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On November 12, the FCA announced that it was fining five banks for their foreign exchange practices. Specifically, ineffective controls at the banks allegedly allowed traders to strategize and manipulate exchange rates for their benefit. Additionally, confidential bank information was compromised in online chat rooms, including “the disclosure of information regarding customer order flows and proprietary Bank information, such as [foreign exchange] rate spreads.” The combined amount of civil money penalties against the banks is $1.7 billion.
On November 10, the Financial Stability Board issued policy proposals in response to G20 Leaders’ request at the 2013 St. Petersburg Summit to develop proposals by the end of 2014. The proposals consist of “a set of principles and a detailed term sheet on the adequacy of loss-absorbing and recapitalization capacity of global systemically important banks (G-SIBs).” The proposals will establish a new minimum standard for total loss-absorbing capacity (TLAC). The new TLAC standard should (i) ensure home and host authorities that G-SIBs have adequate capacity to absorb losses; (ii) allow resolution authorities “to implement a resolution strategy that minimi[zes] any impact on financial stability and ensures the continuity of critical economic functions;” and (iii) help achieve an equal playing field internationally. Comments and responses to the proposals are due by February 2, 2015.
On November 3, a medical company agreed to pay a total of $55 million to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. According to the SEC’s cease-and-desist order, subsidiaries of the bio-medical instrument manufacturer paid $7.5 million in bribes in Russia, Thailand, and Vietnam from 2005 to 2010 in order to win business in violation of Section 30A of the FCPA, which resulted in $35 million in improper profits for the company. Some of the payments were disguised as commissions to foreign agents, in situations where the “agents had no employees and no capacity to perform the purported services for [a medical company].” The company also allegedly had an “atmosphere of secrecy.” The company self-disclosed the violations to the government in 2010.
As part of the resolution, the company reached a Non-Prosecution Agreement with the DOJ regarding activities in Russia and agreed to a $14.35 million criminal penalty related to books and records and internal controls violations. The resolution with the SEC involved the payment of $40.7 million in disgorgement and pre-judgment interest regarding anti-bribery, books and records, and internal controls violations related to Russia, Thailand, and Vietnam.
Of note, and continuing the trend of cross-border cooperation, the SEC in its press release disclosed that numerous international entities had assisted its investigation, including the “Bank of Lithuania, Financial and Capital Market Commission of Latvia, and British Virgin Islands Financial Services Commission.” Underscoring the issue, following public disclosure of the company’s settlement with the SEC regarding alleged payments in Vietnam, news reports indicate that Vietnam’s Ministry of Health has ordered a review of hospital purchases from the company, and asked for information and assistance from US authorities.
Just a month after announcing its internal investigation of possible FCPA violations, news reports indicate that a major cable company's review will be completed or substantially completed by the first quarter of 2015. The company also announced that it “plans to exit all of its Asia Pacific and African manufacturing operations,” although it did not link the exit – which affects nine plants in Asia and five plants in Africa, and approximately 17% of its total sales – to its FCPA investigation.
In September, the Kentucky-based cable manufacturer announced that it was investigating its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns. News reports indicate that, to date, the company has spent millions on the review, which has included a review of over 450,000 documents and interviews of over 20 individuals. The company also disclosed that it was cooperating with investigations by the DOJ and SEC.
On November 6, the Financial Stability Board published its annual update of global systemically important banks (G-SIBs). Included in its annual update is the addition of one international bank bringing the total number of institutions on the list to 30. Eight U.S. G-SIBs remain on the list. Coinciding with the updated list, the Basel Committee on Banking Supervision also published updated information regarding denominators and capital thresholds used to calculate bank scores and allocate capital requirements of G-SIBs.
On October 29, representatives from 51 countries, having met at the Global Forum on Transparency and Exchange of Information for Tax Purposes, agreed to address tax havens in exchange for transparency in tax information. Recently, the Global Forum released a report regarding the Global Forum’s progress in efforts to increase tax transparency and exchange of information. Since the early 2000s, the Global Forum has worked with the Paris-based Organisation for Economic Cooperation and Development (OECD) to increase international tax transparency. The OECD drafted the Standard for Automatic Exchange of Financial Account Information in Tax Matters so that jurisdictions participating in the fight against tax evasion will have a way to share financial information with each other.
On October 23, the CFPB announced its proposal for a Language Access Plan, continuing its efforts to provide non-English speaking persons access to its programs and services. The Language Access Plan “describes the Bureau’s policy and how the Bureau’s current language access activities are implemented across all of the Bureau’s operations, programs and services.” Comments on the proposed plan are due by January 6, 2015.
On September 22, 2014, following a two-month trial, a federal jury in the Eastern District of New York ruled in favor of a group of 297 individual plaintiffs in a civil suit accusing Arab Bank PLC, headquartered in Amman, Jordan, of supporting terrorism. Linde vs. Arab Bank PLC, No. 1:04-CV-2799 (E.D.N.Y. filed July 2, 2004).
In summary, the plaintiffs alleged that Arab Bank was liable under the U.S. Anti-Terrorism Act, 18 U.S.C. § 2331, et seq. (the “ATA”), for the deaths and/or severe injuries resulting from acts in international terrorism that occurred between 2001 and 2004, because the bank had processed and facilitated payments for Hamas and other terrorist or terrorist-related organizations, their members, the families of suicide bombers, or Hamas front organizations.
What this means for financial institutions, particularly foreign banks that increasingly face the potential reach of U.S. laws and plaintiffs, remains to be seen. But there are three take-aways worthy of immediate consideration.
On October 11, the International Swaps and Derivatives Association, Inc. (ISDA) announced that 18 major global banks (G-18) agreed to sign the Resolution Stay Protocol, which was designed to support cross-border resolution and reduce systematic risk and is a significant step for banks that are considered “too-big-to-fail.” Effective January 2015, the Protocol will allow participating counterparties to “opt into certain overseas resolution regimes via a change to their derivatives contracts.” The Protocol will be applicable to new and existing trades and will likely extend to firms beyond G-18 banks in 2015.
On October 8, FHFA Director Mel Watt announced Janell Byrd-Chichester as the agency’s new Chief of Staff. From 2010 to 2014, Ms. Byrd-Chichester was a partner at DC’s Mehri & Skalet law firm in their fair housing, lending and consumer protection practice. Prior to joining Mehri & Skalet, Ms. Byrd-Chichester held positions at DC’s Cochran Firm, the NAACP Legal Defense Fund, and the North Carolina Central University School of Law, and she clerked for the Honorable Cecil F. Poole of the U.S. Court of Appeals for the Ninth Circuit.
- Jonice Gray Tucker to discuss “Getting your company ready: Managing fair lending for IMBs” at the Mortgage Bankers Association Independent Mortgage Bankers Conference
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting