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On May 15, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Order (GTO), which requires U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for high-end residential real estate in 12 major metropolitan areas. The purchase amount threshold for the beneficial ownership reporting requirement remains set at $300,000 for residential real estate purchased in the 12 covered areas.
The renewed GTO takes effect May 16, and covers certain counties within the following areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.
FinCEN FAQs regarding GTOs are available here.
Previous InfoBytes coverage on FinCEN GTOs available here.
On May 9, Brazilian telecom company settled SEC charges that it spent $621,756 on 2014 World Cup tickets and hospitality for Brazilian and foreign government officials. The company will pay $4.125 million to settle SEC claims that it violated internal accounting controls and recordkeeping requirements connected to providing 124 World Cup tickets and hospitality to 93 government officials at an average cost per guest of $3,204. The SEC took the company’s remediation efforts into account, including “enhanced internal accounting controls” and “adopting a new anti-corruption policy and compliance structure.”
On May 13, a Hawaiian businessman was sentenced to 30 months imprisonment to be followed by three years of supervised release after pleading guilty in January to a charge of conspiracy to bribe a Micronesian official in violation of the FCPA. The DOJ alleged that the businessman’s consulting company paid $440,000 in bribes to officials to obtain and keep contracts with the Micronesian government worth more than $10 million. One of the officials also pleaded guilty in April. See more previous coverage here.
OFAC imposes additional oil sector sanctions connected to Venezuela’s defense and intelligence sector
On May 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it had determined that persons operating in Venezuela’s defense and security sector may be subject to sanctions. Additionally, OFAC imposed sanctions against two companies for their alleged involvement in the transportation of oil from Venezuela to Cuba, which provides support to former President Maduro’s defense and intelligence sector. According to the Treasury Secretary Steven T. Mnuchin, “[OFAC’s] action today puts Venezuela’s military and intelligence services, as well as those who support them, on notice that their continued backing of the illegitimate Maduro regime will be met with serious consequences.” Furthermore, OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2019-A002, FIN-2017-A006, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to corrupt foreign political figures and their financial facilitators.
Visit here for continuing InfoBytes coverage of actions related to Venezuela.
On May 9, the Financial Crimes Enforcement Network (FinCEN) issued new guidance designed to consolidate and clarify current FinCEN regulations, guidance, and administrative rulings related to money transmissions involving virtual currency. FinCEN noted that the guidance, “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC),” serves to “remind persons subject to the Bank Secrecy Act (BSA) how FinCEN regulations relating to money services businesses (MSBs) apply to certain business models involving money transmission denominated in value that substitutes for currency, specifically, convertible virtual currencies (CVCs).” The guidance does not create any new expectations but instead “applies the same interpretive criteria to other common business models involving CVC.” These business models include peer-to-peer exchangers, CVC wallets, CVC money transmission services through electronic terminals (CVC kiosks), decentralized (or distributed) applications (DApp), anonymity-enhanced CVC transactions, CVC payment processors, and internet casinos. Finally, the guidance also specifies specific business models that may be exempt from the definition of a money transmitter. The same day, FinCEN also issued an “Advisory on Illicit Activity Involving Convertible Virtual Currency” to highlight threats posed by the criminal exploitation of CVCs for money laundering, sanctions evasion, and other illicit financing purposes, and to provide identification and reporting guidance for financial institutions.
President Trump issues new Iran Executive Order targeting Iran's metal sector; OFAC publishes related FAQs
On May 8, President Trump issued Executive Order 13871 (E.O. 13871) authorizing the imposition of sanctions on persons determined to operate in Iran’s iron, steel, aluminum, and copper sectors. The order is intended to target sectors of the Iranian economy that OFAC has identified as providing “funding and support for the proliferation of weapons of mass destruction, terrorist groups and networks, campaigns of regional aggression, and military expansion.” Among other things, E.O. 13871 authorizes the Secretaries of Treasury and State to impose sanctions on a foreign financial institution if it is determined that it has knowingly conducted or facilitated any significant financial transactions in these sectors, or for or on behalf of a blocked person. These sanctions are intend to curtail such institutions’ access to the U.S. financial system by prohibiting the opening of, or impose strict conditions on maintaining, a correspondent account or payable-through account by such foreign financial institutions in the United States.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a set of FAQs connected to the issuance of E.O. 13871, including a discussion of the relevant 90-day wind-down period for affected transactions as well as sanction exceptions.
Visit here for additional InfoBytes coverage of actions related to Iran.
Malaysian national extradited to the United States on embezzlement and FCPA charges in Malaysian fund scheme
On May 6, the DOJ announced that a Malaysian national was extradited to the United States from Malaysia on charges of conspiracy to embezzle and to violate the FCPA’s anti-bribery and accounting provisions in connection with a scheme relating to a Malaysia government-run strategic development fund. The Malaysian national was a former Managing Director at a financial institution. The indictment against him alleges that between 2009 and 2014, he conspired with others to launder billions of dollars embezzled from the development fund, including money from three bond offerings underwritten by the financial institution in 2012 and 2013, and that he conspired to bribe government officials in Malaysia and Abu Dhabi to obtain and retain business for the financial institution, including the bond transactions. DOJ alleges that the financial institution received approximately $600 million in fees and revenues from its work for the fund, and that he and his co-conspirators embezzled more than $2.7 billion from the fund's bond deals. In his first court appearance, he pleaded not guilty to the charges, and press coverage reported a federal magistrate judge’s statement that he and the DOJ are engaged in plea negotiations, but his defense counsel denied the judge’s characterization.
As detailed in prior FCPA Scorecard coverage, an alleged co-conspirator and former managing director of the same financial institution pleaded guilty in November 2018 to conspiracy to violate the FCPA and to commit money laundering. Another charged co-conspirator has not appeared in court.
On May 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it removed sanctions imposed on a former high-ranking Venezuelan official in the Maduro regime after he broke ties with the regime. As previously covered by InfoBytes, the sanctions were imposed in February of this year pursuant to Executive Order (E.O.) 13692. As a result of the removal, any otherwise lawful transactions involving U.S. persons and the individual are no longer prohibited. OFAC emphasized that the action “demonstrates that U.S. sanctions need not be permanent and are intended to bring about a positive change of behavior,” and further “shows the good faith of the [U.S.] that removal of sanctions may be available for designated persons who take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the illegitimate Maduro regime, or combat corruption in Venezuela.”
On May 6, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-18, which provides guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA’s Anti-Money Laundering Compliance Program. Specifically, the Notice is intended to assist broker-dealers with their existing obligations under Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements by providing a list of “money laundering red flags,” augmenting the red flags list from the 2002 Notice to Members 02-21 with additional red flags published by a number of U.S. government agencies and international organizations. The guidance lists potential red flags in a number of categories, including (i) customer due diligence and interactions with customers; (ii) deposits of securities; (iii) securities trading; (iv) money movements; and (v) insurance products. The Notice emphasizes that the list of 97 red flags “is not an exhaustive list and does not guarantee compliance with AML program requirements or provide a safe harbor from regulatory responsibility,” but rather provides examples for firms to consider incorporating into their AML programs, as may be appropriate in implementing a risk-based approach to BSA/AML compliance. The Notice also reminds firms to be aware of emerging areas of risk, such as those associated with activity in digital assets.
On May 3, the Financial Crimes Enforcement Network (FinCEN) issued an updated advisory to warn financial institutions of continued public corruption and attempted money laundering related to Venezuelan government agencies and political figures. The advisory updates a September 2017 advisory (previously covered by InfoBytes here) and renews the description of public corruption in Venezuela. The advisory also describes how “corrupt Venezuelan senior political figures exploit a Venezuelan government-administered food program by directing overvalued, no-bid contracts to co-conspirators that use ‘an over-invoicing trade-based money laundering’” scheme, which involves, among other things, front or shell companies, non-dollar denominated accounts, and nested accounts designed to evade sanctions and anti-money laundering/countering the financing of terrorism (AML/CFT) controls. The advisory also notes attempts by former President Maduro’s regime to evade sanctions and AML/CFT controls through the use of digital currency. The update provides revised financial red flags to assist with the identification and reporting of suspicious activity to FinCEN in connection with senior Venezuelan political figures.
FinCEN further emphasizes that financial institutions should continue to follow a risk-based approach and that normal transactions involving Venezuelan business and nationals are not necessarily reflective of the aforementioned risks.
See here for continuing InfoBytes coverage of actions related to Venezuela.
- Daniel P. Stipano to discuss "Regulatory changes: Proposed AML regulatory changes, marijuana banking and hemp/CBD" at the ACAMS Carolinas Chapter AML and OFAC Symposium-Technology and Hot Topics
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Buckley Webcast: Flirting with alternatives — Opportunities and challenges created by alternative data, modeling, and technology
- Daniel P. Stipano and Moorari K. Shah to discuss "Vendor management: What is the NCUA looking for?" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Daniel P. Stipano to discuss "Reporting requirements for credit unions: CTRs and SARs" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference