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  • DOJ Pilot Program Extended to Provide Adequate Time for Evaluation

    Financial Crimes

    Speaking at the American Bar Association’s National Institute on White Collar Crime yesterday, U.S. Department of Justice official Kenneth Blanco reportedly announced that the Justice Department’s FCPA pilot program encouraging corporate cooperation will not end on April 5 of this year as originally announced.  Instead, until the Justice Department is able to render a final decision based on a complete evaluation, the program will remain in force.  Notably, as previously reported, the new Deputy Assistant Attorney General with oversight over the Fraud Section, Trevor N. McFadden, co-authored an article during his time in the private sector praising the program as “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”

    Financial Crimes DOJ FCPA Pilot Program

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  • New Survey Reports on Corruption in the Asia Pacific Region

    Financial Crimes

    A German nonprofit that tracks global corruption and perceptions of corruption, has published People and Corruption: Asia Pacific – Global Corruption Barometer. In what the organization calls “the most extensive survey of its kind,” the group spent a year and a half interviewing over 21,000 people living in the Asia Pacific region as a litmus test for corruption in the area.  The 38-page report found considerable differences in bribery rates between surveyed countries; for example, while Japan weighed in at 0.2%, a staggering 69% of people surveyed in India indicated they had paid a bribe in the past year in exchange for public services.  People across the surveyed region agreed that police were the most corrupt part of public services.  While Australians expressed the “most positive” outlook on corruption, people in Malaysia and Vietnam felt the least positive overall, and people in China “were most likely to think the level of corruption had increased recently.”  The report outlines three key recommendations, encouraging governments to “make good on promises,” “stop[] bribery in public services,” and “encourag[e] more people to report corruption.” 

    Financial Crimes FCPA Anti-Corruption

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  • New DOJ Appointee Expresses Commitment to Enforcing the FCPA

    Financial Crimes

    In late January of 2017, President Donald Trump appointed Trevor N. McFadden as Deputy Assistant Attorney General in the U.S. Department of Justice Criminal Division, a position that includes oversight over the Fraud and Criminal Appellate Sections.  The Fraud Section is in charge of enforcing the FCPA, placing the former law firm Litigation and Government Enforcement partner, who also served as an Assistant U.S. Attorney and Counsel to the Deputy Attorney General, in a key role to determine the future of FCPA enforcement under the new administration.  On February 16, 2017, McFadden gave a speech at the Global Investigations Review Conference in which he proclaimed his dedication to the continued enforcement of the statute.  While McFadden’s comments reflect Attorney General Jeff Sessions’ recent promise to enforce the FCPA, they contrast with President Trump’s 2012 comments that the FCPA is a “horrible law” that “should be changed.”

    Above all, McFadden’s message was one of enforcement, enforcement, enforcement.  He commented that the law “has been vigorously enforced” over its 40-year history, efforts which have “steadily increased over time.”  McFadden specifically highlighted two important trends of this history of enforcement: transparency to businesses, and cooperation with foreign nations in the fight against corruption.  McFadden’s emphasis on the “utmost importance” of working with other countries also signaled a continued commitment to what he called “important anti-corruption conventions,” including “the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (NCAC), the Convention on Transnational Organized Crime (UNTOC), and several others.” 

    In looking to the future of FCPA enforcement, McFadden called the law’s continued “fight against official corruption [] a solemn duty of the Justice Department…regardless of party affiliation.”  He also emphasized that the Justice Department will continue to prioritize “individual accountability,” although he did comment that some people “may be unwittingly involved in facilitating an illegal payment under circumstances that do not merit criminal prosecution of the individual.”  Finally, McFadden expressed that a company’s “voluntary self-disclosures, cooperation, and remedial efforts” will “continue to guide our prosecutorial discretion determinations,” along with the “penalty reductions for companies that self-disclose, cooperate, and accept responsibility for their misconduct” provided for in the U.S. Sentencing Guidelines.  Interestingly, the only whiff of questioning past Justice Department approaches was McFadden’s mention of an upcoming review of the FCPA pilot program encouraging such company cooperation.  However, plans to re-evaluate the pilot program were already in place under the Obama administration, according to an article McFadden co-wrote with colleagues at his proir law firm in April of 2016.  Notably, McFadden’s article called the pilot program “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”

    Financial Crimes Trump FCPA

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  • Second Circuit Hears Oral Arguments on Accomplice Theory of Liability Under FCPA

    Financial Crimes

    On March 2, 2017, a three judge panel for the United States Court of Appeals for the Second Circuit heard oral arguments in U.S. v. Hoskins.  The government charged U.K. citizen with FCPA violations as part of a larger scheme involving a U.S. subsidiary of a French company.  The citizen, a non-resident foreign national who did not act on U.S. soil and who was an executive of a non-U.S. company, argued in federal district court that Congress did not intend for people like him to be subject to direct FCPA liability, and that the government cannot circumvent Congressional intent by charging him with accomplice liability.  In August of 2015, the federal district court in Connecticut ruled in the citizen’s favor, holding that the government would first have to show that the citizen was subject to direct liability as an agent of a U.S. concern in order to reach accomplice liability.  The legal issues at hand are detailed in previous FCPA Scorecard posts here and here

    In addition to the important question of the scope of liability of foreign nationals under the FCPA, this argument has a secondary importance related to the right of the government to appeal criminal matters under Title 18 U.S.C. § 3731.  Section 3731 allows the government to appeal “from a decision, judgment, or order of a district court dismissing an indictment or information or granting a new trial after verdict or judgment, as to any one or more counts, or any part thereof….”  Here, the citizen argues that the court did not dismiss any counts, so the government had no right to make the interlocutory appeal.  For its part, the government argues that the court’s ruling was effectively a dismissal of a portion of a count, making the matter appealable. 

    In ruling on the case, the Second Circuit will have the potential to expand or limit both the reach of the FCPA, and the power of the federal government to bring interlocutory appeals when a trial court rules against it in a criminal matter. 

    An mp3 of the oral arguments may be downloaded here.

    Financial Crimes FCPA

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  • OFAC Reaches $1.192 Billion Resolution with Chinese Telecommunication Equipment Corporation

    Financial Crimes

    On March 7, the Treasury’s Office of Foreign Asset Control (OFAC) announced a combined $1.192 billion resolution with other federal agencies against a Chinese telecommunications equipment corporation and its subsidiaries and affiliates to settle alleged violations of the Iranian Transactions and Sanctions Regulations. The resolution is pending approval of the company’s criminal plea in federal court. OFAC’s settlement agreement  resolves its investigation into the company’s practice of “utilizing third-party companies to surreptitiously supply Iran with a substantial volume of U.S.-origin goods, including controlled goods appearing on the Commerce Control List.” As noted by Steven T. Mnuchin, Secretary of the Treasury, this “settlement is OFAC’s largest ever against a non-financial entity and sends a powerful message that Treasury will aggressively pursue any company that willfully violates U.S. economic sanctions laws and obstructs federal investigations of such violations.”

    In addition to the monetary penalty, the company must maintain policies and procedures designed to minimize future risk of violations of U.S. economic sanctions and export control violations.

    Financial Crimes Sanctions OFAC

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  • FTC Reaches $9 Million Settlement with Nationwide Debt Relief Company

    Financial Crimes

    On March 7, the FTC announced that it had reached a settlement with a debt relief company and its principals over allegations that they mislead consumers and charged illegal advance fees. The FTC claimed that the defendants sent direct mail ads that looked like official attorney or bank documents and exaggerated the amount of money consumers would save and the time it would take them to become debt free. In violation of the FTC’s Telemarketing Sales Rule, the defendants also allegedly charged advance fees before negotiating savings on credit card debts. The stipulated order requires the defendants to pay $9 million (to be partially suspended upon payment of $510,000), a figure that represents the amount of alleged harm to consumers. The defendants are also banned from “making misrepresentations about debt relief and other financial products or services, and making unsubstantiated claims about any products or services.”

    Financial Crimes FTC Telemarketing Sales Rule Debt Relief

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  • Financial Services Institution Discloses SEC FCPA Investigation into Hiring Practices

    Financial Crimes

    On February 24, a major financial services institution disclosed in its 10-K that government and regulatory agencies, including the SEC, are conducting investigations concerning potential violations of the FCPA related to hiring of candidates referred by or related to foreign government officials.  The institution stated that it was cooperating with the investigations.

    This is not the first FCPA-related investigation of a company’s hiring practices.  As previously reported here in November 2016, a global financial company and a Hong Kong subsidiary agreed to pay approximately $264 million to the DOJ, SEC, and the Federal Reserve, ending a nearly three year, multi-agency investigation of the subsidiary’s referral program through which the children of influential Chinese officials were allegedly given prestigious and lucrative jobs as a quid pro quo to retain and obtain business in Asia.  Similarly, as reported here, in August 2015, the SEC announced a settlement with a multinational financial services company over allegations that the company violated the FCPA by giving internships to family members of government officials working at a Middle Eastern sovereign wealth fund in hopes of retaining or gaining more business from that fund. The company paid $14.8 million to settle the charges. 

    Nor are the inquiries confined to financial services companies.  For example, the SEC announced in March 2016 that it settled charges with the San Diego-based mobile chip maker.  The company agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist the company in obtaining or retaining business in China.

    Financial Crimes DOJ FCPA Federal Reserve SEC

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  • Claims Management Company Reports Conclusion of SEC FCPA Investigation

    Financial Crimes

    As previously covered here, an Atlanta-based claims management firm, disclosed in November 2015 that it self-reported possible FCPA violations to the DOJ and SEC.  These potential violations were identified during an internal audit.  On February 27, 2017, the firm announced that it had received notice that the SEC “concluded its investigation and did not intend to recommend an enforcement action” related to this matter.   The company did not reference the DOJ in its announcement.

    Financial Crimes DOJ FCPA SEC

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  • FinCEN and OCC Penalize CA Bank for BSA/AML Violations

    Financial Crimes

    On February 27, the Financial Crimes Enforcement Network (FinCEN) announced that it had assessed a $7 million civil money penalty against a bank specializing in providing services for check-cashers and money transmitters, for alleged “willful violations” of several Bank Secrecy Act provisions. The OCC also identified deficiencies in the bank’s practices and assessed a $1 million civil money penalty for “violations of previous consent orders entered into by [the bank].” As noted in the release, the bank’s payment of the $1 million OCC penalty will go towards satisfying the FinCEN penalty. According to FinCEN, the bank allegedly failed to (i) “establish and implement an adequate anti-money laundering program;” (ii) “conduct required due diligence on its foreign correspondent accounts;” and (iii) “detect and report suspicious activity.” Furthermore, FinCEN claims $192 million in high-risk wire transfers were processed through some of these accounts.

    Financial Crimes Courts Anti-Money Laundering Bank Secrecy Act FinCEN OCC

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  • BAFT Issues Comments on Proposed AML/CFT Guidance Revisions

    Financial Crimes

    On February 22, the Bankers Association for Finance and Trade (BAFT), an international financial services association for organizations engaged in international transaction banking, together with the Institute of International Finance (IIF) issued a letter to the Basel Committee on Banking Supervision (BCBS) with comments on BCBS’ proposed revisions to its risk management guidance related to anti-money laundering and counter-terrorism financing. In the letter, BAFT and IFF note that, while both associations are “particularly pleased with [BCBS’] recognition that not all correspondent banking relationships bear the same level of risk and [BCBS’] acknowledgment of the difference between inherent and residual risk,” they do summarize several areas where enhancements would assist with the “general usefulness” of the final guidance:

    • BCBS should “design guidance that explicitly permits a correspondent bank to rely upon appropriate utilities for the vast majority of cases rather than simply permitting a correspondent bank to use a utility as another source of information supporting the due diligence process” with the purpose of “establishing international standards or sound practices for such utilities to create greater assurance of achieving official ALM/CFT goals.”
    • BCBS should adopt “regulatory practices [that] include standards for ‘verification’ that national authorities could administer or supervise.”

    The “[s]tandardization of information requirements (or templates) for utilities could also be extended to include [the] international standardization of basic due diligence information and ‘enhanced due diligence’ information for higher-risk relationships.” A “basic standardization would give both parties a ground of expectations to build upon in making judgments about how to do business. It could [also] eliminate a degree of unnecessary duplication of effort and costs.”

    Financial Crimes Agency Rule-Making & Guidance International BAFT BCBS IIF Risk Management Anti-Money Laundering Combating the Financing of Terrorism

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