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Financial Services Law Insights and Observations


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  • Federal Regulators Enter Settlement Agreement with Former Chief Compliance Officer Following AML Program Investigation

    Financial Crimes

    On May 4, FinCEN and the U.S. Attorney’s Office for the Southern District of New York announced a $250,000 settlement with the former chief compliance officer of an international money transfer company over allegations that he failed to report suspicious activity and knowingly participated in the company’s failure to maintain an effective anti-money laundering program. The settlement resolves a lawsuit filed in December of 2014 against the defendant, in which the district court dismissed the defendant’s motion to dismiss, ruling that the Bank Secrecy Act’s (BSA) general civil penalty provision, § 5321(a)(1), could subject a partner, director, officer, or employee of a financial institution to civil penalties for violations of any provision of the BSA or its regulations, excluding the specifically excepted provisions, and that because § 5318(h) was not listed as one of those exceptions, “the plain language of the statute provides that a civil penalty may be imposed on corporate officers and employees like [the defendant], who was responsible for designing and overseeing [the company's] AML program.” U.S. Dep’t of Treasury v. Haider, No. 15-cv-01518, WL 107940 (Dist. Ct. Minn. Jan. 8, 2016). (See previous InfoBytes summary.) In the stipulation and order of settlement and dismissal, the defendant (i) accepted responsibility for failing to further investigate consumer fraud reports; (ii) is required to pay $250,000 to the Department of the Treasury; and (iii) is banned for three years from performing compliance functions for other U.S.-based money transmitters. Notably, in February 2016, the money transfer company agreed to pay $13 million to settle claims from 49 states and the District of Columbia over charges that it transferred money to third parties that were defrauding customers. As part of the company’s settlement, it was required to ensure its agents attend mandatory compliance training, enhance its comprehensive anti-fraud compliance program, and implement a hotline system for employees to report noncompliance.

    Financial Crimes Anti-Money Laundering Bank Secrecy Act FinCEN Courts State Attorney General

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  • Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges

    Financial Crimes

    A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies. 

    The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.

    The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former asset management executives with bribing government officials across Africa to secure mining deals, including in Guinea.

    Financial Crimes SEC Bribery Anti-Money Laundering

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  • OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List

    Agency Rule-Making & Guidance

    In April, OFAC announced implementation of three new sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designated Nationals (SDN) and Blocked Persons.

    Libya-Based ISIS Financial Facilitators / Algerian ISIS Supporter and Arms Trafficker. On April 13, OFAC imposed sanctions against certain Libyan and Algerian financial facilitators for their roles in assisting ISIS’s financial operations in Libya. The designations block the individuals, one of whom was designated as engaging in actions through weapon trafficking, from the global financial system, and further state that “all property and interests in property . . . subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with” the identified individuals.

    Syrian “Research Center” Accused of Developing Weapons. On April 24, OFAC announced it was taking action against 271 employees of a Syrian research center for “developing and producing non-conventional weapons and the means to deliver them.” The sanctions came as a reaction to the widely- reported April 4 sarin gas attack against civilians, and followed sanctions announced January 12 against 18 officials, five branches of the Syrian military, and associated entities for their participation in a chemical weapons program responsible for attacks in 2014 and 2015. The 271 named individuals are “designated for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services in support of, and having acted or purported to act for or on behalf of, directly or indirectly, the Government of Syria.” The new sanctions block U.S. persons from dealing with these employees.

    Foreign Narcotics Kingpin Sanctions. OFAC made additions to the Specially Designated Nationals (SDN) list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise deal in the property or interest in property of an entity or individual on the SDN list. Additions to the list include Foreign Narcotics Kingpin Sanctions Regulations against two Mexican entities, and Global Terrorism Sanctions Regulations against a Saudi individual.

    Agency Rule-Making & Guidance Financial Crimes OFAC Sanctions

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  • House Financial Services Subcommittee Explores Ways to Safeguard Financial System from Terrorist Financing

    Financial Crimes

    On April 27, the Financial Services Subcommittee on Terrorism and Illicit Finance held a hearing entitled Safeguarding the Financial System from Terrorist Financing to examine information sharing and data collection practices at the Financial Crimes Enforcement Network (FinCEN) and assess how the process could be improved. According to a Committee memorandum released in advance of the hearing, the hearing was also called for the purposes of considering whether to amend the Bank Secrecy Act and USA PATRIOT Act to improve FinCEN’s effectiveness in disrupting terrorist financing and money laundering.

    Jamal El-Hindi, the Acting Director of the Financial Crimes Enforcement Network (FinCEN) at the Department of the Treasury, was the only witness. For just over an hour, the Acting Director offered testimony and answered questions concerning, among other things, the collection, analysis and dissemination of Bank Secrecy Act data and information sharing between the public and private sectors. Mr. El-Hindi also discussed several new and evolving money laundering and terrorist financing challenges, including potential money laundering vulnerabilities associated with “all cash” real estate transactions, virtual currency, and cybersecurity.

    In a statement delivered by Rep. Maxin Waters (D-CA), the Ranking Member of the Committee on Financial Services, the Congresswoman noted, among other things, that “high-end U.S. real estate is a key sector used by corrupt foreign leaders, drug traffickers and other criminals to launder illicit money.”  The Ranking Member explained further that she “find[s] it disturbing that FinCEN continues to largely exempt the real-estate sector from even the most basic anti-money laundering requirements,” and urged the regulator to “take more urgent action to address these risks nationwide and on a permanent basis.”

    A video recording of the hearing may be accessed here.

    Financial Crimes Anti-Money Laundering Bank Secrecy Act FinCEN

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  • Upon Review, NYDFS Requires International Bank to Continue Independent Monitoring

    State Issues

    On April 21, the New York Department of Financial Services (NYDFS) announced it had entered into a supplemental consent order with an international bank to modify its 2012 and 2014 consent orders. In 2012, the bank agreed to engage an independent on-site monitor for 24 months to evaluate the New York branch’s BSA/AML and OFAC compliance programs and operations. The bank was also issued a $340 million civil money penalty. The 2014 consent order outlined the monitor’s findings including reports of significant failures in the bank’s transaction monitoring. The 2014 order extended the engagement of the monitor for another two years, outlined remedial measures to address continued deficiencies, and required the bank to pay an additional $300 million civil money penalty.

    While NYDFS acknowledged in the 2017 supplemental consent order that the bank has made significant improvements in its BSA/AML compliance program, the engagement of the monitor has been extended until December 31, 2018 with all the other terms and conditions of the 2012 and 2014 consent orders remaining in full effect.

    State Issues Financial Crimes Anti-Money Laundering Bank Secrecy Act OFAC

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  • Two Telecom Executives Pay FCPA Penalties

    Financial Crimes

    Two former executives of a Hungarian telecommunications company recently agreed to settle their FCPA claims with the SEC and pay related penalties, along with five-year bars against serving as an officer or director of any SEC-registered public company. The company’s former CEO agreed to pay a $250,000 penalty, while its former Chief Strategy Officer agreed to pay a $150,000 penalty. The settlements are still subject to court approval.

    The SEC’s case against these individuals was heading to trial this month prior to this week’s settlement. The SEC’s complaint alleged that these individuals used sham contracts to funnel millions of dollars in bribes to foreign officials in Macedonia and Montenegro to win contracts and, importantly, block out competitors including U.S.-traded telecoms. This action was related to similar claims previously brought against the company and its majority owner, who settled civil and criminal FCPA charges in December 2011 for $95 million. In February 2017, another former executive settled FCPA charges, agreeing to pay a $60,000 penalty without admitting or denying the charges.

    These settlements underscore the FCPA’s broad territorial and jurisdictional reach, which can encompass transactions that facially do not even involve U.S. companies. As the SEC’s Stephanie Avakian noted, these individuals were ultimately charged because they “spearhead[ed] secret agreements with a prime minister and others to block out telecom competitors,” and “[the SEC] persevered in order to hold these overseas executives culpable for corrupting a company that traded in the U.S. market”.

    Financial Crimes SEC FCPA

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  • Senators Introduce Combating Global Corruption Act of 2017

    Financial Crimes

    Senator Ben Cardin and Republican co-sponsors recently introduced a bill titled the “Combating Global Corruption Act of 2017,” which seeks “to identify and combat corruption in countries, to establish a tiered system of countries with respect to levels of corruption by their governments and their efforts to combat such corruption, and to assess United States assistance to designated countries in order to advance anti-corruption efforts in those countries and better serve United States taxpayers.”

    This bill, if enacted, would require the Secretary of State to publish annual rankings of foreign countries split up into three tiers that depend on whether those countries’ governments comply with “minimum standards for the elimination of corruption.” The introduced bill defines corruption as “the exercise of public power for private gain, including by bribery, nepotism, fraud, or embezzlement.”

    Once a country’s tier-rank is established, the bill would then require the Secretary of State, Administrator of USAID, and the Secretary of Defense to take various steps, including the creation of a “corruption risk assessment” and “corruption mitigation strategy” for U.S. foreign assistance programs; fortified anti-corruption and clawback provisions in contracts, grants and other agreements; disclosure of beneficial ownership for contractors and other participants; and mechanisms to investigate misappropriated funds.

    If passed into law, this bill would create substantial new enforcement powers to combat international corruption activities. And, unlike the current ambiguity under the FCPA regarding its applicability to state-owned or state-controlled enterprises (“SOEs”), as drafted, this bill expressly would cover SOEs. Like the FCPA, however, this bill also contains a broad national security waiver component, if the Secretary of State “certifies to the appropriate congressional committees that such waiver is important to the national security interest of the United States.”

    Financial Crimes Anti-Corruption FCPA Bribery Fraud

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  • DOJ Voices Continued Support for Robust FCPA Enforcement

    Financial Crimes

    On April 24, 2017, in a speech at the Ethics and Compliance Initiative Annual Conference in Washington, D.C., Attorney General Jeff Sessions appeared to commit to the continued aggressive enforcement of the FCPA. He noted that bribery "increases the cost of doing business and hurts honest companies that don’t pay these bribes,” and he explained that the Trump administration’s DOJ will enforce laws that protect honest businesses: “One area where this is critical is enforcement of the Foreign Corrupt Practices Act (FCPA). Congress enacted this law 40 years ago, when some companies considered it a routine expense to bribe foreign officials in order to gain business advantages abroad.” AG Sessions also emphasized that individuals, not just companies, may face increased FCPA focus.

    These remarks come on the heels of comments from another senior DOJ official who recently noted that robust FCPA enforcement will continue. As previously reported, Trevor McFadden, the DOJ’s Criminal Division's Acting Principal Deputy Assistant Attorney General, noted that the DOJ remains "intent on creating an even playing field for honest businesses."

    These remarks suggest that the DOJ will remain active in enforcing FCPA compliance issues, despite comments from then-candidate Trump that FCPA enforcement may be scaled back under his watch.

    Financial Crimes DOJ FCPA

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  • DOJ’s Trevor McFadden Addresses Anti-Corruption, Export Controls & Sanctions Compliance Summit

    Financial Crimes

    On April 18, Acting Principal Deputy Assistant Attorney General Trevor McFadden spoke at the 10th annual Anti-Corruption, Export Controls & Sanctions Compliance Summit in Washington, D.C. According to Mr. McFadden, the Justice Department “remains committed to enforcing the FCPA and to prosecuting fraud and corruption more generally.” He emphasized the importance of company cooperation, stating that that the department considers voluntary self-disclosures and remedial efforts when making charging decisions. Mr. McFadden also stated that the department is making a “concerted effort to move corporate investigations expeditiously,” adding that FCPA investigations should be “measured in months, not years.”

    Mr. McFadden also discussed an increased prioritization of anti-corruption prosecutions around the world and stated that the DOJ will “seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies that want to accept responsibility for misconduct are not unfairly penalized by multiple agencies.”

    Additionally, the department is assessing its FCPA Pilot Program. Last year, as part of the Program, the department began publishing information on cases it declined to prosecute due to voluntary self-disclosure, full cooperation, and comprehensive remediation. Mr. McFadden stated that the Program is “one example of an effort to provide more transparency and consistency for our corporate resolutions” and “will continue in full force.”

    Financial Crimes DOJ Anti-Corruption Export Controls Sanctions FCPA Pilot Program

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  • South Korea’s Former President Formally Indicted on Corruption Charges

    Financial Crimes

    On April 17, the former South Korean president was formally indicted on 18 charges of corruption including bribery, extortion, abuse of power, and leaking state secrets. The former president was impeached in December after months of public protests. Last month, she was removed from office and arrested.

    The corruption scandal has also implicated the former president’s longtime confidante, who is currently on trial on corruption charges. The pair is accused of coercing Korean businesses into donating $68 million to two non-profit foundations that the former president’s confidante controlled. They are both also accused of collecting or demanding $52 million in bribes from businesses, including $38 million from a Korean multinational conglomerate, $6.2 million from a retail conglomerate, and $7.8 million from a telecommunications and semiconductor conglomerate. The chairman of the retail conglomerate, was indicted on bribery charges on Monday.

    Financial Crimes FCPA Anti-Corruption Bribery

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