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Japanese electronics corporation settles parallel FCPA actions for $280 million
On April 30, a DOJ deferred prosecution agreement and SEC settlement with Japan-based electronics corporation and a subsidiary were announced, with the company agreeing to pay $280 million in total. The resolutions related to the company’s U.S.-based subsidiary, and allegations that senior management of the subsidiary orchestrated a bribery scheme to help secure over $700 million in business from a state-owned airline, in which the subsidiary paid a Middle East government official nearly $900,000 for a “purported consulting position, which required little to no work,” and concealed the payment “through a third-party vendor that provided unrelated services to [the subsidiary].” The subsidiary is then alleged to have falsely recorded the payments in its books and records, as well as similar payments made to other purported consultants and sales agents in Asia.
Under the DPA with the subsidiary, they agreed to pay the DOJ a $137.4 million criminal penalty for knowing and willful violations of the FCPA’s accounting provisions. The DOJ gave the subsidiary a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from [the subsidiary] or [the company].” However, because many of the company's remediation efforts were “more recent, and therefore have not been tested,” the deferred prosecution agreement subjects the company to two years of scrutiny by an independent compliance monitor, followed by a year of self-reporting. The SEC‘s simultaneous settlement included violations of the anti-bribery as well as accounting provisions, and the payment of $143 million to the SEC.
As FCPA Scorecard previously reported, the company disclosed the investigations in February 2017, though they were first reported as early as 2013.
OFAC issues Belarus-related General License 2E
On April 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License No. 2E (GL 2E) to extend the authorization allowing nine Belarusian entities to enter into transactions otherwise prohibited by Executive Order 13405. GL 2E replaces and supersedes in its entirety General License No. 2D, and authorizes transactions with any entities that are owned 50 percent or more by the nine named entities. All property and interests in property of these entities, if blocked, remain blocked, and U.S. persons must report authorized transactions or any series of transactions exceeding $50,000 to the U.S. Department of State no later than 30 days after execution. The authorization expires on October 30, unless otherwise extended or revoked.
Visit here for additional InfoBytes coverage on Belarus General Licenses.
FinCEN updates FATF-identified jurisdictions with AML/CFT deficiencies
On April 27, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to financial institutions concerning the Financial Action Task Force’s (FATF) updated list of jurisdictions identified as having “strategic deficiencies” in their anti-money laundering/combatting the financing of terrorism (AML/CFT) regimes. FinCEN urges financial institutions to consider this list when reviewing due diligence obligations and risk-based policies, procedures, and practices.
As further described in the Improving Global AML/CFT Compliance: On-going Process, FATF identified the following jurisdictions as having developed action plans to address AML/CFT deficiencies: Ethiopia, Iraq, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu, and Yemen. Notably Serbia has been added to the list for failing to effectively implement its AML/CFT framework, whereas Bosnia and Herzegovina has been removed from the list due to “significant progress in improving its AML/CFT regime . . . [and] establishing the legal and regulatory framework to meet the commitments in its action plan.” The Democratic People’s Republic of Korea and Iran remain the two jurisdictions subject to countermeasures and enhanced due diligence due to AML/CFT deficiencies.
DOJ declines to prosecute commercial data and analytics firm, SEC issues $9 million fine for FCPA violations in China
On April 23, a commercial data and analytics firm secured a declination letter from the DOJ regarding FCPA violations stating that, “consistent with the FCPA Corporate Enforcement Policy,” the DOJ would be declining to bring criminal charges against the company. The firm simultaneously agreed to settle with the SEC regarding books and records and internal controls violations regarding the same conduct, and pay a total of $9 million, including a $2 million civil penalty and $6 million of disgorgement. The firm had self-disclosed payments made by two Chinese subsidiaries through third party agents. One of the subsidiaries, part of a joint venture with a Chinese company, made payments to Chinese government officials to acquire non-public financial statement information on Chinese entities. The other subsidiary made improper payments both to obtain specific business and to acquire non-public personal data. The SEC noted that there were pre-acquisition concerns regarding the subsidiaries, but the firm failed to take appropriate action to stop the payments or the false entries, which continued for several years after the acquisition.
This is the first instance we are aware of a company receiving a full declination from the DOJ under the new policy. The policy, which grew out of the FCPA Pilot Program, states that when a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there will be a presumption that the DOJ will issue a declination. The firm's declination letter notes the company’s self-identification and disclosure, thorough investigation, and full cooperation, including identifying all individuals involved in the misconduct. The DOJ also cited the company’s “full remediation,” in part by terminating 11 employees, including senior employees, and reducing compensation and other forms of discipline.
Former Venezuelan official pleads guilty in bribery scheme
The DOJ announced on April 19, that a former Venezuelan official had pleaded guilty to one count of conspiracy to commit money laundering. The charge arose from the former official’s role in a bribery scheme involving bribes paid by the owners of U.S. companies to Venezuelan government officials to secure energy contracts and payments on outstanding invoices. As the former general manager of a procurement subsidiary of a Venezuelan state-owned energy company, he had solicited and accepted bribes. The judge entered a personal money judgment of $7,033,504.71. As a government official receiving the bribes, he could not be charged himself with FCPA offenses (which are targeted at those paying the bribes). Related charges against four other individuals remain pending, including charges of conspiracy to violate the FCPA; 11 individuals have already pleaded guilty in previous cases.
For prior coverage of the company's enforcement actions, please see here.
Federal Reserve issues cease and desist order against Taiwanese bank for BSA/AML deficiencies
On April 19, the Federal Reserve Board (Fed) issued a cease and desist order against a Taiwanese bank and its New York agency in connection with alleged Bank Secrecy Act and anti-money laundering (BSA/AML) violations. According to the Fed’s order, a recent examination conducted by the Federal Reserve Bank of New York (Reserve Bank) and the NYDFS identified “significant deficiencies” in the agency’s BSA/AML compliance and risk management controls. The order requires, among other things, that the bank and agency submit within 60 days: (i) a written governance plan to strengthen the board of director’s oversight of BSA/AML compliance; (ii) a written program to achieve compliance with BSA/AML requirements; (iii) an enhanced, written customer due diligence program plan; and (iv) a revised program to ensure compliant suspicious activity monitoring and reporting. The bank and agency are further required to engage an independent third party acceptable to the Reserve Bank to conduct a review of certain wire transactions to determine whether “suspicious activity involving high risk customers or transactions” was properly identified and reported in accordance with applicable regulations. The order imposes no financial penalty.
Treasury issues general license to extend wind-down period for sanctioned Russian aluminum producer
On April 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License 14 (GL 14) to extend the grace period for specified wind-down activities involving a Russian aluminum producer sanctioned earlier this month. As previously covered in InfoBytes here, the April 6 sanctions—issued pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017—allowed U.S. persons until May 7 to wind down operations involving identified blocked persons. According to Treasury’s press release, GL 14’s new October 23 deadline provides Treasury time to consider the aluminum producer’s petition for delisting given the impact the April 6 sanctions have had on U.S. partners and allies. Additionally, Treasury stated that “OFAC will not impose secondary sanctions on non-U.S. persons for engaging in the same activity involving [the aluminum producer] or its subsidiaries that General License 14 authorizes U.S. persons to engage in.”
The same day, OFAC also issued an amended General License 12A to reflect the authorization in GL 14, and released several new FAQs addressing authorizations and limitations under GL 14.
Visit here for additional InfoBytes coverage on Ukraine/Russian sanctions.
Aruban telecom official pleads guilty to money laundering conspiracy involving FCPA violations
An Aruban telecom official pleaded guilty to money laundering charges in connection with a scheme to arrange and receive corrupt payments to influence the awarding of contracts in Aruba. The DOJ’s press release describes the company as an Aruban state-owned company. According to his plea agreement, a Dutch citizen living in Florida operated a money laundering conspiracy between 2005 and 2016 in his position as the company’s product manager. An individual who owned several Florida-based telecommunications companies, previously pleaded guilty to paying bribes to the official and his wife.
The official admitted that he conspired with the individual and others to transmit funds from Florida and elsewhere in the United States to Aruba and Panama with the intent to promote a wire fraud scheme and a corrupt scheme that violated the FCPA. The official was promised and received bribes from individuals and companies located in the United States and abroad in exchange for using his position at the company to award lucrative mobile phone and accessory contracts. The official also admitted to providing favored vendors with confidential company information in exchange for the more than $1.3 million in corrupt payments.
The company filed a civil complaint against the official and other parties on March 3 in U.S. District Court for the Southern District of Florida, which contains a few points of note. First, the company describes itself in the complaint as a privatized company, whereas the DOJ’s press release called it an instrumentality of the Aruban government. Second, the complaint states that the company became aware of some of the official's alleged activities via the Panama Papers, the 2016 leak of over 11 million documents from Panamanian law firm and financial services provider Mossack Fonseca.
U.S. imposes denial of export privileges on Chinese telecom giant for violating prior settlement agreement
On April 16, the U.S. Department of Commerce imposed a denial of export privileges on Chinese telecommunications equipment corporation for violating a previous settlement relating to illegally shipping telecommunications equipment to Iran and North Korea. As previously covered in InfoBytes, in March 2017, the company agreed to a combined civil and criminal penalty and to forfeiture of over $1.1 billion for shipping the equipment, making false statements, and obstructing justice. As part of the settlement, the company agreed to a seven-year suspended denial of export privileges, which would trigger if the agreement was not met or if the company committee further violations.
The Department imposed the denial after determining that the company made false statements during the 2016 settlement negotiations and again during the probationary period in 2017 related to disciplinary actions against senior employees that the company said it was taking or had already taken. The false statements covered up the fact that the company had actually failed to issue letters of reprimand and paid full bonuses to the employees who had engaged in illegal conduct.
OFAC sanctions Russian oligarchs and government officials; releases new general licenses and updated FAQs
On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction seven Russian oligarchs along with 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its Russian bank subsidiary, pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) and Executive Orders 13661, 13662, and 13582. In a foreign policy statement released the same day, President Trump explained that the identified persons placed on the Specially Designated Nationals (SDNs) and Blocked Persons List engaged in actions that have reportedly contributed to “advancing Russia’s malign activities,” including (i) profiting from “Russia's destabilizing activities”; (ii) election meddling; (iii) undermining U.S. cybersecurity; (iv) engaging in weapons proliferation; (v) continuing to occupy Crimea; (vi) instigating violence in eastern Ukraine; and (vii) providing military equipment and support for the Government of Syria's continued attacks against Syrian citizens. Pursuant to OFAC’s sanctions, all property or interests in property of the designated persons along with any other entity owned 50 percent or more by one or more designated persons that is within U.S. jurisdiction are blocked, and U.S. persons are “generally prohibited” from participating in transactions with these individuals and entities. Additionally, “non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of the individuals or entities blocked today.”
The same day, OFAC issued two Ukraine-/Russia-related general licenses to “minimize immediate disruptions to U.S. persons, partners, and allies.” General License 12 authorizes through June 5 certain activities necessary to “wind down” operations, contracts, or agreements in effect prior to April 6 involving specified blocked persons. General License 13 authorizes through May 7 divestiture transactions with certain blocked persons to a non-U.S. person, as well as the facilitation of transfers of debt, equity, or other holdings involving listed blocked persons by a non-U.S. person to another non-U.S. person. OFAC also released eight new FAQs related to this action and published one updated FAQ related to CAATSA.
Visit here for additional InfoBytes coverage on Ukraine/Russian sanctions.