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President Trump issues new Venezuela Executive Order targeting gold sector; OFAC publishes related FAQs
On November 1, President Trump issued Executive Order 13850 (E.O. 13850) authorizing the imposition of sanctions on persons who operate in Venezuela's gold sector “or in any other sector of the Venezuelan economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.” The sanctions come in response to the actions of Venezuelan President Maduro’s regime and associated persons in allegedly “plunder[ing] Venezuela's wealth for their own corrupt purposes.” Among other things, the sanctions specifically block the acquisition or retention of property and interests in the United States by persons who “operate in the gold sector of the Venezuelan economy” or “have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity or transaction” involving deceptive practices or corruption in conjunction with the Venezuelan government.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a set of FAQs connected to the issuance of E.O. 13850, stating that it “expects to use its discretion to target in particular those who operate corruptly in the gold or other identified sectors of the Venezuela economy, and not those who are operating legitimately in such sectors.”
E.O. 13850 is issued in conjunction with E.O.s 13692, 13808, 13827, and 13835. See here for continuing InfoBytes coverage of Venezuelan actions and E.O.s.
Arizona approves two more participants in fintech sandbox program
On November 1, the Arizona Attorney General announced the approval of two more participants in the state’s fintech sandbox program. The first company, which is based in New York, will test a savings and credit product, enabling Arizona consumers to obtain a small line of credit aimed at providing overdraft protection. If a consumer agrees to a repayment plan recommended by the company’s proprietary technology, the APR may be as low at 12 percent; if a consumer adopts a different repayment plan, the line of credit will have a standard APR of 15.99 percent. The company intends to report transactions under the payment plan to national credit bureaus to enable the building of credit histories. The second company, an Arizona-based non-profit, will test a lending product using proprietary blockchain technology, which has an APR cap of 20 percent.
As previously covered by InfoBytes, the Arizona governor signed legislation in March creating the first state sandbox program for companies to test innovative financial products or services without certain regulatory requirements. In October, the Attorney General announced the first sandbox participant, a mobile platform company (InfoBytes coverage available here).
Federal Reserve Board to implement new supervisory rating system for large financial institutions
On November 2, the Federal Reserve Board (Board) finalized a new supervisory rating system for large financial institutions that is aligned to the core areas supporting qualifying institutions’ safety and soundness and is effective February 1, 2019. Supervisors will use the new rating system to assign confidential ratings for “all domestic bank holding companies and non-insurance, non-commercial savings and loan holding companies with $100 billion or more in total consolidated assets”—an increase from the $50 billion threshold proposed originally. The Board stated that the new rating system “will also apply to U.S. intermediate holding companies of foreign banking organizations with $50 billion or more in total consolidated assets.” The new rating system is designed to (i) better align with current Board supervisory programs and practices; (ii) “[e]nhance the clarity and consistency of supervisory assessments and communications of supervisory findings and implications”; and (iii) “provide transparency related to the supervisory consequences of a given rating.”
According to the Board, supervisors will continue to apply the existing rating system to bank holding companies with less than $100 billion in total consolidated assets, as well as to non-insurance, non-commercial savings and loan holding companies who do not meet the $100 billion total consolidated asset minimum threshold.
VA clarifies effect of guarantee claim payments on home loan entitlement
On October 30, the Department of Veterans Affairs (VA) released Circular 26-18-25, which clarifies the effect on a veteran’s home loan entitlement when the VA pays a guaranty on a home loan terminated by foreclosure, short sale, or deed-in-lieu of foreclosure. Specifically, for loans originated on or after January 1, 1990, the circular clarifies that the VA no longer establishes debts against veterans after the VA pays a guaranty to reimburse a servicer for its loss. However, if the veteran wants to reuse the VA home loan benefit, then he or she is required to reimburse the VA for the loss amount. The loss only affects the veteran’s entitlement under the VA Home Loan Guaranty program and does not impact any other VA benefits. The veteran may choose to repay the loss to restore the full entitlement or use any of the remaining entitlement amount that may be available to the veteran. The circular is effective until October 1, 2020.
DOJ settles with credit union for alleged SCRA violations
On November 2, the DOJ announced a $95,000 settlement with a credit union resolving allegations that the credit union violated the Servicemembers Civil Relief Act (SCRA) by repossessing vehicles owned by servicemembers without first obtaining the required court orders. According to the complaint, which was filed on the same day the settlement was announced, the DOJ launched an investigation into the credit union’s repossession practices after learning of two private complaints filed against the credit union for alleged SCRA violations. Through the investigation, the DOJ discovered additional violations and that the credit union did not have policies and procedures that addressed non-judicial auto repossessions against servicemembers until August 2014. Under the terms of the settlement, the credit union is required to pay $65,000 to compensate affected servicemembers and a civil money penalty of $30,000. In addition, the company must submit its employee SCRA training materials for approval and complete reporting, record-keeping, and monitoring requirements.
Oil company executives found guilty in U.K. of money laundering
According to the U.K Serious Fraud Office (SFO), the former CEO and CFO of an oil and gas exploration and production company were sentenced in the UK on October 29 for their parts in a kickback scheme in Nigeria. The former CEO was sentenced to up to six years in prison, and the CFO to up to five years. The executives were found to have recommended that the company enter a $300 million deal with an oil field partner in Nigeria without telling the company’s board that they would personally receive 15 percent of the deal’s value from the partner. They then laundered more than $45 million, using some of the proceeds to buy luxury Caribbean real estate. The SFO thanked the U.S. DOJ for its assistance with the investigation.
U.S. announces charges and guilty plea stemming from Malaysian development fund scheme
The DOJ unsealed two indictments and a guilty plea related to the sprawling Malaysian development fund fraud on November 1 in the Eastern District of New York. A Malaysian financier and a former banker were charged with conspiring to launder billions of dollars embezzled from the investment development fund, and conspiracy to violate the anti-bribery provisions of the FCPA. The former banker was also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a U.S. financial institution, which underwrote $6 billion in bonds issued by the fund. He was a managing director at the bank. Another former banker at the same financial institution, pleaded guilty to the same charges. He has been ordered to forfeit $43.7 million.
These three and others allegedly conspired to bribe Malaysian and Abu Dhabi officials to obtain business for the financial institution, including the fund's bond deals. They also allegedly conspired to launder the proceeds through purchasing luxury New York real estate, artwork, and financing major Hollywood films, such as The Wolf of Wall Street.
For prior coverage of the fund's scheme, please see here.
Former Venezuelan state-owned oil company procurement officer pleads guilty
On October 30, a Texas businessman, who was a former procurement officer for PDVSA, pleaded guilty to conspiracy to launder the bribe payments he and his co-conspirators at PDVSA received for directing PDVSA business to a Miami-based supplier. The scheme involved false invoices, false e-mail addresses, and shell companies with a Swiss bank account.
For prior coverage of the company's actions, please see here.
Swiss banker sentenced to 10 years in Venezuelan state-owned oil company embezzlement and bribery scheme; official pleads guilty in same scheme
On October 29, a former banker was sentenced to serve 10 years in prison for his role in a scheme to launder funds embezzled from a Venezuelan state-owned oil company. The banker had pleaded guilty to one count of conspiracy to commit money laundering on August 22, 2018. He admitted to using his position at the bank to attract clients from Venezuela. He helped some of those clients launder proceeds from the company's foreign-exchange embezzlement scheme using false-investment schemes and Miami real estate. The PDVSA money was originally obtained through bribery and fraud.
Two days later, on October 31, a former executive director of financial planning at the Venezuelan state-owned oil company pleaded guilty to charges related to his role in the same scheme. He admitted to accepting $5 million in bribes to give priority loan status to a French company and Russian bank. The former executive was paid with the proceeds of the same foreign-exchange embezzlement scheme. He admitted that he ultimately received $12 million in bribes for his participation in the embezzlement scheme and laundered that money with a co-defendant through a false-investment scheme. He is expected to be sentenced on January 9, 2019.
CEO of Haitian development and reconstruction company charged in bribery scheme
On October 30, the DOJ charged a dual U.S.-Haitian citizen with conspiracy to violate the FCPA, commit money laundering, and violate the Travel Act, as well as substantive Travel Act violations. The individual is a licensed attorney and the CEO of a Haitian development and reconstruction company. The indictment is part of an ongoing case against a retired U.S. Army colonel who was indicted in 2017 related to an alleged plan to solicit bribes from potential investors for infrastructure projects in Haiti. (For prior coverage of the charges against the colonel, please see here.) According to the indictment, at a meeting in 2015, the citizen and retired colonel met with undercover FBI agents posing as potential investors in the development project, and allegedly asked the agents to invest $84 million in the project. The colonel told them that 5 percent of that total would be paid to Haitian officials to secure approval for the project. The colonel allegedly planned to disguise the funds through a non-profit he controlled. The FBI then wired money to the non-profit.