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Federal banking agencies and FinCEN issue statement on risk-focused BSA/AML examinations
On July 22, the Federal Reserve Board, FDIC, NCUA, and the OCC along with the Financial Crimes Enforcement Network (FinCEN), released a joint statement to improve transparency of their risk-focused approach to Bank Secrecy Act/anti-money laundering (BSA/AML) supervision. The statement outlines common practices for assessing a bank’s risk profile, including (i) leveraging available information, including internal BSA/AML risk assessments, independent audits, and results from previous examinations; (ii) contacting banks between examinations or before finalizing the scope of an examination; and (iii) considering the bank’s ability to identify, measure, monitor, and control risks. Examiners will use the information from the risk assessments to scope and plan the examination, as well as to evaluate the adequacy of the bank’s BSA/AML compliance program. The statement notes that the extent of examination activities needed to evaluate a bank’s BSA/AML compliance program, “generally depends on a bank’s risk profile and the quality of its risk management processes.”
OFAC sanctions international network involved in procuring materials for Iranian nuclear program
On July 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13382 against an international network of seven entities and five individuals involved in the procurement of sensitive materials for sanctioned elements of Iran’s nuclear program. According to OFAC, the network—based in Iran, China, and Belgium—acted as a procurement network in order to acquire materials controlled by the Nuclear Suppliers Group (NSG), which were then used in facilities belonging to the Atomic Energy Organization of Iran. OFAC noted that while United Nations Security Council Resolution 2231 does permit certain NSG-controlled items to go to Iran, participants are required to receive advance, case-by-case approval, which the identified entities and individuals in this action did not receive. As a result of the sanctions, “all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated entities and individuals. Moreover, OFAC warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated entities and individuals, they may be subject to U.S. correspondent account or payable-through account sanctions which, if imposed, could restrict their access to the U.S. financial system.
OFAC sanctions four Venezuelan DGCIM officials
On July 19, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned four officials of Venezuela’s General Directorate of Military Counterintelligence (DGCIM). As previously covered by InfoBytes, the DGCIM was sanctioned by OFAC on July 11, pursuant to Executive Order (E.O.) 13850, for operating in the country’s defense and security sector. According to OFAC, the designations of the four individuals were pursuant to E.O. 13692, following the arrest, physical abuse, and death of a Venezuelan Navy Captain. As a result of the designations, all property and interests in property of the designated persons within U.S. jurisdiction must be blocked and reported to OFAC. OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with these individuals and entities.
OFAC sanctions four individuals for human rights violations in Iraq
On July 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two militia figures and two former Iraqi governors for alleged human rights abuses or corruption violations of the Global Magnitsky Human Rights Accountability Act. According to OFAC, the four individuals committed the corruption-and abuse-related actions “in areas where persecuted religious communities are struggling to recover from the horrors inflicted on them by ISIS.” As a result of the sanctions, all property and interests in property of the designated persons within U.S. jurisdiction must be blocked and reported to OFAC. OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with these individuals and entities.
OFAC sanctions senior member of Hizballah operation
On July 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against a senior Hizballah operative allegedly connected to the planning, coordination, and execution of terrorist attacks outside of Lebanon. According to OFAC, the action is part of the Treasury Department’s continued attempts to disrupt “the full range of Hizballah’s illicit financial and facilitation activities.” As a result of the sanctions, “all property and interests in property of this target that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated person. The designated individual is also subject to secondary sanctions pursuant to the Hizballah Financial Sanctions Regulations, which implement the Hizballah International Financing Prevention Act of 2015, and allow OFAC the authority to “prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution that knowingly facilitates a significant transaction for Hizballah, or a person acting on behalf of or at the direction of, or owned or controlled by, Hizballah.”
Hungarian subsidiary of multinational technology company settles FCPA claims
On July 22, the DOJ announced an $8.7 million settlement with the Hungarian subsidiary of an American multinational technology company to resolve allegations of bid-rigging and bribery in violation of the FCPA. The SEC simultaneously announced a related resolution with the parent technology company over the operations of subsidiaries in four countries, with the parent company paying an additional $16.5 million.
According to the DOJ announcement, between 2013 and 2015, executives and employees of the Hungarian subsidiary falsely represented to the parent company that discounts were necessary to finalize deals with resellers to sell company licenses to government customers; however, the savings were allegedly used for “corrupt purposes” in violation of the FCPA. The subsidiary entered into a non-prosecution agreement with DOJ, which noted that while the subsidiary did not voluntarily self-disclose the misconduct, it received credit for the company’s “substantial cooperation with the Department’s investigation and for taking extensive remedial measures.” Specifically, the subsidiary terminated four licensing partners and the company implemented an enhanced compliance system and internal controls to address corruption risks.
Jury acquits former metal industry supplier executives of U.K. SFO bribery charges
On July 16, a London jury acquitted three former metal industry supplier executives who had been charged with foreign bribery by the U.K. Serious Fraud Office (SFO). The SFO reportedly failed to prove that the former executives – a managing director, sales head, and project manager – had paid bribes to secure overseas contracts. The acquittal comes three years after the company entered into the SFO’s second-ever deferred prosecution agreement (DPA). The July 2016 DPA resolved, at a corporate level, some of the same bribery allegations that the executives faced at trial, and resulted in the company paying a £6.5 million fine. The company’s identity in the DPA was not publicly known until restrictions were lifted at the conclusion of the trial.
SEC defends whistleblower award delay in foreign bribery case
On July 11, the SEC responded to a petition asking the U.S. Court of Appeals for the District of Columbia to compel a whistleblower award determination from the agency. In April 2017, the “John Doe” petitioner had applied for an SEC whistleblower award, claiming that beginning in May 2011 and continuing for the next several years, he voluntarily provided original information to the Commission that led to the SEC and DOJ’s $519 million resolution of foreign bribery claims against a multinational pharmaceutical company (previously reported here). Under the SEC Whistleblower Program established by the Dodd-Frank Act, the petitioner could be eligible for up to 30% of that $519 million recovery. In April 2019, after the SEC still had not issued a preliminary determination in connection with his application, the petitioner sought relief in court. The petitioner argued that it was a “simple task” to evaluate his claim, and the agency’s two-year delay was “unreasonable.”
In its response, the SEC argued that the petitioner “greatly misapprehends the work, effort, and time involved in reviewing whistleblower claims,” “overlooks the substantial complexities involved in adjudicating claims regarding the matter,” and “ignores that the SEC is processing a voluminous number of other whistleblower applications that require the attention of the Commission in addition to his claim.”
For additional information about SEC whistleblower awards and procedures under the SEC Whistleblower Program, see the article published here by Buckley LLP attorneys.
Two businessmen and two former Venezuelan officials charged in bribery investigation
On June 24, two businessmen, Luis Alberto Chacin Haddad and Jesus Ramon Veroes, pleaded guilty in federal court in Miami to conspiracy to violate the FCPA. The charges relate to bribes paid to Venezuelan officials at a state-owned and state-run electricity company in an effort to obtain $60 million in contracts for their Florida-based businesses. Pursuant to their plea agreements, the businessmen will each forfeit at least $5.5 million in profits, as well as Miami-area real estate obtained with the ill-gotten gains. Sentencing is scheduled for September 4.
In addition, on June 27 the Venezuelan officials they allegedly bribed, Luis Alfredo Motta Dominguez (former minister of electrical energy in Venezuela and the head of the company) and Eustiquio Jose Lugo Gomez (former procurement director at the company), were charged by eight-count indictment in the Southern District of Florida. On the same day, the same officials were also sanctioned by OFAC. See related InfoBytes coverage here.
Two Ecuadorians charged with FCPA conspiracy related to oil company investigation
On May 9, pursuant to an indictment filed in federal court in Miami without announcement by DOJ, two Ecuadorian citizens were charged with conspiracy to violate FCPA, conspiracy to commit money laundering, and nine counts of money laundering. The indictment was first reported on July 1 by the Financial Times.
The charges against Armengol Alfonso Cevallos Diaz and Jose Melquiades Cisneros Alarcon, who both live in Florida, relate to the ongoing investigation and prosecution of bribery and money laundering at Ecuador’s state oil company. To date, the investigation has yielded four guilty pleas. One additional defendant has pleaded not guilty; his case is pending.
See prior FCPA Scorecard coverage here.