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Financial Services Law Insights and Observations


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  • Korean bank settles investigation into Iran transfers; resolves BSA/AML violations allegations

    Financial Crimes

    On April 20, the U.S. Attorney for the Southern District of New York and the New York attorney general announced that a Korean bank will pay $51 million in penalties to resolve a six-year investigation into the bank’s transfer of more than $1 billion to Iranian entities in violation of U.S. economic sanctions. According to the U.S. Attorney’s press release and deferred prosecution agreement and statement of facts (as well as a press release from the state attorney general), the bank violated the Bank Secrecy Act (BSA) by “willfully failing to establish, implement, and maintain an adequate anti-money laundering (‘AML’) program” at its New York branch—even though its compliance officer repeatedly asked it to do so—which led to the illegal transfer of approximately $1 billion in transactions to Iran in violation of the International Emergency Economic Powers Act. According to the government, the bank’s lack of an effective AML program resulted in its failure to detect and report $10 million in payments through the bank and other U.S. financial institutions from Korean entities to Iranian entities, as well as its failure to “report the balance of the $1 billion of such sanctioned transactions” between the parties. Furthermore, the bank also failed to self-report to the U.S. Treasury Department’s Office of Foreign Assets Control its wrongdoing in a timely manner or its willful violations of the BSA prior to the investigation. Under the terms of the deferred prosecution agreement, the bank will pay $51 million through a civil forfeiture action, half of which will go to the United States Victims of State Sponsored Terrorism Fund, and will undergo regular reviews of its AML and sanctions compliance programs.

    The bank also reached a separate agreement with NYDFS for violating state regulations, under which it will pay an additional $35 million penalty for violations of BSA/AML laws. Among other things, NYDFS found that the compliance program of the bank’s New York branch failed to achieve satisfactory levels until its 2019 examination. “While the department applauds the bank for its ultimate efforts after eight examination cycles of noncompliance, one positive examination report does not equate to a sustainable, safe and sound financial institution,” NYDFS said in its consent order. Under the terms of the order, the bank is required to revise its BSA/AML compliance program and enhance its customer due diligence program to ensure compliance with relevant state laws and regulations. NYDFS acknowledged the bank’s substantial cooperation in the matter, including remediating identified shortcomings.

    Financial Crimes DOJ State Attorney General NYDFS OFAC Department of Treasury Settlement Of Interest to Non-US Persons Korea Anti-Money Laundering Bank Secrecy Act

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  • DOJ reaches $2.47 million settlement to resolve alleged lending violations regarding FHA-insured reverse mortgages

    Federal Issues

    On March 31, the DOJ announced a $2.47 million settlement with an Oklahoma-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to an acquired predecessor entity’s origination and underwriting of home equity conversion mortgages (HECM). According to the DOJ, these HECM loans were insured by the Federal Housing Administration (FHA) but failed to meet HUD requirements. The DOJ alleged that, prior to May 2, 2010, the predecessor entity ordered appraisals for HECM loans on forms that provided loan amounts and “otherwise improperly communicated certain information to [appraisers] in an attempt to influence the appraised value, in violation of FHA requirements.” The mortgage lender agreed to pay the DOJ $1.97 million to resolve the FCA claims, as well as $500,000 to HUD to resolve administrative liability allegations. The DOJ’s press release noted that the claims “are allegations only, and [that] there has been no determination of liability.”

    Federal Issues DOJ False Claims Act / FIRREA HECM HUD Mortgages

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  • DOJ unveils charges against Maduro, Venezuelan government officials

    Financial Crimes

    On March 26, the DOJ announced criminal charges against numerous current and former Venezuelan government officials, including “Former President” Nicolás Maduro Moros and two Fuerzas Armadas Revolucionarias de Colombia (FARC) leaders. The charges include allegedly engaging in drug trafficking, laundering drug proceeds using Florida real estate and luxury goods, corruption, and bribery. According to an unsealed four-count superseding indictment filed in the Southern District of New York, Maduro, along with five other high-ranking officials, participated in a “narco-terrorism conspiracy,” conspired to import large-scale cocaine shipments into the U.S., and used—or conspired to use—“machine guns and destructive devices” to further the narco-terrorism conspiracies. The charges also allege that Maduro and the officials negotiated and facilitated FARC-produced cocaine shipments, coordinated “foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking,” and solicited assistance from FARC leadership with respect to militia training.

    A separate indictment unsealed in the District of Columbia charges the current Venezuelan Minister of Defense with conspiracy to distribute cocaine on a U.S.-registered aircraft. That individual was previously sanctioned in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). (Covered by InfoBytes here.)

    A criminal complaint was also filed in the Southern District of Florida charging the current Chief Justice of the Venezuelan Supreme Court with accepting “tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases,” including a case in which the defendant authorized the dismissal of charges brought against a Venezuelan who was “charged in a multibillion-dollar fraud scheme against the Venezuelan state-owned oil company.” According to the complaint, the defendant laundered the proceeds through U.S. bank accounts, and spent approximately $3 million in South Florida on a private aircraft and luxury goods.

    Another unsealed indictment in the Southern District of New York charges three additional Venezuelans with evading OFAC sanctions by working “with U.S. persons and U.S.-based entities to provide private flight services for the benefit of Maduro’s 2018 presidential campaign.”

    Additional separate indictments accuse various former Venezuelan officials of drug trafficking and military aircraft smuggling. In addition, several individuals were charged with FCPA violations, including: (i) two individuals for allegedly receiving bribes to award business to U.S.-based companies; and (ii) several individuals for allegedly participating in an international money laundering scheme and conspiring to solicit Petróleos de Venezuela, S.A. (PDVSA) vendors “for bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” According to the DOJ’s press release, the scheme involved “bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices.”

    Financial Crimes DOJ Indictment Of Interest to Non-US Persons Venezuela Petroleos de Venezuela Anti-Money Laundering Bribery FCPA OFAC Sanctions Courts

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  • DOJ reminds landlords of servicemember rights during Covid-19 crisis

    Federal Issues

    On March 30, the DOJ’s Civil Rights Division released a statement encouraging landlords and property managers to provide flexibility for servicemembers who have had to quickly change housing plans and employment responsibilities. The Division explained that due to the Covid-19 outbreak, a March 13 Stop Movement Order halted domestic travel by military personnel. As a result, many servicemembers who had signed leases for housing in anticipation of a move to a new duty station will not be able to move until May 11, at the earliest. The statement continues that “[c]onsistent with federal and state law” property managers are urged “to afford the men and women of our armed forces maximum flexibility to adjust their residential lease obligations as needed to comply with military orders during this uncertain time.” The statement reminds property managers and landlords of “the responsibilities they have with respect to members of the National Guard and Reserve under USERRA, the SCRA and similar state laws,” adding that the Division “will act swiftly to bring violators to justice.”

    Servicemembers with concerns regarding their civil rights should contact the DOJ or their nearest Armed Forces Assistance Program Office.

    Federal Issues DOJ Servicemembers SCRA USERRA Covid-19 Consumer Protection

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  • District court grants DOJ’s request for TRO against website for selling nonexistent Covid-19 vaccine

    Federal Issues

    On March 22, the U.S. District Court for the Western District of Texas granted the DOJ’s motion for a temporary restraining order against an allegedly fraudulent website. In its announcement of the court’s action, the DOJ detailed that it had filed a complaint against the operator of a website (defendant) that purported to offer Covid-19 World Health Organization vaccine kits to consumers for free, if the consumers paid $4.95 in shipping charges. In its complaint, the DOJ alleged that the defendant was engaged in a scheme to defraud consumers by charging them $4.95 for shipping for the vaccine—which does not exist—and collecting the consumers’ credit card information for purposes of “fraudulent purchases and identity theft.” The DOJ alleged that the defendant was “engaging in and facilitating a predatory wire fraud scheme exploiting the current Covid-19 pandemic.” Among other things, the Department also requested a permanent injunction against the defendant.

    Federal Issues Courts DOJ Fraud Covid-19

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  • DOJ adopts changes to merger investigation process

    Federal Issues

    On March 17, the DOJ announced it would adopt a series of temporary changes to its civil merger investigation processes, which will remain in place during the pendency of Covid-19. For example, for mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests.  Additionally, all scheduled depositions will be temporarily postponed and will be rescheduled using secure videoconferencing capabilities.

    Federal Issues DOJ Covid-19

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  • Chinese nationals sanctioned and charged with laundering over $100 million in cryptocurrency from hacked exchange

    Financial Crimes

    On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13694, 13757, and 13722 against two Chinese nationals for allegedly laundering over $100 million in stolen cryptocurrency connected to a North Korean state-sponsored cyber group that hacked cryptocurrency exchanges in 2018. According to OFAC, the two individuals “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity” or in support of the North Korean cyber group, which was designated by OFAC last September (covered by InfoBytes here). OFAC stated that it closely coordinated its action with the U.S. Attorney’s Office for the District of Columbia and the Internal Revenue Service’s Criminal Investigation Division. As a result of the sanctions, “all property and interests in property of these individuals that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated individuals may subject them to U.S. correspondent account or payable-through sanctions.

    On the same day, the DOJ unsealed a two-count indictment against the two individuals, charging them with money laundering conspiracy and operating an unlicensed money transmitting business. The indictment claims that the individuals converted virtual currency traceable to the hack of a cryptocurrency exchange into fiat currency or prepaid Apple iTunes gift cards through accounts in various exchanges linked to Chinese banks and then transferred the currency or gift cards to customers for a fee. According to the indictment, neither individual was registered as a money transmitting business with the Financial Crimes Enforcement Network, which is a federal felony offense. The complaint seeks forfeiture of 113 virtual currency accounts belonging to the individuals.

    Financial Crimes Department of Treasury OFAC Cryptocurrency Of Interest to Non-US Persons Sanctions DOJ Anti-Money Laundering Virtual Currency

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  • Court overturns foreign bribery conviction of former transportation and energy industry executive

    Financial Crimes

    On February 26, the U.S. District Court for the District of Connecticut acquitted a British national and former executive of a French multinational transportation and energy company who had been convicted by a jury of FCPA violations, citing the government’s failure to prove at trial that the defendant was an “agent” of a domestic concern. The court left intact the jury’s money laundering verdicts against the defendant.

    At trial in November 2019, the jury found the defendant guilty of one count of conspiracy to violate the FCPA, and six counts of substantive FCPA violations, as well as several money laundering counts, for his alleged involvement in a scheme by the company’s U.S. subsidiary, a power generation equipment manufacturer, to bribe Indonesian officials to obtain a power plant construction contract. The defendant filed a Rule 29(a) motion for a judgment of acquittal on all of the counts, arguing as to the FCPA counts that the government “failed to prove that he was an agent of [the subsidiary], the relevant domestic concern,” as required pursuant to the U.S. Court of Appeals for the Second Circuit’s earlier decision in the matter (covered by InfoBytes here). The trial court agreed, ruling that the evidence adduced at trial did not established that the subsidiary exercised “control over [the defendant’s] actions sufficient to demonstrate agency.” The court also granted the defendant’s in-the-alternative request for a new trial on the FCPA counts, in the event that court’s acquittal is later disturbed on appeal.

    Financial Crimes Bribery Of Interest to Non-US Persons FCPA SEC DOJ Indonesia International

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  • DOJ, SEC settle with national bank for $3 billion over sales-compensation practices

    Federal Issues

    On February 21, the DOJ and SEC announced that one of the nation’s largest banks agreed to a settlement including a $3 billion monetary penalty to resolve investigations regarding their incentive compensation sales program. (See the DOJ’s Statement of Facts here). As previously covered by InfoBytes, the OCC also recently issued charges against five of the bank’s former executives, and announced settlements with the former CEO and operating committee members for allegedly failing to adequately ensure that the bank’s sales incentive compensation plans operated according to policy.

    The SEC alleged in its Cease and Desist order that the bank violated the antifraud provisions of the Securities Exchange Act of 1934. The SEC’s press release states that in addition to agreeing to cease and desist from committing any future violations of the antifraud provisions, the bank agreed to a civil penalty of $500 million, which the SEC will return to harmed investors.

    The bank also settled the DOJ’s civil claims under the Financial Institutions Reform, Recovery and Enforcement Act. According to the settlement, the bank accepted responsibility, cooperated in the resulting investigations, and has taken “extensive remedial measures.” In addition, the DOJ’s press release states that it entered into a three-year deferred prosecution agreement with the bank regarding the bank’s sales incentive compensation practices. 

    Federal Issues DOJ Regulator Enforcement Enforcement SEC Securities Exchange Act FIRREA Incentive Compensation

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  • Iranian company employee charged in $115 million international bank fraud scheme

    Financial Crimes

    On January 31, the U.S. Attorney’s Office for the Southern District of New York announced charges against an employee (defendant) of an Iranian company for bank fraud, conspiracy to commit bank fraud, and for making false statements to federal agents regarding financial transactions made through U.S. banks to benefit Iranian entities and individuals. According to the indictment, an agreement between the Iranian government and the Venezuelan government resulted in a construction contract for housing units in Venezuela where an Iranian company would construct the units and be paid with money funneled through U.S. banks by a Venezuelan state-owned company subsidiary. The defendant was purportedly part of a committee formed to guide the project. In coordination with other individuals, the defendant allegedly directed money from the Venezuelan company to the Iranian company through bank accounts—set up to hide the transactions from U.S. banks—in Switzerland. The indictment charges that, among other things, the defendant “knowingly and willfully” conspired with others to commit bank fraud against an FDIC-insured institution by directing the Venezuelan company to route $115 million in payments for the Iranian company to the Swiss bank account through correspondent U.S. banks in New York. Additionally, when the defendant was interviewed by federal agents, he “knowingly and willfully” concealed the scheme and made materially false statements about his knowledge of the applicability of sanctions against Iran. The indictment seeks forfeiture of any proceeds or property obtained by the defendant in the course of the alleged offenses.

    Financial Crimes DOJ Iran Venezuela Combating the Financing of Terrorism Of Interest to Non-US Persons OFAC Sanctions Fraud FDIC

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