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Financial Services Law Insights and Observations


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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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  • OFAC settles with Swiss technology provider over sanctions violations

    Financial Crimes

    On February 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $7.8 million settlement with a Swiss provider of commercial telecommunications and information technology services to the civilian air transportation industry for 9,256 alleged violations of the Global Terrorism Sanctions Regulations. According to OFAC, between April 2013 and February 2018, the company allegedly provided commercial services and software subject to U.S. jurisdiction that may have benefitted certain airlines designated as specially designated global terrorists (SDGTs) pursuant to Executive Order 13224. These sanctioned airlines, OFAC noted, were member-owners in the company’s organization.

    In arriving at the settlement amount, OFAC considered various mitigating factors, including (i) OFAC has not issued a violation against the company in the five years preceding the earliest transaction at issue; (ii) the company has undertaken remedial efforts to minimize the risk of similar violations from occurring in the future; (iii) the company cooperated with the investigation and executed multiple tolling agreements; and (iv) the company terminated the membership of the SGDT airlines.

    OAC also considered various aggravating favors, including that (i) the company did not voluntarily self-disclose the alleged violations; (ii) the company had actual knowledge that it was providing services and software to SDGTs; (iii) the company’s actions “facilitated the operations of, or otherwise benefitted, airlines that were sanctioned for supporting terrorism”; and (iv) the company is “commercially sophisticated” with operations in every county in the world.

    Financial Crimes OFAC Department of Treasury Settlement Of Interest to Non-US Persons

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  • FATF calls for countermeasures on Iran; discusses global AML/CFT deficiencies

    Financial Crimes

    On February 21, the U.S. Treasury Department released a public statement issued by the Financial Action Task Force (FATF) following the conclusion of its plenary meeting held February 19-21, calling on its members and urging all jurisdictions to impose countermeasures on Iran for failing to address deficiencies in its anti-money laundering/combating the financing of terrorism (AML/CFT) regime. FATF provided specific examples of countermeasures within The Interpretive Note to Recommendation 19, which include, among other things, (i) “[p]rohibiting financial institutions from establishing branches or representative offices in” Iran; (ii) “[l]imiting business relationships or financial transactions with” Iran; and (iii) “[r]equiring financial institutions to review, amend, or if necessary, terminate correspondent relationships with [Iranian] banks.” According to Treasury, the “countermeasures should be developed and implemented to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing . . . risks emanating from Iran.”

    Treasury also discussed recent FATF guidance on digital identity for customer identification and verification. According to FATF, the guidance “explains how digital ID systems can meet FATF customer due diligence requirements and will assist governments and financial institutions worldwide when applying a risk-based approach to using digital ID systems.”

    FATF’s public statement also discussed progress made by the U.S. to strengthen its AML/CFT system, including Treasury’s customer due diligence rulemaking and beneficial ownership requirements that took effect in 2018. According to Treasury, the U.S. is also one of the first countries to voluntarily submit to an assessment of its compliance with new FATF standards regarding virtual assets.

    Finally, Treasury reported that FATF is calling “on all countries to apply countermeasures on North Korea due to the ongoing money laundering, terrorist financing, and weapons of mass destruction proliferation financing risks to the international financial system.” On the same day as its public statement, Treasury released an updated list of jurisdictions under increased monitoring that are actively working with FATF to address strategic AML/CFT deficiencies.

    Financial Crimes Department of Treasury FATF Anti-Money Laundering Combating the Financing of Terrorism Of Interest to Non-US Persons Iran Sanctions

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  • OFAC releases FAQs for reporting, procedures and penalties regulations

    Financial Crimes

    On February 20, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) issued two new FAQs related to the Reporting, Procedures and Penalties Regulations (RPPR). The RPPR “set forth standard reporting and recordkeeping requirements and license application and other procedures relevant to the economic sanctions programs administered by OFAC.” As previously covered by InfoBytes, OFAC amended the RPPR last June to expand instructions and add “new requirements for parties filing reports on blocked property, unblocked property, or rejected transactions,” updating six sections of the regulations. The two new FAQs state that the June amendment is currently in effect and that all parties, including entities that are not U.S. financial institutions, must obey all of the RPPR requirements, which include submitting reports to OFAC “within 10 business days of [a] rejected transaction.” Information on submitting the reports can be found here.

    The FAQs also address how much information must be included in a rejected transaction report. OFAC anticipates filers will include all required information “that is in the filer’s possession in a rejected transaction report, and generally does not expect reporters to seek further information from their counterparty.” However, OFAC does expect that, at a minimum, filers will include (i) the identity of the filer; (ii) the date of the rejected transaction; (iii) the authority under which the transaction was rejected; and (iv) all pertinent documentation acquired with the transaction.

    Financial Crimes Department of Treasury OFAC Of Interest to Non-US Persons Sanctions Rejected Transactions

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  • U.S., EU discuss financial regulatory developments

    Federal Issues

    On February 19, the U.S. Treasury Department issued a joint statement on the U.S. – EU Financial Regulatory Forum held February 11-12 in Washington, D.C. U.S. participants included officials from the Federal Reserve Board, CFTC, FDIC, SEC, OCC, and Treasury. Forum topics focused on five key themes: “(1) supervision and regulation of cross-border activities, particularly in the areas of derivatives and central clearing; (2) the importance of monitoring market developments, both in relation to financial assets classes, like leveraged loans and collateralized loan obligations, and reference rates, like the London Interbank Offered Rate; (3) implementation of international standards in banking and insurance; (4) regulatory issues presented by fintech/digital finance; and (5) EU regulations related to sustainable finance.”

    Among other topics, participants discussed U.S. banking developments concerning prudential requirements for foreign banks, including tailoring standards based on risk; proposed amendments to the Volcker Rule; EU data protection rules; cross-border supervision and data flow in financial services; the transition period following the U.K.’s departure from the EU; and European Commission priorities such as preventing and combating money laundering and the financing of terrorism. Participants acknowledged the importance of fostering continued dialogue between the U.S. and the EU noting that, “[r]egular communication on supervisory and regulatory issues of mutual concern should foster financial stability, supervisory cooperation, investor protection, market integrity, and a level playing field.”

    Federal Issues Department of Treasury Federal Reserve CFTC FDIC SEC OCC European Union Of Interest to Non-US Persons LIBOR Fintech Anti-Money Laundering Combating the Financing of Terrorism

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  • Treasury sanctions Russian company for doing business with Venezuela

    Financial Crimes

    On February 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13850, as amended, against a Swiss-incorporated, Russian-controlled oil brokerage and its board chairman and president for operating in the oil sector of the Venezuelan economy. According to the press release, the company assisted Venezuela state-owned Petroleos de Venezuela, S.A., in brokering, selling, and transporting Venezuelan petroleum products.

    In connection with the designations, OFAC issued Venezuela General License (GL) 36, titled “Authorizing Certain Activities Necessary to the Wind Down of Transactions Involving [company].” GL 36, which expires on May 20, authorizes certain transactions and activities otherwise prohibited under E.O.s 13850 and 13857 that are required in order to wind down business with the company. Concurrently, OFAC issued a new Venezuela-related frequently asked question regarding GL 36, addressing the significance of OFAC’s designation of the company, and whether the E.O. 13850 blocking sanctions on the company apply to its corporate parent and affiliates. In its press release, OFAC added that “all property and interests in property of [the company] and [its president] that are in the United States or in the possession or control of U.S. persons, and of any entities that are owned, directly or indirectly, 50 percent or more by the designated individual and entity, are blocked and must be reported to OFAC.”

    Financial Crimes Venezuela Petroleos de Venezuela Department of Treasury OFAC Combating the Financing of Terrorism Of Interest to Non-US Persons Sanctions

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  • FinCEN focuses on securities industry BSA/AML information sharing

    Financial Crimes

    On February 6, Financial Crimes Enforcement Network (FinCEN) Deputy Director Jamal El-Hindi delivered remarks at the Securities Industry and Financial Markets Association’s 20th Anti-Money Laundering (AML) and Financial Crimes Conference discussing, among other things, the agency’s focus on the Bank Secrecy Act (BSA). Specifically, El-Hindi stressed the importance of information sharing in the BSA context, remarking that the financial sector is “in an evolutionary state” dealing with “new technologies and new payment systems, such as those that involve virtual currency.” He asserted that innovators in the development of cryptocurrencies and messaging systems “cannot turn a blind eye to illicit transactions that they may be fostering,” and noted that FinCEN will regulate these emerging systems in accordance with existing principles that underlie the BSA and AML rules and regulations for the financial sector. El-Hindi encouraged the securities industry to share information, observing that only 14 percent of eligible securities companies are registered to take part in the 314(b) business-to-business information sharing program. He suggested that the industry needs better communication and cooperation to increase the effectiveness of BSA information collection. El-Hindi also discussed how cooperation has helped FinCEN’s cross-agency coordination and enhanced the agency’s rulemaking and guidance—specifically in the establishment of the Customer Due Diligence and Beneficial Ownership rule, but recognized that the lack of information collected regarding the formation of new corporations can frustrate the agency’s risk assessment abilities. To motivate information sharing, El-Hindi emphasized the importance of BSA information financial companies collect, sharing that SARs filings by securities companies have “increased roughly eight-fold” from 2003 to 2019, and that data provided from BSA filings is used frequently by law enforcement and regulators to inform their investigations and examinations and to “identify trends and focus resources.”

    Financial Crimes Federal Issues FinCEN Anti-Money Laundering Bank Secrecy Act Combating the Financing of Terrorism Supervision Customer Due Diligence SARs Securities Of Interest to Non-US Persons

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  • FinCEN rules on currency transaction reporting

    Agency Rule-Making & Guidance

    On February 10, the Financial Crimes Enforcement Network (FinCEN) issued administrative ruling FIN-2020-R001 to clarify requirements for financial institutions’ reporting of currency transactions involving sole proprietorships and legal entities operating under a “doing business as” (DBA) name. The ruling replaces and rescinds two prior rulings (FIN-2006-R003 and FIN-2008-R001), and addresses reporting requirements when filing current Currency Transaction Report (CTR) FinCEN Form 112. In the ruling, FinCEN defines a sole proprietorship as “a business in which one person, operating in his or her own personal capacity, owns all of the business’s assets and is responsible for all of the business’s liabilities.” To remain consistent with the Bank Secrecy Act definition of a “person” (where a sole proprietorship is not separate from its individual owner), FinCEN instructs financial institutions to complete CTR FinCEN Form 112 for transactions involving a sole proprietorship with the individual owner’s name and information. The ruling also instructs institutions that additional entries may be required in instances where an individual owner operates a business under a DBA, or multiple DBAs. FinCEN also advises that when a CTR is prepared for a legal entity such as a partnership, incorporated business, or limited liability company, the form should contain, among other things, the entity’s home office or headquarters information. According to the ruling, “[w]hen multiple entity locations are involved in an aggregated CTR, a separate Part I section should be prepared for each location involved.”

    Agency Rule-Making & Guidance FinCEN Bank Secrecy Act Of Interest to Non-US Persons

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  • Powell discusses CRA, LIBOR at House hearing

    Federal Issues

    On February 11, Federal Reserve Chairman Jerome Powell provided testimony to the House Financial Services Committee during a hearing titled “Monetary Policy and the State of the Economy,” discussing regulatory issues concerning, among other things, proposed rulemaking related to the Community Reinvestment Act (CRA) and the transition away from reliance on LIBOR as an interest rate benchmark in financial products. During the hearing, Powell fielded a number of questions concerning the Fed’s plan to update CRA regulations. Reaffirming his support for Fed Governor Lael Brainard’s disapproval of how quickly the FDIC and OCC issued their notice of proposed rulemaking (covered by a Buckley Special Alert), Powell stated that he is “very comfortable with. . .the thinking” Brainard recently outlined in a speech describing alternative approaches to the CRA modernization process (covered by InfoBytes here). Powell emphasized, however, that the ideas in Brainard’s speech do not yet represent a formal framework, stating “[w]e want to be very, very sure. . .that what comes out of this is a proposal. . .from us that will leave all major participants in CRA better off. And so we think it’s important that each metric, each change that we make is grounded in data.”

    Powell also discussed the upcoming transition from LIBOR to the Secured Overnight Financing Rate (SOFR), stating that federal regulators are working to ensure financial institutions are prepared for LIBOR’s possible cessation. When asked whether Congress should “simply give the Fed the right to prescribe backup rates when the debt instruments do not do so,” or explicitly adopt SOFR, Powell responded that he did not believe a federal law change is necessary at this time. Powell further responded that the Fed will inform Congress if a change in federal law is needed, emphasizing that the Fed’s “process is ongoing” and that it is “committed to having the banks ready by the end of next year to switch. . .away from LIBOR in case [the rate] is no longer published.” Powell noted that while SOFR will be the main substitute for LIBOR, the Fed is “working with regional [banks] and some of the larger banks, too, about the idea of also having a credit sensitive rate.”

    Federal Issues House Financial Services Committee Federal Reserve CRA LIBOR Of Interest to Non-US Persons SOFR

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  • Treasury announces anti-terrorist financing plan

    Financial Crimes

    On February 6, the U.S. Treasury Department announced the 2020 National Strategy for Combating Terrorist and Other Illicit Financing. The report provides an overview of the anti-money laundering/countering the financing of terrorism (AML/CFT) program in the U.S. and details how the program can be updated to be more efficient and effective. Among other things, the report covers the most noteworthy threats to the financial system such as fraud, drug trafficking, and human trafficking, and highlights that one of the greatest vulnerabilities to the U.S. financial system is a failure to collect beneficial ownership information when new companies are formed or when company ownership changes. The report also focuses on ways to make the AML/CFT framework stronger, including through increased transparency and improved financial institution regulation and supervision. Additionally, the report advocates boosting the AML/CFT operational framework through the use of technologies, expanded data analytics, increased information sharing, and promotion of worldwide standards.

    Financial Crimes Federal Issues Department of Treasury Anti-Money Laundering Combating the Financing of Terrorism Bank Regulatory Supervision Of Interest to Non-US Persons

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