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  • Four receive suspended sentences in SFO’s logistics company North Sea case

    Financial Crimes

    On January 11, the U.K.’s Serious Fraud Office (SFO) announced that four more individuals were sentenced in connection with a bribery scheme involving a logistics company’s oil exploration project in the North Sea. Three of the individuals—one former agent of an American energy corporation and two former logistics company directors—pleaded guilty prior to the trial. They received 6, 12, and 15 month prison sentences, although their terms are suspended for two years. The two former directors were also ordered to pay fines of £15,000 and £20,000.  The fourth individual, the logistics company’s former chief commercial officer, was convicted at trial. He received 9 months’ imprisonment (also suspended for two years), and was ordered to pay a £5,000 fine.

    Several of the defendants also received suspended prison terms related to SFO’s logistics company Angola case. See previous FCPA Scorecard coverage of the probes here and here.

    Financial Crimes FCPA

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  • OFAC issues temporary extension of Ukraine-related General Licenses

    Financial Crimes

    On January 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13J, 14E, and 16E, which modify the expiration dates of previous Ukraine-based general licenses for wind-down transactions for certain companies that otherwise would be prohibited by Ukraine-Related Sanctions Regulations.

    GL 13J supersedes GL 13I and authorizes, among other things, activities and transactions “ordinarily incident and necessary” for (i) the divestiture of the holdings of specified blocked persons to a non-U.S. person; and (ii) the facilitation of transfers of debt, equity, or other holdings involving specified blocked persons to a non-U.S. person. GL 14E, which supersedes GL 14D, relates to specific wind-down activities involving a Russian aluminum producer sanctioned last April as previously covered by InfoBytes here. GL 16E supersedes GL 16D and authorizes permissible activities with the designated company and its subsidiaries, and applies to the maintenance and wind-down of operations, contracts, and agreements that were effective prior to April 6.

    Financial Crimes Sanctions OFAC Department of Treasury Ukraine International

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  • Federal Reserve issues enforcement action against Texas bank for BSA/AML compliance issues

    Financial Crimes

    On January 8, the Federal Reserve Board announced an enforcement action against a Texas bank for alleged weaknesses in its anti-money laundering risk management and compliance programs, including failure to comply with applicable rules and regulations, such as the Bank Secrecy Act. Under the terms of the order, the bank is required to (i) develop and implement a written plan to strengthen the board of directors’ oversight of Bank Secrecy Act/anti-money laundering (BSA/AML) compliance; (ii) submit an enhanced written compliance program that complies with BSA/AML requirements; (iii) ensure the bank provides effective training for all personnel related to BSA/AML compliance responsibilities; (iv) submit an enhanced, written customer due diligence plan; (v) submit a program to ensure compliant, timely, and accurate suspicious activity monitoring and reporting; (vi) retain an independent third party to ensure the effectiveness of the bank’s transaction monitoring system; and (vii) submit a written plan for independent testing of the bank’s compliance with all applicable BSA/AML requirements. A civil money penalty was not assessed against the bank.

    Financial Crimes Federal Reserve Anti-Money Laundering Bank Compliance Bank Secrecy Act

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  • OFAC adds illicit foreign exchange operation participants to Specially Designated Nationals List; issues Venezuela-related General License and new FAQ

    Financial Crimes

    On January 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Order 13850. OFAC’s additions to the list include seven individuals—including former Venezuelan government officials—and 23 entities for their participation in a bribery scheme involving the Venezuelan Office of the National Treasury in order to conduct illicit foreign exchange operations in the country. According to OFAC, the designated persons engaged in transactions involving deceptive practices and corruption, including wiring payments that were “hidden behind a sophisticated network of U.S. and foreign companies that hid the individuals’ beneficial ownership.” As a result, all assets belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked, and U.S. persons generally are prohibited from dealing with them.

    Concurrently, OFAC issued Venezuela-related General License 6 (GL 6) to allow U.S. persons to engage in otherwise prohibited wind-down transactions with two of the designated companies through January 8, 2020. Specifically, GL 6 authorizes certain activities with the designated companies relating to the maintenance and wind-down of operations, contracts, and agreements that were effective prior to January 8, 2019. OFAC also published a new FAQ to provide additional guidance on the types of activities considered “maintenance” under GL 6.

    As FCPA Scorecard previously reported, the owner was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering.

    Visit here for additional InfoBytes coverage on Venezuela sanctions.

    Financial Crimes Sanctions OFAC Department of Treasury Venezuela International

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  • FINRA fines broker-dealer for AML program deficiencies

    Financial Crimes

    On December 26, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), fining a broker-dealer $10 million for failing to establish and enforce an anti-money laundering (AML) program that complies with Bank Secrecy Act and implementing regulation requirements. According to FINRA, alleged failures in the firm’s automated AML surveillance system allowed transactions from countries with “high money laundering risk” to flow through the financial system from January 2011 through at least April 2016. Furthermore, the firm allegedly failed to (i) devote sufficient resources to reviewing suspicious transactions; (ii) adequately monitor customers’ penny stock trades and deposits for suspicious activities; and (iii) adequately monitor and conduct risk-based reviews of correspondent accounts of certain foreign financial institutions.

    The firm neither admitted nor denied the findings set forth in the AWC agreement, but agreed to address identified deficiencies in its programs. FINRA further noted that the firm “has taken extraordinary steps and devoted substantial resources since 2013 to expand and enhance its AML policies and procedures.”

    Financial Crimes FINRA Anti-Money Laundering Bank Secrecy Act

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  • Brazilian electric utilities company reaches settlement of FCPA violations in Brazil

    Financial Crimes

    On December 26, 2018, a Brazilian electric utilities company entered into an administrative order to settle the SEC’s claims that the company violated the books and records and internal accounting controls provisions of the FCPA and agreed to pay a civil monetary penalty of $2.5 million.

    The company, which is majority-owned by the Brazilian government, is alleged to have – through former officers of its nuclear power generation subsidiary – rigged bids and paid bribes through private construction companies in relation to construction of a nuclear power plant in Brazil. This matter was first announced publicly in October 2016 when the company hired outside counsel to conduct an internal investigation into related conduct.

    In entering into this administrative order, the SEC consider the company’s cooperation efforts, including sharing facts discovered in its internal investigation and producing and translating related documents, as well as its efforts towards remediation, including discipline of involved employees, enhancement of internal accounting controls and compliance functions, and adoption of new anti-corruption policies and procedures.

    Previous coverage can be found here.

    Financial Crimes SEC FCPA Bribery

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  • American communication technology company reaches settlement of FCPA violations in China

    Financial Crimes

    On December 26, 2018, an American communication technology company (the company) entered into an administrative order to settle claims by the SEC that the company violated the books and records and internal accounting controls provisions of the FCPA. The alleged conduct involved improper payments made through distributors and resellers its subsidiary in China (the subsidiary) to Chinese government officials from 2006 through 2014 in an effort to obtain business from public sector customers.

    According to the administrative order, at the instruction of the Vice President of the subsidiary, sales personnel used a sales management system outside of the U.S.-based company-approved database to parallel-track sales to public sector customers in China. The scheme involved providing discounts to distributors and resellers that were used to cover the costs of payments to Chinese government officials. These discounts were not passed on to the end customer, and the purpose of those discounts was not tracked in the company-approved database. The subsidiary's sales personnel were also instructed by the VP to use non-company email addresses when discussing and arranging these deals.

    Pursuant to the administrative order, the company will pay to the SEC approximately $10.7 million in disgorgement, $1.8 million in prejudgment interest, and a $3.8 million civil monetary penalty.

    On the same day, DOJ released a December 20, 2018 declination letter settling its investigation of the same conduct.  Pursuant to the declination letter, the company agreed to disgorge approximately $10.15 million to the U.S. Treasury Department and $10.15 to the U.S. Postal Inspection Service Consumer Fraud Fund.

    In settling these matters, both the SEC and DOJ cited the company’s identification of the misconduct, thorough internal investigation conducted by outside counsel, prompt voluntary disclosure, full cooperation, and remediation efforts. The company’s lauded cooperative efforts included making certain employees available for interviews, as well as producing all requested documents and translating large volumes of those documents from Mandarin to English. The remedial efforts cited included termination of eight employees and discipline of eighteen others, termination or reorganization of certain channel partner relationships, enhancement of third party oversight, and improvements to anticorruption and related trainings provided to China-based employees (certain materials of which had previously not been translated into Mandarin, the first language of many of the subsidiary employees).

    Financial Crimes DOJ FCPA SEC

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  • Treasury issues national illicit finance strategy

    Financial Crimes

    On December 20, the U.S. Treasury Department issued the National Strategy for Combating Terrorist and Other Illicit Financing (the National Illicit Finance Strategy). Pursuant to Sections 261 and 262 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA), the National Illicit Finance Strategy describes current U.S. government efforts to combat domestic and international illicit finance threats in the areas of terrorist financing, proliferation financing, and money laundering, and discusses potential risks, priorities and objectives, as well as areas for improvement. The document addresses the strengths of U.S. counter-illicit finance efforts, including the legal and regulatory framework, as well as efforts undertaken to improve the effectiveness of national safeguards currently in place due to changes in technology and emerging threats. Recent efforts include a working group formed earlier in December to explore ways to modernize the Bank Secrecy Act/Anti-Money Laundering regulatory regime and encourage banks and credit unions to explore innovative approaches such as artificial intelligence, digital identity technologies, and internal financial intelligence units to combat money laundering, terrorist financing, and other illicit financial threats when safeguarding the financial system (see previous InfoBytes coverage here).

    Financial Crimes Department of Treasury CAATSA Bank Secrecy Act Anti-Money Laundering

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  • UK court convicts former power company executive

    Financial Crimes

    On December 19, a UK Court found former power company Global Sales Director guilty of conspiracy to corrupt in connection with his role in bribing Lithuanian officials to win lucrative power station contracts for the French power and transportation company. He will be sentenced on December 21.

    The conviction follows the guilty pleas of the company and two other individuals in the UK in connection with the company’s Lithuanian bribery scheme. According to the SFO, the companies paid Lithuanian politicians more than €5 million (~$6.3 million in today’s USD) in bribes to secure the contracts, valued at €240 million (~$304 million in today’s USD). The SFO also has charged the company and former executives for alleged corruption spanning Hungary, India, Poland, and Tunisia.

    In late 2014, the company and various subsidiaries agreed to pay a then-record $772 million fine in connection with FCPA violations spanning numerous countries. For prior FCPA Scorecard coverage of the company, please see here.

    Financial Crimes FCPA Bribery Anti-Corruption

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  • NY-based financial institution and various individuals charged in Malaysia

    Financial Crimes

    On December 17 and 19, press reports indicate Malaysian prosecutors filed criminal charges against a New York-based financial institution and numerous individuals, including former executives of the financial institution, in connection with their alleged roles in a multi-billion bribery and money laundering scheme involving Malaysia sovereign wealth fund.

    Malaysian prosecutors charged the financial institution with making false and misleading statements when raising money for the fund. Among individuals, a former participating managing director of the financial institution, and a former managing director, also were charged. These charges follow the U.S. government’s investigation and charges related to the same scheme.

    As detailed in prior FCPA Scorecard coverage, the former participating managing director pleaded guilty in November to Conspiracy to Violate the FCPA and Conspiracy to Commit Money Laundering and agreed to forfeit $43.7 million. The DOJ charged the former managing director with similar offenses and, according to press reports, is fighting extradition to the United States.

    According to press reports, in response to the filing of the criminal charges in Malaysia, the financial institution stated: “Under the Malaysian legal process, the firm was not afforded an opportunity to be heard prior to the filing of these charges against certain financial institution entities, which we intend to vigorously contest. These charges do not affect our ability to conduct our current business globally.”

    The DOJ has not charged or reached a resolution with the financial institution, which previously announced that it was cooperating with the DOJ’s and all regulators’ investigations. The announcement of the Malaysian charges suggests that the U.S. DOJ and Malaysian prosecutors may not be coordinating efforts.

    Financial Crimes FCPA DOJ Anti-Money Laundering

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