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SEC settles with alcoholic beverage company for $8.2 million regarding India payments
On July 2, the SEC settled FCPA allegations with an alcoholic beverage company in an administrative proceeding stemming from alleged FCPA violations from 2006 through 2012. The company neither admitted nor denied any wrongdoing. The SEC alleged that the company’s subsidiary in India made illegal payments to Indian government officials through third-party sales promoters and distributers. The third parties then presented fabricated or inflated invoices to the subsidiary. These invoices and accounting entries were ultimately incorporated into the parent company’s books and records. The SEC also alleged that the company failed to maintain adequate internal controls.
This is the third case the SEC has pursued related to conduct in India by alcoholic beverage companies, following a British alcoholic beverage company in 2011 and a Belgian alcoholic beverage in 2016.
OFAC publishes Global Magnitsky Sanctions Regulations
On June 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of regulations to implement the Global Magnitsky Human Rights Accountability Act, as well as Executive Order 13818, which calls for the blocking of property of certain persons involved in serious human rights abuses or corruption. Among other things, the Global Magnitsky Sanctions Regulations outline certain prohibitions related to: (i) transactions involving blocked property, in addition to expenses pertaining to the maintenance or liquidation of blocked property; (ii) the holding of funds in blocked interest-bearing accounts; and (iii) exempt transactions. OFAC further noted it plans to “supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.” The regulations took effect June 29.
OFAC revokes JCPOA-related General Licenses
On June 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an announcement revoking Iran-related General Licenses H and I (GL-H and GL-I) following President Trump’s May 8 withdrawal from the Joint Comprehensive Plan of Action. In conjunction with these changes, OFAC amended the Iranian Transactions and Sanctions Regulations to authorize certain wind-down activities through August 6 (GL-I) and November 4 (GL-H) related to, among other things, letters of credit and brokering services. In addition OFAC released updated FAQs related to the May 8 re-imposition of nuclear-related sanctions.
See here for continuing InfoBytes coverage of actions related to Iran.
House Financial Services Committee examines implications of “de-risking”
On June 26, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing titled, “Examining the International and Domestic Implications of De-Risking,” which examined financial institutions terminating “high risk” relationships to minimize compliance exposure. The press release notes that high-risk entities can also include legitimate businesses such as firearms sellers and payday lenders. Subcommittee Chairman, Blaine Luetkemeyer (R-MO), stated that the termination of these relationships has “resulted in the elimination of consumer and small business access to financial products and services, a decrease in the availability of money remittances, and reduced flow of humanitarian aid globally.” Agreeing with the Chairman, many witnesses emphasized the impact de-risking has on the international financial system, including access to banking in the U.S. southwest border region and in the Caribbean and Central America. While recognizing the importance of anti-money laundering regulations and financial sanctions policies, the witnesses encouraged Congress to consider opportunities to ensure equal access to the financial system for legitimate businesses.
Aruban telecom official sentenced for money laundering conspiracy involving FCPA violations
On June 27, Judge Frederico Moreno of the United States District Court of the Southern District of Florida sentenced an Aruban telecom official to 36 months in prison following his guilty plea for money laundering charges in connection with a scheme to arrange and receive corrupt payments to influence the awarding of contracts in Aruba. According to the DOJ’s press release, the official, between 2005 and 2016, used his position as the company’s product manager to influence the awarding of lucrative mobile phone and accessory contracts with the Aruban state-owned telecommunications company. He also admitted to providing favored vendors with confidential company information in exchange for more than $1.3 million in corrupt payments. The official was ordered to pay over $1.3 million in restitution and to serve three years of supervised release following his prison term.
Previous Scorecard coverage of this matter can be found here.
Non-profit advocacy organization accuses UK bank of deceptive report on US whistleblower tip rewards programs
On June 20, an American non-profit advocacy organization for whistleblowers and a European advocacy organization for whistleblowers formally requested that a UK bank retract a report that they allege
smischaracterizes US whistleblower tip rewards programs, including regarding FCPA tips. The report, originally released in 2014 by the bank in conjunction with the UK’s Financial Conduct Authority, had criticized the use of financial incentives for whistleblowers in the US, arguing that they were ineffective, “don’t generate quality tips,” and “impose expensive and unnecessary governance structures.” The report concluded that the UK should adopt regulatory changes to improve protections for all whistleblowers rather than provide rewards, which allegedly allot large financial payouts to a tiny minority of whistleblowers.The American organization disputed these assertions in a rebuttal report, released this year. According to the whistleblower advocacy organizations, many of the assertions in the bank’s report “are simply false” and the continued use of the report “inhibit[s] the implementation of effective anti-fraud laws in the UK.” The organizations further complained that the 2014 report has been used as justification for stakeholders in UK to not create financial incentives for whistleblowers and that it has stifled momentum in the UK for an effective whistleblower program.
Global bank settles FCPA allegations concerning “sons and daughters” investigation into hiring practices
On June 6, a global bank announced it had entered into a non-prosecution agreement with the DOJ to resolve an FCPA investigation into hiring practices in the Asia Pacific region between 2007 and 2013. As part of the agreement, the bank agreed to pay a $46 million penalty to the DOJ. According to the bank, it has already provisioned for the penalty and expects the payment to have “no material impact” on its second quarter financial results. The bank further stated that it has implemented multiple enhancements to its compliance and control functions since 2013.
U.S. authorities have investigated several other financial services institutions over their hiring practices in Asia, which have become known as the “sons and daughters” investigations because of the allegations that banks widely hired the children of elite Chinese political families to secure an advantage in obtaining business. Prior Scorecard coverage of those investigations can be found here.
FinCEN issues advisory on connection between politically exposed persons and financial facilitators
On June 12, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to U.S. financial institutions to increase awareness of the connection between high-level political corruption and human rights abuses. The advisory highlights the use of financial facilitators as a means to gain access to global financial systems for the purpose of moving or hiding illicit proceeds and evading U.S. and global sanctions. Among other things, the advisory, which is designed to assist financial institutions in identifying and reporting suspicious activity, provides typologies used by “politically exposed persons” (PEPs) to access the U.S. financial system and obscure illicit activity. FinCEN also provides several red flags outlining various types of suspected schemes that may be indicators of suspicious activity. The advisory’s regulatory guidance further reminds financial institutions of their risk-based, due diligence obligations, which include (i) identifying legal entities owned or controlled by PEPs (as required by FinCEN’s Customer Due Diligence Rule); (ii) complying with anti-money laundering program obligations; and (iii) filing Suspicious Activity Reports related to illegal activity undertaken by senior foreign political figures.
OFAC sanctions Russian entities and individuals for cyber activities connected to FSB
On June 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction five Russian entities and three Russian individuals connected to Russia’s Federal Security Service (FSB), pursuant to Section 244 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) and Executive Order 13694. The sanctions target individuals and entities who, through “malign and destabilizing cyber activities,” have provided material and technological support to the FSB. 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 individuals and entities. As part of the announcement, Treasury Secretary Steven Mnuchin stated that “The United States is committed to aggressively targeting any entity or individual working at the direction of the FSB whose work threatens the United States and will continue to utilize our sanctions authorities, including those provided under CAATSA, to counter the constantly evolving threats emanating from Russia.”
Visit here for additional InfoBytes coverage on Russian sanctions.
Baltimore-based investment management firm settles FCPA allegations with DOJ
On June 4, the DOJ announced that a Baltimore-based investment management firm, had entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve FCPA allegations in connection with the firm’s involvement in Libya through a London-based fund purchased by the firm. Between 2004 and 2010, Permal, subsidiary of the Baltimore firm, partnered with a Paris-based multinational bank, “to solicit business from state-owned financial institutions in Libya.” As admitted by the bank in its own resolution with the DOJ, the bank paid bribes of over $90 million through the use of a Libyan broker with respect to 14 investments made by Libyan state-owned financial institutions. For seven of the transactions, the bank made payments to the Libyan broker to benefit the firm, through its subsidiary. The subsidiary managed the investments and earned profits of approximately $31 million.
The firm’s resolution includes a penalty of $32.625 million and disgorgement of $31.617 million. As part of the agreement, the firm agreed to continue to cooperate with the DOJ in related investigations and prosecutions, as well as to enhance its compliance program. According to the DOJ, the resolution is based on factors including the firm’s cooperation in the investigation, as well as the fact that the company “did not voluntarily and timely disclose the conduct at issue.” The DOJ also found that the misconduct was “not pervasive throughout the firm or its subsidiary,” but rather that the bank was responsible for running the scheme, noting that the firm and its subsidiary earned less than one-tenth of the profits earned by the bank.
As FCPA Scorecard previously reported, the firm had announced the near completion of the agreement in a recent SEC filing.