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Co-conspirators sentenced in Venezuelan bribery scheme involving Venezuelan TV mogul
Two co-conspirators of a billionaire news network owner were sentenced this week as part of the DOJ’s recently unsealed prosecution of a bribery scheme involving over $1 billion paid in bribes to members of the Venezuelan government. According to the DOJ, the owner was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering. Two co-conspirators, Florida resident and former Venezuelan National Treasurer, and Chicago resident and former owner of a Dominican Republic bank, each pleaded guilty under seal to one count of conspiracy to commit money laundering, and were sentenced in federal court earlier this week.
According to the owner’s indictment, he allegedly bribed members of the Venezuelan government—including former Venezuelan National Treasurer—in exchange for the right to handle the government’s foreign currency exchange transactions, and then acquired a bank in order to launder the bribe money and other illicit proceeds. To do so, the owner allegedly moved money from Switzerland to accounts in Florida and New York and used it to purchase luxury items such as “jets, a yacht, multiple champion horses, and numerous high-end watches.”
In December 2017, the former Venezuelan National Treasurer pleaded guilty to one count of conspiracy to commit money laundering, admitting to taking bribes in exchange for helping his co-conspirators—including the owner—by choosing them to conduct currency exchanges at favorable rates to the Venezuelan government. As part of his plea, the former Venezuelan National Treasurer agreed to cooperate and pay a forfeiture money judgment of $1 billion through the forfeiture of “real estate, vehicles, horses, watches, aircraft, and bank accounts.” On November 27, 2018, U.S. Southern District of Florida Judge Robin L. Rosenberg sentenced the former Venezuelan National Treasurer to 10 years in prison, the maximum under his plea deal.
In March 2018, Chicago resident and former owner of a Dominican Republic bank took a similar plea deal, pleading guilty to one count of conspiracy to commit money laundering, admitting to helping the owner and others acquire and then launder money through the bank. On November 29, 2018, he was sentenced to 3 years in prison.
The Miami Herald has also reported that the owner's personal banker was sentenced last month for his role in another money laundering scheme involving a Venezuelan state-owned oil company. Coverage of the company's prosecutions is available here.
SEC releases 2018 report on whistleblower program
On November 15, the SEC released its 2018 Annual Report to Congress on its Whistleblower Program, as required under § 924(d) of the Dodd-Frank Act and § 21(F)(g)(5) of the Securities Exchange Act of 1934. The Report, which covers October 1, 2017 through September 30, 2018, indicates that the SEC received 202 FCPA-related whistleblower tips during the reporting year. Those 202 FCPA tips account for only 3.82 percent of the tips received in that period. While the overall number of whistleblower tips has steadily risen over the past 4 years, the number of FCPA tips has remained fairly steady. In 2015, there were 186 (4.74 percent of the tips received); in 2016 there were 238 (5.64 percent of the tips received); and in 2017 there were 210 (4.68 percent of the tips received). This relative consistency contrasts with the number of offering fraud tips, which jumped from 758 in 2017 to 1,054 in 2018.
In addition to providing statistics and background on the whistleblower program, the Report discusses rule amendments proposed earlier this year. In particular, the Report reviews proposed amendments to SEC Rule 21F-2 (Whistleblower Status and Retaliation Protection) that are intended to bring the rules in line with the Digital Realty Trust v. Somers decision. The proposed amendments would include instituting a uniform definition of whistleblower that requires the individual to have submitted the information “in writing” to the SEC.
OFAC announces cyber-related designations, releases digital-currency addresses to identify illicit actors
On November 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13694 against two Iran-based individuals for allegedly helping to facilitate the exchange of ransom payments made in Bitcoin into local currency. For the first time, OFAC also identified two digital currency addresses associated with the identified financial facilitators who are designated “for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” ransomware attacks that threaten the “national security, foreign policy, or economic health or financial stability of the [U.S.]” According to OFAC, the provided digital currency addresses should be used to assist in identifying transactions and funds to be blocked as well as investigating potential connections.
Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker stated, “We are publishing digital-currency addresses to identify illicit actors operating in the digital-currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and [anti-money laundering/countering financing of terrorism] safeguards to further their nefarious objectives.” OFAC issued a warning that persons who engage in transactions with the identified individuals “could be subject to secondary sanctions” and that “[r]egardless of whether a transaction is denominated in a digital currency or traditional fiat currency, OFAC compliance obligations are the same.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction “or within or transiting” the U.S. are blocked, and U.S. persons are generally prohibited from entering into transactions with them. OFAC also released new FAQs to provide guidance for financial institutions on digital currency.
View here for additional InfoBytes coverage on Iranian sanctions.
NYDFS and international bank enter into second supplemental consent order over BSA/AML compliance deficiencies
On November 21, NYDFS and an international bank entered into a second supplemental consent order covering its settlement over alleged deficiencies in the bank’s Bank Secrecy Act/anti-money laundering and Office of Foreign Assets Control (OFAC) compliance program controls. As previously covered by Infobytes, 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 and was issued a $340 million civil money penalty. In 2014 NYDFS issued a subsequent consent order outlining 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. In April 2017, NYDFS and the bank entered into the first supplemental consent order to modify the 2012 and 2014 orders, acknowledging the bank made significant improvements in its BSA/AML compliance program but extended the monitor through December 2018 with all the other terms and conditions of the 2012 and 2014 consent orders remaining in full effect.
Now, beginning January 1, 2019, the second supplemental order issued by NYDFS requires the bank to engage an independent consultant, selected by the regulator, for a period of up to one year, with a possible extension of one additional year, to provide guidance for completing remediation called for in the 2012 and 2014 consent orders. In response to the second supplemental order, the bank stated it remained “committed to completing the remaining tasks necessary for that remediation.”
OFAC reaches settlement with company for alleged Ukrainian sanctions violations
On November 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $87,507 settlement with an aerospace and defense technology company for three alleged violations by a former subsidiary of the Ukraine-Related Sanctions Regulations (URSR). According to OFAC, the settlement resolves potential civil liability for the former subsidiary’s alleged involvement in the “indirect export of components to be incorporated into commercial air traffic control radar” through Canadian and Russian distributors “to a person owned 50 percent or more, directly or indirectly, by a person identified on OFAC’s List of Specially Designated Nationals and Blocked Persons.”
In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the former subsidiary’s failure to recognize warning signs; (ii) the transactions, which constituted the apparent violations, were reviewed and approved by the Director of Global Trade Compliance, and “resulted in harm to the sanctions program objectives of the URSR”; (iii) the company and former subsidiary are large, sophisticated entities; and (iv) the company and its compliance personnel previously violated Iranian Transaction and Sanctions Regulations, while the former subsidiary was subject to a consent agreement as a result of recurring compliance failures.
However OFAC also considered mitigating factors, including (i) the former subsidiary has not received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the company has cooperated with OFAC and implemented remedial measures, including terminating the violative conduct and implementing steps to minimize the risk of reoccurring conduct; and (iii) the company voluntarily disclosed the alleged violations on behalf of the former subsidiary.
Visit here for additional InfoBytes coverage on Ukraine sanctions.
French bank agrees to $1.3 billion settlement to resolve U.S. sanctions investigations
On November 19, the Federal Reserve Board, Office of Foreign Assets Control (OFAC), DOJ, Manhattan District Attorney’s Office, and NYDFS announced that a French bank agreed to pay approximately $1.34 billion in total penalties to resolve federal and state investigations into the bank’s allegedly intentional violation of U.S. sanctions laws and other federal and New York state laws from approximately 2003 to 2013.
The bank entered into a deferred prosecution agreement (DPA) with the U.S. Attorney’s Office for the Southern District of New York to settle charges of conspiring to violate U.S. sanctions against Cuba by “structuring, conducting, and concealing U.S. dollar transactions using the U.S. financial system.” The DPA requires the bank to forfeit more than $717 million. The bank also agreed to “accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts, pay penalties totaling [$1.34 billion] to federal and state prosecutors and regulators, refrain from all future criminal conduct, and implement remedial measures as required by its regulators.” According to the DOJ, the bank “admitted its willful violations of U.S. sanctions laws—and longtime concealment of those violations—which resulted in billions of dollars of illicit funds flowing through the U.S. financial system.” As factors mitigating the penalty, the DPA acknowledges the bank’s efforts to collect and produce “voluminous evidence located in other countries to the full extent permitted under applicable laws and regulations, and its enhancement of its compliance program and sanctions-related internal controls both before and after it became the subject of a U.S. law enforcement investigation.” Among other factors, the bank’s willingness to enter into the terms of the DPA, outweighed its “failure to self-report all of its violations of [U.S.] sanctions laws in a timely manner.”
The bank also entered into agreements to pay almost $163 million to the New York County District Attorney’s Office, nearly $54 million to OFAC, approximately $81 million to the Federal Reserve Board, and $325 million to NYDFS. Among other things, NYDFS noted that branch employees “responsible for originating USD transactions outside of the U.S. had a minimal understanding of U.S. sanctions laws and regulations as they related to Sudan, Iran, Cuba, North Korea, or other U.S. sanctions targets.”
Separate from the resolution of alleged sanctions violations, NYDFS imposed an additional $95 million penalty to resolve findings that the bank’s New York branch allegedly failed to “implement and maintain an effective Bank Secrecy Act/Anti-Money Laundering Law compliance program and transaction monitoring system.”
According to a bank statement issued the same day, the bank acknowledges and regrets the identified shortcomings, and “has already taken a number of significant steps in recent years and dedicated substantial resources to enhance its sanctions and AML compliance programs.”
OFAC targets individual accused of offering sanctions evasion advice to North Korean company
On November 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced an addition to the Specially Designated Nationals List pursuant to Executive Order (E.O.) 13722. The addition identifies one individual found to have offered advice on evading U.S. sanctions that ultimately assisted third party companies in the illicit purchase of fuel and gas oil for North Korea. In addition, OFAC also cites to a 2017 DOJ complaint concerning the companies’ alleged participation in laundering millions of dollars connected to North Korea. As a result, all assets belonging to the identified individual that are subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with him.
See here for previous InfoBytes coverage on North Korean sanctions.
FinCEN revises GTOs to expand coverage to 12 metropolitan areas, lower reporting threshold, and include virtual currencies
On November 15, the Financial Crimes Enforcement Network (FinCEN) reissued a revised Geographic Targeting Order (GTO), which requires U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for high-end residential real estate in 12 major metropolitan areas. Notably, the purchase amount threshold for the beneficial ownership reporting requirement—which previously varied by city—is now set at $300,000 for residential real estate purchased in the 12 covered areas. In addition, FinCEN requires title insurance companies to report covered purchases made using virtual currencies. FinCEN states that the reissued GTO “will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.”
The revised GTO takes effect November 17, and covers certain counties within the following areas: Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco and Seattle.
Visit here for additional InfoBytes coverage on FinCEN GTOs.
OFAC sanctions individuals connected to Hizballah, IRGC-QF networks in Iraq
On November 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against four Hizballah-affiliated individuals for their alleged leadership roles in the group’s terrorist financial activities in Iraq, including providing support for the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which “targets terrorists and those providing support to terrorists or acts of terrorism.” OFAC’s designations follow the Hizballah International Financing Prevention Amendments Act of 2018—signed into law October 25—along with the reimposition of Iran-related sanctions on November 5 (see previous InfoBytes coverage here), and reinforces U.S. efforts to “protect the international financial system by targeting Hizballah’s supporters, financial networks, and those that facilitate and enable its destabilizing activities worldwide.” Furthermore, OFAC states that the four Specially Designated Global Terrorists are also subject to secondary sanctions under the Hizballah Financial Sanctions Regulations, which implement the Hizballah International Financing Prevention Act of 2015, and allows OFAC to “prohibit or impose strict conditions on the opening or maintaining in the [U.S.] of a correspondent account or a payable-through account by a foreign financial institution that knowingly facilitates a significant transaction for Hizballah.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from entering into transactions with them.
Visit here for additional InfoBytes coverage on sanctions involving Hizballah networks.
9th Circuit hears oral arguments on overturning FCPA whistleblower retaliation award
On November 14, 2018, a three judge panel for the United States Court of Appeals for the 9th Circuit heard oral arguments for a life science research and diagnostics company hoping to overturn a February 2017 jury verdict ordering the company to pay its former General Counsel and Secretary $11 million in punitive and compensatory damages. The former employee’s complaint alleged that the company had fired him for being an FCPA whistleblower. As detailed in a previous FCPA Scorecard post, the company paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. The former employee’s report to the Audit Committee had involved separate allegations that the company violated the FCPA in China, allegations that did not result in additional penalties against the company.
The company appealed the former employee's award on the grounds that the jury was erroneously instructed that the SEC’s rules or regulations forbid bribery of a foreign official; that the company’s alleged FCPA violations were the result of the former employee’s lack of due diligence; that the trial court wrongly excluded certain impeachment testimony and evidence related to the timing of his pursuit and hiring of a whistleblower attorney; and that he did not qualify as a “whistleblower” under Dodd-Frank in light of his reporting only internally and not to the SEC (pursuant to the U.S. Supreme Court’s decision in another case). During the argument, one member of the circuit panel reportedly expressed doubt concerning the company’s jury instruction argument, and another told counsel for the company, “I don’t see how this can be reversed on the theory you’re offering.”
For prior coverage of the company's matter, please see here and here.