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Treasury issues national illicit finance strategy
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).
UK court convicts former power company executive
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.
NY-based financial institution and various individuals charged in Malaysia
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.
SEC charges former senior executives of in-flight entertainment company
On December 18, the former CEO and CFO of U.S.-based in-flight entertainment company settled SEC charges that they knowingly violated books and records and internal accounting controls provisions of the federal securities laws and caused similar violations by the company’s parent company. As detailed in prior FCPA Scorecard coverage, the parent company and the entertainment company settled related FCPA charges in April and agreed to pay a combined $280 million to the DOJ and SEC.
The company’s former President and CEO and its former CFO consented to the entry of their administrative orders without admitting or denying the findings and agreed to pay penalties of $75,000, and $50,000, respectively.
The SEC alleged the former CEO authorized the use of a third-party to pay more than $1.76 million to several consultants who provided little to no services. One of these consultants, a Middle East government official, was paid $875,000 to help secure over $700 million in business from a state-owned airline, but the position “required little to no work.” The bribery scheme involving this foreign official was previously described in the DPA with DOJ and the SEC Settlement Order. The former CEO was also charged with making false representations to the company’s auditor regarding internal accounting controls, and books and records.
The SEC charged the former CFO in connection with a backdating scheme that resulted in the parent company improperly recording $82 million in revenue. The former CFO was charged with making false representations to the company’s auditor regarding the company’s financial statements, internal accounting controls, and books and records. The order against him suspends him from appearing or practicing before the Commission as an accountant for at least five years.
The former CEO and CFO were previously described in the SEC Settlement Order as the company's Executive 1 and the company's Executive 2, respectively. The DOJ has not brought any criminal charges against any individuals in this matter.
OFAC issues temporary extension of Ukraine-related General Licenses
On December 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13I and 15D, which extend the expiration date of previous Ukrainian-based general licenses to March 7, 2019 for wind-down transactions for certain companies that otherwise would be prohibited by Ukraine-Related Sanctions Regulations.
GL 13I supersedes GL 13H 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 15D, which supersedes GL 15C, relates to 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.
Visit here for additional InfoBytes coverage on Ukraine sanctions.
OECD study finds that government officials punished in only one-fifth of bribery cases
On December 11, the Organization for Economic Cooperation and Development (OECD) published a study examining the consequences faced by public officials who allegedly accepted bribes. The study analyzed 55 foreign-bribery cases concluded between 2008 and 2013 in which companies based in OECD countries had been sanctioned for bribery. It found that government officials were criminally sanctioned in only one-fifth of the 55 cases studied. An additional 11 actions were still pending at either the investigative or prosecutorial stages. The study also found that none of the countries in which bribes were paid, the demand-side countries, detected that their public officials demanded a bribe. Instead, the study found that the “media plays a major role in international information flow.”
Former officer of Venezuela oil company pleads guilty to obstruction
On December 10, a former procurement officer of a Venezuela’s state-owned and state-controlled energy company, pleaded guilty to one count of obstructing an investigation into bribes paid by the owner of U.S.-based companies to Venezuelan government officials in exchange for securing additional business with the company and payment priority on outstanding issues. The former procurement officer, who previously worked for the company in Houston, Texas, pleaded guilty to one count of conspiracy to obstruct an official proceeding.
The charge stems from a guilty plea he entered on December 10, 2015, to one count of conspiracy to launder money and one count of making false statements on his federal income tax return. Under the terms of a plea agreement in that case, he agreed to cooperate with the investigation by being interviewed by the United States, and to providing “truthful, complete and accurate information” to government agents and attorneys. In the latest plea, though, he admitted that after his earlier plea, he concealed facts about bribes paid to the company by a target of the investigation, referred to as Co-Conspirator 1 in the indictment. Additionally, he informed Co-Conspirator 1 that U.S. government authorities were investigating Co-Conspirator 1, and provided Co-Conspirator 1 with information about the investigation, including the topics discussed in his meetings with the government. Consequently, Co-Conspirator 1 destroyed evidence and attempted to flee the country in July 2018. He is scheduled to be sentenced on Feb. 19, 2019.
Global broker-dealer assessed $14.5 million penalty for anti-money laundering compliance failures
On December 17, the Financial Industry Regulatory Authority (FINRA), the Financial Crimes Enforcement Network (FinCEN), and the SEC announced separate settlements (see here, here, and here) with a global broker-dealer following investigations into the firm’s anti-money laundering (AML) programs. According to FINRA, the broker-dealer and its affiliated securities firm allegedly failed to establish and implement AML processes reasonably designed to detect and report potentially high-risk transactions, including foreign currency wire transfers to and from countries known to be at high risk for money laundering, as well as penny stock transactions processed through the use of an omnibus account on behalf of undisclosed customers. FINRA alleged that from January 2004 to April 2017, the broker-dealer “processed thousands of foreign currency wires for billions of dollars, without sufficient oversight.”
In a separate investigation conducted by FinCEN in conjunction with FINRA and the SEC, the broker-dealer reached a settlement over allegations that it failed to, among other things, (i) develop and implement a risk-based AML program that “adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services”; (ii) implement policies and procedures, which would ensure the detection and reporting of suspicious activity through all accounts, particularly for those accounts with little to no securities training; (iii) “implement an adequate due diligence program for foreign correspondent accounts”; and (iv) provide sufficient staffing, leading to a backlog of alerts and decreased ability to file suspicious activity reports (SARs).
According to the SEC's investigation, from at least 2011 to 2013, the broker-dealer allegedly failed to file SARs as required by the Bank Secrecy Act’s reporting requirements and Section 17(a) of the Securities Exchange Act of 1934. Among other things, the SEC also claimed that the broker-dealer (i) provided customers with other services, such as cross-border wires, internal transfers between accounts and check writing, which increased its susceptibility to risks of money laundering and other types of associated illicit financial activity; and (ii) “did not properly review suspicious transactions flagged by its internal monitoring systems and failed to detect suspicious transactions involving the movement of funds between certain accounts in suspicious long-term patterns.”
After factoring in remedial actions, the broker-dealer has been assessed total civil money penalties of $14.5 million, including a $500,000 fine against the securities firm.
OFAC reaches settlement with Chinese company for alleged Iranian sanctions violations
On December 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $2,774,972 settlement with a Chinese oilfield services company and its affiliated companies and subsidiaries (collectively, the “group”) for 11 alleged violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, the settlement resolves potential civil liability for the group’s alleged involvement in exporting or re-exporting, or attempts to export or re-export, U.S.-based goods to end-users in Iran through China.
In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the group “willfully violated U.S. sanctions on Iran by engaging in and systematically obfuscating conduct it knew to be prohibited by company policy and economic sanctions, and continued to engage in such conduct even after the U.S. Government began to investigate the conduct”; (ii) employees, including management, were aware of the transactions and concealed the nature of the transactions from the U.S.; (iii) the group falsified information and provided false statements to the U.S. during the course of the investigation; (iv) the group’s conduct, which occurred over a period of years, provided economic benefits to Iran; and (v) the group is a commercially sophisticated international corporation.
OFAC also considered numerous mitigating factors, including (i) the group has no prior OFAC sanctions history and has not received a penalty or finding of a violation in the five years before the transactions at issue; (ii) the group has cooperated with OFAC and disclosed possible violations involving other sanctions programs; (iii) the group agreed to toll the statute of limitations; and (iv) the group implemented remedial measures and corrective actions to minimize the risk of reoccurring conduct.
Visit here for additional InfoBytes coverage on Iranian sanctions.
FinCEN extends FBAR filing deadline for certain individuals
On December 4, the Financial Crimes Enforcement Network (FinCEN) issued Notice 2018-1 announcing a further extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings in light of FinCEN’s notice of proposed rulemaking (NPR) published March 10, 2016. (See previous InfoBytes coverage on the 2016 NPR here.) Specifically, one of the proposed amendments seeks to “expand and clarify the exemptions for certain U.S. persons with signature or other authority over foreign financial accounts,” but with no financial interest, as outlined in FinCEN Notice 2017-1 issued December 22, 2017. FinCEN noted that because the proposal has not been finalized, it is extending the filing due date to April 15, 2020 for individuals who previously qualified for a filing due date extension under Notice 2017-1. All other individuals must submit FBAR filings by April 15, 2019.