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OCC reduces assessments by 10 percent for 2019
On November 30, the OCC announced a 10 percent reduction in the marginal rates for assessments on national banks, federal savings associations, and federal branches and agencies of foreign banks for 2019. The OCC projects the change will reduce total assessments collected by more than $90 million in 2019. The change will take effect with the March 31, 2019 assessment period.
Additionally, the OCC announced a change to the refund policy for institutions that leave the federal system during an assessment period. If an institution leaves the federal system during the first half of a semiannual assessment period, the OCC will issue a refund for the second half of the assessment period. If an institution leaves during the second half of an assessment period, the OCC will not issue a refund. As a result of this revised policy, institutions will no longer be required to prepay for three months of supervision after they leave the federal system.
U.S., Canada, and Mexico announce annual financial regulatory forum
On November 30, the U.S. Treasury Department, the Canadian Department of Finance, and the Ministry of Finance and Public Credit of Mexico (collectively, the “authorities”) announced the creation of the Canada-Mexico-United States Financial Regulatory Forum (Forum) to share information on financial sector developments and financial regulatory practices and procedures. The authorities published a joint “understanding,” which outlines the Forum’s intentions, including: (i) sharing information to allow for timely identification of potential cross-border financial regulatory issues; (ii) exchanging views on emerging financial sector developments and financial stability risks; and (iii) discussing regulatory issues that arise in bilateral and multilateral contexts or which relate to international standards. The Forum intends to meet annually.
Buckley Special Alert: DOJ announces new policy on pursuing individuals in corporate resolutions
U.S. Deputy Attorney General Rod Rosenstein said at a conference this morning that the U.S. Department of Justice has revised its guidelines relating to corporate resolutions with the DOJ, particularly as those guidelines relate to charging culpable individuals. The revised guidelines modify the 2015 Yates Memo, and affirmatively obligate companies seeking leniency from the DOJ to investigate and furnish information about culpable employees and agents substantially involved in wrongdoing.
Corporations now will receive cooperation credit in criminal resolutions only if all employees substantially involved in the alleged wrongdoing are identified to the government. And in civil resolutions, corporations will receive cooperation credit only if the corporation reveals the involvement of senior management and board members in the alleged wrongdoing. The new policy highlights the DOJ’s ongoing focus on criminal and civil enforcement actions against individuals and emphasizes the importance of giving serious consideration to obtaining individual counsel very early in the process of an investigation.
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Click here to read the full special alert.
If you have questions about the DOJ’s new policy or other related issues, please visit our White Collar practice page or contact one of Buckley Sandler’s 15 partners in that practice.SEC settles with Texas offshore drilling company for violations of FCPA internal controls provision
On November 19, the SEC announced a settlement with a Texas offshore drilling company based on the improper activities of the company’s predecessor in connection with a Brazilian oil company bribery scheme. The Administrative Order found that the offshore drilling company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to" the Brazilian company at the center of a massive FCPA scheme.
The settlement with the SEC concludes the company’s involvement in the Brazilian company's investigations. According to the drilling company, they received a cooperation letter from the DOJ last year confirming the company’s full cooperation in the Brazilian company's investigation, and that the DOJ would not move forward with any actions against the drilling company.
Further coverage of the Brazilian oil company matter is available here.
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.
FFIEC issues second Examination Modernization Project update
On November 27, the Federal Financial Institutions Examination Council (FFIEC) issued the second update on the status of its Examination Modernization Project. The project’s objective is to identify and assess measures to improve the community bank safety and soundness examination process, pursuant to the Economic Growth and Regulatory Paperwork Reduction Act’s review of regulations. As previously covered by InfoBytes, in March, the FFIEC released the first update, which identified four areas with potential for the most “meaningful supervisory burden reduction.” The second update focuses on tailoring examination plans and procedures based on risk in order to reduce burden. Specifically, after a review of risk-based procedures and processes, the Federal Reserve Board, the FDIC, the NCUA, the OCC, and the State Liaison Committee have committed to issue reinforcing and clarifying examiner guidance to their examination staffs on risk-focused examination principles for community financial institutions, if necessary. The guidance covers, among other things, the following practices (i) consideration of the unique risk profile, complexity, and business model of the institution when developing the exam plan; (ii) tailoring of the document request list based on the financial institution’s business model, complexity, risk profile and planned scope of review; and (iii) applying examination procedures in a way that reduces the level of review of low risk institutions or low risk areas.
The FFIEC noted it may take further action to improve the examination process as the project progresses.
FTC commissioners discuss need for expanded authority over consumer data privacy and security
On November 27, the Senate Committee on Commerce, Science and Transportation’s Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security conducted a hearing to discuss, among other topics, whether the FTC should be granted expanded authority over consumer data privacy and security. The hearing entitled “Oversight of the Federal Trade Commission” heard from the Chairman of the FTC as well as the agency’s four commissioners. Ranking Member Senator Bill Nelson’s opening statement discussed the need for providing additional resources to the FTC in order to ensure the agency is able to perform its mandated duties and effectively protect U.S. consumers from unfair or deceptive acts or practices. The five witnesses agreed that enforcement remains a priority for the FTC and called for comprehensive consumer privacy legislation that would clarify the agency’s authority and the rules relating to data security and breach notification, while fostering competition and innovation to the benefit of consumers. Specifically, FTC Chairman Joseph Simons stated he would support federal data security legislation if it provided the following three items: (i) the ability to seek civil money penalties to effectively deter unlawful conduct; (ii) jurisdiction over nonprofits and common carriers; and (iii) broad rulemaking authority to issue implementing rules under the Administrative Procedures Act for consumer protection issues such as privacy and data security. Commissioner Rohit Chopra also emphasized the need for Congress to support the FTC’s authority under Section 13B of the FTC Act, which authorizes the FTC to seek preliminary and permanent injunctions against companies and individuals.
However, Senator Blumenthal argued that too often the FTC has “fallen short” on protecting consumer privacy, particularly in terms of enforcement and pressing challenges. According to Senator Blumenthal, big tech companies misuse their power and consent orders are not “vigorously and adequately enforced.” He argued that the FTC must have the tools and resources to establish meaningful penalties for first offenses that pose a credible deterrent and recognize state attorneys general to ensure violations are investigated and punished.
Among other things, the hearing also discussed topics addressing: (i) the FTC’s ongoing series of public hearings reexamining the agency’s approach to consumer privacy in light of changing technologies (see previous InfoBytes coverage here); (ii) federal preemption versus state-by-state laws and the risk of inconsistencies and compliance challenges; (iii) the potential use of the FTC’s Section 6B authority, which would allow requests to be sent to the tech industry to understand what data is collected from consumers and how that information is used, shared, and sold; (iv) privacy protections for children, including the strengths and weaknesses of the Children’s Online Privacy Protection Act, particularly with respect to children ages 13 and older; (v) data minimization controls; and (vi) notice and comment rulemaking authority.
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.
CFPB publishes quarterly report examining how natural disasters affect credit reporting
On November 21, the CFPB released the latest quarterly consumer credit trends report, which examines how natural disasters affect consumers’ credit reports based on a sample of approximately 5 million credit records. The report notes that while financial institutions are not required to report natural disaster assistance information, in 2017, about 8.3 percent of consumer credit reports included information in a special comment code labeled “affected by natural or declared disasters,” which the CFPB states is similar to the Federal Emergency Management Agency’s estimate that roughly 8 percent of U.S. residents were affected by natural disasters in 2017. Additionally, the report summarizes the natural disaster reporting trends for consumers in the Greater Houston area affected by Hurricane Harvey. Highlights of the report include (i) almost 40 percent of consumers with a credit report in the Greater Houston area received a comment code regarding the hurricane after it hit; (ii) the most common type of tradeline to receive a natural disaster comment code are mortgage loans; and (iii) accounts that received the natural disaster comment code are associated with higher rates of delinquency prior to Hurricane Harvey.