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  • 9th Circuit issues opinion in Wadler, remands for possible new trial

    Financial Crimes

    On February 26, 2019, the Ninth Circuit issued a long-awaited opinion in a case involving a life sciences manufacturing company and its former General Counsel. The 23-page opinion, slated for publication, takes a mixed view of the trial outcome, vacating in part, affirming in part, and remanding for the district court to determine whether to hold a new trial.

    Two years ago, following a $55 million civil and criminal FCPA settlement by the company, a jury awarded Wadler (the company’s former General Counsel) $11 million in punitive and compensatory damages, including double back-pay under Dodd-Frank, in his whistleblower retaliation case against his former employer. The company appealed to the Ninth Circuit, arguing that the district court erroneously instructed the jury that SEC rules or regulations prohibit bribery of a foreign official; that the company’s alleged FCPA violations resulted from Wadler’s own failure to conduct due diligence as the company’s General Counsel; that the district court should have allowed certain impeachment testimony and evidence related to Wadler’s pursuit and hiring of a whistleblower attorney; and that Wadler was not a “whistleblower” under Dodd-Frank because he only reported internally and did not report out to the SEC. The Court heard arguments on November 14, 2018. 

    Section 806 of the Sarbanes-Oxley Act, codified as 18 U.S.C. § 1514A, protects whistleblowers from retaliation under certain circumstances, including reporting violations of “any rule or regulation of the Securities and Exchange Commission.” The company alleged, and the Ninth Circuit agreed, that the district court’s jury instructions incorrectly stated that Section 806 encompasses reports of FCPA violations. The Court ruled that “statutory provisions of the FCPA, including the three books-and-records provisions and anti-bribery provision . . . are not ‘rules or regulations of the SEC’ under SOX § 806.” However, the Court found that with the right instructions, a jury could have still ruled in Wadler’s favor. Accordingly, the Court vacated the Section 806 verdict and remanded to the district court for consideration of a new trial. On the other hand, the Court held that the same jury instruction error was harmless for the purposes of Wadler’s California public policy claim, so the Court upheld that verdict and its associated damages. The Court also rejected the company’s claims of evidentiary error. Finally, the Court ruled that under another case involving a real estate investment company and its former executive, Dodd-Frank does not apply to people who only report misconduct internally, and vacated the Dodd-Frank claim. As for damages, the Ninth Circuit affirmed Wadler’s compensatory and punitive damages award but vacated the double back-pay associated with the Dodd-Frank claim. 

    This decision is likely the first circuit court opinion to cite the case in an FCPA case for its holding that individuals who only report violations internally do not hold “whistleblower” status under Dodd-Frank.

    For prior coverage of the matter, please see herehere, and here.

    Financial Crimes FCPA Whistleblower SEC Dodd-Frank Sarbanes-Oxley Ninth Circuit

  • DOJ amends its FCPA Corporate Enforcement Policy, softens disappearing messaging ban

    Financial Crimes

    In March 2019, the DOJ amended its FCPA Corporate Enforcement Policy, including to clarify the agency’s position on the use of ephemeral messaging apps by companies seeking full cooperation credit under the policy. Ephemeral messaging apps such as Signal, WhatsApp, and Telegram, now common in many workplaces, allow users to send messages that may not be preserved and retrievable later in the same way as e-mails. To the DOJ, the impermanence of ephemeral messaging makes uncovering details about past events more difficult. Prior to the amendments, the DOJ’s initial Corporate Enforcement Policy had indicated that full cooperation credit would not be available to companies which allowed employees to use “software that generates but does not appropriately retain business records or communications.” 

    The updated policy softens this position and specifically addresses ephemeral messaging platforms.  Companies using the platforms may now be eligible for full cooperation credit, provided that they “implement[] appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company’s ability to appropriately retain business records or communications or otherwise comply with the company’s document retention policies or legal obligations.” While the amendment may allow companies to take advantage of the beneficial aspects of ephemeral messaging, it also begs new questions as to what constitutes “appropriate” guidance and controls.

    The March 2019 amendments also provide additional clarification on de-confliction; add a new comment explaining how the DOJ will implement a presumption of a declination in cases where a company involved in a merger or acquisition “uncovers misconduct through thorough and timely due diligence . . . and voluntarily self-discloses,” with the potential for a declination for the acquiring company even where there are aggravating circumstances regarding the acquired company; and enlarge the voluntary self-disclosure of individuals category to include information not just about “all individuals involved in the violation,” but “all individuals substantially involved in or responsible for the violation.”

    In his March 8, remarks to the American Bar Association’s National Institute on White Collar Crime, Assistant Attorney General Brian A. Benczkowski referenced the updates and emphasized the importance of reviewing the 12 previous case declinations made under the policy as supplemental guidance in understanding the policy. 

     

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

  • OFAC sanctions Russians for aggression against Ukraine

    Financial Crimes

    On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction six Russian individuals and eight entities, pursuant to Executive Order 13661, for “playing a role in Russia’s unjustified attacks on Ukrainian naval vessels in the Kerch Strait, the purported annexation of Crimea, and backing of illegitimate separatist government elections in eastern Ukraine.” The action complements sanctions imposed the same day by the European Union and Canada as part of a coordinated effort “to counter Russia’s continued destabilizing behavior and malign activities.” As a result, all property and interests in property of the sanctioned individuals and entities, as well as any entities owned 50 percent or more by them, are blocked and U.S. persons are generally prohibited from entering into transactions with them.

    Visit here for continuing InfoBytes cover of actions related to Russia and Ukraine.

    Financial Crimes Ukraine Sanctions Russia OFAC Department of Treasury

  • OFAC identifies non-U.S. financial institutions on new list of banks facing correspondent account sanctions

    Financial Crimes

    On March 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the introduction of the List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA list). The CAPTA list will identify foreign financial institutions that are prohibited from opening or maintaining correspondent or payable-through accounts in the U.S. pursuant to sanctions including the Countering America's Adversaries Through Sanctions Act, North Korea Sanctions Regulations, Iranian Financial Sanctions Regulations, and the Hizballah International Financing Prevention Act of 2015. Certain regulations have also been amended to reflect the issuance of the new list. OFAC notes that the CAPTA list, which is separate from the Specially Designated Nationals List, will identify the specific prohibitions or strict conditions to which foreign financial institutions are subject. Non-U.S. financial institutions engaging in activity targeted under the above-mentioned regulations risk being added to the CAPTA list.

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

  • OFAC issues continued extension of Venezuela-related General Licenses

    Financial Crimes

    On March 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GL) to extend the expiration date of previous Venezuela-based GLs to May 10 for certain provisions related to sanctions issued against Venezuela’s state-owned oil company pursuant to Executive Order 13850. GL 3D, which supersedes GL 3C, authorizes transactions necessary to wind down financial contracts, and transactions related to, provision of financing for, and other dealings in certain bonds, provided the divestment or transfer (including the facilitation) of any holdings of these bonds are to a non-U.S. person. GL 9C, which supersedes GL 9B, authorizes certain transactions related to securities issued prior to August 25, 2017 by the oil company and its subsidiaries. Additionally, OFAC issued correspondingly revised FAQs 661 and 662 to provide additional clarification on expected levels of due diligence, as well as implications for U.S. and non-U.S. persons.

    Visit here for additional InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Venezuela Sanctions

  • FinCEN updates list of FATF-identified jurisdictions with AML/CFT deficiencies

    Financial Crimes

    On March 8, the Financial Crimes Enforcement Network (FinCEN) issued an advisory reminding financial institutions that on February 22, the Financial Action Task Force (FATF) updated two documents that list jurisdictions identified as having “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) regimes. The first document, the FATF Public Statement, identifies two jurisdictions, the Democratic People’s Republic of Korea and Iran, that are subject to countermeasures and/or enhanced due diligence due to their strategic AML/CFT deficiencies. The second document, Improving Global AML/CFT Compliance: On-going Process, identifies the following jurisdictions with strategic AML/CFT deficiencies that have developed an action plan with the FATF to address those deficiencies: the Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen. Notably, Cambodia has been added to the list due to the lack of effective implementation of its AML/CFT framework. FATF further notes that several jurisdictions have not yet been reviewed, and that it “continues to identify additional jurisdictions, on an ongoing basis, that pose a risk to the international financial system.” Generally, financial institutions should consider both the FATF Public Statement and the Improving Global AML/CFT Compliance: On-going Process documents when reviewing due diligence obligations and risk-based policies, procedures, and practices.

    Financial Crimes FinCEN FATF Anti-Money Laundering Combating the Financing of Terrorism Of Interest to Non-US Persons

  • OFAC sanctions Russian bank for providing assistance to Venezuelan oil company

    Financial Crimes

    On March 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a Moscow-based bank for materially assisting Venezuela’s state-owned oil company, which was sanctioned earlier this year by OFAC pursuant to Executive Order 13850. (See previous InfoBytes coverage here.) The bank, which is jointly owned by Russian and Venezuelan state-owned companies, “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of,” the previously sanctioned entity. According to OFAC, the bank was also identified as “the primary international financial institution willing to finance” the Venezuelan cryptocurrency, Petro, which was allegedly created to help former President Maduro’s regime circumvent U.S. sanctions. As a result, any assets or interests therein belonging to the bank, as well as any entities directly or indirectly owned 50 percent or more by the bank that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also prohibited generally from dealing with any such property or interests.

    Visit here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Venezuela Sanctions OFAC Department of Treasury

  • Danish company pays approximately $33 million to resolve bribery allegations

    Financial Crimes

    A Danish company that makes protective coatings used in maritime environments announced on March 4 that it had settled bribery allegations with the Danish State Prosecutor for Serious and International Crime by paying a $33 million fine. The company self-reported what it called “illegal sales practices found in Germany, other countries in Europe, and in Asia” in April 2017.

    Financial Crimes Bribery

  • CFTC adds self-reporting of foreign corrupt practices by non-registrants to cooperation program

    Financial Crimes

    On March 6, the CFTC issued an enforcement advisory announcing that it would add violations of the Commodity Exchange Act involving foreign corrupt practices to its cooperation and self-reporting program. The CFTC will recommend no civil monetary penalty where companies and individuals which are not registered (or required to be registered) with the CFTC timely and voluntarily disclose such violations. Full cooperation and appropriate remediation would also be required. In announcing the enforcement advisory, the CFTC’s Director of Enforcement stated at the ABA’s National Institute on White Collar Crime that the change “reflects the enhanced cooperation between the CFTC and our law enforcement partners like the Department of Justice.” He also stated that the agency currently has open investigations into various foreign corrupt practices that violate the Commodity Exchange Act, including bribes that “secure business in connection with regulated activities,” manipulation of benchmarks, “prices that are the product of corruption [being] falsely reported to benchmarks,” and corrupt practices altering the commodity markets.

    Financial Crimes CFTC DOJ Commodity Exchange Act White Collar Of Interest to Non-US Persons

  • Foreign financial institutions warned: Will face sanctions for Maduro regime transactions

    Financial Crimes

    On March 6, National Security Advisor Ambassador John Bolton issued a statement warning foreign financial institutions that they will face sanctions if it is determined they have been involved in facilitating illegitimate transactions benefiting former President Maduro’s regime.

    See here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Of Interest to Non-US Persons Venezuela Sanctions

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