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Financial Services Law Insights and Observations


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  • SFO fines shipping and logistics company over $1 million for bribery scheme

    Financial Crimes

    On June 3, the UK Serious Fraud Office (SFO) announced that it had fined a shipping and logistics company £850,000 (approximately $1.08 million) for bribes paid to secure contracts in Angola. The SFO started investigating the company in September 2014 and announced in July 2016 that it had charged the company and seven individuals with making corrupt payments. The company pleaded guilty in 2017. The SFO found that executives had bribed an agent of the Angolan state oil company to obtain $20 million worth of shipping contracts.

    Financial Crimes UK Serious Fraud Office Anti-Corruption Bribery

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  • Executive pleads guilty in oil company bribery case

    Financial Crimes

    On May 29, the DOJ announced that a dual U.S.-Venezuelan citizen pleaded guilty for his role in a bribery scheme involving oil and natural gas company officials. The citizen pleaded guilty in the Southern District of Texas to conspiracy to violate the FCPA, violating the FCPA, and failing to report foreign bank accounts. His sentencing is set for August 28.

    He controlled multiple U.S. and international companies that provided goods and services to the company. According to the DOJ, the U.S. 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. Prior FCPA Scorecard coverage is available here.

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

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  • OFAC issues Finding of Violation, no penalties, against bank for alleged Iranian sanctions violations

    Financial Crimes

    On May 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a Finding of Violation against a U.S. bank, acting as a trustee for a customer, for violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to the announcement, OFAC’s Finding of Violation was based on the fact that the bank processed at least 45 pension payments totaling over $11,000 to a U.S. citizen with a U.S. bank account, but who was residing in Iran. According to OFAC, the bank appears to have known that it was processing payments for the benefit of a person in Iran, not only because its internal system indicated that the individual’s address was located in Tehran, but also because the bank’s sanctions screening software produced an alert on each of the 45 payments. These alerts, however, were reviewed by compliance personnel who were not sanctions specialists instead of the bank’s central sanctions compliance unit. After learning of and reporting the issue to OFAC, the bank modified its review and reporting process to ensure that retirement payments are screened by the right screening platform and that sanctions alerts are handled through the appropriate process, including review by compliance specialists with expertise in sanctions.

    When issuing a Finding of Violation against the bank, as opposed to a civil money penalty, OFAC considered the fact that, among other things, (i) no managers or supervisors appear to have been aware of the conduct that led to the violations; (ii) the payments at issue may not have actually been transferred to Iran; (iii) the bank took remedial action in response to the violations; and (iv) the bank cooperated with OFAC by self-disclosing the alleged violations and agreeing to tolling the matter with extensions.

    Financial Crimes OFAC Iran Enforcement Sanctions Department of Treasury Of Interest to Non-US Persons

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  • FinCEN announces innovation hours program

    Financial Crimes

    On May 24, the Financial Crimes Enforcement Network (FinCEN) announced a new program that will provide opportunities for fintech/regulatory technology companies and financial institutions to showcase new and emerging innovative approaches for combating money laundering and terrorist financing and to demonstrate how other financial institutions could use similar technologies. The FinCEN Innovation Hours Program will accept meetings once per month, with primary consideration given to entities that are already operational. According to FinCEN, the program is part of a broader initiative introduced last year (previously covered by InfoBytes here and here) that encourages banks and credit unions to explore innovative approaches such as artificial intelligence, digital identity technologies, and internal financial intelligence units to combat illicit financial threats, as well as collaborative arrangements to share resources and enhance the effectiveness and efficiency of Bank Secrecy Act/anti-money laundering compliance programs.

    Financial Crimes FinCEN Of Interest to Non-US Persons Bank Secrecy Act Anti-Money Laundering Fintech

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  • Agency officials urge Congress to create central repository to combat money laundering

    Federal Issues

    On May 21, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Combating Illicit Financing By Anonymous Shell Companies Through the Collection of Beneficial Ownership Information.” The Committee heard from the same panel of witnesses who testified in November on the need for modernization of the Bank Secrecy Act/Anti-Money Laundering regime. (Covered by InfoBytes here.) Committee Chairman Mike Crapo opened the hearing by stressing the need to discuss ways in which beneficial ownership information collected in an effort to deter money laundering and terrorist financing through anonymous shell companies can be made more useful. Panelists from the Financial Crimes Enforcement Network, the FBI, and Office of the Comptroller of the Currency all emphasized the importance of creating a regime in which beneficial ownership is collected at the corporate formation stage and, for foreign entities, upon the time of registration with U.S. states to conduct business or upon establishing an account with a U.S. financial institution.

    Federal Issues Senate Banking Committee FinCEN Beneficial Ownership Financial Crimes Department of Treasury OCC FBI Of Interest to Non-US Persons Anti-Money Laundering Combating the Financing of Terrorism CDD Rule Hearing

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  • OCC highlights key banking risks

    Federal Issues

    On May 20, the OCC released its Semiannual Risk Perspective for Spring 2019, identifying and reiterating key risk areas that pose a threat to the safety and soundness of the U.S. federal banking system, focusing on the following risk areas: credit, operational, compliance, and interest rate. The OCC noted that rapid growth within the fintech and regulatory technology space impacts each of these risk areas, which the agency is monitoring closely in order to implement necessary actions to address concerns. Overall, although the OCC acknowledged that the health of the federal banking system remains strong, specific risk areas of concern include (i) the need to have in place appropriate risk management practices as well as methods for assessing “the quality and timeliness of credit risk identification, risk mitigation, and loan loss reserve methodology”; (ii) elevated operational risk as banks adapt to a changing and increasingly complex operating environment, including cybersecurity threats, fintech innovation, and a reliance on third-party providers; (iii) high compliance risk related to Bank Secrecy Act/anti-money laundering (BSA/AML), as well as challenges facing banks to “effectively manage money-laundering risks in a complex, dynamic global operating and regulatory environment”; and (iv) potential challenges to earnings due to interest rate risk and liquidity risk, which lead to increased difficulties when forecasting liability costs.

    Concerning BSA/AML risk, the OCC specifically noted that AML-related deficiencies “stem from three primary causes: inadequate customer due diligence and enhanced due diligence, insufficient customer risk identification, and ineffective processes related to suspicious activity monitoring and reporting, including the timeliness and accuracy of Suspicious Activity Report filings. Talent acquisition and staff retention to manage BSA/AML compliance programs and associated operations present ongoing challenges, particularly at smaller regional and community banks.” The report reminded banks that necessary training, quality assurance, independent testing, and control updates are expected to be implemented during the FY 2019 examination cycle as required under the Financial Crimes Enforcement Network’s customer due diligence rule (previously covered by InfoBytes here).

    “Innovation can enhance a bank’s ability to compete by introducing new ways to meet customer product and service needs, improve operating efficiencies, and increase revenue,” the OCC noted, but changing business models or offering new products and services can “elevate strategic risk when pursued without appropriate corporate governance and risk management.”

    Federal Issues OCC Fintech Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons Financial Crimes

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  • FinCEN renews GTOs covering 12 metropolitan areas; continued focus on AML risk in related shell companies

    Financial Crimes

    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.

    Financial Crimes Agency Rule-Making & Guidance FinCEN GTO Anti-Money Laundering Of Interest to Non-US Persons

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  • Supreme Court holds FCA relators have 10 years to bring nonintervened suit


    On May 13, the U.S. Supreme Court unanimously held that a relator has up to 10 years to bring a qui tam suit under the False Claims Act (FCA) whether or not the government intervenes in the suit. According to the opinion, in November 2013, a relator brought a suit against two defense contractors alleging they defrauded the U.S. Government by submitting false payment claims for security services in Iraq through early 2007. The relator claimed he told federal officials about the allegedly fraudulent conduct in November 2010, but the Government declined to intervene. The defendants moved to dismiss the action as barred by the six year statute of limitations under 31 U. S. C. §3730(b)(1), while the relator claimed the action was timely under §3730(b)(2)— which states that a FCA civil action may not be brought “more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed.” The district court dismissed the action, while the U.S. Court of Appeals for the 11th Circuit reversed the decision, concluding that §3730(b)(2) applies in “nonintervened actions, and the limitations period begins when the Government official responsible for acting knew or should have known the relevant facts.”

    Upon review, the Supreme Court rejected the defendants’ argument that the six year statute of limitations in §3731(b)(1) applies to all relator-initiated actions (whether the Government intervenes or not), while § 3731(b)(2) applies only to qui tam actions when the Government intervenes, arguing the interpretation is “at odds with fundamental rules of statutory interpretation.” Moreover, the Court concluded that the relator in a nonintervened suit is not “the official of the United States” whose knowledge triggers §3731(b)(2)’s three-year limitations period, as it was not what Congress intended, and a private relator is neither “appointed as an officer of the United States nor employed by the United States.”  

    Courts U.S. Supreme Court False Claims Act / FIRREA Whistleblower Financial Crimes

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  • Brazilian telecom settles World Cup ticket bribery charges for $4.125 million

    Financial Crimes

    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.”

    Financial Crimes SEC Of Interest to Non-US Persons

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  • Hawaii man sentenced to 30 months for bribery conspiracy

    Financial Crimes

    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.

    Financial Crimes Bribery FCPA Of Interest to Non-US Persons

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