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Global bank settles two FCPA actions for $10.5 million
On August 16, the SEC announced that a global bank had settled two enforcement actions involving alleged violations of the FCPA’s books and records and internal control provisions. The FCPA’s anti-bribery provisions were not implicated in either action.
The first action alleged that three traders employed by a U.S. subsidiary of the bank had mismarked positions in certain proprietary accounts, causing $81 million in losses that were not reflected in the company’s books and records. Some of these losses were from allegedly “widespread unauthorized trading.” The second action alleged that the bank had “failed to devise and maintain adequate internal accounting controls,” causing $475 million in losses, when the company did not identify that a Mexican subsidiary had loaned nearly $3.3 billion to a counterparty on the basis of fraudulent documentation provided by the counterparty. Without admitting or denying the SEC’s findings, the bank “agreed to pay $10.5 million in penalties”: $5.75 million for the first action, and $4.75 million for the second.
OFAC targets shipping industry in expanded North Korea sanction
On August 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions, pursuant to Executive Order 13810, designed to reinforce the U.S.’s ongoing commitment to prevent the financing of North Korea’s weapons of mass destruction programs and activities. The sanctions designate a Chinese-based trading company and its Singaporean-based affiliate, along with a Russian-based port service agency and its director general, for allegedly facilitating illicit shipments on behalf of North Korea. Pursuant to OFAC’s sanctions, all property and interests in property of the designated persons within U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from participating in transactions with these persons.
See here for previous InfoBytes coverage on North Korean sanctions.
Colombia’s former anti-corruption chief pleads guilty to money laundering conspiracy related to foreign bribes
On August 14, the DOJ announced that Colombia’s former National Director of Anti-Corruption pleaded guilty to “participat[ing] in a conspiracy to launder money with the intent to promote foreign bribery.” A Colombian attorney also pleaded guilty to the conspiracy. According to the press release, the two men admitted that they “attempted to entice a bribe” from a Colombian politician who was facing a corruption investigation by the former director’s office by promising to provide statements made by cooperating witnesses in exchange for $34,500. Working undercover for the DEA, the politician paid the two men a $10,000 deposit of the bribe money during a June 2017 meeting in Miami. At that meeting, the two men were also recorded promising to obstruct the investigation in exchange for an additional $132,000 bribe. Cash from the deposit was found on the former director when he boarded his flight back to Colombia. The two men were arrested in Colombia and extradited to the U.S. in May 2018. Sentencing is scheduled for November 19, 2018.
FinCEN director discusses approach to virtual currency and emerging technology
On August 9, Financial Crimes Enforcement Network (FinCEN) Director Kenneth A. Blanco delivered remarks at the 2018 Chicago-Kent Block (Legal) Tech Conference to discuss, among other things, the agency’s approach to virtual currency and its efforts to protect financial institutions from being exploited for illicit financing purposes as new financial technologies evolve and are adopted. Blanco commented that while innovation provides customers with greater access to financial services, it can also create opportunities for criminals or serve as a vehicle for fraud. Blanco discussed several areas of focus, such as (i) the regulation of virtual currency and initial coin offerings (ICOs), along with coordinated policy development and regulatory approaches done in conjunction with the SEC and CFTC; (ii) examination and supervision efforts designed to “proactively mitigate potential illicit finance risks associated with virtual currency”; (iii) anti-money laundering/countering the financing of terrorism (AML/CFT) regulatory compliance expectations for companies involved in ICOs or virtual currency transmissions; (iv) enforcement actions taken against companies that fail to implement effective programs; (v) the rise and importance of virtual currency suspicious activity report filings which help the agency identify and investigate illicit activity; and (vi) the development of an information sharing virtual currency-focused FinCEN Exchange program. Blanco emphasized that “individuals and entities engaged in the business of accepting and transmitting physical currency or convertible virtual currency from one person to another or to another location are money transmitters subject to the requirements” of the Bank Secrecy Act.
Former Malaysia Prime Minister charged with money laundering
On August 8, Malaysia’s former Prime Minister pleaded not guilty to money laundering charges filed against him in Malaysia in connection with the ongoing investigation of a Malaysian strategic development company. He had previously pleaded not guilty to three charges of criminal breach of trust and one charge of abuse of power. The money laundering charges relate to approximately $10 million that was allegedly deposited into the former Prime Minister’s personal bank account. That is a small portion of the total funds under investigation as misappropriated from the state fund.
The day before, a $250 million super yacht was returned to Malaysia after it was previously seized in Indonesia following claims by the U.S. Department of Justice that is was purchased with funds misappropriated from the company. Back in July 2016, DOJ filed civil forfeiture complaints seeking recovery of more than $1 billion in assets associated with the alleged “international conspiracy to launder funds misappropriated from [the company].” In June 2017, DOJ filed additional civil forfeiture complaints to recover another $540 million in assets. The investigation into assets linked to the company continues with DOJ alleging that more than $3.5 billion in total funds were misappropriated from the company from 2009 through 2015.
Former Barbados Minister of Industry charged with money laundering
On August 6, the Department of Justice announced the arrest and first court appearance of a former Minister of Industry of Barbados who DOJ has charged with “laundering bribes that he allegedly received from a Barbadian insurance company in exchange for official actions he took to secure government contracts for the insurance company.” The indictment, which was initially issued under seal on March 15, charges him with one count of conspiracy to launder money and two counts of money laundering. It also seeks forfeiture of the funds he received as alleged bribes. The indictment alleges that as Minister of Industry, he caused an agency of the Barbados Government to renew two contracts with the Barbadian insurance company. In return, the insurance company purportedly paid him approximately $36,000, routing the payments through a dental company and its bank account located in New York. The indictment also references as co-conspirator, but does not name, the CEO of the dental company, a United States citizen and resident of Tampa, Florida. He is also a lawful permanent resident of Tampa, Florida.
FinCEN issues extension to continue suspension of beneficial ownership requirements for automatic renewal products
On August 8, the Financial Crimes Enforcement Network (FinCEN) issued a notice to provide an additional 30 days of limited exceptive relief for covered financial institutions that are required to obtain and verify the identity of beneficial owners of legal entity customers with respect to certificate of deposit rollovers and loans that renew automatically. As previously covered in InfoBytes, the extension—which was set to expire August 9 and applies to qualified products and services that were established before the Beneficial Ownership Rule’s May 11 compliance date—will now continue until September 8. FinCEN noted it will continue to evaluate the requirement to determine whether additional relief is needed.
Find continuing InfoBytes coverage on beneficial ownership and customer due diligence requirements here.
OFAC targets facilitators of illicit North Korean financial transactions; Russian bank sanctioned
On August 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction a Russian bank, pursuant to Executive Order (E.O.) 13810, for allegedly “knowingly facilitating a significant transaction” on behalf of an individual connected to North Korea’s primary foreign exchange bank. According to OFAC, the Russian bank violated its UN Security Council (UNSC) obligations by providing banking services to a representative of the North Korean bank who had previously been designated for weapons of mass destruction-related activities connected to North Korea. OFAC also issued sanctions against the North Korean bank’s Moscow-based deputy representative (E.O. 13687), as well as two of its associated “front companies” (E.O. 13722) accused of facilitating North Korean illicit financial activity. OFAC noted that, in accordance with UNSC requirements, all identified representatives “working on behalf of or at the direction of a [North Korean] bank or financial institution” should have been expelled from Russia, but instead, the Russian bank continued to facilitate transactions with the sanctioned persons. Pursuant to OFAC’s sanctions, all property and interests in property of the designated persons within U.S. jurisdiction are blocked and “may not be transferred, paid, exported, withdrawn, or otherwise dealt in.” Moreover, U.S. persons are “generally prohibited” from participating in transactions with these individuals and entities.
See here for previous InfoBytes coverage on North Korean sanctions.
President Trump issues Iran-related executive order reimposing previously lifted sanctions; OFAC updates Iran-related FAQs
On August 6, President Trump announced the issuance of Iran-related Executive Order 13846 (E.O. 13846), which reimposes nuclear-related sanctions that were lifted in connection with the United States’ participation in the Joint Comprehensive Plan of Action (JCPA) of July 14, 2015. As previously covered in InfoBytes, President Trump announced his decision to withdraw from the JCPA on May 8. Newly issued E.O. 13846 reimposes certain sanctions, effective August 7, concerning persons—including foreign financial institutions—who facilitate or provide “financial, material, or technological support for” areas including Iran’s trade in U.S. bank notes and precious metals, its automotive sector, and its currency. Sanctions targeting Iran’s energy sector, as well as transactions between foreign financial institutions and the Central Bank of Iran, will resume effective November 5. E.O. 13846 also revokes and supersedes several previously issued E.O.s.
In response to E.O. 13846, OFAC released updates to its FAQs concerning the additional sanctions, along with amendments to existing FAQs concerning the Iran Freedom and Counter-Proliferation Act of 2012. FAQs related to revoked E.O. 13622, Section 4 of E.O. 13628, and E.O. 13645 have been archived.
See here for previous InfoBytes coverage on Iranian sanctions.
Another executive arrested in Venezuelan energy company bribery case
On August 1, DOJ announced the arrest of a dual U.S.-Venezuelan citizen on foreign bribery charges for making and conspiring to make corrupt payments to an official of a Venezuela’s state-owned energy company. He was arrested at Miami International Airport on an arrest warrant based on a criminal complaint in the Southern District of Texas, which was unsealed on July 31. He made an initial appearance before a magistrate judge in the Southern District of Florida.
According to the criminal complaint, the citizen and a co-conspirator paid at least $629,000 in bribes to a former company official in exchange for favorable business treatment for his companies, including: (1) directing company contracts to his companies, (2) giving his companies priority over other vendors to receive payments, and (3) awarding his companies contracts in U.S. dollars rather than Venezuelan bolivars.
DOJ has announced charges against 17 individuals, including the citizen, as part of its investigation into bribery at the company. 12 individuals have pleaded guilty.