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  • U.S. imposes denial of export privileges on Chinese telecom giant for violating prior settlement agreement

    Financial Crimes

    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.

    Financial Crimes Settlement Department of Commerce North Korea China International

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  • British pharmaceutical company responds to inquiries from SFO, DOJ, and SEC regarding its use of third-party advisors in China

    Financial Crimes

    In a securities filing on Wednesday, Feb. 7, a U.K.-based pharmaceutical company announced that it is responding to requests for information from the DOJ and SEC regarding third-party advisors that the company engaged in China. These requests came about after the company, pursuant to its continuing obligation to report to the SEC on its efforts to improve compliance following its September 2016 settlement of allegations that it violated the FCPA, informed the SEC and DOJ that the SFO had sought additional information in the course of its own investigation, which began in May 2014. The company was also investigated by Chinese authorities and, in September 2014, the company’s Chinese subsidiary was reportedly found guilty of bribery resulting in the company’s payment of a $491.5 million fine. 

    Previous FCPA Scorecard coverage here and here.

    Financial Crimes DOJ SEC FCPA SFO Bribery China

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  • NYDFS fines global money service $60 million for AML deficiencies

    Financial Crimes

    On January 4, New York Department of Financial Services (NYDFS) ordered one of the largest global money transfer services to pay $60 million for willfully failing to implement an effective anti-money laundering (AML) program. According to the consent order, between 2004 and 2012, three of the company’s New York locations allowed the company’s services to be used to pay debts to human traffickers based in China. Additionally, the order emphasizes that the company was aware of weaknesses in its compliance program for years and failed to implement controls that could have detected and prevented the payments in question. The NYDFS investigation resulted from a January 2017 settlement with the Department of Justice, which found that during the same time period (2004-2012), the company processed hundreds of thousands of transactions for company agents and others involved in an international consumer fraud scheme, as previously covered by InfoBytes. In addition to the fine, the order requires that the company put in place stricter AML compliance measures, including the creation of an Independent Compliance Committee of the Board of Directors.

    Financial Crimes NYDFS Bank Secrecy Act Anti-Money Laundering Bank Compliance International China

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  • China Bans Commercial Trading of Initial Coin Offerings

    Securities

    On September 4, the People’s Bank of China and several Chinese regulators reportedly jointly announced plans to ban the commercial trading of bitcoin and other cryptocurrencies. This measure, announced in a statement issued by the Ministry of Industry and Information Technology of the People’s Republic of China, will outlaw all fundraising Initial Coin Offerings (ICOs), and declares ICOs and the sale of virtual currency as unauthorized illegal financing behavior, suspected of illegal sale tokens, illegal securities issuance, and illegal fund-raising, including financial fraud, pyramid schemes and other criminal activities. The statement reportedly stresses that virtual currency in China will not be recognized as a legal form of currency and must not be circulated as currency when financing activities. Furthermore, going forward, all cryptocurrency trading platforms are prohibited in China from acting as central counterparties to facilitate the exchange of tokens for virtual currencies. Additionally, one of China’s bitcoin exchanges reportedly published an announcement on its website saying it will close its bitcoin currency trading platform in the country on September 30.

    The SEC recently released an investor bulletin about ICO investment risks and offered fraud prevention guidance. (See previous InfoBytes summary here.) ICO sales are often used to raise capital, and the SEC is monitoring companies who use this method for fraudulent purposes.

    Securities Digital Assets Fintech Initial Coin Offerings International Cryptocurrency Bitcoin Fraud Virtual Currency China

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  • OFAC Imposes Sanctions on Chinese and Russian Entities and Individuals for Aiding North Korea

    Financial Crimes

    On August 22, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on ten entities and six individuals from China, Russia, Singapore, and Namibia for their roles in supporting North Korea’s efforts to develop weapons of mass destruction, violations of United Nations Security Council Resolutions, and attempted evasion of U.S. sanctions. The sanctions prohibit any U.S. individual from dealing with the designated entities and individuals, and further states that “any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are generally prohibited from dealing with them.” OFAC’s notice identified entities and individuals that (i) assisted already-designated persons supporting North Korea’s nuclear and ballistic missile programs; (ii) dealt in the North Korean energy trade; (iii) facilitated overseas labor to North Korea; and (iv) enabled sanctioned North Korean entities to access the U.S. and international financial systems. Targets include three Chinese coal companies allegedly responsible for importing nearly half a billion dollars' worth of North Korean coal, as well as three Russians individuals and two Singapore-based companies OFAC claimed were involved in providing oil to North Korea.

    Financial Crimes Sanctions Department of Treasury OFAC China Russia North Korea

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  • Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges

    Financial Crimes

    A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies. 

    The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.

    The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former asset management executives with bribing government officials across Africa to secure mining deals, including in Guinea.

    Financial Crimes SEC Bribery Anti-Money Laundering China

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  • New Survey Reports on Corruption in the Asia Pacific Region

    Financial Crimes

    A German nonprofit that tracks global corruption and perceptions of corruption, has published People and Corruption: Asia Pacific – Global Corruption Barometer. In what the organization calls “the most extensive survey of its kind,” the group spent a year and a half interviewing over 21,000 people living in the Asia Pacific region as a litmus test for corruption in the area.  The 38-page report found considerable differences in bribery rates between surveyed countries; for example, while Japan weighed in at 0.2%, a staggering 69% of people surveyed in India indicated they had paid a bribe in the past year in exchange for public services.  People across the surveyed region agreed that police were the most corrupt part of public services.  While Australians expressed the “most positive” outlook on corruption, people in Malaysia and Vietnam felt the least positive overall, and people in China “were most likely to think the level of corruption had increased recently.”  The report outlines three key recommendations, encouraging governments to “make good on promises,” “stop[] bribery in public services,” and “encourag[e] more people to report corruption.” 

    Financial Crimes FCPA Anti-Corruption China

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  • Financial Services Institution Discloses SEC FCPA Investigation into Hiring Practices

    Financial Crimes

    On February 24, a major financial services institution disclosed in its 10-K that government and regulatory agencies, including the SEC, are conducting investigations concerning potential violations of the FCPA related to hiring of candidates referred by or related to foreign government officials.  The institution stated that it was cooperating with the investigations.

    This is not the first FCPA-related investigation of a company’s hiring practices.  As previously reported here in November 2016, a global financial company and a Hong Kong subsidiary agreed to pay approximately $264 million to the DOJ, SEC, and the Federal Reserve, ending a nearly three year, multi-agency investigation of the subsidiary’s referral program through which the children of influential Chinese officials were allegedly given prestigious and lucrative jobs as a quid pro quo to retain and obtain business in Asia.  Similarly, as reported here, in August 2015, the SEC announced a settlement with a multinational financial services company over allegations that the company violated the FCPA by giving internships to family members of government officials working at a Middle Eastern sovereign wealth fund in hopes of retaining or gaining more business from that fund. The company paid $14.8 million to settle the charges. 

    Nor are the inquiries confined to financial services companies.  For example, the SEC announced in March 2016 that it settled charges with the San Diego-based mobile chip maker.  The company agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist the company in obtaining or retaining business in China.

    Financial Crimes DOJ FCPA Federal Reserve SEC China

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  • Fired General Counsel Wins $10.9 Million in FCPA Whistleblower-Retaliation Case

    Federal Issues

    On February 6, 2017, a federal jury in San Francisco awarded the former general counsel of a life sciences company $10.9 million in a landmark FCPA whistleblower-retaliation case brought under the Sarbanes-Oxley Act (SOX), the Dodd-Frank Act, and California state law. After three hours of deliberation, the jury found that the company’s former general counsel of nearly 25 years, was fired for reporting suspected FCPA violations to the company’s audit committee in February 2013, a protected activity under SOX’s anti-retaliation provisions. Although the former general counsel did not report his concerns to the SEC, the court held in 2015 that internal whistleblowing under SOX was also protected by the Dodd-Frank Act’s anti-retaliation provisions, opening the door to Dodd-Frank’s double back-pay remedy. The company’s last-minute motion to block purported attorney-client privileged information from trial –“virtually all of the evidence and testimony Plaintiff might rely upon to prove his case” – was denied by the court in December 2016.

    The jury ultimately awarded the former general counsel $2.96 million in back-pay – to be doubled under Dodd-Frank – plus $5 million in punitive damages. As detailed in a previous FCPA Scorecard post, the company paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam.  The former general counsel’s report to the audit committee had involved separate allegations that the company violated the FCPA in China.

    Federal Issues FCPA International SEC DOJ China

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  • SEC Investigating Multi-level Marketing Corporation for FCPA Violations in China

    Federal Issues

    On January 20, a Los Angeles-based maker of nutritional supplements and weight management products, disclosed in a Form 8-K filing that it is being investigated by the SEC in connection with the company’s activities in China. The company said it is also conducting its own review and “has discussed the SEC’s investigation and the company’s review with the Department of Justice.” It also said it is cooperating with the SEC but “cannot predict the eventual scope, duration, or outcome of the matter at this time.”

    The announcement comes months after the company agreed last July to pay $200 million in consumer redress to settle Federal Trade Commission allegations that it operated a pyramid scheme and “deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.” The FTC deal also required the company to “fundamentally restructure” its multi-level marketing operations and compensation structure.

    Federal Issues Securities FTC International SEC DOJ China

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