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DOJ provides further guidance on FCPA Corporate Enforcement Policy in speech
On September 27, Deputy Assistant Attorney General Matthew Miner gave a speech that provided clarification of DOJ enforcement policies, continuing to emphasize voluntary disclosure and underscoring the notion that companies should view DOJ “as partners, not adversaries.” In his speech, Miner announced that DOJ’s FCPA Corporate Enforcement Policy is not limited to just FCPA violations, and that DOJ “will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing,” encouraging companies that discover such wrongdoing to voluntarily disclose it. Miner also pointed to recent published declinations, and noted that declinations under DOJ’s Policy can still be appropriate even when “aggravating circumstances” are present. Miner also referenced the increase in “global enforcement and cooperation with foreign authorities” and emphasized DOJ’s “Anti-Piling On Policy.”
Oil services company CEO and executive sentenced to prison for conspiracy to bribe foreign officials
On September 28, the DOJ announced that a former CEO and a former executive of an oil services company had been sentenced to prison and fined for their roles in a scheme to bribe foreign government officials in Brazil, Angola, and Equatorial Guinea in exchange for oil-services contracts. In November 2017, the former CEO of the company and a former sales and marketing executive at the company each had pleaded guilty to one count of conspiracy to violate the FCPA. The former CEO was sentenced to 36 months in prison and a fine of $150,000 for authorizing payments in furtherance of the bribery scheme, and the former executive was sentenced to 30 months in prison and a fine of $50,000 for using a third-party sales agent to pay bribes to Brazil officials.
The company itself entered into a $238 million three-year deferred prosecution agreement and its subsidiary pleaded guilty to one count of conspiracy to violate the FCPA.
Prior Scorecard coverage of the company can be found here.
DOJ reportedly investigating professional baseball organization for potential FCPA violations
Based on media reports, DOJ’s Fraud Section is reportedly investigating some part of a professional baseball organization for possible FCPA violations related to recruitment of international players, particularly related to immigration issues for players from Latin America. Reports indicate that the investigation was initiated when a whistleblower provided the FBI with information and documents last year during spring training. Since then, several witnesses have reportedly already been subpoenaed and testified before a federal grand jury in connection with the investigation.
A spokesperson for the organization stated that they had not been contacted by federal authorities regarding an investigation, and the two franchises that appear to be most at issue declined to comment to the media on the matter.
SEC settles FCPA accounting violations with medical device company
On September 28, the SEC announced a settlement with a Michigan-based medical device company to resolve the SEC’s charges of books and records and internal controls violations. According to the order, the company agreed to pay a $7.8 million penalty and accepted the imposition of an independent compliance consultant to resolve allegations that the company’s Indian subsidiary failed to maintain accurate books and records, and that the company’s internal controls were inadequate to identify possible improper payments related to the sale of its products in India, China, and Kuwait.
This is the second enforcement action the SEC has brought against the company in recent years. In a prior action in October 2013, the company paid over $13.2 million in penalties, disgorgement, and interest to settle charges of FCPA violations for bribing doctors, health care professionals, and other government-employed officials in Argentina, Greece, Mexico, Poland, and Romania.
FinCEN, federal banking agencies provide exemption from customer identification program requirements for premium finance loans
On September 27, the Financial Crimes Enforcement Network (FinCEN), Federal Reserve Board, FDIC, NCUA, and OCC (together, the agencies) collectively issued an interagency order announcing an exemption from the requirements of the customer identification program (CIP) rules for premium finance loans extended by banks to commercial customers. The exemption, which is effective immediately, will facilitate short-term financing to business to aid in the purchase of property and casualty insurance policies. The order states that FinCEN believes these types of loans present a low risk for money laundering due to the “purpose for which the loans are extended and the limitations on the ability of a customer to use such funds for any other purpose.” However, banks engaged in premium finance lending are still required to comply with all other regulatory requirements implementing the Bank Secrecy Act (BSA), including filing suspicious activity reports. The federal banking agencies further determined that the order granting this exemption is consistent with both the purposes of the BSA and safe and sound banking practices. (See also Federal Reserve Board SR 18-6, FDIC FIL-52-2018, and OCC Bulletin 2018-35.)
FinCEN encourages financial institutions affected by Hurricane Florence to communicate Bank Secrecy Act filing delays; extends FBAR filing deadline
On September 26, the Financial Crimes Enforcement Network (FinCEN) issued a notice to financial institutions that file Bank Secrecy Act reports to encourage communication with FinCEN and their functional regulator regarding any expected filing delays caused by Hurricane Florence. FinCEN also reminded financial institutions to review advisory FIN-2017-A007, previously covered by InfoBytes, which discusses potential fraudulent activity related to recent disaster relief efforts.
The same day, FinCEN issued a second notice for certain filers affected by Hurricane Florence to extend the deadline for submitting their 2017 calendar year Report of Foreign Bank and Financial Accounts (FBAR). FBAR reports for affected filers are now due January 31, 2019.
Find more InfoBytes disaster relief coverage here.
SEC settles FCPA charges with former CEO of Chilean mining company
On September 25, 2018, the SEC announced a settlement of FCPA charges against the former CEO of a Chilean-based chemical and mining company for $125,000. According to the SEC, over the course of seven years, the company’s then-CEO “caused the company to make nearly $15 million in improper payments to Chilean political figures and others connected to them.” The former CEO agreed to the settlement without admitting the findings in the SEC’s order. According to the SEC’s order, the former CEO signed false certifications related to financial reporting in the United States.
Last year, the company agreed to pay $30 million to settle parallel DOJ and SEC charges against the company. That settlement demonstrated the jurisdictional reach of U.S. government enforcement of the FCPA – while the company is a Chilean company with no U.S. operations, it is registered with the SEC as a foreign private issuer.
Brazilian oil company settles FCPA violations for $853 million to U.S. and Brazil
On September 27, 2018, the DOJ announced that a Brazilian state-owned oil company had entered into a Non-Prosecution Agreement with the DOJ, as well as settlement agreements with the SEC and Brazilian authorities, and agreed to pay a total $853.2 million in penalties to all jurisdictions. Under the terms of the settlement, DOJ and SEC will each receive 10 percent of the penalty amount, with Brazilian authorities receiving the remaining 80 percent.
As part of the settlement, the company admitted that its Executive Board members “were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil,” while directors were “involved in facilitating bribes that a major contractor of the company was paying to Brazilian politicians.” The conduct included bribes related to several refineries, as well as shipyard and drillship contracts, as well as payments to “stop a parliamentary inquiry into the company's contracts.”
The company's penalty reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines due to its cooperation and remediation. While the company did not voluntary disclose its conduct, it cooperated with authorities by disclosing the findings of its internal investigation, providing document discovery, and facilitating the interview of foreign witnesses. It also took remedial measures by replacing its Board of Directors and Executive Board, as well as implementing reforms in its policies and procedures.
In addition to the criminal penalty, the SEC announced that the company agreed to an administrative order requiring it to pay almost $1 billion in disgorgement and prejudgment interest. However, the company received full credit for payments it already made to resolve a class action for $2.95 billion earlier this year. The net result is that the company will not have to pay any additional funds to the SEC in the separate disgorgement action.
Prior ScoreCard coverage of the company and related investigations can be found here.
OFAC adds members of Venezuelan President Maduro’s inner circle to Specially Designated Nationals List
On September 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) made additions to the Specially Designated Nationals List pursuant to Executive Order 13692. OFAC’s additions to the list include four members of Venezuelan President Maduro’s inner circle, along with a “front network” identified as acting for or on behalf of a sanctioned member of the Maduro regime. According to OFAC, the additional sanctions are issued in response to the Maduro regime's continued “corruption and gross mismanagement.” 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.
OFAC also referenced FinCEN advisories issued August and September 2017 (see previous InfoBytes coverage here and here) as a source for additional information on “the methods that Venezuelan senior political figures, their associates, and front persons use to move and hide corrupt proceeds,” including the potential for exploitation within the U.S. financial system and real estate market.
See here for continuing InfoBytes coverage of actions related to Venezuela.
FinCEN advisory reminds financial institutions about recent updates to the lists of FATF-identified jurisdictions with AML/CFT deficiencies
On September 21, the Financial Crimes Enforcement Network (FinCEN) issued an advisory reminding financial institutions that, on June 29, the Financial Action Task Force (FATF) updated two documents that each list jurisdictions identified as having “strategic deficiencies” in their anti-money laundering and combatting the financing of terrorism (AML/CFT) regimes. 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, the Improving Global AML/CFT Compliance: On-going Process, identifies jurisdictions with strategic AML/CFT deficiencies. As further described in the document, FATF identified the following jurisdictions as having developed action plans to address their AML/CFT deficiencies: Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen. Notably, Pakistan has been added to the list based on FATF-identified AML/CFT deficiencies, whereas Iraq and Vanuatu have been removed from the list due to “significant progress in improving its AML/CFT regime . . . [and] establish[ing] the legal and regulatory framework to meet the commitments in its action plan.” 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.