Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • DOJ revises corporate enforcement policy applicable to all criminal matters including FCPA cases

    Federal Issues

    On January 17, Assistant Attorney General Kenneth A. Polite, Jr. delivered remarks at Georgetown University Law Center, during which he announced changes to the DOJ’s Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy. Polite provided background information on the DOJ Criminal Division’s voluntary self-disclosure incentive program, the FCPA Pilot Program, that was announced in 2016 and expanded in 2017 to become the FCPA Corporate Enforcement Policy (covered by InfoBytes here). This policy, Pilot said, has been applied to all corporate cases prosecuted by the Criminal Division since at least 2018, and provided, among other things, that “if a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there is a presumption that [the DOJ] will decline to prosecute absent certain aggravating circumstances involving the seriousness of the offense or the nature of the offender.” The policy also provided a maximum 50 percent reduction off the low end of the applicable sentencing guidelines penalty range to companies that self-disclosed violations where a criminal resolution is warranted. Last year, following a request by the Deputy Attorney General to have all DOJ components write voluntary self-disclosure policies, the Criminal Division conducted an assessment of its existing policy. Pilot said the division is now announcing the first significant changes to the policy since 2017.

    Under the updated policy, companies are offered “new, significant and concrete incentives to self-disclose misconduct,” Polite said, explaining that “even in situations where companies do not self-disclose, the revisions to the policy provide incentives for companies to go far above and beyond the bare minimum when they cooperate with [DOJ] investigations.” He emphasized that the revisions clarify that companies will face very different outcomes if they do not self-disclose, meaningfully cooperate with investigations, or remediate. However, the revisions provide a path that incentivizes even more robust compliance on the front-end in order to prevent misconduct and requires even more robust cooperation and remediation on the back-end should a crime occur.

    Polite stated that prosecutors might decline to bring charges against a company over crimes with aggravating factors if the company can demonstrate that it: (i) made voluntary disclosures immediately upon becoming aware of an allegation of misconduct; (ii) had an effective compliance program already in place at the time of the misconduct that allowed it to identify the misconduct and led it to voluntarily self-disclose; and (iii) provided exceptional cooperation and extraordinary remediation. Should a company fail to take these steps, it risks “increasing its criminal exposure and monetary penalties,” Polite warned, emphasizing that the DOJ’s “job is not just to prosecute crime, but to deter and prevent criminal conduct.” He added that the DOJ will recommend a reduction in fines of at least 50 percent and up to 75 percent (except in the case of a criminal recidivist) for companies that voluntarily report wrongdoing and fully cooperate with investigations. Even companies that do not voluntarily disclose wrongdoing but still fully cooperate with an investigation and timely and appropriately remediate could still receive a 50 percent reduction off the low end of the guidelines for fines, Polite said. “The policy is sending an undeniable message: come forward, cooperate, and remediate. We are going to be closely examining how companies discipline bad actors and reward the good ones.”

    Federal Issues Agency Rule-Making & Guidance Financial Crimes Enforcement DOJ FCPA Of Interest to Non-US Persons

    Share page with AddThis
  • FTC takes action against investment advisor, cites violations of Notice of Penalty Offenses

    Federal Issues

    On January 13, the FTC announced an action against an investment advisor and its owners concerning allegations that the defendants made deceptive claims when selling their services to consumers. While the FTC has brought “several cases” concerning false money-making claims, the action marks the first time the FTC is collecting civil money penalties from cases relating to Notice of Penalty Offenses. As previously covered by InfoBytes, the FTC sent the notice to more than 1,100 companies (including the defendants) warning that they may incur significant civil penalties if they or their representatives make claims regarding money-making opportunities that run counter to FTC administrative cases. Under the Notice of Penalty Offenses, the FTC is permitted to seek civil penalties against a company that engages in conduct it knows is unlawful and has been determined to be unlawful in an FTC administrative order. This action is also the first time the FTC has imposed civil penalties for violations of the Restore Online Shoppers’ Confidence Act (ROSCA).

    According to the complaint, the defendants made numerous misleading claims when selling their investment advising services, including that (i) recommendations about the services were based on a specific “system” or “strategy” created by so-called experts who claim to have made numerous successful trades; and (ii) consumers would make substantial profits if they followed the recommended trades (consumers actually lost large amounts of money, the FTC alleged). Moreover, the FTC claimed that company disclaimers “directly contradict the message conveyed by their marketing,” including that featured testimonials and example trade profits “represent extraordinary, not typical results,” “that ‘[n]o representation is being made that any account will or is likely to achieve profits or losses similar to those discussed,’ and that ‘[n]o representation or implication is being made that using the methodology or system will generate profits or ensure freedom from losses.’” By making these, as well as other, deceptive claims, the defendants were found to be in violation of the Notice of Penalty Offenses, ROSCA, and the FTC Act, the Commission said.

    Under the terms of the proposed order, the defendants would be required to surrender more than $1.2 million as monetary relief and must pay a $500,000 civil money penalty. The defendants would also have to back up any earnings claims, provide notice to consumers about the litigation and the court order, and inform consumers about what they need to know before purchasing an investment-related service.

    Federal Issues Enforcement FTC FTC Act ROSCA UDAP Deceptive

    Share page with AddThis
  • FinCEN solicits feedback on beneficial ownership reporting requirements

    Financial Crimes

    On January 17, the Financial Crimes Enforcement Network (FinCEN) published two notices and requests for comment in the Federal Register related to the reporting process the agency intends to use to collect beneficial ownership data pursuant to the Beneficial Ownership Information Reporting Requirements final rule (published last September and covered by InfoBytes here). Under the final rule, most corporations, limited liability companies, and other entities created in or registered to do business in the U.S. will be required to report information about their beneficial owners to FinCEN. The first notice and request for comments invites interested parties to provide feedback on the application that will be used to collect information from individuals who seek to obtain an optional FinCEN identifier. The second notice and request for comments requests feedback on a report that certain entities will be required to file with FinCEN. The electronically filed report will identify the reporting entity’s beneficial owners, and—in certain cases—the individual who “directly filed the document with specified governmental authorities that created the entity or registered it to do business, as well as the individual who was primarily responsible for directing or controlling such filing, if more than one individual was involved in the filing of the document.” Comments on both notices are due by March 20.

    Financial Crimes Agency Rule-Making & Guidance Of Interest to Non-US Persons FinCEN Beneficial Ownership

    Share page with AddThis
  • OFAC issues amended Venezuela-related GL and FAQ

    Financial Crimes

    On January 17, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 5J, which supersedes GL 5I and authorizes certain transactions otherwise prohibited under Executive Orders 13835 and 13857 related to, or that provide financing for, dealings in the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or after April 20, 2023. GL 5J does not authorize any transactions or activities otherwise prohibited by the Venezuela Sanctions Regulations. Concurrently, OFAC updated Venezuela-related FAQ 595 to provide clarification on authorized transactions as well as licensing requirements.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Petroleos de Venezuela Venezuela

    Share page with AddThis
  • SEC issues $5 million whistleblower award

    Securities

    On January 13, the SEC announced an award totaling nearly $5 million to a whistleblower whose new information and assistance led to a successful SEC enforcement action. According to the redacted order, the whistleblower provided substantial ongoing information that helped SEC staff shape its investigative strategy, identify witnesses, and draft document and information requests, which saved staff time and resources during the investigation.

    Securities SEC Enforcement Whistleblower

    Share page with AddThis
  • DOJ settles with bank for $31 million to resolve alleged redlining allegations

    Federal Issues

    On January 12, the DOJ announced a more than $31 million settlement with a national bank over redlining allegations. Calling the action the largest redlining settlement agreement in the department’s history, the DOJ’s complaint alleged that the bank violated the Fair Housing Act and ECOA by, among other things, failing to provide mortgage lending services to majority-Black and Hispanic neighborhoods in Los Angeles County. The DOJ contended that because the bank’s internal fair lending oversight, polices, and procedures allegedly failed to ensure that it was able to provide equal access to credit to residents of majority-Black and Hispanic neighborhoods, the bank generated disproportionately low numbers of loan applications and home loans from these neighborhoods compared to similarly-situated lenders.

    Under the terms of the proposed consent order, the bank (which denies the allegations) has agreed to invest a minimum of $29.5 million in a loan subsidy fund to increase credit for home mortgage loans, home improvement loans, and home refinance loans extended to residents of majority-Black and Hispanic neighborhoods in Los Angeles County. The bank has also agreed to spend at least half a million dollars on advertising and outreach targeted toward residents of these neighborhoods, while it will spend at least another half a million dollars on a consumer financial education program to increase residents’ access to credit. An additional $750,000 is earmarked for use in developing community partnerships to provide services for increasing access to residential mortgage credit.

    Additionally, the bank agreed to (i) open one new branch in a majority-Black and Hispanic neighborhood and explore future opportunities for expansion within Los Angeles County; (ii) dedicate at least four mortgage loan officers to serving majority-Black and Hispanic neighborhoods; and (iii) employ a full-time community lending manager to oversee the continued development of lending in majority-Black and Hispanic neighborhoods. A community credit needs research-based market assessment will also be conducted by the bank to identify financial services’ needs for majority-Black and Hispanic census tracts within Los Angeles County. According to the DOJ’s announcement, the bank stated it is proactively taking measures to expand its lending services in other markets around the county to improve access to credit in communities of color. Measures include “creating a residential mortgage special purpose credit program to cover geographic areas in various locations throughout the country, including New York, Georgia, Nevada, and Tennessee,” and launching “a small business lending program that will be aimed at assisting underserved business owners in operating and growing their business.”

    Federal Issues DOJ Enforcement Redlining Discrimination Consumer Finance Fair Housing Act ECOA

    Share page with AddThis
  • SEC charges companies for offering and selling unregistered crypto asset securities

    Securities

    On January 12, the SEC filed a complaint in the U.S. District Court for the Southern District of New York against two companies (collectively, defendants), alleging that they were involved in the unregistered offer and sale of securities through a crypto asset lending program. According to the complaint, in December 2020, one defendant entered into an agreement with the other defendant to offer customers, including retail investors in the U.S., an opportunity to loan their crypto assets to the defendant in exchange for its “promise to pay interest on those investors’ crypto assets.” The complaint further alleged that in February 2021, the defendants began offering the program to retail investors, which included that there was no minimum investment amount to be eligible to participate, and that investors tendered their crypto assets to one of the defendants acting as the agent to facilitate the transaction. The SEC noted that the defendant deducted an agent fee, sometimes as high as 4.29 percent. The complaint also alleged that the defendant then exercised its discretion in how to use investors’ crypto assets to generate revenue and pay interest to investors. In November 2022, the company announced that it would not allow its investors to withdraw their crypto assets because the company did not have sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market. These activities violated Section 5(a) and 5(c) of the Securities Act the SEC said. The SEC’s complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

    Securities Digital Assets SEC Enforcement Cryptocurrency Securities Act

    Share page with AddThis
  • OFAC issues extended counter-terrorism GL and amended FAQ

    Financial Crimes

    On January 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Counter Terrorism General License (GL) 21B, “Authorizing Limited Safety and Environmental Transactions Involving Certain Vessels,” to authorize limited safety and environmental transactions involving certain persons or vessels that are normally prohibited by the Global Terrorism Sanctions Regulations (GTSR) through 12:01 a.m. EST, April 13, 2023. OFAC explained that such transactions are authorized as long as payments to a blocked person are made into a blocked account in accordance with the GTSR. A list of authorized blocked persons and vessels listed on OFAC’s Specially Designated Nationals and Blocked Persons List is also included. OFAC also amended related FAQ 1097 to provide additional clarification on permitted transactions.

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

    Share page with AddThis
  • OFAC issues and amends Iran-related FAQ

    Financial Crimes

    On January 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published an Iran-related frequently asked question (FAQ) and amended several other Iran-related FAQs. New FAQ 1110 clarifies Iran General License (GL) D-1 and GL D-2. Specifically, OFAC noted that because GL D-1 was issued in 2014, the types of software and services that support communication over the internet have changed. Therefore, to reflect technological developments in communication-related software and services since the issuance of GL D-1 (including in cloud-based services), OFAC issued GL D-2 to expand and clarify the range of U.S. software and services available to Iranians under OFAC’s sanctions program.

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

    Share page with AddThis
  • Ohio will grant occupational licenses to applicants experienced in another state

    On January 2, the Ohio governor signed SB 131, which, among other things, requires “an occupational licensing authority to issue a license or government certification to an applicant who holds a license, government certification, or private certification or has satisfactory work experience in another state under certain circumstances.” The Act eases licensing burdens by allowing licensed professionals to apply for and be granted a license to work provided they meet certain criteria. Specifically, a licensing authority shall issue a license or government certification to an applicant if the authority determines that the applicant meets several conditions, including: (i) the applicant holds either a “substantially similar out-of-state occupational license that authorizes the applicant to engage in the same profession, occupation, or occupational activity as the license or government certification for which the applicant is applying in this state” or a “government certification in the same profession, occupation, or occupational activity as the license or government certification for which the applicant is applying in this state from one of the uniformed services or a state that does not issue an out-of-state occupational license for the respective profession, occupation, or occupational activity”; (ii) the applicant possesses a valid out-of-state license for at least one year immediately preceding the date the application is submitted and has been actively engaged in the profession (a licensing authority may choose to waive this requirement); (iii) the applicant is in good standing; (iv) the applicant satisfied minimum education, training, or experience requirements or passed an examination to receive an out-of-state occupational license or government certification (this provision is waived if applicable law does not require these requirements); (v) the applicant has not surrendered or had revoked a license, out-of-state occupational license, or government certification, and does not have any disqualifying criminal history or is the subject of a complaint, allegation, or investigation related to unprofessional conduct or a violation of a law; and (vi) the applicant pays the required fees. The Act also discusses additional pathways for licensure through private certification.

    Licensing State Issues State Legislation Ohio

    Share page with AddThis

Pages