    On March 6, the CFTC issued an enforcement advisory announcing that it would add violations of the Commodity Exchange Act involving foreign corrupt practices to its cooperation and self-reporting program. The CFTC will recommend no civil monetary penalty where companies and individuals which are not registered (or required to be registered) with the CFTC timely and voluntarily disclose such violations. Full cooperation and appropriate remediation would also be required. In announcing the enforcement advisory, the CFTC’s Director of Enforcement stated at the ABA’s National Institute on White Collar Crime that the change “reflects the enhanced cooperation between the CFTC and our law enforcement partners like the Department of Justice.” He also stated that the agency currently has open investigations into various foreign corrupt practices that violate the Commodity Exchange Act, including bribes that “secure business in connection with regulated activities,” manipulation of benchmarks, “prices that are the product of corruption [being] falsely reported to benchmarks,” and corrupt practices altering the commodity markets.

    Financial Crimes CFTC DOJ Commodity Exchange Act White Collar Of Interest to Non-US Persons

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