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Japanese bank pays $33 million to settle NYDFS claims of weak BSA/AML controls
On June 24, the New York Department of Financial Services (NYDFS), together with the New York Attorney General, announced a $33 million settlement with a Japanese bank resolving allegations the bank’s internal controls—specifically, its anti-money laundering (AML), Bank Secrecy Act (BSA), and Office of Foreign Assets Control (OFAC) sanctions compliance programs—at its New York Branch were “systematically deficient” between November 2014 and November 2018. This allegedly resulted in violations of state and federal laws and regulations, as well as two previous NYDFS consent orders from 2013 and 2014. The settlement resolves an action that was commenced by the bank against NYDFS in connection with a 2017 application with the OCC to convert its state-licensed branches in New York, Illinois, and California and its state-licensed agency offices in Texas to federally licensed branches and agency offices. The action sought to block a NYDFS order that would keep the bank under its supervisory purview notwithstanding the OCC’s granting of the federal charter. The settlement indicates that neither NYDFS, NYAG, or the bank admit any wrongdoing, but have agreed to dismiss all outstanding claims, upon the bank’s monetary payment. The settlement states that NYDFS releases the bank of any further obligations related to the previous consent orders and notes that it “will not attempt to exercise any visitorial power or other supervisory, regulatory, or enforcement authority over [the bank] or its branches or agencies.”
Multinational retailer settles FCPA claims by DOJ and SEC for $282 million
On June 20, the DOJ announced a $137 million settlement with a U.S.-based multinational retailer (the Retailer) and its wholly owned Brazilian subsidiary (the Subsidiary) to resolve claims they violated the FCPA. The Retailer entered into a non-prosecution agreement, while the Subsidiary pleaded guilty. On the same day, the SEC issued an administrative order requiring the Retailer to pay $144 million in disgorgement and interest. The SEC stated that the Retailer failed to “operate a sufficient anti-corruption compliance program for more than a decade as the retailer experienced rapid international growth.” In total, the Retailer will pay more than $282 million to settle the charges.
According to the DOJ announcement, from 2001 to 2011, the Retailer failed to implement and maintain internal accounting controls related to anti-corruption, and senior officials were aware of the failures. The failures allegedly allowed the Retailer’s foreign subsidiaries in Mexico, India, Brazil and China to hire third-party intermediaries (TPIs) “without establishing sufficient controls to prevent those TPIs from making improper payments to government officials in order to obtain store permits and licenses,” which, in turn, allowed the foreign subsidiaries to open stores faster, earning the company additional profits. In its non-prosecution agreement with the DOJ, in addition to the monetary penalty, the Retailer agreed to: (i) appoint an independent compliance monitor for a two-year term; and (ii) continue to cooperate with the DOJ’s investigation. The monetary penalty amount was calculated by reducing by 25 percent the bottom of the U.S. Sentencing Guidelines fine range for the portion of the penalty applicable to conduct in Brazil, China, and India, and reducing by 20 percent the bottom of the U.S. Sentencing Guidelines fine range for the portion of the penalty applicable to conduct in Mexico.
OFAC targets Russian facilitators of illicit North Korean transactions
On June 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction a Russian financial entity, pursuant to Executive Order 13382, for allegedly “having provided, or attempted to provide, financial, material, technological, or other support for, or goods or services” on behalf of an entity that is owned and controlled by North Korea’s primary foreign exchange bank. According to OFAC, since at least 2017 and continuing through 2018, the Russian entity has provided multiple accounts to the North Korean entity, which has “enabled North Korea to circumvent U.S. and UN sanctions to gain access to the global financial system in order to generate revenue for the Kim regime’s nuclear program.” Pursuant to OFAC’s 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 entity and two individuals for trafficking weapons to IRGC-QF and facilitating sanctions evasion
On June 12, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on a resource trading company and its two Iraqi associates, for trafficking “hundreds of millions of dollars’ worth of weapons” to the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and facilitating access to the Iraqi financial system to evade sanctions.
According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations.” As a result, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that persons who engage in transactions with the designated individuals and entities may be exposed to sanctions themselves or subject to enforcement action. Moreover, OFAC warned foreign financial institutions that, unless an exemption applies, they may be subject to U.S. sanctions if they knowingly facilitate significant transactions for any of the designed individuals or entities.
OFAC adds Syrian developer and related businesses to Specially Designated Nationals List
On June 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Orders (E.O.) 13573 and 13582. OFAC’s additions to the list include 13 entities and three individuals associated with an international network benefiting the Assad regime in Syria. According to OFAC, a Syrian business developer and his associated businesses have “leveraged the atrocities of the Syrian conflict into a profit-generating enterprise.” As a result, “all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.”
See here for continuing InfoBytes coverage of actions related to Syria.
OFAC settles with global money services business for alleged sanctions violations
On June 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced an approximately $400,000 settlement with a global money services business for alleged violations of the Global Terrorism Sanctions Regulations (GTSR). The settlement resolves potential civil liability for the money services business' processing of certain transactions totaling roughly $1.275 million. According to OFAC, the transactions were paid out to third-party, non-designated beneficiaries who collected their remittances from a company in Gambia that OFAC designated pursuant to the GTSR in December 2010. Notwithstanding this designation, the money services business continued processing payments to the company until March 2015. In arriving at the settlement amount, OFAC considered various mitigating factors, including the fact that the money services business voluntarily self-disclosed the issue to OFAC. OFAC also considered various aggravating factors, including that the money services business could have identified that the company was a sanctions target with the exercise of reasonable due diligence.
OFAC sanctions Iran’s largest petrochemical holding group for funding IRGC
On June 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Iran’s largest petrochemical holding group for providing financial support to the Islamic Revolutionary Guard Corps (IRGC), an entity targeted for sanctions under OFAC’s Iran-related sanctions. In addition, OFAC designated the holding group’s network of 39 subsidiary petrochemical companies and foreign-based sales agents. According to OFAC, profits derived from the holding group’s activities “support the IRGC’s full range of nefarious activities, including the proliferation of weapons of mass destruction . . . and their means of delivery, support for terrorism, and a variety of human rights abuses, at home and abroad.”
As a result, all property and interests in property belonging to the identified entities subject to U.S. jurisdiction are blocked and must be reported to OFAC, and U.S. persons are generally prohibited from transacting with them. Moreover, OFAC warned foreign financial institutions that 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—if they knowingly facilitate significant transactions for any of the designated entities. OFAC further issued a reminder that as of November 5, 2018, purchasing, acquiring, selling, transporting, or marketing petrochemical products from Iran is sanctionable under OFAC’s sanctions against Iran (covered by InfoBytes here).
Visit here for additional InfoBytes coverage of actions related to Iran.
OFAC amends three Venezuela-related General Licenses
On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended three General Licenses (GL), (i) GL 7B, which supersedes GL 7A; (ii) GL 8A, which supersedes GL 8; and (iii) GL 13A, which supersedes GL 13, to clarify that these general licenses do not authorize transactions or dealings related to the exportation or re-exportation of diluents, directly or indirectly, to Venezuela. Additionally, OFAC is issuing corresponding FAQ 672 to provide further guidance with respect to restrictions regarding diluents.
Visit here for additional InfoBytes coverage of actions related to Venezuela.
SFO fines shipping and logistics company over $1 million for bribery scheme
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.
Executive pleads guilty in oil company bribery case
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.